Superior Court of Massachusetts, Suffolk, Business Litigation Session
CareOne Management, LLC et al.
April 25, 2017
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY
Kenneth W. Salinger, Justice
consolidated lawsuits arise from the agreement by Navisite,
Inc., to develop and provide information technology services
to CareOne Management, LLC and its affiliate Partners
Pharmacy Services, LLC. Navisite first contracted to provide
an array of computerized services to CareOne. Several months
later Navisite contracted to provide a much more limited set
of information technology services to Partners. After
difficulties and disputes regarding implementation of its
contract with CareOne, Navisite threatened to and then did
terminate both contracts.
and Partners asserted various claims against Navisite, which
in turn sued CareOne. (Navisite also sued Partners, but Judge
Sanders dismissed those claims.) Navisite and CareOne both
move for summary judgment; Navisite does so on all claims
while CareOne's motion is limited to Navisite's
claims against it.
Court concludes that CareOne is entitled to summary judgment
on the claims asserted against it by Navisite, and that
Navisite is entitled to summary judgment on all claims
asserted against it by CareOne and Partners. Final judgment
will enter declaring the rights of the parties, with respect
to the issues in controversy that CareOne and Partners
identified in their claim for declaratory judgment, and
dismissing all other claims with prejudice.
Undisputed Material Facts
following are undisputed facts, as demonstrated in the
evidentiary materials submitted by the parties or reasonable
inferences that one could draw from those facts. The Court
" must . . . draw all reasonable inferences" from
the evidence presented " in favor of the nonmoving
party, " as a jury or judicial fact finder would be free
to do at trial. Godfrey v. Globe Newspaper Co.,
Inc., 457 Mass. 113, 119, 928 N.E.2d 327 (2010). It has
manages dozens of nursing homes. Partners operates commercial
pharmacies that serve patients at more than 500 nursing
homes, including those run by CareOne. These two companies
are separate legal entities, though both were founded and are
run by the same person.
retained Navisite in September 2012 to develop, implement,
host, and operate new computing services to be used at all of
CareOne's nursing facilities. The system design was to
include " virtual desktops" through which CareOne
employees could access programs, applications, and data that
Navisite would host on servers located at its facilities. It
also included other computer services that would be
implemented and hosted by Navisite. Navisite agreed that it
would transition CareOne from its current IT vendor and begin
providing the agreed-upon services using Navisite's
servers no later than January 1, 2013. The parties also
agreed that CareOne would pay Navisite certain upfront fees,
but that the majority of the fees were to be billed and paid
on a monthly basis for each component service after CareOne
accepted delivery of that service. CareOne paid Navisite
roughly $580, 000 in upfront charges upon signing of the
contract between CareOne and Navisite consists of a number of
interrelated documents that were executed at the same time.
These parties executed a Master Statement of Work ("
SOW") that described many of the services that Navisite
agreed to provide through a " Third-Party
Provider." They also executed a " Master Services
Agreement" (" MSA"). The SOW provided that it
" is governed by and incorporates by reference, the
terms and conditions of the" MSA. And these parties
executed three detailed " Schedules" providing that
Navisite would provide CareOne with managed hosting services,
managed messaging services, and cloud-enabled desktop as a
service. These Schedules state that they are incorporated
into and part of the MSA. Finally, at the same time these
parties executed two sales orders in which CareOne agreed to
pay certain one-time and monthly fees for the managed hosting
services. The sales orders state that they are subject to the
terms of the MSA.
November 2012 and December 2012 CareOne and Navisite executed
three more sales orders for email services and for the
migration of CareOne's existing email and SharePoint
systems to Navisite's servers. These sales orders all
state that they are subject to the terms of the MSA.
in November 2012 Partners and Navisite executed a sales order
for a Citrix production environment. This sales order
originally designated CareOne as the purchaser, but it was
revised by hand to change the purchaser to Partners. This
sales order contains the same language as the others stating
that it is subject to the terms and conditions of the MSA
between CareOne and Navisite. Partners admits, in the
statement of facts regarding Partners' claims, that by
executing this sales order Partners " consented to the
standard terms and conditions in the Navisite/CareOne Master
Services Agreement . . . as they pertained to Partners . . .
as the 'Customer.' "
work for Partners went fine. Navisite delivered the
implemented the promised services. Partners paid all required
up-front fees and was paying all the agreed-upon monthly
contrast, Navisite's work for CareOne went poorly. The
SOW between these parties provided that Navisite was to begin
hosting and providing CareOne's computer services no
later than January 1, 2013. That did not happen.
