On July 30, 2019, the U.S. District Court for the Southern District of California issued a decision concerning the scope and interpretation of an agreement that required software maintenance. Specifically, the dispute, which included claims for declaratory relief, breach of contract, and various torts, centered around an alleged intra-corporate conspiracy to deprive plaintiff software maintenance services for imaging technology. As analyzed in greater detail in this column, the court issued rulings in both parties’ favor and ultimately did not completely grant defendants’ motion to dismiss. See Vascular Imaging Prof’l v. Digirad, No. 19cv486 JM(MSG), 2019 WL 3429178 (S.D. Cal. July 30, 2019).

Facts and Procedural History

Plaintiff Vascular Imaging Professionals (Vascular) provides a “mobile nuclear imaging service,” which requires the use of sophisticated cameras and related equipment procured from third-parties. Defendants are Digirad Corporation (Digirad Corp.) and Digirad Imaging Solutions, Inc. (Digirad Imaging, and together, Defendants). Defendants were part of the same corporate structure.

In May 2017, Vascular and Digirad Corp. entered into an Equipment Full Maintenance & Support Master Agreement (the Maintenance Agreement). This Agreement required Vascular to pay an annual fee per camera and Digirad Corp. was to provide on-demand maintenance services. Digirad Corp. was also required to provide a “Windows 7 upgrade” to five of Vascular’s cameras and one work station, which amounted to six licenses (the Upgrades).

Vascular maintained it paid the monthly fees and otherwise entirely complied with the Maintenance Agreement. It also claimed that Defendants breached the Maintenance Agreement by failing to provide Upgrades, and ignored repeated demands for the same. According to Vascular, in response to its demands for compliance with the Maintenance Agreement, Defendants “claimed that its performance was cost prohibitive and then further breached the Maintenance Agreement by purporting to terminate the agreement, without good cause.” Finally, Vascular claims that Digirad Corp., notwithstanding its purported termination of the Maintenance Agreement, continued to debit Vascular for monthly payments due under the Maintenance Agreement.