Prairie River Home Care, Inc. v. Procura, LLC

Background

Procura, LLC, also known as Complia Health, was the defendant and third-party plaintiff. Salo Solutions, Inc. was the third-party defendant. Prairie River Home Care, Inc. was the plaintiff in the underlying action.

In September 2014, Salo and Procura entered a Provider Agreement making Salo a preferred but nonexclusive provider of services related to Procura’s software. The agreement contemplated mutual customer referrals and contained indemnification provisions. The agreement was governed by Ohio law.

Salo referred Prairie River to Procura for software and support services. Prairie River later sued Procura, alleging, among other things, that Procura breached a separate contract concerning software and services. Procura eventually filed a third-party complaint against Salo seeking, among other relief, indemnification under the Provider Agreement. Salo responded with counterclaims asserting that Procura owed Salo indemnification because Salo had made the referral.

The scheduling order set February 15, 2019, as the final deadline to amend the pleadings. In July 2019, the court dismissed Procura’s third-party complaint without prejudice, concluding that Salo’s obligations under the Provider Agreement had not attached because Salo had referred Prairie River to Procura. In August 2019, more than six months after the amendment deadline, Procura moved to amend its third-party complaint. A magistrate judge denied that motion, finding that Procura had not shown good cause or extraordinary circumstances.

Leave to Amend

Because Procura sought to amend after the scheduling-order deadline, the court applied Federal Rule of Civil Procedure 16(b)’s good-cause standard. That standard focuses first on whether the party seeking the change acted diligently. The court reviewed the magistrate judge’s decision anew because it was unclear whether the magistrate judge had relied on Rule 15 or Rule 16, although the court believed the magistrate judge had applied the correct good-cause standard.

The court found that Procura had not acted diligently. Procura knew about Salo’s involvement years before the case began but waited nearly a year after Prairie River filed suit to bring Salo into the action. Procura then waited another month to serve Salo and waited until mid-January 2019 to serve discovery requests. Procura also knew about possible defects in its third-party complaint when Salo moved to dismiss and asserted its counterclaims in November 2018, several months before the amendment deadline. Procura nevertheless waited until August 2019 to seek permission to amend.

Because Procura failed to show diligence, the court did not need to consider whether amendment would prejudice Salo. The court overruled Procura’s objections, affirmed the magistrate judge’s order, and denied Procura’s motion to amend its third-party complaint.

Summary Judgment on Salo’s Counterclaims

Summary judgment is appropriate when there is no genuine dispute about a material fact and the party entitled to judgment wins as a matter of law. The court may grant summary judgment to a nonmoving party when the party that loses had sufficient notice and a reasonable opportunity to address the issue. The court found those requirements satisfied because Procura had moved for summary judgment on the relevant counterclaims.

The court interpreted the Provider Agreement under Ohio law. It found the agreement’s language clear and unambiguous, making interpretation a question of law rather than a factual issue. The court relied on its earlier conclusion that the Provider Agreement’s obligations attach to the party receiving the referral. Because Salo referred Prairie River to Procura, Procura was the party bound by the agreement’s obligations toward Salo.

The indemnification provision required Procura to protect, defend, indemnify, and hold Salo harmless from claims arising from Procura’s failure to comply with the agreement or from services provided by Procura. The court concluded that Prairie River’s claims against Procura arose solely from alleged deficiencies in Procura’s software and services. Procura therefore had a contractual duty to indemnify and hold Salo harmless from those claims.

The court further concluded that Procura failed to fulfill that duty by bringing a claim against Salo and refusing to honor the indemnification provision. It held that Procura breached the Provider Agreement. Because no genuine dispute of material fact remained, the court denied Procura’s motion for summary judgment and granted summary judgment to Salo under Rule 56(f) on Count I, breach of contract, and Count II, declaratory relief.

Other Dispositions

The court ordered that damages would be determined at a later evidentiary hearing concerning the amount of reasonable fees and costs incurred by Salo. It denied as moot Salo’s motion for summary judgment and to exclude expert testimony. It also denied as moot Procura’s objections to the magistrate judge’s report and recommendation, declared moot the recommendation concerning evidentiary sanctions, and denied as moot Prairie River’s motion for sanctions to the extent it sought evidentiary sanctions.

Result

The order combined a procedural ruling on Procura’s request to amend with a merits ruling on Salo’s contract counterclaims. Procura’s objections were overruled, its motion to amend was denied, its summary-judgment motion was denied, and Salo received summary judgment on both counterclaims.