United States District Court, D. Minnesota
Hennepin Healthcare System, Inc., d/b/a Hennepin County Medical Center, Plaintiff,
Freedom Medical, Inc., Defendant.
MEMORANDUM AND ORDER
A. Magnuson United States District Court Judge.
matter is before the Court on the parties' cross-Motions
for Partial Summary Judgment. For the following reasons, the
Motions are denied.
Hennepin County Healthcare System, d/b/a Hennepin County
Medical Center (“HCMC”), contracted with
Defendant Freedom Medical, Inc., for specialty medical beds.
HCMC alleges that the beds were defective and therefore HCMC
was forced to cancel the parties' contract. Freedom
Medical insists that the parties' agreement did not
provide for early termination and thus required HCMC to pay
the difference between the discount the parties had
negotiated for the equipment and the list price for that
equipment, or approximately $600, 000. HCMC brought this
lawsuit in state court seeking a declaration of its rights
under the parties' agreements. Freedom Medical removed
the case to this Court, asserting a counterclaim for breach
of contract and breach of the implied covenant of good faith
and fair dealing.
dispute in this case centers on two contracts. The first is a
Capital Equipment Supplier/Group Purchasing Agreement
(“GPO Agreement”) between Freedom Medical and the
equipment-discount wholesaler Novation, now known as Vizient.
(Wells Decl. (Docket No. 81).) This agreement required
Freedom Medical to supply equipment to Vizient's
customers at a discount. HCMC was one of Vizient's
customers, denoted in the GPO Agreement as a
“Member.” The second contract at issue is an
Equipment Rental Agreement and two Addenda (collectively, the
“ERA”), between Freedom Medical and HCMC. The ERA
gave HCMC an even greater discount on Freedom Medical's
mattresses than that provided in the GPO.
2017, HCMC claims that it began experiencing problems with
the mattresses Freedom Medical provided. (Compl. ¶ 18.)
HCMC contends that Freedom did not sufficiently address those
issues. In March 2018, HCMC notified Freedom Medical that it
was terminating the ERA in 60 days. (Vettleson Decl. (Docket
No. 73) Ex. FF.) Freedom Medical responded that, if HCMC
terminated the agreement, it would consider HCMC in default
and would retroactively charge HCMC the difference between
the GPO price and the ERA price for the mattresses. (Henry
Decl. (Docket No. 71) Ex. B.)
April 2018, HCMC filed three incident reports regarding the
mattresses with the FDA. Those reports were ultimately
dismissed, but Freedom Medical contends that HCMC refused to
cooperate with Freedom Medical's investigation into the
problems, and that refusal forms part of the basis of its
good-faith-and-fair-dealing counterclaim. In July 2018,
Freedom Medical sent an invoice to HCMC for $601, 336.12, the
difference between the GPO price and the ERA price for the
mattresses HCMC purchased from Freedom Medical. (Compl. Ex.
E.) This lawsuit followed.
Complaint contains two counts. The first seeks a declaratory
judgment under Minn. Stat. Ch. 55 that (1) HCMC is allowed to
terminate the parties' contract; and (2) HCMC is not
required to pay any penalty to terminate the contract.
HCMC's second claim contends that Freedom Medical's
failure to make repairs to the mattresses and Freedom
Medical's issuance of the $600, 000 invoice constituted a
breach of contract. As noted, Freedom Medical responded with
a counterclaim for breach of contract and breach of the
covenant of good faith and fair dealing. (Docket No. 3.)
Medical seeks summary judgment on its counterclaim,
HCMC's request for a declaratory judgment, and HCMC's
breach of contract claim as to the invoice. HCMC cross-moved
for partial summary judgment, asking for a declaratory
judgment under Count I of its Complaint that it was entitled
to terminate the contract and it owes no penalty for doing
so. HCMC also responded to Freedom Medical's Motion with
a Rule 56(d) affidavit, contending that there is outstanding
discovery necessary to respond to Freedom Medical's
Motion with regard to the good-faith-and-fair-dealing claim.
judgment is proper if there are no disputed issues of
material fact and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(a). The moving party bears
the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter
of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323
contract provisions underlie these cross-Motions. The first
is a provision of the GPO Agreement between Freedom Medical
and Vizient with the title “Pricing
Enhancements.” In relevant part, the provision states,
In the event that Supplier contracts with a Member(s) for
Products . . . Supplier shall [give Vizient notice and allow
the disclosure of the enhanced prices to Vizient]. . . . Any
Member desiring to avail itself of the pricing, terms, and
conditions described in this Agreement may terminate ...