### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 17

- 1276
P AIN C ENTER OF SE I NDIANA LLC, T HE P AIN M EDICINE AND R EHABILITATION C ENTER P.C. , and A NTHONY A LEXANDER , M.D. , Plaintiff s

- Appellant s ,

v.
O RIGIN H EALTHCARE S OLUTIONS LLC, SSIMED LLC, O RIGIN H OLDINGS , I NC ., J OHN D OES (1

– 50) inclusive, and J OHN D OES (1

– 100) inclusive, Defendant s

- Appellee s

.

____________________ Appeal from the United States District Court for the Southern D istrict of Indiana, Indianapolis Division

. No. 1:13

- cv
- 00133

- RLY

- DKL

— Richard L. Young , Judge

.

____________________ A RGUED S EPTEMBER 6, 2017

— D ECIDED J UNE 20, 2018

____________________
Before W OOD , Chief Judge , and R OVNER and S YKES , Circuit Judges

.2 No. 17

- 1276

S YKES , Circuit Judge

. In June 2003 Pa in Center of SE Indiana contract ed with a company called SSIMED LLC f or medical

- billing software and related services

. In June 2006 the parties entered into a second contract, this time for record s
- management software and related services. Almost seven years later

— i n January 2013

— Pain Center sued SSIMED raising multiple claims for relief, includin g breach of c ontract , breach of warranty , breach of the implied duty of good faith , and four tort claims , all ar ising out of alleged shortcomings in SSIMED’s software and services.
The district judge found the entire suit untimely and entered summary judgment for SSIMED

. We affirm on all but the claims for breach of contract

. T he judge applied the four

year statute of limitations under Indiana’s Uniform Commercial Code (“UCC”) , ho l d ing that the two agreements are mixed contracts for goods and services , but the goods ( i.e., t he software ) predominate

. We disagree . Under Indiana’s “predominant thru st” test for mixed contracts, the agreements in question fall on the “services” side of the line, so the UCC does not apply. The breach

- of

- contract claims are subject to I ndiana’s ten

- year statute of limitations for written contracts and are timely

. The su it may go forward only on those claims. I. Background The plaintiffs are Pain Center of SE Indiana LLC, a clinic serving patients who suffer from chronic pain ; its founder and sole member , Dr. Anthony Alexander ; and its corporate
successor, The Pain Medicine and Rehabilitation Center P.C. We refer to the plaintiffs collectively as “Pain Center

. ” The d efendant s are SSIMED LLC ; Origin Healthcare Solutions LLC, the corporation that acquired SSIMED LLC in 2005 ;No. 17

- 1276 3

and Origin Holdings, Inc., its indirect parent c orporation

. We refer to them collectively as “SSIMED .” The suit also names 1 50 John Does as defendants , but a s we explain later , these nominal placeholders can be disregarded

. SSIMED provides billing services to healthcare providers through propri etary billing and records

- management software. Its software line includes Practice Manager, a billing program that functions as a platform for submit ting claims to SSIMED for transmission to insurers, and EMRge, a records

- management software that works in conjunction with Practice Manager

. On June 18, 2003, Pain Center entered into an agreement with SSIMED to purchase the Practice Manager software and related services, including ongoing billing services , IT support and electronic claim

submis sion services , and five days of initial training in how to use the software

. Filing claims using SSIMED’s billing s ystem involves several steps

. First, at the end of each day, the healthcare provider enter s into the Practice Manag er program the relevant c laim information for all reimbursable healthcare services performed that day . T he software then transmits the daily closing files to SSIMED in a zip file , and SSIMED generate s claim files from the daily closing information and

sen ds claims to insurers for payment. Claim processing can fail at any st ep of th is process. Certain data

- entry errors by the healthcare provider may prevent successful transmission of daily closing files to SSIMED . O ther errors would not imp ede transmission to the insurer but ca n result in nonpayment of the claim . The healthcare provider can track the status of its claims using a software tool called the Client Center. Claims with e rror s at4 No. 17

- 1276
any step of the process remain in the Client Center until corrected and resubmitted.
D r. Alexander testified in deposition that Pain Center experienced problems with Practice Manager “ [ a ] lmost from the beginning.” More s pecifically, Dr. Alexander noticed

