Judge Grants PruittHealth Partial Reprieve in $11M Verdict Over EHR Software Dispute

The U.S. Court of Appeals for the 11th Circuit partially upheld an $11 million verdict against the nursing home operator PruittHealth in a breach-of-contract dispute with health care software provider Caradigm USA, though it vacated part of the verdict implementing compound interest on the contract damages.

PruittHealth had argued on appeal that the district court erred leading up to the jury verdict in multiple ways, leading to “an overstated damages award and erroneous awards of interest and fees.”

In the ruling, which was filed on July 10, Judge Kevin Newsom decided that while a jury erred in granting compound interest on the contract damages, the district court did not reversibly err in the ways the Norcross, Ga.-based Pruitt argued in its appeal.

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As a result, the awards of contract damages and fees were affirmed, while the interest decision was remanded “for the district court to calculate interest in simple terms.”

PruittHealth declined to comment on the ruling.

The SNF operator had been looking for a new way of storing patient records and contracted with Caradigm for a platform that could aggregate the patients’ clinical and financial information.

The two companies executed an agreement under which Caradigm would aggregate patient information from Pruitt’s systems to allow patient billing and medical records to be accessed on a single platform. The contract established the legal framework for the agreement, terms, and details of how the software would be implemented.

Pruitt had notified Caradigm in January 2015 that it was likely to abandon the project, and officially ended it in February of that year.

Under the agreement, the contract would have established “a significant increase in monthly payments” starting from Pruitt’s first use of the software “to process actual patient data in a live production environment,” the ruling noted, citing the contract’s definition of “first productive use.” However, the project never reached that stage.

Caradigm sued Pruitt for breach of contract in July 2015 in the U.S. District Court for the Northern District of Georgia, alleging that Pruitt had “anticipatorily breached” the contract, which entitled Caradigm to the contract’s full value in addition to interest and attorney’s fees.

Pruitt and Caradigm had filed competing summary judgment motions, and the district court decided “Pruitt had anticipatorily repudiated the contract before Caradigm’s performance was required,” making the operator liable for breach.

Damages were left to trial, however, and were assessed at $11.11 million by a jury, including $5.12 million in contract damages, $3.69 million, in compound interest and $2.32 million in attorney’s fees and expenses.

The compounded interest portion of the verdict was vacated, but the court concluded that “in the main, the district court did not reversibly err.”