Addiction Allies LLC v. Berkshire Group Services, Inc.

Filing 23

MEMORANDUM OPINION re 22 Second MOTION for Default Judgment. Signed by Senior Judge Norman K. Moon on January 6, 2025. (Opinion mailed to Pro Se Party via US Mail) (dsa)

CLERKS OFFICE U.S. DIST. COURT
AT CHARLOTTESVILLE, VA
FILED

January 06, 2025

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF VIRGINIA
CHARLOTTESVILLE DIVISION
ADDICTION ALLIES, LLC,

Plaintiff,

v.

LAURA A. AUSTIN, CLERK
BY s/ D. AUDIA
DEPUTY CLERK

CASE NO. 3:22-cv-00036
MEMORANDUM OPINION

BERKSHIRE GROUP SERVICES, INC.,
Defendant.

JUDGE NORMAN K. MOON

Plaintiff Addiction Allies, LLC’s (“Addiction Allies”) moves the Court for entry of default
judgment against Defendant Berkshire Group Services, Inc. (“Berkshire”). For the reasons stated
below, the Court GRANTS Addiction Allies’ renewed motion for default judgment, Dkt. 22.
I.

Background
A. Factual Background
The following facts are drawn from Addiction Allies’ amended complaint, Dkt. 8, and

are accepted as true for all purposes, excluding the determination of damages. See Ryan v.
Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir.2001).
Addiction Allies is a comprehensive addiction and substance abuse treatment center
headquartered in Charlottesville, Virginia, that “provid[es] treatment for individuals with
substance disorders.” Dkt. 8 at 2. Berkshire is a medical billing and practice management
company located in North Adams, Massachusetts. Dkt. 8 at 2. On or about June, 12, 2018, the
parties entered into a contact for services, in which Berkshire was to provide medical billing
services to Addiction Allies’ patients, hospitals, and insurance carriers. Dkt. 8 at 2-3. Berkshire

would receive 5.5% of all revenues it collected on behalf of Addiction Allies. Dkt. 8 at 3.
Although the parties did not sign the contract, “they acted in accordance with its terms and
conditions, including termination, at all relevant times,” and Berkshire even later asserted that
the fees it charged and the services it rendered were “as agreed to” under the contract. Dkt. 8 at
3. The existence or validity of the contract has not been contested at any stage of this litigation.
During the performance of the contract, Addiction Allies alleges that Berkshire “did not
bill or pursue collection of all revenues that were due Addiction Allies” and did not disclose to
this deficiency to Addiction Allies. Dkt. 8 at 3. More specifically, Addiction Allies alleges that
Berkshire:
(i)

Failed to “appeal a substantial number of insurance carrier coverage claim
rejections denying insurance coverage for Addiction Allies patients;”

(ii)

Failed to “provide Addiction Allies with any notices of requests for additional
information from insurance carriers to resolve contested claims;”

(iii)

Failed to “bill patient balances and did not send any statements to patients to
collect payment for services rendered;” and

(iv)

Failed to “provide Addiction Allies with patient payment statements or make
adequate efforts to collect payment, and did not notify insurance carriers of any
corrections in claims or re-submit rejected claims for an appeal process or
administrative review.”

Dkt. 8 at 3. Addiction Allies concludes that, based on these failures, Addiction Allies “lost
payments that it would have been otherwise entitled to receive had [Berkshire] met its
contractual obligations.” Dkt. 8 at 4. Accordingly, in its amended complaint, Addiction Allies

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argues that such failures support state law claims for (1) breach of contract and (2) breach of the
implied covenant of good faith and fair dealing. Dkt. 8 at 4-5.
B. Procedural History
Following its complaint, Addiction Allies filed proof showing service upon Berkshire’s
registered agent. Dkt. 12. Thereafter, Berkshire, by its registered agent—but not by counsel—
filed a purported response, styled “Defendant’s Response & Motions,” which included a
purported “Motion to Dismiss.” Dkt. 13. This Court, noting that “[c]orporate entities including
limited liability companies . . . can only appear in federal court through counsel,” denied
Berkshire’s motion for its failure to be prepared and filed by counsel. Dkt. 14 at 1 (citing
Rowland v. California Men’s Colony, 506 U.S. 194, 201–02 (1993) (explaining that “[i]t has
been the law for the better part of two centuries … that a corporation may appear in the federal
courts only through licensed counsel”). The Court directed Berkshire to “secure counsel to enter
an appearance on its behalf, and answer or otherwise respond” to Addiction Allies’ complaint
within fourteen days. Dkt. 14 at 1. The Court further directed Addiction Allies to file a motion
for entry of default, should Berkshire fail to respond. Dkt. 14 at 1.
After Berkshire failed to respond, Addiction Allies properly sought entry of default, and
the Clerk of Court entered default as to Berkshire. Dkt. 16. One week later, Berkshire filed a
“Pro Se Response” in which its registered agent notified the Court that it has been unable to
secure representation in Virginia “[a]fter contacting no less than five Virginia law firms” and
working through “no less than seven [] referrals.” Dkt. 18 at 1. It further stated that Berkshire
could not afford retainer “if representation were to occur” and that it had begun the process of
dissolving the company. Dkt. 18 at 1.

