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Children's Hospital Colorado v. Digisonics, Inc.

United States District Court, D. Colorado

June 27, 2017

CHILDREN'S HOSPITAL COLORADO, Plaintiff/Counterclaim Defendant,
DIGISONICS, INC., Defendant/Counterclaim Plaintiff.


          R. Brooke Jackson United States District Judge

         Digisonics, Inc. moves for summary judgment on Children's Hospital Colorado's (“Children's Hospital”) claims under Section 24 of the Master Service and Support Agreement (“MSA”) and on its counterclaims under Section 7 of the Statement of Work (“SOW”), ECF No. 55, while Children's Hospital moves for summary judgment on Digisonics' counterclaims under Section 13 of the MSA, ECF No. 51. The motions are denied.


         On July 10, 2012 Children's Hospital and Digisonics entered into an agreement for Digisonics to develop, license, install, and support a customized cardiology picture archiving and communication system (“the System”) for Children's Hospital. ECF No. 1 at ¶10, 14; ECF No. 55 at 1. The System would provide Children's Hospital's physicians an “anytime, anywhere” platform for viewing, managing, and analyzing patients' medical diagnostic data. ECF No. 58, § 2. In developing the System, Digisonics was to start with a preexisting software package called “DigiView” and to provide additional features requested by Children's Hospital. Id. The parties memorialized their agreement in two documents: the MSA and the SOW. The documents reference each other and were designed to work together. See, e.g., ECF No. 57 at 5; ECF No. 58 at 6.

         Shortly after executing the agreement, Children's Hospital made its first installment payment to Digisonics for $264, 455.50, and Digisonics started working on the project. ECF No. 1 at 28; ECF No. 55 at 31; ECF No. 65 at 20. In late 2013 Digisonics requested the second installment payment, but Children's Hospital believed payment was not yet due. See ECF No. 53-4; ECF No. 55-21. In July 2014 Children's Hospital offered to pay half of the second installment-$238, 008-until Digisonics made more progress. ECF No. 55 at 31, 36; ECF No. 65 at 20; ECF No. 68 at 5.

         By the fall of 2014 Digisonics still had not delivered the System to Children's Hospital. See ECF No. 55 at 2; ECF No. 65 at 4. Children's Hospital became worried that the System would not be ready in time to replace its aging software without a gap in support. See ECF No. 64-1 at 163:10-25; ECF No. 64-4 at 132:17-23. Beginning in November 2014 executives from Children's Hospital and Digisonics exchanged a number of emails and met several times to try to resolve Children's Hospital's concerns. See, e.g., ECF Nos. 64-10, 64-11, 64-13, 64-14, 64-15.

         On December 2, 2014 Digisonics released and installed DigiView version on Children's Hospital's workstation. ECF No. 64-10. In January 2015 Children's Hospital provided Digisonics a list of software issues that it wanted corrected for its “go-live” version ECF No. 55-4.

         On June 24, 2015 Digisonics delivered DigiView version to Children's Hospital. ECF No. 55-14. However, Children's Hospital believed that this release was still defective, so the next day it sent Digisonics notice that it was terminating the contract. ECF No. 55-19.

         On January 5, 2016 Children's Hospital filed this suit for breach of contract, breach of implied duty of good faith and fair dealing, and unjust enrichment. ECF No. 1. Digisonics responded with counterclaims for breach of contract, breach of implied duty of good faith and fair dealing, unjust enrichment, promissory estoppel, and breach of confidentiality clause. ECF No. 9.

         On December 26, 2016 Digisonics submitted two memoranda regarding whether briefing motions for summary judgment on the claims or counterclaims would be appropriate. ECF Nos. 39, 40. Children's Hospital took the position that the issues identified “cannot and should not be resolved on summary judgment.” ECF No. 43 at 4; ECF No. 44 at 4.

         On January 11, 2017 the Court invited the parties to “file a total of 25 pages of briefing per side, including all pages from the caption through the certificate of service, ” concerning the interpretation of MSA Section 24, SOW Section 7, [1] and MSA Section 13, with this page allowance “to be used as you see fit.” ECF No. 45. This was a modest increase from the Court's practice standards. My order must not have been as clear as I thought it was, however, because each side submitted its own motion for summary judgment on January 24, 2017- notwithstanding Children's Hospital's position that the issues “cannot and should not be resolved on summary judgment”-and the parties apparently interpreted the phrase “a total of 25 pages of briefing” to mean “25 pages per motion and response.” Children's Hospital submitted 49 pages across the two motions, including a 25-page response to Digisonics' motion, see ECF Nos. 51, 65, 78, while Digisonics submitted 50 pages, including a 23-page motion, a 22-page response, and a motion for leave to file even more pages in its reply, see ECF Nos. 55, 68, 75, 77. These submissions would normally be struck for their excessive length, repetitiveness, and failure to stick to the issues identified in the Court's order, but instead the narrow contract interpretation issues presented will be resolved on their merits so that the trial need not be continued again.


         The Court may grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court will examine the factual record and make reasonable inferences in the light most favorable to the party opposing summary judgment. Concrete Works of Colo., Inc. v. City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).


         The motions for summary judgment concern three questions under different provisions of the parties' contracts: (1) whether Children's Hospital has waived any right of recovery by failing to invoke the dispute resolution clause in MSA Section 24; (2) whether Children's Hospital has accepted the System and given rise to final payment under SOW ...

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