## Facts

- A pain-management clinic and its founder contracted with a healthcare IT vendor in 2003 for medical-billing software plus ongoing billing, IT support, claim submission, and training.
- In 2006, the parties entered a second agreement for electronic medical-records software with related ongoing support and billing-related services.
- The vendor licensed standardized, preexisting software and did not create custom software for the clinic.
- The pricing for both agreements allocated substantial value to ongoing services; in the first agreement, service costs were about three times the licensing fee, and in the second, service costs slightly exceeded the licensing fee.
- The clinic experienced performance problems early in the relationship, including deficient billing and claim submission.
- The clinic later determined that thousands of insurance claims went unpaid, and many allegedly became time-barred due to missed submission deadlines.
- Nearly seven years after the second agreement, the clinic sued in federal court asserting breach of contract, warranty-related theories, breach of the implied duty of good faith, and multiple tort claims (including fraud-based claims).
- The district court entered summary judgment for the defendants, treating the agreements as goods-predominant mixed contracts governed by the Indiana UCC’s four-year limitations period and concluding the suit was untimely.
- The complaint also named numerous John Doe defendants.

## Issues

1. Whether the agreements were predominantly for goods (software) or services, determining whether Indiana’s UCC four-year limitations period or Indiana’s ten-year limitations period for written contracts applied.
2. Whether the breach-of-contract claims were timely under the correct limitations period.
3. Whether non-contract claims were time-barred and, if so, whether tolling doctrines (including fraudulent concealment or continuing wrong) applied.
4. Whether unnamed “John Doe” defendants defeated diversity jurisdiction.

## Decision

- The court affirmed in part, reversed in part, and remanded.
- The agreements were service-predominant mixed contracts, so the Indiana UCC did not apply.
- The breach-of-contract claims were governed by Indiana’s ten-year limitations period for written contracts and were timely; summary judgment on those claims was reversed and remanded.
- Summary judgment was affirmed on all other claims, including tort and fraud-based claims, as untimely; tolling theories were rejected.
- The John Doe defendants were treated as nominal placeholders and did not defeat diversity jurisdiction.

## Legal Principles

- For mixed contracts involving goods and services, Indiana applies a “predominant thrust” (predominant factor) test to determine whether the UCC governs.
- Indicators that services predominate include: contract structure emphasizing ongoing performance obligations, pricing showing services outweigh goods, and alleged breaches centered on service failures rather than defects in the product.
- When the UCC does not apply, Indiana’s ten-year statute of limitations for written contracts governs contract claims arising from the agreement.
- For tort and fraud-based claims, shorter limitations periods apply; early knowledge of problems can defeat delayed-accrual arguments, and tolling requires more than continued effects of earlier conduct.
- In diversity cases, unnamed Doe defendants may be disregarded for jurisdictional purposes when they function as nominal placeholders rather than real parties in interest.

## Conclusion

The Seventh Circuit held that the clinic’s software-and-support agreements were primarily service contracts, making the ten-year limitations period for written contracts applicable and allowing the breach-of-contract claims to proceed, while leaving in place the dismissal of warranty-related and tort claims as untimely and confirming that Doe defendants did not defeat diversity jurisdiction.


Pain Ctr. of Se. Ind., L.L.C. v. Origin Healthcare Sols., L.L.C., 893 F.3d 454 (7th Cir. 2018)