IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

ASSISTMED, INC., §

 §

Plaintiff- §

counterdefendant, §

 § Civil Action No. 3:05-CV-0880-D

VS. §

 §

CONCEPTUAL HEALTH SOLUTIONS, §

INC., §

 §

Defendant- §

counterplaintiff, §

 §

and §

 §

MICHAEL FLORIMBI, §

 §

Defendant. §

MEMORANDUM OPINION

 AND ORDER 

This litigation arises from a failed venture to develop

computer software products using natural language processing

technology to manage digital medical records. The court must

decide on cross-motions for summary judgment and a motion to

dismiss whether there are fraud, contract, or declaratory judgment

claims or counterclaims that remain to be tried and whether

plaintiff can pursue certain remedies. For the reasons that

follow, the court holds that plaintiff is entitled to proceed to

trial on part of its breach of contract claim and on its requests

for the equitable remedies of specific performance and quantum

meruit, and that defendants can proceed on their counterclaim for

contractual attorney’s fees and costs. All other claims and

 

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1

In defendants’ second amended counterclaim, they identify

Florimbi as a counterplaintiff and purport to assert counterclaims

on his behalf. See 2d Am. Countercl. ¶¶ 1, 4, 17, 21, 25, and

prayer. At other points in their counterclaim, however, it appears

that only CHS is asserting counterclaims. See id. at ¶¶ 19, 20,

23, 24. But in their response brief, both defendants oppose

summary judgment on the counterclaims. July 24, 2006 Br. 1.

Accordingly, the court will refer to the counterclaims as if

asserted by both CHS and Florimbi.

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counterclaims are dismissed.

I

Plaintiff-counterdefendant AssistMed, Inc. (“AssistMed”) sues

defendant-counterplaintiff Conceptual Health Solutions, Inc.

(“CHS”) and defendant Michael Florimbi (“Florimbi”),1 CHS’s

President and Chief Executive Officer, alleging a claim for fraud

against CHS and Florimbi and a breach of contract claim against

CHS, arising from its business dealings with CHS and Florimbi. The

lawsuit centers primarily on a May 1, 2002 License Agreement

(“License Agreement”) between AssistMed and CHS for the development

of derivative software applications based on the Mayo Vocabulary

Processor (“MVP”). The MVP is comprised of software developed at

the Mayo Clinic for use in coding, indexing, archiving, and

retrieving medical records based on their digital medical language

content, using natural language processing (“NLP”), healthcare

vocabularies, and continual learning algorithms. This technology

is considered to have value to medical providers in performing the

tasks of coding and billing for medical procedures. In addition to

its fraud and contract claims, AssistMed seeks a declaratory

 

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2

Although all parties have moved for summary judgment, because

defendants have essentially accepted voluntary dismissal of the two

counterclaims that are the subject of AssistMed’s motion and the

court is focusing on defendants’ motion addressed to AssistMed’s

claims, the court will recount the pertinent evidence in a light

favorable to AssistMed as the summary judgment nonmovant and draw

all reasonable inferences in its favor. E.g., U.S. Bank Nat’l

Ass’n v. Safeguard Ins. Co., 422 F.Supp.2d 698, 701 n.2 (N.D. Tex.

2006) (Fitzwater, J.) (citing Clift v. Clift, 210 F.3d 268, 270

(5th Cir. 2000)). 

3AssistMed alleges that CHS is, inter alia, the successor by

merger to LingoLogix and is subject to all its liabilities and

obligations.

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judgment concerning the parties’ rights, obligations, and

performance under the License Agreement. 

AssistMed alleges that CHS agreed to work with it to develop

derivative products based on the MVP, including three Specific

Derivative Software Products (“SDSPs”).2 AssistMed avers that, to

induce it to enter into the License Agreement, defendants falsely

represented that the MVP software was already developed and

complete and capable of indexing, archiving, and retrieving

structured and unstructured medical data across systems using NLP

and continual learning algorithms with an accuracy of over 90%.

Instead, CHS failed to deliver the agreed-upon products and

services, and it has sought to use technology licensed exclusively

to AssistMed for other projects and customers, doing so under the

entity LingoLogix, Inc. (“LingoLogix”).3 AssistMed asserts that

defendants’ conduct was fraudulent and that CHS breached the

License Agreement.

 

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4

In defendants’ brief in response to AssistMed’s summary

judgment motion, CHS abandons its claim for attorney’s fees under

the Texas Uniform Declaratory Judgments Act, recognizing that the

Act is a state-law procedural device that is inapplicable in

federal court. Accordingly, the court need not reach this ground

of AssistMed’s motion.

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CHS counterclaims, alleging that AssistMed is liable for fraud

and/or fraudulent inducement, and for attorney’s fees and costs

under the License Agreement and Tex. Civ. Prac. & Rem. Code Ann.

§ 37.009 (Vernon 2006).4 According to CHS, before the parties

entered into the License Agreement, AssistMed and its President and

Chief Operating Officer, Raul Kivatinetz (“Kivatinetz”), committed

fraud concerning AssistMed’s business, including its market share

and expected growth and its ability and intent to attract investors

to fund start-up and development costs for the SDSPs and other

needs. CHS also alleges that it is entitled under the License

Agreement to recover its attorney’s fees as the prevailing party as

to claims that AssistMed has asserted.

Defendants move to dismiss AssistMed’s second amended

complaint, contending that it has failed to plead fraud with the

specificity required by Fed. R. Civ. P. 9(b) and that its

declaratory judgment action is duplicative of its breach of

contract claim. They move for partial summary judgment dismissing

AssistMed’s fraud, breach of contract, and declaratory judgment

claims, its request for equitable relief in the form of specific

performance, reformation, and quantum meruit, and its request for

 

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5In response to defendants’ motion for partial summary

judgment, AssistMed objects on various grounds to parts of their

summary judgment evidence: the affidavits of Florimbi, Timothy D.

Argo, and Brad L. Whitlock. Except to the extent the court

addresses below the merits of certain objections to the Florimbi

affidavit, the objections are moot because the court has not relied

on the evidence. In response to AssistMed’s motion, defendants

object to ¶ 4 of Kivatinetz’s declaration. Because the court has

not relied on this evidence in deciding AssistMed’s motion, the

objection is moot.

6

The court need not reach the last ground of the motion. See

supra note 4.

7Although the court refers to AssistMed’s breach of contract

claim, it recognizes that some arguments are offered in support of

AssistMed’s declaratory judgment action as well. See, e.g., infra

note 12. 

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exemplary damages.5 

AssistMed moves for summary judgment establishing that it is

entitled to recover against CHS on its breach of contract claim,

dismissing defendants’ fraud-based counterclaims and defenses, and

dismissing CHS’s counterclaim for attorney’s fees under the Texas

Uniform Declaratory Judgments Act.6

II

The court will consider together defendants’ motion to dismiss

and their motion for partial summary judgment. It will also

address the parts of AssistMed’s summary judgment motion that

relate to its breach of contract claim.7

A

Defendants maintain that AssistMed’s fraud claim must be

dismissed because it has failed to plead fraud with the specificity

 

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required by Rule 9(b). They contend that AssistMed has not

identified the statements that are allegedly fraudulent or pleaded

when and where the statements were made and why they were

fraudulent. Defendants move for summary judgment on AssistMed’s

fraud claim, positing that the alleged representations on which

AssistMed relies were truthful. They maintain that, even if they

were untrue, AssistMed did not and could not rely on them as a

matter of law, and that AssistMed has not suffered any compensable

damages as a result of the alleged misrepresentations.

AssistMed responds to defendants’ motion to dismiss by

asserting that it has specified in ¶ 8 of its second amended

complaint the statements it maintains were fraudulent, has stated

when and where the statements were made, and has pleaded why they

were fraudulent. It also argues that it has provided defendants

specific information by referring them to Kivatinetz’s deposition,

its interrogatory responses, and documentation that CHS produced.

