Rush University Medical Center v. Draeger, Inc.

Filing 18

MEMORANDUM OPINION. This matter is before the court on Defendant Draeger, Inc.'s (Draeger) motion to dismiss. For the reasons stated below, the motion to dismiss 11 is denied. Signed by the Honorable Samuel Der-Yeghiayan on 11/16/2017. Mailed notice (ags, )

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RUSH UNIVERSITY
CENTER,

MEDICAL

Plaintiff,

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)
)
)
)

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v.

DRAEGER, INC.,
Defendant.

No. 17 C 6043

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)
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MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendant Draeger, Inc.'s (Draeger) motion
to dismiss. For the reasons stated below, the motion to dismiss is denied.

BACKGROUND
In 2011, Plaintiff Rush University Medical Center (Rush) allegedly entered
into an agreement with Draeger to purchase a patient monitoring system (Draeger
System). The parties allegedly memorialized their agreement in a Product Purchase
Agreement (Purchase Agreement) and a Service Agreement (Service Agreement).
Rush claims that the Draeger System failed to perform as promised by Draeger.

According to Rush, as the Draeger System went live, Rush experienced serious
problems with wire-to-wireless monitoring. Rush contends that such technical issues

created a major safety hazardbecause unless a nurse happened to be in a patient's

room when the system in that room went offline, the patient was left completely

unmonitored. Rush claims that its technical staff needed to expend hundreds of
hours to try and remedy the problems with the Draeger System, and Rush needed to

deploy additional nurses to ensure that patients were properly monitored. Rush
contends that the Draeger System also had other problems, such as failing to provide
proper alarms, providing false alarms, and inaccurately monitoring patients' health

status. Rush further asserts that some of the physical components used by Draeger

continually failed, endangering patients at critical times because the components
were fragile and not suitable for their intended use.

In20l5, Draeger allegedly implemented

a major system software upgrade to a

program. The upgrade allegedly took three months to implement and was
enorrnously disruptive to Rush's operations. Rush also contends that certain patient
event log data was erased on the Draeger System. Rush contends that Draeger failed

to disclose problems with the Draeger System in a timely fashion. In2016, Rush
allegedly decided that it had no choice but to replace the Draeger System. Rush
included in its complaint a breach of contract claim (Count I), an unjust enrichment
claim (Count II), a fraudulent inducement claim (Count III), and a claim brought
under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA),
815 ILCS $ 505/1 et seq. (Count

action.

IV).

Draeger now moves to dismiss the instant

LEGAL STANDARI)
In ruling on a motion to dismiss brought pursuant to Federal Rule of Civil
o'accept
as true all of the allegations
Procedure 12(bX6) (Rule 12(bX6)), a court must

contained in a complaint" and make reasonable inferences in favor of the plaintiff.

Ashcroft v. Iqbal,l29 S.Ct. 1937, 1949 (2009)(stating that the tenet is "inapplicable

to legal conclusiotrs"); Thompson v. Ill. Dep't of Prof'l Regulation, 300 F.3d 750,
753 (7th

Cir.2002). To defeat a Rule 12(bX6) motion to dismiss, "a complaint must

contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face." Iqbal,l29 S.Ct. at 1949 (internal quotations omitted)(quoting
in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that
contains factual allegations that are "merely consistent with a defendant's liability . .
. stops short of the line between possibility and plausibility of entitlement to relief."

Iqbal,129 S.Ct. at 1949 (internal quotations omitted).

DISCUSSTON
Draeger argues that Rush's claims are time-barred and that Rush has failed to
allege sufficient facts to state a valid claim.

I.

Time-Barred Claims
Draeger contends that Rush's claims are time-barred.

A.

Breach of Contract Claim

Draeger argues that the breach of contract claim is untimely. Under Illinois

law, the statute of limitations period is four years for breach of contract claims based
on contracts involving a transaction in goods and covered by Section2-725 of the

Uniform Commercial Code. John Heiman & JTE, Inc. v. Bimbo Foods Bakeries

Distribution Co.,2017 WL 4682732, at *3 (N.D.

I11.

