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Breast Care Center of Hawaii LLC v. Fujifilm Medical Systems U.S.A., Inc.

United States District Court, D. Hawaii

May 16, 2019

BREAST CARE CENTER OF HAWAI‘I LLC, Plaintiff,
v.
FUJIFILM MEDICAL SYSTEMS U.S.A., INC., Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          Jill A. Otake United States District Judge

         This case concerns Defendant Fujifilm Medical Systems' (“Fujifilm”) sale of digital mammography equipment to Plaintiff Breast Care Center of Hawai‘i LLC (“BCCH”) and its agreement to service and maintain the equipment for four years. BCCH's Complaint alleges that Fujifilm made false promises to induce BCCH to enter into the contract and breached the incorporated service agreement. Fujifilm filed a counterclaim for failure to pay annual service fees. Presently before the Court is Fujifilm's Motion for Summary Judgment on BCCH's claims and Fujifilm's counterclaim. For the reasons set forth below, the Motion is GRANTED as to all of BCCH's claims and DENIED as to Fujifilm's counterclaim.

         I. BACKGROUND

         A. Undisputed Facts

         BCCH is a medical service provider founded by Dr. Beth Rhodes. ECF No. 1 at 1-2. In June 2012, BCCH purchased three different pieces of equipment from Fujifilm: (1) an Aspire HD mammography system, (2) a Biopsy Positioner, and (3) a Synapse Express Picture Archiving and Communication System (PACS). ECF No. 44 ¶ 1. BCCH and Fujifilm executed the purchase agreement for the Aspire HD System, which incorporated Fujifilm's standard conditions of sale agreement (“the Conditions of Sale Agreement”), a service agreement for service and maintenance of the equipment (“the Service Agreement”), and an “End User Purchase, License and Services Agreement” (“the End User Agreement”).[1] ECF No. 44 ¶ 2.

         The written Service Agreement provided for four years of service and maintenance of the equipment, commencing after the one-year warranty expired. ECF No. 1 at 4; ECF No. 44 ¶ 6. The Service Agreement indicates that Fujifilm would provide one maintenance inspection and calibration per year; scheduled and emergency services; all replacement parts, labor, and travel, performed by factory- trained service engineers; and one-hour telephone and four-hour on-site response time. ECF No. 43-14 at 3. Under the Service Agreement, BCCH was to pay Fujifilm $33, 270 per year in advance for these services. Id.

         The End User Agreement contains numerous provisions limiting Fujifilm's liability under the Service Agreement. Specifically, the End User Agreement precludes liability for any consequential damages, caps damages at the amount of annual fees paid, and states that Fujifilm will not be liable for any breach of the professional and workmanlike service warranty unless BCCH provides Fujifilm with thirty-days written notice of any alleged breach. ECF No. 44 at 2 ¶¶ 8-9; ECF No. 43-11 at 6. The End User Agreement also contains a provision prohibiting oral modifications. ECF No. 43-11 at 10.

         Fujifilm replaced the equipment in May 2013, after BCCH moved offices and after BCCH had complained to Fujifilm that the equipment malfunctioned regularly. Fujifilm then applied a new eight-month warranty beginning May 2013 and a four-year Service Agreement beginning May 2014. It is undisputed that BCCH never paid its annual fees under the Service Agreement and that Fujifilm terminated the contract in August 2017.[2] ECF No. 44 ¶ 28; ECF No. 62 at 11. The reasons for the termination are in dispute, as described below.

         B. Disputed Facts

         BCCH contends that it entered into the contracts based on Fujifilm's verbal assurances, which included that: (1) it had six “cross-trained” field service engineers in Hawai‘i who could assist Dr. Rhodes; (2) it would adjust the annual service fees based on the number of mammograms BCCH performed per year, and that Fujifilm would refund to BCCH any overpayment after the annual service fees were reduced; and (3) it would compensate BCCH for any losses incurred from Fujifilm's inability to service the equipment. ECF No. 1 ¶¶ 11, 12, 17, 20, 35; ECF No. 63 ¶¶ 1-2. Fujifilm denies that its employees made such statements. ECF No. 44 ¶¶ 7, 16, 24.

