Infectious Disease Solutions, P.C. v. Synamed, LLC et al
ORDER granting Defendants' 101 Motion for Summary Judgment -- For the reasons set forth in the ATTACHED WRITTEN OPINION AND ORDER, Defendants' motion for summary judgment is granted in its entirety. Accordingly, this action is DISMISSED. The Clerk of the Court is directed to enter judgment in favor of defendants and to close this case. SO ORDERED by Judge Dora Lizette Irizarry on 3/30/2012. (Irizarry, Dora)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
INFECTIOUS DISEASE SOLUTIONS, P.C.,
SYNAMED, LLC, SYNABILLING, INC., BACK :
KIM, M.D., and BACK KIM, M.D., P.C.,
DORA L. IRIZARRY, United States District Judge:
OPINION AND ORDER
07-CV-5423 (DLI) (MDG)
On December 28, 2007, Plaintiff Infectious Disease Solutions, P.C. (“Plaintiff” or “IDS”)
commenced this diversity action against defendants Synamed, LLC (“Synamed”) and Synabilling,
Inc. (“Synabilling”). On September 18, 2009, Plaintiff served a second amended complaint (“2d
Am. Compl.”) on the above referenced defendants and included additional defendants Back Kim,
M.D. (“Kim”) and Back Kim, M.D., P.C. (“Kim P.C.,” collectively with Kim, Synamed and
Synabilling, “Defendants”). On September 23, 2010, Defendants moved for summary judgment
pursuant to Federal Rule of Civil Procedure 56. For the reasons set forth below, Defendants’
motion is granted in its entirety.
Plaintiff is a medical practice which specializes in care for patients with high risk
infectious diseases. 1 (Plaintiff’s Local Rule 56.1 Statement of Facts to Which Exists [sic] a
Plaintiff’s Local Civil Rule 56.1 statement fails to comply with the requirements of the rule.
Rather than providing a concise statement of additional material facts as to which it contends that
there exists a genuine issue to be tried, Plaintiff merely copied and resubmitted large portions of
its complaint. Additionally, Plaintiff inaccurately cites its own exhibits throughout its 56.1
statement. However, except as where otherwise noted, Defendants do not dispute Plaintiff’s 56.1
Genuine Issue to be Tried (“Pl. 56.1”) ¶ 1; Defendants’ Response to Plaintiff’s Statement of Facts
to Which Exists a Genuine Issue to be Tried (“Def. 56.1 Response”) ¶ 1.) Synamed provides
Practice Management Software (“PMS”) and Electronic Medical Records Systems (“EMR,”
together with PMS, the “Synamed System”) to physicians. (Pl.’s 56.1 ¶ 1; Declaration of Kim
Back, M.D. (“Kim Decl.”) ¶ 2.) PMS gives certain management capabilities to medical practices
such as calendaring, scheduling, accounting and electronic billing. (Pl.’s 56.1 ¶ 2; Def. 56.1
Response ¶ 2.) The EMR is a web based portal that allows a medical practice to access its patient
records stored on Synamed’s computer servers. (Id.) Synabilling provides medical billing and
collections services to physicians. (Pl.’s 56.1 ¶ 1; Kim Decl. ¶ 3.) Dr. Kim is the President and
sole owner of Synamed and Synabilling. Synamed and Synabilling are financed by Dr. Kim’s
medical practice, Back Kim, M.D., P.C. (Pl.’s 56.1 ¶ 1; Def. 56.1 Response ¶ 1.)
The Synamed Contract
On or about August 25, 2004, Synamed contacted IDS by email offering to provide IDS
with “turnkey EMR, Billing, E-prescribing, Scheduling, Task and Work Flow Management
solution with lab connectivity, image center and drawing module.”
(Declaration of Christine
Ann Zurawski, M.D. (“Zurawski Decl.”) ¶ 2 & Ex. A; Def. 56.1 Response ¶ 2.) Based on this
representation, IDS entered into a “Subscription Agreement (3-Year Lease)” contract with
Synamed effective January 19, 2005 (the “Synamed Contract”). (Pl.’s 56.1 ¶ 2; Kim Decl. ¶ 4 &
Ex. A.) The contract required Synamed to provide IDS with, inter alia, “the delivery of secure
access over the internet to a customized and integrated application of [Synamed’s] Electronic
Medical Records (“EMR”) software[.]” (Id.)
statement of facts. Accordingly, the court cites to both Plaintiff’s and Defendants’ 56.1
Statements to frame the background of this action.
The Synamed Contract includes a choice of law/forum clause stating the Synamed
Contract is governed by the laws of the State of New York. (Kim Decl., Ex. A; Plaintiff’s
Response to Defendants’ Statement of Undisputed Material Facts (“Pl. 56.1 Response”) ¶ 3.) The
This Agreement and performance hereunder shall be governed by
and construed in accordance with the laws of the State of New York
. . . [a]ny and all proceedings related to the subject matter hereof
shall be maintained in the New York State Supreme Court for the
County of Queens, or the United States District Court for the
Eastern District of New York, which courts shall have exclusive
jurisdiction for such purpose.
(Kim Decl., Ex. A.) The Synamed Contract also has a “Limitation of Liability” section which
provides in pertinent part:
ANY ACTION OF ANY KIND ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT OR THE
WEBSITE MUST BE COMMENCED WITHIN ONE (1) YEAR
OF THE DATE UPON WHICH THE CAUSE OF ACTION
[SYNAMED] SHALL HAVE NO LABILITY TO [IDS] FOR
ANY DIRECT OR INDIRECT, SPECIAL, INCIDENTIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
“[IDS] ACKNOWLEDGES AND AGREES THAT THE
FOREGOING LIMITATIONS OF LIABILITY AND REMEDIES
REPRESENT BARGAINED FOR ALLOCATIONS OF RISK
WHICH WERE NEGOTIATED AT ARM’S LENGTH.”
