R.I. Managed Eye Care Inc v. Blue Cross & Blue Shield Of R.I.

• Decision Date: 24 June 2010
• Docket Number: No. 2008-216-Appeal,2008-217-Appeal.,2008-216-Appeal
• Citation: 996 A.2d 684
• Parties: RHODE ISLAND MANAGED EYE CARE, INC.v.BLUE CROSS & BLUE SHIELD OF RHODE ISLAND.
• Court: Rhode Island Supreme Court

996 A.2d 684

RHODE ISLAND MANAGED EYE CARE, INC.v.BLUE CROSS & BLUE SHIELD OF RHODE ISLAND.

Nos. 2008-216-Appeal, 2008-217-Appeal.

Supreme Court of Rhode Island.

June 24, 2010.

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Jason C. Preciphs, Esq., Providence, for Plaintiff.

R. Daniel Prentiss, Esq., for Defendant.

Present: SUTTELL, C.J., GOLDBERG, ROBINSON, and INDEGLIA, JJ.

OPINION

Chief Justice SUTTELL, for the Court.

This appeal and cross-appeal arise out of a breach-of-contract claim by the plaintiff, Rhode Island Managed Eye Care, Inc. (RIMEC), against the defendant, Blue Cross & Blue Shield of Rhode Island (Blue Cross). The parties executed a series of contracts in which RIMEC agreed to provide managed-eye-care services to some of Blue Cross's members, and payment by Blue Cross was to be based on the number of active members enrolled in the program. In its complaint, RIMEC primarily alleged that it did not receive payment for all of the Blue Cross members for whom it provided services. Following a lengthy trial, a jury rendered a verdict in favor of RIMEC. In response to a motion by the defendant, the trial justice granted a new trial as to lost profits, finding the jury's verdict in this regard to be against the weight of the evidence. The plaintiff appealed this decision, and the defendant cross-appealed, challenging the admittance of certain business records into evidence. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

IFacts and Procedural History

Blue Cross is a not-for-profit corporation that contracts with physicians, hospitals and laboratories to provide prepaid healthcare plans, under which members receive medical services at specified rates and charges. RIMEC is a corporation that was formed by Peter A. Koch to be a third-party administrator of vision-care services for customers of health insurance providers such as Blue Cross.¹ In 1993, the parties entered into the first of three contracts in which RIMEC agreed to provide vision-care services to Blue Cross's “Healthmate 2000” subscribers. The contracts provided that Blue Cross would pay RIMEC a predetermined, per-member fee for all services, referred to as a “capitation fee.”

In the beginning of the parties' relationship, RIMEC developed original software called a “membership processing system.” This computer software accepted downloads from Blue Cross containing basic subscriber information, such as names, addresses, phone numbers, and dates of coverage. Using that system, RIMEC generated so-called “membership data reports” that ostensibly recorded all active members of Healthmate 2000 during a given reporting period. Twenty of these “membership data reports” were admitted into evidence at trial, and their admission is at issue on appeal.

RIMEC's third and final contract with Blue Cross was, by its terms, set to expire on January 31, 1998. Blue Cross terminated the contract, allegedly for cause, three months early on October 31, 1997. Blue Cross contends it was not satisfied with RIMEC's performance of the contract. RIMEC counters that Blue Cross did not have cause and that, therefore, the termination constituted a breach of contract.

The plaintiff filed a complaint on January 7, 1998, alleging breach of contract. The case was tried before a jury from July 23, 2007, to August 8, 2007. The trial justice declined to preclude in limine, introduction of the disputed computer printouts into evidence. Thereafter at trial, following the testimony of Mr. Koch and another witness, the trial justice admitted the documents as full exhibits.

Mr. Koch testified about the relationship between plaintiff and defendant, as well as regarding RIMEC's computer system. Mr. Koch conceded that he did not program computers, and he admitted generally that he was not a “computer guy.” As a result, Mr. Koch acknowledged that he needed experts to help him manage the large amount of data required to run his business.

Mr. Koch described the creation and management of the company's computer system as a “team effort.” Mr. Koch testified that Rosemary Ferreira was the administrator of RIMEC and ran the day-to-day operations, while Diane Field specifically managed the computer system. Further, he testified that he initially hired a full-time employee to develop the software, but the employee left after the software was “up and running[.]” According to Mr. Koch, for the next year and a half, the software was maintained by Lauren Knapp, another full-time employee. After that time, a part-time programmer was brought in on occasion, as needed.

