Allscripts Healthcare, LLC v. DR/Decision Resources, LLC

United States District Court

District of Massachusetts

)

Allscripts Healthcare, LLC, )

)

Plaintiff, )

)

v. ) Civil Action No.

) 19-11038-NMG

DR/Decision Resources, LLC, )

)

Defendants. )

)

MEMORANDUM & ORDER

GORTON, J.

This suit arises out of a contractual dispute between

Allscripts Healthcare, LLC (“Allscripts” or “plaintiff”) and

Decision Resources, LLC d/b/a Decision Resources Group (“DRG” or

“defendant”). Pending before the Court is the motion of DRG for

summary judgment on the claims in the complaint and the motion

of Allscripts for summary judgment on DRG’s affirmative defenses

and counterclaims II, III and IV.

I. Background

A. The Parties

Allscripts is a healthcare information technology company

that purportedly collects, aggregates and de-identifies

sensitive patient level data from a network of medical practices

in compliance with applicable privacy and security laws and

regulations, i.e., the Health Insurance Portability and

Accountability Act (“HIPAA”).1

Allscripts licenses its anonymized data to third party

recipients, provided that, among other things, the third party

agrees to protect the data and an independent statistician

certifies that the data has been de-identified in compliance

with HIPAA.

In June, 2014, Allscripts entered into a Master Data

License Services Agreement (“the Agreement”) with DRG, a

healthcare data analytics and consulting company that compiles

and repackages licensed data for sale to third parties.

In February, 2018, Allscripts acquired an electronic health

records company and subsequently formed a new business unit,

Veradigm, which competes directly with DRG.

B. Terms of the Agreement

Several provisions of the Agreement, which is governed by

Delaware law, outline the boundaries of DRG’s use and disclosure

of the data provided by Allscripts. In Section 3.2, the parties

agreed that

1 Patient level data refers to healthcare data about specific

patients.

Allscripts hereby grants to [DRG] a limited, revocable

non-exclusive license to use the Data [as defined

elsewhere in the Agreement] to create analyses,

reports and products (“Client Products”) using the

Data and to commercially distribute such Client

Products to its customers. If the Data is de-

identified using a statistician certification, such

license is subject to the terms and restrictions set

forth in the statistician certificate. [DRG] shall

have no authority, permission, right, or license with

respect to the Data except as expressly and explicitly

granted to it by Allscripts by the terms of this

Agreement.

Section 3.3 limits DRG’s rights under the Agreement,

providing that

[DRG] shall have no right to and shall not (nor shall

it request that any third party) engage in the

following: . . . (iii) sell, license, transfer or

distribute the Data to any third party other than as

permitted under this Agreement. . . .

The Agreement further provides in Section 8.2 that

either party can terminate the Agreement if the other party

commits a material breach and fails to cure within 30 days

after written notice thereof.

C. The Statistician Certification

To verify that the data provided under the Agreement

complied with the HIPAA Privacy Rule, Allscripts retained

Dr. Patrick Baier, who issued a statistician certification

(“the Certification”) in October, 2014. Paragraph 22 of

the Certification provides that

[DRG] will not provide patient level Allscripts data

to a client, either alone or in combination with other

data sources. [DRG] may disclose derivative works

such as summaries and analytical results as long as

they are not linked to any individuals.

In 2018, Dr. Baier issued a revised certification that

contains the same language as the original Paragraph 22.

D. Alleged Breach of the Agreement

In 2016, DRG developed a proprietary data product that

linked healthcare data licensed from multiple data suppliers

(“the Raven Product”). Although the Raven Product initially

linked data licensed from Allscripts and only one additional

data supplier, DRG submits that it contained data from as many

as nine sources between 2017 and 2019 and has never included

data from fewer than two sources.

In October, 2018, Allscripts exercised its right under the

Agreement to conduct an audit of DRG’s facilities and records on

suspicion that DRG had violated the Agreement. In February,

2019, Allscripts sent a letter to DRG asserting that DRG was in

material breach of the Agreement for providing Allscripts’

patient level data to DRG customers. DRG responded that it was

acting in accordance with the terms of the Agreement and HIPAA.

DRG avers that it thereafter learned that Allscripts,

through Veradigm, “initiated contact with one of DRG’s

customers” and informed that customer that

it should be concerned about DRG’s sustained ability to

sell [electronic health records (“EHR”)] data.

DRG submits that Allscripts also falsely notified other DRG

customers that “DRG [would] soon lose access to Allscripts’

data.”

