Zimmer, Inc. v. Nu Tech Medical, Inc.
| Decision Date | 31 March 1999 |
| Docket Number | No. 3:97-CV-780 RM.,3:97-CV-780 RM. |
| Citation | 54 F.Supp.2d 850 |
| Parties | ZIMMER, INC., Plaintiff, v. NU TECH MEDICAL, INC., Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
Edward A. Sullivan, III, Baker and Daniels, South Bend, David P. Irmscher, Albert J. Dahm, Baker and Daniels, Fort Wayne, IN, for Zimmer Inc., plaintiffs.
Debra Voltz-Miller, Fred R. Hains and Associates, South Bend, IN, Bradley J. Schram, Robert P. Geller, Warren J. Perlove, Eva T. Cantarella, Hertz Schram and Saretsky, Bloomfield Hills, MI, for Nu Tech Medical Inc., defendants.
This cause came before the court on the motion of plaintiff Zimmer, Inc. for summary judgment. Zimmer filed its complaint seeking a declaratory judgment that its agreement with defendant Nu Tech Medical, Inc. is an illegal contract that violates various federal health care statutes. In a separate order entered this date, the court grants Zimmer's summary judgment motion and denied Nu Tech's motion for oral argument on the motion. This memorandum sets forth the court's reasons for that ruling.
Zimmer is a wholly-owned subsidiary of Bristol-Myers Squibb Company and a major manufacturer of orthopedic products. Nu Tech is a Michigan corporation engaged in "the business of acting as a `supplier' of medical items." After almost a year of discussions, representatives of Zimmer and Nu Tech executed an Independent Contractor Agreement ("the Agreement") on July 1, 1997. The Agreement recites that "Zimmer desires to engage [Nu Tech] in the distribution and billing of Zimmer products," and the parties "intend that the relationship between them [to be] that of a supplier and independent contractor." The Agreement describes the course of the parties' business as follows:
Zimmer agrees to consign a reasonable quantity of Zimmer softgoods products to [Nu Tech] for the purpose of stocking the shelves of the referring physician's offices based upon the physician's annual usage requirements. [Nu Tech] agrees to bill [Nu Tech's] contracted insurance carriers for the Zimmer product[s] consigned to [Nu Tech] by Zimmer. [Nu Tech] agrees to forward the insurance carrier reimbursement and or patient payment, minus [Nu Tech's] fees for each reimbursement to Zimmer within thirty (30) days of receipt of the reimbursement from the insurance carriers and or patients.
The Fee Schedule, attached to the Agreement as Exhibit A, provides that Nu Tech "agrees to forward all reimbursements from [its] contracted insurance carriers and patients who [Nu Tech] has billed for the sale of the Zimmer softgoods products, minus the following fee:
Dollar Volume
Receivable/Year [Nu Tech's] Fee
$0 to $2 Million 25% of Receivable
$2.1 Million to $4 Million 22% of Receivable
$4.1 Million + 20% of Receivable
When the receivable[s] are above the current fee schedule in a single calendar year, [Nu Tech] will reduce the fee according to the above fee schedule starting on the following month.
Section XI of the Agreement contains a provision under which Nu Tech was to provide Zimmer with "consulting services to train the Zimmer field sales force on [Nu Tech's] sales process and reimbursement issues." In exchange for a total of 100 days of consulting services, "at $1,000 per day plus travel expenses approved in advance by Zimmer," Zimmer agreed to pay Nu Tech 60% of the consulting service fees within thirty days of execution of the Agreement, with the remainder to be paid as provided in the Agreement. Section XI directs that the parties "shall agree in advance of any training the specific training requirements and outcomes to be achieved."
The Agreement's duration is two years, with the option to renew for another two years. The parties agreed that "in the event of a dispute which cannot be resolved by escalation through the management of each party, such dispute shall be submitted to binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association in Chicago, Illinois." The Agreement requires Zimmer and Nu Tech to "comply with all laws and ordinances, state, federal, and local," and that the Agreement be governed by the laws of the State of Indiana.
