Pain Ctr. of SE Ind. LLC v. Origin Healthcare Sols. LLC - 893 F.3d 454 (7th Cir. 2018)

Rule:

If the contracts are for the sale of goods and the Uniform Commercial Code (UCC) applies, then the claims are subject to a four-year limitations period, Ind. Code § 26-1-2-725(1). If the UCC does not apply, then contract claims are subject to Indiana's ten-year statute of limitations for written contracts. Ind. Code § 34-11-2-11.

Facts:

Defendants Origin Healthcare Solutions LLC, SSIMED LLC, Origin Holdings, Inc., collectively SSIMED, provided billing services to healthcare providers through proprietary billing and records-management software. In June 2003, plaintiff Pain Center of SE Indiana LLC entered into an agreement with defendant to purchase the medical-billing software and related services. Plaintiff Dr. Anthony Alexander testified that plaintiff Center experienced problems with the software almost from the beginning. More specifically, he noticed problems with accuracy in the amounts that were sent, problems with dates missing, and entire transmissions that had been resent and then were missing. Despite these concerns, plaintiff entered into a second contract with defendant in June 2006 for records-management software and related services. Plaintiff also hired a billing specialist, and the latter discovered that thousands of unpaid claims had piled up, for many of these claims, the deadline for submission to the insurer had passed. Plaintiff made an effort to recover payment, but the insurers refused to pay the stale claims. In January 2013, plaintiff Center filed suit against defendants alleging multiple claims for relief, including breach of contract, breach of warranty, breach of the implied duty of good faith, and four tort claims, all arising out of alleged shortcomings in defendant’s software and services. The district judge found the entire suit untimely and entered summary judgment for defendants.

Issue:

Did the district judge err in holding that the breach of contract claims was time barred?

Answer:

Yes. The court affirmed the decision in part, and reversed in part. Case remanded.

Conclusion:

The court disagree with the district judge’s application of the four-year statute of limitations under Indiana's Uniform Commercial Code, Ind. Code § 26-1-2-725(1) holding that the parties' agreements were mixed contracts for goods and services, but the goods (the software) predominated because the court ruled that under Indiana's predominant thrust test for mixed contracts, the agreements in question fell on the services side of the line, thus, the UCC did not apply. Also, the court held that the breach of contract claims were subject to Indiana's ten-year statute of limitations for written contracts, Ind. Code § 34-11-2-11, and were timely. Hence, the suit could go forward only on those claims. However, the court concluded that the three fraud claims were subject to a six-year limitations period, Ind. Code § 34-11-2-7(4), and were clearly time-barred.