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On May 04, 2023, Addiction Allies moved for default judgment and, by affidavit,
claimed $331,000 in damages—an amount which “constitut[ed] the revenues lost by [Addiction
Allies] over a 15 month period” due to Berkshire’s actions. Dkt. 19, 19-1 at 1. After reviewing
Addiction Allies’ motion, the Court directed Addiction Allies to show cause why it is entitled to
$331,000.00 in damages. Dkt. 20 at 1. Specifically, the Court ordered Addiction Allies to
“demonstrate how the that damages amount was derived from the supporting documents” and
provide a “more detailed explanation of why the aforementioned damages are attributable to
[Berkshire].” Dkt. 20 at 1.
Addiction Allies filed the instant, renewed motion for default judgment, seeking a
reduced award of $324,339.00 plus interest. Dkt. 22. To support its damages claim, Addiction
Allies has submitted an affidavit of Mr. Steven Shields, Plaintiff’s expert witness. Dkt. 22-1.
II.

Legal Standard
Rule 55 of the Federal Rules of Civil Procedure authorizes the entry of a default

judgment “when a defendant fails to plead or otherwise defend in accordance with the Rules.”
United States v. Morandi, 673 F.2d 725, 727 (4th Cir. 1982) (quotations omitted). After the
Clerk of Court’s interlocutory “entry of default” provides notice to the defaulting party pursuant
to Fed. R. Civ. P. 55(a), the non-defaulting party may move the court for “default judgment”
under Fed. R. Civ. P. 55(b). “If the plaintiff’s claim is for a sum certain or a sum that can be
made certain by computation, the clerk—on the plaintiff’s request, with an affidavit showing the
amount due—must enter judgment for that amount and costs against a defendant who has
defaulted for not appearance and who is neither a minor nor an incompetent person.” Fed. R.
Civ. P. 55(b)(1). “In all other cases, the party must apply to the court for a default judgment.”
Fed. R. Civ. P. 55(b)(2).

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In reviewing a motion for default judgment, the court accepts as true the well-pleaded
factual allegations in the complaint as to liability. Ryan v. Homecomings Fin. Network, 253 F.3d
778, 780-81 (4th Cir. 2001). By failing to answer or otherwise respond, defendants admit the
allegations in the complaint which are accepted as true, except for those relating to damages. Id.
at 780. However, a court still must determine whether these unchallenged factual allegations
constitute a legitimate cause of action. Id. Default judgment should be entered if the well-pleaded
allegations in the complaint are sufficient to state a claim upon which relief can be granted.
Proctor v. Edmonds, No. 7:18-cv-87, 2020 WL 4735348, at *2 (W.D. Va. Aug. 14, 2020). As to
damages, Rule 55(b)(2) permits—but does not require—the court to conduct hearings to
determine the amount of damages, or to investigate other matters. See Fed. R. Civ. P. 55(b)(2).
III.

Discussion
The Court has examined the pleadings, the service of process, and the record in this case.

We find that Addiction Allies is entitled to default judgment against Berkshire because it has
made a proper procedural showing for default judgment and has stated a legitimate cause of
action for breach of contract and breach of the implied duty of good faith and fair dealing,
warranting compensatory damages.
In reaching this determination, as explained below, the Court finds that (1) Massachusetts
law is the appropriate choice of law to govern this dispute; (2) under Massachusetts law,
Addiction Allies has adequately stated claims for breach of contract and breach of implied duty
of good faith; and (3) Addiction Allies has adequately demonstrated its entitlement to
$324,339.00 in damages.
A. Choice of Law

