Caradigm U.S. LLC v. Pruitthealth, Inc., No. 19-11648
|964 F.3d 1259
|10 July 2020
|CARADIGM USA LLC, Plaintiff - Appellee, v. PRUITTHEALTH, INC., formerly known as UHS-Pruitt Corp., Defendant - Appellant.
|U.S. Court of Appeals — Eleventh Circuit
Christopher Todd Giovinazzo, Patrick Christopher Fagan, Tiana S. Mykkeltvedt, Bondurant Mixson & Elmore, LLP, ATLANTA, GA, for Plaintiff - Appellee.
Thomas E. Reilly, William Alexander Smith, Troutman Pepper Hamilton Sanders, LLP, ATLANTA, GA, for Defendant - Appellant.
Before MARTIN, NEWSOM, and O'SCANNLAIN,* Circuit Judges.
This is the story of a deal gone south. PruittHealth, Inc., a healthcare provider, was looking for a new way to organize its patient data; Caradigm USA LLC is in the business of delivering software solutions to healthcare providers. The companies executed a contract pursuant to which Pruitt would pay Caradigm to pull patient information from Pruitt's various systems and organize it so that each patient's medical and billing records would be available in one place.
But alas. A little more than six months in, Pruitt grew dissatisfied with Caradigm's progress and announced that it was walking away from the project. Caradigm informed Pruitt that it stood ready to perform and warned Pruitt that it couldn't just unilaterally ditch the contract. Pruitt didn't respond, and Caradigm eventually sued. The district court decided on summary judgment that Pruitt had anticipatorily breached the contract and that Caradigm was therefore entitled to the full value of the deal. Because that value was uncertain, the district court left the issue of damages for trial. After a four-day trial, a jury awarded Caradigm $11 million, which included contract damages, compound interest on those damages, and attorney's fees and expenses.
On appeal, Pruitt doesn't contest the district court's determination that it breached, but it does contend that the district court erred in numerous ways leading up to the jury's verdict, which, it says, resulted in an overstated damages award and erroneous awards of interest and fees. We conclude that the district court did not reversibly err in most of the ways that Pruitt claims, and we will therefore affirm the awards of contract damages and fees, as well as the determination that Caradigm is entitled to recover interest on the damages award. Because we hold that it was error to compound the interest, however, we will vacate that award and remand for the district court to calculate interest in simple terms.
PruittHealth, Inc. is a private, for-profit healthcare provider dealing mostly in home healthcare, skilled-nursing facilities, and hospices. Pruitt was looking for a new way to store its patient records, which were located across multiple systems and difficult to access for billing and treatment purposes. Caradigm USA LLC is a software company that services healthcare providers. As relevant here, Pruitt was particularly interested in one service that Caradigm offered—the "Amalga Platform"—which could aggregate patients’ clinical and financial information.
Pruitt and Caradigm executed an agreement pursuant to which Caradigm would pull patient information from Pruitt's separate data systems and aggregate it so that each patient's medical and billing records would be accessible in a single platform. The contract provided the legal framework for the agreement, defined important terms, included an order form showing the goods and services that Pruitt purchased, and explained the details of how the parties would implement Caradigm's software.1 The contract also contemplated a crucial turning point—"First Productive Use"—when Pruitt would initially employ Caradigm's software "to process actual patient data in a live production environment."
After First Productive Use—and this is important to the damages dispute before us—the contract provided for a significant increase in monthly payments. The order form specified that Pruitt's subscription to the Amalga Platform would cost $64,649 per month, based on "[m]edium" usage, with payments "starting on First Productive Use."2 Pruitt's medium subscription size was calculated based on three metrics: the number of data feeds (i.e. , inbound electronic data from Pruitt's information systems), the number of messages (i.e. , transmission of certain files) per day, and the number of permitted users. So, the more feeds, messages, and users, the bigger the platform size that Pruitt would need (and vice versa). The agreement stated that each quarter, "Caradigm w[ould] review [Pruitt's] actual usage" against the capacity level for its then-current platform size, and "[i]f each metric f[ell] below its threshold for a lower [platform] size, then [Pruitt] w[ould] be moved down" a size and charged fees for that smaller size the next quarter. The agreement also provided for the opposite: If any metric was exceeded in a quarter, Pruitt would be moved up a platform size. By its terms, the agreement was set to "run for an Initial Term ending five years after the date of First Productive Use."
