Hennepin Healthcare System, Inc. v. Freedom Medical, Inc.
- Paul Magnuson
- 0:18-cv-02868
- U.S. District Court · District of Minnesota
- 6
In Hennepin Healthcare v. Freedom Medical, Judge Magnuson denied Hennepin’s motion, allowing Freedom Medical’s contract counterclaims to proceed.
Hennepin Healthcare System, Inc. and Freedom Medical, Inc.; Freedom Medical’s breach-of-contract and good-faith-and-fair-dealing counterclaims were allowed to proceed past Hennepin’s motion.
What happened
Hennepin Healthcare System, Inc. v. Freedom Medical, Inc. concerns a dispute over medical equipment that Hennepin said was defective and a contract it tried to end. Freedom Medical claimed that ending the agreement required Hennepin to pay nearly $900,000 under the contract.
Hennepin asked the court to rule in its favor based on the written agreements or dismiss Freedom Medical’s counterclaims. Hennepin argued that the agreements allowed termination on 60 days’ notice and did not require the claimed payment. Freedom Medical argued that the agreements were open to more than one interpretation and that Hennepin had interfered with its performance.
The court denied Hennepin’s motion for judgment on the pleadings or to dismiss. It held that the contracts could reasonably be interpreted in different ways and that Freedom Medical had adequately stated both its breach-of-contract and good-faith-and-fair-dealing counterclaims. Judge Magnuson did not finally resolve the parties’ contract dispute in this order.
The detailed version
- Hennepin Healthcare System, Inc. v. Freedom Medical, Inc. · No. 0:18-cv-02868
- Paul Magnuson
- Dec. 21, 2018
Background
Hennepin Healthcare System, Inc., doing business as Hennepin County Medical Center, contracted with Freedom Medical, Inc. to obtain medical equipment. Hennepin alleged that the equipment was defective and that it therefore had to cancel the contract. Freedom Medical maintained that the agreement did not allow early termination without a payment. It sought nearly $900,000, representing the difference between the negotiated equipment prices and the list prices.
The parties’ arrangements included a group purchasing agreement involving Novation, now known as Vizient; a supplier agreement between Novation/Vizient and Freedom Medical; and agreements directly between Hennepin and Freedom Medical called the Equipment Rental Agreement and two addenda. Hennepin was a member and third-party beneficiary under the group purchasing agreement. The parties disagreed about which termination provisions applied and what payment, if any, Hennepin owed after ending the relationship.
Freedom Medical asserted counterclaims for breach of contract and breach of the implied covenant of good faith and fair dealing. The latter is a requirement under Minnesota law that a contracting party not unjustifiably hinder the other party’s performance. Freedom Medical alleged that Hennepin had hindered its performance, including by refusing to cooperate with an investigation into the equipment problems.
Motion and analysis
Hennepin moved for judgment on the pleadings and to dismiss under Federal Rule of Civil Procedure 12. A motion for judgment on the pleadings asks the court to decide the case from the pleadings when there is no material factual dispute and the moving party is entitled to judgment as a matter of law. A motion to dismiss tests whether the opposing party has adequately stated a claim.
Hennepin argued that the agreements allowed it to terminate on 60 days’ notice. The court rejected Hennepin’s reliance on a 60-day termination provision in a sample Equipment Rental Agreement because that form agreement had not been signed by either Hennepin or Freedom Medical. The court also concluded that a 90-day termination provision in the supplier agreement applied only to Novation/Vizient, not to Hennepin.
The court further rejected Hennepin’s argument that the directly signed agreement was unambiguous and allowed termination without the claimed payment. The court concluded that the contract terms were susceptible to multiple interpretations. That uncertainty made judgment on the pleadings or dismissal inappropriate at this stage.
The court also concluded that Freedom Medical had sufficiently alleged that Hennepin unjustifiably hindered Freedom Medical’s performance. Taking Freedom Medical’s allegations as true for purposes of the motion, the court found that Freedom Medical had adequately stated a claim for breach of the implied covenant of good faith and fair dealing.
Ruling
The court denied Hennepin’s Motion for Judgment on the Pleadings or to Dismiss, identified as Docket No. 9. The order denied the motion as to both Freedom Medical’s breach-of-contract counterclaim and its good-faith-and-fair-dealing counterclaim. The order did not finally decide how the contracts should be interpreted or whether either party would ultimately prevail.
Read the full 6-page opinion on CourtListener, the free public archive maintained by the Free Law Project.