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MedPricer.com, Inc. v. Becton, Dickinson and Co.

United States District Court, D. Connecticut

March 6, 2017

MEDPRICER.COM, INC., Plaintiff,
v.
BECTON, DIXON AND COMPANY, Defendant.

          MEMORANDUM OF DECISION

          MICHAEL P. SHEA, U.S.D.J.

         I. INTRODUCTION

         This action arises out of a contract dispute between MedPricer.com, Inc. (“MedPricer”), a company that operates an online portal through which purchasers and suppliers of medical equipment can make and accept bids, and Becton, Dixon, and Company (“Becton”), a company that provides medical products, including safety needles and syringes. MedPricer brought suit for, inter alia, breach of contract, and Becton responded by alleging as an affirmative defense that the contract violated the federal Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a-7b(b). The parties have filed cross-motions for summary judgment. For the reasons stated below, Defendant's Motion for Summary Judgment is GRANTED in part and DENIED without prejudice in part, and Plaintiff's Motion for Summary Judgment is DENIED without prejudice.

         II. FACTS

         The following facts are taken from the parties' Local Rule 56(a) Statements and the documents cited therein. See Defendant's Local Rule 56(a)(1) Statement, ECF No. 68; Plaintiffs' Local Rule 56(a)(2) Statement, ECF No. 81-2; Plaintiffs' Local Rule 56(a)(1) Statement, ECF No. 70-4; Defendant's Local Rule 56(a)(2) Statement, ECF No. 80-2. The facts are undisputed unless otherwise noted.

         MedPricer operates a website that provides an online auction platform allowing buyers and sellers to conduct online negotiations (“Sourcing Events”), which include online requests for quotes (“RFQs”), i.e., the means to enter bids to supply services or products to health care organizations.[1] (Defendant's Local Rule 56(a)(1) Statement (“Def.'s L.R. 56(a)(1) Stmt.”), ECF No. 68 at ¶ 1-2; Plaintiffs' Local Rule 56(a)(2) Statement (“Pl.'s L.R. 56(a)(2) Stmt.”), ECF No. 81-2 at ¶ 1-2.) MedPricer does not participate in the Sourcing Events directly, but facilitates negotiations between buyers and suppliers through its website. (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 4; “Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 4.)

         Hospitals and other healthcare service providers enter into Service Agreements with MedPricer to engage MedPricer as the exclusive provider of e-sourcing services. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 10; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 10.) Under the Service Agreement, MedPricer has no role in determining which suppliers are invited to participate in the Sourcing Event and which are ultimately awarded business from the Sourcing Event. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 8; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 8.) Rather, the hospitals determine which suppliers to invite to a Sourcing Event and MedPricer then sends invitations to those suppliers. (Plaintiffs' Local Rule 56(a)(1) Statement (“Pl.'s L.R. 56(a)(1) Stmt.”), ECF No. 70-4 at ¶ 8; Defendant's Local Rule 56(a)(2) Statement (“Def.'s L.R. 56(a)(2) Stmt.”), ECF No. 80-2 at ¶ 8.) MedPricer provides the online forum for the Sourcing Events, provides the forms on which the bids are made, and offers to answer questions about the bidding process. (ECF No. 69-6 at 10.)

         Once a supplier is invited to a Sourcing Event, it must visit MedPricer's website, create an individual login, password, and member profile, and register as a supplier to participate in Sourcing Events and view specifications for a bid.[2] (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 6; Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 6.) As part of the required registration process, the supplier must click a box indicating acceptance of an agreement with MedPricer (the “Contract”). (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 7; Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 7.) Before accepting the Contract, a supplier has the opportunity to review the terms and conditions of the Contract. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 13; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 13.) After the supplier has registered, MedPricer emails the supplier with a copy of the Contract. (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 8; Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 8.)

         The Contract states that a fee of 1.5% of the value of the transaction shall be paid by a supplier “who participates in a Sourcing Event through MedPricer and is awarded business related to a Sourcing Event.” (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 10; Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 10.) The fee is volume based, rather than a flat fee. (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 13, 11; Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 13, 11.) Even if the sale is completed after the Sourcing Event, or is concluded between the buyer and supplier on different terms than those set forth in the Sourcing Event, the supplier must still pay MedPricer the 1.5% fee. (Def.'s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 14; Pl.'s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 14.) The Contract also includes a term binding the supplier to any bid that it makes during a Sourcing Event. (ECF No. 69-3 at 7 ("A supplier may withdraw any bid during the course of the Sourcing Event. Any bids that are not withdrawn will be considered contractually binding.").) The Contract requires that winning suppliers provide MedPricer with monthly sales reports and payments for all business transacted as a result of the successful bid. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 39; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 39.)