E. Procedural History

Mediation proved unsuccessful in May, 2019, and Allscripts

filed this lawsuit shortly thereafter alleging 1) violation of

the Defend Trade Secrets Act (“DTSA”) (Count I); 2) trade secret

misappropriation under Massachusetts law (Count II); 3) breach

of contract (Count III); 4) unfair and deceptive practices under

M.G.L. c. 93A (“Chapter 93A”) (Count IV); and 5) fraud in the

inducement (Count V). In April, 2020, Allscripts and DRG

stipulated to the dismissal of Count V.

In its answer, DRG counterclaimed for 1) declaratory

judgment (Counterclaim I); 2) unfair competition in violation of

Chapter 93A (Counterclaim II); 3) false and misleading

statements in violation of Section 43(a)(1)(B) of the Lanham Act

(Counterclaim III); and 4) breach of contract (Counterclaim IV).

DRG also asserted 17 affirmative defenses.

In May, 2019, the parties filed cross motions for

preliminary injunctions, both of which were denied. Allscripts

also moved to dismiss DRG’s Lanham Act counterclaim but that

motion was denied as well.

In April, 2020, both parties moved for summary judgment.

DRG sought summary judgment with respect to plaintiff’s claims

and Count I of its counterclaims, while Allscripts sought

summary judgment as to DRG’s affirmative defenses and Counts II

through IV of its counterclaims.

II. Analysis

A. Legal Standard

The role of summary judgment is “to pierce the pleadings

and to assess the proof in order to see whether there is a

genuine need for trial.” Mesnick v. Gen. Elec. Co., 950 F.2d

816, 822 (1st Cir. 1991) (quoting Garside v. Osco Drug, Inc.,

895 F.2d 46, 50 (1st Cir. 1990)). The burden is on the moving

party to show, through the pleadings, discovery and affidavits,

“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).

A fact is material if it “might affect the outcome of the

suit under the governing law . . . .” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). A genuine issue of material

fact exists where the evidence with respect to the material fact

in dispute “is such that a reasonable jury could return a

verdict for the nonmoving party.” Id.

If the moving party satisfies its burden, the burden shifts

to the nonmoving party to set forth specific facts showing that

there is a genuine, triable issue. Celotex Corp. v. Catrett, 477

U.S. 317, 324 (1986). The Court must view the entire record in

the light most favorable to the non-moving party and make all

reasonable inferences in that party’s favor. O’Connor v.

Steeves, 994 F.2d 905, 907 (1st Cir. 1993). Summary judgment is

appropriate if, after viewing the record in the non-moving

party’s favor, the Court determines that no genuine issue of

material fact exists and that the moving party is entitled to

judgment as a matter of law. Celotex Corp., 477 U.S. at 322-23.

B. DRG’s Motion for Summary Judgment

1. Breach of Contract (Count III)

To succeed on the breach of contract claim under Delaware

law, a plaintiff must show: 1) a contractual obligation, 2)

breach of that obligation by the defendant and 3) resulting

damage. Terumo Americas Holding, Inc. v. Tureski, 251 F. Supp.

3d 317, 323 (D. Mass. 2017) (citing RoadSafe Traffic Sys., Inc.

v. Ameriseal Ne. Florida, Inc., No. 09-cv-148-SLR, 2011 WL

4543214, at *13 (D. Del. Sept. 29, 2011)).

As a preliminary matter, Allscripts argues that DRG is not

entitled to summary judgment on Count III because it proffered

evidence that DRG breached the Agreement by allegedly

identifying Allscripts as a provider of data in violation of the

provision in Section 3.3 prohibiting such conduct. DRG

correctly observes, however, that because Allscripts did not

raise that claim in the complaint, it may not now use it to

defeat summary judgment. See Estrada v. Progressive Direct Ins.

Co., 53 F. Supp. 3d 484, 497-98 (D. Mass. 2014).

Nevertheless, the Court will address the primary disputes

with respect to Allscripts’ breach of contract claim, namely 1)

the extent to which the Agreement incorporates the terms of the

Certification and 2) the scope of DRG’s license to use the data

and whether defendant adequately transforms the data in its

Raven Product to avoid the charge that it is merely reselling

raw data.

a. Incorporation of the Certification

When an executed contract refers to another instrument and

incorporates its conditions, the two will be interpreted

together. Town of Cheswold v. Cent. Delaware Bus. Park, 188 A.3d

810, 818–19 (Del. 2018). Incorporation requires an “explicit

manifestation of intent.” Id. When the parties intend to

incorporate a document for a specific purpose, “it becomes a

part of the contract for that purpose only” and is otherwise

irrelevant. Id.

