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Case: 5:11-Cv-00446-SL Doc #: 69 Filed: 03/26/13 1 of 20. Pageid Case: 5:11-cv-00446-SL Doc #: 69 Filed: 03/26/13 1 of 20. PageID #: <pageID> UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION HITACHI MEDICAL SYSTEMS ) CASE NO. 5:11CV446 AMERICA, INC., ) ) PLAINTIFF, ) JUDGE SARA LIOI ) vs. ) ) EMPIRE IMAGING, P.C., ) FINDINGS OF FACT AND ) CONCLUSIONS OF LAW ) DEFENDANT. ) I. THE PARTIES’ CLAIMS On March 4, 2011, Hitachi Medical Systems America, Inc. (“HMSA” or “plaintiff”) filed this lawsuit against Empire Imaging, P.C. (“Empire” or “defendant”). (Doc. No. 1.) HMSA alleged that Empire breached a Service Maintenance Agreement entered into by the parties in February 2008 by failing to make the necessary monthly payments. HMSA asserted claims of breach of contract and unjust enrichment. It sought damages, attorney’s fees and costs, and a declaratory judgment.1 On April 22, 2011, Empire filed its answer and counterclaim. (Doc. No. 9.) Empire alleged that, in October 2008, it had purchased certain medical imaging equipment from HMSA for $1,260,000.00, which included an eighteen (18) month warranty expiring on or about April 26, 2010. Pursuant to the Service Maintenance Agreement signed contemporaneously with the purchase agreement, Empire agreed to pay HMSA $120,000.00 per year, or $10,000.00 per month, for service and maintenance, with payments beginning after the expiration of the 1 Although there is discussion herein of a purchase agreement also executed by the parties in 2008, HMSA is suing solely under the 2008 Service Maintenance Agreement. Case: 5:11-cv-00446-SL Doc #: 69 Filed: 03/26/13 2 of 20. PageID #: <pageID> warranty period. Empire alleged that it ultimately paid HMSA $1,450,000.00, which included payment for the MRI, plus a prepayment of $190,000.00 for nineteen (19) months of service and maintenance following the original eighteen (18) months of warranty, that is, through November 26, 2011. Empire alleged that, on or around November 12, 2010, HMSA breached the Service Maintenance Agreement by refusing to provide service and maintenance without additional payment.2 Empire sought damages and a declaratory judgment. On June 4 and 5, 2012, the Court conducted a bench trial. Having considered the testimony and evidence submitted at trial, along with the parties’ post-trial submissions (Doc. Nos. 67, 68), the Court now finds facts and states conclusions of law in accordance with Fed. R. Civ. P. 52(a)(1). II. FINDINGS OF FACT A. The Parties and Jurisdiction 1. Plaintiff HMSA is a Delaware corporation with its principal place of business in Twinsburg, Ohio. (Compl. ¶ 1.) 2. HMSA is a distributor of magnetic resonance diagnostic imaging systems. HMSA sells and markets these systems, as well as provides service and maintenance for such systems. (Cain 754:17-21.)3 3. Defendant Empire is a New York domestic professional corporation with a place of business located in Forest Hills, New York. (Compl. ¶ 2; Answer ¶ 2.) 2 Whereas HMSA is suing soley under the 2008 Service Maintenance Agreement (see n.1, supra), Empire is counter-suing under both that agreement and the contemporaneously-executed purchase agreement discussed infra. 3 All testimonial references are to the trial transcripts in the record at Doc. Nos. 64 and 65. Page citations are to the PageID # electronically applied by CMECF. 2 Case: 5:11-cv-00446-SL Doc #: 69 Filed: 03/26/13 3 of 20. PageID #: <pageID> 4. Dr. Payam Toobian (“Toobian”) is Empire’s president. He has been the president for fourteen (14) years. (Toobian 693:7-9; 802:2-4.) 5. As defendant’s president, Toobian is highly compensated; he is responsible for purchasing and maintaining defendant’s equipment. (Toobian 693:13-16; 817:8-11.) 6. Although Toobian is a medical doctor with a specialty in spine and neuroradiology, he practices medicine only to a limited degree. Most of Toobian’s time is spent in administering his businesses. (Toobian 693:17-694:2; 801:18-802:1; 815:15-18.) 7. Toobian is a sophisticated, experienced businessman who has a history of negotiating commercial contracts. (Toobian 694:3-5, 13-15; 817:4-14.) 8. By the time he purchased from HMSA, Toobian had negotiated the purchase of at least twenty (20) pieces of equipment, valued at $25,000,000.00 or more, without the assistance of lawyers. (Toobian 694:3-20.) B. HMSA Negotations in General 9. In negotiating purchase agreements for diagnostic imaging equipment, HMSA’s sales representative and the customer discuss business terms such as type of equipment, options, pricing, payment terms, warranty period, delivery and installation requirements, and whether the customer is entering into a service maintenance agreement. (Simms 662:24-663:2; Cain 741:2- 742:5.) 