Wilson Pharmacy, Inc. v. General Computer Corp.

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
August 2000 Session
WILSON PHARMACY, INC., v. GENERAL COMPUTER CORPORATION
Appeal from the Chancery Court for Washington County
No. 32602 Thomas J. Seeley, Jr., Judge
FILED SEPTEMBER 21, 2000
No. E2000-00733-COA-R3-CV
The origin of this appeal is a complaint filed by Plaintiff Wilson Pharmacy, Inc., against Defendant
General Computer Corporation, seeking damages for allegedly furnishing defective computer
hardware and software programs pursuant to contracts entered into between the parties. The Trial
Court found that the provision providing suit must be brought within one year after accrual of the
action barred Wilson Pharmacy’s claim. Wilson Pharmacy appeals, contending the contract they
entered into was one of adhesion, rendering the contract limitation period ineffective. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed and
Remanded
HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which HERSCHEL P. FRANKS and
D. MICHAEL SWINEY, JJ. joined.
Olen G. Haynes, Johnson City, Tennessee, for Appellant Wilson Pharmacy, Inc.
Ronald S. Range, Jr., and Matthew D. Davison, Johnson City, Tennessee, for Appellee General
Computer Corporation
OPINION
The origin of this appeal is a complaint filed by Plaintiff Wilson Pharmacy, Inc.,
against Defendant, General Computer Corporation, now known as MedE America of Ohio, Inc.
As grounds for its complaint Wilson Pharmacy alleges the following:
1. Plaintiff is a Tennessee corporation. Its principal place of business is
located at 525 North State of Franklin Road, Johnson City, Tennessee.
2. The Defendant, General Computer Corporation, is a foreign corporation
with offices at 2045 Midway Drive, Twinsburg, Ohio.
3. The Defendant, MedE America, is a foreign corporation with offices at 90
Merrick Avenue, Suite 501, East Meadow, New York. MedE America is the
parent corporation of the Defendant, General Computer Corporation.
4. On or about the 17th day of January, 1995, and thereafter, Plaintiff entered
into agreements with General Computer Corporation under the terms of which
it was represented to the Plaintiff that General Computer Corporation would
supply computer hardware and a software program that would support the
needs of Wilson Pharmacy’s retail and institutional operations.
5. The program provided by the Defendant, General Computer Corporation,
was unable to perform according to the published and verbal representations of
General computer Corporation. As a consequence, the entire system had to be
replaced by the Plaintiff at considerable expense.
6. The Plaintiff paid the sum of $17, 934.00 for the initial software package;
the sum of $29,194.61 for computer hardware and related items; the sum of
$10,173.98 for training and supplies; the sum of $6,000.00 for leasing a
substitute system.
7. The Defendant, MedE America, as parent corporation of the Defendant,
General Computer Corporation, has now taken over the contractual and legal
obligations of the Defendant, General Computer Corporation.
General Computer filed a motion to dismiss and, in the alternative, for a summary
judgment, relying upon the one-year period of limitation for bringing suit contained in the two
agreements entered into by the parties:
5.02 Governing Law and Jurisdiction.
This Agreement is to be governed by and construed in accordance with the laws
of the State of Ohio.1 No action or proceeding based upon this Agreement or
arising out of its performance shall be instituted by CUSTOMER more than one
(1) year after the cause of action has accrued. It is expressly agreed that the courts
of the State of Ohio shall have personal and subject matter jurisdiction (but not
exclusive jurisdiction) to entertain and determine all disputes and claims between
the parties hereto, whether for specific performance injunction, declaratory
judgment or otherwise both at law and in equity, arising out of or in any way
1
The parties do not contend that Ohio law is different from Tennessee law as applicable to this case.
-2-
connected with the validity, construction, breach or anticipated breach of this
Agreement.
The Trial Court rejected Wilson Pharmacy's insistence that the contract was one of
adhesion and granted General Computers a motion for summary judgment.