The parties agree that the Certification was incorporated

into the Agreement but disagree as to the extent of that

incorporation. Allscripts contends that its terms were

incorporated into the Agreement without limitation, requiring

DRG to abide by the provision prohibiting it from providing

patient level data to its customers. For that reason,

Allscripts claims that DRG violated the Agreement by including

Allscripts’ data in the Raven Product. DRG retorts that the

Certification was incorporated for the limited purpose of

ensuring compliance with the HIPAA privacy rule and, therefore,

its terms cannot affect DRG’s rights under the Agreement.

It is clear that the primary purpose of the Certification

is to ensure compliance with HIPAA and DRG has proffered

evidence demonstrating that the parties intended to incorporate

the Certification for that limited purpose. It notes that

Margaret Hogue, an Allscripts’ employee who oversaw the

acquisition of the Certification, testified that the purpose of

the Certification is to “make sure that [Allscripts] is in

compliance with HIPAA and the HIPAA privacy rule.” Defendant

cites additional testimony of Ms. Hogue, Dr. Baier and Tom

Langan, the CEO of Veradigm, indicating that none of them

believed that the terms of the Certification could alter the

commercial terms of the Agreement. Because the Agreement

permits DRG to “use the Data to . . . create products,” and

because all data provided under the Agreement is patient level

data, DRG contends that it is implausible that the parties

intended to incorporate a provision that would prohibit DRG from

including such data in its products.

In response, Allscripts has proffered facts that render the

parties’ intent a matter of genuine dispute. It refers to the

negotiations with DRG and the terms of the Agreement itself to

suggest that the parties intended to incorporate all terms of

the Certification, including the apparent prohibition in

Paragraph 22. Specifically, Allscripts cites emails sent by DRG

in which it “agree[d] to comply with the terms of the

[Certification]” and emphasizes that six different provisions of

the Agreement provide that DRG’s use of the data is subject to

compliance with the terms of the Certification.

Although that evidence indicates that DRG was willing to

comply with the Certification, DRG emphasizes the qualification

it stated in one of the emails cited by Allscripts, that it

would

comply with the terms of the [Certification], certifying

that the data delivered to DRG is de-identified in

compliance with HIPAA.

DRG insists the qualification demonstrates the parties’

understanding that the Certification was incorporated solely for

HIPAA compliance purposes.

Even if DRG had expressly stated that it would comply with

all of the Certification’s terms, there is a genuine dispute as

to whether the Certification should have included the subject

prohibition in the first place. DRG asserts that the document

reflects inaccurate information about its contractual rights,

pointing to Dr. Baier’s declaration in which he states that

Paragraph 22 of the Certification “reflected an assumption [he]

made” about the parties’ commercial relationship based on

information provided to him by Allscripts. Allscripts responds

that Dr. Baier clarified in a later declaration that Paragraph

22 was based upon information provided to him from both parties

rather than by Allscripts alone. DRG notes, however, that Dr.

Baier testified at his deposition that he “rel[ied]” on

information provided solely by Allscripts, a relevant portion of

which Ms. Hogue has conceded was “a mistake, clearly.”

Viewing the evidence in the non-movant’s favor, the Court

concludes that DRG is not entitled to judgment as a matter of

law with respect to the alleged breach of the terms of the

Certification. The record reveals that the effect of the

Certification on DRG’s rights under the Agreement is the subject

of an intense and genuine dispute.

b. Scope of the License and Transformation of the

Data

Regardless of whether the terms of the Certification are

fully incorporated into the Agreement, the parties also dispute

whether DRG contravened its license pursuant to the plain

language of Sections 3.2 and 3.3.

When interpreting a contract under Delaware law, the

“clear, literal meaning” of a contract’s terms should be given

effect when those terms

establish the parties’ common meaning so that a reasonable

person in the position of either party would have no

expectations inconsistent with the contract language.

NAMA Holdings, LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d

411, 418 (Del. Ch. 2007). When there is uncertainty as to the

meaning of contractual language, however, courts should consider

extrinsic evidence to determine the intended meaning of the

ambiguous terms. Eagle Indus. v. DeVilbiss Health Care, 702 A.2d

1228, 1232 (Del. 1997). A contract is ambiguous only when the

disputed language is “susceptible to two reasonable

interpretations.” NAMA Holdings, LLC, 948 A.2d at 418.