         Plaintiff alleges that the equipment stopped working almost immediately and Defendant failed to repair it. ECF No. 1 at 29-31; ECF No. 63 ¶¶ 4-9. Fujifilm contends that the malfunctioning was due, in significant part, to user error. ECF No. 43-1 at 17-18; ECF No. 43-3 ¶ 17.

         BCCH alleges that Fujifilm only remedied the problems with the equipment in May 2013 by replacing the Aspire HD and Biopsy Positioner. ECF No. 1 ¶ 30; ECF No. 62-1 ¶¶ 9-11; ECF No. 44 ¶ 20. BCCH alleges that problems emerged with the replacement equipment, and Fujifilm did not satisfy its service obligations. ECF No. 63 ¶¶ 6-9. Fujifilm disputes this, contending that the new equipment was fine and that Dr. Rhodes' emails to Fujifilm indicate as much. ECF No. 43-3 ¶ 25.

         A significant point of dispute is what happened regarding payment of the Service Agreement fees. BCCH contends that it received invoices from Fujifilm for the Service Agreement beginning in 2014, that BCCH disputed the invoices, and Fujifilm opted not to collect on the invoices due to the equipment's continued failures. ECF No. 63 ¶ 10. Fujifilm contradicts this, saying that it billed BCCH quarterly for the service fees and repeatedly demanded payment. ECF No. 44 ¶¶ 26-27. BCCH alleges that Fujifilm's termination forced them to purchase replacement equipment in 2018. ECF No. 63 ¶ 11.

         C. Case Status

         BCCH brought this lawsuit on September 5, 2017. ECF No. 1. The Complaint asserts numerous causes of action against Fujifilm, but counsel for BCCH abandoned several of its claims at the hearing on the Motion. The Court therefore DISMISSES the following abandoned claims and TERMINATES the Motion as to these claims: Fraudulent Inducement (Count I); Breach of Implied Covenant of Good Faith and Fair Dealing (Count IV); Intentional Interference (Count V); Unjust Enrichment (Count VI); Declaratory Relief (Count VIII); and Specific Performance (Count IX). This Order addresses the remaining claims, which are: Negligent Misrepresentation (Count II); Breach of Contract (Count III), and Promissory Estoppel (Count VII). See ECF No. 1 ¶¶ 10, 11, 14. Fujifilm also asserted a breach of contract counterclaim against BCCH, alleging that BCCH never paid the annual service fees. ECF No. 9-1.

         Fujifilm brought the present Motion for Summary Judgment on November 19, 2018, seeking summary judgment on all of BCCH's claims, as well as on its counterclaim. ECF No. 43-1. Fujifilm contends that the statute of limitations precludes all three of the remaining causes of action. See ECF No. 43-1 at 26-32. Fujifilm also argues that the terms of the contract bar the breach of contract claim. Id. at 32-37. Specifically, Fujifilm asserts that the contract: (1) caps damages to the annual service fees paid; (2) requires BCCH to provide written notice within thirty days of any breach of the Service Agreement; and (3) precludes oral modifications. Id. Fujifilm also argues that BCCH's failure to pay the annual service fees bars the breach of contract claim. Id. at 37-38. Fujifilm further contends that because the alleged promises are covered by the contract, the equitable claim for promissory estoppel is barred as a matter of law. Id. at 38. Finally, Fujifilm asserts that the negligent misrepresentation claim is barred because: (1) Hawai‘i law does not recognize such claims when the alleged misrepresentations are merely promises of future conduct and (2) BCCH waived its claims by reaffirming the contract after becoming aware of the alleged misrepresentations. Id. at 38-41.

         BCCH filed its opposition to the motion on March 1, 2019. ECF No. 62. BCCH opposes the statute of limitations issue and the argument that BCCH's failure to pay the annual service fees excused Fujifilm's performance. ECF No. 62. BCCH also opposes Fujifilm's Motion regarding Fujifilm's counterclaim, arguing that Fujifilm's breach of the Service Agreement excused BCCH's payment requirements. Id. at 11. BCCH did not address the other grounds on which Fujifilm seeks summary judgment. Fujifilm filed its reply on March 19, 2019. ECF No. 66.

