Missouri Consolidated Health Care Plan v. Community Health Plan

order, and, m starting proper 180-day time limitation for motion was context, trial, and, disquali interpreting the Rule 32.07 cases that narrow duty swearing judge, of a trial the court’s start of trial meant the fication Cella, Act to State v. only the venire. has that was sustain motion. Not 543, 550 State accompany- (Mo.App.1998); S.W.2d gutted, been but also 385, (Mo.App. majority Boyd, v. 927 S.W.2d ing upon by cases relied Bonacker, 1996); Act con- ex rel. v. inapposite Mountjoy are State because 241, 244 (Mo.App.1992); for the State templated time specific (Mo. Hornbuckle, The Rules State to start a trial. v. contemplate App.1988). action on the immediate judge ruling of the on part trial Defendant’s trial was not counsel change request. of venue pre-trial who same counsel initiated 3) majority there is The reasons There motion several months earlier. in a potential prejudice less for case; no sandbagging seems to be statutory change venue based on rather, the mo- appears everyone missed cause, than and cites right based on It a small change tion for venue. is right proposition cases for until the say no occurs price waiver change of can be waived. venue I would put jeopardy. defendant speculate This court about should remand. reverse and where “potential prejudice” JJ„ SMITH, ELLIS, HOWARD and necessary requirement rule-based with dissent. judge concur immediacy part ignored. defen- quibble There can be no that the could change motion for of venue

dant’s supportable

have been waived. There is language that the in Rule 32.03

argument MISSOURI CONSOLIDATED prosecutor the onus on or puts PLAN, Ap HEALTH CARE defendant as to judge trial confront the pellant/Cross-Respondent, I argue this live issue. would put time to have the defendant’s proper having feet to the fire on his motion PLAN, HEALTH COMMUNITY upon prior have been been ruled would Respondent/Cross- read jury. the sworn If 32.08 is seating of Appellant. alone, a dual re- because this was indeed 59076. Nos. WD WD nothing place there quest, then the mo- the time the defendant renewed Appeals, Missouri Court of does, him, now apprise as this court tion to Western District. that, change he for a also asked March 2002. had under he lost the he

judge, protection Transfer Rehearing Motion and/or 32.03. 28,May 2002. Court Denied Supreme here, matter real no only issue for Transfer Denied Application a waiver of applies, which rule is when Aug. To change of venue occurred. right on au arbitrary time based pick now portions long-extinct

thority interpreting trial is unfair. speedy statute

ployees public and other entities Mis- souri. Community began experi- When encing substantial financial losses under the MCHCP contract and when MCHCP refused to allow to increase premiums, Community decided to large portion eliminate a provider of its network employees. for state responded by filing this action declar- relief, atory specific performance, and in- junctive Community relief. filed counter- claims for fraudulent representation, nondisclosure, negligent fraudulent non- disclosure, mistake, unilateral breach of contract, duty and breach of good faith dealing. and fair MCHCP filed motions for judgment on the pleadings summary judgment, and for asserting that sovereign immunity barred Community’s claims for fraudulent repre- sentation, nondisclosure, fraudulent and negligent Although nondisclosure. the cir- cuit agreed that MCHCP was enti- sovereign tled to immunity, it concluded that it would consider claims for representation, fraudulent fraudulent nondisclosure, negligent and nondisclosure as contract claims than rather as tort claims. The circuit court also determined legal by issues raised Communi- ty’s counterclaims would be to a jury tried and that equitable by issues raised and Community MCHCP would be taken with the case to be jury’s decided after the Greiman, Louis, Gerald P. St. Eugene G. verdict. Bushmann, Jefferson City, Appel- for that, jury The determined before Com- lant/Cross-Respondent. munity response bid in to MCHCP’s re- Boulware, R. Dan Joseph, Johnny St. K. 1995, 1996, quests in propos- 1997 for Richardson, Jefferson City, Respon- provide als to health benefits to MCHCP dent/Cross-Appellant. members, falsely represented Community that historical and uti- claims SPINDEN,

PAUL M. Chief Judge. lization proposed data on the insured Plan, Health a health main- group was jury not available. The also organization, tenance contracted with Mis- determined that im- MCHCP breached an souri Consolidated Health Care Plan to plied covenant of faith and fair deal- provide (RFP) health care benefits for ing request state em- in the 1997 proposal contracts to resolve give Community a der the current refusing beyond price pertaining damages

rate increase the consumer matters suffered (CPI) jury under contracts since cap. [Community] index awarded $14.5 jurisdic- million to on these claims. It also April 2000.” retained jury on pertaining found for MCHCP Communi- tion to matters consider have ty’s claims that it should received injunctive granted by judgment. relief court, however, rate under the and 1996 increases The circuit determined cap. RFP in excess of CPI contracts and that just required delay that no reason verdict, jury’s In accordance with they parties proceed could “as circuit court for Com- entered appropriate.” MCHCP deem[ed] munity and stated that would bear inter- Community appeals. filed cross percent est at nine costs would be Warranty Ex Contractu Breach of against