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This case raises conflict of law questions since it is a contract dispute between parties
from different states and the contract purports to select the law of Massachusetts.
As this is a diversity action, this Court must apply the choice of law principles of
Virginia, the jurisdiction in which the Court sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487 (1941). Under Virginia choice of law, the law of the place of performance governs questions
concerning performance of a contract. Equitable Trust Co. v. Bratwursthaus Management Corp.,
514 F.2d 565 (4th Cir. 1975). A contract breach is a performance issue and thus, is regulated by
the law of the place of performance. See Arkla Lumber & Mfg. Co. v. West Virginia Timber Co.,
146 Va. 641, 132 S.E. 840 (1926); Restatement of Conflicts § 370 (1934); 16 Am. Jur. 2D,
Conflict of Laws § 96 (1979).
Moreover, under Virginia conflict of law principles, “where parties to a contract have
expressly declared that the agreement shall be construed as made with reference to the law of a
particular jurisdiction, [the courts] will recognize such agreement and enforce it, applying the
law of the stipulated jurisdiction.” Paul Business Sys., Inc. v. Canon U.S.A., Inc., 240 Va. 337,
343 (1990).
Here, both the law of the place of performance and the parties’ selected jurisdiction point
to the laws of the Commonwealth of Massachusetts. Berkshire is a Massachusetts corporation,
and, without additional or contrary information, the Court reasons that when a Massachusetts
corporation performs services pursuant to a services contract, the contract is performed in the
state of Massachusetts—even when performed in connection with entities located in other states.
Thus, under Virginia’s adherence to the law of the place of performance, the law of
Massachusetts should supply the substantive standards to govern this contractual dispute.
Furthermore, the contract between the parties clearly selects the laws of Massachusetts: “This

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agreement is governed and construed in accordance with the laws of the Commonwealth of
Massachusetts where [Berkshire] is incorporated and maintains its sole office.” Dkt. 13 at 10. 1,2
This further persuades the Court that the contract law of Massachusetts supplies the substantive
standards in this dispute.
B. Massachusetts Law of Contracts
Massachusetts law requires that a plaintiff establish four elements to prove a breach of
contract: (1) the existence of a valid and binding contract; (2) the plaintiff’s willingness to
perform or performance; (3) a breach by the defendant of the terms of the contract; and (4)
causation and the amount of damages to the plaintiff. See, e.g., Amicas, Inc. v. GMG Health Sys.,
Ltd., 676 F.3d 227, 231 (1st Cir. 2012); Singarella v. Boston, 342 Mass. 385, 387 (1961).
Furthermore, “[t]he covenant of good faith and fair dealing is implied in every contract.”
UNO Rests., Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 805 N.E.2d 957, 964 (2004).
The covenant provides that “neither party shall do anything that will have the effect of

This choice of law clause in the contract, along with the contract itself, is only before the Court in full via
Berkshire’s purported motion to dismiss, see Dkt. 13, which was dismissed because it was not submitted by counsel.
See Dkt. 14. However, Addiction Allies also submitted a portion of the contractual language as excerpted in an
email, for purposes of demonstrating breach. See Dkt. 22-2 at 1-2. Here, the Court takes notice of the contractual
language solely for purposes of determining the choice of law in this matter.
2
The Court also notes that the contract contains a forum selection clause which states that “any and all legal
actions must be filed” in the Commonwealth of Massachusetts. Dkt. 13 at 10. However, the Court concludes that the
clause should not be enforced. Forum selection clauses are generally enforced by federal courts, see M/S Bremen v.
Zapata Off–Shore Co., 407 U.S. 1, 13 (1972), as well as in Virginia, see Paul Business Systems v. Canon U.S.A.,
Inc., 240 Va. 337 (Va.1990). The appropriate way to enforce a forum-selection clause pointing to a state forum is
through the doctrine of forum non conveniens. Atlantic Marine Const. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of
Texas, 571 U.S. 49, 60 (2013). Under the common law doctrine of forum non conveniens, a “district court . . . may
dispose of an action . . . when considerations of convenience, fairness, and judicial economy so warrant.” Sinochem
Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 432 (2007). Here, the doctrine of forum non conveniens
does not warrant enforcement of the clause and/or dismissal of the action. First, no party has properly sought
dismissal of the action under forum non conveniens. Second, the Court sees no need to dismiss the action sua
sponte, because doing so would not serve judicial economy or convenience. Berkshire has notified the Court that it
“lacks any assets and that it carries significant liabilities,” such that it has begun “the process of dissolution.” Dkt.
18 (Pro Se Letter to Court). It would be nonsensical and inefficient to force Addiction Allies to re-initiate this
litigation in Massachusetts, only to confront a non-responsive and/or insolvent defendant. In the interest of
convenience and judicial economy, the case should be heard and resolved in this jurisdiction, so that Addiction
Allies may proceed to enforce any judgment awarded to it.
1