“ [ p ] roblems with accuracy in the amounts that were sent,”

“ [ p ] roblems with dates missing,” and “entire transmissions that had been resent [and then were] missing.” Dr. Alexander confronted SSIMED about these problems in 2003, and SSIMED told him that the insurers were to blame for any unpaid claims. Dr. Alexander testified that Pain Center followed up with health insurers “on numerous occasions,” but the insurers reported that they never received the claims

. Soon after implementing Practice Manager, Dr. Alexander noticed that Pain Center was “losing money like crazy

. ” B ut he insists that he did not realize until much later that SSIMED’s software and services were to blame for his cash

flow problems

. Despite these concerns, Pain Center entered into a second contract with SSIMED o n June 28, 2006

— this time for a software program called EMRge tha t worked in conjunction with Practice Manager to facilitate patient record s management and billing reimbursement

. Like the first contract, this one included the software , five days of initial training in its
use, ongoing billing services , and IT support. D r. Alexander thought that implementing EMRge would resolve the p ayment losses his clinic was suffering

. But just as with Practice Manager, he experienced problems with EMRge “ [ a ] lmost from the beginning. ”
In October 2011 Pain Center hired Demetria Hilton Pierce, a billing specialist, and she immediately noticed thatNo. 17

- 1276 5

some of Pain Center’s claims were going unpaid

. Pierce asked SSIMED about the unpaid claims

. SSIMED directed her to log in to the Client Center

. When she did so , she discovered that the Client Center had not been opened in about 18 months. T housands of unpaid claims had piled up in the meantime . F or many of these claims , the deadline for submission to the insurer had passed

. Pain Center made an effort to recover payment , but the insurers refused to pay the stale claims . Dr. Alexander maintains this was the first time he learned of the Client Center and how it function ed

. On January 24, 2013, Pain Center filed suit against SSIMED alleging that its Practice Manager and EMRge software and related billing services caused these losses. As relevant here , the complaint raised several contract

- based claims ( breach of contract, breach of warrant y , and breach of the implied duty of good faith and fair dealing ) and four tort claims (tortious interfer ence w ith business relations , fraud , fraud in the inducement, and fraudulent misrepresentation )

. O n cross

- motions for summary judgment, the judge concluded that the statute of limitations for each claim had long since expired

. The judge ruled that all of Pain C enter’s claims accrued soon after the execut ion of the two agreements in 2003 and 2006 , respectively, because Dr. Alexander admitted that he was aware of problems with SSIMED’s billing system “ [ a ] lmost from the beginning

. ” Under Indiana law , fraud claim s are subject to a six

- year statute of limitations , so th is accrual ruling meant that all three fraud

- based claims were time

- barred. The tortious

- interference claim was likewise untimely under the applicable two

- year limitations period . T he judge also conc luded that all of the contract

based claims are governed by the UCC because the agree-6 No. 17

- 1276

ments in question were predominantly for the sale of goods

— that is, the software

. Indiana UCC claims are subject to a four

- year statute of limitations , so the judge held t hat these claims too were untimely . Finally, t he judge rejected Pain Center’s argument that equitable tolling saved its claims.
II. Discussion
Before turning to the merits of the judge’s timeliness rulings , we pause to address a lingering doubt about s ubject

matter jurisdiction

. As we’ve explained , the operative c omplaint names as defendants John Does 1

– 100 ( identified only

as shareholders, promoters, or subscribers of Origin Holdings, Inc. ) and John Does 1

– 50 ( identified only as individuals, corporatio ns, o r associations that are somehow responsible for Pain Center’s damages )

. T he parties do not mention the John Does in their jurisdi ctional statements , but we have an independent duty to verify subject

- matter jurisdiction. Dexia Cr é dit Local v. Rogan , 602 F.3d 879, 883 (7th Cir. 2010). The jurisdictional basis for this suit is diversity of citizenship , see 28 U.S.C. § 1332, which requires co mplete diversity between the parties. 1 All of t he plaintiffs are citizens of Indiana , and t he complaint alleges “upon information and belief” that the John Does are not citizens of Indiana . B ut without knowing who or what the John Does might be, their citizenship remains a mystery. Because the pre requi sites for