(Id.) The Synamed Contract required IDS to pay Synamed a monthly subscription fee for both
the EMR and PMS services. (Pl.’s 56.1 ¶ 2; Kim Decl., Ex A.) At the direction of Synamed, IDS
entered into a financing agreement with a third party, HSPC, Inc. (“HSPC”), which obligated IDS
to makes its monthly subscription payments directly to HSPC.
(Pl.’s 56.1 ¶ 2; Def. 56.1
Response ¶ 2.) In turn, HSPC made a lump sum payment to Synamed at the outset of the
Synamed Contract. (Id.) At the time, IDS believed it was making payments to Synamed through
HSPC and that HSPC was merely the servicing agent for payment. (Dep. of Christine Ann
Zurawski, M.D. (“Zurawski Dep.”) at 89, 225, attached as Ex. A to Decl. of Adam Joffee, Esq.
(“Joffee Decl.”); Def. 56.1 Response ¶ 2.)
IDS began using the Synamed System in late February or early March of 2005 and IDS
alleges that, from its inception, the Synamed System and services were defective. (2d Am.
Compl. ¶ 29; Def. 56.1 ¶ 19.) Between April 18, 2005 and May 31, 2005, IDS sent multiple
electronic correspondences to Synamed detailing problems with the Synamed System and
requesting training and support. (Pl.’s 56.1 ¶ 3; Defendants’ Local Rule 56.1 Statement (“Def.
56.1”) ¶¶ 6-7; Kim Decl., Exs. C-F.) Eventually, Synamed denied IDS’s requests for training and
declined to provide IDS with additional support. (Pl.’s 56.1 ¶ 3; Def. 56.1 Response ¶ 3.)
As a result of the difficulties IDS encountered with the Synamed System, IDS’s accounts
receivables greatly increased and IDS suffered financial distress. (Pl.’s 56.1 ¶¶ 3, 5; Def. 56.1
Response ¶¶ 3, 5.) In March of 2006, Defendants approached IDS and offered to provide
additional services to manage IDS’s billing. (Pl.’s 56.1 ¶ 5; Def. 56.1 Response ¶ 5.) As part of
contract negotiations, Defendants offered to provide the Synamed EMR for free to IDS during the
time Synabilling managed IDS’s billing and collection needs. (Pl.’s 56.1 ¶ 5; Def. 56.1 Response
The Synabilling Contract
On March 13, 2006, IDS entered into a six-month “Billing and Collection Services
Agreement” with Synabilling (the “Synabilling Contract,” together with the Synamed Contract,
the “Contracts”). (Pl.’s 56.1 ¶ 6; Kim Decl. ¶ 5 & Ex. B.) The Synabilling Contract required
Synabilling to provide “comprehensive collection solutions and services.” (Kim Decl., Ex. B.)
The Synabilling Contract further provides that “[Synabilling] will maintain records regarding its
rendition of Services and the status of [IDS] accounts. On a monthly basis, [Synabilling] will
provide to [IDS] its standard financial and other reports.” (Id.) Additionally, the Synabilling
Contract states “SynaMed will provide IDS . . . a Free EMR solution for all physicians including
[certain enumerated] functionality [.] Furthermore, SynaMed shall make the IDS’s monthly lease
payments [to HSPC] until the end of the lease period [.]” (Id.)
In consideration for Synabilling’s services, IDS made an advance payment of $20,000 to
Synabilling at the outset of the Synabilling Contract to cover billing and collections from
December 31, 2005 to February 26, 2006. Further, the Synabilling Contract entitled Synabilling
to a percentage of all outstanding bills it collected from March 1, 2006 onward. (Pl.’s 56.1 ¶ 6;
Kim Decl., Ex. B.) As part of the Synabilling Contract, IDS enabled Synabilling to have access
to IDS’s bank accounts from which it debited its fees. (Pl.’s 56.1 ¶ 8; Kim Decl., Ex. B.)
The Synabilling Contract is governed by the laws of the State of New York. (Def. 56.1 ¶
9; Pl. 56.1 Response ¶ 9; Kim Decl., Ex. B.)
The Synabilling Contract includes an
“Indemnification and Limitation of Liability” section providing:
Any cause of action brought by [IDS] against [Synabilling] relating
to this Agreement or [Synabilling’s] performance hereunder must
be commenced within one (1) year after the date when such cause
of action accrues.
(Kim Decl., Ex. B.) The “Indemnification and Limitation of Liability” section further provides
SHALL NOT HAVE ANY LIABILITY TO [IDS] FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL
DAMAGES FOR ANY ACT OR OMISSION ARISING OUT OF
OR IN CONNECTION WITH THE AGREEMENT OR
INCLUDING WITHOUT LIMITATION, ANY THIRD PARTY
CLAIMS AND ANY LOSSES, EXPENSES, OR DAMAGES
INCURRED BY REASON OF LOST PROFITS OR SAVINGS.
Neither Synabilling nor Synamed made any lease payments to HSPC on behalf of IDS to
cover the monthly cost of the EMR service during the duration of the Synabilling Contract. (Dep.
of Holly Demuro (“Demuro Dep.”) at 143-144, attached as Ex. B to Joffe Decl.) Moreover,
Synabilling did not provide IDS with standard financial reports detailing Synabilling’s collection
efforts and explaining the fees charged to IDS.
(Pl.’s 56.1 ¶ 6; Def. 56.1 Response ¶ 5.)
Accordingly, in September of 2006, IDS terminated its agreement with Synabilling and continued
attempting its own billing and collections through the Synamed PMS system. (Pl.’s 56.1 ¶ 9; Def.