AssistMed opposes defendants’ summary judgment motion, contending

that it has adduced sufficient evidence of fraud to raise genuine

fact issues regarding the falsity of the statements, reliance, and

damages.

B

AssistMed alleges that defendants committed fraud by

representing to AssistMed that the MVP software was already

developed and complete and capable of indexing, archiving, and

 

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retrieving structured and unstructured medical data across systems

using NLP and continual learning algorithms with an accuracy of

over 90%. Instead, according to AssistMed, at the time it entered

into the License Agreement with CHS, the MVP software was not fully

developed, complete, installable, or operational and was not

capable of being used to develop the derivative products referred

to in the License Agreement.

The court need not decide whether AssistMed has pleaded fraud

with the specificity required by Rule 9(b) because, assuming

arguendo that it has, the court nevertheless holds for the reasons

explained infra at § II(C) that defendants are entitled to summary

judgment dismissing this claim.

C

1

To establish its fraud claim, AssistMed must prove that the

defendant in question

(1) made a material representation, (2) that

was false when made, (3) [the defendant] knew

the representation was false, or made it

recklessly without knowledge of its truth and

as a positive assertion, (4) [the defendant]

made the representation with the intent that

[AssistMed] should act upon it, and (5)

[AssistMed] acted in reliance upon it and

suffered injury as a result. 

Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313

F.3d 305, 322 (5th Cir. 2002) (Fitzwater, J.) (citing Beijing

Metals & Minerals Imp./Exp. Corp. v. Am. Bus. Ctr. Inc., 993 F.2d

 

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1178, 1185 (5th Cir. 1993) (applying Texas law)). Because

defendants will not have the burden of proof on this claim at

trial, they can obtain summary judgment by pointing the court to

the absence of evidence to support an essential element of the

claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).

Once they do so, AssistMed must go beyond its pleadings and

designate specific facts showing there is a genuine issue for

trial. See id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069,

1075 (5th Cir. 1994) (en banc) (per curiam). Summary judgment is

mandatory if AssistMed fails to meet this burden. Little, 37 F.3d

at 1076. An issue 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).

AssistMed’s failure to produce proof as to any essential element

renders all other facts immaterial. Edgar v. Gen. Elec. Co., 2002

WL 318331, at *4 (N.D. Tex. Feb. 27, 2002) (Fitzwater, J.) (citing

Celotex Corp., 477 U.S. at 323). 

Defendants have pointed to the absence of evidence to support

AssistMed’s assertion that defendants made a false representation.

AssistMed must therefore produce evidence that would permit a

reasonable jury to find that defendants made a representation that

was false.

 

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8

Because the parties have briefed several motions, the court

for clarity will cite the briefs and appendixes by the date filed.

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2

In its second amended complaint, AssistMed pleads fraud on

this basis:

In order to induce AssistMed into executing

the License Agreement, Florimbi and CHS

falsely represented to AssistMed that the MVP

software was already developed and complete

and was capable of indexing, archiving and

retrieving both structured and unstructured

medical data across systems, using Natural

Language Processing and continual learning

algorithms with an accuracy of over 90%.

D. June 30, 2006 App. 2 (2d Am. Compl. ¶ 8).8 It asserts that

Florimbi and CHS repeated these false representations many times,

orally and in writing. Id. at 3. According to AssistMed, at the

time the License Agreement was executed, the MVP software was not

fully developed, complete, installable, or operational as

represented, and was not yet ready or capable of being used to

develop derivative products referred to in the License Agreement.

Id. (¶ 9). Consequently, although AssistMed alleges, and

defendants address in their motion, multiple false representations,

these representations are repeated instances of the same core false

statement: “that the MVP software was already developed and

complete and was capable of indexing, archiving and retrieving both

structured and unstructured medical data across systems, using

Natural Language Processing and continual learning algorithms with

 

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9AssistMed asserts two other arguments, but the court need not

consider them because AssistMed has failed to produce evidence that

would enable a reasonable jury to find in its favor on its fraud

claim.

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an accuracy of over 90%.”

In response to defendants’ motion, AssistMed cites the

following evidence as sufficient to raise a genuine issue of

material fact: Kivatinetz’s deposition testimony that the software

was not fully developed and complete, that there were

representations on the level of accuracy of the MVP technology that

had not been delivered, and that once AssistMed had a means of

determining the accuracy of the technology, it learned that the

accuracy was not at the level represented and that it was clear

there were aspects of the technology that needed to be improved and

optimized. AssistMed also points to Kivatinetz’s testimony that,

when the MVP was tested in late 2002 and 2003, problems were

identified, including one arising from the MVP’s inability during

indexing to distinguish between positive and negative findings in

a medical record.9

AssistMed has not met its burden of producing evidence that

would permit a reasonable jury to find that defendants committed

fraud. AssistMed first cites Kivatinetz’s assertion that the

software was not fully developed and complete. When asked during

his deposition to explain why the MVP was not fully developed and

complete, he testified in conclusory terms that it did not perform

 

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indexing and extracting at the represented level of accuracy, and

that he could not recall what level of accuracy was actually

represented, although he stated that the number 98.7 “sticks in my

mind.” D. June 30, 2006 App. 74. AssistMed next cites

Kivatinetz’s conclusory assertion that there was a representation

on the level of accuracy of the MVP technology that had not been

delivered. Id. at 51. It then relies on Kivatinetz’s testimony

that, while CHS was installing components, AssistMed ran some

documents and did not get accuracy at the represented level, and

that there were things at a high level (e.g., more refined tests to

see if something was a positive or negative finding) that needed to

be improved and optimized. Finally, it cites Kivatinetz’s

testimony that the MVP had problems such as the inability to

correctly index positive and negative findings in a medical record.

Id. at 55. But the basis for AssistMed’s fraud claim is that

defendants falsely represented that the MVP software was already

developed and complete and capable of indexing, archiving, and

retrieving structured and unstructured medical data across systems

using NLP and continual learning algorithms with an accuracy of

over 90%. A reasonable jury could not find based on the conclusory

testimony of Kivatinetz that AssistMed cites, including proof

apparently related to a higher (98.7%) level of accuracy, that this

representation was false. Although the court must view the

evidence favorably to AssistMed as the summary judgment nonmovant

 

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and draw all reasonable inferences in its favor, given the nature

of the fraud claim, AssistMed must do more than offer generalized

and conclusory evidence——particularly where it appears that the

witness was basing his testimony on a higher standard of accuracy

than defendants allegedly represented——because a reasonable jury

could not find in its favor based on such proof. Although there

are fraud cases in which testimony at this level of generality

would be adequate to raise a genuine fact issue, AssistMed’s fraud

claim relates to what the record shows is complicated computer

technology. It would be insufficient as a matter of law for

AssistMed to attempt at trial to prove its fraud claim based on

Kivatinetz’s conclusory assertions that the technology was

incapable of performing at the represented level.

Because AssistMed has not adduced evidence that would permit

a reasonable jury to find that defendants made a false

representation, it cannot prevail on its fraud claim. The court

need not consider defendants’ other two arguments (i.e., no

reliance and no damages) because AssistMed’s failure to produce

proof as to this essential element renders all other facts

immaterial. See Edgar, 2002 WL 318331, at *4. Accordingly, the

court grants defendants’ motion for summary judgment dismissing

AssistMed’s fraud claim.

 

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10AssistMed’s breach of contract claim is only asserted against

CHS. For ease of reference, the court will refer to “defendants”

rather than to “CHS,” unless the context requires otherwise.

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III

Defendants10 move on three grounds for summary judgment

dismissing AssistMed’s breach of contract claim: the License

Agreement’s limitation of liability provision bars AssistMed’s

claimed damages or equitable relief, AssistMed cannot prove

damages, and CHS did not breach the contract.

A

The court turns first to defendants’ contention that

AssistMed’s claim for damages and equitable relief for breach of

contract is barred by the License Agreement’s limitation of

liability provision.