DRG contends that Section 3.2 clearly and unambiguously

authorizes it to “use the Data to create analyses, reports and

products . . . and to commercially distribute” those products to

its customers. It contends that its process of cleaning and

normalizing Allscripts’ data and linking it to other datasets

creates something more valuable than its component parts,

thereby constituting a “product.” It has proffered the

declaration of Sven Junkergård, DRG’s former Chief Technology

Officer (“CTO”), who notes that the procedures for

“normaliz[ing] and cleaning” the data “may sound trivial” but

that the “hundreds of hours” spent processing Allscripts’ data

are actually “critical” to creating a new product.

Allscripts responds that Mr. Junkergård’s declaration is,

however, unsubstantiated and misleading. It dismisses DRG’s

admittedly “trivial” processing of the data as superficial and

asserts that the Raven Product is a mere “vehicle for

distributing the Data itself” rather than a new “product using

the Data” as contemplated by the Agreement. Even if the

processing were more substantial, Allscripts maintains that

Section 3.2 authorizes DRG to create only products that draw

inferences from the licensed data rather than products (such as

the Raven Product) that actually contain the data.

Although each party believes the contract language is

unambiguous in its favor, the presence of seemingly

contradictory provisions and the absence of precise definitions

of the disputed terms in Section 3.2, namely “use” and

“products,” render the contract language ambiguous and subject

to conflicting interpretation.

For instance, Allscripts observes that Section 3.3 states

that DRG may not

sell, license, transfer or distribute the Data to any third

party [or] permit third parties to access to the Data.

Allscripts contends that the sale of the Raven Product is in

direct violation of those provisions. DRG rejoins that the

restriction is qualified by the phrase “other than as permitted

under this Agreement,” and insists that such language would be

meaningless if it were not authorized to sell Allscripts’ data

pursuant to Section 3.2. To that Allscripts replies that DRG is

permitted elsewhere in the Agreement to distribute the data to

its employees, subcontractors and independent contractors,

demonstrating that the clause cited by DRG would retain meaning

even under Allscripts’ interpretation.

Having concluded that the language of the license in

Section 3.2 is ambiguous, the Court considers extrinsic evidence

to determine the parties’ intended meaning. See Eagle Indus.,

702 A.2d at 1232. Yet the extrinsic evidence fails to

illuminate the intended meaning and further demonstrates a

genuine dispute as to the scope of the license.

Allscripts highlights testimony from Ms. Hogue and Daniel

Pucci, a former Allscripts’ employee who helped negotiate the

Agreement, in which each stated they understood early on that

DRG would not be authorized to sell patient level data under any

circumstances. Allscripts then accuses DRG of sending one of

its customers a doctored version of the Agreement in which it

explicitly added a right to distribute commercially both

products and the data itself, suggesting that DRG knew it could

not resell the data licensed under the Agreement.

For its part, DRG vehemently denies that it sent out an

altered version of the Agreement, emphasizing that the document

to which Allscripts refers was attached to an email in which DRG

clearly stated that it was intended to summarize the language

and rights of multiple agreements. Furthermore, DRG has

presented evidence of an internal instant message conversation

from August, 2018, in which Ms. Hogue noted to another

Allscripts employee that the Agreement “isn’t very clear that

[DRG] CANNOT relicense our data IF it is combined with their

other data.” That suggests that Allscripts was aware of the

ambiguity of Section 3.2 even though it now asserts that the

Agreement “unambiguously bars” the marketing of the Raven

Product.

Ultimately, this is not a case in which one party asserts a

contrived interpretation to create the illusion of a good faith

dispute. Instead, both parties have proffered facts supporting

reasonable interpretations of ambiguous contractual terms.

Because a reasonable jury could return a verdict for either

party on Allscripts’ breach of contract claim, DRG is not

entitled to summary judgment on Count III.

c. Resulting Damages

DRG also declares that summary judgment is appropriate on

Allscripts’ breach of contract claim because it cannot establish

that it has suffered any damage as a result of DRG’s alleged

breach. It maintains that Allscripts’ allegations of damages

are based solely on DRG’s alleged noncompliance with the

prohibition in the Certification and, because the Certification

exists to ensure compliance with HIPAA, any damage must have

resulted from a HIPAA violation.

