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Healthfuse LLC v. Cdh-Delnor Health System

United States District Court, E.D. Wisconsin

March 8, 2017

HEALTHFUSE LLC, Plaintiff,
v.
CDH-DELNOR HEALTH SYSTEM, Defendant.

          ORDER GRANTING THE DEFENDANT'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION (DKT. NO. 8), AND DISMISSING CASE

          HON. PAMELA PEPPER United States District Judge.

         This case arises from a post-termination contract dispute between the plaintiff and the defendant. The plaintiff is a Wisconsin limited liability company that provides revenue cycle management services to health care systems and hospitals. The defendant is a not-for-profit Illinois corporation that provides health care services at locations in Illinois. Under two professional services contracts, the plaintiff agreed to perform revenue cycle management services for the defendant. After the parties' first contract had been replaced by the second, the defendant invoked its right to terminate without cause. The plaintiff claims that the defendant failed to make payments that became due upon termination.

         The defendant has moved to dismiss the complaint under Federal Rules of Civil Procedure 12(b)(1) (lack of subject-matter jurisdiction) and 12(b)(2) (lack of personal jurisdiction). Dkt. No. 8. The court will deny the defendant's motion to dismiss for lack of subject-matter jurisdiction, because the plaintiff has submitted evidence establishing diversity of citizenship between the parties. The court will grant the defendant's motion to dismiss for lack of personal jurisdiction; the court cannot exercise personal jurisdiction over the defendant consistent with due process, because the defendant lacks sufficient minimum contacts with Wisconsin.

         I. ALLEGATIONS OF FACT[1]

         The complaint alleges that plaintiff is a Wisconsin limited liability corporation that assists “health care systems and hospitals with managing their revenue cycle vendors to drive value by reducing vendor costs and increasing vendor recovery performance.” Dkt. No. 1 at ¶¶1, 7. The plaintiff did not plead the identities and citizenships of its members in the complaint. In response to the defendant's motion to dismiss, however, it filed a declaration from Michael Zimmerman. Dkt. No. 13. Zimmerman declared that Healthfuse has two members-Nicholas Fricano and Zimmerman Ventures, LLC. Id. at 1. He declared that he is the sole member of Zimmerman Ventures, LLC; that he lives in Franklin, Wisconsin; and that Zimmerman Ventures, LLC was incorporated in Wisconsin and has its corporate offices in Milwaukee, Wisconsin. Id. at 1-2. The plaintiff also filed the declaration of Nicholas J. Fricano. Dkt. No. 14. Fricano-the second member of Healthfuse, as well as its president and chief executive officer-declared that he lives in Milwaukee, and previously lived in Whitefish Bay, Wisconsin. Id. at 1-2.

         The defendant is an Illinois not-for-profit corporation with its principal place of business located at 25 North Winfield Road, Winfield, Illinois. Dkt. No. 8-2 at ¶7. It provides health care services at locations in Illinois. Id. at ¶¶4, 7.

         The plaintiff alleges that the parties entered into a Professional Services Agreement dated April 1, 2014, (the “First PSA”) under which the plaintiff “agreed to provide revenue cycle vendor performance management services and revenue cycle support to the [defendant] and one or more of its affiliate corporations” for a three-year period. Dkt. No. 1 at ¶8. The defendant executed that contract after a meeting in DuPage County, Illinois. Dkt. No. 8-1 at ¶12. The First PSA contains a choice of law provision selecting Illinois law as the governing law. Dkt. No. 1-1, §9.6.

         During the term of the First PSA, the plaintiff alleges that the defendant “asked to renegotiate the payment terms” of the contract. Dkt. No. 1 at ¶11. The plaintiff alleges that it agreed to adjust the payment terms “[a]s a business courtesy to its new client, ” and the parties entered a second Professional Services Agreement dated July 1, 2014, (the “Second PSA”). Id. at ¶12. The defendant executed the Second PSA contract in St. Charles, Illinois. Dkt. No. 8-1 at ¶13. The plaintiff alleges that, “[b]y its terms, the Second Agreement replaced the First Agreement.” Dkt. No. 1 at ¶12. Like the First PSA, the Second PSA is governed by Illinois law. Dkt. No. 1-2, §9.6.

         The plaintiff alleges that on July 13, 2015, during the term of the Second PSA, the defendant notified the plaintiff of its decision to terminate the Second PSA without cause effective August 14, 2015. Dkt. No. 1 at ¶16. According to the plaintiff, the defendant breached the payment terms of both the First PSA and Second PSA by failing to pay “all earned but unpaid” amounts within thirty days of the defendant's termination of the Second PSA. Id. at ¶¶17-20. The plaintiff pleaded four causes of action: breach of contract as to the First PSA (Count I, dkt. no. 1 at 5); breach of contract as to the Second PSA (Count II, dkt. no. 1 at 5), quantum meruit (Count III, dkt. no. 1 at 6); and unjust enrichment (Count IV, dkt. no. 1 at 7).

         On the date the plaintiff filed the complaint (May 6, 2016), the defendant:

* “was not engaged in conducting or transacting any business or performing any services at any location” in Wisconsin (Dkt. No. 8-2 at ¶8(a));
* “was not authorized, licensed or registered by or with any authority within” Wisconsin “to conduct or transact any business or to perform any services there” (Id. at ¶8(b));
* “did not own, operate, lease, occupy or maintain any office, facility, or other real property” in Wisconsin (Id. at ¶8(c));
* “did not employ any employees” in Wisconsin (Id. at ¶8(d)):
* “had no designated, appointed or registered agent or office for accepting service of process” in Wisconsin (Id. at ¶8(e));
* “was under no obligation to pay, or withhold any taxes payable, to the State of Wisconsin or to any of its political ...

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