assessed MCHCP. appeal, first point entry After the jury’s verdict the circuit court erred contends court determined the judgment, the circuit motions for verdict denying its directed equitable It remaining issues. entered a notwithstanding the ver- judgment and for permanent injunction prohibiting Commu- dict did not make because nity reducing provider network warranty case on its breach of submissible and from not its contractual performing that ex claims. asserts contractu MCHCP obligations with It also conclud- MCHCP. court could not recast Commu- circuit that, ed because affirmed the as breach nity’s misrepresentation claims by submitting its for dam- contracts claims warranty ex contractu claims warranty under ex con- ages breach that did not establish evidence action, Community tractu abandoned its positive representation MCHCP made a claims and affirmative defenses that Community relied. MCHCP upon which sought the contracts. The disaffirm Community’s argues misrepresenta- circuit found: tion were tort claims barred claims at its right, option, MCHCP has the sole immunity. sovereign 1996 RFP to extend the 1995 and Con- year tracts for four additional one up to reviewing circuit court’s In RFP periods and to extend 1997 motion for directed denial of MCHCP’s up to two additional one Contract for notwithstanding judgment verdict and however, year periods, provided, verdict, must determine whether Com we mutually agree- parties establish Spring case. munity made submissible rate If a rate is not so (price). able Au Transportation Area City v. Kansas established, [Community] terminate 224, (Mo. banc thority, 225 873 S.W.2d days writ- the contracts advance upon 1994). determination, we making this notice. ten in review evidence all reasonable The circuit court also decided light in the most favorable ferences funds, were segregated which contrary evi disregard jury’s verdict bond, injunction and set aside in lieu of University, v. St. Louis dence. Nemani segregated. should continue to remain (Mo. 2000), 184, cert. banc 33 S.W.3d 1623, denied, 981, 121 S.Ct. further announced that 532 U.S. The circuit court (2001). Whether evidence L.Ed.2d 485 jurisdiction “to resolve retaining it was whether the inferences substantial and pertaining matters establishment questions are it are reasonable coverage un- drawn from (price) the rate of continued Inc., of law. Simpson Indopco, character, promise concerning 18 te a — 470, willWe quality subject and nature of the contract’s reverse on the basis that insuffi matter. such “nar Because issues are a supported cient evidence jury’s verdict law,” body row niche in the vast of case “only where there is a complete absence of that, recognized Ideker court to allow a probative support jury’s fact to conclu cause of warranty action breach of ex sion.” Giddens v. Kansas Southern contractu, courts had to reconcile the Railway 813, Company, 29 S.W.3d 818 cause of countervailing action two (Mo. 2000), denied, 990, banc cert. 532 U.S. principles: 1644, (2001). 121 S.Ct. 149 L.Ed.2d 502 being damages The first that since were When reasonable minds can differ on a sought connection with per- work question put a jury, this court should formed on public project under a con- jury’s not disturb the verdict. Washing governmental tract with a entity, ton v. Hospital, Barnes party hable, sought to be held the doc- (Mo. 1995). banc sovereign trine of immunity precluded a (fraudulent claims, cause of action misrepresentation ex delicto as submitted to the jury, misrepresentation). asserted being breach second ex contractu. Community well established principle of contract law, averred that falsely represented finding clarity expression to it that historical claims and utilization Spearin, United States v. 248 U.S. information1 on proposed 59, 61, (1918), insured 39 S.Ct. 63 L.Ed. 166 group was not available to it before it bid that when agrees one to do a thing on the 1996 and 1997 RFP contracts possible of performance “he will not be and that such representations were mate- excused or become entitled to additional rial to Community that, its bids. contends compensation because unforeseen diffi- information, had it had this its bids would culties are encountered.” have been higher, and higher bids would decision, Id. at In a later Judge generated have more revenues from the Ideker, Somerville, Ronald author MCHCP contracts. admonished: theory of recovery identified with

To against recover a governmen Ideker, Inc. v. entity Highway tal Missouri State for breach warranty ex con- tractu, Commission ... a contractor was never intended to must establish that the be a governmental panacea every successful entity made bidder positive repre a false, sentation of material whose costs overrun the price. fact that bid Hence, that the the emphasis upon positive contractor did not know repre false, representation sentation was and that he material fact sustained damages governmental entity as direct result of misrepre which is false or Ideker, sentations and his reliance on it. incorrect and relied upon by a contrac- Otherwise, Inc. v. Missouri State Highway Commis tor. theory this innovative sion, 654 S.W.2d recovery could never be reconciled The cause of action focuses on a warran with the principle well-established ty form guarantee synonymous law, finding clarity of expres- —a tions, 1. The claims information was a list average length hospital of claims of their period. their cost for a certain The uti- stays, pharmaceutical and their use of ser- lization information was the number of claim- vices. consultations, hospitalíza- ants' medical their alleged Meyer that Spearin, Community director. sion United States 132, 136, 59, 61, pre-bid 63 L.Ed. that during 39 S.Ct. said conferences U.S. (1918), that to do agrees when one was not claims and utilization information “he will thing possible performance jury, the cir- instructing available. be excused entitled or become misrep- hypothesized alleged cuit court compensation, “[Pjrior un- additional resentation: foreseen difficulties are encountered.” RFP bidding on the ... Con- Health[’s] tract, represented to Communi- [MCHCP] and Heat Company Plumbing Sanders utiliza- Health that historical claims and Independence, ty Inc. v. ing, (Somer group on the insured (Mo.App.1985) proposed 850-51 tion data S.W.2d ville, J., dissenting). acknowl- available[.]” was not MCHCP possess that it did the information. edges informing asserts that its Com- claims and uti- munity its historical infor- representation that Meyer’s insured proposed lization data on the a positive mation was not available was not positive not a group was not available was representation. representation therefore, Community did representation; subject interpreta- ambiguous, varying on its breach not make submissible case tions, and, most, implied rep- it was an warranty ex claims. contractu We implied It resentation. have agree. information, possess did not bright line is drawn between “[A] reason- person no business could have but representations or ‘affirmative’ ‘positive’ positive ably the statement as taken representations degree a lesser not have MCHCP did representation A merely implied suggestive. are or which sugges- As or implied the information. an ‘positive’ representation or ‘affirmative’ one—it representation positive tive a—not representation distinguishes actionable for a sub- satisfy requirements did sug or merely implied one which is warranty as to case of breach of missible Ideker, at 624 n. 3 gestive.” nature of the contract that Too, original). Supreme (emphasis to undertake. agreed “[t]here has instructed that a Court court, and a representation between a distinction Schme recognize that this We not, strictly A warranty. representation is Inc. v. Mis lig Company, Construction contract, part a or the speaking, Commission, of Highway souri State it, something collat but rather essence suggests (Mo.App.1976), S.W.2d nature of an and preliminary, eral or that, requests if a contractor dictum it, warranty a enters inducement while governmen information possessed by the contract it forms a part into and project govern and the entity tal about Broth the United Lodge self.” Grand that infor entity does furnish mental Mys Friendship and Sisters ers mation, cause of have a the contractor Bonding Ten v. and terious Massachusetts plans warranty for breach of action 938, 25 324 Mo. Company, Insurance con reaching In specifications. and (Mo. 1930). 783, 787 banc S.W.2d however, clusion, court relied Schmelig Palmberg, v. Walla Port District posi- made a on Walla asserting In that (9th Cir.1960). Schmelig, 543 F.2d 237 Community does not 280 representation, tive Wal at 267. Its reliance on Walla of warran- any misrepresentations S.W.2d point because, the federal misplaced la was but to statements ty within RFPs noted, im involved an Walla Walla executive Meyer, Ron MCHCP’s made plied representation, not a positive repre closed to all [the contractor] relevant infor sentation. knowledge possession mation and in its concerning subsoil at conditions.” Id. Walla, port Walla request- district added). (emphasis ed bids for a construction project. Before bid, submitting a a contractor asked the implied The law Missouri is that consulting engineer about the subsoil con- representations are not sufficient. The ditions the area dredged to be representation positive give must be specifically requested copy report Ideker, to a rise cause of action. firm submitted of soil engineers about 617; at Cargo S.W.2d St. Louis Air Ser the condition of the soil and borings vices, Louis, Inc. City St. 929 S.W.2d made, which were general shown on the 821 plan. consulting The engineer responded report available, that the readily “was not More importantly, represen- even if the but that it did provide any additional positive, tation had been it did not concern information that helpful, would be and that Meyer a material fact. did not make a all essentially plans, and that warranty character, concerning quality he had no knowledge further that would be or nature subject contract’s matter. helpful to in submitting [the contractor] a His statement did not cause bid.” 280 F.2d at 237. believe that its contractual duties were different than those described in the project’s

