Western Dermatology Consultants, P.C. v. VitalWorks, Inc.
Western Dermatology Consultants, P.C. v. VitalWorks, Inc.
Opinion
In this certified appeal, the plaintiff, Western Dermatology Consultants, P.C., claims that the Appellate Court improperly reversed the judgment of the trial court, which found that the defendants, VitalWorks, Inc. (VitalWorks), 1 and Cerner Physician Associates, Inc. (Cerner), had violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., 2 by making misrepresentations in connection with the sale of certain practice management and electronic medical records software to the plaintiff. The plaintiff contends that the Appellate Court incorrectly concluded that, under applicable choice of law principles, the law of New Mexico, rather than CUTPA, governs the plaintiff's unfair trade practices claim. We conclude that the Appellate Court correctly determined that that claim is governed by New Mexico law. Contrary to the determination of the Appellate Court, however, we conclude that the case must be remanded for a new trial so that New Mexico law can be applied to the plaintiff's unfair trade practices claim. 3 The following facts, as found by the trial court, and procedural history are relevant to our resolution of this appeal. The plaintiff is a dermatological clinic with two offices located in Albuquerque, New Mexico. VitalWorks is a Delaware corporation that, at all times relevant to this appeal, had its corporate headquarters in Ridgefield, Connecticut, and was engaged in the marketing and selling of software designed to assist physicians in efficiently managing patient appointments, billing, and medical records. VitalWorks' software development and technical support facility is located in Alabama. Cerner is a Delaware corporation with its principal place of business in Missouri. In January, 2005, Cerner purchased VitalWorks' Alabama operations and continued to market, service, and develop the software thereafter.
In March, 2003, the plaintiff's representative attended a medical conference in San Francisco, California, where VitalWorks was demonstrating its software. At the time, the plaintiff did not contemplate the purchase of new software because it was satisfied with older software that it had been using in its practice since 1997. At the conference, however, Tim Holman, a VitalWorks' salesperson, and Terri Cannady, a representative from the company that marketed the older software, informed the plaintiff's representative that the plaintiff would need to replace the older software because it was going to be phased out and would no longer be supported. As a replacement for the older software, the plaintiff was offered VitalWorks' software. Holman told the plaintiff that VitalWorks' software was "user-friendly" and would increase the plaintiff's efficiency and save it money by streamlining the preparation of medical notes and billing statements. Specifically, Holman represented that the new software would allow the plaintiff's receptionist to confirm a patient's information upon the patient's arrival and create a note that, with "[a] click [of] a button," would be sent to the physician, who would fill it out while examining the patient, thereby creating a billing statement with the required diagnostic codes and necessary prescriptions.
In September, 2003, Holman traveled to one of the plaintiff's Albuquerque offices to conduct a follow-up demonstration. Following that demonstration, Holman sent the plaintiff a letter stating that, on the basis of the plaintiff's then existing monthly transcription expense of $2500, 4 the plaintiff would realize "a return on investment in two years" were it to purchase the new software. Holman also informed the plaintiff that, by purchasing the new software prior to the end of 2003, it would avoid a 15 percent price increase.
Having been told that the older software no longer would be supported and that a price increase for the new software was imminent, the plaintiff agreed to purchase the new software for $44,170.30, which included software training by VitalWorks employees. On December 19, 2003, the plaintiff signed a standard form contract produced by VitalWorks' Connecticut headquarters. The choice of law provision of the contract provided that "[the] [a]greement shall be construed and interpreted in accordance with the laws of the [s]tate of Connecticut and any dispute shall be resolved in a forum located in the [s]tate of Connecticut."
As soon as the new software was installed, the plaintiff began experiencing technical difficulties while attempting to use it. Contrary to the representations made by Holman, the plaintiff's physicians and staff found the software neither fast nor user-friendly. The plaintiff experienced a wide variety of problems with the software, including (1) loss of access to the system while attempting to schedule appointments, (2) the need to change passwords on multiple occasions, (3) claims not closing when payments were posted, thereby requiring the plaintiff to manually enter secondary billing statements, (4) uninitiated user log offs, (5) disappearing toolbar buttons, (6) inaccurate patient ledgers, and (7) blank screens that required a complete reboot of the system. In addition to these fundamental software flaws, the physicians were not able to use the system while seeing patients because the software did not have preinstalled dermatological terminology and did not allow users to indicate the number and size of lesions and biopsies, the name or dosage of prescribed medication, or whether the patient had been informed about the potential risks and benefits of medication. As a result of these defects, creating medical notes with the new software took far longer than it did to create those notes manually.