56.1 Response ¶ 9.)
Georgia and New York Actions
On January 24, 2007, IDS commenced an action against defendants Synamed,
Synabilling, and Kim in the United States District Court for the Northern District of Georgia (the
“Georgia Action”). (Def. 56.1 ¶ 13; Pl. 56.1 Response ¶ 13; Declaration of Philip C. Chronakis,
Esq. (“Chronakis Decl.”), Ex. 1.) On August 24, 2007, the Georgia Action was dismissed,
because the Contracts contain enforceable forum selections clauses making New York the
exclusive forum for a cause of action. (Pl.’s 56.1 ¶ 10; Def. 56.1 ¶ 16; Chronakis Decl., Ex. 2.)
On December 28, 2007, IDS commenced the instant action alleging breach of contract,
fraud, breach of the covenant of good faith and fair dealing, and violation of New York General
Business Law § 349 (“GBL § 349”). (2d Am. Compl. ¶¶ 68-103.) As part of the judgment
sought, IDS requests imposition of consequential and punitive damages as well as attorney’s fees
and costs pursuant to GBL § 349. Plaintiff also seeks to “pierce the corporate veil” and recover
damages from Back Kim, M.D., in his personal capacity and/or from Back Kim, M.D., P.C. (Id.)
On September 23, 2010, Defendants moved for summary judgment on the following
grounds: (1) Plaintiff’s contract-based claims are time-barred; (2) Plaintiff’s claims for
consequential and punitive damages are precluded by the Contracts’ limitation of liability
provisions; (3) Plaintiff’s fraud based claims should be dismissed because the alleged fraud only
relates to breach of contract; and (4) Plaintiff’s GBL § 349 claim should be dismissed because
the parties’ transactions were not consumer oriented. Defendants further assert that (5) the
dismissal or limitations of any claims against Synamed or Synabilling warrant the same dismissal
or limitations against Back Kim, M.D. and Back Kim, M.D., P.C. 2 (See Dkt. Entry No. 101,
Mem. of Law in Supp. of Defs.’ Mot. for Summ. J. (“Def. Mem.”) at 9.)
Summary judgment is appropriate where “the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c). The court must
view all facts in the light most favorable to the nonmoving party, but “only if there is
a ‘genuine’ dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380 (2007). “When opposing
parties tell two different stories, one of which is blatantly contradicted by the record, so that no
reasonable jury could believe it, a court should not adopt that version of the facts for purposes of
ruling on a motion for summary judgment.” Id. A genuine issue of material fact exists if “the
Defendants also move for summary judgment striking certain of Plaintiff’s expert reports. (Def.
Mem. at 9.) Because summary judgment is granted as to Defendants’ other claims, the issue of
the expert reports is moot.
evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The nonmoving party, however, may not rely
on “[c]onclusory allegations, conjecture, and speculation,” Kerzer v. Kingly Mfg., 156 F. 3d 396,
400 (2d Cir. 1998), but must affirmatively “set out specific facts showing a genuine issue for
trial.” FED. R. CIV. P. 56(e). “When no rational jury could find in favor of the nonmoving party
because the evidence to support its case is so slight, there is no genuine issue of material fact and
a grant of summary judgment is proper.” Gallo v. Prudential Residential Servs., Ltd. P’ship., 22
F. 3d 1219, 1224 (2d Cir. 1994) (citing Dister v. Cont’l Group, Inc., 859 F. 2d 1108, 1114 (2d
A. Whether the Uniform Commercial Code or Common Law Governs the Contracts
As an initial matter, the court must determine the appropriate standards of law that govern
the Contracts. The Synamed Contract provided IDS a three-year lease of Synamed’s web-based
EMR and PMS programs. (Kim Decl. ¶¶ 2-3 & Ex. A; Pl. 56.1 ¶ 2.) Defendants argue Synamed’s
EMR and PMS web-based computer software is a tangible and movable item that should be
categorized as a “good” and thereby governed by Article 2 of New York’s Uniform Commercial
Code (“NY-UCC”). (Def. Mem. at 10.) Plaintiff does not dispute this claim, but instead offers
alternative arguments under the NY-UCC and the common law with respect to each claim related
to the Synamed Contract. (See generally Pl. Br.)
A review of New York case law suggests computer software is appropriately categorized
as a good under the NY-UCC. See Architectronics, Inc. v. Control Sys., Inc., 935 F. Supp. 425,
432 (S.D.N.Y. 1996) (citing New York State cases) (noting under the NY-UCC that “[g]enerally,
software is considered a ‘good,’ even though a finished software product may reflect a substantial
investment of programming services.”); Richard A. Rosenblatt & Co., Inc. v. Davidge Data Sys.
Corp., 295 A.D. 2d 168, 168, (1st Dep’t 2002) (contract for computer hardware and software user
rights is a contract for the sale of goods); Commc'ns Groups, Inc. v. Warner Commc'ns, Inc., 138
Misc. 2d 80, 83 (N.Y. Civ. Co. Ct. 1988) (“[I]t seems clear that computer software, generally, is
considered by the courts to be a tangible, and movable item, not merely an intangible idea or
thought and therefore qualifies as a ‘good’ under Article 2 of the UCC.”). Accordingly, the court
will evaluate the Synamed Contract under NY-UCC Article 2-A, which governs leases.
Defendants argue that the Synabilling Contract is a contract for services which is governed
by the common law. (Def. Mem. at 15.) Plaintiff does not dispute this claim. (See generally Pl.
Br.) The court agrees that the common law controls the analysis of the Synabilling Contract.
B. The Contracts’ Statute of Limitations Clauses
Defendants contend they are entitled to summary judgment in their favor with respect to
Plaintiff’s claims for breach of contract (2d Am. Compl. ¶¶ 68-82) and breach of the covenants of
good faith and fair dealing (2d Am. Compl. ¶¶ 93-97) because the claims are time-barred as a
matter of law under the terms of the Contracts. (See Mem. of Law in Supp. of Defs.’ Mot. for
Summ. J. (“Def. Mem.”) at 13-18, Dkt Entry 101.) As discussed in more detail below, when
viewing the facts in the light most favorable to the non-moving party, the court finds Plaintiff’s
contract-based claims are time-barred by the Contracts’ one-year limitations provision.
