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Lane v. Netsmart Technologies, Inc.

United States District Court, D. Oregon

February 14, 2017

SERENITY LANE, an Oregon corporation Plaintiff,
v.
NETSMART TECHNOLOGIES, INC., a Delaware corporation; and SEQUEST TECHNOLOGIES, Inc., an Illinois corporation, Defendants.

          OPINION AND ORDER

          THOMAS M. COFFIN United States Magistrate Judge.

         Defendants, Netsmart Technologies, Inc. (Netsmart), and Sequest Technologies, Inc. (Sequest), move for summary judgment or in the alternative, for partial summary judgment. (Doc. 85). Having considered the motions and related materials, defendants' motion for summary judgment is denied and defendants' motion in the alternative for partial summary judgment is granted.

         BACKGROUND

         The underlying dispute in this case arose out of an agreement between plaintiff and Sequest, whereby Sequest agreed to provide plaintiff with totally integrated electronic medical record (TIER) software customized for plaintiffs use. Pl's First Am. Compl., 2-3. Sequest was then acquired by Netsmart in October 2011. Id. at 2. Plaintiff alleges that it paid defendants $518, 308.41 for the development, licenses, and customization of the TIER software and that defendants breached the agreement by failing to deliver the TIER software. Id. On January 8, 2014, plaintiff filed a Complaint with this court stating that defendants now owe it the obligations of Sequest under the agreement. Pl's Compl. 2. Plaintiffs Complaint made four claims for relief.

         Plaintiffs first claim for relief sought damages of $518, 308.41 for the TIER software it claims was never delivered, $654, 242 for time it spent performing its obligations under the agreement, $147, 937.61 for computer hardware purchases that became obsolete or unusable as the result of defendants' alleged failure to deliver the software, and prejudgment interest. Id. at 3. Plaintiffs second claim asserted that defendants violated the Uniform Commercial Code (UCC). Id. Plaintiffs third claim sought a declaration from this court stating that it was not bound to the 2006 contract because the TIER software was never delivered or received. Id. at 4. Plaintiffs fourth claim asserted that in the alternative, if the court declared that it was bound to the contract, pursuant to the terms of the contract, the TIER software was not subject to repair or replacement and defendants were, therefore, obligated to refund the amount plaintiff paid them for the TIER software in the sum of $518, 308.41, plus prejudgment interest. Id. at 5.

         Defendants filed a Motion to Dismiss (Doc. 32) on May 15, 2014, followed by a Renewed Motion to Dismiss (Doc. 44) on January 15, 2015, to which this court entered its Findings and Recommendation on May 15, 2015, recommending that defendants' motion be granted in part and denied in part. Doc. 59 at 1. Specifically, this court found that: (1) because "defendants delivered at least some Sequest computer software that plaintiff installed, tested, and accessed through defendants' FTP site, there is no question of fact regarding whether the TIER software product was delivered and received" and, therefore, pursuant to Article I, Section 1.5 of the 2006 contract, the contract is binding on both parties; (2) the UCC does not apply; (3) Illinois law governs all questions regarding the validity and operation of the contract; and (4) plaintiffs claims for incidental and consequential damages, as well as prejudgment interest, should be dismissed. Id. at 8, 19-20. In sum, this court concluded that plaintiffs first, second, and third claims, as well as its demand for prejudgment interest in its fourth claim, should be dismissed. Id. at 19-20. On June 22, 2015, District Judge Michael McShane adopted this court's Findings and Recommendation in full. Doc. 63.

         Plaintiff filed its First Amended Complaint (Doc. 68) on September 1, 2015, asserting two claims against defendants. Plaintiffs first claim sought rescission of the contract and damages of $518, 308.41 for money it paid defendants for the development, licenses, and customization of the TIER software, $654, 242 for the time it spent performing its obligations under the contract, $147, 937.61 for computer hardware purchases that became obsolete or unusable as the result of the "frustration of the contract's primary purpose, " and interest of $129.58 per day. Pl's First Am. Compl. 3. Plaintiffs second claim, which was brought in the alternative, was for breach of contract and sought $518, 308.41 in damages for money it paid defendants for the development, licenses, and customization of the TIER software, plus costs and disbursements. Id. at ¶ 8. On September 18, 2015, defendants moved to dismiss the first claim from plaintiffs First Amended Complaint. Defs.' Mot. to Dismiss Pl's First. Am. Compl. 2.

         This court entered its Findings and Recommendation on March 20, 2016, recommending that defendants' Motion to Dismiss the first claim from plaintiffs First Amended Complaint should be granted. Doc. 81. On April 13, 2016, this court's Finding and Recommendation was adopted by District Judge Michael McShane and plaintiffs first claim for rescission in its First Amended Complaint was dismissed. Doc. 83. Accordingly, a single claim for breach of contract seeking a refund of the $518, 308.41 plaintiff paid to defendants for the development, licenses, and customization of the TIER software remained in plaintiffs First Amended Complaint. Pl's First Am. Compl. 4. On October 13, 2016, defendants filed the instant Motion for Summary Judgment that is presently before this court. Doc. 85.

         STANDARD OF REVIEW

         Summary judgment is appropriate if "the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Summary judgment is not proper if material factual issues exist for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995).

         The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). An issue of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the moving party fulfills its burden, the burden shifts to the nonmoving party who must go beyond the pleadings to identify genuine issues of fact. Celotex Corp., 477 U.S. at 324. Conclusory allegations, unsupported by factual material, are insufficient to defeat a motion for summary judgment. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposing party must, by affidavit or as otherwise provided by Fed.R.Civ.P. 56, designate specific facts that show there is a genuine issue for trial. Devereaux, 263 F.3d at 1076.

         The court must view the evidence in the light most favorable to the nonmoving party. Szajer v. City of Los Angeles, 632 F.3d 607, 610 (9th Cir. 2011). All reasonable doubt as to the existence of a genuine dispute of material fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir. 1976). Where different ultimate inferences may be drawn, summary judgment is inappropriate. Sankovich v. Life Ins. Co. of North America, 638 F.2d 136, 140 (9th Cir. 1981). However, facts must be "viewed in the light most favorable to the nonmoving party only if there is a 'genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380 (2007). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial."' Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         DISCUSSION

         Defendants argue that summary judgment should be entered in their favor because plaintiff is not entitled to a refund of any of the fees it paid for the development, licenses, and customization of the TIER software because plaintiff prematurely terminated the contract and refused to accept the remedies offered to it in accordance with the Limited Warranty provision of the contract. Defs.' Mot. for Summary J. 2, 10. Defendants specifically argue that pursuant to the Limited Warranty provisions at Article I, Sections 4.5 and 6 of the contract, the $135, 000 license fee plaintiff paid for the TIER software is ...


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