The specifications said that the RFPs. Community does not assert subsoil in the dredging area anticipat- anything within bidding documents sand, ed to be silt gravel. and fine and RFPs any positive contained or affir- specifications, however, instructed that the representations mative that were false. expected bidders were to examine the site and to study the records of “three churn Typically in cases dealing with breach of drill holes located on the ... drawings contractu, governmental ex en information available the office of the tity positive made the representation in a Engineer[.]” Id. at 243. port district project’s plans specifications. See conceded that the drill holes soil Massman Construction Company v. Mis report did not disclose presence souri Highways Transportation Com rocks and boulders the subsoil. mission, 31 S.W.3d 109 (Mo.App.2000);

The evidence established the con Contracting Unnerstall Company, Limit sulting engineer Salem, knew that the subsoil con ed v. 1 (Mo.App. Sanders, tained substantial quantity 1997); 841; boulders Idek er, and rocks. The contractor specifically 617; Annotation, 654 S.W.2d at see also engineer asked the whether any Right he had Public Contractor to Allowance subsoil, information about the but engi the Expense Extra Over What Would Have neer did not disclose what he knew. Necessary The Been Conditions Had Been if said, “[T]here the element of supe Represented by as the Specifi Plans and cations, (1932). rior knowledge part on the port of [the 76 A.L.R. 268 In these conditions, cases, as to district] the subsoil and contractors found commencing after the failure to knowledge disclose such or representations work that made the the means of knowledge plans the specifications [contrac and were and false tor].” Id. at 245. The court determined that they would incur additional costs be port the district “implied made an representations. cause of the false As the representation ... it fully had dis explained: Ideker court cover- might provide cost the bidders to

Syllogistically, governmental where a age prospective to the insureds. entity positive representation makes fact a contrac- upon a material relied af- positive ... no or MCHCP made bid, calculating out tor in which turns representation firmative to the bidders or after work is to be false incorrect much utilization as to how or how little ex- commenced and occasions additional prospective might have. the insureds himself pense, contractor finds af- positive ... or MCHCP made no one one con- position of who undertakes how the representation firmative as to performance tract but is confronted might utilization cost or for its members entity, governmental of another. The compare to the bidders’ other business. gets the benefit pragmatically speaking, [Community] challenged the has not performance another If contract. conditions, terms, accuracy any of the more thereof the contractor entails any of the specifications and set forth than in submit- expense was calculated attachments, proposals, for requests bid, entity ting governmental for or thereto amendments clarification than should bear the added cost rather (1995, respective years any of contractor the former is the 1997). and beneficiary necessary but unbar- that Com- The circuit court also concluded posi- work from its gained resulting for the risk munity had to assume contracted a material fact representation tive medical to MCHCP’s providing benefits which turned out to be false or incorrect. members. original). (emphasis 654 S.W.2d at 621 heavily Louis Community relies on St. Services, City St. Cargo Air Inc. v. Ideker, con- highway construction Louis, as a (Mo.App.1996), commission highway tractor sued claim. a claim to its involving case identical contractu on the warranty breach of ex nego- officials Cargo, city In St. Louis Air required perform that it was ground for the Cargo Air tiated with St. Louis bargain. for which it did not cargo operation of an air construction upon by the specifications relied plans International facility at Lambert Louis St. a “bal- project described the contractor that, if Airport. represented officials any job” provide anced did not build, finance, Cargo Air St. Louis would Upon disposal Id. at 619. waste areas. city would operate facility, work, the contractor commencing all of Lambert’s centralize and consolidate balanced, that job found that the was not facility. new cargo air activities waste, and job required dispose concerning representation Id. at it would incur additional costs. character, nature quality or perfor- changed This the contractor’s Cargo Air facility to built. Louis St. mance. agreement into a written lease entered case, any not make In our MCHCP did of land and city to acres with the lease 30 any- in the RFPs —or representations An exhibit facility. to construct much work Com- else—-about how where as ten- air carriers cargo showed all lease how or munity perform would have to facility. Cargo’s Air new of St. Louis ants Indeed, the it incur. expense might much the facili- completed the contractor When found: circuit court air all of the not ty, city did consolidate had been facility into cargo or af- carriers positive ... made no to other tenants and allowed promised as to what it representation firmative compete Cargo. with Louis Air St. as tenants. St. each carrier Plans city, drawings incorporated which are into Cargo asserting Louis Air sued the an the contract also constitute actionable warranty claim for breach ex contractu Ideker, supra. upon city’s representation. See representation. based false city The motion summary judg- filed a Id. at The reversed the circuit argued ment and Air Cargo St. Louis summary judgment court’s and found that did not establish that the expressly lease Cargo Louis Air had cause St. of action positive representation made a of a materi- against for breach of ex city al regarding fact the consolidation of air contractu. The cargo service. circuit court granted Community’s contention that the claim city’s summary motion for judgment, Cargo St. Louis identical Air is Cargo St. Louis Air appealed. city claim is Had wrong. told contractor that it could tell it not how the appeal,