         Becton participated in three transactions on the MedPricer platform that are the subject of this lawsuit.[3] On October 3, 2011, Becton accessed the MedPricer platform to participate in a Sourcing Event for Children's Hospital of Alabama (the “First Transaction”). (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 15; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 15.) Becton checked the box indicating that it accepted the terms of the Contract and was provided access to the Sourcing Event.[4] (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 15; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 15.) On October 25, 2011, Becton participated in a Sourcing Event for Children's Hospital and submitted a bid to provide analyzers. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 17-18; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 17-18.) Following the Sourcing Event, Becton was awarded the Children's Hospital business. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 19; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 19.) Becton sold the analyzers to Children's Hospital for $28, 900. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 20; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 20.) Under the Contract, MedPricer was entitled to 1.5% of the total volume of the sale, or $433.50. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 21-22; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 21-22.) MedPricer invoiced Becton for the fee, but Becton did not pay it. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 22; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 23.)

         On May 21, 2012, Becton was invited to participate in Sourcing Events for Barnabas Health (the “Second Transaction” and “Third Transaction”). (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 23; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 23.) Becton accessed the MedPricer platform and was required to register again. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 24; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 24.) Becton registered by checking the box indicating acceptance of the Contract.[5] (Id.) Becton then contacted MedPricer and requested that it be permitted to make payments on a semi-annual rather than monthly basis as required by the Contract, and MedPricer agreed to allow payment semi-annually. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 27-28; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 27-28.) MedPricer allowed Becton access to its platform and Becton participated in a Sourcing Event and submitted bids to provide pre-filled syringes and safety syringes to Barnabas. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 30-32; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 30-32.) In submitting the bids, Becton included a comment stating:

[Becton]'s response to this Request for Quote and the pricing offered herein is subject to the understanding that [Becton] will not be required to pay any fees to MedAssets or any other GPO fee. The MedPricer fee is subject to continued discussion. In the event that [Becton] is required to pay any such fees, [Becton] reserves the right to modify the pricing offered herein.

(Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 33; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 33.) Following the bids, Becton and Barnabas reached an agreement for Becton to sell Barnabas pre-filled syringes (the Second Transaction) and safety syringes (the Third Transaction) for a certain price for three years. (Pl.'s L.R. 56(a)(1) Stmt., ECF No. 70-4 at ¶ 36; Def.'s L.R. 56(a)(2) Stmt., ECF No. 80-2 at ¶ 36.) Becton did not provide MedPricer with monthly sales reports or pay any fees to MedPricer as a result of the Second and Third Transactions. This action followed.

         In its Amended Complaint, MedPricer brings four claims against Becton for the failure to pay the fees associated with the First, Second, and Third transactions. The claims include Breach of Contract (Count One), Breach of the Covenant of Good Faith and Fair Dealing (Count Two), Unjust Enrichment (Count Three), and Violation of Connecticut Unfair Trade Practices Act (“CUTPA”) (Count Four). MedPricer has moved for summary judgment on Count One, and Becton has moved for summary judgment on all counts.

         III. LEGAL STANDARD

         Summary judgment is appropriate only when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The “party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists.” Goenaga v. Mar. of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995). “In moving for summary judgment against a party who will bear the ultimate burden of proof at trial, the movant's burden will be satisfied if he can point to an absence of evidence to support an essential element of the nonmoving party's claim.” Id. If the moving party carries its burden, “the opposing party must come forward with specific evidence demonstrating the existence of a genuine dispute of material fact.” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (citation omitted).

         An issue of fact is “material” if “it might affect the outcome of the suit under the governing law.” Konikoff v. Prudential Ins. Co. of America, 234 F.3d 92, 97 (2d Cir. 2000) (internal citation and quotation marks omitted). “A dispute regarding a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Williams v. Utica Coll. of Syracuse Univ., 453 F.3d 112, 116 (2d Cir. 2006) (internal citation and quotation marks omitted). On summary judgment, a court must “construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the movant.” Caronia v. Philip Morris USA, Inc., 715 F.3d 417, 427 (2d Cir. 2013) (internal citation and quotation marks omitted). In this case, both parties have moved for summary judgment.

         IV. DISCUSSION

         I begin with Becton's Motion for Summary Judgment because I need not decide the legal issues raised by MedPricer's Motion for Summary Judgment if the Contract is unenforceable.[6]Becton argues that the Contract is unenforceable because it violates the AKS, 42 U.S.C. § 1320a- 7b(b). Both parties agree that Connecticut law governs the Contract. Under Connecticut law, illegal contracts are unenforceable. D'Angelo Dev. & Const. Co. v. Cordovano, 278 Conn. 237, 242 (2006). “The question of whether a contract is enforceable or illegal is a question to be determined from all the facts and circumstances of each case. Similarly the question of whether a contract is against public policy is a question of law dependent on the circumstances of the particular case.” Carriage House I-Enfield Ass'n, Inc. v. Johnston, 160 Conn.App. 226, 245-46 (2015) (internal quotation marks omitted). “Generally, a contract made in violation of a statute is illegal and unenforceable.” Cimmino v. Town of Trumbull, 1994 WL 76859, at *2 (Conn. Super. Ct. 1994) (quoting C.J.S., supra, § 201) (holding that a contract was unenforceable where it violated a state law intended to prevent conflicts of interest because “[e]ven assuming the alleged contract was entered into with the best of intentions it is still in violation of [the statute].”). “The court will not lend its aid in support of a contract rendered in violation of a governing statute.” Douglas v. Smulski, 20 ...


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