$60 Million Verdict in “David v. Goliath” Breach of Contract Case

Attorneys for the Independence, MO law firm of Humphrey, Farrington & McClain on Friday won a $60 million verdict for a husband and wife business ownership team in a breach-of-contract case against HMS Holdings Corp.
After two hours of deliberations, the six-member jury in New York City found HMS Holdings Corp. liable for $60 million in contract damages after it acquired Allied Management Group-Special Investigation Unit, a software business started by Lori Lewis and Dennis Demetre.
Under terms of the acquisition, which was agreed to in June 2010, the couple sold AMG-SIU to HMS Holdings Corp. for $13 million up front. And they were to receive in 2011 and 2012 “earn-out” payments which were contingent on profits related to the sale.
Testimony presented during the trial showed that HMS Holdings Corp. never paid Lori Lewis and Dennis Demetre any earn-outs. Nor did HMS produce any auditable record of its profits during that two-year period.
“This was a true David vs. Goliath case,” said Kenneth B. McClain, senior partner for Humphrey, Farrington & McClain, who was the lead attorney for the plaintiffs. “HMS hired the venerable New York firm of Weil, Gotshal & Manges to put out a furious defense. Fortunately, the jury saw through the subterfuge and vindicated the rights of my clients.”
Lori Lewis and Dennis Demetre, who live in Nevada, also will be able to collect an additional $27 million in pre-judgment interest from the lost earnings, Mr. McClain said.
AMG-SIU was a small but successful business before the acquisition. Its revenue shot up from $400,000 in 2006 to $7 million in 2010. The company had developed a web-based, forensic editing system that analyzed medical and billing claims data for patterns of fraud, waste and abuse.
That software caught the attention of HMS Holdings Corp., a NASDAQ-traded company based in Irving, Texas which offers cost-containment services to healthcare payers and sponsors, including the coordination of benefits services and program integrity services.
The trial started October 23 in the Supreme Court of the State of New York County of New York. The Honorable Saliann Scarpulla presided over the trial.
The Plaintiffs also were represented by Michael S. Kilgore, Nichelle L. Oxley and Scott Britton-Mehlisch of Humphrey, Farrington & McClain, as well as Steven W. White and William L. Carr, of White, Allinder, Graham, Buckley & Carr, LLC, of Independence; John Klamann and Andy Schermerhorn of the Klamann Law Firm, of Kansas City, MO; and Joshua B. Katz, of Kent, Beatty & Gordon, LLP, of New York City.