Monarch Fire Protection District of St. Louis County v. Freedom Consulting & Auditing Services, Inc.
2011 U.S. App. LEXIS 13775
| 8th Cir. | 2011Background
- Monarch hired Freedom to audit its self-funded health plan after union concerns about an allegedly illegal non-covered procedure.
- HIPAA and a Business Associate Agreement required Freedom to safeguard PHI and restricted disclosure.
- Indellicati conducted the audit; Privileged Supplement contained PHI and was shared with Firefighter Union attorneys.
- Union attorneys disclosed the Privileged Supplement to law enforcement, triggering a criminal investigation; Freedom handed over audit materials per the BAA subpoena.
- Monarch sued for breach of contract, conversion, and a mandatory injunction seeking return of PHI; Freedom, Indellicati, and Turner moved for summary judgment.
- District court granted Monarch summary judgment on breach of contract, ruled against Monarch on conversion, and limited sanctions and fees; injunction compelled return of PHI; many sanctions motions were moot on trial resolution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Conversion viability | Monarch had rightful possession; Freedom improperly retained PHI. | Freedom merely retained copies; Monarch retained access to documents. | Conversion claim fails as a matter of law. |
| Indemnity clause and attorneys’ fees | Indemnity clause covers Monarch’s fees incurred in contract enforcement and responding to the investigation. | Indemnity does not expressly cover inter-party litigation and thus excludes Monarch’s fees. | Indemnity does not expressly cover inter-party litigation; fees not recoverable. |
| Sanctions | Indellicati’s destruction of a hard drive warrants sanctions. | District court acted within discretion; no clear error in sanctions posture. | District court did not abuse discretion; sanctions ruling affirmed. |
| Punitive damages and injunctive relief | Punitive damages supported by breach; injunctive relief necessary to compel return of PHI. | Punitive damages moot due to converted claims; injunction already granted. | Punitive damages moot; injunctive relief upheld. |
Key Cases Cited
- Riley v. L.J. Schuster Co., 844 S.W.2d 521 (Mo.Ct.App.1992) (copy cannot be converted absent loss of possession)
- JEP Enters., Inc. v. Wehrenberg, Inc., 42 S.W.3d 773 (Mo.Ct.App.2001) (possession requirement for conversion)
- Nusbaum v. City of Kansas City, 100 S.W.3d 101 (Mo.banc 2003) (indemnity-fee recovery requires express language enforcing the indemnity right)
- Lee v. Investors Title Co., 241 S.W.3d 366 (Mo.Ct.App.2007) (indemnity expressly for enforcing rights may trigger fees)
- RJF Int’l Corp. v. B.F. Goodrich Co., 880 S.W.2d 366 (Mo.Ct.App.1994) (indemnity clause authorizing inter-party expenses recognized)
- Fortune Southfield Co. v. Kroger Co., 931 F.2d 1282 (8th Cir.1991) (inter-party fee shifting under similar indemnity clause)
- Praetorian Ins. Co. v. Site Inspection, LLC, 604 F.3d 509 (8th Cir.2010) (indemnity provisions may shift fees in inter-party litigation)
- Beard v. Beard, 723 S.W.2d 542 (Mo.Ct.App.1987) (broad interpretation of arising out of)
- Dunn Indus. Grp., Inc. v. City of Sugar Creek, 112 S.W.3d 421 (Mo.banc 2003) (cardinal contract-interpretation principle)