         II. STANDARD OF REVIEW

         Summary judgment is proper when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Federal Rule of Civil Procedure 56(a) mandates summary judgment “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).

         “A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323). “When the moving party has carried its burden under Rule 56[(a)], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts [and] . . . come forward with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (internal quotation marks and citations omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“[A] party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.” (internal quotation marks omitted)).

         “An issue is ‘genuine' only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is ‘material' only if it could affect the outcome of the suit under the governing law.” In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson, 477 U.S. at 248). When considering the evidence on a motion for summary judgment, the Court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that “the evidence of [the nonmoving party] is to be believed, and all justifiable inferences are to be drawn in his [or her] favor”).

         III. ANALYSIS

         Fujifilm moves for summary judgment on all of BCCH's claims and on its own breach of contract counterclaim. By failing to oppose many of Fujifilm's arguments for summary judgment, BCCH waived those issues. Shakur v. Schriro, 514 F.3d 878, 892 (9th Cir. 2008) (“We have previously held that a plaintiff has ‘abandoned . . . claims by not raising them in opposition to [the defendant's] motion for summary judgment.'” (quoting Jenkins v. Cty. of Riverside, 398 F.3d 1093, 1095 n.4 (9th Cir. 2008))); Abogados v. AT&T, Inc., 223 F.3d 932, 937 (9th Cir. 2000); Packnett v. Gomez, 182 F.3d 926 (9th Cir. 1999); see also Ramirez v. Ghilotti Bros. Inc., 941 F.Supp.2d 1197, 1210 n.7 (N.D. Cal. 2013) (listing cases). But regardless of BCCH's waiver, Fujifilm is entitled to summary judgment on several grounds.

         The Court addresses BCCH's claims against Fujifilm first, and then addresses Fujifilm's counterclaim.

         A. BCCH's Claims Against Fujifilm

         i. Breach of Contract (Count III)

         BCCH alleges that Fujifilm breached the Service Agreement. ECF No. 1 at 11. BCCH, however, takes contradictory positions with respect to how and when the breach (or breaches) occurred. The Complaint alleges that the equipment experienced massive technical problems almost immediately after sale, and that Fujifilm was unable to fix the problems until it replaced the machinery more than a year later. ECF No. 1 ¶ 31. The Complaint further alleges that even after Fujifilm replaced the equipment, Fujifilm “fail[ed] to provide adequate technical support.” Id. ¶ 40. In its opposition brief too, BCCH alleges that Fujifilm's failure to “employ an on-site engineer trained to service BCCH's equipment . . . was a “material breach of the service agreement from its inception.” ECF No. 62 at 11.

         But at the hearing, perhaps to avoid Fujifilm's statute of limitations defense, BCCH contended that Fujifilm first breached the contract in 2017 by terminating the agreement and refusing to perform further service or maintenance. Under either of these inconsistent positions, however, summary judgment must be granted on BCCH's breach of contract claim.

         Generally, “the construction and legal effect to be given a contract is a question of law.” Koga Eng'g & Const., Inc. v. State, 122 Haw. 60, 72 (2010). Contracts are “interpreted according to their plain, ordinary, and accepted sense in common speech.” Hawaiian Ass'n of Seventh-Day Adventists v. Wong, 130 Haw. 36, 45 (2013). “The court's objective is ‘to ascertain and effectuate the intention of the parties as manifested by the contract in its entirety.'” Id. (quoting Brown v. KFC National Management Co., 82 Haw. 226, 240 (1996)). Courts generally do not look outside the contract itself to assist in its interpretation:

As a general rule, the court will look no further than the four corners of the contract to determine whether an ambiguity exists. The parol evidence rule precludes the use of extrinsic evidence to vary or contradict the terms of an unambiguous and integrated contract. This rule, however, is subject to exceptions that permit the court to consider extrinsic evidence when the writing in question is ambiguous or incomplete. Where there is any doubt or controversy as to the meaning of the language, the court is ...

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