Accordingly, summary judgment is granted in Defendants’ favor as to those claims.
i. Synamed Contract’s Limitations Period
Defendants argue Plaintiff’s contract-based claims against Synamed should be dismissed
because they were brought after the expiration of the one-year statute of limitations period set
forth in the Synamed Contract. Specifically, Defendants argue Plaintiff’s claims accrued no later
than April 18, 2005. (Def. Mem. at 14.) Thus, according to Defendants, Plaintiff had until no
later than April 18, 2006 to bring its action, approximately nine months before Plaintiff
commenced the Georgia Action. Plaintiff contends its cause of action is not time-barred because
it did not accrue until January 19, 2008, the date the agreement terminated on its own terms,
because of reasonable assurances made by Defendants that the problems with the Synamed
System would be cured. (Pl. Br. at 16 (citing NY-UCC § 2-A-517(1)(a).) Based on the record
before the court, the court finds that Plaintiff’s cause of action accrued more than a year before it
commenced the Georgia Action and, thus, was commenced after the expiration of the Synamed
Contract’s limitations period. Consequently, Plaintiff’s contract claims against Synamed are
time-barred and must be dismissed.
Under the terms of the Synamed Contract “ANY ACTION OF ANY KIND ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE WEBSITE
MUST BE COMMENCED WITHIN ONE (1) YEAR OF THE DATE UPON WHICH THE
CAUSE OF ACTION AROSE.” (Kim Decl., Ex. A.) As noted supra in Part II.A, the Synamed
Contract is governed by Article 2-A of the NY-UCC. Generally, “[a]n action for default under a
lease contract . . . must be commenced within four years after the cause of action accrued.” NY
UCC § 2-A-506(1). However, “the parties may reduce the period of limitation to not less than
one year.” Id. Accordingly, on its face, the provision in the Synamed Contract reducing the
period in which to bring a cause of action to one year is valid and enforceable. See Cadlerock
Joint Venture, L.P. v. Remillard, 56 A.D. 3d 1095, 1096 (3d Dep’t 2008) (dismissing claim
commenced after the limitation period set forth in NY UCC § 2–A–506(1)); see also Gruet v.
Care Free Hous. Div. of Kenn-Schl Enter., 305 A.D. 2d 1060, 1061 (4th Dep’t 2003) (agreed
upon one-year statute of limitations for commencement of an action for breach of contract valid
and enforceable pursuant to NY-UCC § 2–725(1)).
A cause of action for default under a lease accrues “when the act or omission on which the
default or breach of warranty is based is or should have been discovered by the aggrieved party,
or when the default occurs, whichever is later.” NY-UCC § 2-A-506(2). The record establishes
that Plaintiff discovered the breach or default sometime between the middle of April and the end
of May of 2005. As such, Plaintiff’s cause of action accrued, at the latest, on May 31, 2005.
Between April 18, 2005 and May 31, 2005, Plaintiff sent numerous emails to Synamed
regarding problems Plaintiff was experiencing with the Synamed System. (Kim Decl., Exs. C-F.)
Specifically, on April 29, 2005, Plaintiff sent an email to Synamed with an attached document
labeled “Synamed Problems.” (Id., Ex. C.) The document enumerated twenty (20) discrete
problems with the Synamed System.
Plaintiff sent an addendum to the “Synamed
Problems” list, enumerating additional problems that Plaintiff experienced on May 5 and May 13
of 2005. (Id., Ex. D.) Finally, Plaintiff sent an email on May 31, 2005, explaining that the
Synamed System’s inability to change a service provider was “going to be a long standing
problem.” (Id., Ex F.) Notably, Plaintiff, who began using the Synamed System in February or
March of 2005, alleges it was defective from the very beginning. (2d Am. Compl. ¶ 29; see also
Zurawski Dep. at 116, 126 (detailing problems with the EMR system).) The record thus shows,
according to Plaintiff, that: (1) upon first use Plaintiff immediately experienced problems with the
Synamed System; (2) the Synamed System was defective from the very beginning; and (3)
Plaintiff was aware of and complained of the problems with the System between mid-April and
late-May of 2005. Accordingly, the record establishes that Plaintiff’s cause of action against the
Synamed Contract accrued no later than May 31, 2005.
Plaintiff does not dispute these facts, but instead argues, under NY-UCC §§ 2-A-508(1) 3
and 2-A-517(1)(a), that its cause of action did not accrue until the lease terminated on its own
terms on January 19, 2008. (Pl. Br. at 16.) NY-UCC § 2-A-517(1)(a), relates to finance leases
and states in pertinent part:
(1) A lessee may revoke acceptance of a lot or commercial unit
whose nonconformity substantially impairs its value to the lessee if
the lessee has accepted it:
(a) except in the case of a finance lease, on the reasonable
assumption that its nonconformity would be cured and it has
not been seasonably cured . . . .
According to Plaintiff’s interpretation of NY-UCC § 2-A-517(1)(a), “the cause of action did not
accrue, and the limitations period did not begin to run [until January 19, 2008] because of the
reasonable assurances by the Defendants the problems would be cured.” (Pl. Br. at 16.) Plaintiff
provides no legal authority or argument to support its interpretations of these NY-UCC sections
or to explain their applicability to the Synamed Contract because it cannot as its analysis of NYUCC § 2-A-517(1)(a) is flawed.