To establish a claim for breach of contract under Texas law,

AssistMed must prove (1) the existence of a valid contract, (2)

that AssistMed performed or tendered performance of its duties

under the contract, (3) CHS breached the contract, and (4)

AssistMed suffered damages as a result of the breach. See Lewis v.

Bank of Am. N.A., 343 F.3d 540, 545 (5th Cir. 2003) (Texas law).

“[I]n general, parties to a contract are free to limit or modify

the remedies available for breach of their agreement.” SAVA

gumarska in kemijska industria d.d. v. Advanced Polymer Sciences,

Inc., 128 S.W.3d 304, 317 (Tex. App. 2004, no pet.)(citing Tex.

Bus. & Com. Code Ann. § 2.719; Frost Nat’l Bank v. Heafner, 12

 

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S.W.3d 104, 110-11 (Tex. App. 1999, pet. denied)). “If the parties

agree to a contractual remedy, that remedy will be enforced unless

it is illegal or against public policy.” Id. (citations omitted).

Section 14 of the License Agreement provides:

IN NO EVENT SHALL CHS BE LIABLE TO

[ASSISTMED], ITS SUCCESSOR AND/OR ASSIGNS, END

USERS, AND/OR SUB-LICENSEES FOR INDIRECT,

INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES

OR DAMAGES DUE TO LOSS OF USE OF DATA OR LOSS

OF PROFITS ARISING UNDER OR IN CONNECTION WITH

THIS AGREEMENT OR OUT OF THE USE OF OR IN

CONNECTION WITH SDSPs. ADDITIONALLY, CHS

SHALL NOT BE LIABLE, REGARDLESS OF THE FORM OF

ACTION, FOR ANY CLAIM ARISING OUT OF OR IN

CONNECTION WITH THIS AGREEMENT BROUGHT MORE

THA[N] ONE (1) YEAR AFTER THE CAUSE OF ACTION

THEREFOR[ ] HAS ACCRUED. NOR FOR ANY SUCH

CLAIM IN AN AGGREGATE TOTAL AMOUNT IN EXCESS

OF AMOUNTS PAID HEREUNDER DURING THE PRECEDING

12 MONTHS.

Ds. App. 23 (emphasis added). Defendants maintain that, under this

clause, the most that CHS can be liable for under the License

Agreement is the total amount of royalties that AssistMed paid CHS

during the preceding 12-month period. And because it is undisputed

that AssistMed never paid CHS any royalties, AssistMed cannot

recover damages for breach of contract. 

AssistMed responds that defendants cannot rely on § 14 because

the clause was never triggered. It posits that the License

Agreement must be given a reasonable interpretation and that, so

interpreted, § 14 does not apply where CHS never sufficiently

performed under the License Agreement. AssistMed also maintains

that defendants’ interpretation of § 14 would render many other

 

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express terms of the License Agreement meaningless by essentially

making some of CHS’s mandatory obligations optional.

Alternatively, it contends that this clause does not bar an award

of monetary compensation ancillary to an award of specific

performance.

B

The court rejects AssistMed’s contention that § 14 cannot

reasonably be construed according to its plain meaning.

Under Texas law, the court’s primary concern

when interpreting a contract is to ascertain

the parties’ true intentions as expressed in

the instrument. To achieve this objective,

the court should examine and consider the

entire writing in an effort to harmonize and

give effect to all the provisions of the

contract so that none will be rendered

meaningless. Language should be given its

plain and grammatical meaning unless it

definitely appears that the intention of the

parties would thereby be defeated. Where the

contract can be given a definite legal meaning

or interpretation, it is not ambiguous and the

court will construe it as a matter of law. A

contractual provision is ambiguous when its

meaning is uncertain and doubtful or if it is

reasonably susceptible to more than one

interpretation. Whether a contract is

ambiguous is a question of law for the court

to decide by looking at the contract as a

whole in light of the circumstances present

when the contract was entered.

Bank One, Texas, N.A. v. FDIC, 16 F.Supp.2d 698, 707 (N.D. Tex.

1998) (Fitzwater, J.) (citations omitted). 

Construing the License Agreement in its entirety, harmonizing

and giving effect to all its provisions so that none is rendered

 

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meaningless, and affording the language of the agreement its plain

and grammatical meaning, it is clear that AssistMed and CHS agreed

to limit damages for any claim, including breach of contract, to

what AssistMed had paid CHS in royalties. Section 14 is a

limitation of liability clause that is written entirely in

uppercase type and reflects the parties’ intent to limit a broad

array of types and categories of damages. It not only limits CHS’s

liability to the total paid in royalties during the preceding 12

months, but it also shields CHS from liability for indirect,

incidental, consequential, or punitive damages, or damages due to

loss of use of data or loss of profits arising under or in

connection with the License Agreement or out of the use of or in

connection with SDSPs. AssistMed attempts to characterize one

sentence of § 14 as unreasonable because it would limit AssistMed’s

damages to zero if, for example, AssistMed paid no royalties

because CHS’s performance was so deficient as to excuse AssistMed

from the obligation to pay them. But if this argument is correct,

the balance of § 14 would also be “unreasonable.” That is, it

would also be “unreasonable” to excuse CHS from liability for

indirect, incidental, consequential, or punitive damages, or

damages due to loss of use of data or loss of profits arising under

or in connection with the License Agreement or out of the use of or

in connection with SDSPs where its performance was so deficient

that it caused AssistMed to suffer such damages. If the court were

 

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to accept AssistMed’s argument, it would be required not only to

read the last sentence of § 14 as “never triggered” in

circumstances where AssistMed had paid no royalties as a result of

CHS’s deficient performance, but it would also be obligated to

disregard § 14 in its entirety. Such a reading would not square

with the plain meaning of § 14 or of the License Agreement as a

whole. Moreover, AssistMed is asking the court to read into § 14

language that is not contained there: that the limitation on

damages to the amount of royalties paid applies only when royalties

are paid.

Nor can the court accept AssistMed’s contention that

interpreting § 14 as does CHS would render meaningless other

contractual provisions that mandate CHS’s performance obligations.

AssistMed argues that certain of CHS’s contractual obligations

would be rendered optional because, without a remedy in damages,

AssistMed could not enforce CHS’s obligations. But contractual

limitations on liability will almost always reduce to some extent

the incentives for a benefiting party to perform its contractual

obligations. If that were enough to vitiate a limitation of

liability proviso, such clauses could rarely, if ever, be enforced,

falling prey to the argument that some mandatory contractual

obligation was rendered unenforceable and “meaningless.” Yet Texas

law makes clear that such clauses will be enforced unless they are

illegal or are against public policy. And this rule necessarily

 

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applies in instances where a party has undertaken mandatory

contractual obligations that, if breached, are remediable only

through limited relief prescribed by a contractual limitation of

liability clause.

C

AssistMed argues in the alternative that it is entitled to a

monetary recovery in connection with its prayer for specific

performance because such an award is in the nature of equitable

relief and thus not contract damages. But the limitation of § 14

is not restricted to contract damages. It limits CHS’s liability

for “any claim arising out of or in connection with this agreement”

to what has been paid during the preceding 12 months, “regardless

of the form of action.” Ds. June 30, 2006 App. 23 (uppercase type

converted to lower case). Therefore, it does not matter whether

Texas law would characterize the recovery AssistMed seeks as

equitable relief rather than damages for breach of contract.

Because AssistMed’s claim indisputably arises out of or in

connection with the License Agreement, the limitation of § 14

applies regardless of the form of action.

Accordingly, because under the plain meaning of the License

Agreement AssistMed cannot recover in damages more than what it has

paid in royalties, and since it is undisputed that AssistMed has

not paid any royalties, the court grants defendants’ motion to the

extent that it holds that AssistMed cannot recover monetary relief

 

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11Although the court has already held that AssistMed cannot

recover monetary relief pursuant to its claim for breach of

contract, see supra § III(B) and (C), it must address the merits of

AssistMed’s breach of contract claim because it may still be

entitled to the equitable remedy of specific performance. See

infra § IV(A).

