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Premier, Inc. v. Peterson

Court of Appeals of North Carolina

September 5, 2017

PREMIER, INC., Plaintiff,

          Heard in the Court of Appeals 23 March 2017.

         Appeal by Defendants from order entered 13 May 2016 by Judge Louis A. Bledsoe, III in Mecklenburg County No. 11 CVS 1054 Special Superior Court for Complex Business Cases.

          Moore & Van Allen PLLC, by J. Mark Wilson and Kathryn G. Cole, for Plaintiff-Appellee.

          The Spence Law Firm, LLC, by Mel C. Orchard, III, and Tin, Fulton, Walker & Owen, PLLC, by Sam McGee, for Defendants-Appellants.

          MURPHY, Judge.

         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[1](collectively "Defendants") appeal from an Order and Opinion granting Premier, Inc.'s ("Premier") motion for summary judgment; dismissing with prejudice Defendants' counterclaims for breach of contract, attorneys' fees, and recovery of audit expenses; and entering judgment for Premier on its claim for declaratory judgment upon determining that Premier had not violated Defendants' rights to receive annual earnout payments (the "Earnout Amount") under their Stock Purchase Agreement (the "Agreement"). After careful review, we affirm the trial court's decision.


         This is Defendants' second appeal in this case. Although a full recitation of the first appeal's facts and procedural history may be found in Premier, Inc. v. Peterson, 232 N.C.App. 601, 755 S.E.2d 56 (2014) ("Premier, Inc. I"), we limit our discussion in this opinion to the facts and procedural history relevant to the issues currently before us.

         On 29 September 2006, Premier acquired stock in Cereplex, Inc. ("Cereplex") by entering into a Stock Purchase Agreement with Defendants, former shareholders and stakeholders of Cereplex, under which Defendants were entitled to receive an annual Earnout Amount from Premier for five years after the date of the Agreement. Cereplex had developed software products, Setnet and PharmWatch, that provided web-based surveillance and analytic services for healthcare providers. After acquiring shares of Cereplex, Premier developed SafetySurveillor, a successor product that combined the functionalities of Setnet and PharmWatch into one software program which generates automated alerts to notify its users of health-related problems that require attention.

         Pursuant to the Agreement, the annual Earnout Amount to which Defendants are entitled is calculated as "$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[.]" There has been "Product Implementation" when:

a Hospital Site . . . 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 product so that the product is ready for production use by the Hospital Site.

(Emphasis added and omitted).

         Following an audit of Premier's records, Defendants accused Premier of failing to report or include in the Earnout Amount certain Hospital Sites where there was Product Implementation. Specifically, Defendants alleged that single-event alerts[2]that were reported in the audit were indicative of Product Implementation. Ultimately, the audit indicated that SafetySurveillor software was utilized by over 1, 000 Hospital Sites. However, Premier only recognized 263 Hospital Sites for purposes of the Product Implementation provision of the Agreement. Accordingly, Defendants informed Premier that they intended to sue for miscalculating the Earnout Amount to which Defendants were entitled and violating the terms of the Agreement.

         On 19 January 2011, Premier preemptively filed an action in Mecklenburg County Superior Court seeking declaratory judgment that it had not breached the Agreement.[3] On 27 April 2011, Defendants filed an answer and counterclaims, alleging breach of contract and seeking recovery of damages, audit expenses, and attorneys' fees. On 30 August 2011, Premier filed a motion for judgment on the pleadings pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure, or, alternatively, a motion for summary judgment pursuant to Rule 56. On 11 December 2012, the trial court entered an Order and Opinion granting summary judgment in favor of Premier on its declaratory judgment claim as well as Defendants' counterclaims.

         i. Pr ...

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