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Princeton Healthcare System v. Netsmart New York

October 21, 2011

PRINCETON HEALTHCARE SYSTEM, PLAINTIFF-RESPONDENT,
v.
NETSMART NEW YORK, INC., DEFENDANT-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2611-09.

The opinion of the court was delivered by: Skillman, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued September 26, 2011

Before Judges Grall, Alvarez and Skillman.

The opinion of the court was delivered by SKILLMAN, J.A.D.

(retired and temporarily assigned on recall).

This appeal requires us to consider the applicability of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, to a negotiated contract between corporations for the installation and implementation of a complex computer software system. We conclude that such a contract does not constitute a "sale of merchandise" as defined in the CFA and therefore cannot provide a basis for a CFA claim.

I.

Plaintiff Princeton Health Care System (PHCS) is a nonprofit corporation that provides healthcare services. Defendant Netsmart New York (Netsmart) is engaged in the business of providing computer software products and services to healthcare facilities.

Sometime in 2003, PHCS decided to upgrade the computer and medical billing system at Princeton House Behavioral Health Facility (Princeton House), which is a PHCS satellite facility that provides healthcare services to patients suffering from mental illnesses and addictions. On January 28, 2004, Princeton House distributed a request for proposals for what it described as a "Behavioral Health Information System" to companies that provide the products and services required for such an upgrade in its computer system. This request, which PHCS's computer consultant, ACS Consultants, assisted Princeton House in preparing, contained detailed specifications any proposal was required to meet and an outline of the criteria Princeton House would use in selecting a company for the project.

On February 25, 2004, Netsmart submitted a 149-page response to this request for proposals. Various other companies also submitted responses.

Princeton House subsequently engaged in a lengthy process of evaluation of these responses. During this process, representatives of Princeton House and Netsmart held meetings regarding Netsmart's proposal and representatives of Princeton House visited other healthcare facilities that use computer systems supplied by Netsmart. The parties also engaged in negotiations regarding the terms of a proposed contract, in which PHCS's computer consultant, ACS, and its legal counsel were active participants. In the course of those negotiations, the system Netsmart proposed was expanded to include a software application called eMar (Electronic Medication Administration Record), which was designed to allow nurses and other authorized staff to chart the administration of medication online.

On December 21, 2006, nearly three years after Princeton House distributed the request for proposals to potential suppliers of an upgraded computer system for its facility, Princeton House selected Netsmart to provide this system. Consequently, Princeton House entered into a contract with Netsmart that spelled out Netsmart's obligations with respect to the installation of its Avatar computer system and integration of that system into the existing computer system at Princeton House and Princeton ...


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