Plaintiff’s reliance on NY-UCC § 2-A-517(1)(a) is erroneous as the lease arrangement
between Synamed and IDS simply is not a finance lease as defined by the NY-UCC. The
definition of “finance lease” is conjunctive, requiring, inter alia, a lease with respect to which:
“(i) the lessor does not select, manufacture, or supply the goods; (ii) the lessor acquires the goods
or the right to possession and use of the goods in connection with the lease; and (iii) [the
occurrence of one of three addition elements.]” NY-UCC § 2A-103(1)(g).
In a finance lease
arrangement “the lessee negotiates directly with the supplier or manufacturer and then arranges
NY-UCC § 2-A-508(1) designates NY-UCC § 2-A-517 as the section that governs a lessee’s
remedy where the lessee justifiably revokes acceptance of the goods.
for the lessor to buy the goods to lease them to the lessee.” Direct Capital Corp. v. New ABI Inc.,
13 Misc. 3d 1151, 1160-61 (N.Y. Sup. Ct. 2006) (quoting Gen. Elec. Capital Corp. v. Nat’l
Tractor Trailer Sch., Inc., 175 Misc. 2d 20, 27 (N.Y. Sup. Ct. 1997). Thus, in a finance lease “the
lessor is only supplying the funds to cover the cost of merchandise or equipment that is actually
selected and purchased at the lessee’s direction from a third party vendor.” Id. at 1164. The
Synamed Contract does not meet the definition of a finance lease. While the Synamed Contract
involved a third-party (HSPC), Synamed was the manufacturer and supplier of the Synamed
System. Synamed did not purchase the Synamed System from HSPC and lease it to Plaintiff, as
is required for a lease to qualify as a finance lease. HSPC merely purchased the right to collect
payments on the Synamed System lease. Accordingly, NY-UCC § 2-A-517(1)(a) is inapplicable
to the Synamed Contract and Plaintiff’s claim that the cause of action did not accrue till January
19, 2008 is meritless. 4
In viewing the facts in the light most favorable to Plaintiff, the court finds there are no
genuine disputes of material fact regarding Plaintiff’s contract-based claims. Accordingly, the
court finds these claims against Synamed are time-barred and summary judgment is granted in
favor of Defendants as to Plaintiff’s contract-based claims.
ii. Synabilling Contract’s Limitations Period
Defendants argue Plaintiff’s contract-based claims against Synabilling should also be
dismissed because they too were brought after the expiration of the one-year statute of limitations
period set forth in the Synabilling Contract. Plaintiff contends it complied with the Synabilling
Contract’s one-year limitation, or, in the alterative, that the one-year limitation should not be
Plaintiff also argues that because the Georgia Action was timely filed then, pursuant to NYUCC § 2-A-506(3), the New York Action also was filed timely. (Pl. Br. 16-17.) Because the court
finds the Georgia Action was not timely filed, the argument is moot.
enforced because the Synabilling Contract was the result of fraud and duress. (Pl. Br. at 13.) The
court finds, based on the plain and unambiguous terms of the contract, that Plaintiff brought its
contract claims against Synabilling after the mutually agreed upon one-year limitation period
expired, in contravention of the express contract language. Accordingly, Plaintiff’s claims are
time-barred and Defendants’ summary judgment motion is granted as to Plaintiff’s contract-based
claims against Synabilling.
Pursuant to Section 213 of New York’s Civil Practice Law and Rules (“C.P.L.R.”), claims
for breach of contract actions must be brought within six years from the time the action accrued.
See C.P.L.R. § 213(2) (McKinney 2012).
However, Section 201 of the C.P.L.R. “allows
contracting parties to shorten a statutory period of limitations if that period is contained in a
written agreement between the parties.” Micciche v. Kemper Nat. Servs., 560 F. Supp. 2d 204,
212 (E.D.N.Y. 2008) (quoting Patterson-Priori v. Unum Life Ins. Co. of Am., 846 F. Supp. 1102,
1105 n.5 (E.D.N.Y. 1994)).
Under the Synabilling Contract “[a]ny cause of action brought by [IDS] against
[Synabilling] relating to this Agreement or [Synabilling’s] performance hereunder must be
commenced within one (1) year after the date when such cause of action accrues.” (Kim Decl.,
Ex. B.) Here, the contracting parties agreed, in writing, to shorten the statutory period of
limitations to one year. Thus, IDS and Defendants’ agreement to shorten the limitations period is
statutorily authorized and valid under New York law. See Kozemko v. Griffith Oil Co., Inc., 256
A.D. 2d 1199, 1200 (4th Dep’t 1998) (citing Diana Jewelers of Liverpool, Inc. v. A.D.T. Co., 167
A.D. 2d 965, 966 (4th Dep’t 1990)). Moreover, courts applying New York law have regularly
upheld the enforceability of contractual limitations provisions similar to the one found in the
Synabilling Contract. See Allman v. UMG Recordings, 530 F. Supp. 2d 602, 606 (S.D.N.Y. 2008)
1. Timeliness of Plaintiff’s Cause of Action
Generally, under New York law, the limitations period on a cause of action begins to run
when the cause of action accrues. See C.P.L.R. § 203(a) (McKinney 2012). Moreover, it is well
settled under New York Law that “[a] cause of action for breach of contract ordinarily accrues
and the limitations period begins to run upon breach.” Guilbert v. Gardner, 480 F. 3d 140, 149
(2d Cir. 2007) (citing Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399 (1993)).
Defendants contend that, by Plaintiff’s own pleadings, Plaintiff’s cause of action accrued
as to the Synabilling Contract on March 13, 2006. (Def. Mem. at 16 (citing 2d Am. Compl. ¶
44).) Plaintiff neither rebuts this argument nor offers its own argument as to when the cause of
action accrued. Nonetheless, both parties agree that the Synabilling Contract was terminated on
September 1, 2006. (Pl. 56.1 Resp. ¶ 9; Heslep Dep. at 65; Mem. of Law in Further Supp. of
Defs.’ Mot. for Summ. J. (“Def. Rep. Mem.”) at 8.) Accordingly, even if the cause of action
accrued on the date of termination, Plaintiff had, at the latest, until September 1, 2007 to bring its
cause of action. Defendants argue Plaintiff’s action is untimely because it was not brought in the
proper forum, as defined by the Synabilling Contract, until December 28, 2007, which is after the
one-year limitation expired. (Def. Mem. at 15-16 (citing Chronakis Decl. ¶ 4 & Exs. 1, 3.) The
court agrees with Defendants.