On this court’s Eastern District city air going cargo use the facili- determined that the city had made an “ac- ty it would have bid without representation:” tionable —that knowing this information —the claims A positive or representation affirmative misrepre- would be identical. Instead distinguishes an representa actionable senting to the contractor it did not tion from one merely which is or implied any have information air about how the [Ideker, suggestive. 624]. S.W.2d at used, cargo facility was to be it misled representation can be words or oth city’s contractor about the use of intended er conduct amounting to an assertion it. The city’s contractor factored the truth, accordance with the or a promises concerning into its calculations statement made to deceive or mislead. debt service and return on investment. Humansville, v. City Missouri, Clark city had breached its St. warranties. [3, 4] (Mo.App. therefore, Cargo, Louis Air involved 1961). The representation is if material claim identical to Ideker the other person reasonable impor would attach cases, plans specifications but the case tance to it in determining his choice of quite is dissimilar action in the in question. transaction claim. Id. Here, city] case, it is uncontested that In Community’s Meyer’s [the rep prior made statements execution resentations that the claims and utilization cargo of the all air at Lease that Lam- information was not did available not alter bert would consolidated into scope performed [the] work to be or of facility. new These oral statements con- by Community. benefits to be received representation. an stitute actionable with perfor faced Clark, addition, See supra. it un- is mance a contract different from the one subsequent contested that the execu- bargained for which it had for. Nor was it Lease, city] tion of made repre- [the confronted with unfulfilled benefit or that all air at cargo handling expectation upon sentations RFP based contracts. Lambert would be into Community’s consolidated contract performance re facility. Furthermore, new [the] mained the same: to provide health care uncontested that exhibit B to Although the Lease benefits to MCHCP members. all air cargo shows at of providing carriers the costs those benefits parked facility Lambert have been more than what Community [the new] specific storage nothing within the space expected, allotted RFP con- second, and, making any by not rate within the statements nothing tracts and the soil conditions representations the claims and as to by Meyer Ron that made by truly putting not available information was and the like and utilization be or to do what those costs would the contractors represented upon entire burden oum, Community expect investigations. could pre-bidding what benefits their receive. Sanders, add- (emphasis at 847 694 S.W.2d estab- important Unnerstall, was evidence

Equally at 8. ed); see also access from Community that had lishing essence, did. this is what MCHCP it to the information other sources can be no breach there promise, Without and utilization data sought. Claims representa- no MCHCP made promise. RFP. included MCHCP’s Community might it cost what tions about RFP to Com- the 1994 MCHCP submitted in- prospective to the coverage provide Moreover, corporation. munity’s parent uti- sureds, much or how little about how utilization data was included claims and might prospective insureds lization Community reports. annual MCHCP’s have, the cost or utilization about how by “hamstrung” certainly was not as other bid- might compare to its members the information di- making MCHCP’s Indeed, way chal- Community in no ders. claims. to it as it rectly available of the terms accuracy any lenges the the RFPs. and conditions Moreover, make did not contract, was the informa- warranty about more Community That desired Cargo. Air case in Ideker and St. Louis its bid is making before from MCHCP tion merely no information provided understandable, Community points to but Community was advised Community. that MCHCP that establishes nothing only that “the official in all of the RFPs war- misrepresentation or positive amade position which is that position MCHCP fact. MCHCP’s ranty a material about by MCHCP writing and issued is stated or even produce failure to information any amend Request Proposal as a of the informa- availability lying about the com other means of war- ments thereto. No to a breach of be likened tion cannot written, munication, shall Community whether oral or If ranty under a contract. or official re construed as a formal had be information that insufficient believed Implied represen or statement.” sponse obligation no it was under provided, been by bids, such “boiler negated Community tations placed to bid. Because a contrac which disclaim provisions,” obviously felt it had plate any representations respond tor’s reliance information to enough Ideker, Moreover, entity. governmental formulate its bid. RFPs and to specifi n. This court has at 624 assertion that logic no we discern entities governmental cally recognized that its bid reliance Community submitted alleged misrep liability for that the claims and telling can best avoid on MCHCP’s any represen making by not not available. Com- history resentations utilization at all: utiliza- tations that the claims and munity insists making history was material tion charge public project those [I]f bid, a bid know- Community submitted but posi- question eliminate [the wish to information. it did not have this ing that any disputes representation] tive contractors, representation in Whether MCHCP’s they may do so with their was true not available first, information was advance, making very sure that not as material make are accu- or false was they any representations

45 now a regard granting any beyond as it contends because it submitted increases anyway. cap. bid to MCHCP

