Pain Center of SE Indiana LLC, The Pain Medicine and Rehabilitation Center P.C., and Anthony Alexander, M.D., Plaintiffs-Appellants,
Origin Healthcare Solutions LLC, SSIMED LLC, Origin Holdings, Inc., John Does (1-50) inclusive, and John Does (1-100) inclusive, Defendants-Appellees.
September 6, 2017
from the United States District Court for the Southern
District of Indiana, Indianapolis Division. No.
1:13-cv-00133-RLY-DKL - Richard L. Young, Judge.
Wood, Chief Judge, and Rovner and Sykes, Circuit Judges.
2003 Pain Center of SE Indiana contracted with a company
called SSIMED LLC for medical-billing software and related
services. In June 2006 the parties entered into a second
contract, this time for records-management software and
related services. Almost seven years later-in January
2013-Pain Center sued SSIMED raising multiple claims for
relief, including breach of contract, breach of warranty,
breach of the implied duty of good faith, and four tort
claims, all arising out of alleged shortcomings in
SSIMED's software and services.
district judge found the entire suit untimely and entered
summary judgment for SSIMED. We affirm on all but the claims
for breach of contract. The judge applied the four-year
statute of limitations under Indiana's Uniform Commercial
Code ("UCC"), holding that the two agreements are
mixed contracts for goods and services, but the goods (i.e.,
the software) predominate. We disagree. Under Indiana's
"predominant thrust" test for mixed contracts, the
agreements in question fall on the "services" side
of the line, so the UCC does not apply. The
breach-of-contract claims are subject to Indiana's
ten-year statute of limitations for written contracts and are
timely. The suit may go forward only on those claims.
plaintiffs are Pain Center of SE Indiana LLC, a clinic
serving patients who suffer from chronic pain; its founder
and sole member, Dr. Anthony Alexander; and its corporate
successor, The Pain Medicine and Rehabilitation Center P.C.
We refer to the plaintiffs collectively as "Pain
Center." The defendants are SSIMED LLC; Origin
Healthcare Solutions LLC, the corporation that acquired
SSIMED LLC in 2005; and Origin Holdings, Inc., its indirect
parent corporation. We refer to them collectively as
"SSIMED." The suit also names 150 John Does as
defendants, but as we explain later, these nominal
placeholders can be disregarded.
provides billing services to healthcare providers through
proprietary billing and records-management software. Its
software line includes Practice Manager, a billing program
that functions as a platform for submitting claims to SSIMED
for transmission to insurers, and EMRge, a records-management
software that works in conjunction with Practice Manager. On
June 18, 2003, Pain Center entered into an agreement with
SSIMED to purchase the Practice Manager software and related
services, including ongoing billing services, IT support and
electronic claim-submission services, and five days of
initial training in how to use the software.
claims using SSIMED's billing system involves several
steps. First, at the end of each day, the healthcare provider
enters into the Practice Manager program the relevant claim
information for all reimbursable healthcare services
performed that day. The software then transmits the daily
closing files to SSIMED in a zip file, and SSIMED generates
claim files from the daily closing information and sends
claims to insurers for payment.
processing can fail at any step of this process. Certain
data-entry errors by the healthcare provider may prevent
successful transmission of daily closing files to SSIMED.
Other errors would not impede transmission to the insurer but
can result in nonpayment of the claim. The healthcare
provider can track the status of its claims using a software
tool called the Client Center. Claims with errors at any step
of the process remain in the Client Center until corrected
Alexander testified in deposition that Pain Center
experienced problems with Practice Manager "[a]lmost
from the beginning." More specifically, Dr. Alexander
noticed "[p]roblems with accuracy in the amounts that
were sent, " "[p]roblems with dates missing, "
and "entire transmissions that had been resent [and then
were] missing." Dr. Alexander confronted SSIMED about
these problems in 2003, and SSIMED told him that the insurers
were to blame for any unpaid claims. Dr. Alexander testified
that Pain Center followed up with health insurers "on
numerous occasions, " but the insurers reported that
they never received the claims. Soon after implementing
Practice Manager, Dr. Alexander noticed that Pain Center was
"losing money like crazy." But he insists that he
did not realize until much later that SSIMED's software
and services were to blame for his cashflow problems.
these concerns, Pain Center entered into a second contract
with SSIMED on June 28, 2006-this time for a software program
called EMRge that worked in conjunction with Practice Manager
to facilitate patient records management and billing
reimbursement. Like the first contract, this one included the
software, five days of initial training in its use, ongoing
billing services, and IT support. Dr. Alexander thought that
implementing EMRge would resolve the payment losses his
clinic was suffering. But just as with Practice Manager, he
experienced problems with EMRge "[a]lmost from the
October 2011 Pain Center hired Demetria Hilton Pierce, a
billing specialist, and she immediately noticed that some of
Pain Center's claims were going unpaid. Pierce asked
SSIMED about the unpaid claims. SSIMED directed her to log in
to the Client Center. When she did so, she discovered that
the Client Center had not been opened in about 18 months.
Thousands of unpaid claims had piled up in the meantime. For
many of these claims, the deadline for submission to the
insurer had passed. Pain Center made an effort to recover
payment, but the insurers refused to pay the stale claims.
Dr. Alexander maintains this was the first time he learned of
the Client Center and how it functioned.
January 24, 2013, Pain Center filed suit against SSIMED
alleging that its Practice Manager and EMRge software and
related billing services caused these losses. As relevant
here, the complaint raised several contract-based claims
(breach of contract, breach of warranty, and breach of the
implied duty of good faith and fair dealing) and four tort
claims (tortious interference with business relations, fraud,
fraud in the inducement, and fraudulent misrepresentation).
cross-motions for summary judgment, the judge concluded that
the statute of limitations for each claim had long since
expired. The judge ruled that all of Pain Center's claims
accrued soon after the execution of the two agreements in
2003 and 2006, respectively, because Dr. Alexander admitted
that he was aware of problems with SSIMED's billing
system "[a]lmost from the beginning." Under Indiana
law, fraud claims are subject to a six-year statute of
limitations, so this accrual ruling meant that all three
fraud-based claims were time-barred. The
tortious-interference claim was likewise untimely under the
applicable two-year limitations period. The judge also
concluded that all of the contract-based claims are governed
by the UCC because the agreements in question were
predominantly for the sale of goods-that is, the software.