1 The original complaint included a federal Lanham Act claim, but that claim dropped out early on ; nothing in the record suggests that the judge opted to retain supplemental jurisdiction over the remaining state

- law claims.No. 17

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diversity jurisdiction must be pro ved and not presumed, John Doe defendants are ordinarily forbidden in federal diversity suits. Howell ex rel. Goerdt v. Tribune Entm’t Co. , 106 F.3d 215, 218 ( 7th Cir. 1997).
A n exception applies when t h e John Does are nominal parties

— n othing more than pla ceholders “in the event that during discovery [the plaintiff] identifie [s] any additional defendants he wishe[s] to add to the suit.” Moore v. Gen

. Motors Pension Plans , 91 F.3d 848, 850 (7th Cir. 1996)

. We’ve held that “ t he citizenship of such defendants can be disregarded for diversity jurisdiction.” Dalton v. Teva N. Am

. , No. 17

- 1990, 2018 WL 2470634, at *1 (7th Cir. June 4, 2018) (citing Moore , 91 F.3d at 850 ) ; see also Howell , 106 F.3d at 218. The 150 John Does are mer e placeholders, so we can safely i gnor e them for purposes of diversity jurisdiction. C omplete diversity otherwise exists, so our jurisdiction is secure

. W ith that preliminary matter resolved, we proceed to the merits. W e review the summary

- judgment order de novo, construing the evidence and drawing inferences in Pain Center’s favor

. Indianapolis Airport Auth. v. Travelers Prop

. Cas

. Co. of Am

. , 849 F.3d 355, 361 (7th Cir. 2017).
A. Contract

- B ased C laims
1. Breach of C ontract
The timeliness of Pain Center’s claims for breach of contract depends on whether the contracts fall within the UCC.If the contracts are for the sale of goods and the UCC applies, then the claims are subject to a four

- year l imitations period, see I ND

. C ODE § 26

- 1

- 2

- 725(1), which expired long before Pain Center filed suit. If the UCC does not apply, then the claims are subject to Indiana’s ten

- year statute of limita-8 No. 17

- 1276

tions for written contracts and are timely

. 2 See i d. § 34

- 11

- 2

- 11.
The judge held that the UCC’s four

- year limit ations period applies, reasoning that the agreements in question are mixed contracts for goods and services in which goods predominate. The judge correctly identified the test used in Indiana for resolving a question like this but er red in its application

. W here a contract involves the purchase of a “ pre

existing, standardized software, ” Indiana courts treat it as a contract for the sale of goods governed by the UCC. Olcott Intern. & Co. v. Micro Data Base Sys. , Inc. , 793 N.E.2d 1063, 1071 ( Ind. Ct. App. 2003). On the other hand, where a contract calls for the design of software to meet the buyer’s spec ific needs, Indiana tre at s it as a services contract. Data Processing Servs., Inc. v. L.H. Smith Oil Corp. , 492 N.E.2d 3 14, 318

– 19 (Ind. Ct. App. 1986) , rev’d on other grounds , Insul

– Mark Midwest, Inc. v. Modern Materials, Inc. , 612 N.E.2d 550, 554 (Ind. 1993) . For example , in C onwell v. Gray Loon Outdoor Marketing Group , Inc. , 906 N.E.2d 805 , 812 ( Ind. 2009), the court held that the UCC d oes not apply whe re one party

2 In an alternative ruling, t he judge held that if the UCC does not apply, then the contract claims are subject to Indiana’s six

- year statute of limitations for “action[s] upon promissory notes, bills of exchange, or other written contracts for the payment of money.” I ND

. C OD E § 34

- 11

- 2

- 9. On this alternative view, the claims are also untimely. But as SSIMED conceded at oral argument, the judge’s alternative ruling was incorrect. In diana interpret s “contract s for the payment of money” narrowly; this category includes only cont racts that establish an obligation to pay money and exclud es agreements to pay money in exchange for something else. Folkening v. Van Petten , 22 N.E.3d 818, 822 (Ind. Ct. App. 2014).No. 17

- 1276 9

hires the other to design a custom websi te and provide webhost services

. Here it’s clear that Pain Center licensed SSIMED’s preexisting, standardized software. SSIMED’s sales representative Joy Deckard testified in deposition that the licensing agreements involved “standardized,” “out