Mr. Koch also testified that, at times over the course of their contractual relationship, RIMEC's “computer people” met with Blue Cross's “computer people.” Specifically, Mr. Koch stated that he and his “computer people” met with Blue Cross employees during the first few months of the parties' business relationship, and that “all the computer people worked together to try to get [the companies' systems] compatible.” Mr. Koch acknowledged that he did not personally test RIMEC's software to make sure it was compatible with Blue Cross's data files, but he stated that he did have personal knowledge of the effort to make the systems compatible because he attended the relevant meetings.

Once the computer system was functional, Mr. Koch testified, the system was “beta tested.” He described beta-testing as making sure a computer system performs its tasks correctly by downloading sample data. Mr. Koch acknowledged that RIMEC did not use any data files from Blue Cross during the beta-testing process.

Mr. Koch stated that he had personal knowledge of how the membership data reports were generated and how they were used by RIMEC. According to Mr. Koch, RIMEC's computer system contained an accounting module that enabled RIMEC to count the number of Healthmate 2000 subscribers. Mr. Koch testified that the membership data reports generated by RIMEC recorded the number of active subscribers, as gleaned from the information downloaded from Blue Cross. Mr. Koch explained the contents of the membership data reports, line by line.

Mr. Koch also testified about how the software recognized Blue Cross members who were not Healthmate 2000 subscribers. Specifically, Mr. Koch stated that the beginning date and end date of coverage were recorded as the same day, and therefore the member would not be included in the active subscriber count. Mr. Koch testified that, at times, RIMEC made adjustments to the membership data upon learning that an individual or group had been added or dropped from membership.

Mr. Koch explained that for the first six or seven months of the parties' relationship, Blue Cross would give RIMEC “big reel[s] of data” containing information about their subscribers on a monthly basis. After these initial months, Blue Cross developed an “FTP” or “file transfer protocol” which, as Mr. Koch described it, involved Blue Cross depositing information in a computer database that RIMEC could access and download remotely over telephone lines. Mr. Koch recounted that he personally observed some of Blue Cross's downloads being received.

Mr. Koch testified that the reports were made in the regular course of business, and that the reports were generated on the “run-date” indicated on each report. He acknowledged, however, that RIMEC did not preserve all the records and data files that contained the member information received from Blue Cross, believing that the missing records and data files had been inadvertently lost or destroyed.

Additionally, Allan MacArthur, a former employee of Blue Cross who was trained in computer analysis and programming, also testified about RIMEC's software. In order to complete a report for Blue Cross, Mr. MacArthur analyzed the functioning of the software RIMEC used to produce the Healthmate 2000 membership counts. The document Mr. MacArthur created was entitled “RIMEC Analysis” and was dated June 23, 1997. Mr. MacArthur testified that in terms of the way the computer program was structured he “didn't see any real problems.” Further, in this report, Mr. MacArthur described the process by which RIMEC downloaded member information from Blue Cross, and stated that he believed “RIMEC [was] calculating members accurately * * *.” Following Mr. MacArthur's testimony, the trial justice admitted the documents as exhibits in full.²

Kimberly Booth testified on behalf of RIMEC in regard to its claim for lost profits. Ms. Booth stated that RIMEC's net income for 1997 was $68,981, as reported on its tax return for that year. This figure derived from its gross receipts in 1997 of $2,154,912, also as reported on its tax return. For purposes of her analysis, Ms. Booth added to the net profit two sums which, in her opinion, reflected the amounts RIMEC was underpaid by Blue Cross in 1997: $21,316.65 and $44,483.92. This resulted in an adjusted net income for 1997 of $134,781.57. Because Blue Cross terminated the contract ten months into 1997, she divided this sum by ten to arrive at a monthly net profit of approximately $13,478.16. She multiplied this amount by three to reflect the three-month period by which the contract was shortened, and arrived at an estimated lost-profits calculation of $40,434.48.

The jury ultimately rendered a verdict in plaintiff's favor for the sum of $152,100.42, which included the $40,434.48 lost-profit figure suggested by Ms. Booth. Final judgment for plaintiff was entered on August 28, 2007.

Subsequently, on January 29, 2008, the Superior Court considered motions filed by Blue Cross for judgment as a matter of law and a motion for a new trial. In its motion for a new trial, Blue Cross renewed its objection to the admission of the disputed printouts, and it challenged the jury's verdict as being against the weight of the credible evidence put forth at trial. The trial justice denied that portion of Blue Cross's motion that challenged the admission of evidence, but...