Allscripts has, however, presented evidence from multiple

sources indicating that it suffered lost profits due to DRG’s

sale of Allscripts’ data to its customers. It proffered, inter

alia, a declaration and testimony from Stephanie Reisinger, the

head of Allscripts’ data and analytics business, who testified

that customers buying Allscripts’ data from DRG would likely

have purchased that data directly from Allscripts in the absence

of the DRG alternative and that Allscripts would have certainly

attempted to secure that business.

In any event, because the existence of damages depends on

whether DRG exceeded the scope of its license, which is a matter

of genuine dispute, summary judgment will not be allowed on that

basis.

2. Allscripts’ Remaining Claims (Counts I, II and IV)

DRG avers that it is entitled to summary judgment on the

remaining counts in Allscripts’ complaint. Those counts include

two counts of misappropriation of trade secrets in violation of

state and federal law and one count alleging unfair and

deceptive trade practices in violation of Chapter 93A.

With respect to Allscripts’ claims under the DTSA and

Massachusetts trade secret law, the Court observed in a previous

memorandum and order that the success of such claims depends on

whether DRG used and/or disclosed the data provided by

Allscripts contrary to the terms of the Agreement. See Docket

No. 41 at 11-12. Similarly, Allscripts’ Chapter 93A claim

depends on whether it can establish that DRG committed an unfair

or deceptive act or practice by including its patient level data

in the Raven Product.

Because the Court has concluded that there is a genuine

dispute regarding the scope of DRG’s license and whether the

Raven Product exceeded that scope, summary judgment is

unwarranted on Counts I, II and IV of Allscripts’ complaint.

3. Declaratory Judgment (Counterclaim I)

Finally, DRG requests that the Court enter summary judgment

on Count I of its counterclaims, in which it seeks a declaration

that it has not breached the Agreement.

As previously noted, whether DRG’s Raven Product complies

with the terms of the Agreement is a genuinely disputed issue.

Accordingly, summary judgment on DRG’s first counterclaim will

be denied.

C. Allscripts’ Motion for Summary Judgment

1. Admissibility of Evidence Supporting Counterclaims

As a preliminary matter, each of DRG’s counterclaims relies

on emails that purportedly indicate that Allscripts employees

used information from a confidential audit of DRG to advise

Point72, a DRG customer, that DRG was improperly selling

products using Allscripts’ data. Allscripts argues that the

proffered emails may not be considered by the Court because they

are inadmissible hearsay. Accordingly, the Court will assess

the admissibility of the emails before proceeding. See Ferring

Pharms., Inc. v. Braintree Labs., Inc., 215 F. Supp. 3d 114,

120-21 (D. Mass. 2016) (“At the summary judgment stage, the

Court may consider only evidence that would be admissible at

trial.”).

DRG concedes that the Point72 emails are hearsay but

asserts that they are nonetheless admissible under either Fed.

R. Evid. 803(1) or (6).

Fed. R. Evid. 803(1) allows the admission of hearsay

describing or explaining an event or condition, made while

or immediately after the declarant perceived it.

For that exception to apply, the hearsay statement “must be made

contemporaneously or immediately after the event described.”

Taylor v. Erna, No. 08-10534, 2009 U.S. Dist. LEXIS 61612, at

*13 (D. Mass. July 14, 2009). Although there is “no bright-line

rule indicating what will constitute contemporaneity,”

statements made more than 20 minutes after the relevant event

almost certainly do not meet that standard. See id. at *14-15.

Here, the first email to describe the subject meeting was

sent at 4:03 A.M., many hours after the prior day’s meeting.

DRG has proffered no evidence demonstrating that the particular

email or any other was drafted during or immediately after the

meeting. Accordingly, Fed. R. Evid. 803(1) is inapplicable.

Fed. R. Evid. 803(6) provides that “[a] record of an act,

event, condition, opinion, or diagnosis” is not excluded by the

rule against hearsay if it satisfies five requirements.

Allscripts contends that the emails are inadmissible under

that exception because the custodial declaration submitted by

DRG does not indicate that Point72 imposed a duty on its

employees to write the emails. Even assuming that Allscripts is

correct about the declaration’s insufficiencies, however, the

Court is not precluded from considering the emails for that

reason. To the contrary, a court may consider evidence on a

summary judgment motion unless it “cannot be presented in a form

that would be admissible in evidence.” Vaks v. LumiraDx, Inc.,

2020 U.S. Dist. LEXIS 232882, at *39 (D. Mass. Dec. 11, 2020)

(quoting Fed. R. Civ. P. 56(c)(2)). Allscripts has not

suggested any reason why DRG would be unable to have the emails

admitted into evidence at trial under Fed. R. Evid. 803(6).