But the project never reached First Productive Use. An early step in the implementation of Caradigm's software called for Pruitt to send Caradigm a data sample so that Caradigm could test its ability to match patient files coming from disparate sources (i.e. , the "patient matching" process). Pruitt was apparently disappointed with the results of an initial patient-matching test in December 2014. Caradigm's internal communications show that, as of January 23, 2015, it planned to offer Pruitt two options with regard to patient matching: Pruitt could either (1) continue with Caradigm's "basic patient matching as described in the proposal," which "include[d] basic support (in house, no third party)," with any "[e]nhancements" and additional services to be billed separately, or (2) purchase a third-party matching system, which had more "bells and whistles."
Caradigm was never able to present those options to Pruitt. On January 29, Pruitt's Chief Information Officer, Dan Martin, telephoned Caradigm account executive Tina Mirkheshti to notify her that Pruitt was likely to abandon the project. Less than a month later—on February 17—Pruitt sent Caradigm a confirmatory email stating, in relevant part:
[W]e have suspended all efforts dedicated to this project and that includes the utilization of your services. Therefore the contract you have with PruittHealth is no longer valid. In addition regarding payments, we will make our final payment for January date(s) of service, and this will fulfill our economic commitment under the agreement.
About a month after Pruitt's email—on March 16—Caradigm sent Pruitt a letter stating, among other things, that Pruitt didn't "have a unilateral right to terminate the Agreement during the Agreement's five-year initial term" and that Pruitt's "purported termination would therefore constitute a breach ... result[ing] in the acceleration of payments owed to Caradigm for the contracted five-year period." Caradigm's letter also stated that it stood "ready, willing, and able to continue to fulfill [its] obligations under the Agreement."
Caradigm says—and Pruitt doesn't dispute—that Pruitt never responded to the March 16 letter. Caradigm sent Pruitt seven invoices (for a total of $287,000) that Pruitt neither disputed nor paid. Pruitt paid Caradigm for fees that accrued through March 2015, but no more.
In July 2015, Caradigm sued Pruitt for breach of contract in the U.S. District Court for the Northern District of Georgia. Caradigm alleged that Pruitt had anticipatorily breached, entitling Caradigm to the contract's full value, plus interest and attorney's fees. After discovery, the parties filed dueling summary judgment motions. The district court decided that Pruitt had anticipatorily repudiated the contract before Caradigm's performance was required and that Pruitt was therefore liable for breach. Because the value of the contract wasn't clear, though, the district court left the issue of damages for trial.
Before trial, Pruitt sought clarification regarding Caradigm's burden to prove damages—specifically, whether Caradigm had to "prove to a reasonable certainty that it would have satisfactorily performed its obligations under the Agreement" and that "First Productive Use would have been achieved." Defendant's Motion for Clarification at 1–2, 4. The district court held that, under Georgia law, the entire value of the agreement became due at the moment Pruitt breached, and that the value hinged on the point at which the parties moved from the pre-First Productive Use phase to the "going live" phase. Dist. Ct. Order on Motion for Clarification at 2–3. Thus, the court concluded that Caradigm would have "to show a jury, with reasonable certainty, the time frame in which the pre-First Productive Use phase would likely have concluded." Id. at 2. In so holding, the district court made two things clear concerning Caradigm's burden: (1) Caradigm didn't have to show Pruitt's subjective satisfaction in order to prove that the project would have moved forward to First Productive Use because "Pruitt's performance under the contract was not conditioned on its satisfaction" and "the contract lacked any ‘subjective satisfaction’ requirement"; and (2) by breaching, Pruitt "absolved Caradigm of remedying any issues that Pruitt had with the performance of the software platform." Id. at 2–3, 4.
Over the course of a four-day trial, Caradigm called as witnesses (1) Tina Mirkheshti, who had managed the Pruitt contract; (2) a damages expert; and (3) its counsel (to testify regarding attorney's fees). Mirkheshti testified that Caradigm would have performed the agreement successfully and on time if Pruitt hadn't breached and that Pruitt ignored her calls and emails after Martin had told her that Pruitt was likely backing out. Caradigm's expert explained his damages calculations and said that they were supported by Caradigm's confidence that it would have...
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