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destroying or injuring the rights of the other party to receive the fruits of the contract.” Anthony’s
Pier Four, Inc. v. HBC Associates, 411 Mass. 451, 471–472, (1991) (quotations omitted). “[T]he
purpose of the covenant is to guarantee that the parties remain faithful to the intended and agreed
expectations of the parties in their performance.” UNO Restaurants, 441 Mass. at 385. “The
essential inquiry is whether the challenged conduct conformed to the parties’ reasonable
understanding of performance obligations, as reflected in the overall spirit of the bargain.”
Speakman v. Allmerica Fin. Life Ins., 367 F. Supp. 2d 122, 132 (D. Mass. 2005).
Here, Addiction Allies has adequately pled facts to state a legitimate cause of action for
breach of contract and breach of the covenant of good faith and fair dealing under Massachusetts
law. Addiction Allies alleges that although the parties did not sign a contract, they drew one up
and subsequently “acted in accordance with its terms and conditions, including termination, at all
relevant times”—to the extent that Berkshire even later asserted that the fees it charged and the
services it rendered were “as agreed to” under the contract. Dkt. 8 at 3. Accepting these
allegations as true, see Ryan, 253 F.3d 778, 780-81, the Court finds that a contract existed and
that Addiction Allies was ready to perform.
Furthermore, Berkshire then breached the terms of the contract and violated the covenant
of good faith and fair dealing. Addiction Allies alleges that Berkshire “did not bill or pursue
collection of all revenues that were due Addiction Allies” and did not disclose to this deficiency
to Addiction Allies. Dkt. 8 at 3. More specifically, Berkshire allegedly failed to “appeal a
substantial number of insurance carrier coverage claim rejections;” failed to “provide Addiction
Allies with any notices of requests for additional information from insurance carriers to resolve
contested claims;” and failed to “bill patient balances . . . collect payment for services rendered.”
Dkt. 8 at 3. The Court finds these allegations sufficient to demonstrate that Berkshire breached

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the contract during performance to Addiction Allies’ detriment, and that Berkshire’s actions had
the effect of “destroying or injuring the rights of [Addiction Allies] to receive the fruits of the
contract.” Anthony’s Pier Four, 411 Mass. 451, 471–472.
Accordingly, the Court concludes that Addiction Allies is entitled to default judgment
against Berkshire based on breach of contract and breach of the covenant of good faith. The only
remaining issue is the computation of damages.
C. Damages
Addiction Allies claims $324,339.00 in lost revenue damages resulting from Berkshire’s
breach. To support its claim, Addiction Allies has submitted an affidavit of Mr. Steven Shields,
Plaintiff’s expert witness. See Dkt. 22-1. As explained below, the Court finds that Addiction
Allies has submitted sufficient evidence of its damages such that it should be awarded
$324,339.00 in damages.
Mr. Shields’ affidavit first describes best practices in the medical billing industry and
explains how Berkshire fell short of these standards, resulting in lost revenue for Addiction
Allies. Dkt. 22-1 at 2-3. The affidavit next computes Addiction Allies’ damages by comparing
the revenue Addiction Allies received under contract with Berkshire with the revenue it received
under contract with a subsequent firm, Medical Billing Solutions, LLC (MBS). Dkt. 22-1 at 3-4.
The affidavit demonstrates that Berkshire collected only 47.8% from Addiction Allies’ submitted
charges during the relevant billing period, while MBS collected 56.8% from submitted charges
during the subsequent period—a rate of collection which Addiction Allies alleges is industry best
practice. Had Berkshire collected revenue at the same percentage as MBS, roughly 57% instead
of 48%, Addiction Allies would have earned $324,339.00 more in revenue during the relevant
period. The Court has reproduced the computation below.

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Berkshire
MBS
01/01/2020 - 04/07/2021 01/01/2022 - 12/31/2022
$
3,619,746.09 $
6,177,521.38
$
1,731,314.09 $
3,508,336.52
47.8%
56.8%

Billing Period
Charges Submitted by Billing Firm
Actual Payments to Addiction Allies
Revenue Collection %

Hypothetical Payments to Addiction Allies
using MBS Revenue Collection %
$
Addiction Allies' Lost Revenue
$

2,055,725.37
324,339.00

Based on these arguments and figures in the pleadings, the Court concludes that
Addiction Allies’ evidence and computation is credible, that a hearing on the matter is not
necessary, and that Addiction Allies is therefore entitled to $324,339.00 in damages, plus postjudgement interest at the legal rate in accordance with 28 U.S.C. § 1961.
IV.

Conclusion
For the foregoing reasons, Plaintiff Addiction Allies is entitled to default judgment against

Defendant Berkshire for the contract claims alleged in the complaint, entitling Addiction Allies to
$324,339.00 in damages plus post-judgment interest at the legal rate until the judgment is fully
paid. An appropriate order will issue.
The Clerk of the Court is directed to send a certified copy of this Memorandum Opinion
Order to all counsel of record.
Entered this 6th day of January, 2025.

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