According to Nu Tech, after the parties executed the Agreement, representatives of Nu Tech and Zimmer met and exchanged information intended to facilitate implementation. Sometime in August 1997, Nu Tech learned that Zimmer did not want to make the $60,000 lump sum payment due under Section XI of the Agreement. Nu Tech advised Zimmer, by letter dated October 31, 1997, that it considered Zimmer's actions (or inactions) a breach of contract. Nu Tech told Zimmer that if their differences could not be resolved, Nu Tech would commence arbitration proceedings under Section VI of the Agreement.
Nu Tech maintains that only after Zimmer received the letter threatening arbitration did Zimmer inform Nu Tech that it believed that performance under the Agreement could amount to a violation of various federal health care statutes. At that time, Zimmer suggested that the parties submit a joint request for an advisory opinion as to the Agreement's legality to the Office of the Inspector General ("OIG") of the Department of Health and Human Services pursuant to 42 U.S.C. § 1320a-7d(b). Zimmer submitted its request for an advisory opinion to the OIG on December 18, 1997; Nu Tech did not join in the request.
Two days before its submission to the OIG, Zimmer filed its declaratory judgment action pursuant to 28 U.S.C. § 2201. A preliminary injunction was entered on April 17, 1998, staying arbitration pending resolution of the validity of the contract. The summary judgment record was filed on August 17.
Zimmer sets forth three main arguments in support of summary judgment: A) the Agreement violates the anti-kickback statute, 42 U.S.C. § 1320a-7b(b); B) the Agreement violates 42 U.S.C. § 1320a-7(b)(6), which prohibits submission of claims to federal or state health care programs that are in excess of the entity's usual charges for such items; and C) as illegal under federal law, the Agreement is void and unenforceable under Indiana law.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(e) "mandates entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an essential element to that party's case, and on which the party will bear the burden of proof at trial." "Where the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial ... there can be no `genuine issue of material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."
Although the moving party must initially identify the basis for its contention that no genuine issue of material fact exists, the nonmoving party cannot rest on his pleadings, but must produce his own evidence. Rule 56(e) requires that the nonmoving party who bears the burden of proof on an issue allege specific facts showing that there is a genuine issue for trial by his own affidavits or by the depositions, answers to interrogatories, and admissions on file ....
In considering whether there are any genuine issues of material fact we view the record and extract all reasonable inferences from the evidence in the light most favorable to the nonmoving party. However, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Where a fact is disputed, the nonmoving party must show that the disputed fact is material under the applicable law. The applicable law will dictate which facts are material. Only disputes that could affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.
National Soffit & Escutcheons, Inc. v. Superior Sys., Inc., 98 F.3d 262, 264-265 (7th Cir.1996) (citations omitted). Nu Tech moved for oral argument, but the parties' briefs adequately explain their positions, and to schedule argument at this point would only further delay ruling in this case. For that reason, the separate order denies the motion for oral argument.
As enacted in 1972, the Medicare-Medicaid Anti-Kickback statutes made it a misdemeanor to solicit, offer, or receive "any kickback or bribe in connection with" furnishing covered goods or services or referring a patient to a provider of those services. See Social Security Amendments Act, Pub.L. No. 92-603, §§ 242(b) and 242(c), 86 Stat. 1419 (1972). Congress expanded the language in 1977 to prohibit the solicitation or receipt of "any remuneration (including any kickback, bribe, or rebate)" in return for referrals, to prohibit the offer or payment of such remuneration to induce referrals, and to make violations of the statutes a felony. See Medicare-Medicaid Antifraud and Abuse Amendments, Pub.L. No. 95-142, 91 Stat. 1175, 1181, 1182 (1977). In 1980, the knowing and willful requirement was added, Omnibus Reconciliation Act of 1980, Pub.L. No. 96-499, 94 Stat. 2599, 2625 (1981), and in 1987, the Medicare and Medicaid statutes were combined into one statute (42 U.S.C. § 1320a-7b) and the Office of the Inspector General was authorized to exclude individuals and entities that violated the statutes from the Medicare and Medicaid programs. See Medicare and Medicaid Patient and Program Protection Act of 1987, Pub.L. No. 100-93, 101 Stat. 680, 681-682 (1989). None of the amendments since then affect the statute in any significant...
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