Plaintiff argues that the Synabilling Contract does not require an action to be “pending”
within one year of the date the cause of action accrued, but requires only that the cause of action
be brought before the expiration of the one-year limitation. (Pl. Br. at 14.) Plaintiff thus contends
that, by the terms of the contract, it commenced an action on the Synabilling Contract before the
expiration of the one-year limitation when it brought the Georgia Action on January 24, 2007.
(Id.) Plaintiff further adds, without citation to legal authority, that it merely “renewed” the
Georgia Action when it commenced the New York Action and that the Synabilling Contract is
devoid of language addressing a renewed action. (Id. at 15.) Plaintiff thereby concludes an
ambiguity exists in the contract that makes the matter inappropriate for disposition on summary
judgment. 5 (Id.)
Plaintiff’s tortured reading of the Synabilling Contract flies in the face of the plain and
unambiguous language of the four corners of the document. Plaintiff, with the assistance of
counsel, filed the Georgia Action in violation of the valid forum selection clause. Plaintiff cannot
violate the terms of an agreement, which it consciously entered into, and reap the benefit of the
Moreover, a party to a contract cannot engage in forum shopping, especially when
there is a valid forum selection clause, as a means to circumvent a mutually agreed upon
shortening of the statute of limitations.
As discussed infra, the court is troubled by the record in this case as it appears that
Defendants’ may not have lived up to their promises.
Nevertheless, the court is constrained to
dismiss Plaintiff’s claims pursuant to its obligation to apply the law objectively to the facts.
Giving Plaintiff the benefit of the doubt, and assuming the cause of action on the Synabilling
Contract accrued on the date of termination, September 1, 2006, Plaintiff was obligated, by the
Plaintiff also inexplicably argues its Synabilling Contract claims are timely because: “Plaintiff
initially filed suit on January 24, 2007 in the United States District Court, Northern District of
Georgia, Atlanta Division. The Synabilling Agreement is dated March 13, 2006. Therefore, suit
was commenced prior to the inception of the Synabilling Agreement.” (Pl. Br. at 14 (internal
citations omitted).) The court is at a complete loss as to how Plaintiff’s counsel can possibly
contend that Plaintiff filed suit on a contract before the contract even came into being. This
argument is illogical and meritless.
valid terms with which it agreed, to bring its cause of action in the proper forum no later
September 1, 2007. The plain facts are that Plaintiff failed to do so. 6
2. Fraud and Duress
Plaintiff additionally argues that the one-year limitation period in the Synabilling Contract
should not be enforced because “the entire Synabilling contract was the result of fraud and
duress.” (Pl. Br. at 13.) As both parties note, under New York law “[f]ailure to comply with a
contractual limitations period will subject the action to dismissal, absent proof that the limitations
provision was obtained through fraud, duress, or other wrongdoing.” Allman, 530 F. Supp. 2d at
606; (see also Pl. Br. at 13; Def. Rep. Mem. at 8.).
Under New York law, the elements of fraud are: “(1) a misrepresentation or an omission
of material fact which was false and known to be false by the defendant, (2) the misrepresentation
was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the
plaintiff on the misrepresentation or material omission, and (4) injury.” Jablonski v. Rapalje, 14
A.D. 3d 484, 487 (2d Dep’t 2005) (citations omitted). Moreover, “duress is a species of fraud in
which compulsion in some form takes the place of deception in accomplishing an injury.” Candid
Prods., Inc. v. SFM Media Serv. Corp., 51 A.D. 2d 943, 944 (1st Dep’t 1976). Thus to establish
duress, a plaintiff must show “actual or threatened violence or restraint contrary to law.” Id.
On the record before the court as presented by Plaintiff, Plaintiff has failed to show that
the challenged limitation provision was “obtained through fraud, duress, or other wrongdoing.”
Allman, 530 F. Supp. 2d at 606. Throughout its brief, Plaintiff asserts the events surrounding the
The court also finds it curious that while the Georgia Action was dismissed without prejudice,
on August 22, 2007, Plaintiff then waited an additional four months before bringing the action in
this court on December 28, 2007. (See Chronakis Decl., Exs. 2 & 3.)
entirety of both Contracts were wholly permeated by Defendants’ fraudulent activities. (See
generally Pl. Br.) Certainly such allegations should be taken seriously, but they also must not be
spuriously made, but rather must be substantiated by the record. Here, Plaintiff’s counsel cites
Plaintiff’s own deposition transcripts, to support the fraud allegations, but they are either
inaccurate or simply not in the record that Plaintiff provided. 7
In support of Plaintiff’s argument that Synabilling fraudulently induced Plaintiff into the
Synabilling Contract, it asserts the Synabilling Contract was signed after it “had been driven into
financial distress” by Synamed. (Pl. Br. at 7 (citing Zurawski Dep. at 179).) There is no page
179 in the Zurawski Deposition submitted by Plaintiff to this court. (See Joffe Decl., Ex. A.)
