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Putnam County Memorial Hospital v. TruBridge, LLC

Supreme Court of Alabama

May 10, 2019

Putnam County Memorial Hospital
v.
TruBridge, LLC, and Evident, LLC

          Appeal from Mobile Circuit Court (CV-17-902242)

          MENDHEIM, JUSTICE.

         Putnam County Memorial Hospital ("Putnam") appeals from the denial by the Mobile Circuit Court of its motion to set aside a default judgment entered in favor of TruBridge, LLC ("TruBridge"), and Evident, LLC ("Evident").[1] We reverse and remand.

         I. Facts

         TruBridge and Evident are wholly owned subsidiaries of Computer Programs and Systems, Inc. In September 2015, Putnam entered into a "Master Services Agreement" with TruBridge ("the MSA agreement") and a license and support agreement with Evident ("the LSA agreement"). In the MSA agreement, TruBridge agreed to provide accounts-receivable management services for Putnam for five years. The MSA agreement provided that TruBridge would receive 5.65 percent of the "cash collections," as that term is defined in the MSA agreement, to be paid monthly, for its account and billing services. In the LSA agreement, Evident agreed to provide Putnam with Evident's electronic health-records system as well as maintenance and support for that system. According to the LSA agreement, Evident's payment for those services was "included in the fees paid to TruBridge" under the MSA agreement.

         According to Putnam, starting in 2016, Putnam entered into a series of agreements with Hospital Partners, Inc. ("HPI"), in which HPI agreed to manage and control the operations of the hospital and its facilities. Putnam alleges that HPI exercised full control over Putnam's operations for two years, after which a dispute arose between HPI and Putnam concerning the quality of the management services HPI provided. Putnam alleges that David Byrns, whom Putnam describes as the chief executive officer of HPI, effectively ran the operations of Putnam during the period 2016 through 2018.

         TruBridge and Evident allege that Byrns became chief executive officer of Putnam in 2016 and that at that time Putnam began entering patient information and billing services through a different computer system than the one provided by Evident pursuant to the LSA agreement and used by TruBridge for accounts receivable pursuant to the MSA agreement. By December 2016, admissions of patient data into the computer system provided by Evident and used by TruBridge had dropped precipitously, and, as a consequence, payments to TruBridge and Evident for their services also declined significantly. TruBridge and Evident allege that, when a TruBridge manager contacted Putnam to inquire about this drop in new-patient admissions into their system, Byrns responded that Putnam had almost no new patients and that it was barely surviving. TruBridge and Evident allege that, Byrns's statement was deliberately false and that Putnam was, in fact, simply entering new patients into a different system but that TruBridge and Evident did not discover the falsehood at that time and continued to work with Putnam.

         According to an affidavit from an administrative assistant for Putnam, Sue Ann Varner, on June 28, 2017, Putnam received a letter addressed to Byrns from counsel for TruBridge and Evident dated June 22, 2017, asserting that Putnam had breached the MSA agreement and the LSA agreement. Varner e-mailed Byrns about the letter and asked for direction concerning what to do with it, and Byrns instructed Varner to forward the letter to him. Varner forwarded the letter to Byrns the same day she received it.

         On August 23, 2017, TruBridge and Evident sued Putnam in the Mobile Circuit Court, alleging breach of contract and fraud. Putnam received the summons and complaint on August 28, 2017, and, according to Varner, on that date she forwarded the complaint and accompanying filings to Byrns, HPI vice president Jorge Perez, Michael Christensen, who was then managing Putnam for HPI, and J.T. Lander.[2]

         No appearance from Putnam was entered in the circuit court. As a result, on November 23, 2017, TruBridge and Evident requested entry of default. On December 21, 2017, the circuit court entered a default judgment against Putnam.

