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Walgreen Co. v. Panasonic Healthcare Corporation of North America

United States District Court, N.D. Illinois, Eastern Division

December 29, 2017

WALGREEN CO., Plaintiff,
v.
PANASONIC HEALTHCARE CORPORATION OF NORTH AMERICA, Defendant.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr. United States District Judge.

         In its Complaint, Plaintiff Walgreen Co. (“Plaintiff”) brings claims against Defendant Panasonic Healthcare Corporation of North America (“Defendant”) for breach of contract (Count I), negligence (Count II), and breach of warranty (Count III). Currently before the Court is Defendant's motion [16] to dismiss Count I of Plaintiff's Complaint for failure to state a claim. For the reasons explained below, Defendant's motion [16] is denied. This case remains set for status hearing on March 20, 2018 at 9:00 a.m.

         I. Background [1]

         A. The Parties

         Plaintiff is a drugstore chain operating retail pharmacy locations across the United States. [1-1 ¶ 7.] In addition to its retail locations, Plaintiff operates four specialty pharmacies, including one in Beaverton, Oregon. [Id.] These specialty pharmacies handle and dispense specialty pharmaceuticals used to treat chronic, high-cost, or rare diseases. [Id. ¶ 1.] Many such specialty pharmaceuticals must be stored in specific climate-controlled environments to prevent adverse effects on the drugs themselves. [Id.] If a specialty pharmaceutical is not stored in the proper temperature range, the pharmaceutical's efficacy may be compromised, in which case Plaintiff cannot dispense it to a patient. [Id.]

         Defendant sells products and services, including ultra-low and cryogenic freezers, cell culture incubators, laboratory and biomedical refrigerators and freezers, and portable autoclaves, that are used in the life science, pharmaceutical, biomedical, and research markets. [Id. ¶ 8.] One of Defendant's products is the “LabAlert System.” [Id. ¶ 13.] The LabAlert System is marketed as a product that allows remote monitoring of freezer temperatures and provides alarm notifications in the event that a freezer's temperature exceeds a specific range. [Id. ¶¶ 12-13, 34.]

         B. The Hosted Services and License Agreement

         On April 2, 2015, Plaintiff and Defendant entered into a Hosted Services and License Agreement (the “Agreement”) under which Defendant agreed to supply, install, and configure the LabAlert monitoring system so that Plaintiff could remotely monitor the temperature of the walk-in cooler at Plaintiff's Beaverton, Oregon specialty pharmacy. [Id. ¶¶ 2, 9-12.]

         Section 14 of the Agreement contains the indemnification provisions agreed to by Plaintiff and Defendant. [See 1-1, Exhibit A, § 14.] Section 14.1(a), governing general indemnification by Defendant, [2] reads as follows:

General Indemnity. [Defendant] will indemnify, defend and hold harmless (collectively, “indemnification” or “indemnify”) [Plaintiff], its Affiliates, and their respective officers, directors, employees and agents (“[Plaintiff] Indemnified Parties”) from and against any and all demands, judgments (including applicable pre-judgment and post-judgment interest, if any), awards, losses, damages, costs, penalties, expenses, claims and liabilities, including reasonable attorneys fees, witness fees and court costs, and any other losses and liabilities of any kind or nature whatsoever (collectively, “Damages”) of, or awarded to, or settled with (in accordance with Section 14.3 (Indemnification Procedures), third parties in third-party claims or actions, and the costs of [Plaintiff] in enforcing this indemnification obligation. In each case arising out of any of the following: (i) the negligent acts or omissions, or intentional misconduct, of [Defendant], its subcontractor, or the [Defendant] Personnel under any Agreement; (ii) any breach by [Defendant] of any Agreement; and (iii) claims arising out of or relating to any Agreement brought by [Defendant] personnel, [Defendant]'s subcontractors, or [Defendant]'s subcontractor personnel.
[Defendant] will indemnify, defend and hold harmless the [Plaintiff] Indemnified Parties from and against any and all Damages, and the costs of [Plaintiff] in enforcing this indemnification obligation, arising out of or in connection with any of the following: (i) bodily harm, death and/or loss and damage to real and tangible personal property caused by the negligence or willful misconduct of [Defendant] or any [Defendant] Affiliate or subcontractor, or by their respective personnel; and (ii) [Plaintiff]'s and/or its Affiliates' compliance with the requirements of applicable data protection laws following a breach by [Defendant], or any of its subcontractors or their respective personnel of Section 9 (Data Security).

[Id. § 14.1(a).] Section 14.2, in turn, governs indemnification by Plaintiff, and reads as follows:

Indemnification by [Plaintiff]. [Plaintiff] will indemnify [Defendant] Contractor and its Affiliates and subcontractors, and their respective officers, directors, employees, agents, representatives, successors and assigns (collectively, the “[Defendant] Indemnitees”) from and against any and all Damages of, or awarded to, or settled with (in accordance with Section 14.3 (Indemnification Procedures), third parties in third-party claims or actions, and the costs of [Defendant] in enforcing this indemnification obligation, in each case arising out of any of the following: (i) the negligent acts or omissions, or intentional misconduct, of [Plaintiff] or its employees or personnel under any Agreement; (ii) any breach by [Plaintiff] of any term of this Agreement; and (iii) bodily harm, death and/or loss and damage to real and tangible personal property caused by the negligence or willful misconduct of [Defendant] or any [Defendant] Affiliate or subcontractor, or by their respective personnel.

[Id. § 14.2.]

         Other relevant sections of the Agreement include the sections governing indemnification procedures (Section 14.3), limitations on liability (Section 15), and attorneys' fees (Section 17.12). Section 14.3 begins as follows: “If a Party makes a claim for indemnifications under this Section 14 (Indemnification), such indemnified Party shall give written notice to the indemnifying Party promptly and in no event later than thirty (30) days after learning of a third party claim that is subject to indemnification (“Indemnified Claim”) * * *.” [Id. § 14.3.] It then sets out the procedures for notice of an Indemnified Claim, the indemnifying Party's right to assume the conduct and defense of an Indemnified Claim, the indemnified Party's requirement to provide reasonable assistance in defense of an Indemnified Claim, and the indemnified Party's right to consent to a settlement of an Indemnified Claim. [Id.]

         Section 15 of the Agreement includes two limitations on liability. The first is a waiver of consequential, special, indirect, incidental, punitive, or exemplary damages. [Id. § 15.1.] The second is a direct damages cap limiting damages for claims asserted against one party by the other party under the Agreement to five times the total fees paid or payable in the prior twenty-four months. [Id. § 15.2.] These limitations do not apply, however, for (i) damages arising in connection with either party's indemnification obligations; (ii) damages related to either party's willful misconduct or gross negligence; and (iii) damages related to breaches of either party's confidentiality obligations. [Id. §§ 15.1, 15.2.] Finally, Section 17.12 provides that “[t]he prevailing party shall be entitled to recover its costs and reasonable attorneys' fees and expenses incurred in connection with any action or proceeding between [Defendant] and [Plaintiff] arising out of or related to any Agreement.” [Id. § 17.12.]

         C. The Beaverton Specialty Pharmacy ...


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