Medfusion, Inc. v. Allscripts Healthcare Solutions, Inc.
| Decision Date | 31 March 2015 |
| Docket Number | 14 CVS 5192 |
| Citation | 2015 NCBC 31 |
| Court | Superior Court of North Carolina |
| Parties | MEDFUSION, INC., Plaintiff, v. ALLSCRIPTS HEALTHCARE SOLUTIONS, INC., Defendant |
Poyner Spruill LLP by Keith H. Johnson, Esq. and Steven B. Epstein, Esq. for Plaintiff Medfusion, Inc.
Wood Jackson, PLLC by W. Swain Wood, Esq. and Emily Moseley, Esq., and Vedder Price, P.C. by Derek Zolner, Esq. for Defendant Allscripts Healthcare Solutions, Inc.
THIS CAUSE, designated a mandatory complex business case by Order of the Chief Justice of the North Carolina Supreme Court, pursuant to N.C. Gen. Stat. § 7A-45.4(b) (), and assigned to the undersigned Special Superior Court Judge for Complex Business Cases, comes before the Court upon Defendant's Motion to Dismiss Amended Complaint ("Motion to Dismiss") pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)"). On January 9, 2015, the Court held a hearing on the Motion to Dismiss.
THE COURT, after considering the Motion to Dismiss, briefs in support of and in opposition to the Motion to Dismiss, arguments of counsel and other appropriate matters of record, CONCLUDES that the Motion to Dismiss should be GRANTED, in part, and DENIED, in part, for the reasons stated herein.
1. Plaintiff Medfusion, Inc. ("Plaintiff") initiated this action on May 15, 2014, by filing its original Complaint. On August 11, 2014, Plaintiff filed its Amended Complaint, asserting the following causes of action ("Claim(s)"): Claim One (Breach of Contract); Claim Two (Fraudulent Inducement); Claim Three (Fraud); Claim Four (Unfair Methods of Competition in Violation of G.S. § 75-1.1); and Claim Five (Unfair or Deceptive Trade Practices in Violation of G.S. § 75-1.1).
2. On September 15, 2014, Defendant Allscripts Healthcare Solutions, Inc. ("Defendant") filed its Motion to Dismiss. Pursuant to an Order on Motion to File Under Seal, entered on November 4, 2014, the Exhibits to the Motion to Dismiss were filed under seal.
3. The Motion to Dismiss has been fully briefed[1] and argued, and is ripe for determination.
Among other things, the Amended Complaint alleges that:
4. Plaintiff is a health care software and internet technology company headquartered in Wake County, North Carolina.[2]
5. Defendant is a medical software company headquartered in Chicago, Illinois.[3]
6. Plaintiff offers patient portal messaging services to health care providers. These services enable patients and physicians to communicate securely online for purposes such as requesting prescription refills, making appointments, paying bills, reviewing lab results and exchanging other communications.[4]
7. Defendant provides "an array of software solutions for creating and managing electronic health care records and providing practice management solutions."[5]
8. On July 7, 2009, the Parties entered into their 2009 Patient Access Solution Agreement ("Agreement") and agreed to "integrate [Plaintiffs] technology with [Defendant's] health care software solutions to create an online patient portal (the "Portal"), and to market the Portal to health care providers."[6] As part of the Agreement, Defendant agreed to use commercially reasonable efforts to market and sell the Portal.[7] Defendant would enter into End User Agreements ("EUA(s)"), whereby End Users purchased the rights to the Portal for a specific term and committed to pay Defendant monthly subscription fees.[8] Once the EUA was accepted by Plaintiff, Defendant would pay Plaintiff for Plaintiffs services pursuant to a fee schedule in the Agreement.[9]
9. In April 2010, following the initiation of the federally sponsored Meaningful Use program which required health care providers to use certified electronic health records technology, the parties executed the First Amendment to the Agreement ("First Amendment"). The First Amendment was intended to address the "unique marketing and sales opportunity" created by the Meaningful Use program. Under the First Amendment, Defendant agreed to take certain additional efforts to market Plaintiffs services in exchange for Plaintiffs contribution of funds to a "co-marketing fund used to market the Portal."[10]
10. On August 1, 2011, the parties executed a Second Amendment and Addendum to the Agreement ("Second Amendment"). The Second Amendment was intended to cure a backlog of orders for the Portal caused by Defendant's delaying Portal implementation and billing. The Second Amendment required Defendant to use best efforts to include terms in EUAs that enabled implementation of the Portal and client billing within 30 days of signing the EUA.[11] Under the Second Amendment, Defendant also agreed to offer the Portal by default in every "EHR Enterprise" and "EHR Pro" product offering, and to embed the Portal in all net new "EHR/PM" deals for its "Professional" and "Enterprise" market segments, with case-by-case exceptions.[12] Defendant agreed to represent that the Portal was Defendant's "only preferred Patient Portal solution."[13]