12In its brief in support of its own motion, AssistMed seeks

summary judgment establishing that the License Agreement was not

terminated for the reason CHS asserted, and that CHS does not have

the right to refuse to develop any SDSP. Although AssistMed is not

entitled to summary judgment establishing the validity of these

claims, the court considers them below to the extent they bear on

defendants’ entitlement to summary judgment dismissing AssistMed’s

breach of contract claim.

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from CHS based on its claim for breach of contract. The court need

not address defendants’ alternative argument that AssistMed has no

evidence of damages arising from a breach of the License Agreement.

D

Defendants contend that AssistMed cannot recover for breach of

contract because CHS did not breach the License Agreement.11

AssistMed maintains in its response and in its own summary judgment

motion that CHS breached the License Agreement by not delivering

the required SDSPs and by violating the exclusive license clause.12

1 

Defendants divide AssistMed’s breach of contract claim into

two parts. Because AssistMed follows this convention in its

response brief, the court will do so as well. The first component

of the claim——“breach of performance”——alleges that CHS breached

the License Agreement by failing to perform under §§ 2(a)

and 3(e)(1). The second part——“breach of exclusive license”——avers

 

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13AssistMed also asserts in its brief that the court should

grant declaratory relief based on its summary judgment motion.

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that CHS breached §§ 1(e), 3(a), and 12(b) by delivering

AssistMed’s licensed technology to other entities. Defendants

maintain that CHS did not breach the License Agreement in either

respect. AssistMed argues in its motion that it is entitled to

summary judgment establishing the merits of both claims.13

 Because defendants will not have the burden of proof on

AssistMed’s breach of contract claim at trial, they can, as here,

point the court to the absence of evidence to support it.

AssistMed must then go beyond its pleadings and produce evidence

that would permit a reasonable jury to find in its favor. For

AssistMed to obtain summary judgment in its own right, it “must

establish ‘beyond peradventure all of the essential elements of the

claim.’” Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878

F. Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.) (quoting

Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). This

is because AssistMed will have the burden of proof on this claim at

trial.

2

a

The court turns first to AssistMed’s breach of performance

claim, and it begins by identifying its proper scope. This claim

rests primarily on two provisions of the License Agreement:

 

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§§ 3(e)(1) and 2(a). Section 3(e)(1) provides that “[AssistMed]

shall meet the following schedule”:

Within forty-five (45) days after CHS delivers

the necessary information relative to SDSPs to

[AssistMed], [AssistMed] and CHS shall

formulate product specifications for the SDSPs

and [AssistMed] shall formulate requirements

for the SDSPs-AssistMed product interface and

deliver all such information to CHS. In

addition, during said period, [AssistMed] and

CHS shall jointly develop acceptance testing

procedures.

Id. at 17-18. Section 2(a) of the License Agreement states: “Upon

execution of this Agreement, CHS shall continue the development, at

its sole cost and expenses, of three (3) specific SDSPs which are

herein described in Exhibit ‘A’ attached hereto and made a part

hereof of this Agreement.” Ds. June 30, 2006 App. 16. 

In ¶ 11 of its second amended complaint, AssistMed alleges

that the “initial information” required under § 3(e)(1) “includ[ed]

but [was] not limited to a documented and working version [of]

MVP.” Id. at 3-4 (2d Am. Compl. ¶ 11). In ¶ 12 AssistMed alleges

that CHS breached the contract by failing to deliver a documented

and working version of the MVP and the three SDSPs. Id. at 4 (2d

Am. Compl. ¶ 12). In its summary judgment response brief, however,

it acknowledges that a proof of concept version of the MVP was

delivered, and it focuses on SDSPs. See P. July 20, 2006 Br. 25.

And a fair reading of AssistMed’s brief in support of its own

motion shows that it is relying on CHS’s failure to deliver SDSPs,

not other “necessary information,” as the basis for the failure-to-

 

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perform component of its breach of contract claim. See, e.g., P.

June 30, 2006 Br. 3-4 (contending that, at a minimum, § 3(e)(1)

must be construed so that “necessary information” includes SDSPs,

and asserting that CHS breached License Agreement by failing to

deliver SDSPs). Accordingly, while the concept of “necessary

information” may be broader for other purposes——such as in

determining whether AssistMed had a full 45-day period to perform

under the License Agreement——AssistMed has not preserved a breach

of performance claim under § 3(e)(1) of the License Agreement that

is broader than a failure to deliver SDSPs.

Concerning § 2(a), AssistMed’s briefing shows that it is

alleging that CHS breached this provision of the License Agreement

by failing to develop all three SDSPs. See P. June 30, 2006 Br. 9

(arguing that § 2(a) obligated CHS to develop all three SDSPs).

In sum, AssistMed’s breach of performance claim is based on

the premises that CHS was obligated under § 3(e)(1) of the License

Agreement to deliver SDSPs and under § 2(a) to develop all three

SDSPs. When AssistMed’s brief in opposition to defendants’ motion

and its brief in support of its own summary judgment motion are

read together, they exclude any additional or alternative bases for

its breach of performance claim.

b

Defendants argue that AssistMed cannot recover on its breach

of performance claim because the summary judgment evidence

 

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establishes that CHS performed its obligations under the License

Agreement by providing AssistMed a demonstration version of the MVP

software in 2002. They also posit that CHS performed by assigning

a consultant to coordinate the development of derivative software

with AssistMed and because Florimbi began a campaign to encourage

AssistMed to participate in the development of product

specifications and requirements. Defendants also assert that

AssistMed ignored its contractual obligations by failing to provide

CHS adequate technology, functionality, or user specifications that

were necessary to development an SDSP and by not introducing CHS to

an AssistMed user or customer. Defendants reject AssistMed’s

allegation that CHS breached the License Agreement by failing to

comply with obligations that defendants maintain are not found

within the License Agreement, i.e., failing to deliver a documented

and working version of MVP and/or a complete, installable, and

marketable copy of MVP or any SDSP. They point to the parties’

obligations under § 3(e)(1) and contend that only after those tasks

were completed could the parties develop a complete, installable,

and marketable copy of an SDSP.

AssistMed responds that defendants’ arguments ignore the clear

language of the License Agreement and the factual development of

the case. It maintains that because Mayo Foundation provided the

apparently preexisting proof of concept to AssistMed, defendants

are arguing that CHS was required to do virtually nothing to comply

 

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with § 3(e)(1), or apparently are asserting that as long as CHS did

something, regardless how ineffective, and called it “necessary

information,” CHS complied with its duties under § 3(e)(1). 

AssistMed also contends that its obligations under the License

Agreement began 45 days after CHS delivered “necessary information”

under § 3(e), and pretrial discovery shows that this was an ongoing

process, including email communications dated as late as midDecember 2004. According to AssistMed, even assuming that CHS

finished providing this information in mid-December, AssistMed

never had the opportunity to complete its contractual performance

because CHS improperly terminated the License Agreement on December

16, 2004. 

In its own summary judgment motion, which it also relies on

to oppose defendants’ motion, AssistMed maintains that CHS did not

provide all the “necessary information” required under § 3(e)(1),

and that there is a genuine issue of fact concerning defendants’

performance that must be resolved at trial. AssistMed reasons that

the License Agreement as a whole requires the court to hold that

CHS’s performance under § 3(e)(1) included providing actual SDSPs,

not the MVP demonstration alone. It urges that although § 3(e)(1)

refers to delivery of information “relative to SDSPs,” § 3(e)(2)

addresses the next phase of development and provides for alpha and

beta testing to commence according to § 3(b), which states that

SDSPs are to be tested once CHS delivers each SDSP to AssistMed.

