Amicas, Inc. v. GMG Health Systems, LTD.

Procedural entryThis page is a short order in Amicas, Inc. v. GMG Health Systems, LTD.. Read the opinion of the Court — 676 F.3d 227
Court of Appeals for the First Circuit·Decided April 10, 2012·No. 11-1628·Published

Opinion

United States Court of Appeals For the First Circuit

No. 11-1628 AMICAS, INC.,

Plaintiff, Appellee,

v.

GMG HEALTH SYSTEMS, LTD., d/b/a Gonzaba Medical Group, Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Leo T. Sorokin, U.S. Magistrate Judge]

Before

Torruella, Circuit Judge, Souter,* Associate Justice, and Boudin, Circuit Judge.

James L. Messenger with whom Kevin G. Kenneally and LeClairRyan, P.C. were on brief for appellant.

Lawrence S. Delaney with whom Joseph M. Downes III and Demeo & Associates, P.C. were on brief for appellee.

April 10, 2012

*

The Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.

BOUDIN, Circuit Judge. This appeal concerns a contract dispute between two companies: Gonzaba Medical Group ("GMG"), a 280-employee provider of medical services, and Amicas, Inc. ("Amicas"), a publicly-traded information technology ("IT") company specializing in medical software. GMG contracted with Amicas in 2006 to develop and license two computer programs related to GMG's radiology services: a picture archiving communications system ("PACS") and radiology information system ("RIS").

Broadly speaking, the purpose of the software was to automate the collection and transfer of information necessary for billing that GMG had previously been entering manually. The aim was to avoid revenue loss due to incomplete capturing of billable charges that had occurred through manual data entry. To this end, the proposed software had to accept information from a patient management system previously established by another company-- Sage--and send information to Sage's previously established billing system.

The parties reached an agreement in October 2006 and executed a contract, drawn up by Amicas, calling for GMG’s payment of $1,009,548 over five years in exchange for a software license for the RIS and PACS programs, specified hardware, and continuing support services from Amicas. The agreement (whose relevant provisions are set out in an appendix to this opinion) comprised a

set of different documents signed on the same date, and contained an integration clause.

The agreement warranted that for 90 days after the "go-

live date" the software would "substantially conform to Documentation"--specified product manuals for the relevant software and hardware--"when used by [GMG] in a manner that is consistent with the Documentation.” But the warranty excluded any failure resulting from databases of GMG or third parties and warned that “[Amicas] does not warrant that the Software described herein will meet [GMG’s] requirements.”

Amicas developed and installed the programs, which involved working with Sage to design, test, and tweak the "interfaces"--the programming necessary to move data from the Sage patient management system into the Amicas RIS system and out to Sage's billing system. It was controversy over the operation of the latter connection, referred to by the parties as the "chargeout interface," that ultimately led to this litigation.

GMG began using Amicas' software and hardware on March 13, 2007 (the "go-live date"), but the chargeout interface was not ready due to GMG's indecision on a particular implementation detail and delays on Sage’s end of the interface, so GMG continued processing radiology charges manually in the interim. GMG started using the chargeout interface in late July, and reported several

problems to Amicas in the first few months--one a minor glitch that was easily resolved.

More serious were transpositions of the name of the physician who read the radiology films and the referring physician; Amicas investigated the name switching issue and reported that the problem stemmed from how Sage's software was processing and interpreting Amicas’ batch file, not with what Amicas’ program was producing. After some internal deliberations and more back and forth with Amicas over a few weeks, GMG referred the issue to Sage.

The record does not reveal whether Sage resolved the problem but it is clear that GMG continued to experience some frustration with the system, and it ultimately stopped using the chargeout interface altogether in "late 2007," opting instead for its old method of manual processing. However, GMG does not claim that it informed Amicas of that decision--or even that any problems whatsoever with the chargeout interface persisted.

By November 2007, GMG was negotiating with Sage to develop substitute software, and by February 2008 Sage was proposing to demonstrate a replacement product. An e-mail from Sage to GMG in March 2008 urged that "[o]ur experts feel that almost 100 percent of [your errors] are due to . . . having disparate systems and would be eliminated by using our RIS system."

As the negotiations with Sage progressed, GMG's principal contact with Amicas, Elsa Vasquez,1 e-mailed Adam Helms (the Amicas engineer responsible for setting up the chargeout interface) on February 8, 2008--some five months after Vasquez's last communication with Amicas about the chargeout interface--to ask “where we are with this interface.” Helms, who was under the impression it was successfully installed months earlier, expressed surprise at the question and asked Vasquez for clarification.

Over the next few months, GMG reported problems it perceived with the interface, and Amicas worked with Sage to follow-up on GMG's concerns. Helms ultimately concluded that the problems were attributable to “GMG’s failure to maintain consistent sets of data,” and were worsened by user errors and failure to report the issues earlier. Amicas finished its work on the reported issues by May 2008, but in June 2008--around the same time that negotiations with Sage for replacement software neared completion--GMG put off all efforts to test the chargeout interface.

On June 30, 2008 (10 days after Sage forwarded GMG a contract for replacement software), GMG sent Amicas a termination notice, citing “fail[ure] to conform to the Documentation and

1 Vasquez--the full-time GMG employee with the "responsibility to ensure that the software and hardware solution[s] for the GMG practice function[ed] effectively"--held the title of "Imaging Services Coordinator/Radiology Manager." She had no IT background or training.

[failure to] deliver[] a functional product.” Amicas and GMG personnel met on July 9, 2008, to discuss GMG's letter, but by then GMG had decided to substitute Sage and had directed Sage not to cooperate further with Amicas on seeking solutions to whatever interface problems remained. Amicas then brought the present suit against GMG in federal district court.

Amicas' complaint alleged breach of contract, together with other claims not at issue on appeal, and GMG counterclaimed (e.g., for breach, negligent misrepresentation, and violation of Chapter 93A, Mass. Gen. Laws ch. 93A, § 11 (2011)). Following discovery, both parties moved for summary judgment; the district court found for Amicas on its breach claim, rejected GMG's counterclaims, and ordered the parties to bring any remaining issues to the court's attention within 20 days.2 Amicas had sought $778,889 in damages (plus costs and fees) in the complaint and in its motion for summary judgment, and GMG proceeded to contest the $778,889 figure. The court then ordered further briefing on attorneys' fees, costs, and prejudgment interest, which GMG used in part to renew its attacks on the damages request. The court agreed with Amicas that the requested $778,889 damages had already been established as part of the summary judgment ruling, but treated GMG's arguments as a Rule

2 Both parties consented to proceed before a magistrate judge, 28 U.S.C. § 636(c); Fed. R. Civ. P. 73, who for purposes of this decision we describe simply as the court.

60(b) motion for reconsideration and ordered Amicas to respond on the merits.

After Amicas responded, the court denied Rule 60(b)

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Amicas, Inc. v. GMG Health Systems, LTD., (1st Cir. 2012).

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