11. The Second Amendment also addressed certain enhancements to the Portal that Defendant was to integrate with other of its services.[14] Additionally, in exchange for Defendant's commitments in the Second Amendment, the parties agreed, "effective as of the date of the Second Amendment, that [Defendant] would receive 55% and [Plaintiff] would receive 45% of all ue/rrevenues and recurring charges (aferpayment to [Plaintiff] for its costs of goods)" for Portal sales carried out pursuant to the Second Amendment.[15]
12. In February 2013, Defendant acquired Jardogs, LLC ("Jardogs").[16] Jardogs had a patient messaging service called Folio wMyHealth that competed with Plaintiffs Portal. Following the acquisition of Jardogs, Defendant announced that it would make FollowMyHealth "available across all [Defendant's] products, "[17] which Defendant began to do before the five-year term of the Agreement expired in July 2014.[18]
13. Plaintiff alleges that after Defendant acquired Jardogs, Defendant no longer marketed the Portal as Defendant's only preferred portal, as required in the Second Amendment, and instead circulated comparisons between the Jardogs product and Plaintiffs services.[19] Plaintiff additionally alleges that Defendant began to market FollowMyHealth as an alternative service to customers using the Portal.[20]
14. Plaintiff alleges that Defendant, as the first point of customer contact for Portal support, failed to give Plaintiff any notice of technical issues experienced by End Users, thereby limiting Plaintiff's ability to resolve the issue.[21]
15. Following the execution of the Second Amendment, and while negotiating to purchase Jardogs, Defendant "took a new interpretation" of the revenue allocation provisions in the Second Amendment.[22] Under this new interpretation, Defendant contended that Plaintiff "was no longer entitled to payment for its costs of goods sold before revenue was allocated between the parties, but instead it was gross revenue . . . allocated between them."[23]Defendant also began to contend that the 55-45% allocation formula applied to pre-existing End User accounts, not just those carried out under the Second Amendment's marketing plan.[24]
16. On April 14, 2014, after Defendant's failure to timely pay to Plaintiff more than $5, 460, 627.64 under the Agreement, Plaintiff sent Defendant a notification of breach of the Agreement. Following the notification, Defendant sent $993, 540.80 in payments to Plaintiff but claimed that Defendant now disputed the remaining amount "in good faith."[25] On April 24, 2014, Plaintiff terminated the Agreement based on Defendant's failure to cure the breach.[26]
17. Following the termination of the Agreement, Plaintiff alleges that Defendant has made a number of false and misleading statements to Portal End Users regarding the termination of the Agreement, that continued support for the Portal was "up in the air" even after Plaintiff promised to continue to provide support, that Plaintiff was going out of business, that Plaintiff's service would not comply with the Meaningful Use requirements, and that the only way to comply with Meaningful Use requirements would be to switch to FollowMyHealth.[27] Plaintiff alleges that Defendant has continued to use the termination of the Agreement, and misleading statements concerning the plans and capabilities of Plaintiff, to convert users from Plaintiff's products to FollowMyHealth.[28]
18. Based on these factual allegations, Plaintiff asserts its claims for breach of contract, fraudulent inducement, fraud, unfair methods of competition, and unfair and deceptive trade practices.
19. In the Motion to Dismiss, Defendant seeks dismissal pursuant to Rule 12(b)(6) of Claim One, to the extent that Claim is barred by the limitation of liability provision in the parties' Agreement and dismissal of Claims Two, Three, Four, and Five in their entirety.
20. The Court, in deciding a Rule 12(b)(6) motion, treats the well-pleaded allegations of the complaint as true and admitted. Sutton v. Duke, 277 N.C. 94, 98 (1970). However, conclusions of law or unwarranted deductions of fact are not deemed admitted. Id. The facts and permissible inferences set forth in the complaint are to be treated in a light most favorable to the nonmoving party. Ford v. Peaches Entm't Corp., 83 N.C.App. 155, 156 (1986). As our Court of Appeals has noted, the "essential question" raised by a Rule 12(b)(6) motion is "whether the complaint, when liberally construed, states a claim upon which relief can be granted on any theory." Barnaby v. Boardman, 70 N.C.App. 299, 302 (1984) (citations omitted), rev'd on other grounds, 313 N.C. 565 (1985). A motion to dismiss should be granted only if "it appears certain that [the plaintiff] can...
To continue reading
Request your trial