 

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AssistMed posits that it could not test SDSPs without their being

delivered. And because Florimbi has conceded that no SDSPs were

ever developed under the License Agreement, CHS did not deliver

“necessary information,” or there is a fact question concerning

defendants’ assertion that CHS delivered “necessary information”

and fully performed under the contract.

Concerning § 2(a), AssistMed maintains that defendants

acknowledge that the breach of contract claim is based in part on

this section but then fail to address CHS’s failure to perform

under this provision. AssistMed cites the language of § 2(a) and

(b) to argue that CHS breached its obligations by failing to

develop all three SDSPs under the License Agreement.

Alternatively, it argues that there is a fact issue regarding

whether CHS breached the contract in this respect.

c

i

The court first considers AssistMed’s breach of performance

claim based on § 3(e)(1) of the License Agreement. The court has

set out supra at § III(B) several well-settled principles that

govern the court’s interpretation of the License Agreement, and it

applies them here. Having considered § 3(e)(1) in light of these

principles, the court concludes that CHS’s obligation to deliver

“necessary information” did not require that it deliver an SDSP. 

Section 3(e) as a whole prescribes a “schedule” that AssistMed

 

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must meet. Ds. June 30, 2006 App. 17. Section 3(e)(1) provides

that CHS must deliver to AssistMed necessary information relative

to SDSPs. Within 45 days after the delivery, AssistMed and CHS

must formulate product specifications for the SDSPs and

requirements for the SDSPs-AssistMed product interface and deliver

this information to CHS, and they must jointly develop acceptance

testing procedures. Section 3(e)(2) provides that alpha and beta

testing is to commence in accordance with § 3(b). Section 3(b)

provides that, “[o]nce CHS delivers to [AssistMed] each SDSP, in

conformance to the specifications jointly developed by CHS and

[AssistMed] as set forth in Section 3(e)(1), [AssistMed] shall

commence alpha and beta testing in conformity with the jointly

developed test procedures.” Id. (emphasis added). When these

sections are read together, it is clear that the parties intended

the following: CHS was obligated to deliver to AssistMed the

information necessary to enable CHS and AssistMed to jointly

develop product specifications for SDSPs. Within 45 days after

delivery of this information, AssistMed and CHS were required to

formulate these product specifications and requirements for the

SDSPs-AssistMed product interface and deliver the information to

CHS, and they were obligated to jointly develop acceptance testing

procedures. CHS was then required to deliver SDSPs to AssistMed

that conformed to the specifications that CHS and AssistMed had

jointly developed. Once that occurred, AssistMed was obligated to

 

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commence alpha and beta testing in conformity with the jointly

developed test procedures. Under this interpretation of the

License Agreement, CHS was not obligated to deliver an SDSP to

AssistMed until after CHS and AssistMed had jointly developed

product specifications for the SDSP, which never occurred. In

other words, § 3(e)(1), the provision on which AssistMed relies,

did not obligate CHS to deliver an SDSP.

ii

AssistMed also contends that CHS breached § 2(a) of the

License Agreement. Considering together AssistMed’s brief in

support of its motion and its brief in opposition to defendants’

motion, the court concludes that AssistMed is arguing that CHS

breached this section by failing to develop all three SDSPs. See

P. June 30, 2006 Br. 9; P. July 20, 2006 Br. 26. 

In support of their summary judgment motion, defendants cite

Florimbi’s affidavit for the proposition that AssistMed took no

steps to perform its development obligations under the License

Agreement, i.e., that it never provided adequate technology,

functionality, or user specifications to CHS that were necessary

for the development of an SDSP. They maintain that CHS was

therefore unable to develop any SDSPs and consequently did not

breach the License Agreement. See Ds. June 30, 2006 Br. 35 (citing

 

 Case 3:05-cv-00880-D Document 140 Filed 12/14/06 Page 27 of 49 PageID 3111
14AssistMed objects to Florimbi’s entire affidavit on the

ground that it is not made on personal knowledge, as Rule 56(e)

requires. P. July 20, 2006 Br. 4. The court overrules the

objection to the extent pertinent to the part of the affidavit on

which the court relies in deciding defendants’ motion. Florimbi

states in ¶ 1 of his affidavit that he is “personally acquainted

with the facts herein stated.” Ds. June 30, 2006 App. 583. This

court has held——at least in the context of opposition

affidavits——that an “affidavit need not affirmatively state that

the affiant is competent to testify so long as the record as a

whole shows that [the] testimony meets the requirements of Rule

56.” Crank v. Crank, 1997 WL 538736, at *4 (N.D. Tex. Aug. 21,

1997) (Fitzwater, J.) (citing Lodge Hall Music, Inc. v. Waco

Wrangler Club, Inc., 831 F.2d 77, 80 (5th Cir. 1987); Brueggemeyer

v. Am. Broad. Cos., 684 F. Supp. 452, 463 (N.D. Tex. 1988)

(Fitzwater, J.)), aff’d, 146 F.3d 868 (5th Cir. June 4, 1998)

(unpublished table decision) (per curiam). The court concludes

that Florimbi’s affidavit meets this standard, at least with

respect to the portion on which the court relies. AssistMed also

objects specifically to the last two sentences of ¶ 21, see P. July

20, 2006 Br. 5, but the court is not relying on these sentences and

need not address the merits of the objection.

- 28 -

Ds. App. 590 at ¶ 21).14

In response to defendants’ motion, AssistMed offers three

paragraphs of conclusory assertions to support the premise that CHS

failed to perform under § 2(a) and that there is a genuine issue of

material fact whether CHS breached the License Agreement. See P.

July 20, 2006 Br. 26. The only citations to the summary judgment

record are to the content of § 2(a) and (b) of the License

Agreement and to Florimbi’s admission that in December 2004 no

SDSPs had been developed. None of this evidence addresses the

basis for defendants’ contention that AssistMed cannot prove a

breach of contract claim: that CHS was unable to develop any SDSPs

without the necessary technology, functionality, or user

 

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15There are instances in which the court will not permit a

summary judgment nonmovant to incorporate evidence from a separate

motion into an opposition response. In this case, however, the

cross-motions are sufficiently linked that the court will allow

AssistMed to rely on its own motion as well.

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specifications. AssistMed has failed to cite the court to evidence

that would permit a reasonable jury to find in AssistMed’s favor in

this respect. 

But this failure does not result in summary judgment

dismissing this aspect of AssistMed’s breach of performance claim.

In its opposition response and in its brief in support of its own

motion (which it incorporates in its response),15 AssistMed

introduces evidence that would permit a reasonable jury to find

that AssistMed was not afforded the full 45-day period provided by

§ 3(e)(1) to perform under the License Agreement. According to

AssistMed’s proof, CHS was still providing AssistMed with

“necessary information” within 45 days of the date CHS terminated

the contract. Defendants refute AssistMed’s interpretation of this

evidence, characterizing it as no more than a series of emails

regarding a December 2004 meeting. But a reasonable jury could

interpret the evidence as does AssistMed. In response to a

discovery request, CHS cited the documents on which AssistMed

relies——identified as CHS 442-452 (P. July 20, 2006 App. 99-

109)——as “necessary information” provided under § 3(e)(1). See P.

July 20, 2006 App. 93 (citing CHS 442-452). CHS also referred to

the meeting at Johns Hopkins University (“JHU”) in late 2004 as a

 

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step taken in providing “necessary information.” Id.

Defendants’ argument for defeating AssistMed’s breach of

contract claim based on § 2(a) of the License Agreement is that CHS

was excused from performing due to AssistMed’s failure to provide

adequate technology, functionality, or user specifications that

were necessary for the development of an SDSP. Under Texas law, if

AssistMed prevented CHS from performing the License Agreement,

CHS’s performance is excused. See, e.g., Atkinson Gas Co. v.

Albrecht, 878 S.W.2d 236, 239 (Tex. App. 1994, writ denied)

(holding that performance is excused when party to contract

prevents other party from performing); see also O’Shea v. IBM

Corp., 578 S.W.2d 844, 846 (Tex. Civ. App. 1979, writ ref'd n.r.e.)

