Medacist Sols. Grp. v. CareFusion Sols., LLC

MEDACIST SOLUTIONS GROUP, LLC, Plaintiff and Counter-Defendant, v. CAREFUSION SOLUTIONS, LLC, Defendant and Counter-Plaintiff.

19-CV-1309 (JMF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

January 28, 2021

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

In 2014, Plaintiff and Counter-Defendant Medacist Solutions Group, LLC ("Medacist") and Defendant and Counter-Plaintiff CareFusion Solutions, LLC ("CareFusion") entered into an agreement pursuant to which CareFusion was to act as the "exclusive reseller" of drug diversion analytics software developed by Medacist. As the opioid crisis in the United States worsened, and the market for such software became more competitive, CareFusion developed its own drug diversion analytics software. Perhaps not surprisingly, the relationship between Medacist and CareFusion thereafter soured, and this lawsuit — with competing claims for breach of contract and the like — followed. Now pending are competing motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure and competing motions to exclude expert testimony. For the reasons that follow, CareFusion's motion for summary judgment is granted in part and denied in part; Medacist's cross-motion for summary judgment is granted in its entirety; CareFusion's motion to exclude the testimony of Medacist's expert is denied; and Medacist's motion to exclude the testimony of CareFusion's experts is granted in part and denied in part.

BACKGROUND

The following facts, taken from the pleadings and the admissible materials submitted by the parties in connections with their cross-motions for summary judgment, are either undisputed or described in the light most favorable to the relevant non-moving party. See Simon v. City of New York, 893 F.3d 83, 91 (2d Cir. 2018).

A. The Reseller Agreement

Medacist, owned by David and Lorraine Brzozowski, develops and sells drug diversion analytics software, which collects and interprets data related to the dispensing of medication and allows healthcare facilities to track potentially improper dispensing of medication. See ECF No. 49 ("TAC"), ¶¶ 1, 6. One of Medacist's products is called the RxA Solution, a suite of software and services that makes use of a patented drug diversion detection algorithm. See id. ¶ 6; ECF No. 84 ("Medacist's 56.1 Resp."), ¶ 1.¹ CareFusion offers products and technologies to healthcare providers, including the Pyxis MedStation, an "automated medication dispensing cabinet," and Knowledge Portal (together known as the "CF Offering"), which allows medical professionals to access medication stored in the Pyxis MedStation. Medacist's 56.1 Resp. ¶¶ 4-5; TAC ¶ 7.²

In 2014, Medacist and CareFusion entered into the RxAuditor Reseller Agreement (the "Reseller Agreement"), pursuant to which Medacist appointed CareFusion to act as its"authorized exclusive . . . reseller" of the RxA Solution and CareFusion agreed to "market[] and sell[] the RxA Solution as part of the CF Offering." ECF No. 75-8 ("Reseller Agreement"), § 2.1. In particular, CareFusion agreed to sell the RxA Solution to healthcare providers in the form of subscription agreements, which — absent Medacist's written consent — were required to contain substantially the same terms and conditions as a model attached to the Reseller Agreement. Reseller Agreement §§ 4.1-.2. The model subscription agreement consisted of a contract to be entered into by CareFusion and the subscriber for a term of sixty months and provided for automatic renewal at the end of that term unless the subscriber opted out of such renewal in writing. See ECF No. 75-10 ("Schedule") 4, at 66-67. Under the Reseller Agreement, CareFusion determined the price at which the RxA Solution would be sold to subscribers, consisting mainly of hospitals, with Medacist receiving a fixed fee. Reseller Agreement § 8.1. Medacist, for its part, agreed to make the RxA solution available to customers, to provide set-up services for new subscribers, and to provide technical support. TAC ¶ 11.

To the extent relevant here, the Reseller Agreement included certain limitations on CareFusion's marketing and sales activities. For instance, Section 2.3 provided that, for the duration of the Reseller Agreement, the RxA Solution was to be "the only automated drug diversion reporting and analytics solution rights which are directly or indirectly sold, re-sold or recommended for use by CareFusion . . . in the Market, in connection with the CF Offering." Reseller Agreement § 2.3. It also provided that CareFusion could not "sell or resell any other technology . . . that competes with, or would, with reasonable likelihood, displace or distract from the sales of Subscriptions to the RxA Solution." Id. Under Section 3.2, Medacist and CareFusion agreed to "develop and finalize a written, joint go-to-market strategy document for the RxA Solution," defined as the "General Marketing Plan," and "a written, joint plan settingforth specific strategies to effect . . . the upgrade of a specifically identified mutually agreed upon sub-set of prospective Subscribers who are then-currently customers of the CF Offering," defined as the "Customer Upgrade Plan." Id. § 3.2(a)-(b). "As part of both the General Marketing Plan and/or Customer Upgrade Plan," entities "designated on Schedule 3.2(b)as [sic] . . . 'House Accounts'" could "not be solicited" by CareFusion. Id. § 3.2(b) (emphasis omitted). In turn, Schedule 3.2(b) provided: "Notwithstanding anything to the contrary in this Schedule or the Agreement, CareFusion shall not sell or market to, pursue, solicit or engage, either directly or indirectly, any of the . . . House Accounts . . . at any time . . . ." Schedule 3.2(b)(2)(a), at 53.

