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Northwestern Memorial Hospital v. Virtual Imaging, Inc.

United States District Court, Seventh Circuit

December 5, 2013

NORTHWESTERN MEMORIAL HOSPITAL, Plaintiff,
v.
VIRTUAL IMAGING, INC., Defendant.

MEMORANDUM OPINION AND ORDER

JOHN Z. LEE, District Judge.

Plaintiff Northwestern Memorial Hospital ("NMH") brings the instant suit against Defendant Virtual Imaging, Inc. ("Virtual") arising out of NMH's purchase of three RadPRO mobile x-ray units from Virtual in September 2010. NMH alleges that the x-ray units were non-conforming and failed to perform as warranted. NMH therefore seeks to rescind the contract of sale or, in the alternative, recover damages for alleged breaches of express and implied warranties. Virtual removed the action to this Court from the Circuit Court of Cook County, Illinois, and now moves to dismiss NMH's Complaint in its entirety. As set forth below, the Court denies Virtual's motion.

Facts

The facts alleged in NMH's Complaint are taken as true for the purposes of deciding this motion to dismiss. EEOC v. United Airlines, Inc., 693 F.3d 760, 762 (7th Cir. 2012) (internal citations and quotations omitted).

NMH purchased three RadPRO mobile x-ray units from Virtual Imaging in September 2010. (Compl. ¶ 1.) Before NMH committed to purchase the x-ray units, Virtual demonstrated a sample unit to NMH and made certain representations regarding the units' capabilities. ( Id. ¶¶ 2, 19.) Virtual also warranted that the x-ray units would meet NMH's needs, which, most significantly, would allow NMH personnel to x-ray patients with limited mobility and transmit those images wirelessly onto NMH's computer network. ( Id. )

As part of the Purchase Agreement, executed in September 2010, Virtual provided an express warranty that the x-ray units would conform to the specifications and descriptions provided. ( Id. ¶¶ 3, 23.) Once the x-ray units were delivered and installed at NMH in October 2010, however, NMH found that the x-ray units failed to perform as warranted. ( Id. ¶¶ 4, 24.) Specifically, the x-ray units did not connect to NMH's wireless network in order to transfer the x-ray images wirelessly. ( Id. ¶ 25.) Moreover, the software that operated the x-ray units frequently froze and lost x-ray images, and the battery capacity was so low that x-ray technicians were only able to take a few images at a time. ( Id. ¶¶ 26-28.)

NMH contends that it informed Virtual of the defects it identified, but despite numerous attempts to remedy the problems, Virtual ultimately was unable to repair the units to perform as Virtual had represented. ( Id. ¶¶ 5, 29-33.) Under the Terms and Conditions in the Purchase Agreement, NMH contends that it had the option to demand that Virtual repair or replace the units or credit back NMH's purchase price. ( Id. ¶¶ 6, 34.) However, when NMH requested that Virtual retrieve the x-ray units and credit NMH its purchase price, Virtual refused. ( Id. ¶¶ 7, 35.) The instant lawsuit resulted.

Discussion

I. Standard of Review

A motion brought pursuant to Fed.R.Civ.P. 12(b)(6) ("Rule 12(b)(6)") challenges the sufficiency of the complaint. Christensen v. Cnty. of Boone, 483 F.3d 454, 457 (7th Cir. 2007). Under the federal notice pleading standards, "a plaintiff's complaint need only provide a short and plain statement of the claim showing that the pleader is entitled to relief, sufficient to provide the defendant with fair notice of the claim and its basis." Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008) (internal quotations omitted); see also Fed.R.Civ.P. 8(a). When considering a motion to dismiss under Rule 12(b)(6), the Court must "accept [ ] as true all well-pleaded facts alleged, and draw[ ] all possible inferences in [the plaintiff's] favor." Id.

However, a complaint must also allege "enough facts to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). For a claim to have facial plausibility, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.

II. Rescission (Count I)

Virtual attacks NMH's rescission claim on three grounds. First, Virtual argues that NMH may not seek rescission of the Purchase Agreement as a matter of law, because NMH waived its right to seek rescission by not doing so for two years after discovering the alleged defects. Second, Virtual contends that NMH's claim is barred because it elected to pursue contractual remedies rather than seek rescission. Third, Virtual argues that rescission is precluded as a matter of law because the remedy of rescission would not restore the status quo. These arguments are not well-taken for a number of reasons.

As a threshold matter, the Court applies Illinois substantive law to NMH's rescission claim pursuant to the express choice of law clause in the Purchase Agreement. In Illinois, a party states a claim for rescission where "it alleges: (1) substantial nonperformance or breach by the defendant; and (2) that the parties can be restored to the status quo ante. " Horwitz v. Sonnenschein Nath & Rosenthal LLP, 926 N.E.2d 934, 942 (Ill.App.Ct. 2010). The Court finds that NMH properly ...


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