We, therefore, conclude that the circuit pronounced Supreme Court has The denying court erred MCHCP’s motions implies that “Missouri a covenant of law judgment for directed verdict and not- good every faith and fair con dealing withstanding verdict Community’s on Cooperative, tract.” Farmers’ Electric of breach ex claims. contractu Department Inc. v. Missouri Correc of (Mo. did make a submissible tions, 266, 977 S.W.2d 271 banc support case 1998).3 such claim.2 Although recognizes MCHCP duty good dealing faith and fair contract, implied every it asserts that Breach of Covenant Good will implied covenant inserted into Dealing Faith Fair the parties expressly contract where MCHCP also contends that the circuit in their agree address matter issue denying erred its motions for di- Plaza, ment. See Inc. v. Kro Crestwood verdict judgment rected and for notwith- 93, ger Company, (Mo.App. 520 S.W.2d 98 standing in regard the verdict to Commu- 1974), Savings and Conservative Federal nity’s claim for breach of the covenant Warnecke, and Loan v. Association 324 good faith and fair dealing in connection 471, (Mo.App.1959). 479 with jury the 1997 RFP contract. The de- that, argues merely if conduct consisted termined MCHCP breached the cove- right of actions it had which to take good nant of faith and fair dealing within the discretion conferred the con 1997 by refusing RFP contract give tract, conduct cannot be deemed Community a premium rate increase be- breach of good the covenant of faith and yond cap. argues, the CPI how- true, fair dealing. according This is ever, grant that its failure to a premium MCHCP, irrespective of whether it acted rate increase cap above contractual faith, in good faith or in its own bad self- cannot a breach constitute of the covenant interest. faith good and fair dealing because the granted contract 1997 provided: unfettered discretion in RFP contract conclusion, held, 2. we Because reach this principle we need “It is a fundamental and con- not address MCHCP's contentions that Com- agreements 'Every comitant that: contract munity did not make a submissible case as to imposes upon party duty each faith damages claims, regard misrepresentation to its dealing performance and fair in its and en- jury's misrepre- award on (Second) forcement.' Restatement of Con- supported by sentation claims was not sub- (1981). duty prevents § tracts 205 That one evidence, stantial and that the circuit court party exercise giving erred in Verdict Form onA Communi- express agreement conferred terms ty's misrepresentation together claims of spirit in such manner as to evade the of the Verdict Form B on claims deny party or as to other transaction so express implied breach contract. expected of the benefit contract. 1A Cor- Summers, (1963); § bin on Contracts 165 making pronouncement, In the Su- Duty Recogni- Good Mills, General Faith —Its preme Court relied on Slone Purina v. Inc., Conceptualization, tion and 67 Cornell L.Rev. (Mo.App.1996), 927 S.W.2d (1982).” seq. By relying et had on Mar- Corpora- which relied Morton v. Hearst tion, (Mo.App.1989), progeny, tin and its we that the conclude which, turn, silentio, relied on Martin Prier Brass Supreme adopted, Court has sub Manufacturing Company, 710 S.W.2d § Restatement. Martin, this court Any price request require give for a increase must be not Brass Prier to notice to its concerning by employees termination of cov- supported documentation adverse experience erage, plan gave other and the Prier Brass “the any claims such and/or addition, justification. authority to Plan and to In such construe the de- prices questions under termine all that arise it.” subject shall to extension terms be CPI) duty finding good In that a faith and to negotiation (up the medical be- dealing required fair under the con- tween to the con- parties MCHCP and tract, this court held: All requests tract. renewal shall be percentage equal at a capped to ... Prier Brass was bound to exercise change component power the medical of the by conferred contract as April Urban Price Index for of the terms arbiter interpreter Consumer an[d] However, year. “all questions each rates arise under [the do, good Plan]” faith. It will not as increased over CPI at dis- cap argument, Prier Brass to cretion of the Board of Trust- intimates MCHCP consideration, employees] bind to a construction of [the ees. To receive this the employer the contract that allows to provide contractor must substantial evi- cancel the un- employees benefits of a significant dence adverse financial Plan, prior der the and to do so without regard condition in to this contract and notice, merely because Prier Brass pay for an data aby repu- audit such reads the contract to that The effect.... qualified party table and third to be express empowered Plan Prier Brass as by selected MCHCP. the exclusive determinant of the benefits MCHCP asserts that is at- employees ... due the under con- tempting implied to use covenant of deny expectations tract. To them those good dealing impose faith and fair merely without notice because Prier independent obligation on MCHCP —to due, reads that notice is not Brass grant rate premium increases above vested, only impairs rights already but cap is not found in the express CPI —that duty also the of good faith. agreement. terms of the 473; Id. at see also Environmental Protec- obligations, MCHCP misunderstands its tion, Consulting, Inc. v. Inspection, however, duty good faith regard City, Kansas 366 duty dealing. impose and fair This did (Mo.App.2000). obligation premi on to grant MCHCP an The case. The 1997 same true this In cap. um rate above the increases CPI granted RFP contract discretion to deed, gave the contract MCHCP’s board of determine whether Communi- to grant trustees discretion whether increase; given a ty should be rate howev- however, duty, The such increases. did er, MCHCP was bound exercise obligation to impose on MCHCP an exer good faith. discretion discretionary power cise the conferred faith, good the contract in To establish breach of cove duty in Martin v. Prier found such a dealing, nant of faith and fair Com Manufacturing Company, Bras s munity’s was to establish that burden S.W.2d conferred exercised Martin, express agreement terms of the plaintiffs brought claim Brass, spirit Prier after such manner as evade against employer, their deny Community plan health transaction or so employee it modified with- Ko plan expected did of the contract. employees. out to its benefit notice ger directing Insurance in- Company, cap. the CPI verdict Hartford Life S.W.3d Mar (Mo.App.2000); struction claims said: tin, 710 473. The comments to Your must be verdict § (Second) Restatement of Contracts you Health if believe: instruct: First, Community Health requested “good phrase faith” is used in a price over the CPI for cal- cap increase contexts, variety of and meaning var- year supported by endar documen- ies somewhat with the context. Good tation of and experience adverse claims performance faith or enforcement of a provided signif- substantial evidence of emphasizes contract faithfulness to an icant financial adverse condition re- agreed purpose consistency common and Contract, gard to the 1997 RFP and justified with the expectations of the Second, did not Missouri Consolidated other it party; variety excludes a of give Community Health in- premium types of conduct characterized as involv- crease cap over the CPI for the calendar ing they “bad faith” because violate com- 1999; year and munity decency, standards of fairness Third, by engaging the conduct de- and reasonableness.... Second, scribed in paragraph Missouri not cooperate Consolidated did ... Subterfuges and evasions violate Community perfor- Health to enable obligation good of in perfor- faith mance and the achievement of the ex- though mance even the actor believes pected benefits, and justified. his conduct to be But Fourth, Community Health was there- obligation goes may further: faith bad by damaged. inaction,

be overt or consist of and may require fair dealing than hon- more give MCHCP’s to Community refusal esty. complete A catalogue types of premium cap over the did increase CPI impossible, bad faith following but the not, itself, in and of establish breach types among are those which have been duty faith good dealing. and fair judicial recognized decisions: evasion gave This is because spirit of the bargain, lack of dili- MCHCP’s board trustees discretion gence off, slacking and willful rendering premium determine whether a increase of imperfect performance, abuse of a would be allowed. To breach establish a power terms, specify and interference of good covenant faith fair with or failure to cooperate the other Community dealing, pres- obligated party’s performance. ent evidence that MCHCP exercised its (1981). way Section discretion in such a cmts. and d that evaded spirit of the contract. however, Community, did not that, make a submissible case that MCHCP ex Community January asserts ercised its Meyer discretion such a manner as it requested met with spirit to evade percent RFP con Community rate increase. sub- tract or to deny Community so as the mitted documentation of its substantial expected Mey- benefit the contract. Commu through losses advised MCHCP nity that, essentially increase, tried its might breach cove er without a rate it nant good faith and dealing by fair have to close business and declare focusing exclusively on bankruptcy. MCHCP’s refusal board of trustees MCHCP’s permit it to increase its premiums premi- over allowed to increase its dealing. fair ner faith and cap, contrary percent

urns three based the CPI cap. no such evidence. Community presented it denied increase over the CPI but it that left discretion Community says that MCHCP told When a decision is mismanage- question its losses the result of whether the party, were one is not high to high ment due medical costs and decision but party made an erroneous Community disa- administrative costs. made bad whether the decision was persisted in its that its greed arbitrary belief so as capricious faith or was or inadequate premium losses resulted from abuse of Mac to amount to an discretion. that, rates. asserts Dougald Company v. State Construction of adverse claims submitted documentation Ga.App. Highway Department, substantial evi- experience provided (1972); v. Mc Dayan 188 S.E.2d financial of a adverse significant dence Ill.App.3d Corporation, Donald’s condition, implied (1984). breached its MCHCP 466 N.E.2d 81 Ill.Dec. by and fair dealing covenant of faith good we Community’s argument, If we accepted premiums in- granting requested for holding liable would be MCHCP much crease. MCHCP makes too While faith and good breach of the covenant of contract, of the discretion element because, solely according to dealing fair Community little of it. makes too Community, wrong de MCHCP made giving Community premium cision in discretion, con-