Accordingly, the emails may be considered at this stage. See id.

at *40.

2. Chapter 93A Violation (Counterclaim II)

DRG asserts that Allscripts has engaged in unfair

competition in violation of Chapter 93A by 1) intending to

terminate DRG’s access to Allscripts’ data provided under the

Agreement and 2) making false representations to DRG’s customers

about its business relationship with DRG.

First, Allscripts contends it is entitled to summary

judgment as to the claim that it intended to terminate DRG’s

access to the data feed. Because Allscripts did not, and has

not, terminated access to the data feed pursuant to the

Agreement, DRG cannot show that it has suffered any loss from

such alleged intent and summary judgment is therefore warranted.

See Shaulis v. Nordstrom, Inc., 865 F.3d 1, 10 (1st Cir. 2017)

(“[A] plaintiff must show real economic damages, as opposed to

some speculative harm” to recover under Chapter 93A).

Second, Allscripts argues that it is also entitled to

summary judgment with respect to the allegations involving false

representations because the allegedly unfair acts did not

primarily occur in Massachusetts.

Chapter 93A expressly provides that

no action may be brought under the statute unless the

complained-of-conduct occurred “primarily and substantially

within the Commonwealth.”

Monahan Prods. LLC v. Sam’s East, Inc., 463 F. Supp. 3d 128, 151

(D. Mass. 2020) (quoting M.G.L. c. 93A, § 11). To determine

whether this standard has been met, courts apply a “center of

gravity” test in which the focus should be “solely on the

actionable conduct said to give rise to the violation.” Id. The

defendant bears the burden of establishing that the conduct

occurred outside of Massachusetts. Zyla v. Wadsworth, 360 F.3d

243, 255 (1st Cir. 2004).

Allscripts observes that the pertinent communications took

place in Florida between two companies with principal places of

business outside of Massachusetts. Although DRG acknowledges

that fact, it insists that “every other aspect of [its] claim

occurred at least in part in Massachusetts.” It states that

several DRG employees based in Massachusetts participated in

conversations regarding the audit request and subsequent price

reduction negotiations between DRG and Point72 and that DRG was

injured in Massachusetts due to Allscripts’ conduct.

DRG ignores that the cited conduct does not comprise “the

actionable conduct said to give rise to the violation,” on which

the Court must focus its analysis. Monahan Prods. LLC, 463 F.

Supp. 3d at 151. Furthermore, the fact that DRG sustained

financial injury in Massachusetts is neither controlling nor

worthy of significant weight in this analysis. See New Eng. Gen-

Connect, LLC v. US Carburetion, Inc., No. 16-12270, 2019 U.S.

Dist. LEXIS 49302, at *5 (D. Mass. Mar. 25, 2019) (“While [place

of injury] may be a factor to be taken account of in particular

cases, it is not a general principle that trumps other factors,

such as the situs of the loss-producing activity.”); Spring

Inv’r Servs., Inc. v. Carrington Capital Mgmt., LLC, No. 10-

10166, 2013 WL 1703890, at *13 (D. Mass. Apr. 18, 2013) (“As

many courts have previously held, a place of injury within

Massachusetts is not a sufficient basis for finding that conduct

occurred ‘primarily and substantially’ within the

Commonwealth.”).

Accordingly, because DRG cannot establish that the

complained-of conduct occurred primarily in Massachusetts,

summary judgment on Counterclaim II will be allowed.

3. Lanham Act Violations (Counterclaim III)

Section 43(a)(1)(B) of the Lanham Act provides that any

person who “uses in commerce” any

false or misleading description of fact, or false or

misleading representation of fact, which . . . (B) in

commercial advertising or promotion, misrepresents the

nature, characteristics, qualities, or geographic origin of

his or her or another person’s goods, services, or

commercial activities, shall be liable in a civil action by

any person who believes that he or she is likely to be

damaged by such act.

15 U.S.C. § 1125(a)(1).

Allscripts asserts that DRG cannot succeed on its Lanham

Act claim because, inter alia, the evidence does not establish

that the statements made to Point72 constituted “advertising or

promotion” under the Act. It argues that a single statement

made to one of DRG’s customers cannot be considered an

advertisement within the meaning of the Act.