When the plaintiff complained to VitalWorks about the new software's poor performance, VitalWorks denied that the problems were software related and recommended additional training for the plaintiff's employees. Despite that training, however, the plaintiff's problems persisted because, in fact, they were primarily software related. Indeed, the plaintiff never was able to bill a patient, generate a prescription or complete a real time checkout using the software, and, as a consequence, the plaintiff ultimately abandoned it in May, 2005. The plaintiff commenced the present action against the defendants in August, 2006.
In its second amended complaint, the plaintiff alleged six counts: (1) breach of contract; (2) breach of warranty; (3) fraud; (4) negligent misrepresentation; (5)
unjust enrichment; and (6) a violation of CUTPA. 5 Following a bench trial, the court concluded that the plaintiff had proven its case against VitalWorks on the breach of contract, breach of warranty, negligent misrepresentation, and CUTPA counts. 6 The court also found in favor of the plaintiff on its CUTPA claim against Cerner, concluding that Cerner was liable under CUTPA pursuant to the continuity of enterprise exception to the successor in interest doctrine. The court further concluded that, following the acquisition of VitalWorks' Alabama operations, Cerner itself had violated CUTPA by engaging in unfair trade practices while being involved in trade or commerce that was intimately associated with Connecticut. 7 Thereafter, the defendants filed motions to reargue and for articulation, and the plaintiff filed motions for costs, attorney's fees, prejudgment interest, and punitive damages. 8 In its motion to reargue, VitalWorks asserted, among other things, that the trial court improperly had failed to subject the plaintiff's unfair trade practices claim to a choice of law analysis and, instead, appeared to have "automatically" assumed that Connecticut law applied to that claim. VitalWorks further argued that, under a choice of law analysis, it was clear that New Mexico rather than Connecticut law should govern the plaintiff's claim because New Mexico had the most significant contacts with the occurrence and the parties. In its memorandum of decision on VitalWorks' motion to reargue, the trial court noted that it had applied Connecticut choice of law principles to the facts and determined that Connecticut was the state that had the most significant relationship to the occurrence and the parties involved. The trial court explained that, in evaluating the choice of law issue, it had utilized the principles set forth in §§ 6(2) and 145(1) of the Restatement (Second) of Conflict of Laws. See 1 Restatement (Second), Conflict of Laws § 6(2), p. 10 (1971) ; 1 id., at § 145(1), p. 414. In a subsequent memorandum of decision on VitalWorks' motion for articulation, the trial court further explained that "the strongest and most predictable contact" in the present case was Connecticut because "Ridgefield, Connecticut was the corporate headquarters for VitalWorks. Corporate responsibility for product development, marketing, sale and delivery of a functioning product is most strongly connected to Connecticut. The sales agreement was drafted in Connecticut by VitalWorks.... Among the terms [of that agreement] ... was a standardize[d] choice of law/forum provision [that] required that Connecticut law apply to contract interpretation and required [Connecticut] to be the locus of dispute resolution."
In addition to its choice of law argument, VitalWorks contended that, even if Connecticut law did apply to the plaintiff's unfair trade practices claim, VitalWorks'
conduct, as alleged by the plaintiff, did not fall within the purview of CUTPA because VitalWorks had not engaged in any trade or commerce in Connecticut. The trial court rejected this argument, noting that the facts that it found supported the conclusion that the actions that gave rise to the plaintiff's claims "occurred in Connecticut or were the result of [VitalWorks'] corporate [decision] to market and sell software systems [that] it knew had not been fully developed and [that] would not operate as represented to [the plaintiff]." Specifically, the trial court explained that "[t]he contract in question qualified as trade or commerce within the state of Connecticut.... It [was] the genesis of the relationship between [the] plaintiff and VitalWorks...." (Internal quotation marks omitted.)
