Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Naz, LLC v. Philips Healthcare

United States District Court, E.D. Louisiana

March 8, 2018

NAZ, LLC
v.
PHILIPS HEALTHCARE, A DIVISION OF PHILIPS ELECTRONICS NORTH AMERICA CORPORATION

         SECTION "F"

          ORDER AND REASONS

          MARTIN L. C. FELDMAN, UNITED STATES DISTRICT JUDGE.

         Before the Court are two motions by the defendant: (1) Rule 12(c) motion to dismiss or, alternatively, Rule 56 motion for summary judgment on plaintiffs' contract claim for property damage; and (2) Rule 12(b)(6) motion to dismiss certain damages. For the reasons that follow, the Rule 12(c) motion is DENIED; and the Rule 12(b)(6) motion is GRANTED in part (insofar as it seeks to dismiss punitive, exemplary, and non-pecuniary damages) and DENIED in part (insofar as it seeks to dismiss claims for economic loss damages).

         Background

         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 amended 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. Advanced Neurodiagnostic Center, Inc. Ad Neuro is the operational entity whose employees operate the diagnostic equipment and service and treat the patients who undergo diagnostic testing. 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 and Ad Neuro, 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 the proper computer hardware and software equipment would expand the number and geographical reach of services, and thereby increase NAZ's and Ad Neuro's revenue and profits.

         After research and discussions with various manufacturers, Dr. Shamsnia, on behalf of NAZ and Ad Neuro, decided to purchase the Philips Ingenia 3.0T Omega MRI neurological complete package. This complete package was crafted to serve NAZ's, Ad Neuro'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 and Ad Neuro.

         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, NAZ, and Ad Neuro agreed that Philips would deliver the Ingenia MRI package, and Dr. Shamsnia on behalf of NAZ and Ad Neuro agreed to follow Philips' experts' instructions and recommendations regarding installation and services.

         On December 22, 2014, the Philips' team released the MRI package to NAZ and Ad Neuro 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 and Ad Neuro 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. 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, a process involving 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, one of NAZ's and Ad Neuro's employees discovered that water from the prior night's heavy rainfall 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 the carelessly executed quenching process caused an opening in the roof through which the water entered the facility. NAZ and Ad Neuro paid $850, 000 to repair the damage.

         Even after months of communication, Philips' experts could not determine the cause of the MRI's malfunction. NAZ and Ad Neuro had to hire its own experts at its own expense. NAZ's and Ad Neuro's experts determined that the cause of the malfunction was the movement of the MRI in normal operation; the support system for the MRI equipment was inadequate, which caused the approximately 4, 600 kilogram (10, 000 pound) magnet to move while the MRI was being used. When Philips was notified of this discovery, it admitted that the support system it had recommended and installed was neither suitable nor safe.

         NAZ and Ad Neuro then spent more time and money to obtain additional equipment to repair the problem caused by Philips. The parties agreed that this remedial work was subject to the oversight, direction, control, and approval of Philips' engineers and done according to Philips' specifications and modifications. These included additional modifications to the door and the room in which the MRI was housed. Given the continuing inspections, troubleshooting, repairs, reinstallation, and testing, the MRI equipment was not re-activated until after April 2016.

         Because the continuing repair, modification, reinstallation, and redelivery of the MRI equipment took so long, it was not until sometime after April 2016 that NAZ and Ad Neuro discovered that the computer software and hardware package component that should have been installed with the MRI equipment had not been installed. Because the software and hardware component of the MRI package was central to NAZ's and Ad Neuro's agreement to purchase the MRI equipment from Philips at the particular price agreed upon, and because the computer component has not been delivered, NAZ and Ad Neuro claim that Philips has failed to deliver the MRI package it purchased. NAZ and Ad Neuro claim that Philips' failure to properly install and configure the MRI equipment and because of the structural alterations of the building caused by Philips' actions, an application to the appropriate governmental agency for approval of the ambulatory surgery center cannot be initiated by NAZ and Ad Neuro, which has resulted in loss of use and profits.

         To operate the MRI equipment for clinical use, Philips required NAZ and Ad Neuro to complete advance training, which did not occur until after May 2016. Certification for clinical use of the MRI equipment by the American College of Radiology was not obtained until August 2016.

         On April 4, 2017, NAZ, LLC sued Philips Healthcare, alleging gross fault (because, as a manufacturer of highly complex medical diagnostic equipment, Philips should be held to a heightened standard of care from which Philips grossly deviated) and several breach of contract causes of action: breach of obligation to provide a complete system that would fit NAZ's particular purposes of which Philips was aware, in violation of Louisiana Civil Code article 2524; bad faith breach of contract in violation of Louisiana Civil Code article 1997; bad faith seller in redhibition, in violation of Louisiana Civil Code article 2520; failure to make timely delivery, in violation of Louisiana Civil Code article 2485; and breach of installation and service agreements. NAZ seeks to recover the following damages: purchase price and expenses occasioned by the sale; loss of business with respect to use of the MRI package; loss of business with respect to use of NAZ's surgery center; loss of profits with respect to use of the MRI package; loss of profits with respect to use of plaintiff's surgery center; loss of goodwill; costs and expenses incurred in relation to damages to the facility caused by the quenching of the MRI; loss of intellectual gratification and physical enjoyment of the MRI and ambulatory surgery center; inconvenience; financing costs and interest; costs incurred to mitigate damages and costs associated with repairs and testing of the MRI and MRI room; costs incurred to mitigate damages or costs associated with repairs to and testing of the MRI and MRI room; costs incurred to preserve the MRI and related equipment; depreciation; overhead costs and expenses; in the event of rescission, return of the purchase price with interest from the time of the sale and all expenses incurred as a result of the sale; attorney's fees and litigation costs; and any and all penalties, punitive or exemplary damages, fines, fees, including treble damages afforded under Louisiana law.

         On June 12, 2017, Philips moved for a more definitive statement regarding the LLC plaintiff's members' identity to determine subject matter jurisdiction. Philips also moved to dismiss any claims arising from an alleged contract of sale, and alternatively sought a more definite statement of those claims. On July 26, 2017, the Court granted the motion in part, ordering the plaintiff to amend the complaint to identify the citizenship of the plaintiff's members; the Court denied the motion in part insofar as Philips sought to dismiss breach of contract claims and sought a more definitive statement. On November 2, 2017, the plaintiff filed an amended complaint to add Ad Neuro as plaintiff and to clarify Ad Neuro's relationship to NAZ. The defendant now moves to dismiss plaintiffs' $850, 000 claim for property damage arising from the allegedly botched MRI repair and moves to dismiss plaintiffs' claims for punitive, exemplary, non-pecuniary, and duplicitous economic loss damages.

         I.

         A.

         Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a party to move for dismissal of a complaint for failure to state a claim upon which relief can be granted. Such a motion is rarely granted because it is viewed with disfavor. See Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982)).

         Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)(citing Fed.R.Civ.P. 8). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         In considering a Rule 12(b)(6) motion, the Court “accept[s] all well-pleaded facts as true and view[s] all facts in the light most favorable to the plaintiff.” See Thompson v. City of Waco, Texas, 764 F.3d 500, 502 (5th Cir. 2014) (citing Doe ex rel. Magee v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012)(en banc)). But, in deciding whether dismissal is warranted, the Court will not accept conclusory allegations in the complaint as true. Id. at 502-03 (citing Iqbal, 556 U.S. at 678).

         To survive dismissal, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009)(quoting Iqbal, 556 U.S. at 678)(internal quotation marks omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (citations and footnote omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (“The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.”). This is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to 550 U.S. at ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.