Wilson Pharmacy appeals, raising the following issues:
1. The Trial Court erred as a matter of law in failing to overrule General
Computer’s Motion for Summary Judgment because there was material evidence
that the written contract was a contract of adhesion which did not fall within the
reasonable expectations of Wilson Pharmacy.
2. The Trial Court erred as a matter of law in failing to overrule General
Computer’s Motion for Summary Judgment because there was material evidence
that the written contract was a contract of adhesion that was unreasonably
oppressive and unconscionable to Wilson Pharmacy.
The standard for appellate review of the Trial Court's granting a summary judgment
has been recently restated in the Supreme Court case of Staples v. CBL & Associates, Inc., 15
S.W.3d 83, 89 (Tenn. 2000), as follows:
The standards governing the assessment of evidence in the summary judgment
context are also well established. Courts must view the evidence in the light most favorable to the
nonmoving party and must also draw all reasonable inferences in the nonmoving party’s favor. See
Robinson v. Omer, 952 S.W.2d at 426; Byrd v. Hall, 847 S.W.2d at 210-11. Courts should grant
a summary judgment only when both the facts and the inferences to be drawn from the facts permit
a reasonable person to reach only one conclusion. See McCall v. Wilder, 913 S.W.2d 150, 153
(Tenn.1995); Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn.1995).
Aside from the two agreements and various other paper writings made exhibits to the
pleading, the only other evidence introduced was the affidavit of Guy B. Wilson, Chief Executive
Officer and Chairman of the Board of Wilson Pharmacy, which we quote in full:
1. My name is Guy B. Wilson. I am a resident of Johnson City in
Washington County, Tennessee. At all times material herein I was the Chief
Executive Officer and the Chairman of the Board for Wilson Pharmacy, Inc.
2. In the latter part of 1994, Wilson Pharmacy, Inc., was contacted by Mr.
Bob McKissick, a salesman for General Computer Corporation. Mr. McKissick
represented to representatives of Wilson Pharmacy, Inc., that his company was
capable of providing computer software that could accommodate the needs of
Wilson Pharmacy in its retail pharmacy and nursing home operations. In
-3-
November and December, 1994, a series of meetings was held with Mr.
McKissick with various representatives of Wilson Pharmacy, Inc., during which
time Mr. McKissick represented that General Computer Corporation would be
able to supply computer hardware and software programs that would support the
needs of Wilson Pharmacy’s retail and nursing home operations. Wilson
Pharmacy, Inc., was particularly interested in the computer service being offered
by General Computer Corporation as there was no other entity known to Wilson
Pharmacy, Inc., in the trade at that time that was attempting to provide a
comparable service.
3. In January, 1995, a standardized contract, attached herewith as “Exhibit
1", was submitted to me for my signature as the Chief Executive Officer of
Wilson Pharmacy, Inc. The contract as submitted was drafted by General
Computer Corporation and was submitted to Wilson Pharmacy, Inc., on a take-it-
or-leave-it basis. Wilson Pharmacy, Inc., did not participate in any way in the
drafting of this standardized contract attached.
4. On or about January 21, 1995, I signed the contract submitted by
General Computer Corporation as the Chief Executive Officer of Wilson
Pharmacy, Inc., and returned the signed contract to representatives of General
Computer Corporation. The contract was then approved by General Computer
Corporation on February 3, 1995. The installation of the program and the training
of personnel was completed around mid-May, 1995 and within 30 days of
continued use of the system, or around mid-June, 1995, it was apparent that the
system as installed was unable to perform according to the published and verbal
representations of representatives of General Computer Corporation. A lawsuit
was not filed against General Computer Corporation within one year from that
time, as representatives of General Computer Corporation and Wilson Pharmacy,
Inc., spent the next two years attempting to correct the deficiencies of the system.
Finally, in June of 1997, it became apparent that the deficiencies could not be
corrected to meet the needs of Wilson Pharmacy, Inc., and the system was “shut
down” and at considerable expense to Wilson Pharmacy, Inc., another system was
installed.