On appeal to the Appellate Court, VitalWorks and Cerner both claimed, inter alia, that the trial court incorrectly had determined that Connecticut law governed the plaintiff's unfair trade practices claim. See
Western Dermatology Consultants, P.C. v. VitalWorks, Inc.,
The Appellate Court first concluded that, by its express terms, CUTPA applies only to acts of trade or commerce conducted in Connecticut.
Next, the Appellate Court engaged in a choice of law analysis in accordance with the most significant relationship test set forth in §§ 6(2) and 145 of the Restatement (Second) of Conflict of Laws; see, e.g.,
Jaiguay v. Vasquez,
We granted the plaintiff's petition for certification to appeal, limited to the following issues: "1. Under the established [conflict of law] principles ... and the facts of this case, did the Appellate Court properly
determine that [CUTPA] applies to this case?"
Western Dermatology Consultants, P.C. v. Vitalworks, Inc.,
On appeal, the plaintiff argues that the Appellate Court incorrectly determined that the law of New Mexico should govern the plaintiff's unfair trade practices claim because (1) the defendants waived their right to argue that New Mexico law should apply to that claim by failing to allege and establish in the trial court that there exists an outcome determinative conflict between the laws of Connecticut and New Mexico, and (2) under the test set forth in §§ 6(2) and 145 of the Restatement (Second) of Conflict of Laws, Connecticut law governs its unfair trade practices claim. The defendants dispute the plaintiff's contention and argue, in addition, that, in light of the Appellate Court's disposition of the case against the plaintiff on all counts, there are no remaining facts to support the plaintiff's CUTPA claim, and, consequently, the appeal is moot. We conclude that the plaintiff's appeal is not moot and that the Appellate Court correctly determined that New Mexico law governs the plaintiff's unfair trade practices claim. We therefore remand the case for a new trial at which the plaintiff's unfair trade practices claim shall be decided under New Mexico law. 12
We first address the defendants' contention that this appeal is moot. See, e.g.,
In re Jorden R.,
With respect to the first contention, the record reveals that the Appellate Court reversed the trial court's judgment on the plaintiff's breach of contract claim not because the trial court's factual findings relating to that claim were unsupported but, rather, because the plaintiff failed to comply with the notice requirements in the parties' contract and the Uniform Commercial Code for bringing such a claim. See
Western Dermatology Consultants,
P.C. v. VitalWorks, Inc.,
supra,
We turn, therefore, to the merits of the plaintiff's contention that the Appellate Court incorrectly determined that, contrary to the conclusion of the trial court, the law of New Mexico, rather than the law of Connecticut, governs the plaintiff's unfair trade practices claim. 14
We
begin our analysis by setting forth the legal principles
that govern our review of this claim. Choice of law questions are subject to de novo review. E.g.,
American States Ins. Co. v. Allstate Ins. Co.,
"Section 145 of the Restatement [ (Second) of Conflict of Laws] provides in [relevant
part] that '[t]he rights and liabilities of the parties with respect to an issue [in tort] are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.' [1 Restatement (Second), supra, at § 145(1), p. 414.] Section 6 of the Restatement [Second], in turn, provides: '(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. (2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the [protection] of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the
determination and application of the law to be applied.' [1 id., at § 6, p. 10.]"
O'Connor v. O'Connor,
"For assistance in our evaluation of the policy choices set [forth] in §§ 145(1) and 6(2), we turn ... to § 145(2) of the Restatement [Second], which establishes black-letter rules of priority to facilitate the application of the principles of § 6 to tort cases.... Section 145(2) provides: 'Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. These contacts are to be evaluated according to their relative importance with respect to the particular issue.' [1 Restatement (Second), supra, at § 145(2), p. 414.]" (Citation omitted.)
O'Connor v. O'Connor,
supra,
Applying § 145(2)(a) of the Restatement (Second) to the present case, we agree with the Appellate Court that the plaintiff's injury occurred in New Mexico, the place where the plaintiff suffered the adverse consequences of its decision to purchase the new software. With respect to § 145(2)(b), the Appellate Court concluded that the injury causing conduct occurred in New Mexico, "where the goods were installed, service was provided, and training occurred."