By granting them That cap. rate over increase the CPI to granted power tract trustees the increase in Community did not receive an Community’s request pre- no to for a say however, not convert premiums, its does cap, mium the CPI notwith- increase over deny to exercise of its discretion MCHCP’s standing Community’s providing “sub- into a breach of such increase significant adverse stantial evidence action. regard to this con- financial condition an

tract and audit of such pay[ing] any evi- did not Community present qualified and third reputable data part faith on dence of bad MCHCP’s To party to be selected MCHCP.” deny premi- exercising its discretion to conclude would render “discre- otherwise cap. It um increase over the CPI rate spirit con- meaningless. The tion” sup- that merely relied on evidence Community into with tract that entered for a increase ported premium its claim MCHCP, therefore, contemplated that claims ex- adverse documentation deny request pre- for a MCHCP could provided substantial evidence perience and the CPI cap. mium rate increase over condition adverse financial of a significant evidence, That the contract.4 to regard of the covenant To establish a breach however, that MCHCP does not establish dealing, Community’s faith and fair good Indeed, Community faith. that acted in bad MCHCP’s was to establish burden that MCHCP concluded acknowledges in a man its discretion trustees exercised coverage expanding to Community into points to this evidence to also good region, increasing and fair Commu- establish MCHCP's lack faith western MCHCP's (1) dealing: withheld crucial claims nearly nity’s membership from 2400 information; (2) history evidence, however, and utilization does not Such members. Community’s bid initial MCHCP knew its pertain to whether exercised even knew was neces- was far than MCHCP less deny the above rate increase discretion (3) sary; that its bid MCHCP told good covenant of cap in breach CPI high submit that it would have to was too dealing. faith and fair new, bid; (4) MCHCP lured lower a new Community’s reaching agreement price. from misman- losses resulted agement high due to medical costs and The circuit court concluded: high administrative costs. We need not right, option, sole MCHCP has the its deny decide whether the decision to RFP the 1995 and 1996 Con- extend cap premium rate increase above the CPI year four one up tracts for additional pre- was erroneous. Given the evidence extend the 1997 RFP periods and to sented, Community did not make a sub- to two additional one up Contract missible case that MCHCP exercised however, year periods, provided, rate, deny in- premium discretion to mutually agree- parties establish cap crease above the CPI in breach of the rate If a is not so (price). able rate good dealing. faith fair covenant established, [Community] terminate court, therefore, deny- The circuit erred in upon days the contracts advance writ- ing MCHCP’s motions for directed verdict ten notice. judgment notwithstanding and for the ver- regard dict in claim for jury found that MCHCP breached breach the covenant of faith good dealing faith fair obligation dealing fair in connection with the 1997 by refusing Community a in- grant rate RFP contract.5 cap regard crease above the CPI in 1997 RFP contract and that MCHCP was

Retention of Jurisdiction for breach ex warranty liable of contractu for the 1996 and RFP MCHCP also that con- complains in retaining jurisdiction circuit court erred presume tracts. We that the circuit court adjudicate Community’s dam post-trial that it would recognized be inconsistent age judgment, claims. In its final jury’s require verdict to Commu- circuit court announced it re that would nity perform to continue to the contract jurisdiction tain “to per resolve matters at jury apparently a rate that the found taining damages [Communi suffered court, inadequate. The circuit there- ty] under the April contracts since fore, jurisdiction retained “to resolve mat- 2000[,] jury’s the date of the verdict.” pertaining ters establishment of the Community Because did not make a sub- coverage rate of (price) continued under its missible case on claims for breach of however, Again, the current contracts!.]” warranty ex contractu and breach of the Community make a did not sub- good covenant of faith it dealing, and fair case its for breach missible on claims of appears Community that would have warranty ex contractu and breach of the any damages arising future from its good faith and dealing, covenant fair for the circuit court claims to decide. appears the circuit court would have legal conditioning no basis for its the con- complains

