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Allscripts Healthcare, LLC v. Etransmedia Technology, Inc.

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

December 24, 2019

ALLSCRIPTS HEALTHCARE, LLC, Plaintiff,
v.
ETRANSMEDIA TECHNOLOGY, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          GARY FEINERMAN JUDGE

         Allscripts Healthcare, LLC brought this suit against Etransmedia Technology, Inc. in the Circuit Court of Cook County, Illinois, and Etransmedia removed it under the diversity jurisdiction. Docs. 2, 23. On Etransmedia's motion, the court compelled the parties to arbitrate Allscripts's claims and stayed the litigation. Docs. 64-65 (reported at 188 F.Supp.3d 696 (N.D. Ill. 2016)). After the arbitrators dismissed the arbitration, Doc. 73-1, the court lifted the stay and litigation resumed, Doc. 98. With a jury trial set for early February 2020, Doc. 207, Etransmedia moves for summary judgment, Doc. 202. The motion is granted in part and denied in part.

         Background

         The court recites the facts as favorably to Allscripts as the record and Local Rule 56.1 permit. See Johnson v. Advocate Health & Hosps. Corp., 892 F.3d 887, 893 (7th Cir. 2018). At this juncture, the court must assume the truth of those facts, but does not vouch for them. See Gates v. Bd. of Educ. of Chi., 916 F.3d 631, 633 (7th Cir. 2019).

         Under a contract called the “Partner Agreement, ” Etransmedia acted as a reseller of Allscripts software. Doc. 217 at p. 11, ¶ 34. In early September 2015, the parties attempted to negotiate a settlement of outstanding disputes at a mediation in New York City. Id. at p. 3, ¶ 7. When the mediation ended, the parties signed a document they refer to as the “Term Sheet, ” id. at pp. 3-4, ¶¶ 10-11, which is an untitled, two-page list of bullet-pointed terms, Doc. 202-11. The Term Sheet purports to provide for Etransmedia to sell its Allscripts client base to Allscripts in exchange for the dissolution of the parties' relationship and resolution of all outstanding disputes. Doc. 216 at 8; Doc. 202-11.

         The Term Sheet includes provisions regarding what Allscripts would pay Etransmedia, which clients would be transferred, and the method and timing of the transfers. Doc. 224 at ¶ 3; Doc. 202-11 at 1. It also provides for the return of unsold software licenses, a two-year non-compete agreement, and a commitment to use “best efforts to cooperate to achieve implementation prior to October 1 of the MU 2014 package to all … clients who indicate their election to receive it.” Doc. 224 at ¶ 4; Doc. 202-11 at 1. The Term Sheet further provides: “Parties will enter into comprehensive settlement agreement memorializing terms contained herein on or before October 1. Agreement will provide for filing of stipulations of dismissal with prejudice in all pending actions between the parties as soon as reasonably possible after execution.” Doc. 202-11 at 2.

         Several bullet points on the Term Sheet concern the contract breaches alleged by Allscripts in this case. One is titled “Representations and warranties as to:” and is followed by several sub-bullets, including “Estimated average revenue per license = approximately $716”; “Number of practices”; “Number of providers”; “Provide info regarding contract start dates AEO”; “Etransmedia will provide some piece of paper on each rep AEO”; “Estimated percentage of licenses on subscription model - approx. 94%”; “All contracts have 1 year automatic renewal with 90 days notice of termination”; and “Etransmedia has lost very few Professional clients to anyone other than Allscripts.” Doc. 202-11 at 1. Another bullet point reads: “Parties agree to seek to extend the stay of Illinois and North Carolina litigations and arbitration for an additional 30 days (through October 15) or such further additional time as may be necessary to effectuate the terms hereof.” Id. at 1-2.