2017). Draeger contends that

according to Rush, the Draeger System went live in January 2012, and Rush

immediately began having problems with the system. Draeger argues that the statute

of limitations for the breach of contract claim began to run in January 2012, and that
the complaint filed in August 2017, was untimely. Draeger argues that even if the
90-day warranty period for the Draeger System is deemed to have delayed the

limitations period from running, the breach of contract claim is untimely.
Rush argues that the breach of contract claim is timely because goods were
extended to Rush in separate deliveries that occurred between 2012 and20l6.
Based on the allegations in the complaint, it cannot be determined whether any new

deliveries after January 2012 were such that they would create new claims and/or
trigger the running of a new statute of limitations period. It is generally premature to
present a statute of limitations defense in a motion to dismiss, and in this case Rush
has not pled allegations that establish on their face that the breach of contract claim

is untimely. See Amin ljbara Equity Corp. v. Vill. of Oak Lawn,860 F.3d 489, 492

(7th Cir. 2017)(stating that "[a] limitations defense is not often resolved on a Rule

4

12(b)(6) motion because 'a complaint need not anticipate and overcome affirmative
defenses, such as the statute of limitations"' but that "dismissal at this early stage is

appropriate when the complaint alleges facts sufficient to establish that the suit is
indeed tardy")(quoting in part Cancer Found., Inc. v, Cerberus Capital Mgmt., LP,
559 F.3d 671,674 (7th Cir. 2009)). The determination of whether the breach

of

contract claim was timely involves an assessment of evidence that is outside of the

pleadings. Thus, it is premature at the pleadings stage to find the breach of contract
claim untimely.

B. Uniust Enrichment

and Fraud Claims

Draeger argues that the unjust enrichment and fraud claims are untimely.

Under Illinois law, the statute of limitations for unjust enrichment and fraud claims
is five years. 735 ILCS 5l13-205; In re Collazo,8l7 F.3d 1047,1050 (7th Cir.
2016); Mann v. Thomas Place, L.P.,976 N.E.2d 554,557 (Ill. App. Ct.2012).
Under the discovery rule, a statute of limitations period does not begin to run until

"the plaintiff knew, or reasonably should have known, that he has been injured and
that his injury was wrongfully caused." John Heiman,2017

WL 4682732, at*5.

Draeger contends that Rush pled in its complaint that it immediately began having
problems with the Draeger System in January 2012. Such allegations, however, are

not sufficient on their face to establish when Rush should have known that Draeger
had been unjustly enriched or that Rush was injured. The mere fact that Rush

encountered some problems with the Draeger System does not necessarily mean that
Rush was aware of being injured for the purposes of the statute of limitations issue.
Based on the facts in this case, the precise determination of when Rush knew or

should have known that it had been injured involves an assessment of evidence
beyond the pleadings. Thus, the statute of limitations arguments as to the unjust
enrichment and fraud claims are premature.

C. ICFA Claim
Draeger argues that the ICFA claim is untimely. Under Illinois law, the
statute of limitations for an ICFA claim is three years. Blankenship v. Pushpin

Holdings, LLC,l57 F. Supp. 3d 788, 792 (N.D.I11.2016). As indicated above,
under the discovery rule, based on the facts in this case, the precise determination
when Rush knew or should have known that it had been injured involves an
assessment of evidence beyond the pleadings. Thus, the statute of limitations

argument as to the ICFA claim is premature.

II.

Sufficiency of Allegations
Draeger argues that even if Rush's claims were timely, Rush has failed to

allege sufficient facts to state a valid claim.

A.

Breach of Contract Claim

of

Draeger contends that Rush has failed to allege sufflrcient facts regarding a
breach of contract claim. Draeger argues that Rush has failed to specifically allege
facts explaining in detail how it performed its own contractual obligations. Draeger
relies upon Illinois state law to support its argument. (Mem. Dis. 10-11). In this
case, however, the federal pleading standard applies rather than the

Illinois pleading

standard. Rush has alleged sufficient facts in its complaint to suggest that it met its
own contractual obligations, stating, for example, that it paid Draeger over $18

million for the Draeger System. (Compl. Par.2,43). Therefore, the motion to
dismiss the breach of contract claim is denied.

B. Uniust Enrichment Claim
Draeger argues that Rush cannot pursue an unjust enrichment claim because
Rush alleges that there was a written contract governing its relationship with

Draeger. Under Illinois law, "fw]here there is an express contract that governs the
relationship of the parties, the doctrine of unjust enrichment has no application."

Martis v. Pekin Mem'l Hosp. lnc.,952,917 N.E.2d 598, 606 (Ill. App. Ct. 2009).
Rush pleads in its complaint that its relationship with Draeger was governed by the
Purchase Agreement and Service Agreement. Rush argues, however, that it can

plead the unjust enrichment claim in the alterative in case the written agreements are

found to be invalid. Since the court has not yet assessed the validity of any written
agreement, Rush can plead the unjust enrichment claim in the alternative.

Therefore, Draeger's motion to dismiss the unjust enrichment claim is denied.

C.