MCHCP also that the circuit the parties’ court erred in tinuation the contracts on conditioning continua- price. tion the RFP upon parties’ agreeing contracts to a new Community dealing. we Because conclude that did and fair We also need not faith not make a submissible case its claim for contention that the circuit address MCHCP’s good breach the covenant of faith and fair refusing grant erred its in motions dealing, we need not address MCHCP’s con- grounds a new for a mistrial and trial on giving tention the circuit court erred in "other horribles” evi- admission directing the verdict instruction on Communi- dence. ty’s good claim for breach of the covenant Injunction relief, generally moot and Bond and Costs the case is Missouri, be dismissed.” State should that the cir MCHCP also asserts County v. Missouri ex rel. Jackson in a matter of law cuit court erred as Commission, Public Service $100,000 declining to release (Mo.App.1999). Because no live paid preliminary into the court lieu a.of concerning controversy exists whether assessing costs injunction bond and enjoined be Community should Community Because against MCHCP.6 con- breachingMts obligations under the case on its did not make submissible tracts, is moot. this issue ex claims breach contractu of the covenant of faith and breach also contends dealing, fair circuit court should denying mo the circuit court erred $100,000 posted in release the notwithstanding judgment tion for the ver and costs not be lieu bond should express claims for breach of dict on its against assessed MCHCP. and 1996 RFP con contract of Appeal Cross 72.01(b), Rule a party tracts. Pursuant to close must ask for directed verdict cross-appeal, In its all the evidence to entitled to raised several issues the event that this notwithstanding the verdict. app favor court ruled MCHCP’s Gilbert-Magill Company, 965 Manzella v. point, Community claims In its first eal.7 Commu entering that the circuit court erred move a directed verdict on nity did not permanent injunction against it. Commu trial; issue at nor did it file motion MCHCP, having nity avers that besides therefore, It, for a new trial on this issue. unclean hands in its transactions with that circuit court cannot now assert the that it would Community, did not establish denying judgment in motion for erred irreparably injunc without the harmed notwithstanding the verdict. an adequate tion and that it did not have remedy point law. This is moot because ap- on remaining As to its contentions RFP involved in case the contracts Community claims: peal, “ on case ‘[A] ended December 2000. (1) in denying circuit court erred judgment a has no is moot if rendered the Community’s motion increase controver practical upon an existent effect ” into the court be- paid bond MCHCP Missouri, ex rel. Chastain sy.’ State of $100,000 placed in MCHCP cause the City, Kansas (citation omitted). preliminary that the escrow in the event (Mo.App.1998) entered was injunction wrongfully was an event occurs that makes “When to cover Communi- grossly insufficient unnecessary or makes court’s decision ty’s losses. grant for the court to effectual impossible brief, appen- the filed motion strike reply that it with- 7. MCHCP In its MCHCP said Community’s portions the circuit court brief drew its contention and other dix $100,000 declining the erred to release in appeal. Because we rule in MCHCP’s pre- paid into the court in lieu MCHCP appeal against and rule favor on its issues on light liminary injunction in of Commu- bond Community, the issues raised in the motion $100,000 nity’s the serves admission that are strike moot. liability for cap any in- damages relating issuance of the junction. (2) The denying raising circuit court erred in the issues in the interest economy we judicial provide so that could Community’s for change judge motion circuit in event guidance court Judge ap- because Drumm’s Berhardt new the case remanded for a pointment as judge the trial case reversing trial. we circuit Because are appearance created the impropriety remanding court’s and Judge Drumm was an in- trial, case for a new we need not address sured. Community’s remaining ap- contentions on (3) denying The circuit court erred in peal. Community’s for change motion trial denying The circuit court erred County venue from Cole sub- motions for and MCHCP’s directed verdict County stantial number of Cole resi- judgment notwithstanding for the verdict dents were MCHCP insureds. regard claims for (4) The circuit denying court erred in breach of ex contractu Community’s motion to strike MCHCP breach of the covenant of faith employees insureds state from the We, therefore, fair dealing. reverse jury panel and in denying Community’s judgment. circuit court’s motions to such panelists strike during cause dire voir because those NEWTON, Judge, H. THOMAS members had an interest in the outcome concurs. litigation they in that had an LOWENSTEIN, Judge, L. HAROLD in preserving pre-

interest their current separate opinion. dissents mium rates for coverage. health care LOWENSTEIN, Judge, HAROLD L. (5) The circuit court erred in overrul- part concurring dissenting part. ing Community’s objection to testi- I. Did the Plaintiff Make Case on mony of MCHCP’s actuarial re- expert Misrepresentation Counts garding length terms Breach of Covenant of Good Faith RFP contracts because such testimony Dealing? and Fair constituted an impermissible opin- legal The central issue before the ion and invaded province jury. defendant, whether state seek- entity (6) The circuit court erred in overrul- ing bids health on insurance for state ing Community’s objection expert tes- workers, liable to plaintiff, is the Commu- timony reports Meyer and from Ron nity, materially it misrepresented regarding an alternative measure of facts Community about the contract was Community’s damages because such tes- making upon. bid evidence favor- timony impermissible expert constituted during able to the that submissions showed testimony Meyer’s that opinions and negotiations, per- the the highest ranking reports were not disclosed to Communi- deliberately son of bid- told the ty Meyer not as an qualified was figures der that no historical were avail- actuary opinions. to render such able to whether the determine former Because we found that did not holder of contract had lost made or amake submissible case on its claims for money figures. based certain bid Such breach warranty ex contractu financial information available good breach of the covenant of faith and showed that the incumbent insurer lost fair we not dealing, need consider these money price on a great sums of based bid points. In regard to most of conten- what neighborhood in the tions, Community acknowledges it about to bid.

52 1970). context, public early century, “In construction twentieth

Since States, however, the of a public agency conduct Supreme Court the United States, which otherwise amount a tor- as Hollerbach v. United would such cases 553, 165, misrepresentation is treated 34 58 L.Ed. 898 tious as 233 U.S. S.Ct. (1914), theory The underlying v. breach of contract. Spearin, United 248 States 132, 59, (1918), providing misleading plans L.Ed. is that S.Ct. 63 166 U.S. 39 im a breach of government specifications held that contract constitutes has Howard, cases, to a con of correctness.” government plied is liable Howard, positive Cal.Rptr.2d statements at 599. tractor when makes permits city knowledge facts had certain concerning about material nature question when those bidder had to obtain to of the work state the successful adopted project timely are finish in a manner would ments false. Most states have McKee, Similarly, South Da forthcoming. Robert E. Inc. v. principle. this Atlanta, F.Supp. government kota has held that liable City (N.D.Ga.1976). McKee, warran implied rationale in a contractor breach gov ty misrepresents conditions of “it material proposed which concerns when facts sites, through concealment or statements.” applies equally ernment construction false Morris, Dept. bids for Inc. v. ex rel. S.D. soliciting to the facts here on State (S.D.1999) 520, 523 Transp., 598 N.W.2d insurance: Mooney’s, Dept. Inc. S.D. (quoting holding government The reason for (S.D.1992)). 43, 46 Transp., 482 N.W.2d misrepresen- liable certain material Sons, Peter Inc. v. See also Salvucci & job simple: tations is certain site inves- (1970). State, N.H. 268 A.2d 899 expected per- are not to be tigations bidder; every formed each and of good law implies covenant Missouri rather, government performs cer- every fair contract. dealing faith and provide tain tests order to each basic Co., 710 Mfg. Martin v. Prier Brass on which bidder with some information (Mo.App.1986). ap There may every his If he make bid. bidder this would pears why principle no reason all the required perform were inves- entity protected to an tort apply the chance of tigations, though even re- immunity. sovereign action under Cf. remote, ceiving the number the bid was Prot., Consulting, Envtl. & Inspection, and the dollar of bids would decrease City, 37 S.W.3d Inc. v. Kansas increase. amount of the bids would long party As Id. implied cove the breach claiming nant evidence of presents substantial general principles of