- of

- the

- box

- type software.” She also explained that SSIMED does not design custom software to meet the needs of individual healthcare providers

. She acknowledged that a h ealthcare provider could make minor changes to the standard ized software , but she did not elaborate on the precise extent of this capability. In response Pain Center points to evidence that it asked for (and obtained) minor modifications within the confines of the standardized software

. Dr

. Alexander testified that he asked SSIMED to add a question to a patient survey and SSIMED did so. P ain Center’s billing specialist testified that at her request SSIMED arranged for the payment amounts associated with certain billing codes to automatically populate in the software

. Setting up field auto

- population and adding a single survey questi on to a preexisting, standardized software program does not convert it into custom software designed speci fically for a particular purchaser

. Pain Ce nter also seizes on one of SSIMED ’s interrogatory answers stating that it “creat ed [p]laintiff s ’ database from the ground up.” But a s SSIMED explain s , this meant only that it used its standard ized software to create a database with Pain Center’s information : provider names, referring physicians, and procedure codes. That is, SSIMED used its preexisting , standardized software to serve Pain Center’s objectives; it did not design a new, customized software program for its client

.10 No. 17

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Fina lly , Pain Center relies on contract langu age contemplat ing the possibility of purchasing custom programming services . B ut there’s no evidence that Pain Center ever purchased these services or that SSIMED ever offered them

. In sum, b ecause the Practice Manager and EMRge programs were preexisting and standardiz ed, we agree with the district judge that the software should be treated as a good

. And b ecause the two software programs are properly classified as good s , the contracts between SSIM ED and Pain Center are appropriately characterized as mixed contracts for both goods and services.
T o determine whether the UCC applies to a mixed contract for both goods and services, Indiana uses the “predominant thrust test.” Insul

– Mark Midwest , 612 N.E.2d at 554. Indiana c ourts ask whether the predominant thrust of thetransaction is the performance of services with goods incidentally involved or the sale of goods with services incidentally involved. Id. To determine whether serv ices or goods p redominate, the test considers (1) the language of the contract ; (2) the circumstances of the parties and the primary reason the y entered into the contract ; and (3) the relative costs of the goods and services. Id. at 555.
Here t he language of the contra cts is largely a neutral factor, though in some limited respects it points toward a conclusion that services predominate

. Each agreement is a single double

- sided sheet of paper: the front is a simple order form ; the back s upplies the terms and conditions of the agreement. The front also identif ies services ( e.g., “Monthly Services & Suppo rt , ” “On

- site training” ) as well as software ( “SSIMED EMRge” and “S SIMED Practice Manager Suite ” ). Pain Center paid for monthly billing services and IT supportNo. 17

- 1276 11

for the life of the contract s ; the services are described on the back page as including “telephone support,” “on

- line support,” and “electronic claim submission.” The back of the Practice Manager contract also lists the various software modu les incorporated in the Practice Manager software , including modules for collections, appointment scheduling, and electronic

- claim submission, among others. In short , the language of the contract provides slight support for a conclusion that the predominant focus of the se agreements was ongoing billing and IT services and that the softwa re was a tool that allowed SS IMED to perform those services.
The n ext step in the predominant

- thrust test asks us to examin e the parties’ circumstances to determin e whether their primary reason for entering the contract was the goods or the services component

. Pain Center argues that its primary reason for executing these agreement s was to obtain SSIMED’s billing services and that the software was merely a conduit to transfer claims data to SSIMED to allow it to perform those services. SSIMED counters that the parties’ focus was software

— not services

— because Pain Center used the software day in and day out ; it points out that the initial training on the program s lasted a total of only ten days.
Pain Center has the better of this debate

. SSIMED overlooks that Pain Center received monthly billing and IT services for the life of both contracts. In fact, Deckard testified that SSIMED license d its software only when purchased in conjunction with billing and support services. Pain Cent er used the software to input its daily insurance claims and transmit the data via zip file to SSIMED’s billing system

. After receiving a zip file from Pain Center, SSIMED generate d claim s files and submit ted them to insurers. If the insurer12 No. 17