(same). But by the same token, if CHS prevented AssistMed from

performing, AssistMed’s performance is also excused. Because a

reasonable jury could find that the 45-day period had not expired

and that CHS prevented AssistMed from performing, defendants cannot

obtain summary judgment dismissing AssistMed’s breach of

performance claim on the ground that CHS was excused from meeting

its contractual obligations under § 2(a) due to AssistMed’s failure

to provide necessary technology, functionality, or user

specifications to develop SDSPs.

Accordingly, the court denies defendants’ motion to the extent

they seek summary judgment dismissing the § 2(a)-based component of

AssistMed’s breach of performance claim, i.e., that CHS breached

 

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16Concerning the exclusive license claim, AssistMed’s brief in

support of its own summary judgment motion is substantially

similar, if not virtually identical, to the part of its response

brief that addresses this claim. The court will therefore discuss

AssistMed’s arguments and evidence as set forth in its response

brief, but the court’s reasoning would not change if it were to

rely instead on AssistMed’s brief in support of its own summary

judgment motion.

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this section of the License Agreement by failing to develop all

three SDSPs. The court also denies AssistMed’s cross-motion, in

which it seeks summary judgment affirmatively establishing this

component of the claim. Based on the foregoing reasoning, the

court concludes that AssistMed cannot establish beyond peradventure

that it is entitled to summary judgment. 

3

Defendants maintain that they are entitled to summary judgment

dismissing AssistMed’s breach of exclusive license claim.

AssistMed moves for summary judgment establishing that CHS violated

the exclusive license clause of the License Agreement.16

a 

AssistMed alleges that CHS breached the exclusivity provisions

of the License Agreement by delivering AssistMed’s SDSPs to JHU and

by transferring AssistMed’s SDSPs to LingoLogix. Defendants argue

that this component of AssistMed’s breach of contract claim must be

dismissed because the License Agreement establishes that AssistMed

was not granted an exclusive license. Citing the language of

§ 3(a) that provides that obtainment of an exclusive license is

 

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“expressly subject to the terms of this Agreement and the specific

schedule set forth in Section 3(e),” and that “[t]he commencement

date for the exclusive grant for each of the SDSPs shall be the

date [AssistMed] accepts each of the SDSPs,” Ds. App. 17,

defendants argue that the parties were required to develop an SDSP

under § 3(e), and that AssistMed was required to accept the SDSP,

in order for AssistMed to obtain an exclusive license, and that the

summary judgment record reflects that CHS and AssistMed never

succeeded in developing any SDSPs. 

Defendants also contend the License Agreement unambiguously

establishes that CHS’s dealings with JHU did not breach the

contract because § 3(a) gave AssistMed an exclusive license only in

the “Field,” which the License Agreement defines as the medical

transcription market. Because there is no evidence that JHU

operates in the same “Field,” CHS did not breach the License

Agreement even if the court assumes arguendo that AssistMed had an

exclusive license. Defendants also posit that there is no evidence

that CHS breached an exclusive license because there is no

way——absent a developed SDSP——to compare JHU’s software to

AssistMed’s software, and there is no evidence that JHU’s software

meets AssistMed’s technical product specifications or requirements

and thus establish that the software breached AssistMed’s license.

Concerning LingoLogix, defendants argue that AssistMed’s claim

fails because there has been no illegal or unlawful transfer of

 

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technology to a separate corporation or evidence or legal reason

why such a transfer violated the License Agreement. And the

summary judgment record shows that CHS rather than LingoLogix has

always held the right to develop derivative software based on the

MVP technology.

AssistMed responds that, by providing SDSPs to third parties,

CHS destroyed its ability to deliver an exclusive license to

AssistMed, and thus breached the License Agreement. It maintains

that the summary judgment evidence establishes that CHS violated

the agreement to make MVP-based derivative software available

exclusively to AssistMed by using the MVP software in software that

it developed for JHU. AssistMed cites similarities between the

general features of “CodeAccess”——one of the three never-developed

SDSPs that are the subject of the License Agreement——and the JHU

“OptiCode” software. It argues that JHU’s software falls within

the “Field” that the License Agreement reserves exclusively to

AssistMed. AssistMed concludes that this is clear evidence of a

breach of the exclusive license provision and a fact issue that

precludes summary judgment.

As to LingoLogix, AssistMed points to its objection to the

affidavit of Brad L. Whitlock. It also contends that the failed

attempt to transfer CHS’s assets to LingoLogix violated § 12(c) of

the License Agreement because CHS warranted that it would have

throughout the term of the contract the exclusive licensing rights

 

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necessary to enable it to license the MVP and SDSPs.

 

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17Differences in the evidence that AssistMed cites in its own

brief versus what it cites in its response brief appear to be the

result of differences in the pagination of the relevant appendixes.

(AssistMed correctly followed the court’s local civil rules by

filing two appendixes.) The court therefore cites the evidence

that AssistMed relies on in its response brief.

- 35 -

b

Even if the court assumes arguendo that AssistMed obtained an

exclusive license in the SDSPs and that JHU operated in the “Field”

reserved exclusively to AssistMed, AssistMed has not cited summary

judgment evidence that would permit a reasonable jury to find that

the JHU OptiCode software violates the exclusive license.

Defendants have pointed to the absence of evidence that the JHU

software is comparable to an SDSP——because no SDSP was ever jointly

developed——and have produced evidence that the JHU application is

materially different. The evidence AssistMed cites in response is

Exhibit A to the License Agreement, see P. July 20, 2006 Br. 28

(citing P. App. 22), which describes “CodeAccess,” and deposition

testimony of Florimbi concerning the JHU software, id. (citing P.

App. 88-89).17 This evidence merely describes at a general level

the CodeAccess and JHU software. It would not permit a jury

reasonably to find that the JHU application is sufficiently similar

to an SDSP that it violates AssistMed’s exclusive license.

As to LingoLogix, AssistMed has not shown that a reasonable

jury could find that CHS breached the License Agreement by

attempting unsuccessfully to transfer assets to that entity.

 

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18Even had the court not granted defendants’ motion on this

claim, it would have denied AssistMed’s motion in this respect. As

noted above, because AssistMed will have the burden of proof on

this claim at trial, to obtain summary judgment it must satisfy the

beyond-peradventure standard. AssistMed cannot meet this high

standard based on the evidence it has adduced.

19In their reply brief, defendants assert a new basis for

granting summary judgment: that specific performance is barred by

the limitation of liability provision of the License Agreement.

Ds. Aug. 7, 2006 Reply Br. 15. The court will not consider a new

- 36 -

The court therefore concludes that AssistMed’s breach of

exclusive license claim cannot serve as a predicate for its breach

of contract claim, and this component of the claim is dismissed.

The court denies AssistMed’s motion to the extent it seeks summary

judgment establishing that CHS breached the exclusive license

clause of the License Agreement.18

IV

Defendants next move for summary judgment dismissing

AssistMed’s requests for equitable relief in the form of specific

performance, reformation, and quantum meruit. 

A

The court turns first to AssistMed’s request for specific

performance. Defendants contend they are entitled to summary

judgment dismissing this request because AssistMed is seeking

equitable relief for personal services that exceeds what CHS is

contractually obligated to perform under the License Agreement, and

the requested relief exceeds the type of specific performance

relief available under Texas law.19 

 

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argument made for the first time in defendants’ reply brief. See,

e.g., Senior Unsecured Creditors’ Comm. of First RepublicBank Corp.

v. FDIC, 749 F. Supp. 758, 772 (N.D. Tex. 1990) (Fitzwater, J.). 

