Profit Recovery Group, USA, Inc. v. Commissioner, Department of Administrative & Financial Services

2005 ME 58, 871 A.2d 1237, 2005 Me. LEXIS 61
CourtSupreme Judicial Court of Maine
DecidedMay 4, 2005
StatusPublished
Cited by14 cases

This text of 2005 ME 58 (Profit Recovery Group, USA, Inc. v. Commissioner, Department of Administrative & Financial Services) is published on Counsel Stack Legal Research, covering Supreme Judicial Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Profit Recovery Group, USA, Inc. v. Commissioner, Department of Administrative & Financial Services, 2005 ME 58, 871 A.2d 1237, 2005 Me. LEXIS 61 (Me. 2005).

Opinions

CALKINS, J.

[¶ 1] The Commissioner of the Maine Department of Administrative and Finan[1239]*1239cial Services (DAFS)1 appeals from a judgment in favor of The Profit Recovery Group, USA, Inc. (PRGU) for damages in the amount of $578,527.53, entered in the Superior Court (Kennebec County, Studstrup, J.) following a jury trial. The jury found that the parties entered into a contract and that DAFS breached the contract by refusing to pay PRGU its fee. DAFS contends that the court erred in denying its motions for judgment as a matter of law. DAFS claims that, as a matter of law, it did not have the authority to enter into the contract. DAFS also argues that the court erred in denying its motions for a mistrial and a new trial after a PRGU witness testified about settlement negotiations. PRGU cross-appeals the court’s denial of pre- and post-judgment interest. We affirm the damages judgment, but we vacate the order denying interest.

I. BACKGROUND

[¶2] In 1998, DAFS contracted with PRGU, with the stated objective of employing it to audit all State of Maine payments to vendors and service providers and to recover overpayments.2 The contract was executed after DAFS requested and reviewed proposals from several entities. The contract states that PRGU will audit “one hundred percent of all accounts payable transactions” for the four-year period beginning July 1, 1994. PRGU agreed to provide the State Controller with a list of overpayments and supporting documents and explanations. PRGU was to be paid for its work on a contingency basis; that is, it was to receive percentages of recovered overpayments.

[¶ 3] Work under the contract began in November 1998. In early 1999, the State Controller notified the Commissioner of the Department of Human Services (DHS)3 that PRGU would begin looking at Medicaid and other DHS accounts. A PRGU employee had several meetings with DHS employees, including the official who was charged with investigating Medicaid fraud and abuse. The DHS official was particularly interested in having PRGU look at Medicaid overpayments in the acquisition of durable equipment and the double billing by private nonmedical institutions, known as PNMI providers. Another DHS employee provided the PRGU employee with background information on PNMIs and PNMI billing and cost reports.

[¶ 4] After several days of reviewing PNMI cost reports at the DHS offices, PRGU found an overpayment by DHS of over one million dollars in 1996 made to one PNMI and an overpayment of over [1240]*1240one million dollars in 1997 made to the same PNMI. PRGU discovered these overpayments by comparing DHS interim payments to the final costs of the services. PRGU notified the State Controller and provided her with preliminary information regarding the overpayments. The State Controller notified the Commissioner of DHS, and after a meeting attended by the Commissioner and PRGU, PRGU was told to stop its work on the PNMI cost reports. The parties stipulated that the State recovered overpayments of approximately one million dollars each for 1996 and 1997 from the PNMI identified by PRGU.

[¶ 5] When DAFS refused to pay PRGU a fee for these two overpayments, PRGU filed a complaint in the Superior Court seeking the fee. Among other defenses, DAFS asserted that PRGU’s claims were barred because DHS is the only state agency designated to handle Medicaid matters, and DHS did not authorize PRGU’s services.

[¶ 6] At trial, during the cross-examination of a PRGU employee, DAFS asked the employee if he, stood to make a lot of money if PRGU prevailed. He responded that he would receive $15,000, which was a smaller figure than he had given during his deposition. When DAFS asked him if he misspoke, he said that he had been paid part of his commission after settlement negotiations in anticipation that DAFS was going to make a substantial offer. DAFS objected, and the court sustained the objection and promptly instructed the jury to disregard the testimony. Later that day DAFS moved for a mistrial, but the court denied the motion. The next day DAFS renewed its request for a mistrial, which was also denied.

[¶ 7] At the close of PRGU’s case, DAFS moved for judgment as a matter of law on the ground that the contract was unenforceable because the federal Medicaid statute and regulations prohibit DHS from delegating any power to DAFS to interpret or apply Medicaid regulations. The court denied the motion.

[¶ 8] The jury, finding that DAFS breached the contract, awarded PRGU damages of $573,527.53, and the court entered a judgment for PRGU in this amount. Thereafter, DAFS made two motions, which the court denied: (1) a motion for a new trial; and (2) a motion for judgment as a matter of law. DAFS also requested that the court waive any interest payments on ’ the judgment on the ground that sovereign immunity bars the assessment of interest against the State. The court granted this request.

[¶ 9] Although DAFS raised numerous defenses before and at trial, DAFS appeals only two issues: (1) whether the court erred in denying its motions for judgment as a matter of law on the basis that the State Controller lacked authority to contract with PRGU for the work it performed regarding Medicaid overpayments because of the “single state agency” requirement of the federal Medicaid statute and regulations, 42 U.S.C.A. § 1396a(a)(5) (Supp.2004) and 42 C.F.R. § 431.10(e)(1) (2004); and (2) whether a mistrial should have been granted because of testimony alluding to a settlement offer in violation of M.R. Evid. 408. PRGU cross-appeals the denial of pre- and post-judgment interest.

II. DISCUSSION

A. Motions for Judgment as a Matter of Law

1. Standard of Review

[¶ 10] We review de novo the denial of a motion for judgment as a matter of law, viewing all of the evidence in the light most favorable to the party opposing the motion. M.R. Civ. P. 50(a). Our task is to [1241]*1241determine whether the “jury could not reasonably find for [the party opposing the motion] on an issue that under the substantive law is an essential element of the claim.” Id.

[¶ 11] The substantive law surrounding DAFS’s defense of lack of authority to enter into the contract consists of the federal statutes and regulations governing the Medicaid program. According to DAFS, those statutes and regulations prohibited it from contracting with PRGU to perform the task of looking for DHS overpayments. Thus, we examine the relevant Medicaid statute and regulation and examine the application of the federal law to the contract at issue.

2. Medicaid

[¶ 12] Medicaid is a federal program that assists states in providing medical benefits to low-income persons. 42 U.S.C.A. § 1396 (2003). The federal agency that administers the Medicaid program and promulgates implementing regulations is contained within the United States Department of Health and Human Services (USDHHS). In order to receive federal dollars under the Medicaid program, Maine is required, as are all states, to designate a single state agency to administer the state Medicaid program. 42 U.S.C.A. § 1396a(a)(5).

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Bluebook (online)
2005 ME 58, 871 A.2d 1237, 2005 Me. LEXIS 61, Counsel Stack Legal Research, https://law.counselstack.com/opinion/profit-recovery-group-usa-inc-v-commissioner-department-of-me-2005.