Although the Lanham Act covers more than “classic

advertising campaigns,” it is nonetheless “aimed at specific

forms of communication.” Podiatrist Ass’n v. La Cruz Azul de

P.R., Inc., 332 F.3d 6, 19 (1st Cir. 2003). It is not so broad

that it “includes all statements made by one competitor about

its or another competitor’s product.” Gillette Co. v. Norelco

Consumer Prods. Co., 946 F. Supp. 115, 134 (D. Mass. 1996). To

constitute advertising or promotion,

commercial speech must at a bare minimum target a class or

category of purchasers or potential purchasers, not merely

particular individuals.

Podiatrist Ass’n, 332 F.3d at 19. Although “a single

promotional presentation to an individual purchaser may be

enough” to trigger Lanham Act liability where potential

purchasers are “relatively limited in number,” Seven-Up Co. v.

Coca-Cola Co., 86 F.3d 1379, 1386 (5th Cir. 1996), there is “no

indication” Congress intended that the Lanham Act extend to

“every isolated alleged misrepresentation made to a potential

customer by a business competitor.” Garland Co. v. Ecology Roof

Sys. Corp., 895 F. Supp. 274, 279 (D. Kan. 1995).

The evidence of record indicates that Allscripts told one

of DRG’s customers, Point72, that an audit led it to believe

that DRG was re-licensing raw data in breach of the Agreement.

DRG has presented no evidence of additional statements made by

Allscripts to any of DRG’s other 38 customers who purchased the

Raven Product. As a result, DRG has not demonstrated that

Allscripts’ statement was “disseminated sufficiently to the

relevant purchasing public,” Ultra-Temp Corp. v. Advanced Vacuum

Sys., 27 F. Supp. 2d 86, 94 (D. Mass. 1998), to subject

Allscripts to Lanham Act liability. Although the market for

linked data products is undoubtedly small, it is not nearly as

small as the market at issue in Coastal Abstract Serv. v. First

Am. Title Ins. Co., 173 F.3d 725 (9th Cir. 1999), in which the

court found that a single representation was sufficient to

trigger Lanham Act liability where the market contained “two or

possibly three” potential customers. 173 F.3d at 735.

DRG submits that “the Court already ruled on this issue”

because it previously held that DRG’s allegations about false

representations were sufficient to survive Allscripts’ motion to

dismiss. It does not follow, however, that DRG has proffered

evidence adequate to support those allegations at the summary

judgment stage. As previously noted, the evidence does not

reveal that Allscripts made any false or misleading statements

to any of DRG’s customers aside from Point72.

Because DRG cannot establish that Allscripts made false

representations in “commercial advertising or promotion,”

summary judgment on Counterclaim III is allowed.

4. Breach of Contract (Counterclaim IV)

In its final counterclaim, DRG submits that Allscripts

breached Section 5.2 of the Agreement when it allegedly used

DRG’s confidential information, including the identities of

certain customers of DRG, to contact Point72 and report that DRG

was in danger of losing access to Allscripts’ data.

As noted above, to succeed on the breach of contract claim

under Delaware law, a party must show: 1) a contractual

obligation, 2) breach of that obligation by the opposing party

and 3) resulting damage. Tureski, 251 F. Supp. 3d at 323.

The parties do not dispute the first element and agree that

they are each under a contractual obligation pursuant to the

Agreement to refrain from using or disclosing the confidential

information of the other. Instead, Allscripts contends that DRG

cannot establish either of the other two elements.

Allscripts asserts that DRG cannot prove damages

because it has failed to disclose any calculation of

damages as required by the Federal Rules of Civil

Procedure.

Rule 26(e) requires a party who has responded to an

interrogatory to “supplement or correct its disclosure or

response” unless the information sought by the

interrogatory has “otherwise been made known to the other

part[y] during the discovery process or in writing.” Fed.

R. Civ. P. 26(e)(1)(A). Pursuant to Rule 37, if a party

fails to supply information required by Rule 26(e),

[that] party is not allowed to use that information or

witness to supply evidence on a motion, at a hearing,

or at a trial, unless the failure was substantially

justified or is harmless.

Fed. R. Civ. P. 37(c)(1).

DRG explains that it had no obligation to supplement

its insufficient damages calculation because evidence

pertaining to damages was made available to Allscripts

during discovery. It highlights the fact that one witness

testified that the damages suffered amounted to

approximately $150,000 and another witness testified that

was between $50,000 and $1 million.

