Doctors' Administrative Solutions v. Allscripts

FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
APR 23, 2010
JOHN LEY
CLERK
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 09-14379
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D. C. Docket No. 09-00989-CV-T-30-AEP
DOCTORS' ADMINISTRATIVE
SOLUTIONS, LLC,
Plaintiff-Appellee,
versus
ALLSCRIPTS, LLC,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(April 23, 2010)
Before DUBINA, Chief Judge, MARTIN and HILL, Circuit Judges.
PER CURIAM:
Plaintiff-Appellee Doctors’ Administrative Solutions, LLC (“DAS”) filed
this suit against Defendant-Appellant Allscripts, LLC (“Allscripts”) in a Florida

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state court, asserting claims for breach of warranty, breach of contract, and tortious
interference with prospective business relationships. DAS sought both monetary
damages and injunctive relief. Allscripts removed the action to the United States
District Court for the Middle District of Florida. After filing its answer to the
complaint, Allscripts filed a motion to compel arbitration and stay the proceedings.
The district court denied Allscripts’ motion and this appeal followed.
I. BACKGROUND
DAS provides technology-based solutions, including as a value added
reseller, for physician practices throughout Florida and the United States.
Allscripts provides software, services, information and connectivity solutions to
physician practices. A third company, Misys Physician Systems, LLC (“Misys”),
provides similar services as Allscripts. The undisputed facts show that DAS has
been a reseller for Misys since approximately 2004. On July 31, 2008, at Misys’
request, DAS and Misys entered into a partner agreement (“Misys Agreement”)
that solidified the relationship between the companies and continued to allow DAS
to resell Misys products. Nothing in the Misys Agreement prevented DAS from
also selling products made by competitors of Misys. According to David
Schlaifer, who entered into the Misys Agreement on behalf of DAS, he knew at the
time he entered into the agreement that Misys was about to merge with another
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company–Allscripts.
The Misys Agreement contains a written arbitration clause, which provides:
In case of any and all disputes in connection with the negotiation,
execution, interpretation, performance or non-performance of this
Agreement, [Misys and DAS] agree to seek non-binding mediation[.] .
. . In the event that any such mediation does not produce a settlement,
unless the dispute is otherwise settled, the dispute shall be determined
by binding and final arbitration in Atlanta, Georgia, by three (3)
arbitrators selected by the Parties (or by the American Arbitration
Association if the parties cannot agree) in accordance with the law of
the State of Georgia and the rules of the American Arbitration
Association.
Supp. Record, Tab 2, § 19(d). Section 19(n) of the Misys Agreement provides that
“this Agreement shall inure to the benefit and be binding upon the Parties hereto
and their respective successors and permitted assigns.” Section 19(o) of the Misys
Agreement provides that “this Agreement may not be modified or amended except
by an instrument in writing signed by the parties or their duly authorized
representatives.”
Beginning around July 2008, around the same time that DAS entered into
the Misys Agreement, DAS began discussing with Allscripts the possibility of
DAS becoming a reseller of Allscripts products. At this time, although it had been
announced that Misys and Allscripts intended to merge, the merger had not yet
taken place. On September 30, 2008, DAS and Allscripts entered into an
agreement (“Allscripts Agreement”). Unlike the Misys Agreement, the Allscripts
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Agreement did not include an arbitration clause. It did, however, include a
provision which provided that venue and jurisdiction for any and all disputes is
Hillsborough County, Florida. Supp. Record, Tab 3, Addendum at ¶ 9. The
Allscripts Agreement also included the following provision:
[I]n the event Allscripts is acquired by, merges with, or acquires
another company . . . with which [DAS] has existing contractual
relations as a reseller, channel partner, services provider, or other, the
parties agree to use best efforts to timely consolidate such agreements
on terms most favorable to [DAS] . . . . Such consolidation shall be
completed within 30 days of any such corporate change. Breach of
this provision shall be considered a material breach of this agreement.
Id. at Exhibit “F” at ¶ 12.
Misys and Allscripts merged on October 10, 2008. Subsequent to the
merger, Allscripts and DAS attempted to negotiate a new, consolidated agreement
as was required by the above-cited provision. On behalf of DAS, Mr. Schlaifer
presented Allscripts with a chart of certain terms he believed should be included in
the new agreement, some of which came from the Allscripts Agreement and some
of which came from the Misys Agreement. Not surprisingly, DAS’s proposed
terms did not include the arbitration provision contained in the Misys Agreement.
