Caradigm U.S. LLC v. Pruitthealth, Inc.

• Decision Date: 30 May 2017
• Docket Number: CIVIL ACTION NO. 1:15-CV-2504-SCJ.
• Citation: 253 F.Supp.3d 1175
• Parties: CARADIGM USA LLC, Plaintiff, v. PRUITTHEALTH, INC., Defendant.
• Court: U.S. District Court — Northern District of Georgia

253 F.Supp.3d 1175

CARADIGM USA LLC, Plaintiff,
v.
PRUITTHEALTH, INC., Defendant.

CIVIL ACTION NO. 1:15-CV-2504-SCJ.

United States District Court, N.D. Georgia, Atlanta Division.

Signed May 30, 2017

253 F.Supp.3d 1177

Christopher Todd Giovinazzo, Patrick Christopher Fagan, Bondurant Mixson & Elmore, LLP, Atlanta, GA, for Plaintiff.

Edward Alexander Marshall, Anuj Desai, Rebecca Lunceford, Arnall Golden Gregory LLP, Atlanta, GA, for Defendant.

ORDER

HONORABLE STEVE C. JONES, UNITED STATES DISTRICT JUDGE

Data analytics and computer software create efficiencies in many industries, nursing home providers included. That's why defendant Pruitt Health, Inc., one such provider in the southeast, contracted with Caradigm USA LLC to condense several different electronic medical records systems into one longitudinal patient summary. After a few months, however, Pruitt walked away from its relationship with Caradigm over what it perceived as Caradigm's inability to perform essential services. That led to this breach of contract suit against Pruitt and ultimately to the dueling summary judgment motions (docs. 65 & 67)¹ and motion to exclude expert testimony now before this Court. Doc. 75.

I. BACKGROUND

Pruitt "is a privately held, for-profit healthcare provider that among other things operates nursing homes." Doc. 73 at 2 (Caradigm's Statement of Undisputed Fact). "Caradigm provides software services to healthcare companies." Id. at 1. When Pruitt began looking for an IT partner to help it synthesize patient data stored in multiple software systems, the "Caradigm Intelligence Platform" (CIP) piqued its interest. Doc. 67–1 at 1 (Pruitt's Motion for Partial Summary Judgment Opening Brief). CIP, according to Caradigm,

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aggregates and normalizes clinical and financial data from across the care continuum, and allows for data re-use for a more adaptable and strategic approach. Unlike a typical data warehouse, CIP aggregates data and makes it available in near real time, allowing insights within a workflow. The key point is that having all the data in one place creates an entirely new ‘asset’ that functions as a platform to ‘dive off from’ and or build broader tools upon.

Doc. 1–3 at 6 (Statement of Work) (SOW). Those features, and CIP's attendant ability to "[p]rovide ... Pruitt with a comprehensive patient summary view based on patient information" from disparate systems, led Pruitt to contract with Caradigm "for the customization, implementation, and licensing of CIP." Doc. 73 at 2.

A. The Parties' Contract

Three documents, all executed on June 25, 2013, comprise the parties' contract (collectively, the "Agreement"): a "Cloud Services Agreement" (CSA) (doc. 1–1); an "Order for a set of services" (Order) (doc. 1–2); and the SOW (doc. 1–3). Doc. 73 at 2. The CSA sets forth the legal framework that governs the parties' relationship, the Order² documents the precise services and goods Pruitt purchased pursuant to the CSA and their costs, and the SOW details the nuts and bolts of how Pruitt and Caradigm would integrate a complicated software system like CIP into Pruitt's business.

All three documents contemplate a rough divide of the relationship into two halves—before Pruitt used CIP "to process actual patient data in a live production environment," and after. Doc. 1–1 at 7. The CSA brands that fulcrum as the "First Productive Use." Id. Implicitly recognizing the significance of that moment, the Order invoiced one set of fees to be paid monthly prior to "go live," and another, much more expensive set, for after. See doc. 1–2 at 2. The SOW similarly acknowledged a preparation-intensive "testing" phase that would precede "First Productive Use."³ Doc. 1–3 at 23.