10. In negotiating service maintenance agreements, HMSA’s sales representative and the customer discuss business terms such as service term, pricing, payment, coverage hours, level of desired coverage, parts and options discounts, and uptime guarantee. (Simms 658:16- 659:4; Cain 741:13-742:5.) 3 Case: 5:11-cv-00446-SL Doc #: 69 Filed: 03/26/13 4 of 20. PageID #: <pageID> 11. Customers can negotiate changes to the terms of HMSA’s standard form agreements. (Cain 742:1-5; Pl.’s Ex. 1, Bates 653.4) C. The 2006 Agreement 12. On or about October 4, 2006, Toobian and HMSA’s sales representative Larry Simms (“Simms”) negotiated a purchase agreement (“the 2006 Agreement”) for an Echelon™ 1.5T High Field MRI System (“the MRI”). (Simms 649:20; 650:12-15; 653:23-24; 655:5-8; Toobian 695:3-5; Pl.’s Ex. 1; Def.’s Ex. C.)5 13. Contemporaneously with the 2006 Agreement, Empire and HMSA entered into a service maintenance agreement (“the 2006 SMA”) by which Empire would pay HMSA $120,000.00 per year, plus tax, over a five (5) year period beginning upon the expiration of the warranty, to perform service and maintenance on the MRI. (Simms 652:9-13; Pl.’s Ex. 2.) 14. Pursuant to the 2006 Agreement, Empire agreed to pay HMSA a total of $1,260,000.00 for the MRI. (Pl.’s Ex. 1; Def.’s Ex. C.)6 15. Pursuant to the 2006 Agreement, the purchase price included eighteen (18) months of warranty for the MRI. (Toobian 832:17-21.) 16. Toobian alleges that the purchase price under the 2006 Agreement included a $300,000.00 construction allowance for the installation of the MRI. (Toobian 807:8-13; 807:24- 808:3; Pl.’s Ex. 5.) He asserts that, unless he had independent financing to cover the costs of 4 Because the exhibits are not electronically filed, the page citations are the Bates numbers applied by the parties. 5 At the same time, another company owned by Toobian, Midtown Medical Imaging (“Midtown”), was also negotiating a deal with HMSA for an identical Echelon™ MRI. For the Midtown deal, Simms negotiated with Dr. Dennis Rossi, who acted with Toobian’s knowledge and authorization. The virtually simultaneous negotiations for Midtown and Empire in 2006 resulted in the same price for each Echelon™ MRI; it was that price that Toobian alleges to have renegotiated in 2008. (Toobian 700:16-24; 701:12-14; 802:14-19; 803:15-23.) 6 The parties have a dispute about whether these two exhibits accurately express the final purchase deal. However, there is no dispute that they did enter into a purchase agreement in 2006, which was later superseded by a different agreement in 2008. Since these are not the controlling agreements, the Court cites these exhibits merely as evidence of the fact of the 2006 deal. 4 Case: 5:11-cv-00446-SL Doc #: 69 Filed: 03/26/13 5 of 20. PageID #: <pageID> construction for an MRI, he always negotiated a construction allowance as part of his deals because each MRI requires particular construction. (Toobian 805:9-14; 807:11-13; 829:2-4.) 17. HMSA denies that the 2006 Agreement included a construction allowance. (Simms 657: 10-12; Germano 719:16-19.) 18. Toobian’s assertion of a $300,000.00 construction allowance in the 2006 Agreement is not supported by credible record evidence. 19. There are two versions of the 2006 Agreement in the record: Pl.’s Ex. 1, fully executed by all parties on October 4, 2006 and approved by HMSA on October 26, 2006, and Pl.’s Ex. 5, which is signed by Toobian and Simms,7 but is not approved by HMSA.8 20. Pl.’s Ex. 1 shows a purchase price of $1,260,000.00, which included a chiller, an MRI compatible power injector, and eighteen (18) months of warranty, but no construction allowance. 21. Toobian asserts that he wrote “construction” on the contract (see Pl.’s Ex. 5) when he realized that it had been omitted by Germano, who had written the terms on the second page (Bates 651); Toobian further asserts that both he and Simms initialed this addition. 22. There is considerable dispute over whether the initials “LS” near the “construction” term on Pl.’s Ex. 5 were made by Simms. Neither party presented a handwriting expert. The Court concludes that the “LS” initials do not match known initials written by Simms 7 The date for Toobian’s signature on Pl.’s Ex. 5 is over-written and, although not entirely clear, appears to be “11/14/06” rather than “10/4/06,” the date on which Toobian and Simms originally signed. 8 On the face of the 2006 Agreement, it clearly states: “This agreement shall not bind Hitachi Medical Systems America, Inc. until it has been countersigned by an authorized representative in its corporate offices in Twinsburg, Ohio.” (Pl.’s Ex.
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