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Smmhc Inc. v. Aprima Medical Software, Inc.

United States District Court, D. Arizona

March 14, 2014

SMMHC Inc., d/b/a Mountain Health & Wellness, Plaintiff,
Aprima Medical Software, Inc., Defendant.


NEIL V. WAKE, District Judge.

Before the Court is Defendant Aprima Medical Software, Inc.'s Motion to Abate, or in the Alternative, Motion to Dismiss or Transfer (Doc. 9), the Response (Doc. 14), and the Reply (Doc. 15). The Motion also seeks to compel arbitration of Plaintiff's claims. For the following reasons, the Motion (Doc. 9) will be denied, except that the parties will be required to submit their disputes in this action to arbitration in accordance with the terms of their agreement.


In December 2010, Plaintiff SMMHC, Inc., d/b/a Mountain Health & Wellness entered into a Software License Agreement ("License Agreement") with Aprima Medical Software, Inc., to license Aprima's Patient Relationship Manager ("PRM") software for Mountain Health's behavioral healthcare services. Although the Patient Relationship Manager was primarily used by general medicine providers, the parties believed the program could also be useful for a behavioral health provider. The License Agreement provided for installation, training, and maintenance of software that streamlined patient management by performing functions related to "charting, coding, billing and documentation." (Doc. 9, Exh. A-1 at p. 1). The arbitration clause contained within the License Agreement provides, "Any controversy or claim arising out of or relating to the contract, or breach thereof, shall be finally settled by binding arbitration administered by the American Arbitration Administration...."

On June 17, 2011, the parties entered into a new agreement, the Final Development Agreement ("Development Agreement"), wherein Aprima contracted to work with Mountain Health to develop enhancements to its "PRM2011" software product that would serve the needs of behavioral health practices. (Doc. 9, Exh. A-3 at p. 1). Mountain Health wanted the software enhancements to generate the specific records, reports, coding, billing, and receivables required for Mountain Heath to be reimbursed by its third party payers. Mountain Health continued licensing the Patient Relationship Manager software under the License Agreement after the Development Agreement was executed.

The Development Agreement provided that Mountain Health would pay $250, 000 during the development period and an additional $50, 000 upon acceptance of the product. (Doc. 9, Exh. A-3 at p. 1). Aprima would maintain ownership of the final work product but, for a period of five years from the date of acceptance, Aprima would pay Mountain Health "a 25% commission on any net software license fees generated from future behavioral health customers sold and installed in Arizona and 12.5% commission for net software licenses fees generated from future behavioral health customers elsewhere in the United States." (Doc. 9, Exh. A-3 at p. 2). The Development Agreement does not contain an arbitration clause and does not mention, refer to, or in any way incorporate the terms of the License Agreement.

Over the next two years, the parties' working relationship unraveled. On July 1, 2013, Mountain Health mailed a demand letter and draft complaint to Aprima. The demand and draft complaint asserted claims for breach of contract under the Development Agreement (but none under the License Agreement), and under the Texas Deceptive Trade Practices Act. A consumer seeking damages under the Deceptive Trade Practices Act must give written notice sixty days in advance of filing suit. Tex. Bus. & Com. Code Ann. § 17.505. The notice must include the nature of the complaint and projected damages. Id.

Aprima's counsel responded by requesting a time to discuss the dispute in August 2013. Because Mountain Health's counsel was on vacation, a call could not be set until September 4, 2013. In that call, Aprima offered to draft a position statement outlining its understanding of the facts surrounding the dispute. The parties then set another call for September 17, 2013, to discuss Aprima's position. Aprima sent its position statement to Mountain Health on September 9, 2013.

The second call took place as agreed at 11:00 a.m., September 17, 2013. Mountain Health disagreed with Aprima's position statement but presented Aprima with a proposed settlement amount. Aprima's counsel said he did not believe the company could or would settle for the proposed amount but advised Mountain Health that he would present the demand, since up to that point in time, Aprima had not considered any specific amount. The meeting ended, and a few hours later Aprima filed with the American Arbitration Association in Dallas, Texas, a demand for arbitration of claims under the License Agreement, though Mountain Health had made no claims under the License Agreement. At the same time, it also filed a complaint in the United States District Court for the Northern District of Texas to compel arbitration of Mountain Health's claims under the Development Agreement or, in the alternative, for declaratory judgment that Aprima has no liability on those claims. Aprima contends that the arbitration provision in the License Agreement encompasses the claims under the later Development Agreement.

The next day, September 18, Aprima notified Mountain Health that it rejected the settlement offer and had already filed suit the day before. Mountain Health then filed this action on its claims under the Development Agreement that same day, September 18, 2013, one day after Aprima had filed its Texas case. Mountain Health unsuccessfully challenged personal jurisdiction in the Northern District of Texas. Aprima's Motion seeks to abate or dismiss Mountain Health's action in this Court, or in the alternative, to transfer it to the Northern District of Texas. (Doc. 9.) Aprima also moves to compel arbitration of Mountain Health's claims under the Development Agreement, the claims asserted in this action.


Aprima argues this case should be transferred to the Northern District of Texas. The federal venue statute provides, "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought...." 28 U.S.C. § 1404(a). On a motion to transfer venue, "a court must balance the preference accorded plaintiff's choice of forum with the burden of litigating in an inconvenient forum. The defendant must make a strong showing of inconvenience to warrant upsetting the plaintiff's choice of forum." Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). Private factors are considered, such as "relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses;... and all other practical problems that make trial of a case easy, expeditious and inexpensive.'" Id. (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947) (discussing forum non conveniens )). Public factors are also weighed, such as "the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.'" Id. (quoting Piper Aircraft v. Reyno, 454 U.S. 235, 241 n.6 (1981)).

Aprima argues that because it is based in Texas, manages only a small sales force in Arizona, and has many of its key witnesses in Texas, the balance of convenience weighs heavily in its favor. These factors do not sharply favor Aprima, or favor it at all. Mountain Health is an Arizona corporation that does business only in Arizona. All of its witnesses reside in Arizona, and some of Aprima's witnesses are in Arizona. Mountain Health's only connection with Texas is the software it commissioned from Aprima and a trip made by some employees to be trained by Aprima. The contract was to write software specifically for Mountain Health's use in Arizona. If breached, it was breached in Arizona. These private factors favor Mountain Health, not Aprima.

The public considerations do not favor Aprima. Statistical averages of case times in the District of Arizona and the Northern District of Texas do not differ significantly and are less important than data for the specific division of each court. Litigation in this Court will not delay anyone. The undersigned judge concludes 89.5% of civil cases within twelve months of filing. Arizona's interest in adjudicating claims against persons doing business with Arizona residents in Arizona is stronger, not weaker, than Texas's interest in providing a local forum against out-of-state customers. The parties could have contracted for an exclusive venue but did not. The Development Contract has a Texas choice of law provision, but there is no suggestion that relevant Texas contract law differs from Arizona law or contract law generally or that any difference would present any difficulty. Weighing the factors, it is clear that a transfer to Texas would not reduce inconvenience, but shift it and to some extent increase ...

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