Medical billing software provider negligent in failing to preserve contracted product in spoliation suit, COA affirms

A grievance introduced by a now-defunct healthcare billing enterprise in opposition to a business it employed to craft a software package plan was adequately dismissed as a sanction for spoliation of evidence, the Court docket of Appeals of Indiana has ruled.

Synergy Healthcare Methods LLC, a health-related billing software package supplier, hired Telamon Company in 2012 to transform its program to a website-based mostly application to comply with governing administration laws.

Immediately after about a calendar year of do the job, Telamon realized it would not be ready to total the software program conversion by the deadline. After having into a dispute with Synergy about a non permanent solution, Telamon canceled the parties’ deal.

Synergy then employed a company referred to as Itransition Inc. to end the conversion and later on purchased that Telamon deliver the resource code for the software program to Itransition, not to Synergy. An settlement was designed among Synergy and Telamon that the latter would relinquish any and all copies of the retained supply code and resources to Synergy or its designee.

In August 2014, Synergy’s attorney wrote to Telamon informing it that the software package it had delivered was “not functioning and was negligently mounted or not converted properly.” As a consequence, Synergy claimed it shed several purchasers.

Meanwhile, Telamon despatched the resource code to Itransition and did not retain a duplicate of the code. By January 2015, Synergy was not able to keep on spending Itransition to complete the application and finally went out of organization.

Synergy sued Telamon for breach of agreement though Telamon countersued by alleging breach of deal and unjust enrichment. Through discovery, Synergy unveiled that it did not maintain a copy of the first, unmodified software package source code. As an alternative, it only had the model finished by Itransition.

Telamon responded by submitting a movement for sanctions owing to spoliation of evidence, which the Lake Exceptional Courtroom granted. It dismissed Synergy’s grievance, concluding Synergy “had a obligation to maintain the topic evidence, the subject matter evidence was negligently wrecked and is no lengthier accessible to the functions, [and] the resulting prejudice to [Telamon] is intense[.]”

The demo court docket issued a ultimate judgment pursuant to Indiana Trial Rule 54(B), prompting Synergy to assert abuse of discretion in Synergy Healthcare Sources, LLC v. Telamon Corporation, 22A-PL-121.

In affirming the demo court, the COA famous that contrary to Synergy’s rivalry that it are not able to be billed with preserving what it never experienced in its possession, a get together with a obligation to protect evidence in the possession of a third party may bear duty for spoliation of proof.

The appellate panel pointed to N. Ind. Pub. Serv. Co. v. Aqua Env’t Container Corp., 102 N.E.3d 290 (Ind. Ct. Application. 2018), noting that in which Synergy directed Telamon to produce the source code to Itransition, Synergy could not steer clear of its duty to protect the evidence.

“In other words and phrases, below, where Synergy directed Telamon to provide the resource code to Synergy’s designee Itransition and Telamon was contractually certain to relinquish all copies of the source code in its possession, Synergy’s possession was distinctive vis-à-vis Telamon,” Choose Mathias wrote in a footnote.

The COA also pointed to the August 2014 letter from Synergy’s lawyer to Telamon in search of payment for the “negligently installed” computer software that was “not performing.” The appellate panel concluded that at the time, Synergy realized or ought to have recognized that litigation was achievable and that the as-sent source code would be appropriate proof.

On top of that, the panel established Synergy disregarded the proof that it was negligent by omission when it unsuccessful to direct Itransition to preserve the code when litigation turned very likely. As these kinds of, it concluded Synergy was negligent in failing to maintain the code.

The COA concluded by noting Synergy’s carelessness resulted in a significant prejudice to Telamon due to the fact devoid of the as-sent resource code,Telamon could not put together a meaningful defense to Synergy’s statements that the code was deficient.

“The demo court docket did not abuse its discretion when it dismissed Synergy’s complaint as a sanction for its spoliation of proof,” Mathias concluded.