SSM Managed Care Organization, L.L.C. v. Comprehensive Behavioral Care, Inc.

Filing 56

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that the stay of this case is lifted. IT IS FURTHER ORDERED that plaintiff SSM Managed Care Organization, L.L.C.s motion for default judgment is GRANTED. Doc. 52 IT IS FURTHER ORDERED that default judgmen t will be entered in favor of plaintiff SSM Managed Care Organization, L.L.C. and against defendant Comprehensive Behavioral Care, Inc. in the amount of Three Million Six Hundred Thirty-Seven Thousand Three Hundred Eighty-Two Dollars and Seventy-Six Cents ($3,637,382.76). Signed by District Judge Charles A. Shaw on 4/9/2014. (RAK)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
SSM MANAGED CARE ORGANIZATION,
L.L.C.,
Plaintiff,
v.
COMPREHENSIVE BEHAVIORAL CARE,
INC.,
Defendant.

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No. 4:12-CV-2386 CAS

MEMORANDUM AND ORDER
This matter is before the Court on plaintiff SSM Managed Care Organization, L.L.C.’s
(“SSM”) motion for default judgment. For the following reasons, the Court will grant SSM’s motion
and award it default judgment in the amount of $3,637,382.76.
I.

Background
This case arises out of defendant Comprehensive Behavioral Care, Inc.’s (“CompCare”)

failure to pay or respond to 227 claims related to medical services provided by SSM to covered
patients between November 23, 2010 and June 2013. SSM alleges that CompCare breached the
parties’ Letter Agreement and Facility Provider Agreement by failing to pay these claims and violated
Missouri’s Prompt Pay Act, Mo. Rev. Stat. § 376.383. SSM seeks to recover in damages the
amounts owed for these outstanding claims under the parties’ contracts, as well as the penalties and
interest and reasonable attorneys’ fees under § 376.383(6) of the Prompt Pay Act.
Defendant appeared in this action and filed its answer. The parties submitted a joint
scheduling plan, and the Court issued a Case Management Order on April 17, 2013. The case was
scheduled for court-ordered mediation on November 19, 2013.

On November 4, 2013, defendant’s counsel filed motions to withdraw. Counsel stated that
defendant has not abided by the client agreements with the attorneys’ law firms, “which has created
irreconcilable differences between [the law firms] and [defendant] CompCare that have not been
resolved.” On December 5, 2013, after a hearing, the Court held the motions in abeyance, and
ordered defendant to obtain substitute counsel no later than January 6, 2014. Defendant did not
obtain substitute counsel by January 6, 2014. The Court granted defense counsel’s motions to
withdraw on January 16, 2014. SSM filed a motion to strike CompCare’s pleadings, which the Court
granted. SSM filed a motion for entry of default, and the Clerk of Court entered default against
CompCare on January 23, 2014. SSM now moves for default judgment.
II.

Discussion
When a default judgment is entered on a claim for an indefinite or uncertain amount of

damages, the facts alleged in the complaint are taken as true, except facts relating to the amount of
damages, which must be proved in a supplemental hearing or proceeding. Everyday Learning Corp.
v. Larson, 242 F.3d 815, 818 (8th Cir. 2001) (even if liability for tortious interference with contract
was established, which includes an element of loss, the plaintiff still had to prove actual damages to
a reasonable degree of certainty); American Red Cross v. Community Blood Center of the Ozarks,
257 F.3d 859, 863 (8th Cir. 2001) (court properly found plaintiff failed to prove its damages where
its damages expert’s testimony and valuation methods were suspect, and the expert failed to
adequately separate out alleged damages due to legitimate competition). A default judgment cannot
be entered until the amount of damages has been ascertained. Hagen v. Sisseton-Wahpeton
Community College, 205 F.3d 1040, 1042 (8th Cir. 2000). A party entitled to default judgment is

