OptumHealth Care Solutions, LLC v. Sports Concussion Institute Global, Inc.

Background

OptumHealth Care Solutions, LLC, a health care services company, and Sports Concussion Institute Global, Inc. (SCI), which develops concussion-management systems, entered into a Marketing Agreement on October 20, 2016. The agreement concerned exploring a network to provide concussion services to members of the class-action settlement arising from National Football League players’ concussion-injury litigation.

The agreement required Optum to establish and execute a marketing plan within 30 days and required Optum to pay SCI a $2.5 million prepaid marketing fee. SCI agreed to market and promote the network. The agreement also allowed either party to terminate it with 90 days’ written notice. If termination occurred before the initial three-year term ended, SCI had to pay Optum an early-termination fee equal to $2.5 million minus any net-margin payments Optum had received. The agreement barred either party from recovering several categories of damages, including lost profits, lost business, and lost opportunities.

Optum never created the required marketing plan, but SCI nevertheless marketed the network through email, social media, its website, and press releases. The parties and a third party, Garretson Resolution Group, continued discussing the proposed project. Optum later concluded that the project was not workable for several reasons, including limits on exclusivity, administrative-service payments, reimbursement amounts, medical-care liability, and provider contracts.

Optum notified SCI on June 20, 2017, that it was terminating the agreement effective September 21, 2017, and that SCI had to return the $2.5 million marketing fee. SCI did not substantively respond or pay. Optum then sued SCI for breach of contract. SCI asserted counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, breach of fiduciary duty, and fraud in the inducement. In an earlier order, the court dismissed the fiduciary-duty and fraudulent-inducement counterclaims. This order addressed Optum’s summary-judgment motion on its contract claim and SCI’s remaining counterclaims.

Optum’s Breach-of-Contract Claim

The court granted summary judgment to Optum. Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law.

SCI argued that Optum’s failure to provide a marketing plan was an earlier breach that excused SCI from repaying the fee. The court rejected that argument. SCI provided no evidence that the missing marketing plan prevented SCI from performing; SCI marketed the network anyway, and the parties worked on the project for months. The court also found no connection between the marketing-plan requirement and SCI’s repayment obligation. In addition, SCI waived any right to complain about the missing plan by continuing to proceed under the agreement without objection.

SCI also argued that the agreement was illusory, meaning that one party supposedly had no real obligation to perform. The court rejected that argument because Optum provided SCI with the $2.5 million prepaid fee and rights to use Optum’s logos, trade names, trademarks, and proprietary notices. The court characterized the fee as essentially a loan supporting SCI’s marketing efforts and held that the repayment obligation did not make the agreement illusory.

The court concluded that the agreement was valid and enforceable and that SCI owed the full $2.5 million. SCI did not dispute that Optum had received no net-margin payments, so the court awarded Optum $2.5 million in damages.

SCI’s Counterclaims

The court also granted summary judgment against SCI on its remaining counterclaims. As to the breach-of-contract counterclaim, the court held that SCI expressly sought lost profits and lost business opportunities, which the agreement prohibited. The court said the claim failed even assuming SCI could support those damages with evidence. The court also noted that SCI did not respond to this part of Optum’s motion and therefore had waived the issue.

The court rejected SCI’s claim for breach of the implied covenant of good faith and fair dealing for the same reason: SCI had not established that it was entitled to damages not prohibited by the agreement.

The court dismissed SCI’s quantum-meruit counterclaim. Quantum meruit is a claim for payment based on the value of services or benefits provided when no enforceable express contract governs. Because the court determined that the parties’ express agreement was valid and enforceable, quantum meruit was unavailable.

Affirmative Defense and Order

SCI also asserted fraud as an affirmative defense, claiming that Optum misrepresented its present ability to form the required provider network or the existence of a viable network. SCI did not respond to Optum’s motion concerning that defense. The court therefore held that SCI waived the issue and that Optum was entitled to the requested relief.

The court ordered that Optum’s summary-judgment motion was granted and that Optum was entitled to judgment for $2.5 million, with pre- and post-judgment interest to be determined. The court directed that judgment be entered accordingly.