Univ. Dermatology & Vein Clinic v. Cerner Healthcare Sols.
| Decision Date | 26 August 2022 |
| Docket Number | 22-cv-00379 |
| Parties | UNIVERSITY DERMATOLOGY AND VEIN CLINIC, LLC AND ST. JOSEPH DERMATOLOGY AND VEIN CLINIC, PLLC, Plaintiffs, v. CERNER HEALTHCARE SOLUTIONS, INC., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Defendant Cerner Healthcare Solutions, Inc. moves the Court under Federal Rule of Civil Procedure 12(b)(3) and the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, to dismiss Plaintiffs' Complaint based on the parties' arbitration agreement. Alternatively, Cerner requests that the Court transfer the suit to the United States District Court for the Western District of Missouri under 28 U.S.C § 1406. For the reasons stated herein, Cerner's motion [10] is denied without prejudice. Plaintiffs' motion for reconsideration regarding the order on motion for leave to file and to strike [24] is denied without prejudice as moot.
In this case, Plaintiffs University Dermatology and Vein Clinic, LLC (UDVC) and St. Joseph Dermatology and Vein Clinic, PLLC (SJDVC), plead claims against Cerner for breach of contract negligence, and participation in breach of trust. (Compl., Dkt. 1-1). Plaintiffs allege that their suit arises from “Cerner's breaches of duties owed to UDVC and SJDVC as their electronic health records provider” because Cerner allowed third parties to access Plaintiffs' patient electronic medical records. (Id. p.1).
Vassilios A. Dimitropoulos, M.D. is the majority member interest holder and manager of both UDVC and SJDVC. (Id. ¶¶ 1-2). Before 2016, Dimitropoulos and Clarence W. Brown, Jr. were the principal owners of a medical dermatology practice providing services through two entities, University Dermatology (Corp.) and St. Joseph's Dermatology, LLC (referred to as the “Pre-2016 Practice”). (Id. ¶ 5). Cerner “was a supplier of health care information technology solutions and tech-enabled services” to medical practices. (Id. ¶ 6). Cerner provided the Pre-2016 Practice with all of its clinical, financial and operational technology needs, through contracts entered into with St. Joseph's Dermatology, LLC. (Id. ¶ 7).
In May 2016, Brown filed a dissolution action in Michigan against several defendants including Dimitropoulos and University Dermatology (Corp.) and St. Joseph's Dermatology, LLC. (Id. ¶ 8). Not long after, Brown set up competing dermatology practices in Michigan and Illinois. (Id. ¶ 9). In September 2016, the Michigan court entered an order appointing a receiver and requiring the Pre-2016 Practice entities to cease operations. (Id. ¶¶ 10-12). In November 2016, the receivership property was sold at an auction. (Id. ¶¶ 13-14). Dimitropoulos was the successful bidder for all of the non-real property originally owned by the Pre-2016 Practice. (Id. ¶ 14). Pursuant to the sale, the business assets, including all patient records of the Pre-2016 Practice, transferred to UDVC and SJDVC. (Id. ¶ 18). UDVC asked Cerner for a new medical practice system similar to the Cerner system used by the Pre-2016 Practice. (Id. ¶ 21). Instead of doing this, Plaintiffs allege, Cerner continued the Pre-2016 Practice medical practice system, merely changing the ownership and billing of the system to UDVC. (Id. ¶ 22). This failure, Plaintiffs claim, gave Brown and his agents unauthorized access to all of UDVC's medical practice records for both the pre-2016 Practice and Dimitropoulos' new dermatology practices. (Id.) Brown sought these records to compete with Dimitropoulos and steal or attempt to steal patients, and Cerner benefited by earning significant fees from Brown. (Id. ¶¶ 26, 27, 29). Dimitropoulos discovered the unauthorized access in 2017, and later discovered that Cerner was charging UDVC for services that had been ordered by Brown, not UDVC. (Id. ¶¶ 30, 32). In 2020, UDVC nevertheless paid Cerner to avoid business disruption, and at that time, requested expiration dates for “all purported Cerner contracts.” (Id. ¶ 33). UDVC found a new provider, and subsequently “requested that Cerner cancel all services except for one provider to be able to access to Specialty PM service”; Cerner did not respond and instead continued its excessive billing. (Id. ¶¶ 34, 35).
Plaintiffs claim that Cerner's failures “under the oral and/or written contracts with UDVC constitute material breaches of the contracts.” (Id. ¶ 45). And “[a]s a direct and proximate result of Cerner's breaches of the contracts, UDVC and SJDVC have been damaged in an amount to be proven at trial in excess of $300,000 ” (Id. ¶ 49). Plaintiffs seek a “declaration that any and all contracts with Cerner are null and void and that UDVC and SJDVC owe Cerner no further fees and costs pursuant to those contracts....” (Id. p. 13).
