Frustrated by a variety of alleged problems with its patient monitoring system, a hospital sued the monitoring software company on several theories. The hospital claimed that the system was both inaccurate and unreliable, in that on unpredictable occasions it would leave patients unmonitored, it failed to trigger alarms when needed (false negatives), and triggered false alarms (false positives), all creating risks for patients and expense for the hospital. In 2015, the company provided an upgrade, but in doing so, assertedly, caused significant disruption over three months. Eventually, the hospital alleged, it had to replace the system, at high cost.
The hospital filed a breach of contract claim, an unjust enrichment claim, a fraudulent inducement claim, and a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 ILCS $ 505/1 et seq. Early on, defendant company moved to dismiss all of these claims, on two primary bases:
- The statute of limitations. The company asserted that the hospital had been aware of the alleged deficiencies soon after the system was installed, and so was on notice to file then. Unfortunately for the defense, the court ruled that “the determination of whether the [claims were] timely involves an assessment of evidence that is outside of the pleadings. Thus, it is premature at the pleadings stage to find the [claims] untimely.” The defense will have to adduce more evidence to prevail on its theory than, at this early stage in the proceedings, it has so far done.
- The sufficiency of the claims. The court found that the hospital had adequately pled its own performance under the agreement; that despite the written contract between the parties it could pursue its unjust enrichment claim because the contract could be held invalid; that it could plead fraud, despite the contract’s integration clause, because the contract lacked a “non-reliance clause” denying reliance upon matters outside the contract; and that the hospital could invoke the ICFA because, even though as defendant claimed the hospital was indeed a business, in this case it acted like a consumer.
The motion to dismiss was therefore dismissed. Memorandum Opinion, Rush University Medical Center v. Draeger, Inc., No.17C6043 (N.D. Ill. 2017), available at https://s3.amazonaws.com/assets.fiercemarkets.net/public/004-Healthcare/external_Q42017/draegeropinion.pdf. Presumably, the parties will proceed to trial unless they settle.
This case is of interest less for the court’s analysis of each specific defense theory than for the more general proposition that a patient monitoring software company may indeed be liable to its customers. The vulnerability of such companies to suit has sometimes been questioned, but Draeger suggests theories such as those asserted are indeed viable. It would not require the kind of mental gymnastics that plaintiffs’ lawyers are capable of to extend the concept to companies offering clinical decision support software, artificial intelligence, and the like. It would in fact be surprising if such products never failed, or if the plaintiffs’ bar did not seek some sort of compensation from the makers when they do.