Accordingly, this evidence is not before the court. In further support of its claim that Synabilling
fraudulently induced Plaintiff into the Synabilling Contract, Plaintiff asserts “Defendants
threatened to withhold additional support on the Synamed agreement until they agreed to the
Synabilling Services.” (Pl. Br. at 8 (citing Zurawski Dep. at 287).) This is a less than fair or
accurate representation of the deposition transcript. 8 The court has carefully reviewed the record
For example, on page 11 of Plaintiff’s brief, Plaintiff’s counsel cites to page 188 of the
Deposition of Holly Demuro. (Pl. Br. at 11.) The transcript of the Demuro Deposition submitted
by Plaintiff to this court does not include a page 188; rather, the transcript skips from page 148 to
241. (See Jofee Decl, Ex. B.) As another example, also on page 11, in the same paragraph,
Plaintiff’s counsel cites to “Para.” [sic] 35 of the Deposition of Douglas Heslep, in support of its
assertion that “the [Synabilling] system never became functional nor capable of performing the
promised tasks.” (Pl. Br. at 11 (citing Deposition of Douglas (“Heslep Dep.”) at 35, attached as
Ex. D to Joffe Decl.) While the Heslep Deposition does contain a page 35, that page of the
transcript does not include testimony to the effect that the Synabilling system failed to perform
promised tasks. (See Heslep Dep. at 35.) The court can only assume that the pages cited would
actually support the opposite view of Plaintiff’s theory.
The relevant exchange as documented in the transcript of the Deposition of Dr. Zurawski is as
Defendants’ Counsel: Did anyone at SynaMed or SynaBilling ever
force IDS to enter into the Synabilling Agreement?
and concludes that the record does not support Plaintiff’s assertions that Plaintiff was fraudulently
induced into the Synabilling Contract. As such, that the contractual limitation provision in the
Synabilling Contract was not the product of fraud or duress.
Based on the foregoing, even when the facts are viewed in the light most favorable to
Plaintiff, the court finds there are no genuine disputes of material fact regarding Plaintiff’s
contract-based claims against Synabilling. Accordingly, summary judgment is granted in
Defendants’ favor with respect to Plaintiff’s contract claims against Synabilling and those
contract claims are dismissed. See Allman, 530 F. Supp. 2d at 606.
iii. Equitable Tolling of Contractual Limitations Period
Plaintiff also argues that its contract-based claims under both Contracts should not be
time-barred because the limitations period should be equitably tolled. (Pl. Br. at 17.) This claim
is without merit. As Plaintiff notes, equitable tolling is only appropriate under New York law
where, inter alia, “it is the defendant’s affirmative wrongdoing . . . which produced the long delay
between the accrual of the cause of action and the institution of the legal proceeding.” TIG Ins.
Dr. Zurawksi: No.
Defendants’ Counsel: Did anyone at SynaMed or SynaBilling
every make any threats of economic coercion to IDS regarding the
Dr. Zurawski: I don’t understand what that means.
Defendants’ Counsel: Did anyone at SynaMed or SynaBilling
threaten not to work on the IDS account if they did not execute the
Dr. Zurawski: We were told that they wouldn’t be spending any
more time working on our account unless they were doing all of the
billing of [sic] themselves.
(Zurawski Dep. at 287:1-2, 5, 6-15.)
Co. v. Newmont Min. Corp., 413 F. Supp. 2d 273, 281 (S.D.N.Y. 2005). Plaintiff has not shown
that its delay in filing suit was affirmatively caused by the Defendants’ actions. Moreover, there
is absolutely nothing in the record to support this contention. Thus, the court declines to equitably
toll the limitations period in the Contracts.
C. Fraud Claims
As part of its second cause of action, Plaintiff alleges a general fraud claim against
Defendants. Defendants contend that Plaintiff’s allegation of fraud should be dismissed as it is
entirely related to Defendants’ alleged breach of contract and that New York does not recognize
an independent claim for fraud when the allegations of fraud relate to a breach of contract. (Def.
Mem. at 18.)
As an initial matter, the fraud claims arise out of, or are connected with, Defendants’
alleged conduct under the Contracts. Accordingly, the fraud claims are barred by the limitations
provisions in the contract. (See Kim Decl. Exs. A & B.) Moreover, Plaintiff’s fraud claims are
not independent from its contract claims, and, therefore, are not cognizable under New York law.
It is well settled under New York law that “a cause of action seeking damages for fraud
cannot be sustained when the only fraud charged relates to a breach of contract.” Suzy Phillips
Originals, Inc. v. Coville, Inc., 939 F. Supp. 1012, 1016 (E.D.N.Y. 1996) (citing cases); Long
Island Lighting Co. v. IMO Delaval, Inc., 668 F. Supp. 237, 240 (S.D.N.Y. 1987). Moreover,
under New York law, a contract claim cannot be transformed into a fraud claim by simply
alleging a defendant “entered the . . . agreement while intending not to perform it.” GEM
Advisors, Inc. v. Corporacion Sidenor, S.A., 667 F. Supp. 2d 308, 330 (S.D.N.Y. 2009) (internal
quotation marks and citation omitted); see also Bridgestone/Firestone, Inc. v. Recovery Credit
Servs., Inc., 98 F. 3d 13, 19-20 (2d Cir. 1996) (an intentionally false statement of intent to
perform a contract does not rise to an independent fraud claim).
Thus, as both parties agree (See Pl. Br. at 6; Def. Rep. Mem. at 4), to maintain a fraud
claim in a contractual setting under New York law a Plaintiff must demonstrate: (1) a legal duty
separate from the duty to perform under the contract; (2) a fraudulent misrepresentation that is
collateral or extraneous to the contract; or (3) special damages that are unrecoverable as contract
damages. Hettinger v. Kleinman, 733 F. Supp. 2d 421, 440-441 (S.D.N.Y. 2010) (citations
Plaintiff has shown neither that Defendants violated a legal duty owed to Plaintiff,
separate from its duty to perform under the Contracts, nor a fraudulent misrepresentation by
Defendants that is collateral or extraneous to the Contracts.