On December 1, 2021, Plaintiffs filed this suit in state court. On January 24, 2022, Cerner removed the case to this court, and thereafter filed the instant motion. [10]; [11]. In its motion, Cerner argues that the parties' contract contains a mandatory arbitration agreement which the Court must enforce.
Under the Federal Arbitration Act (“FAA”), “[a] written provision in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The Act “mandates that district courts shall direct parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). It reflects a “liberal federal policy favoring arbitration agreements,” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), and places “arbitration agreements on an equal footing with other contracts,” Gore v. Alltel Comm'ns, LLC, 666 F.3d 1027, 1032 (7th Cir. 2012) (quoting Concepcion, 563 U.S. at 339). The FAA's policy favoring arbitration “is to make ‘arbitration agreements as enforceable as other contracts, but not more so.” Morgan v. Sundance, Inc., 142 S.Ct. 1708, 1713 (2022) (quotation omitted).
“When deciding whether parties agreed to arbitrate a certain matter, courts generally should apply ordinary state-law principles that govern the formation of contracts.” Druco Rest., Inc. v. Steak N Shake Enterp., Inc., 765 F.3d 776, 781 (7th Cir. 2014). “Whether enforcing an agreement to arbitrate or construing an arbitration clause, courts and arbitrators must give effect to the contractual rights and expectations of the parties.” Smith v. Bd. of Directors of Triad Mfg., Inc., 13 F.4th 613, 619 (7th Cir. 2021) (cleaned up).
Under the FAA, in response to an opposing party's refusal to arbitrate despite a written agreement for arbitration, a party “may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. The party seeking to compel arbitration bears the burden to show an agreement to arbitrate. Id.; see A.D. v. Credit One Bank, N.A., 885 F.3d 1054, 1063 (7th Cir. 2018). “The court may consider exhibits and affidavits regarding the arbitration agreement in question.” Friends for Health: Supporting N. Shore Health Ctr. v. PayPal, Inc., No. 17 CV 1542, 2018 WL 2933608, at *3 (N.D. Ill. June 12, 2018). Once the moving party makes its initial showing, the party resisting arbitration bears the burden of identifying a triable issue of fact on the purported arbitration agreement. See Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). The resisting party's evidentiary burden is like that of a party opposing summary judgment. Id. “[A] party cannot avoid compelled arbitration by generally denying the facts upon which the right to arbitration rests; the party must identify specific evidence in the record demonstrating a material factual dispute for trial.” Id. As with summary judgment, the court views the evidence in the light most favorable to the nonmoving party and draws reasonable inferences in its favor. Id. If the party opposing arbitration identifies a genuine issue of fact as to whether an arbitration agreement was formed, “the court shall proceed summarily to the trial thereof.” Id. (quoting 9 U.S.C. § 4).
A party seeking to compel arbitration must demonstrate: (1) an enforceable written agreement to arbitrate; (2) a dispute within the scope of the arbitration agreement; and (3) a refusal to arbitrate. A.D., 885 F.3d at 1060. The only issue here is whether there is an enforceable agreement to arbitrate.
Plaintiffs dispute that “there is a valid and enforceable contract between one or both of plaintiffs and Cerner that requires arbitration.” (Dkt. 17 at 2). State law controls the determination of this issue. Janiga v. Questar Capital Corp., 615 F.3d 735, 742 (7th Cir. 2010). Under Missouri law, an enforceable contract requires an offer, acceptance, and consideration. Beck v. Shrum, 18 S.W.3d 8, 10 (Mo.Ct.App. 2000).[1]
In their complaint, Plaintiffs allege that Cerner “provided its services to UDVC and SJDVC pursuant to oral and/written contracts with UDVC,” and claim that Cerner breached those contracts. (Compl. at ¶¶ 40, 43-45). Plaintiffs attach to their complaint “[d]ocuments purporting to represent the contracts signed by UDVC for its new Cerner medical practice system for UDVC and SJDVC,” but deny those documents were valid and enforceable contracts between the parties. (Id. ¶ 21). A plaintiff claiming breach of contract is not generally required to attach the operative contract to a complaint. See Glen Flora Dental Ctr., Ltd. v. First Eagle Bank, 487 F.Supp.3d 722, 740 (N.D. Ill. 2020).
Attached to Cerner's motion are: (1) a Cerner...
To continue reading
Request your trial