Western Dermatology Consultants P.C. v. VitalWorks, Inc.,
supra,
As we previously have explained, "it is the significance, and not the number, of § 145(2) contacts that determines the outcome of the choice of law inquiry under the Restatement [Second] approach. As the concluding sentence of § 145(2) provides, [t]hese contacts are to be evaluated according to their relative importance with respect to the particular issue." (Internal quotation marks omitted.)
Jaiguay v. Vasquez,
supra,
Likewise, the factors enumerated in § 6(2) of the Restatement (Second) also militate in favor of the applicability of New Mexico law to the plaintiff's unfair trade practices claim. Section 6(2)(a), the needs of the interstate and international systems, supports neither state's law. With regard to § 6(2)(b), the relevant policies of the forum, we conclude that, although Connecticut undoubtedly has an interest in applying its law to ensure that local businesses do not engage in unfair trade practices in this state, that interest is not especially strong in the present case in view of the limited nature of the contact that occurred between the parties in Connecticut. 15 New Mexico's interest in protecting its citizens and commercial enterprises from unfair or deceptive trade practices, however, is especially strong in the present case considering the facts that the plaintiff conducts its business exclusively in New Mexico and that the majority of the dealings between the parties took place in that state. Accordingly, we conclude that § 6(2)(c), which requires consideration of the relevant policies of other interested states and the relative interests of those states, also supports application of New Mexico law.
Turning to § 6(2)(d), the protection of justified expectations, we agree with the Appellate Court that there was "no justified expectation that Connecticut law, including CUTPA, would apply to tort claims not arising from the construction and interpretation of the contract itself."
We also agree with the Appellate Court that § 6(2)(e), the basic policies underlying the particular field of law, is a neutral factor because the unfair trade practice statutes of both New Mexico and Connecticut are intended to effectuate the same policies, namely, "[t]he deterrence of tortious
conduct and the provision of compensation for the injured victim...."
We note, finally, that, after reversing the trial court's judgment in favor of the plaintiff on its CUTPA claim, the Appellate Court remanded the case to the trial court
with direction to render judgment for the defendants.
As we previously noted, the Appellate Court first determined that the plaintiff could not establish a violation of CUTPA; see
Having resolved that issue in favor of New Mexico law, we now must determine the proper remedy. Ordinarily, the trial court's failure to apply the correct legal standard results in a remand to the trial court for application
of the correct standard. See, e.g.,
McDermott v. State,
In this opinion the other justices concurred.
VitalWorks is now known as Amicas, Inc. We nevertheless refer to it as VitalWorks, which was its name at all times relevant to the present case.
General Statutes § 42-110b (a) provides in relevant part: "(a) No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce...."
The terms "trade" and "commerce," in turn, are defined in CUTPA as "the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state." General Statutes § 42-110a (4).
The parties also raise several additional claims on appeal. In particular, the plaintiff argues that the Appellate Court incorrectly concluded that CUTPA was not implicated on the ground that the defendants had not engaged in any trade or commerce in Connecticut. The plaintiff also challenges the trial court's refusal to award punitive damages, full attorney's fees, prejudgment interest, and certain costs. Cerner argues that the Appellate Court's decision that the plaintiff cannot maintain a CUTPA claim against Cerner can be affirmed on the alternative ground that the trial court improperly imposed liability on Cerner as a successor to VitalWorks. In light of our resolution of the case, we need not address the parties' arguments with regard to CUTPA, Cerner's alternative ground for affirmance or the plaintiff's arguments with regard to punitive damages, attorney's fees, prejudgment interest, and certain costs.
During that time, the plaintiff documented patient visits by having dictated notes transcribed at a cost of between $2000 and $2500 per month.
In addition to making CUTPA-specific allegations in count six, the plaintiff also incorporated by reference the allegations in the other five counts.