A legal duty separate from the duty to perform under the contract exists “where one
party’s superior knowledge of essential facts renders a transaction without disclosure inherently
unfair.” Cirillo v. Slomin’s Inc., 196 Misc. 2d 922, 928 (N.Y. Sup. Ct. 2003) (internal quotation
marks omitted). A contracting party thus has “a legal duty to speak truthfully and accurately”
about a product it offers and “to disclose any material limitations . . . that would not be apparent
to the purchaser.” Id. Put another way, where a party to a contract makes a false representation
of a present fact, as opposed to where the party breaches a contractual promise after the promise
is made, a fraud claim, independent of the contract, may lie. See FSP, Inc. v. Societe Generale,
2005 WL 475986, at *9 (S.D.N.Y. Feb. 28, 2005) (citing Stewart v. Jackson & Nash, 976 F. 2d
86, 89 (2d Cir. 1992)).
With respect to the Synamed System, the evidence shows that the system was indeed
riddled with problems. (See Kim Decl., C-F.) Moreover, the record also shows that Defendants
acknowledge that components of the lab interface with the Synamed System were not operational
at the time the Synamed Contract was entered into. (Demuro Dep. at 131-32.) Similarly, the
record shows that Defendants were aware that problems existed with the PMS program. (Heslep
Dep. at 162-63.) What Plaintiff has not shown is that Defendants made a false representation of
present fact; instead the evidence all points to Defendants’ failure to fulfill promises made under
the contract. Thus, an independent claim for fraud does not lie as to the Synamed Contract.
Similarly, the overwhelming evidence shows Defendants’ alleged conduct with respect to
the Synabilling Contract also relates to violations of contractual promises instead of
misrepresentations of present facts. For example, the record shows Defendants never made lease
payments to HPSC on behalf of Plaintiff as required under the Synabilling Contract.
Demuro Dep. at 143-44.) The record also shows that Defendants had the ability to debit monies
from Plaintiff’s bank accounts, pursuant to the Synabilling Contract, and that Defendants were
obligated under the Synabilling Contract to maintain billing records and provide invoices and
accountings for Plaintiff. (Heslep Dep. at 122; Demuro Dep. at 142.) However, during the entire
duration of the Synabilling Contract, Defendants only provided one invoice to Plaintiff and
neither party has been able to determine the amount of money Synabilling collected on behalf of
Plaintiff and, thus, determine whether Synabilling debited more monies than it was entitled to
from Plaintiff’s bank accounts.
(Demuro Dep. at 142; Heslep Dep. at 158; Zurawski Dep. at
250.) While these allegations are troubling, the conduct complained of relates to Defendants’
failure to fulfill promises made under the contract. Thus, as with the Synamed Contract, an
independent claim for fraud does not lie.
In viewing the facts in the light most favorable to Plaintiff, the court finds there are no
genuine disputes of material fact regarding Plaintiff’s fraud claims, which claims, under New
York law, cannot be sustained as they are not independent from Plaintiff’s contract claim.
Accordingly, Plaintiff’s fraud claim is dismissed.
D. GBL § 349(a) Claim
Plaintiff alleges, as its fifth claim, that Defendants’ conduct constitutes deceptive acts and
practices in violation of N.Y. General Business Law Section 349 (“GBL § 349”). Accordingly,
Plaintiff seeks reasonable attorney’s fees pursuant to Section 349. (2d Am. Compl. ¶¶ 101-102.)
Defendants move to dismiss this claim on the ground that GBL § 349 is inapplicable to the
transaction between Plaintiff and Defendants. (Def. Mem. at 19.)
GBL § 349 makes unlawful “[d]eceptive acts or practices in the conduct of any business,
trade or commerce or in the furnishing of any service in this state.” N.Y. Gen. Bus. Law § 349(a)
(McKinney 2012). To state a claim under this section a plaintiff must show: “(1) the defendant's
challenged acts or practices must have been directed at consumers, (2) the acts or practices must
have been misleading in a material way, and (3) the plaintiff must have sustained injury as a
result.” Cohen v. JP Morgan Chase & Co., 498 F. 3d 111, 126 (2d Cir. 2007). Under New York
law, “the term ‘consumer’ is consistently associated with an individual or natural person who
purchases goods, services or property primarily for ‘personal, family or household purposes.’ ”
Cruz v. NYNEX Info. Res., 263 A.D. 2d 285, 289 (1st Dep’t 2000) (citation omitted). Thus, “it
has repeatedly been held that when the activity complained of involves the sale of commodities to
business entities only, such that it does not directly impact consumers, section 349 is
inapplicable.” Shema Kolainu–Hear Our Voices v. Providersoft, ––– F.Supp.2d ––––, –––, 2010
WL 2075921, at *7 (E.D.N.Y. May 21, 2010) (citing cases).
Here, the record shows Defendants’ products are designed for, and used by, highly
sophisticated medical practitioners. (See Kim Decl. ¶¶ 2-3.)
Nothing in the record shows
Defendants’ product was directed toward consumer use. Accordingly, there being no disputed
issue of material fact that Defendants’ products are not consumer oriented, summary judgment is
granted in Defendants’ favor and Plaintiff’s GBL § 349 claim is dismissed as matter of law. See
Shema Kolainu–Hear Our Voices, 2010 WL 2075921, at *7 (marketing a software product to a
not-for-profit corporations does not qualify as consumer-oriented conduct and accordingly § 349
claim must be dismissed).
E. Remaining Claims
Because Plaintiff’s contract based claims and fraud claims against Synabilling and
Synamed are dismissed as a matter of law, those claims are also dismissed as to Dr. Back Kim,
and Back Kim P.C. in their individual capacities. Moreover, as the contract and fraud claims are
dismissed, Plaintiff’s claim seeking punitive damages as well as Defendants’ motion to strike
certain expert reports are now moot.
For the reasons set forth above, Defendants’ motion for summary judgment is granted in
its entirety and the complaint is dismissed.
DATED: Brooklyn, New York
March 30, 2012
DORA L. IRIZARRY
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?