Eleventh Circuit Vacates Compound Interest Award and Directs Trial Court to Recalculate Simple Interest Under Georgia Law

In this action, Caradigm USA, a computer software company, brought a breach of contract action against health care provider PruittHealth Inc. in the U.S. District Court for the Northern District of Georgia, alleging that Pruitt breached a contract with Caradigm to consolidate and organize patient medical and billing records. Pruitt argued that it was dissatisfied with Caradigm's progress and that it had a right to abandon the contract. 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. However, because the value of the contract was unclear, the district court left the issue of damages for trial.

After a four-day trial, the jury awarded Caradigm $11 million, comprising $5.1 million in contract damages, $3.6 million in compound interest, and $2.3 million in attorneys' fees and expenses under a Georgia statute that provides for fee awards against "stubbornly litigious" parties.

Pruitt appealed, arguing that the district court erred in several ways in the run-up to and during the damages trial, which led to the overstated contract damages award and erroneous awards of interest and attorneys' fees. Specifically, Pruitt claimed that the district court was wrong in its construction of the parties' contractual obligations, that the court held Caradigm to a lower burden of proof than it should have, and that it was wrong to exclude evidence that Caradigm's future revenues might have decreased.

A three-judge panel of the Eleventh Circuit concluded that, in the main, the district court did not reversibly err, therefore affirming the awards of contract damages and fees, as well as the determination that Caradigm was entitled to recover interest on the damages award. However, the Eleventh Circuit concluded that it was error to compound the interest, and thus vacated that award and remanded so that the district court can calculate simple interest.

Although the Eleventh Circuit agreed that Pruitt failed to raise the compound interest order before trial, the court stated that Pruitt had not waived its compound interest argument. The court stated that Georgia law is clear that parties must explicitly agree to compound interest in their contract. Because the language in the contract between Pruitt and Caradigm did not establish that the parties agreed to compound interest, the Eleventh Circuit vacated the compound interest award and remanded for the district court to calculate simple interest.

Caradigm USA LLC v. PruittHealth, Inc., No. 19-11648 (11th Cir. July 10, 2020).