Jury faults state for failed bid to overhaul Medicaid software

A defunct software company won more than $23 million against the state of Missouri at the conclusion of a month-long trial in Cole County.

A jury on Aug. 11 awarded $18.9 million in actual damages to EngagePoint Inc. on claims that state officials failed to pay for the work it had done overhauling the Department of Social Services’ computer system for federal eligibility and benefits programs. Prior to the verdict, Judge Jon Beetem held that the company was owed another $4.1 million as a matter of law.

According to the lawsuit filed in 2016, the case involved “the State’s Machiavellian attempts to not only avoid payment on this claim, but to outright destroy the contractor.” As a result of its treatment on the project, EngagePoint said it has gone out of business, and its assets are now held by another company, HHS Technology Group Holdings.

The plaintiffs had asked the jury to award as much as $36 million in unpaid work. Ken Barnes of the Barnes Law Firm in Kansas City, who represented EngagePoint, said he was gratified that the jury went through the alleged damages line by line in determining its award.

“I feel like they did their best to provide what was owed under the law based on what we could prove,” he said. Jury selection began July 7, and Barnes said the court often worked into the evening.

“They worked their tails off to try this case,” he said.

The jury also rejected a counterclaim by the state alleging that EngagePoint had repeatedly failed to deliver on its contractual requirements, which it said forced state employees to craft labor-intensive work-arounds that brought operations “to the brink of dysfunction.” The counterclaim alleges the state suffered $82.3 million in damages, but by the time of trial it had sought nominal damages.

Chuck Hatfield of Stinson in Jefferson City, who defended EngagePoint from the counterclaim, said the case reaffirms that the state must treat its contractors fairly.

“The State regularly takes a hard line with contractors, invoking sovereign immunity to protect itself from otherwise valid claims,” he said. “This decision should make them think twice about refusing to negotiate in the face of cost overruns that are not the fault of the contractor.”

Chris Nuelle, a spokesman for the attorney general’s office, said an appeal was planned but otherwise declined to comment. 

The case has now been litigated under three attorney general administrations. In 2013, EngagePoint was the successful bidder in a $147 million contract to overhaul MEDES, the eligibility, enrollment and case management system that the Department of Social Services uses for Medicaid and the Children’s Health Insurance Program.

EngagePoint’s suit alleges that the project required a series of cost adjustments and unforeseen work, mostly because of Cúram, a social program management software program owned by IBM. EngagePoint alleged the software was “unstable and not functionally ready to support MEDES.”

Although EngagePoint says that it was still able to meet many of the key deadlines in the contract, state officials terminated its contract on May 18, 2015 — just after the adjournment of the legislative session — and turned the project over to IBM on an emergency basis.   

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$23 million verdict 

Contracts 

Breakdown: $18,945,341 jury verdict for actual damages, $4,097,000 directed verdict on withheld funds. Net judgment of $23,042,341 

Venue: Cole County Circuit Court 

Case Number/Date: 16AC-CC00335/Aug. 11, 2022 

Judge: Jon Beetem 

Caption: HHS Technology Group Holdings LLC v. State of Missouri 

Plaintiffs’ Attorneys: Ken Barnes, Barnes Law Firm, Kansas City (for plaintiff claims); Chuck Hatfield, Stinson, Jefferson City; Julian Dayal, Shawn Taylor, Clarissa Medrano and Elpitha Lambros, Akerman LLP, Chicago (for counterclaim defense) 

Defendant’s Attorneys: Natalie Warner and Peter Houser, Missouri Attorney General’s Office, Jefferson City