Implementation of the promised services was repeatedly
delayed. Who caused or was responsible for the delays is in
dispute. Navisite blames CareOne and vice versa.
January 31, 2013--one month after the due date--Navisite sent
an email asking CareOne to accept four of the promised
systems. CareOne responded immediately, stating it "
cannot accept this environment in its current state"
because the computer systems were purportedly incomplete, had
not been fully tested, and could not be used by CareOne. As a
result CareOne refused to pay Navisite's first monthly
invoice for January 2013.
never sent CareOne any other notice stating that any part of
the project was complete and ready for acceptance by CareOne.
In April, June, and August 2013 Navisite made available test
versions of many but not all of the services it had
contracted to provide. CareOne informed Navisite that it had
discovered material problems with all of them. CareOne never
accepted any of those services and never used them for any
purpose other than acceptance testing.
CareOne refused to pay the January 2013 invoice rejected the
first four services, the parties had further discussions
about what it would take for Navisite to finish implementing
the project. CareOne and Navisite negotiated the only
amendment to their contract, which they executed on February
28, 2013. The amendment was called Amendment Number One to
Amendment provided as follows. CareOne agreed to pay
Navisite's first monthly invoice, for the month of
January 2013, by March 31, 2013. In turn, Navisite agreed
that CareOne would receive a credit of twice that amount that
would be applied against CareOne's monthly invoices in
months 34, 35, and 36 of the MSA's term. Navisite also
agreed to deliver an Active Directory Synchronization
solution to CareOne by March 3, 2013. The Amendment stated
that all terms and conditions of the MSA remained in effect
except as otherwise provided in the Amendment.
paid Navisite's monthly invoice for January 2013 as
agreed in Amendment Number One; that payment was in the
amount of $365, 169.30. CareOne also paid Navisite's
invoices for February, March, and April 2013; the payments
for those three invoices totaled just over $2 million,
which means that CareOne paid some $2.4 million to Navisite
for these four monthly invoices. Thus, including the roughly
$580, 000 in upfront payments made when the contract was
first executed, CareOne has paid Navisite almost $3 million.
submitted invoices for later months, but CareOne did not pay
them. Navisite was aware that CareOne refused to pay and was
disputing the invoices issued after April 2013 because
CareOne had still not received or accepted the services that
CareOne was billing for.
November 2013 CareOne informed Navisite that it intended to
terminate their Agreement for non-performance and sought to
negotiate an orderly transition. Navisite responded five days
later by demanding $2.2 million as payment for its monthly
invoices for April through September 2013. Navisite said that
if it did not receive payment of that amount within five days
it would terminate all services it was providing to Partners.
Partners successfully migrated its services from Navisite to
another provider, Navisite finally terminated the contract
and stopped providing any services to CareOne or Partners on
January 24, 2014.
Relevant Contract Terms
Court must construe the parties' written contracts.
Neither side appears to claim that any of the relevant
contract documents is ambiguous. " If a contract . . .
is unambiguous, its interpretation is a question of law that
is appropriate for a judge to decide on summary
judgment." Seaco Ins. Co. v. Barbosa, 435 Mass.
772, 779, 761 N.E.2d 946 (2002). " Whether a contract is
ambiguous is also a question of law." Eigerman v.
