893 F.3d 454
7th Cir.2018Background
- Pain Center (Indiana clinic and related entities) contracted with SSIMED for Practice Manager billing software and services in June 2003, then for EMRge records-management software and services in June 2006.
- Contracts included licenses for preexisting software, initial training (five days each), and ongoing monthly billing, IT support, and electronic claim-submission services.
- Pain Center experienced billing failures and missing transmissions almost from the start; thousands of unpaid claims accumulated, many becoming stale and unpaid by insurers.
- Pain Center sued SSIMED in January 2013 asserting breach of contract, breach of warranty, breach of implied good-faith duty, and four tort claims (including fraud and tortious interference).
- The district court granted summary judgment for SSIMED as time-barred, concluding the contracts were goods-dominant under the UCC (4-year limitations) and that tort claims accrued early; the Seventh Circuit affirmed in part and reversed as to breach-of-contract claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contracts are governed by the UCC (goods) or common law (services) | Contracts primarily purchased for monthly billing/IT services; software was a conduit | Software were standardized goods licensed to Pain Center; UCC applies | Contracts are mixed but predominated by services; UCC does not apply |
| Statute of limitations for breach of contract | If common-law contracts, 10-year limitations applies and claims are timely | If UCC applies, 4-year limitations has expired and claims are untimely | 10-year written-contract period applies; breach claims are timely |
| Breach of warranty claims (UCC implied warranties) | Warranty claims asserted under UCC implied warranties | UCC should govern | UCC does not apply; Indiana has no common-law equivalent for these implied-warranty claims — judgment for defendant appropriate |
| Timeliness of tort claims (fraud, tortious interference) | Fraud and concealment/continuing-wrong tolling may save claims | Plaintiff knew of problems early and could not reasonably rely later; statutes ran | Tort claims time-barred; equitable tolling doctrines do not apply because plaintiff had notice early |
Key Cases Cited
- Olcott Intern. & Co. v. Micro Data Base Sys., Inc., 793 N.E.2d 1063 (Ind. Ct. App. 2003) (preexisting standardized software treated as goods)
- Data Processing Servs., Inc. v. L.H. Smith Oil Corp., 492 N.E.2d 314 (Ind. Ct. App. 1986) (custom software treated as services)
- Insul–Mark Midwest, Inc. v. Modern Materials, Inc., 612 N.E.2d 550 (Ind. 1993) (adopts predominant-thrust test for mixed goods/services contracts)
- Conwell v. Gray Loon Outdoor Marketing Group, Inc., 906 N.E.2d 805 (Ind. 2009) (custom website and hosting treated as services, not UCC)
- Moore v. Gen. Motors Pension Plans, 91 F.3d 848 (7th Cir. 1996) (John Doe nominal-party exception for diversity jurisdiction)
- Howell ex rel. Goerdt v. Tribune Entm’t Co., 106 F.3d 215 (7th Cir. 1997) (John Doe defendants ordinarily not permitted in federal diversity suits)
- Dexia Crédit Local v. Rogan, 602 F.3d 879 (7th Cir. 2010) (appellate courts’ duty to confirm subject-matter jurisdiction)
- Indianapolis Airport Auth. v. Travelers Prop. Cas. Co. of Am., 849 F.3d 355 (7th Cir. 2017) (summary-judgment review standard)