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required to prove the amount of damages that should be awarded. Oberstar v. F.D.I.C., 987 F.2d
494, 505 n.9 (8th Cir. 1993).
A. Amount of Damages for Unpaid Claims
Pursuant to Missouri Revised Statutes § 376.383(6),
[i]f the health carrier has not paid the claimant on or before the forty-fifth processing
day from the date of receipt of the claim, the health carrier shall pay the claimant one
percent interest per month and a penalty in an amount equal to one percent of the
claim per day. The interest and penalty shall be calculated based upon the unpaid
balance of the claim as of the forty-fifth processing day. . . . Such interest and
penalties shall cease to accrue on the day after a petition is filed in a court of
competent jurisdiction to recover payment of such claim. . . .
Mo. Rev. Stat. § 376.383(6).
In support of its motion for default judgment, SSM has submitted an affidavit of Louis C.
Rotter, Jr., the Network Vice President-Chief Contracting Officer for SSM Health Care St. Louis.
Mr. Rotter’s affidavit calculates the amount of damages due on the 155 claims CompCare failed to
pay SSM as required by the Letter Agreement. (Rottler Aff. ¶¶ 8-25). Mr. Rottler’s affidavit also
calculates the amount of damages due on the 72 claims CompCare failed to pay SSM as required by
the Facility Provider Agreement. (Id. ¶¶ 26-42).
Based on the affidavit of Mr. Rottler and the accompanying spreadsheets attached thereto as
Exhibit 1, the amount SSM is entitled to recover from CompCare for the 155 claims under the terms
of the Letter Agreement is $642,748.40. In addition, SSM is entitled to receive statutory interest at
one percent under the Missouri Prompt Pay Act. See Mo. Rev. Stat. § 376.383(6). SSM calculated
the amount of interest at one percent of the “Amount CompCare Owes Under Contract” per month
beginning on the “45th Day Following CompCare’s Receipt” of the claim and ending on the date

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SSM filed this lawsuit. The interest calculation for the 155 claims is $61,382.11. See Rottler Aff.;
Ex. 1.
The Missouri Prompt Pay Act also contains a statutory penalty in the amount of one percent
of the claim per day. See Mo. Rev. Stat. § 376.383(6). SSM calculated the amount of penalties at
one percent of the “Amount CompCare Owes Under Contract” per day beginning on the “45th Day
Following CompCare’s Receipt” of the claim and ending on the date SSM filed this lawsuit. The
penalty calculation for the 155 claims is $1,870,913.84. See Rottler Aff. ¶ 24; Ex. 1.
As detailed in Mr. Rottler’s affidavit and the spreadsheet attached as Exhibit 1, SSM is
entitled to recover $2,575,044.35 from CompCare for the 155 claims submitted under the Letter
Agreement. See Rottler Aff. ¶ 25; Ex. 1.
In addition to these 155 claims under the Letter Agreement, CompCare failed to pay 72 claims
as required by the Facility Provider Agreement. SSM provides a column-by-column explanation of
these damages in Exhibit 2 to Mr. Rottler’s affidavit. The amount owed to SSM under the agreement
for these 72 claims is $805,880.80. Additionally, SSM is entitled to one percent interest per month
under the Missouri Prompt Pay Act, which is calculated at $5,927.13; and penalties of one percent
per day under the Missouri Prompt Pay Act, which is calculated at $180,514.82. The total amount
of damages owed to SSM from CompCare on the 72 claims under the Facility Provider Agreement
is $992,322.75. See Rottler Aff. ¶ 42; Ex. 2.
B. Attorneys’ Fees and Costs
Missouri Revised Statute § 376.383(6) also provides that “[u]pon a finding by a court of
competent jurisdiction that a health carrier failed to pay a claim, interest, or penalty without good
cause, the court shall enter judgment for reasonable attorney fees for services necessary for recovery.”
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Mo. Rev. Stat. § 376.383(6). To prove the amount of its attorneys’ fees and costs, SSM has attached
the affidavit of Kevin F. Hormuth, an officer of the law firm Greensfelder, Hemker & Gale, P.C.
(“Greensfelder”). Attached to Mr. Hormuth’s affidavit is an itemized billing record that provides for
the total amount of time expended and expenses incurred by each lawyer or paralegal for each day,
and a detailed description of the particular litigation task performed. In total, SSM seeks $69,829.37
in attorneys’ fees for work performed from August 1, 2012 through February 4, 2014. SSM’s
litigation costs total $186.29 for this same time period.
In a diversity case such as this, federal courts follow state law regarding an award of
attorneys’ fees, absent conflict with a federal statute or court rule. See Schaefer v. Spider Staging
Corp., 275 F.3d 735 (8th Cir. 2002) (district court in diversity case properly considered
reasonableness of attorneys’ fee submissions under standards established by Missouri law). The
general rule in Missouri is that attorneys’ fees are only recoverable when a statute specifically
authorizes recovery or when attorneys’ fees are provided by contract. See Rental Co., LLC v. Carter
Group, Inc., 399 S.W.3d 63, 67 (Mo. Ct. App. 2013). Here, the fees are authorized by statute.
Relevant factors in determining the reasonable value and amount of statutorily authorized fees
include: (1) the rates customarily charged by the attorneys involved in the case and by other attorneys
in the community for similar services; (2) the number of hours reasonably expended on the litigation;
(3) the nature and character of the services rendered; (4) the degree of professional ability required;
(5) the nature and importance of the subject matter; (6) the amount involved or the result obtained;
and (7) the vigor of the opposition. See Berry v. Volkswagen Group of Am., Inc., 397 S.W.3d 425,
431 (Mo. 2013) (en banc).