         According to Varner, on December 29, 2017, she e-mailed a copy of the summons and complaint to attorney Dylan Gauldin, counsel for HPI, who Putnam believed was representing Putnam in the lawsuit. In that e-mail, Varner told Gauldin that she had previously forwarded the summons to Byrns, Perez, Christensen, Lander, and Howard Luscan, the chairman of Putnam's board of trustees, and she copied that e-mail to Christensen and hospital employee Gayle Pickens. On December 29, 2017, Varner also forwarded to Gauldin, Lander, and Perez the June 22, 2017, letter from TruBridge and Evident's counsel to Putnam, TruBridge and Evident's request for production of documents and request for admissions, and a copy of the general pretrial order, dated August 23, 2017.

         According to Varner, on January 16, 2018, Putnam received a copy of an order from the circuit court stating that "[t]he damages hearing scheduled in this cause of action for January 26, 2018, is hereby reset to March 2, 2018, at 9:00 a.m." According to Varner, the notice of the hearing was not forwarded to anyone because Christensen had told Pickens that "Dylan [Gauldin] was handling things" and that Putnam representatives should not talk to or have anything further to do with TruBridge.

         On March 2, 2018, the circuit court entered a final order awarding TruBridge and Evident $586, 210.76 in compensatory damages and $100, 000 in punitive damages.

         On April 4, 2018, Putnam filed a motion to set aside the default judgment pursuant to Rule 55(c), Ala. R. Civ. P., or, in the alternative, for relief from the judgment under Rule 60(b), Ala. R. Civ. P. On July 2, 2018, the circuit court denied Putnam's motion to set aside the default judgment. The order stated: "Motion to set aside default judgment filed by Putnam County Memorial Hospital is denied." Putnam appeals.

         II. Standard of Review

"A trial court has broad discretion in deciding whether to grant or deny a motion to set aside a default judgment. Kirtland v. Fort Morgan Auth. Sewer Serv., Inc., 524 So.2d 600 (Ala. 1988). In reviewing an appeal from a trial court's order refusing to set aside a default judgment, this Court must determine whether in refusing to set aside the default judgment the trial court exceeded its discretion. 524 So.2d at 604. That discretion, although broad, requires the trial court to balance two competing policy interests associated with default judgments: the need to promote judicial economy and a litigant's right to defend an action on the merits. 524 So.2d at 604. These interests must be balanced under the two-step process established in Kirtland.
"We begin the balancing process with the presumption that cases should be decided on the merits whenever it is practicable to do so. 524 So.2d at 604. The trial court must then apply a three-factor analysis first established in Ex parte Illinois Central Gulf R.R., 514 So.2d 1283 (Ala. 1987), in deciding whether to deny a motion to set aside a default judgment. Kirtland, 524 So.2d at 605. The broad discretionary authority given to the trial court in making that decision should not be exercised without considering the following factors: '1) whether the defendant has a meritorious defense; 2) whether the plaintiff will be unfairly prejudiced if the default judgment is set aside; and 3) whether the default judgment was a result of the defendant's own culpable conduct.' 524 So.2d at 605."

Zeller v. Bailey, 950 So.2d 1149, 1152-53 (Ala. 2006).

         III. Analysis

         Putnam's first contention on appeal is that the circuit court's order must be reversed because its order does not reflect a consideration of any of the three factors set out in Kirtland v. Fort Morgan Authority Sewer Service, Inc., 524 So.2d 600 (Ala. 1988).

"In Kirtland, we held that a trial court's broad discretionary authority to set aside a default judgment under Rule 55(c) should not be exercised without considering the following three factors: 1)whether the defendant has a meritorious defense; 2)whether the plaintiff will be unfairly prejudiced if the default judgment is set aside; and 3) whether the default judgment was a result of the defendant's own culpable conduct. 524 So.2d at 605. '"'However, in order to trigger the mandatory requirement that the trial court consider the Kirtland factors, the party filing a motion to set aside a default judgment must allege and provide arguments and evidence regarding all three of the Kirtland factors.'"' Hilyer [v. Fortier], 176 So.3d ...

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