The Reseller Agreement, which became effective on November 11, 2014, was to last for five years, but it allowed for early termination after three years by either party "upon at least one hundred eighty (180) days' prior written notice to the other party." Reseller Agreement § 9.1. If CareFusion exercised this right to early termination, it would have to pay an early termination fee to Medacist: $750,000 if the termination was between the third and fourth anniversary of the agreement and $600,000 if the termination was between the fourth and fifth anniversary of the agreement. Id. Separately, Schedule 9.4 provided that "[w]ithin fifteen (15) business days" of the effective date of the Agreement, Medacist was to "place into" an escrow account "a list of" then-existing customers and that CareFusion would be "prohibited, directly or indirectly, [from] selling or marketing to, pursuing, soliciting or engaging" the customers on that list for 180 days following the effective date of termination if CareFusion terminated the Agreement early. Schedule 9.4, at 78. Medacist failed to place the list into escrow. Medacist's 56.1 Resp. ¶ 25.

B. CareFusion's Sales of the RxA Solution and Development of HealthSight

In May 2015, CareFusion entered into its first subscription for the RxA Solution under the Reseller Agreement. Id. ¶ 29.³ In total, during the life of the Agreement, CareFusion entered into over 1,000 RxA subscription agreements with healthcare providers. ECF No. 96 ("CareFusion's SJ Reply & Opp'n"), at 12 n.6. Although the Reseller Agreement specified the process by which CareFusion would submit subscription orders to Medacist, see Reseller Agreement § 5.1, CareFusion prepared a separate document as part of its procedure for billing pursuant to which Medacist was expected to promptly notify CareFusion when it had completed a subscriber's installation of the RxA Solution, see ECF No. 91-54 ("Order to Cash Process" or "OTC Process"); see also ECF No. 33 ("Counter-Compl."), ¶¶ 8-9. By 2018, CareFusion complained that Medacist had fallen behind on providing these notices. ECF No. 97 ("CareFusion's 56.1 Resp."), ¶ 103.

In or around late 2017, as the opioid crisis intensified, CareFusion decided to develop its own drug diversion analytics product, called HealthSight Diversion ("HealthSight"), which it planned to sell as part of a pre-existing data and inventory management platform. Medacist's 56.1 Resp. ¶ 33. CareFusion alleges that during a telephone call in October of that year, its General Manager of Dispensing Technologies, Jason Strohm, shared that fact with David Brzozowski, Medacist's President and Chief Executive Officer, and advised that CareFusion planned to release the new product in 2018. ECF No. 71 ("CareFusion's 56.1 Stmt."), ¶¶ 6, 34.The following month, Strohm emailed David Brzozowski to advise that CareFusion planned to showcase HealthSight at an upcoming trade conference sponsored by the American Society of Health-System Pharmacists ("ASHP") at which Medacist also planned to appear. ECF No. 75-20, at 2; see also Medacist's 56.1 Resp. ¶¶ 37-40. Strohm advised that CareFusion was planning to announce that was "developing" and would "bring to market in the second quarter of 2018 a new diversion solution . . . to help [its] customers address controlled substance diversion." ECF No. 75-20, at 2; see also Medacist's 56.1 Resp. ¶ 38. At the conference, CareFusion demonstrated HealthSight to potential customers. Medacist's 56.1 Resp. ¶ 39; CareFusion's 56.1 Resp. ¶ 60; ECF No. 91-32, at 47. It did not, however, sell any version of HealthSight during the conference.

On December 20, 2017, Strohm emailed David Brzozowski reiterating that CareFusion was "developing [its] own diversion analytics offering to the market" and that CareFusion "intend[ed] to market [its] own product as well." ECF No. 75-18, at 3. Strohm stated CareFusion was "feeling pressure to send [a] termination notice in the coming days, only to start the clock on the 180[-]day" notice period required for early termination under Section 9.1 of the Reseller Agreement. Id. At the same time, Strohm noted that CareFusion's preference was not to terminate, but to negotiate an amended, non-exclusive agreement, and...