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In this case, four Greensfelder attorneys billed at various rates. Officer Gregg Lepper billed
at $380/hour; officer Kevin Hormuth billed at $310 (and later $327.75)/hour; officer David Niemeier
billed at $274.50/hour; and attorney James Walkup billed at $235 (and later $247.50)/hour. The
paralegals involved in this case billed at a rate of $155/hour. The Court finds these rates in line with
the prevailing rates for St. Louis attorneys, particularly those practicing in health care litigation.
Missouri Lawyer’s Weekly has compiled lists of billing rates in its Fourth Annual Corporate Counsel
Desk Book. See CORPORATE COUNSEL DESK BOOK (Missouri Lawyers Weekly, 2014 ed.); see e.g.,
Berry, 397 S.W.3d at 431 n.5 (citing Missouri Lawyers Weekly’s Third Annual Corporate Counsel
Desk Book). Although the lists are not necessarily comprehensive, they do establish that the billing
rates for litigation partners in St. Louis region firms vary from a high of $495 to $550/hour to a low
of $230 to $295/hour. See id. at 10-13. The officers at Greensfelder billed at rates of between
$274.50 to $380/hour, which the Court finds reasonable based on the rates customarily charged by
other attorneys in the community for similar services. Although it is unclear whether Mr. James
Walkup was an associate or an officer at Greensfelder, his billing rate of $235 to $247.50/hour is
reasonable (if not low) compared to litigation associates in the St. Louis area firms. See id. Finally,
based on the Missouri Lawyers Weekly directory of billing rates, paralegals in the larger firms in St.
Louis bill at a rate of $125 to $130/hour on the low end to $170 to $200/hour on the high end. Id.
Greensfelder’s paralegals billed at a rate of $155/hour, which the Court finds reasonable.
The Court has also reviewed the detailed descriptions of the work Greensfelder’s attorneys
performed on this case and the numbers of hours spent on that work. The Court finds both the nature
of the services and the amount of time involved to be reasonable. SSM researched and filed this case,
proceeded through initial disclosures and initial discovery, and prepared the case for mediation before
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defendant CompCare defaulted. The Court has examined the relevant factors in determining the
reasonable value and amount of the statutorily authorized fees, and finds the fees charged by
Greensfelder’s attorneys to be reasonable for the services necessary for recovery in this action. See
Mo. Rev. Stat. § 376.383(6). The Court will award Greensfelder its reasonable attorneys’ fees from
August 1, 2012 through February 4, 2014 in the amount of $69,829.37. In addition, the Court will
award Greensfelder its costs in the amount of $186.29. The attorneys’ fees plus costs for work
performed by Greensfelder from August 1, 2012 through February 4, 2014 total $70,015.66.
III.

Conclusion
Based on the foregoing, the Court will enter default judgment in favor of plaintiff SSM and

against defendant CompCare in the amount of Three Million Six Hundred Thirty-Seven Thousand
Three Hundred Eighty-Two Dollars and Seventy-Six Cents ($3,637,382.76). The stay previously
imposed in this case will be lifted.
Accordingly,
IT IS HEREBY ORDERED that the stay of this case is lifted.
IT IS FURTHER ORDERED that plaintiff SSM Managed Care Organization, L.L.C.’s
motion for default judgment is GRANTED. [Doc. 52]
IT IS FURTHER ORDERED that default judgment will be entered in favor of plaintiff SSM
Managed Care Organization, L.L.C. and against defendant Comprehensive Behavioral Care, Inc. in
the amount of Three Million Six Hundred Thirty-Seven Thousand Three Hundred Eighty-Two
Dollars and Seventy-Six Cents ($3,637,382.76).

An appropriate default judgment will accompany this Memorandum and Order.

CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE

Dated this 9th day of April, 2014.

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