Allscripts Healthcare, LLC v. DR/Decision Res., LLC

521 F.Supp.3d 112

ALLSCRIPTS HEALTHCARE, LLC, Plaintiff,

v.DR/DECISION RESOURCES, LLC, Defendants.

Civil Action No. 19-11038-NMG

United States District Court, D. Massachusetts.

Signed February 22, 2021

Jennifer B. Routh, Pro Hac Vice, Michael S. Nadel, Pro Hac Vice, Sarah P. Hogarth, Pro Hac Vice, Lauren H. Evans, Pro Hac Vice, McDermott Will & Emery LLP, Washington, DC, Robert J. Cordy, Matthew L. Knowles, Sarah E. Walters, McDermott, Will & Emery LLP, Boston, MA, for Plaintiff.

Daniel E. Rhynhart, Pro Hac Vice, John P. Wixted, Pro Hac Vice, Michael D. Silberfarb, Pro Hac Vice, Blank Rome LLP, Philadelphia, PA, Patrick J. Hannon, Hartley Michon Robb LLP, Boston, MA, for Defendants.

MEMORANDUM & ORDER

GORTON, United States District Judge

This suit arises out of a contractual dispute between Allscripts Healthcare, LLC ("Allscripts" or "plaintiff") and Decision Resources, LLC d/b/a Decision Resources Group ("DRG" or "defendant"). Pending before the Court is the motion of DRG for summary judgment on the claims in the complaint and the motion of Allscripts for summary judgment on DRG's affirmative defenses and counterclaims II, III and IV.

I. Background

A. The Parties

Allscripts is a healthcare information technology company that purportedly collects, aggregates and de-identifies sensitive patient level data from a network of medical practices in compliance with applicable privacy and security laws and regulations, i.e., the Health Insurance Portability and Accountability Act ("HIPAA").¹

Allscripts licenses its anonymized data to third party recipients, provided that, among other things, the third party agrees to protect the data and an independent statistician certifies that the data has been de-identified in compliance with HIPAA.

In June, 2014, Allscripts entered into a Master Data License Services Agreement ("the Agreement") with DRG, a healthcare data analytics and consulting company that compiles and repackages licensed data for sale to third parties.

In February, 2018, Allscripts acquired an electronic health records company and subsequently formed a new business unit, Veradigm, which competes directly with DRG.

B. Terms of the Agreement

Several provisions of the Agreement, which is governed by Delaware law, outline the boundaries of DRG's use and disclosure of the data provided by Allscripts. In Section 3.2, the parties agreed that

Allscripts hereby grants to [DRG] a limited, revocable non-exclusive license to use the Data [as defined elsewhere in the Agreement] to create analyses, reports and products ("Client Products") using the Data and to commercially distribute such Client Products to its customers. If the Data is de-identified using a statistician certification, such license is subject to the terms and restrictions set forth in the statistician certificate. [DRG] shall have no authority, permission, right, or license with respect to the Data except as expressly and explicitly granted to it by Allscripts by the terms of this Agreement.

Section 3.3 limits DRG's rights under the Agreement, providing that

[DRG] shall have no right to and shall not (nor shall it request that any third party) engage in the following: ... (iii) sell, license, transfer or distribute the Data to any third party other than as permitted under this Agreement....

The Agreement further provides in Section 8.2 that either party can terminate the Agreement if the other party commits a material breach and fails to cure within 30 days after written notice thereof.

C. The Statistician Certification

To verify that the data provided under the Agreement complied with the HIPAA Privacy Rule, Allscripts retained Dr. Patrick Baier, who issued a statistician certification ("the Certification") in October, 2014. Paragraph 22 of the Certification provides that

[DRG] will not provide patient level Allscripts data to a client, either alone or in combination with other data sources. [DRG] may disclose derivative works such as summaries and analytical results as long as they are not linked to any individuals.

In 2018, Dr. Baier issued a revised certification that contains the same language as the original Paragraph 22.

D. Alleged Breach of the Agreement

In 2016, DRG developed a proprietary data product that linked healthcare data licensed from multiple data suppliers ("the Raven Product"). Although the Raven Product initially linked data licensed from Allscripts and only one additional data supplier, DRG submits that it contained data from as many as nine sources between 2017 and 2019 and has never included data from fewer than two sources.