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refused to pay a claim due to an error, SSIMED place d them in the Client Center to be corrected. The software was merely the vehicle through which Pain Center communicated its claim s information to SSIMED in order to access its billing and collection services. This second factor weighs heavily in favor of a conclusion that services predominate and that the goods were incidental

. The third and final factor

— the relative cost of the goods and services

— also points toward that conclusion. As the Indiana Supreme Court has explained , “[i]f the cost of the goods is but a small portion of the overall contract price, such fact would increase the likelihood that the services portion predominates.” Insul

– Mark Midwest , 612 N.E.2d at 555. Under the Practice Manager agreement, Pain Center paid a one

- time licensing fee of $8,000 for software ; a one

time training fee of $2,000 ; and $224.95 each month for services and support for about nine years. Thus, for the life of the Practice Manager agreement, the services totaled approximately $26,294

— more than three times the $8,000 licensing fee for the software

. Under the EMRge agreement, Pain Center paid a one

- time licensing fee of $23,275 for the software ; a one

- time training fee of $4,000 ; and $284 per month for services and support for about six years

. Thus, the services totaled about $ 24,448

— slightly more than the $23,275 software licensing fee. T he relative

- cost factor reinforces the conclusion that services predominate

. On balance , then, t he predominant thrust of the two agreements is medical billing and IT servic es , not the sale of goods . So the UCC and its four

- year limitations period do not apply. I nstead , the breach

- of

- contract claims are subjectNo. 17

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to Indiana’s ten

- year statute of limitations for written contracts and are timely.
B efore moving on, we take a moment to address SSIMED’s argument tha t we should affirm on the alternative ground th at Pain Center cannot show causation or damages

. This requires only brief comment.
SSIMED ’s argument regarding causation is as follows : Pain Center’s claims hinge on its assertion that a software defect caused its losses ; e xpert testimony is required to sh ow that a software defect caused the losses ; and the judge ruled that Pain Center’s proffered expert , Mark Anderson, can testify that the software’s “poor functionality or interface” caused Pain Center’s damages, but he is unqualified to testify that “software defects” caused Pain Center’s damages

— hence , the contract claims fail.
But the breach

- of

- contract claims do not hinge on a contention that a software defect caused the losses. Pain Center asserts that SSIMED failed to satisfy its contractual obli gations and caused losses in a number of respects : it (1) in adequately train ed Pain Center employees ; (2) did not rel iably submit claims to insurers; and (3) failed to notify Pain Center of problems with claims. Pain Center may pr evail on its breach

- of

- con tract claims without proving a particular defect in SSIMED’s software. Regarding damages, SSIMED argues that Pain Center’ s proffered expert testimony is entirely speculative . Because Pain Center has offered other evidence of damages

— including Dr. Alexander’s testimony that thousands of claims went unpaid by insurers

— we do not need to wade14 No. 17

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into questions about t he admissibility of the damages expert ’s t estimony.
Pain Center m ounts a halfhearted effort to convince us to find as a matter of law that S SIMED breached the contracts and is liable for $15 million in damages . That’s a serious overreach. Many material factual disputes remain on the questions of breach, causation, and damages. Indeed , Pai n Center’s own expert could give only a loose range of t he healthcare practice’s damages from unpaid claims: somewhere between $7.2 million and $15 million. We hold only that the breach

- of

- contract claims are timely. On remand Pain Center will have to prove its entitlement to relief

. 2. Breach of Warranty
Pain Center also raised claims for breach of the implied warranty of fitness for a particular purpose and the implied warranty of merchantability. T hese a re UCC claims , see I ND

. C ODE § § 26

- 1

- 2

- 315 , - 314 , and we’ve just explained why the UCC does not apply. T he Indiana Supreme Court has declined to create a common

- law equivalent of the UCC’ s implied

- warranty cause of action in cases between merchants dealing at arm ’ s length

. S ee Insul

– Mark Midwest , 612 N.E.2d at 556

. J udgment for SSIMED on these claims

was therefore appropriate, though on a different ground

. 3. Breach of Implied Covenant of Good Faith
Pain Center ’s final contract

- based claim is one for breach of the covenan t of good

- faith performance , which the UCC implies in every contract. See I ND

. C ODE § 26

- 1

- 1

- 203

. Because the UCC does not apply , this claim drops out too . We note for completeness that this section of the UCC “does not support an independent cause of action for failure to per-No. 17