- 37 -

AssistMed responds that summary judgment is premature since

the court must examine all the circumstances, that specific

performance is warranted in this case because the License Agreement

is valid, that CHS refuses to comply with its contractual

obligation to turn over all necessary information, including SDSPs,

and that AssistMed lacks an adequate remedy at law. It also

maintains that it is only seeking relief that falls within the

scope of the License Agreement and that it is requesting specific

performance for corporate, not personal, services. AssistMed

maintains that it is entitled to summary judgment in its favor as

a matter of law, or that a fact issue precludes summary judgment.

The court declines to grant summary judgment dismissing

AssistMed’s request for specific performance, because it cannot say

that all such relief is precluded. AssistMed cites, inter alia,

delivery of three SDSPs as a component of its request for specific

performance. This request does not plainly exceed the scope of the

License Agreement. Nor is AssistMed requesting specific

performance of personal services. See, e.g., Falk v. Axiam Inc.,

944 F. Supp. 542, 552-53 n.3 (S.D. Tex. 1996). And although

defendants maintain that Texas courts will not decree the equitable

remedy of specific performance when it involves a continuous series

of actions extending over a long period of time, the court cannot

 

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20When this court denies rather than grants summary judgment,

it typically does not set out in detail the evidence that creates

a genuine issue of material fact. See, e.g., Swicegood v. Med.

Protective Co., 2003 WL 22234928, at *17 n.25 (N.D. Tex. Sept. 19,

2003) (Fitzwater, J.). Accordingly, the court has discussed the

minimum grounds for concluding that it cannot grant summary

judgment dismissing AssistMed’s request for specific performance.

- 38 -

say at this juncture that requiring CHS to deliver SDSPs will

require such an extensive period of time, or such constant and

continuing court supervision, as to justify denying specific

performance on motion for summary judgment. See Roberts v. Brewer,

371 S.W.2d 424, 425 (Tex. Civ. App. 1963, no writ) (reversing

dismissal of action seeking specific performance based on

conclusion that performance would require constant court

supervision over long time-period where contract contained clear,

concise, and unambiguous language and specific performance would

simply require appellee to place appellant’s machines in her place

of business so long as she operated business); see also Fraud-Tech,

Inc. v. Choicepoint, Inc., 102 S.W.3d 366, 371-72, 386-87 (Tex.

App. 2003, pet. denied) (reversing on other grounds summary

judgment dismissing specific performance claim asserted in context

of licensing agreement for joint development and marketing of

mortgage fraud detection software).

Accordingly, without suggesting that AssistMed would be

entitled to all (or any) aspects of the specific performance remedy

it seeks, the court holds that at least part of this claim for

relief survives summary judgment.20

 

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- 39 -

B

Defendants next seek summary judgment dismissing AssistMed’s

claim for reformation of the License Agreement. They maintain that

reformation is only available when there has been a unilateral

mistake by one party, accompanied by fraud by the other party, and

AssistMed cannot show that it made a unilateral mistake in entering

into the License Agreement or that there are any mistaken terms

that would be subject to reformation. They cite Kivatinetz’s

testimony that the License Agreement embodied the parties’ deal.

AssistMed responds that Kivatinetz’s testimony does not establish

the absence of a mistake by AssistMed and supports its claim of

fraud. 

Defendants are entitled to summary judgment dismissing

AssistMed’s claim for reformation of the License Agreement because

AssistMed misunderstands the nature of this remedy. Under Texas

law, “[w]here there has been a mistake by one party, accompanied by

fraud or other Inequitable conduct of the remaining party, the

instrument may be made to conform to the agreement or transaction

entered into, according to the intention of the parties.” Ace Drug

Marts, Inc. v. Sterling, 502 S.W.2d 935, 939 (Tex. Civ. App. 1974,

writ ref’d n.r.e.) (citations omitted). In other words, the nature

of the remedy is to reform the instrument——here, the License

Agreement. To obtain reformation, AssistMed must be able to point

to a provision of the License Agreement that does not reflect the

 

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- 40 -

parties’ agreement and that was the result of AssistMed’s

unilateral mistake and CHS’s fraud or other inequitable conduct.

That is the point of defendants’ reliance on Kivatinetz’s testimony

that the License Agreement embodied the parties’ deal: to show that

there is no contractual provision to be reformed.

That AssistMed is not actually seeking reformation is

evidenced by an argument it makes in its response brief. It states

that it expects to persuade the court that the License Agreement

“should be reformed to provide AssistMed with, among other things,

the promised ‘developed and complete’ MVP, perhaps by ordering that

CHS provide AssistMed with the MVP source code so that AssistMed

can develop and complete the programs itself.” P. July 20, 2006

Br. 43. This is not an argument for reforming the License

Agreement; it is one for requiring CHS to perform under the one the

parties executed.

Accordingly, the court grants defendants’ motion for summary

judgment as to AssistMed’s request for reformation.

C

AssistMed also seeks quantum meruit relief of at least $29.6

million “for the fair value of the critical insights, work and

services provided by AssistMed to CHS.” D. App. 9 (2d Am. Compl.

¶ 32). 

 

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1

Defendants move for summary judgment dismissing this requested

remedy, contending that the parties entered into an express

contract that covers the services for which AssistMed is seeking

compensation. They also posit that AssistMed did not provide

critical insights, work, or services, and that it cannot establish

that it is entitled to recover $29.6 million. 

AssistMed responds that the ban on a quantum meruit recovery

that applies when services are covered by express contract is

inapposite when a plaintiff partially performed but was prevented

from completing the contract because of the defendant’s breach. It

also argues that it is seeking quantum meruit relief for services

rendered before May 1, 2002 and therefore not covered by the

License Agreement. And it maintains that there is evidence to

support a recovery of $29.6 million.

2

“As a general rule, a plaintiff who seeks to recover the

reasonable value of services rendered . . . will be permitted to

recover in quantum meruit only when there is no express contract

covering those services . . . .” Truly v. Austin, 744 S.W.2d 934,

936 (Tex. 1988) (citing Black Lake Pipe Line Co. v. Union Constr.

Co., 538 S.W.2d 80, 86 (Tex. 1976)). Under Texas law, to recover

under the doctrine of quantum meruit, a party must establish (1)

either valuable services or materials or both were furnished, (2)

 

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21The court need not reach AssistMed’s contention that the

License Agreement does not cover services rendered before May 1,

2002.

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to the party sought to be charged, (3) that were accepted by the

party sought to be charged, (4) under such circumstances as

reasonably notified the recipient that the plaintiff, in

performing, expected to be paid by the recipient. Heldenfels

Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex.

1992)(citing Vortt Exploration Co. v. Chevron USA, Inc., 787 S.W.2d

942, 944 (Tex. 1990)). Truly discusses two circumstances in which

a plaintiff can recover in quantum meruit despite the existence of

an express contract that covers the subject matter of the claim:

(1) where a plaintiff has partially performed an express contract

but, because of the defendant’s breach, the plaintiff is prevented

from completing the contract, and (2) where a plaintiff partially

performs an express contract that is unilateral in nature. Truly,

744 S.W.2d at 936-37.

As the court explains supra at § III(D)(2)(c)(ii) in

addressing AssistMed’s breach of contract claim, there is a genuine

issue of material fact whether CHS prevented AssistMed from

performing at least one aspect of the License Agreement. The court

therefore concludes that AssistMed is not precluded from recovering

in quantum meruit due to the existence of the License Agreement.21

The court also holds that AssistMed has introduced evidence

that would permit a reasonable jury to find that it provided

 

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valuable services that CHS accepted under such circumstances that

reasonably notified it that AssistMed expected to be paid.

AssistMed points to Kivatinetz’s testimony that he originated the

idea of using the MVP software to code medical bills. Although

defendants vehemently contest this evidence, the dispute is

sufficient to require resolution at trial. 

Finally, even assuming arguendo that AssistMed’s evidence

concerning the value of its services would not support an award of

$29.6 million, the court cannot say that a reasonable jury would be

unable to find that they had any value.

Accordingly, the court denies defendants’ motion to the extent

directed to AssistMed’s request for quantum meruit relief.