In October, 2018, Allscripts exercised its right under the Agreement to conduct an audit of DRG's facilities and records on suspicion that DRG had violated the Agreement. In February, 2019, Allscripts sent a letter to DRG asserting that DRG was in material breach of the Agreement for providing Allscripts’ patient level data to DRG customers. DRG responded that it was acting in accordance with the terms of the Agreement and HIPAA.

DRG avers that it thereafter learned that Allscripts, through Veradigm, "initiated contact with one of DRG's customers" and informed that customer that

it should be concerned about DRG's sustained ability to sell [electronic health records ("EHR")] data.

DRG submits that Allscripts also falsely notified other DRG customers that "DRG [would] soon lose access to Allscripts’ data."

E. Procedural History

Mediation proved unsuccessful in May, 2019, and Allscripts filed this lawsuit shortly thereafter alleging 1) violation of the Defend Trade Secrets Act ("DTSA") (Count I); 2) trade secret misappropriation under Massachusetts law (Count II); 3) breach of contract (Count III); 4) unfair and deceptive practices under M.G.L. c. 93A ("Chapter 93A") (Count IV); and 5) fraud in the inducement (Count V). In April, 2020, Allscripts and DRG stipulated to the dismissal of Count V.

In its answer, DRG counterclaimed for 1) declaratory judgment (Counterclaim I); 2) unfair competition in violation of Chapter 93A (Counterclaim II); 3) false and misleading statements in violation of Section 43(a)(1)(B) of the Lanham Act (Counterclaim III); and 4) breach of contract (Counterclaim IV). DRG also asserted 17 affirmative defenses.

In May, 2019, the parties filed cross motions for preliminary injunctions, both of which were denied. Allscripts also moved to dismiss DRG's Lanham Act counterclaim but that motion was denied as well.

In April, 2020, both parties moved for summary judgment. DRG sought summary judgment with respect to plaintiff's claims and Count I of its counterclaims, while Allscripts sought summary judgment as to DRG's affirmative defenses and Counts II through IV of its counterclaims.

II. Analysis

A. Legal Standard

The role of summary judgment is "to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir. 1990) ). The burden is on the moving party to show, through the pleadings, discovery and affidavits, "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

A fact is material if it "might affect the outcome of the suit under the governing law ...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists where the evidence with respect to the material fact in dispute "is such that a reasonable jury could return a verdict for the nonmoving party." Id.

If the moving party satisfies its burden, the burden shifts to the nonmoving party to set forth specific facts showing that there is a genuine, triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must view the entire record in the light most favorable to the non-moving party and make all reasonable inferences in that party's favor. O'Connor v. Steeves, 994 F.2d 905, 907 (1st Cir. 1993). Summary judgment is appropriate if, after viewing the record in the non-moving party's favor, the Court determines that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. 2548.

B. DRG's Motion for Summary Judgment

1. Breach of Contract (Count III)

To succeed on the breach of contract claim under Delaware law, a plaintiff must show: 1) a contractual obligation, 2) breach of that obligation by the defendant and 3) resulting damage. Terumo Americas Holding, Inc. v. Tureski, 251 F. Supp. 3d 317, 323 (D. Mass. 2017) (citing RoadSafe Traffic Sys., Inc. v. Ameriseal Ne. Florida, Inc., No. 09-cv-148-SLR, 2011 WL 4543214, at *13 (D. Del. Sept. 29, 2011) ).

As a preliminary matter, Allscripts argues that DRG is not entitled to summary judgment on Count III because it proffered evidence that DRG breached the Agreement by allegedly identifying Allscripts as a provider of data in violation of the provision in Section 3.3 prohibiting such conduct. DRG correctly observes, however, that because Allscripts did not raise that claim in the complaint, it may not now use it to defeat summary judgment. See Estrada v. Progressive Direct Ins. Co., 53 F. Supp. 3d 484, 497-98 (D. Mass. 2014).

Nevertheless, the Court will address the primary disputes with respect to Allscripts’ breach of contract claim, namely 1) the extent to which the Agreement incorporates the terms of the Certification and 2) the scope of DRG's license to use the data and whether defendant adequately transforms the data in its Raven Product to avoid the charge that it is merely reselling raw data.

a. Incorporation of the Certification

When an executed contract refers to another instrument and incorporates its conditions, the two will be interpreted together. Town of Cheswold v. Cent. Delaware Bus. Park, 188 A.3d 810, 818–19 (Del. 2018). Incorporation requires an ...