Substantively, the CSA gave Pruitt "the right to access and use ... Cloud Services," i.e., CIP. Doc. 1–1 at 2. Because Pruitt purchased a development license (the right to itself customize CIP)—for which it paid $20,000 every month beginning the day it executed the CSA and Order (doc. 1–2 at 2)—the CSA allowed Pruitt to not only access CIP, but also to "build Customer Use Cases⁴ and configure Data Feeds⁵ for those" cases. Doc. 1–1 at

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2 (footnotes added). "Following [CIP's] Installation" (i.e., configuring Cloud Services for Pruitt to test or use, id. at 7), Pruitt could "test the Cloud Services to determine whether they perform [ed] in material conformance with the Documentation" (technical guides and user manuals that Caradigm provided). Id. at 3. That particular "testing period" expired at "the earlier of: (a) First Productive Use of those Cloud Services; (b) the date on which those Cloud Services materially conform to the Documentation; or (c) 35 days from Installation of those Cloud Services without Caradigm having received written notice from Customer of any material nonconformance." Id. For testing Customer Use Cases (a subgroup of Cloud Services), something only Pruitt as the end user and sometimes designer of those use cases could do, the CSA obligated Pruitt to "notify Caradigm when testing [was] satisfactorily completed and ... Caradigm [could] move the Customer Use Case to the production environment." Id.

The Order—"made as of June 25th, 2013 ("Order Effective Date ") pursuant to the [CSA]"—meanwhile, reveals that Pruitt, in addition to the $20,000/month CIP development license, purchased two other "Cloud Services:" (1) a CIP subscription for $64,649 per month, with payments "starting on First Productive Use," and (2) a "Pre-First Productive Use Hosting Fee" of $4,000, charged monthly from the CIP "Platform Implementation kick-off⁶ until First Productive Use." Doc. 1–2 at 2 (emphasis in original, footnote added). Pruitt also ordered several professional services from Caradigm related to installing CIP on Pruitt computers and setting up Data Feed and Use Cases installations. Id. Together, Caradigm invoiced Pruitt $650,000 after discounts for those services. Id.

Back to the CSA's legal framework. Its "Term & Termination" provision defines the duration of the parties' agreement and the circumstances under which unilateral termination may occur. The "Term" portion bifurcates the length of agreement into an "Initial Term" and possible "Renewal Terms." Doc. 1–1 at 3. The parties' "Agreement," says the CSA, "will run for an Initial Term ending five years after the date of [CIP's] First Productive Use." Id. (emphasis added). Renewal Terms are twelve month extensions of the Initial Term that occur if neither "party provides written notice of non-renewal at least 90 days before the end of the then-current Term." Id. The "Termination" provision states that "[e]ither party may terminate [the CSA] or any Order if the other party commits a material breach of [the CSA] or the applicable Order that remains uncured for 90 days after written notice of such breach." Id. No other provision in the CSA, Order, or SOW addresses the Agreement's duration or termination.

The CSA also addressed CIP warranties.⁷ Although Caradigm warranted that its "Cloud Services [would] perform substantially as described in their Documentation," it disclaimed all "other express or implied warranties ... with respect to software or services." Doc. 1–1 at 4–5. In particular, it disclaimed any warranty "with respect to ... [the] correctness or reliability of patient information (including patient record matching)" in addition to merchantability and fitness for a particular

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purpose warranties.⁸ Id. at 5. Finally, the CSA made clear that it and any referenced documentation "constitute[d] the entire agreement of the parties ... [and] supersede[d] all other prior or concurrent agreements." Id. at 6.

B. Contractual Performance

After some hiccups getting started (related primarily to turnover in key positions at Pruitt, see doc. 73 at 4), the parties began in July 2014 to implement CIP. Part of that process involved Pruitt sending batches of patient data to Caradigm so the latter could test its systems' ability to "match" patient files from various sources. That "patient matching"—a "complex task ... whereby records associated with a patient in source system A (of which there can be many per patient) are identified and linked to all the records associated with the same patient in source systems B, C, D, E, and F," doc. 67–1 at 4⁹ —undergirded (in Pruitt's eyes anyway) CIP's usefulness to Pruitt. Doc. 72 at 3–10.

The December 2014 results of that initial testing showed a match success rate that, regardless of the precise percentage of records matched, did not satisfy Pruitt. Doc. 72 at 27–30. The parties dispute what happened thereafter and the relevance of what indisputably did occur (see, e.g., id. at 31), but neither side contests that additional discussions about how best to proceed with CIP implementation took place. Then, on January 15, 2015, Pruitt issued an "official status report" for the project that reflected Caradigm's belief "that there is a sufficient level of matching ... in [its] systems to produce a viable matching result," and that "[s]ince Caradigm is not a true EMPI system,...