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Etransmedia Technology, Inc. v. Allscripts Healthcare, LLC

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

December 24, 2019




         Etransmedia Technology, Inc. and its former shareholders brought this diversity suit against Allscripts Healthcare, LLC, alleging breach of contract and various torts. Doc. 1. Early in the litigation, the court dismissed the former shareholders as party plaintiffs. Doc. 39-40 (reported at 2018 WL 278719 (N.D. Ill. Jan. 3, 2018)). With discovery closed, Allscripts moves for summary judgment, Doc. 127, Etransmedia moves for partial summary judgment as to certain liability issues, Doc. 122, and each moves to strike portions of the other's Local Rule 56.1 materials, Docs. 141, 148. Allscripts's summary judgment motion is granted, and the other motions are denied.


         As the parties have cross-moved for summary judgment, the court ordinarily would view the facts in the light most favorable to Etransmedia when considering Allscripts's motion and in the light most favorable to Allscripts when considering Etransmedia's motion. See First State Bank of Monticello v. Ohio Cas. Ins. Co., 555 F.3d 564, 567 (7th Cir. 2009) (“[B]ecause the district court had cross-motions for summary judgment before it, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.”) (internal quotation marks omitted). But because the court will grant summary judgment to Allscripts, the facts are set forth as favorably to Etransmedia as the record and Local Rule 56.1 permit. See Garofalo v. Vill. of Hazel Crest, 754 F.3d 428, 430 (7th Cir. 2014). 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 Chicago, 916 F.3d 631, 633 (7th Cir. 2019).

         Etransmedia entered into a “Partner Agreement” with Misys Healthcare Systems in 2008, and Allscripts later merged with Misys and succeeded to its rights and obligations under the Agreement. Doc. 147 at p.16, ¶ 24. The Agreement concerns Etransmedia's resale of Allscripts software. Id. at p. 24, ¶ 25. In 2015, Etransmedia brought an arbitration action before the American Arbitration Association against Allscripts pursuant to the Agreement's arbitration provision, alleging breach of contract and various torts. Id. at pp. 42-43, ¶¶ 60-61.

         In 2016, while arbitration was pending, Etransmedia's then-shareholders-referred to by the parties as the “Agrawals”-sold their shares to Formativ Health, Inc. pursuant to a Stock Purchase Agreement (“SPA”). Id. at p. 4, ¶ 11. Section 5(l) of the SPA-which refers to the Agrawals as the “Sellers”-provides that the Agrawals would retain “sole control” over the “Allscripts Litigation, ” including “the right to any and all amounts collected, ” and would indemnify Etransmedia for any losses. Id. at p. 8, ¶ 16; Doc. 120-1 at 57-58.

         In the view of Nick Stefanizzi, Formativ's corporate representative and chief administrative officer, the Agrawals and Formativ “negotiated … provisions in [the SPA] that essentially carved [the Allscripts] litigation out of the purchase and left it with the Agrawals.” Doc. 147 at pp. 9-10, ¶ 17; Doc. 120-2 at 11. Stefanizzi added that, “as far as I was concerned, as a member of the [Formativ] executive team, Allscripts litigation was a non-thing for us from [the closing date] forward.” Doc. 147 at p. 10, ¶ 17; Doc. 120-2 at 34. Stefanizzi further added:

When I think about [the Allscripts] litigation, I don't think about it as Etransmedia. The way I think about it is that this is the Agrawal dispute with Allscripts. The Agrawals … have a strategy and are making decisions relative to that because this litigation was carved out of what we purchased. … That's my view of who is making the decisions.
My understanding is that the [SPA] spoke to the fact that this was [the Agrawals'] responsibility, their responsibility, their risk, their potential for upside, that it lived with them, it did not come with the company.

Doc. 147 at pp. 11-12, ¶ 18; Doc. 120-2 at 13-14. When apprised of the SPA, the arbitration panel dismissed Etransmedia's claims against Allscripts, reasoning that the SPA's terms deprived Etransmedia of its status as the real party in interest under North Carolina law. Doc. 147 at p. 49, ¶ 72; Doc. 120-14 at 3-5; 2018 WL 278719, at *1.

         Etransmedia and the Agrawals then filed this suit. Doc. 1. Allscripts moved to dismiss Etransmedia's claims on “standing” grounds, arguing that the arbitration panel's holding on the real-party-in-interest issue was binding here. Doc. 15 at 4-6. The court denied the motion, reasoning that North Carolina law concerning real parties in interest is materially different from the requirements of Civil Rule 17(a) and that, in any event, even a real-party-in-interest problem under Rule 17(a) would not implicate Article III standing. 2018 WL 278719, at *2-4. Allscripts also moved to dismiss the Agrawals' claims on the ground that the complaint, while naming the Agrawals as party plaintiffs, did not assert any claims or seek any relief on their behalf. Doc. 15 at 6. The court granted that motion, dismissing the Agrawals' claims without prejudice because the complaint did not “allege that Allscripts injured them [or] … identify their claims.” 2018 WL 278719, at *4. The court did not reach any conclusion-because Allscripts's motion did not present the issue-as to whether Etransmedia and/or the Agrawals were real parties in interest under Rule 17(a).

         The court gave the Agrawals leave to amend and warned that if they did not file an amended complaint within three weeks, the dismissal of their claims would convert automatically to a dismissal with prejudice. Ibid.; Doc. 39. The Agrawals never filed an amended complaint, resulting in the dismissal with prejudice of their claims and leaving Etransmedia as the sole plaintiff.


         Allscripts seeks judgment against Etransmedia on the ground, among others, that Etransmedia is not a real party in interest under Rule 17(a). Doc. 119. Rule 17(a)(1) provides that “[a]n action must be prosecuted in the name of the real party in interest, ” Fed.R.Civ.P. 17(a)(1)-that is, of the person who owns the claim. See Frank v. Hadesman & Frank, Inc., 83 F.3d 158, 159-60 (7th Cir. 1996) (internal quotation mark omitted). In determining the real party in interest, the key consideration is not “who will ultimately benefit from the recovery, ” but rather who, “by the substantive law, possesses the right sought to be enforced.” Illinois v. Life of Mid-Am. Ins. Co., 805 F.2d 763, 764 (7th Cir. 1986) (internal quotation marks omitted); see also CWCapital Asset Mgmt., LLC v. Chicago Props., LLC, 610 F.3d 497, 500-01 (7th Cir. 2010) (noting that “an assignee for collection, who must render to the assignor the money collected by the assignee's suit on his behalf … can sue in his own name ...

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