“Under dealing, fair case lack faith and law, a who conceals or fails party and tort Allowing Id. a con jury. go to material information to another to disclose damages compensatory tract action Contracting, liable fraud.” Howard is for' into a Co., was induced when the contractor Constr. 71 Inc. v. G.A. MacDonald a based on 590, government contract with the 38, Cal.Rptr.2d 83 599 Cal.App.4th is not misrepresentation (1998). government by failing is general rule The being prod the away merely explained to knowledge of difficulties be impart to jurists;” “teetering uct project, in a the owner will be of result-oriented encountered in the rather, the rationale con it is based on misrepresentations if the liable for gov that the above according cases cited is to to out-of-state perform unable tractor at a price of got the benefit work Constr. ernment provisions. Warner the price would have 285, far than the 2 lower what Angeles, Los Cal.3d Corp. City of (Cal. misrepresenta 444, 996, been if it had not made the 1001 Cal.Rptr. 466 P.2d 85 Humansville, v. City figures tion. Clark were unavailable were incorrect. S.W.2d to (Mo.App.1961). past history most material the This was allowed, in the the plaintiff, bid of supra The referred all a cases contain Ideker, Judge words Somerville common theme. It should make no differ “pragmatically speaking” get a benefit majority ence that the the of caselaw on performance the because the contract subject from comes cases where construc by expense contractor “more the entailed faulty tion contracts were involved and bid, than calculated in his submitting government specifications were supplied. [and, thus,] should governmental entity the The rationale behind all construction bear the added cost.” Id. at 621. The equally applies cases to incorrect represen by governmental tations a distin- entity made facts in the case at bar cannot be any type induce a contractor to enter into Cargo, guished those in St. Louis Air government contract or lease. St. See city by made where words conduct Svcs., Cargo Louis Inc. v. City Air St. potential assertions to the contractor that Louis, (Mo.App.1996). 929 S.W.2d 821 were not accordance with the truth and government by cannot induce positive made deceive. 929 S.W.2d at incorrect, representation, which a party by fact that the made misrepresentations entering totally into into a contract that is city and persons represented who unjust unfair gives government or itself, airport were not in the contract windfall, compensatory then avoid documents, or in defeat bidding did not Ideker, damages in suit in contract. Inc. bar, of action. Id. In at the cause the case Comm’n, v. Mo. Highway State person impor- reasonable would attach (Mo.App.1983); 620-21 Sand tance the comments of the executive Plumbing ers Heating Co. & Inc. v. determining director MCHCP in wheth- (Mo. Independence, 694 S.W.2d therefore, contract; er or to bid on App.1985). Missouri belongs major case submissible and the ity of states allows a contract action verdict should be Id. affirmed. these types cases where there has been Both were counts claims positive Ideker, misrepresentation. dif- submissible. Reasonable minds could S.W.2d at 620-21. Governmental entities fer a sub- as to whether made may not make representations false therefore, case; should missible this court merely avoid in contract suits aside the where defen- set verdict theory such behind smack of suits tort— representation dant was false and knew this is so especially where result would Mo. incorrect. Massman Constr. Co. v. fundamentally unfair: Comm’n., Highways Transp. & What ‘positive rep- is and what is not a contrary 112-13 A will always question resentation’ be a entity result allows the state windfall case-by- be answered of fact trier private of a who expense contractor But, if case. in charge public those would dealt faith. I affirm. project question wish to eliminate that contractors, from disputes with their II. Retention of Jurisdiction they do ... so advance mak- ing very representations sure that any upon Com- Based determination that are they make accurate. made a of its con- munity submissible case Sanders, S.W.2d at 694 847. actions, I affirm trial tract would sum, case, jurisdiction deter- representations in this court’s retention of to entity damages flowing defendant state financial mine the amount of

54 plan to as health care for state the final serve losses sustained I Though Al believe verdict years employees. of the contract’s existence. affirmed, ruling be of costs generally is should though damages action entity a state should not stand equitable, against rather than legal considered 539, Brune, permit- no specific where there is statute Jaycox v. 434 S.W.2d 542-43 v. (Mo.1968), Mauer Bd. ting here ob such assessment. the trial court also Employees’ Ret. and as such the Trustees Mo. State equity jurisdiction, tained 517, jurisdiction long Sys., (Mo.App.1988). as court retains such jurisdic point appeal should equity has been no loss of This MCHCP’s there Sloan, granted. ex. rel. v. tion. State Willman (Mo. 1978). A 422-23 banc S.W.2d y. jurisdic equity

trial court will then retain complete justice tion until full and have points remaining I believe scope been administered as within the brief, dealing those including MCHCP’s Craig v. pleadings evidence. error damages and instructional Inc., Likewise, Jo B. Gardner S.W.2d points should be denied. (Mo. White, 1979); Gray v. banc cross-appeal in its raised dismissing appel- After should be denied. bond, injunction I would point lant’s on the case, it the facts in this would be Under in all affirm the court’s trial judicial economy for the the interest of assessment of except as respects action, in this damages court to determine points raised Com- deny costs and has require party than who rather munity’s appeal. cross a case and obtained a verdict made year full refile each to obtain relief. point this aca-

majority decision makes Community’s

demic statement as would it had made a that if it was found brief court reversed

submissible case it RICHARDSON, point, only jurisdictional on this Margaret Jaccard on the issue of dam- gladly would refile Appellant, ages. motion Finally, grant I MCHCP’s would QUIKTRIP CORPORATION, appendix strike Respondent. a proposed contains appendix brief. 58884. No. WD parties which does settlement between Appeals, Court of Missouri part been a of this appear to have District, Western record.

extensive En Banc. Injunction III. Bond 29, 2002. March brief, MCHCP, reply withdrew in its Rehearing Transfer Motion and/or X. it Point for relief raised request May Denied Supreme Court Therefore, analyze this unnecessary Denied Application for Transfer point. 27, 2002. Aug.

IV. Costs against costs

The trial court assessed

MCHCP, entity by statute a state created

Case Details

Case Name: Missouri Consolidated Health Care Plan v. Community Health Plan

Court Name: Missouri Court of Appeals

Date Published: Mar 29, 2002

Citation: 81 S.W.3d 34

Docket Number: WD 59012, WD 59076

Court Abbreviation: Mo. Ct. App.