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NAZ, LLC v. Philips Healthcare

United States District Court, E.D. Louisiana

July 26, 2017


         SECTION "F"



         Before the Court is the defendant’s Rule 12(e) motion for more definite statement and Rule 12(b)(6) motion to dismiss or, alternatively, for more definite statement. For the reasons that follow, the motion is GRANTED in part (insofar as the plaintiff must amend its complaint to identify the citizenship of each of its members) and DENIED in part (insofar as the plaintiff has satisfied its notice pleading obligation with respect to its allegations of the sale of the MRI and the defendant is not entitled to a more definite statement).


         This litigation arises from a medical facility’s purchase of allegedly faulty MRI equipment, the manufacturer’s allegedly shoddy installation and service of the MRI equipment, as well as its failure to provide the purchaser with the “complete package” including the hardware and software components that should have been delivered when the MRI equipment was installed.

         This extensive factual summary is drawn from the allegations of the complaint. Philips Healthcare, a Division of Philips Electronics North America Corporation (Philips), designs, manufactures, tests, markets, sells, installs, and services medical and diagnostic equipment, including the Ingenia 3.0T Omega MRI.[1] Philips Medical Capital (PMC) is the financing arm of Philips, but Philips leads its customers to believe that Philips controls the financing terms of its equipment sales in order to coax sales.

         NAZ, LLC owns a medical facility on Kingman Street in Metairie, Louisiana. The medical facility at 2909 Kingman Street was constructed to expand the existing medical center (2905 Kingman St.) with the addition of a state of the art neuroscience center and ambulatory surgery center. Critical to this expansion, the neuroscience center was to house an Ingenia 3.0T Omega MRI. Dr. Morteza Shamsnia, as principal of NAZ, decided that a new, state of the art 3T MRI would provide better services to patients, would produce much higher quality MR images, would allow vast expansion of his research into subjects such as autism, dementia, Alzheimer’s disease, concussions, post-traumatic stress disorder. Dr. Shamsnia decided, with the proper computer hardware and software equipment, it would expand the number and geographical reach of services, and thereby increase NAZ’s revenue and profits.

         After research and discussions with various manufactures, Dr. Shamsnia, on behalf of NAZ, decided to purchase the Philips Ingenia 3.0T Omega MRI neurological complete package. This complete package was crafted to serve NAZ’s and Dr. Shamsnia’s particular purposes for use of the machine. Philips marketed its product with promises and representations that the MRI package was the equipment needed to achieve the particular purposes sought by Dr. Shamsnia on behalf of NAZ.

         In December 2011, relying on Philips’ representations including those regarding the high level of skill, expertise, and knowledge possessed by Philips, its engineers, and installation specialists, Dr. Shamsnia signed a quote document that set forth the price and components, package, and services Philips promised to deliver. In doing so, Dr. Shamsnia (on behalf of NAZ) made a counteroffer to Philips’ quote or proposal by adding to the terms a condition that acceptance was contingent upon Philips providing financing for the purchase of the MRI at 3.9%. The effective dates of this quote document were December 11 and December 30, 2011.

         Nevertheless, it is alleged, there was never a meeting of the minds as to this quote document, which was never fully executed. There remained disputes regarding the terms of the sale. Negotiations regarding the sale terms continued.

         In May 2012, a Philips financial sales representative sent another “partial” quote document to Dr. Shamsnia, who countered by attaching additional conditions of the sale. Dr. Shamsnia noted on the quote that any agreement on the sale of the Ingenia 3.1T was conditioned upon Philips confirming its authority to lock in the financing terms previously requested by Dr. Shamsnia and made subject of a financing arrangement with PMC. No Philips representative ever signed this partial quote document and the Philips Standard Terms and Conditions of Sale were never sent or explained to Dr. Shamsnia. This partial quote document, which had the effective dates of May 14, 2012 to June 28, 2012, was never finalized and never became effective or binding on NAZ.

         Negotiations between Philips and Dr. Shamsnia continued in an attempt to reach an agreement on the sale terms and conditions and on the services, instructions, and recommendations by Philips. While the negotiations continued, because of the delays, Philips and NAZ agreed that Philips would deliver the Ingenia MRI package, and Dr. Shamsnia on behalf of NAZ agreed to follow Philips’ experts’ instructions and recommendations regarding installation and services.

         Before the MRI package could be installed, the facility and room where it would be housed needed to be constructed and modeled according to Philips’ experts’ specifications. NAZ had expended significant costs to construct and model the second floor of its facility at 2909 Kingman Street based on Philips’ experts’ representations. But, after Philips’ engineers visited the facility, they notified Dr. Shamsnia that, due to vehicular movement below in the medical facility’s parking lot, the MRI package needed to be located on the third floor. NAZ then incurred additional costs to reconstruct the third floor of the facility to house the MRI package. NAZ relied upon Philips’ engineers and installation specialists, who installed the MRI package and its components on the facility’s third floor.

         Dr. Shamsnia and his construction teams and Philips’ engineers participated in weekly meetings, discussing in detail the issue of vibration and sound isolation. NAZ articulated its concerns regarding vibration and the support system for the MRI unit. Philips’ experts showed photographs and told NAZ that the redesigned, special pads for 3T MRI units solved those concerns: the experts reassured NAZ that the weight of the unit and the special modified pads were adequate and safe to operate the MRI package and prevent its movement during operation. Philips never mentioned the existence of anti-seismic brackets.

         On December 22, 2014, the Philips’ team released the MRI package to NAZ and represented that it was safe for patient use. At that time, Philips began to request monthly payments on the MRI package. Dr. Shamsnia, on behalf of NAZ, began making payments to Philips’ financing arm, PMC. NAZ hired a board certified MRI technician, who was sent to Philips’ headquarters in Cleveland, Ohio to receive training on the 3T Philips MRI before January 5, 2015.

         The MRI use on patients and volunteers began on January 5, 2015 and continued for only four days. When the technician returned on January 12, 2015, the technician noted improper signals during calibration as well as gaps and separation of the covers on the MRI unit. Immediately, she notified Philips engineers. That afternoon, a Philips engineer made a site visit and noticed these changes. When the engineer opened the bottom cover of the MRI unit, it revealed a significant, clear shift and sliding of the vibration pads from their originally installed location. The MRI unit was inoperable and service was required to render it safe for operation.

         Philips agreed to service the MRI unit, which was tendered to Philips’ engineering team for modifications and repairs to allow Philips the opportunity to correct the faulty condition. On January 13, 2015, Philips’ senior engineers arrived at the facility and discovered that the MRI had moved inches from where Philips’ engineers had originally installed it. The engineers inquired about the possibility of an earthquake as the explanation for the movement. After inspecting the unit, the engineers evacuated the facility based on their concern that the unit might explode. They then “quenched” the MRI, which involved de-energizing the MRI and discharging it of all of the helium gas in the MRI system; the helium was released through a vent pipe on the roof. The MRI was completely inoperable.

         Two days later, NAZ employee discovered water from heavy rainfall the night before had entered through the roof and flooded the floors, walls, and ceiling of the MRI room, as well as the floors of the surrounding rooms. It was later determined that Philips’ engineers had caused an opening in the roof ...

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