         The Term Sheet expressly leaves open several terms-including those regarding the mechanics of Allscripts's payments and the release of certain claims-to be resolved in the comprehensive settlement agreement that the Term Sheet contemplated would be finalized by October 1. The Term Sheet states that “[p]ayment will be disbursed in accordance with terms of executed settlement agreement, ” and “Timing of payment: [by X DATE].” Doc. 202-11 at 1. As to mutual releases, it provides only that the “Parties will execute mutually satisfactory general releases of all claims.” Id. at 2. And as to indemnification for claims brought by others, it states: “Issues related to cross-claims for indemnification arising from third-party claims not yet resolved. The parties will address these issues in the final settlement agreement.” Ibid.

         The parties engaged in discussions regarding a comprehensive settlement agreement. Doc. 217 at pp. 4-5, ¶ 14. The parties did not reach agreement by the October 1 deadline and continued to negotiate into October. Id. at p. 5, ¶ 15. Ultimately, the parties never signed a comprehensive settlement agreement. Id. at p. 9, ¶ 28. Allscripts nonetheless worked to implement its “Meaningful Use 2014” software package-referred to in the Term Sheet as “ MU 2014”-in the days following execution of the Term Sheet, Doc. 224 at ¶ 21, providing implementation to every Etransmedia client requesting it, id. at ¶ 22. (Etransmedia argues that this fact is not supported by the evidence cited by Allscripts. However, the evidence-testimony by representatives of both Allscripts and Etransmedia that they were unaware of any clients who wanted a MU 2014 and did not receive one-supports the fact.) In addition, Etransmedia required that its clients who used Allscripts software and sought a data transfer from Etransmedia to another vendor sign contracts agreeing that the client “shall not permit Allscripts or any of its affiliates or subsidiaries to host any data transferred as a result of” those contracts. Doc. 224 at pp. 16-17, ¶¶ 28-29. (Etransmedia objects to this fact, arguing that the cited evidence does not support it. But the court quotes directly from the contract, and Etransmedia representative Renee Smith testified that it is the “standard contract form [Etransmedia] would use with people who are asking for their data to be released for the transfer.” Doc. 217-8 at 24; Doc. 217-8 at 24; Doc. 217-17 at 4.) At least one client signed such a contract on October 8, 2015. Doc. 217-17.

         Discussion

         The operative complaint sets forth claims for breach of implied contract, unjust enrichment, defamation, tortious interference with prospective economic advantage, unfair and deceptive trade practices, declaratory relief, and breach of the Term Sheet. Doc. 23. Allscripts has voluntarily withdrawn the declaratory judgment claim, Doc. 216 at 23 n.4, so the court will proceed to address those that remain, beginning with the breach of Term Sheet claim, to which the parties devote most of their briefing.

         I. Breach of Term Sheet Claim

         “A breach of contract claim requires … the existence of a valid and enforceable contractual promise … .” Doe v. Columbia Coll. Chicago, 933 F.3d 849, 858 (7th Cir. 2019). Etransmedia contends that the Term Sheet is a non-binding, preliminary statement of proposed settlement terms and therefore cannot give rise to a breach of contract claim. Doc. 208 at 9-18.

         Although the Term Sheet was negotiated and executed in New York, Illinois law governs whether it is a binding contract. If “[n]o party raises a choice of law issue, ” the court “appl[ies] the law of the forum state.” Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339, 345 (7th Cir. 2010). “A district court is required to engage in a choice of law analysis only if there is a conflict between Illinois law and the law of another state such that a difference in law will make a difference in the outcome.” Bd. of Forensic Document Exam'rs, Inc. v. ABA, 922 F.3d 827, 831 (7th Cir. 2019) (internal quotation marks omitted). It is “incumbent on … the party seeking a choice of law determination[] to establish the existence of an outcome-determinative conflict.” Ibid. (internal quotation marks omitted); see also West Side Salvage, Inc. v. RSUI Indem. Co., 878 F.3d 219, 223 (7th Cir. 2017) (“The party who seeks a choice-of-law determination must establish the existence of an outcome-determinative conflict.”). Because Etransmedia does not attempt to establish a conflict between New York and Illinois law- indeed, it argues that the two dictate the same result-the court applies Illinois law. See West Side Salvage, 878 F.3d at 223 (“If the party fails to establish the ...


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