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form or enforce in good faith.” Id. cmt

. (West 2018)

. And i n In d iana a co mmon

- law duty of good faith and fair dealing arises “only in limited circumstances, such as when a fiduciary relationship exists.” Del Vecchio v. Conseco, Inc. , 788 N.E.2d 446 , 451 (Ind. Ct. App. 2003)

. No fiduciary relationship exists here

. Finally, a nd in any event, such a claim is subject to a two

- year limitations period, id

. (citing I ND

. C ODE § 34

- 11

- 2

- 4(2)), which has long since expired. Th e claim fails for a host of reasons.
B. Tort C laims
Pain Center’s remaining claims sound in tort. T he three fraud claims a re subject to a six

- year limitations period , see I ND

. C ODE § 34

- 11

- 2

- 7(4), and h ere we agree with the district judge that the y are clearly time

- barred. Dr. Alexander testified unequivocally that (1) SSIMED’s software and services did not function as promised “from the beginning” ; (2) he promptly confronted SSIMED about these failures and was told that the insurers were to blame; and (3) he followed up with the insurers “on numerous occasions” and was told that they never received the claims. This testimony establishes that Dr. Alexander was well aware s oon after implementing SSIMED’s billing system in June 2003 and June 2006 that the SSIMED software and services were the source of his billing problems

— not the insurance companies

— and thus that potential claims for misrepresentation existed

. Pain Center contends that the fraud claims accrued aneweach time SSIMED repeated the same alleged misrepresentations. But one of t he essential elements of Indiana c ommon

law fraud is that the misrepresentation “was rightfully relied upon by the complaining party.” Kesling v. Hubler Nissan , Inc. , 9 9 7 N.E.2d 327, 335 (Ind. 2013). Once Pain Center was16 No. 17

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on notice that it had been bamboozled, it could not continue to rely on those same alleged misrepresentations when SSIMED repeated them.
Pain Center also seeks recover y for tortious interference with business relations. The theory underlying thi s claim is hazy , but the argument seems to be that SSIMED’s inadequate software and services led to so many unpaid claims that Pain Center was un able to take advantage of business opportunities. Th is claim is subject to a t w o

- year limitations period

. I ND

. C ODE § 34

- 11

- 2

- 4(a); Miller v. D anz , 36 N.E.3d 455, 457 (Ind. 2015). Here a gain , because Dr. Alexander knew in 2003 and 2006 that SSIMED’s software and services were not performing as represented

— and indeed , that his clinic was suffering obvious cash

- flow problems during this period

— th is claim is plainly time

- barred.
Pain Cente r makes a last

- ditch plea for equitable tolling based on the doctrines of fraudulent concealment and “continuing wrong

. ” Indiana recognizes that a defendant’s fraudulent concealment of a cause of action tolls the statute of limitations. I ND

. C ODE § 34

- 11

- 5

- 1

. Moreover, u nder Indiana’s continuing

- wrong doctrine, when a wrong occurs outside the limitations period and closely related wrongs occur within the limitations period, the plaintiff can recover for all wrongs. Marion County v. Indiana , 888 N.E.2d 292, 29 9 (Ind. Ct. App. 2008). But neither doctrine toll s the statute of limitations if the plaintiff obtains information that should lead to the discovery of the cause of action. Snyder v. Town of Yorktown , 20 N.E.3d 545, 551 (Ind. Ct. App. 2014); C&E Corp. v. R ambo Indus., Inc. , 717 N.E.2d 642, 645 (Ind. Ct. App. 1999). Pain Center had actual knowledge of potential causes of action in 2003 and 2006, which is outside the statutoryNo. 17

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limitations period for all of the tort claims. E quitable tolling cannot save them

. Accordingly , we R EVERSE the judgment only with respect to the cl aims for breach of contrac t and R EMAND for further proceedings. 3 In all other respects, the judgment is A FFIRM ED

.

3 Pain Center asks us to reassign the case to a different judge pursuant to Circuit Rule 36. We see no reason to do so

.