Fraud Claim

Draeger argues that the fraud claim is barred based on the integration clause

in the Purchase Agreement (Integration Clause). Under Illinois law, a plaintiff

bringing a fraud claim must establish: (1) that there was "a false statement of
material fact," (2) that the defendant knew "the statement was false," (3) that the
defendant intended 'othat the statement induce the plaintiff to act," (4) that the

plaintiff relied "upon the truth of the statement," and (5) that the plaintiff suffered
damages as a result of "the reliance on the statement." Massltda v. Panda Exp., Inc.,

759 F.3d 779,783-84 (7th Cir.2014)(internal quotations omitted)(quoting in part

Tricontinental Indus., Ltd, v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 841 (7th

Cir.2007)).
The Integration Clause allegedly provided, in part, the following:

Entire Agreement: Counterparts. This Agreement constitutes the entire
agreement between [Rush] and Seller. Any agreements, promises,
negotiations, or representations not expressly set forth in this Agreement are
ofno force or effect. . . .
(Compl. Ex.

A). Draeger argues that Rush could not have relied upon any oral

statements made to it by Draeger because of the Integration Clause. Under Illinois

law, "an integration clause does not bar a claim of fraud based on statements not
contained in the contract." Vigortone AG Prod., Inc. v. PM AG Prod., [nc.,316 F.3d
641, 644 (7th Cir. 2}}Z)(explaining that "an integration clause prevents a party to a

contract from basing a claim of breach of contract on agreements or understandings,
whether oral or written, that the parties had reached during the negotiations that
eventuated in the signing of a contract but that they had not written into the contract

itself'

and that to prevent fraud suits, contractual parties may "insert a 'no-reliance'

clause into their contract, stating that neither party has relied on any representations
made by the other"). In the instant action, the Integration Clause merely assures the

parties that there are no other agreements governing their contractual relationship
that would supersede the written document. As Rush points out, the Integration
Clause is not a "non-reliance clause" speciffing that Rush agreed that it had not and

would not rely upon any extraneous statements made by Draeger. Thus, the fraud
claim is not barred by the Integration Clause and the motion to dismiss the fraud
claim is denied.

D. ICFA Claim
Draeger argues that Rush has not pled sufficient facts to state a valid ICFA

claim. A plaintiff bringing an ICFA claim must establish: "(1) a deceptive act or
practice by the defendant; (2) the defendant intended that the plaintiff rely on the
deception; (3) the deception occurred in the course of conduct involving trade or
commerce; (4) the plaintiff suffered actual damage; and (5) the damage was

proximately caused by the deception
345

."

Geschke v.

Air Force Ass'n, 425 F .3d 337,

(7thCir. 2005). Draeger argues that Rush could not have relied on any

statements outside of the written agreements based upon the Integration Clause.

However, as explained above, the Integration Clause does not prevent Rush from
claiming reliance and Draeger has not pointed to any "non-reliance" clause in the

written agreements between the parties.
Draeger also argues that Rush is not a consumer protected by the ICFA. The

goal of the ICFA is to protect Illinois consumers and thus, 'o[a] non-consumer

plaintiff suing under the [ICFA] must prove that there is a nexus between the alleged
fraud and consumer injury." GC2 Inc. v. Int'l Game Tech. PLC,255 F. Supp. 3d
812,823 (N.D. Ill. 201 7). Draeger argues that the alleged fraud in this action

involved dealings between two businesses and not consumers. Rush argues that in
regard to the Draeger System, it acted as a consumer of services. Under Illinois law,
a business entity can be deemed a consumer in the

ICFA context. Law Offices of

William J. Stogsdill v. Cragin Fed. Bankfor fiav.,645 N.E.2d 564,566-67 (Ill. App.

Ct. 1995). Draeger cites to Downers Groye Volkswagen, Inc. v. Wigglesworth
Imports, lnc,,546 N,E.2d 33 (I11. App. Ct. 1989) in support of its argument that Rush
is not protected by the ICFA. However, in Downers, the plaintiff business entity
was a competitor of the defendant business entity bringing claims relating to alleged
statements to consumers by the defendant as to the

plaintiff s services. In the instant

action, Rush is not seeking to sue a competitor and Rush purchased services from

Draeger. Rush thus acted as a consumer in this case. Under Illinois law, "[t]he fact
that both parties to the transaction are business entities does not render the IICFA]

10

inapplicable;' Law Offices of Llrilliam J. StogsdiU,645 N.E.2d at 566-67.
Therefore, the motion to dismiss the ICFA claim iidenied.

CONCLUSION
Based on the foregoing analysis, Draeger's motion to dismiss is denied.

samuel L,er- Y egnnyan
United States District Court Judge

Dated: November

16, 2017

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