V

The court now considers AssistMed’s declaratory judgment

claim. 

A

Defendants argue in their motions to dismiss and for summary

judgment that the court should dismiss AssistMed’s declaratory

judgment claim because it does nothing more than duplicate

AssistMed’s claim for breach of contract. They also maintain that

AssistMed is not entitled to any of the relief it seeks because

none is supported by the record or the contract.

AssistMed responds that this court’s prior decisions

dismissing declaratory judgment actions are distinguishable and

 

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22The fact that AssistMed in its declaratory judgment action

asks the court to declare what is “necessary information” does not

undermine the court’s earlier conclusion that AssistMed is suing

under § 3(e)(1) based only on the failure to deliver SDSPs. See

supra § III(D)(2)(a).

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that the declaratory judgment action does not merely restate the

claim for breach of contract. It urges the court to consider both

claims in tandem because there are issues in the declaratory

judgment action that are not necessarily resolved in the context of

the breach of contract claim. AssistMed provides the following

four examples: (1) what information is required as “necessary

information relative to SDSPs” under the License Agreement;22 (2)

whether the software engine referred to as “SAVS” is the same or

substantially the same as the MVP engine and subject to the terms

of the License Agreement; (3) whether other software products that

CHS produced are within the defined “Field” of products subject to

the terms of the License Agreement; and (4) whether CHS is

contractually required to develop more than one SDSP or only one

SDSP.

B 

Federal courts have broad discretion to grant or refuse

declaratory judgment. See Torch, Inc. v. LeBlanc, 947 F.2d 193,

194 (5th Cir. 1991). “Since its inception, the Declaratory

Judgment Act has been understood to confer on federal courts unique

and substantial discretion in deciding whether to declare the

rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286

 

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(1995). It gives federal courts the competence to declare rights,

but it does not impose a duty to do so. See Public Affairs Assocs.

v. Rickover, 369 U.S. 111, 112 (1962) (per curiam). Although “the

district court’s discretion is broad, it is not unfettered.”

Travelers Ins. Co. v. La. Farm Bureau Fed’n, Inc., 996 F.2d 774,

778 (5th Cir. 1993). The court cannot dismiss a declaratory

judgment action “‘on the basis of whim or personal

disinclination.’” Id. (quoting Rowan Cos. v. Griffin, 876 F.2d 26,

28-29 (5th Cir. 1989)). 

This court has dismissed a declaratory judgment action where

“[t]he core issues of th[e] controversy concern[ed] whether the

parties entered into enforceable contracts and, if so, whether

defendants breached the contracts.” Kougl v. Xspedius Mgmt. Co.,

2005 WL 1421446 at *4 (N.D. Tex. June 1, 2005) (Fitzwater, J.). It

reasoned that “[t]hese questions [would] be resolved in the context

of breach of contract actions.” Id. Of the four examples

AssistMed cites, the first and fourth are plainly covered by

AssistMed’s breach of contract claim. The court has resolved what

is the scope of the “necessary information” that serves as the

basis for AssistMed’s lawsuit, see supra § III(D)(2)(a). It has

also addressed the breadth of the term in the context of deciding

whether a reasonable jury could find that AssistMed had the full

45-day period provided by § 3(e)(1) to perform under the License

Agreement. See id. § III(D)(2)(c)(ii). There is no apparent need

 

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23To the extent this issue is pertinent to AssistMed’s request

for specific performance, it can be adequately considered in that

context and need not be addressed as a component of a declaratory

judgment action.

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for the court to interpret the meaning of the term. And the

question whether CHS is contractually required to develop one or

more than one SDSP will be addressed in the context of AssistMed’s

§ 2(a)-based breach of performance claim.

Because AssistMed in its summary judgment response has done

little more than assert that the four examples “are not necessarily

resolved in the context of the breach of contract action,” P. July

20, 2006 Br. 48, the court has little to go on in determining that

they are. Based on its review of the briefing and the record,

however, the only apparent relevance of the third example——whether

other software products that CHS produced are within the defined

“Field” of products subject to the terms of the License

Agreement——is in resolving whether JHU operated in a “Field”

reserved exclusively to AssistMed. Because a reasonable jury could

not find that the JHU OptiCode software violates the exclusive

license, the court need not declare the parties’ rights concerning

the “Field” of products. And even if AssistMed could now identify

other reasons for the court to resolve this issue by declaratory

judgment, it did not adequately brief them.23

Similarly, based on AssistMed’s briefing, it has failed to

show why the second example——whether the software engine referred

 

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24Defendants do not address a fraud defense in their opposition

brief, and they treat AssistMed’s motion as if it is addressed only

to their fraud counterclaims. See Ds. July 24, 2006 Br. 20. In

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to as “SAVS” is the same or substantially the same as the MVP

engine and subject to the terms of the License Agreement——is not

necessarily resolved. The court declines in its discretion to

preserve AssistMed’s declaratory judgment action to resolve this

single issue of uncertain importance.

The court therefore declines in its discretion to hear

AssistMed’s declaratory judgment action, and it dismisses the

action without prejudice.

VI

Defendants seek summary judgment dismissing AssistMed’s claim

for exemplary damages. Because the court has granted summary

judgment dismissing AssistMed’s fraud claim——which is the only

cause of action that would support an award of exemplary

damages——there is no legal basis on which AssistMed can recover

exemplary damages, and this claim is dismissed.

VII

The court now turns to the ground of AssistMed’s motion for

summary judgment that remains to be considered: its contention that

defendants’ fraud counterclaims and defenses are not valid as a

matter of law. Based on the court’s decision above dismissing

AssistMed’s fraud claim and defendants’ summary judgment response,

the court dismisses the fraud counterclaims and defense.24

 

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¶ 31(d) of their November 16, 2005 answer to AssistMed’s first

amended complaint (because defendants have moved to dismiss the

second amended complaint, they have not yet been required to answer

it), defendants assert fraudulent inducement as a defense.

Defendants do not indicate, however, that they desire to litigate

a fraudulent inducement defense separately from a fraudulent

inducement counterclaim. The court thus assumes that it need not

address this defense and that it has effectively been withdrawn.

25This conclusion applies as well to defendants’ fraudulent

inducement defense. See supra at note 24.

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In their response to AssistMed’s motion, defendants maintain

that neither side can recover for fraud. See Ds. July 24, 2006 Br.

21 (“Defendants want to be perfectly clear: Defendants contend that

all fraud claims are barred by the plain language of the License

Agreement and under [Schlumberger Technology Corp. v. Swanson, 959

S.W.2d 171 (Tex. 1997),] as a matter of law.”). They oppose

dismissal of their own fraud claims if the court rejects their

arguments regarding Schlumberger. Id. (“[I]f the Court rejects

CHS’s arguments regarding Schlumberger, CHS’s fraud claims

withstand summary judgment . . . .”). Although the court has not

found it necessary to reach defendants’ relevant arguments——e.g.,

the Schlumberger bar——in deciding defendants’ motion, it has

dismissed AssistMed’s fraud claim. It therefore appears that

defendants do not seek to recover for fraud, and the court

dismisses the fraud counterclaims without prejudice.25

 

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26As noted supra at note 4, because defendants have withdrawn

their claim under the Texas Uniform Declaratory Judgments Act, the

court need not reach this ground of AssistMed’s motion. And as

explained supra at § VII, the court is dismissing defendants’ fraud

counterclaims without prejudice. Therefore, although the court is

denying AssistMed’s motion, defendants’ claims under the Texas

Uniform Declaratory Judgments Act and for fraud are no longer

pending.

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* * *

For the reasons stated, defendants’ June 13, 2006 motion to

dismiss is granted in part and denied in part as moot, and their

June 30, 2006 motion for partial summary judgment is granted in

part and denied in part. AssistMed’s June 30, 2006 motion for

summary judgment is denied as moot.26

SO ORDERED.

December 14, 2006.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE

 

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