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Wired Infomatics, LLC v. Omnimd Inc.

United States District Court, D. Massachusetts

July 30, 2019

WIRED INFORMATICS, LLC, Plaintiff and Defendant-in-Counterclaim,
v.
OMNIMD INC., Defendant and Plaintiff-in-Counterclaim.

          MEMORANDUM AND ORDER ON MOTION TO DISMISS COUNTERCLAIMS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.

         Plaintiff Wired Informatics, LLC (“Wired”), a software developer, filed this action against its former client, Defendant OmniMD Inc. (“OmniMD”), alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive business practices in violation of Massachusetts General Laws ch. 93A, § 11. [ECF No. 1-1 at 6-9]. OmniMD brought counterclaims against Wired for fraud, breach of the implied warranties of fitness and merchantability, and breach of contract. [ECF No. 4 (“Counterclaim Complaint” or “Counterclaim Compl.”) ¶¶ 23-36]. Currently pending before the Court is Wired's motion to dismiss the Counterclaim Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 6]. For the reasons set forth below, Wired's motion to dismiss [ECF No. 6] is GRANTED, and OmniMD may file an amended counterclaim complaint consistent with this Order.

         I. BACKGROUND

         The following facts are drawn from the Counterclaim Complaint, the well-pleaded allegations of which are taken are true for purposes of evaluating Wired's motion to dismiss. See Ruivo v. Wells Fargo Bank, 766 F.3d 87, 90 (1st Cir. 2014).

         On September 17, 2017, Wired and OmniMD entered into a Master Software License and Services Agreement (“MSL”). [Counterclaim Compl. ¶ 4]. The MSL granted OmniMD licenses to use Wired products as specified in one or more ordering documents, which would amend or supplement the MSL. [Id. ¶¶ 5, 7]. The licenses would either be “Development” licenses, which would allow the use of Wired products in a development or testing environment, or “Production” licenses for using Wired products in a commercial or production environment. [Id. ¶ 6]. The MSL also provided for technical support to accompany licenses of Wired's products. [Id. ¶ 8].

         On March 22, 2018, OmniMD ordered two Development licenses for a term of nine months for a product called “Invenio.” [Id. ¶ 9]. OmniMD intended to use Invenio “as an artificial intelligence engine to read and parse natural language in medical transcripts, [to] select[] vital medical information from those transcripts[, ] and [to] transfer[] that information to specific locations in standardized electronic health records . . .” for patients being treated by medical professionals using OmniMD's electronic health records software. [Id. ¶ 10]. Wired represented to OmniMD that Invenio was “ready to use, ” and the parties anticipated that the nine-month term would be used to “fine-tune[], ” test, and adapt Invenio for OmniMD's expected usage. [Id.].

         Also on March 22, 2018, OmniMD ordered nine Production licenses for Invenio for a twelve-month term to immediately follow the expiration of the term of the Development licenses. [Id. ¶ 11]. Before OmniMD placed its order for the Development and Production licenses, Wired had represented to it that “the nine-month term of the Development licenses would be a sufficient period of time for the Invenio artificial intelligence engine to adapt” to the integration with OmniMD's electronic health records software. [Id. ¶ 12].

         Once it received the Development licenses, OmniMD tried unsuccessfully to integrate Invenio into its electronic health records software. [Id. ¶ 13]. During this time, Wired failed to provide sufficient technical support, despite OmniMD notifying Wired that Invenio was not fit for its intended purpose and was not merchantable. [Id. ¶¶ 16, 18-19]. After the nine-month term ended and OmniMD had spent more than $17, 500 in license fees, Invenio was “barely working for only a small portion of functions” that Wired had represented it could perform. [Id. ¶ 10]. OmniMD determined that Invenio would need several more years of work before it would be usable and that it could not be incorporated into OmniMD's electronic health records software at that time. [Id. ¶¶ 10, 20]. OmniMD informed Wired that it was terminating the March 22, 2018 order as well as the MSL. [Id. ¶¶ 20-21]. As a result of the time spent by OmniMD on unsuccessfully adapting Invenio for use with its electronic health records software, OmniMD was delayed in getting its own product to market. [Id. ¶ 22].

         On November 19, 2018, Wired filed a complaint in Suffolk County Superior Court. [ECF No. 1-1 at 3-9]. OmniMD removed the action to this Court on January 3, 2019 and thereafter filed an answer, affirmative defenses, and counterclaims on January 25, 2019. [ECF Nos. 1, 4]. On February 14, 2019, Wired file a motion to dismiss the counterclaims, which OmniMD opposed on March 11, 2019. [ECF Nos. 6, 10].

         II. LEGAL STANDARD

         On a motion to dismiss a counterclaim under Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiff-in-counterclaim's theory, and draw all reasonable inferences from those facts in favor of the plaintiff-in-counterclaim. See United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). While detailed factual allegations are not required, a counterclaim complaint must set forth “more than labels and conclusions, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), and it must contain “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory, ” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (citations omitted). The facts alleged must be sufficient to “state a claim to relief that is plausible on its face.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Twombly, 550 U.S. at 570).

         When assessing the sufficiency of a counterclaim complaint, the Court first “separate[s] the [pleading's] factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next, the Court “determine[s] whether the remaining factual content allows a ‘reasonable inference that the [defendant-in-counterclaim] is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224). “[T]he court may not disregard properly pled factual allegations, ‘even if it strikes a savvy judge that actual proof of those facts is improbable.'” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Twombly, 550 U.S. at 556).

         III. DISCUSSION

         A. ...


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