The trial court determined, however, that the plaintiff had not met the higher standard of proof applicable to the fraud count. The court also declined to award any damages on the unjust enrichment count, concluding that to allow for such damages in the present case "would ... create a windfall profit for the plaintiff, rather than properly compensating [it] for the defendants' breach." Finally, although the trial court found that the defendants had breached the contract, it did not award the plaintiff any damages on that count. See
Western Dermatology Consultants, P.C. v. VitalWorks, Inc.,
See e.g.,
Titan Sports, Inc. v. Turner Broadcasting Systems, Inc.,
The trial court denied the plaintiff's request for punitive damages and prejudgment interest. See
Western Dermatology Consultants, P.C. v. VitalWorks, Inc.,
In conducting the choice of law analysis in the present case, both the trial court and the Appellate Court, citing
O'Connor v. O'Connor,
In its appeal to the Appellate Court, the plaintiff claimed that the trial court "abused its discretion in denying the [plaintiff's request for] punitive damages, reducing the amount of attorney's fees and refusing to award it certain costs," and that the trial "court erred in declining to award it prejudgment interest."
Western Dermatology Consultants, P.C. v. VitalWorks, Inc.,
supra,
In addition, Cerner contended that the trial court improperly imposed successor liability on it.
The Appellate Court also directed the trial court to render judgment for the defendants on the other counts, namely, breach of contract, breach of warranty, and negligent misrepresentation. See
Western Dermatology Consultants, P.C. v. VitalWorks, Inc.,
supra,
In light of our remand for a new trial, we need not address the third certified question regarding the denial of prejudgment interest, punitive damages and certain costs. See footnote 3 of this opinion.
In support of their argument to the contrary, the defendants rely on
Gomes v. Commercial Union Ins. Co.,
We note that the plaintiff contends that the defendants waived their right to argue that New Mexico law governs the plaintiff's unfair trade practices claim by failing to raise that claim in a proper manner in the trial court. Specifically, the plaintiff argues that the trial court was not required to apply New Mexico law to its unfair trade practices claim because the defendants never argued at trial that New Mexico's unfair trade practices law conflicts with CUTPA, and, in Connecticut, the party seeking a choice of law determination bears the burden of demonstrating such a conflict. See, e.g.,
Walzer v. Walzer,
We do note, however, that there is, in fact, an outcome determinative conflict of laws between the unfair trade practices law of New Mexico and CUTPA. Specifically, N.M. Stat Ann. § 57-12-1 et seq. (2000 & Supp. 2015), unlike CUTPA, requires a showing that the alleged false or misleading representation was "knowingly made...."
We note, moreover, that the defendants did not identify the New Mexico statute's scienter requirement as the outcome determinative conflict when it asked the trial court to apply New Mexico law. The defendants argued, rather, that the New Mexico statute of limitations barred the plaintiff's claim. In fact, the statute of limitations for actions brought under the New Mexico Unfair Practices Act is four years, one year longer than CUTPA's limitation period. Compare
Nance v. L.J. Dolloff Associates, Inc.,
We express no opinion as to whether the defendants were engaged in trade or commerce in this state for purposes of CUTPA.
As we have explained, it is only because the plaintiff did not challenge the propriety of the defendants' choice of law claim in the Appellate Court that we are obliged to review that claim in the present appeal. See footnote 14 of this opinion. Generally, however, choice of law claims must be raised in the trial court in a timely manner; otherwise, they are deemed to be waived. E.g.,
Harty v. Cantor Fitzgerald & Co.,
We note that none of the parties has specifically requested a new trial in the event that this court concluded that the trial court should have applied New Mexico law to the plaintiff's unfair trade practices claim. If the trial court had decided the choice of law issue correctly, however, that court would have been required to apply New Mexico law to the plaintiff's claim. In such circumstances, the defendants, having asked the trial court to apply New Mexico law to the plaintiff's unfair trade practices claim-presumably because they believed that that state's statute of limitations favored them-have no cause to complain about a remand so that New Mexico law can be applied. Such a remedy simply places them in the position that they would have been in if the trial court had decided the choice of law issue correctly, in accordance with the defendants' request.
Reference
- Full Case Name
- WESTERN DERMATOLOGY CONSULTANTS, P.C. v. VITALWORKS, INC., Et Al.
- Cited By
- 35 cases
- Status
- Published