Despite efforts to negotiate a new, consolidated agreement, the parties were unable
to reach an agreement as to the new terms. Accordingly, no formal consolidated
agreement was ever signed or entered into. According to Schlaifer, the disputes
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that arose during the attempt to consolidate the two agreements are a large part of
what gave rise to DAS’s legal claims in this case.
DAS filed its complaint in April 2009, after the negotiations between
Allscripts and DAS failed. DAS asserted claims for breach of warranty, breach of
the Allscripts contract, and tortious interference with prospective business
relations. DAS sought both monetary and injunctive relief. The case was removed
to the district court on May 28, 2009, and Allscripts filed its answer and
affirmative defenses on June 11, 2009. In its answer, Allscripts asserted that
DAS’s claims arose out of or related to the arbitration provision contained in the
Misys Agreement and that, pursuant to that arbitration provision and the Federal
Arbitration Act (“FAA”), all of DAS’s claims were subject to mandatory, binding
arbitration. Doc. No. 6, p.7. That same day, Allscripts filed a motion to compel
arbitration and to stay the proceedings. Doc. No. 8.
The district court held an evidentiary hearing on Allscripts’ motion to
compel arbitration on July 29, 2009. After hearing the videotaped deposition1
testimony of Kelly Schudy, an Allscripts employee, as well as the live testimony of
Schlaifer, the district court found that the only issue it had to decide was whether
or not the arbitration provision contained in the Misys Agreement would be
The full transcript of this hearing can be found at District Court Docket No. 38.1
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included in the new, consolidated agreement that was required by the consolidation
clause of the Allscripts Agreement. Doc. No. 38, p.39. The court noted that this
would depend on whether or not the arbitration provision would be “favorable” to
DAS. Id. at 38-39. After hearing arguments from both parties, the district court
ruled as follows:
I rule that DAS has a right to a new contract, negotiating in good faith
within 30 days containing the terms most favorable to DAS, and it
remains in dispute what those terms might be; but if the parties can’t
agree on what those terms are, either side is entitled to try to have the
Court or an arbitration panel decide for them what those terms are so
that they do have a contract.
Id. at 56. However, the district court went on to hold: “But I make a finding that
the arbitration provision is not most favorable to DAS and, therefore, would not be
a part of the new contract and rule that the new Allscripts Misys company is not
entitled to arbitration.” Id. On August 5, 2009, the district court entered an order
denying Allscripts’ motion to compel arbitration and stay proceedings for the
reasons stated on the record during the evidentiary hearing. Doc. No. 31.
Allscripts filed a timely appeal.
The issue on appeal is whether the district court erred in denying Allscripts’
motion to compel arbitration and stay proceedings based on its finding that the
new, consolidated agreement that was required by the Allscripts Agreement upon
the merger of Allscripts and Misys would not contain the arbitration provision
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from the Misys Agreement because such a provision would not be “most
favorable” to DAS.
II. STANDARD OF REVIEW
This court reviews de novo a district court’s denial of a motion to compel
arbitration. Jenkins v. First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 873
(11th Cir. 2005) (citing Musnick v. King Motor Co. of Ft. Lauderdale, 325 F.3d
1255, 1257 (11th Cir. 2003)).
III. DISCUSSION
We affirm the district court’s denial of Allscripts’ motion to compel
arbitration and stay proceedings. However, we need not decide, as the district
court did, whether the new, consolidated agreement that was required by the
Allscripts Agreement upon the merger would or should contain an arbitration
provision. Instead, it is enough to hold that the agreement that governs the
disputes in this case is the Allscripts Agreement, not the Misys Agreement.
Therefore, the fact that the Misys Agreement contains a written arbitration
provision is irrelevant. Instead, all that matters is that the relevant contract–the
Allscripts Agreement–undisputably does not contain an arbitration provision.
Accordingly, the arbitration agreement that was entered into between the parties
does not govern the current dispute and, therefore, is inapplicable. Because there is
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no governing arbitration agreement, we conclude that the district court correctly
denied Allscripts’ motion to compel arbitration.
AFFIRMED.
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