Heard in the Court of Appeals August 29, 2013.
Counsel Amended March 4, 2014.
Mecklenburg County. No. 11 CVS 1054. Calvin E. Murphy, Judge.
Moore & Van Allen, PLLC, by J. Mark Wilson, Kathryn G. Cole, and Benjamin R. Huber, for plaintiff-appellee.
Williams Mullen, by Christopher G. Browning, Jr. and Garrick A. Sevilla, for defendants-appellants.
DAVIS, Judge. Judges CALABRIA and STROUD concur.
Appeal by defendants from order entered 11 December 2012 by Judge Calvin E. Murphy in Mecklenburg County Superior Court. Heard in the Court of Appeals 29 August 2013.
Dr. Dan Peterson (" Dr. Peterson" ); Optum Computing Solutions, Inc.; Hitschler-Cera, LLC; Donald Bauman; Michael Held; the Held Family Limited Partnership; Robert Wagner; Alek Beynenson; I-Grant Investments, LLC; James Munter; Gail Shenk; Steven E. Davis; Charles W. Leonard, III; and John Does 1-10 (collectively " Defendants" ) appeal from the trial court's 11 December 2012 order granting summary judgment in favor of Plaintiff Premier, Inc. (" Premier" ) on (1) its claim for a declaratory judgment that it did not breach its contract with Defendants; and (2) Defendants' counterclaims for breach of contract, attorneys' fees, and recovery of audit expenses. After careful review, we vacate the trial court's order granting summary judgment and remand for further proceedings.
On 29 September 2006, Premier acquired Cereplex, Inc. (" Cereplex" ) by entering into a Stock Purchase Agreement (the " Agreement" ) with Defendants, the former shareholders and stakeholders of Cereplex. Cereplex developed and designed web-based surveillance and analytic services to healthcare providers through its software products, Setnet and PharmWatch. Setnet was designed to assist healthcare providers in detecting, responding to, and preventing healthcare-associated infections (" HAIs" ). HAIs are infections that patients acquire during their course of treatment in a healthcare facility or setting. The Setnet program provided various alerts, reports, and other monitoring and surveillance functions regarding the possible presence of HAIs in healthcare providers' patient population.
PharmWatch was a program designed to optimize treatment, curb resistance to antibiotics, and prevent unnecessary use or overuse of antibiotics. The PharmWatch product provided automated surveillance and monitoring by generating alerts to notify a healthcare provider of a potential problem in the provision and dosage of antibiotics to a particular patient.
After acquiring Cereplex, Premier developed SafetySurveillor, a successor product that combined the functionalities of Setnet and PharmWatch into one software program. SafetySurveillor, like its predecessors, generates automated alerts to notify the user of potential problems that require attention. SafetySurveillor's key features relate to its ability to (1) facilitate infection prevention by firing alerts to infection control professionals regarding the potential existence of clusters or outbreaks of HAIs; and (2) provide configurable pharmacological-related alerts based on set variables, including high-cost medication, drug combinations, length of therapy, lab results, and other factors.
Pursuant to the Agreement, Defendants were entitled to receive an annual earnout payment (the " Earnout Amount" ) from Premier for five years following the date of the Agreement. The Earnout Amount provision of the Agreement states, in pertinent part, as follows:
(iii) Earnout. On each of the dates that are the first five (5) anniversaries of the Closing Date, the Earnout Amount earned during
the preceding twelve (12) months shall be determined by the Buyer in good faith (the " Yearly Earnout" ). . . . " Earnout Amount" shall mean an amount equal to $12,500 for each Hospital Site where a Product Implementation occurs during the applicable 12-month period; excluding the first fifty (50) Hospital Sites where a Product Implementation occurs . . . . For the avoidance of doubt the first fifty (50) Hospital Site threshold is a one-time threshold, not an annual threshold. " Hospital Site" shall mean an individual hospital, nursing home, care center or similar facility (and for the avoidance of doubt a single health care company or hospital group may consist of multiple Hospital Sites). " Product Implementation" means a Hospital Site that has (A) subscribed to or licensed the Company's Setnet or PharmWatch product (or any derivative thereof, successor product, or new product that substantially replaces the functionality of either product), whether such product is provided, sold or licensed (for a charge or at no charge, or provided on a stand-alone basis or bundled with other products and/or services) to the applicable Hospital Site by Company (or its successor in interest), any affiliate of the Company or any reseller authorized by the Company, and (B) completed any applicable implementation, configuration and testing of the ...