DRG ignores, however, that its precise computation of

damages in the amount of $246,250 is not based on either

witness’s testimony. Rather, according to the declaration

of Graham Lincoln, the computation is based on the

difference between DRG’s proposed price for a renewed

contract for the Raven Product, that included Allscripts’

data, and the amount Point72 actually paid DRG for a

renewed contract for the Raven Product, without Allscripts’

data. DRG has not claimed, let alone demonstrated, that

such information was made known to Allscripts during

discovery or that its failure to produce it was

substantially justified or harmless. As a result, DRG may

not now proffer the undisclosed evidence to avoid the

stricture of Fed. R. Civ. P. 37(c)(1). See AVX Corp. v.

Cabot Corp., 251 F.R.D. 70, 75-80 (D. Mass. 2008) (barring

a party from presenting evidence on damages because it

failed timely to compute damages in violation of its

obligations under Fed. R. Civ P. 26(a)(1)(A)(iii)).

Because DRG cannot establish an essential element of

its breach of contract counterclaim, Allscripts’ motion for

summary judgment will be allowed.

5. DRG’s Affirmative Defenses

Finally, Allscripts seeks summary judgment with

respect to DRG’s affirmative defenses because DRG refused

to provide the factual and legal bases for each defense in

violation of Fed. R. Civ. P. 26(e), which would subject it

to preclusion pursuant to Fed. R. Civ. P. 37(c)(1) as

described above.

The Court concludes that Allscripts is entitled to

summary judgment on DRG’s affirmative defenses. Allscripts

propounded an interrogatory to DRG requesting the basis for

each of its affirmative defenses but DRG, objecting to the

interrogatory as overbroad, unduly burdensome and

premature, did not provide any information in support of

those defenses. DRG never supplemented its response as

required by Fed. R. Civ. P. 26(e)(1)(A) and, as a result,

is subject to the sanction contained in Fed. R. Civ. P.

37(c)(1).

DRG does not claim that its failure to respond to the

interrogatory was substantially justified or harmless.

Instead, it contends that its failure is excusable because

Allscripts never moved to compel a further response, which

it argues is required before a court may employ the

sanction of Rule 37. The decision it cites for that

proposition is, however, inapposite because it reversed

sanctions imposed under Rule 37(b), which prescribes

punishment that may be imposed only for failure to comply

with a court order. See United States v. One 1987 BMW 325,

985 F.2d 655, 660-61 (1st Cir. 1993). In contrast, Rule

37(c) does not require a motion to compel and subsequent

noncompliance with a court order prior to the imposition of

sanctions. See Fed. R. Civ. P. 37(c); Resolution Trust

Corp. v. North Bridge Assocs., 22 F.3d 1198, 1206 (1st Cir.

1994) (“[A] discovering party’s failure to invoke Rule 37

celeritously will not excuse the guilty party’s failure to

furnish required discovery in a timely manner.”).

DRG also asserts that summary judgment should be

denied because the factual bases for each defense were

revealed to Allscripts during discovery as permitted by

Fed. R. Civ. P. 26(e)(1)(A). In its opposition, DRG

mentions only six of its 17 affirmative defenses, and as to

those six, it makes no real effort to identify the specific

evidence revealed to Allscripts that purportedly

establishes the elements of each defense. Consequently,

DRG cannot avoid summary judgment on that basis. See GE

Capital Healthcare Fin. Servs. v. Fall River Walk-In

Emergency Med. Office, No. 02-cv-11789, 2004 U.S. Dist.

LEXIS 75, at *9-11 (D. Mass. Jan. 7, 2004) (allowing

summary judgment on all affirmative defenses where

defendant failed to set forth specific facts or legal

arguments in support of those defenses in its opposition).

Because DRG is precluded from “us[ing] that

information or witness to supply evidence on a motion,”

Fed. R. Civ. P. 37(c)(1), it cannot meet its burden to

present facts showing that there is a genuine issue for

trial. Accordingly, Allscript’s motion for summary

judgment will, with respect to DRG’s affirmative defenses,

be allowed.

ORDER

For the foregoing reasons,

(a) the motion of defendant Decision Resources, LLC d/b/a

Decision Resources Group (“DRG”) for summary judgment

(Docket No. 152) is DENIED;

(b) the motion of plaintiff Allscripts Healthcare, LLC

(“Allscripts”) for summary judgment on DRG’s

affirmative defenses and counterclaims (Docket No.

154) is ALLOWED.

So ordered.

/s/ Nathaniel M. Gorton

Nathaniel M. Gorton

United States District Judge

Dated February 22, 2021