5. Wilson Pharmacy attempted to initiate negotiations with General
Computer Corporation through letters of August, September, and October, 1997,
with no success. In December, 1997, I initiated contact and discussions were
conducted with an attorney, and in January, 1999, I authorized the filing of suit
against General Computer Corporation.
6. I am now aware that General Computer Corporation is relying on
Paragraph 5.02, of the agreement which provides that “no action or proceeding
based upon this agreement or arising out of its performance shall be instituted by
-4-
a customer more than one year after the cause of action has accrued.” As a
customer of General Computer Corporation, I would not have expected such a
limitation on the time to file suit as we continued to attempt to correct the
deficiencies for over two years after we were aware that the system, as installed,
was not meeting the representations of General Computer Corporation. Wilson
Pharmacy, Inc., while attempting to correct the deficiencies, was never told by
representatives of General Computer Corporation that suit would have to be
brought within one year after its cause of action had accrued. Given the
circumstances under which we found ourselves, Wilson Pharmacy, Inc., had no
choice but to attempt to correct and resolve all those problems that arose. Because
the system simply was not as represented by General Computer Corporation, the
additional time was needed to allow General Computer Corporation the
opportunity to live up to its representations.
The leading case in this State on contracts of adhesion is Buraczynski v. Eyring, 919
S.W.2d 314 (Tenn. 1996). That was a case by a patient against a physician who asserted that a
contract providing arbitration precluded the patient’s suit. The trial court found in favor of the
patient and refused to compel arbitration. This Court reversed the trial court and thereafter the
Supreme Court took the case and made the following observation (at page 320):
An adhesion contract has been defined as "a standardized contract form offered to
consumers of goods and services on essentially a 'take it or leave it' basis, without
affording the consumer a realistic opportunity to bargain and under such conditions
that the consumer cannot obtain the desired product or service except by
acquiescing to the form of the contract." Black's Law Dictionary 40 (6th ed. 1990);
Broemmer, 840 P.2d at 1015. Professor Henderson has observed that "the essence
of an adhesion contract is that bargaining positions and leverage enable one party
'to select and control risks assumed under the contract.'" 58 Va. L. Rev at 988.
Courts generally agree that "[t]he distinctive feature of a contract of adhesion is that
the weaker party has no realistic choice as to its terms." Broemmer, 840 P.2d at
1016; Leong, 788 P.2d at 168; Pepper, 693 P.2d at 1260; Wheeler, 133 Cal.Rptr.
at 783.
In the case at bar we do not believe the statements in the affidavit of Mr. Wilson that
he did not know of any other computer corporation which would provide a comparable service, or
the conclusory statement that he was offered a standardized contract “on a take-it-or-leave-it basis”
are sufficient to show a contract of adhesion and repel the motion to dismiss.
Moreover, in Buraczynski, the Supreme Court, after finding that in that case the
contract was one of adhesion, went on to state the following (at page 320):
Our conclusion that the contracts were contracts of adhesion is not,
however, determinative of the contract's enforceability. Enforceability generally
-5-
depends upon whether the terms of the contract are beyond the reasonable
expectations of an ordinary person, or oppressive or unconscionable. Broemmer,
840 P.2d at 1016. Courts will not enforce adhesion contracts which are oppressive
to the weaker party or which serve to limit the obligations and liability of the
stronger party. Id.
Thereafter, the Court found the contract was enforceable as the terms were not
“beyond the reasonable expectations of an ordinary person or oppressive or unconscionable.”
In this case we believe that even if the contract had been one of adhesion, it does not
meet the second test set out in Buraczynski.
For the foregoing reasons the judgment of the Trial Court is affirmed and the cause
remanded to the Circuit Court for collection of costs below. Costs of appeal are adjudged against
Wilson Pharmacy, Inc., and its surety.
__________________________________________
HOUSTON M. GODDARD, PRESIDING JUDGE
-6-