Rush U Med Center OK to continue fraud suit vs vendor Draeger over patient monitoring system, judge says

By Scott Holland | Nov 21, 2017

Rush University Medical Center   By Paul Sableman (Rush University Medical Center) [CC BY 2.0 (], via Wikimedia Commons

A federal judge in Chicago has allowed Rush University Medical Center to keep alive its $18 million lawsuit against a vendor it has accused of installing a patient monitoring system that didn’t work.

In an opinion issued Nov. 16, U.S. District Judge Samuel Der-Yeghiayan refused to dismiss the complaint against Draeger Inc., that Rush filed this summer, accusing the Telford, Pa.-based company of breach of contract, unjust enrichment and fraud over its Infinity Acute Monitoring Solution. That system was intended to monitor the breathing, vital signs and other physical conditions of patients in Rush’s 664-bed hospital and academic medical center in Chicago.

Rush said it spent four years installing the $18 million system and then had to buy a new system for $30 million after Draeger couldn’t resolve issues with Infinity to the hospital’s satisfaction. Rush said problems with Draeger's system endangered patients and forced Rush employees to “waste thousands of hours of time” trying to fix the problems. In its lawsuit, the hospital said Draeger incorrectly blamed Rush for the problems and noted a software upgrade was “extraordinarily time-consuming and disruptive,” but didn’t fix the original issues while also allegedly introducing new problems, such as sporadically erasing patient information.

Draeger — primarily arguing the complaints weere time-barred — moved to dismiss the entire complaint, which included claims of breach of contract, unjust enrichment, fraudulent inducement and one county under an Illinois fraud and deceptive business practices law.

Draeger said the four-year statute of limitations for the breach of contract claim should be considered to have started in January 2012 when the Infinity system went live. Even if the company’s 90-day warranty period could be considered to have delayed the start of the limitations period, the window would still be closed, Draeger argued.

Rush, however, said goods were delivered between 2012 and 2016, extending that window, and Der-Yeghiayan primarily sided with the hospital on that question. The judge said determining if the breach claim is timely relies on evidence outside what Rush pleaded in its initial complaint.

The limitations window for unjust enrichment and fraud claims in Illinois is five years. Again Draeger noted Rush alleged problems with the system as far back as January 2012, and again the judge said the allegations alone don’t establish Rush knew enough at the time to formulate the relevant claims.

“The mere fact that Rush encountered some problems with the Draeger System does not necessarily mean that Rush was aware of being injured for the purposes of the statute of limitations issue,” Der-Yeghiayan wrote. “Based on the facts in this case, the precise determination of when Rush knew or should have known that it had been injured involves an assessment of evidence beyond the pleadings. Thus, the statute of limitations arguments as to the unjust enrichment and fraud claims are premature.”

The ICFA claim has a statutory limitation of three years, and Der-Yeghiayan again said Draeger’s argument is premature. But Draeger also said Rush failed to allege sufficient facts to state a valid claim.

That argument suffered with respect to breach of contract, Der-Yeghiayan explained, because Draeger relied on Illinois law to argue for dismissal. Rush needed to only meet the lower standards for federal pleading, and Rush explained how it met its part of the contractual obligations, the judge reasoned.

With respect to unjust enrichment, Draeger said that claim can’t apply under state law because there is a written contract. But Rush said it can pursue unjust enrichment if the written contracts are found to be invalid, which the court hasn’t yet assessed.

Draeger said the integration clause in the hospital’s purchase agreement bars the fraud claim.

However, Der-Yeghiayan explained that clause only means no other agreements existed that would supersede the contract. Rush could still be allowed to use statements Draeger made while implementing and supporting Infinity in future litigation.

The same finding also hampered Draeger’s efforts to have the ICFA claim dismissed. In attacking the ICFA argument, Draeger asserted Rush is not a consumer entitled to such protections.

But in cases like this, Der-Yeghiayan explained businesses can be consumers when they purchase services, and are only barred from pursuing such claims if the complaint concerns conduct between business competitors.

Representing Rush in the matter is Goldstein & McClintock LLLP, of Chicago.

Draeger is represented by the firm of Nixon Peabody LLP, of Chicago.

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Goldstein & McClintock LLLP Nixon Peabody Llp Rush University Medical Center U.S. District Court for the Northern District of Illinois

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