U.S. Neurosurgical, Inc. v. City of Chicago

572 F.3d 325, 2009 U.S. App. LEXIS 15106
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 9, 2009
Docket07-3520, 08-2851
StatusPublished
Cited by26 cases

This text of 572 F.3d 325 (U.S. Neurosurgical, Inc. v. City of Chicago) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
U.S. Neurosurgical, Inc. v. City of Chicago, 572 F.3d 325, 2009 U.S. App. LEXIS 15106 (7th Cir. 2009).

Opinion

BAUER, Circuit Judge.

The City of Chicago (the “City”) hired Global Health Systems, Inc. (“Global”) to install a computer information system for the Chicago Department of Health. Although the installation of the system ultimately was successful, the parties argued over whether some of the work Global performed was covered by the contract price or constituted extra work for which the City owed additional money.

U.S. NeuroSurgical, Inc., as successor in interest to Global, sued the City, alleging a breach of contract and seeking recovery for unpaid invoices. Following a bench trial, the district court entered judgment for the City, which U.S. NeuroSurgical, Inc. appeals and we affirm.

I. BACKGROUND

On June 30, 1995, Global signed a contract with the City in which Global agreed to design, install, implement, and manage a computer information system for the Chicago Department of Health (CDOH). Recognizing that CDOH needed a computerized system which integrated information amassed at a number of separate health care clinics, the City purchased the Global Health Information System (Global System) to function as the means of collecting, automating, manipulating, analyzing, and displaying volumes of data.

The Global System was not built from scratch for the City; rather, the system used existing software that Global expected to modify to meet the particular specifications of its clients. For the City’s purposes, the Global System would be used to implement clinical case management and billing functions for CDOH; the contract described many modifications that Global would make to the Global System to ren *328 der it capable of performing those desired functions.

There were a number of ways in which a client such as the City could get data into the Global System. Generally, Global’s service was to build an interface that would make the Global System capable of receiving data exported from a client’s existing computer system. However, the Global System could also receive data through conventional key entry, and purportedly, through an alternative method such as scanning. We use the word purportedly only because at the time Global and the City entered into the contract, the Global System did not include a scanning function; it processed only data that was “keyed in” at terminals. However, Global had represented to Jack Lenihan, the City’s project manager, that the Global System had the capability of receiving scanned data.

The contract between the parties provided that data entry would be the City’s task, but it left open the mechanism by which the data would make its way into the Global System.

The contract provision addressing data entry modes read as follows:

Current configuration calls for data keyed entry---- [Global] will assist CDOH in assessing the feasibility of alternative data entry modes, such as scannable forms and bar coding, and will incorporate changes in hardware and [Global System] where alternative data entry is found to be more appropriate by CDOH.

An additional provision stated, “[u]nless specifically noted to the contrary, all provisions called for in this project plan are included in the contracted price.”

Had the City decided that key entry would suffice as the method of inputting new data into the Global System, this lawsuit may not have been brought. But the City decided that it wanted the Global System at CDOH’s sexually transmitted disease (STD) clinics to include a scanning function. Global dispatched its software developer, Bill Hartmann, to visit the STD clinics and perform an assessment of the clinics’ existing computerized system. At that time, the STD clinics had scanning capacity that allowed employees to take a completed form, such as that filled out by a patient following his visit, and import the form into a computer so that the information on the form would become data stored in the computer’s database. Hartmann understood that the City wanted its new system to have similar capacity, and noted that it would be unacceptable for the clinics to be deficient in this area. The implementation of the feature, however, would prove quite difficult and give rise to the present dispute.

Because scanning alone yields only a visual image of a document, software was needed to help transform the visual information into usable data. On Global’s recommendation, CDOH selected Teleform, a scanning software that could be used to accomplish this objective through a three-step process: first, the data was validated, or edited to correct inconsistencies; second, the validated data was formatted into an output, or export file that met the system’s specifications; finally, the data could be “pushed,” or transferred, into the Global System. A computer programmer was needed to perform each category of change.

At the recommendation of Global’s Vice-President, a subcontractor named Burt Quint was hired to perform the first two categories of programming. When Quint failed to produce an export file that met Global’s specifications for the Global System, he was fired. Global took over some *329 of Quint’s tasks, while the City performed other aspects of the work.

At trial, Alan Gold, Global’s President and Chief Executive Officer, testified that he told Lenihan that if Global performed any of the work Quint had not completed, it “could be extra work.” According to Gold, Lenihan responded that Global should do “whatever [it] had to” to implement the scanning function and that Lenihan could get the money to pay for the work. According to Lenihan, however, no such conversation ever occurred. 1

In any event, the project went forward. After Global and the City completed Quint’s tasks, Global made the final programming adjustments necessary for the Global System to process data, and the scanning function ultimately worked. However, Global classified the programming as an “additional service” that was not covered by the underlying contract.

The contract contemplated a scenario in which additional services could be rendered. Section 4.6 of the contract stated that, “[f]rom time to time the City may request [Global] to perform such additional services such [sic] as data entry or other consulting, which are not set forth in the Project Plan.” In that event, Global would charge the City its current rates, “to be quoted at the start of any work agreed to by the parties, in accordance with the provisions of Section 4.7.” Section 4.7 established those procedures. It required Global to submit a written work plan and cost estimate to the City; if agreement was reached, Global was then required to submit a detailed work order, which, after several layers of internal bureaucratic approval, would result in the issuance of an amendment to the contract corresponding to the work order.

Although the above procedures were not followed, Global nonetheless reasoned that the parties had orally agreed to modify the original contract; it billed the City for the “extra” work it had performed. The City did not pay Global for that work.

On July 11, 2002, USN, Global’s successor in interest, sued the City in federal court.

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Bluebook (online)
572 F.3d 325, 2009 U.S. App. LEXIS 15106, Counsel Stack Legal Research, https://law.counselstack.com/opinion/us-neurosurgical-inc-v-city-of-chicago-ca7-2009.