Putnam Investments, Inc., 450 Mass. 281, 287, 877 N.E.2d
1258 (2007). The Court concludes that the contract documents
The Original Contract Documents
parties agreed to allocate the risk of non-performance by
Navisite in several ways that are relevant to the pending
claims and counterclaims. This allocation of risk is
reflected in terms of the MSA that was executed by CareOne
and Navisite and accepted by Partners when it executed its
agreed to bear much of the risk that it may not be able to
deliver systems acceptable to CareOne, by agreeing to accept
most of its compensation in the form of monthly recurring
payments that would not be due for any service until it was
accepted. The contract provides (in MSA § § 3.1 and
3.3) that Navisite was not entitled to invoice, and CareOne
had no obligation to pay, monthly recurring fees for any
service provided by Navisite until after CareOne had accepted
that particular service. Navisite was required to send
CareOne a " Completion Notice" as to each service
once it had been fully implemented and was ready for use by
CareOne. CareOne would then have ten days to test the service
to determine whether it conformed to the agreed-upon
specifications. If CareOne notified Navisite that the service
did not conform to the specifications, then Navisite would
have to use commercially reasonable efforts to fix the
problem and submit a new Completion Notice when the service
was ready for use. CareOne only had to begin paying the
monthly charge for a service if it accepted the service after
having received a Completion Notice, or if was deemed to have
done so because it did not respond to a Completion Notice
within ten days or used the service for purposes other than
acceptance testing after receiving a Completion Notice.
and Partners, in turn, agreed to bear most of the remaining
risk that Navisite might breach its contractual obligations.
The MSA placed clear limits on CareOne's and
Partners' remedies and Navisite's liability for any
breach of contract.
contract limits the remedies available to CareOne and
Partners for any breach of contract by Navisite. As relevant
here, § 6.4 of the MSA provides that if Navisite were to
breach the contract then CareOne's or Partners'
" sole and exclusive remedy, and Navisite's sole and
exclusive liability, " would be as follows: (1) CareOne
or Partners could give Navisite notice of the breach, which
would trigger a contractual obligation by Navisite to work
diligently to cure the breach at its expense; (2) CareOne or
Partners could obtain a credit against monthly recurring fees
for any services affected by the breach of contract; or (3)
CareOne or Partners could terminate the contract for any
uncured material breach, which would cut off any further
obligations by CareOne and Partners to make any payments or
doing anything else under the contract. The right to
terminate the contract for an uncured material breach by the
other side is spelled out in MSA § 7.4, which provides
that a party could only terminate for an uncured material
breach after giving the other side written notice of the
claimed breach and at least thirty days to cure the breach.
contract further limits Navisite's potential liabilities
in several ways. Section 6.3 bars any claim that Navisite
breached any kind of implied warranty, by specifying that
Navisite did not make and expressly disclaimed any implied
warranty of any kind. And § 9.1 provides that neither
Navisite, CareOne, nor Partners shall be liable " for
any indirect, consequential incidental, special or punitive
damages--including, without limitation, loss of use,
interruption of business, loss of data or loss of
profits--arising out of, or in any way connected with"
the parties' contract.
addition, the parties agreed to an allocation of the risk
that CareOne or Partners might commit a material breach of
the contract. Section 7.4 specifies that the failure by
CareOne or Partners to pay amounts owed when due would be a
material breach, and that Navisite could terminate the
contract if CareOne or Partners failed to make payment after
being asked or failed to cure any other material breach. This
section also contains an acceleration clause providing that
if Navisite were to terminate a schedule or the whole
contract because of an uncured material breach by CareOne or
Partners, then the Customer (CareOne or Partners) would have
to pay all monthly fees that would have been due through the
end of the contract term. The same right to accelerated
payment of all monies owed under the contract would also
apply if CareOne or Partners terminated the contract in a
manner not expressly permitted (e.g., if it terminated for a
non-material breach by Navisite or terminated without giving
Navisite thirty days to cure any material breach). Navisite
has the right (per MSA § 3.2) to be reimbursed for any
fees and costs it incurs to collect amounts owed to it under
parties also agreed in MSA 10.14 that neither side would
waive any right under the contract by failing to enforce any
provision of it, and that contractual waivers would only be
effective if made in writing.