Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_05-cv-01104/USCOURTS-almd-2_05-cv-01104-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1346 Breach of Contract

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IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

CAPITAL RISK MANAGEMENT, )

INC., )

)

Plaintiff, )

) CIVIL ACTION NO.

v. ) 2:05cv1104-MHT 

) (WO)

MILLENNIUM BUSINESS )

ASSOCIATION OF AMERICA, )

Inc., a corporation, )

)

Defendant. )

OPINION

This litigation is before the court on plaintiff

Capital Risk Management, Inc.’s motion for default

judgment against defendant Millennium Business

Association of America, Inc. Capital Risk waived its

request for a jury trial on the issues presented in the

motion. Based on the evidence submitted at a hearing on

September 8, 2006, the court concludes as follows: 

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I. FINDINGS OF FACT

(1) Capital Risk is an Alabama corporation which is

in the business of providing, among other things, health

insurance to its customers; its principal place of

business is in Alabama. 

(2) Millennium is a foreign corporation with its

principal place of business in Albany, New York. 

(3) The matter in controversy exceeds the sum of

$ 75,000.00. 

(4) Millenium was properly served with the summons

and complaint and has failed to respond as required under

the Federal Rules of Civil Procedure. 

(5) In the fall of 1999, Capital Risk was managing

the health care benefits for the American Hospitality

Association (“AHA”), which at that time had approximately

500 unit members. The third-party administrator for AHA

was HealthStrategies. Because, over time,

HealthStrategies’ effectiveness as a third-party

administrator deteriorated, Capital Risk had to find a

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new association and third-party administrator in which to

enroll the AHA plan members. 

(6) In the fall of 1999, Capital Risk’s president,

Ron Howard, approached Millennium to determine if it

could replace HealthStrategies. Millennium is an

organization that sponsored an association plan similar

to that of the AHA plan, using “in-house” third-party

administrator Advanced Healthcare Management Corporation.

(7) Howard flew to Albany, NY to meet with Robert

Aldunate (president of Millennium) and Peter D. Perry

(president of Advanced Healthcare and vice-president of

Millennium). At the conclusion of his visit, Howard (on

behalf of Capital Risk), Aldunate (on behalf of

Millennium), and Perry (on behalf of Advanced

Healthcare), agreed to negotiate a contract that would

enroll the members of AHA in the Millennium Association

Health Plan, using Advanced Healthcare as its third-party

administrator. 

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(8) Capital Risk and Millennium agreed that on

December 15, 1999, certain members of AHA, namely the

Emerald Coast Health Alliance, would be enrolled in the

Millennium health plan and begin receiving services from

Millennium as of that date. They further agreed that, on

January 1, 2000, the remaining members of the AHA would

be enrolled in the Millennium health plan. 

(9) The contract between the parties provided that

there would be a two-month moratorium on premium payments

to Millennium. During that two-month period, the money

that Millennium would normally use for premiums would be

used instead to pay claims that had not been paid by

HealthStrategies. Moreover, Capital Risk agreed to

provide Millennium with an additional $ 105,000 that was

in the AHA claims account as of January 1, 2000, to pay

claims not paid by HealthStrategies. Millennium also

agreed to reprocess all of HealthStrategies’ claims with

the AHA plan in order to determine whether the claims

were adjudicated and paid correctly. If any claims were

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paid incorrectly, Millennium agreed to attempt to recoup

any overpayments from the medical providers. Millennium

also agreed to process all unprocessed claims from

HealthStrategies. Millennium was to pay these

unprocessed claims using the $ 105,000 in the claims

account and the two months of premiums. 

(10) Pursuant to the contract, Capital Risk provided

Millennium with the $ 105,000 payment and the two months

of premiums for January and February 2000; enrolled the

Emerald Coast Health Alliance by December 15, 1999; and

enrolled the remaining AHA members participating in the

MBAA plan by January 1, 2000. Capital Risk assigned its

stock as collateral to Millennium, which is still in its

possession. 

(11) Capital Risk paid premiums to Millennium for the

enrolled members from January 2000 though September 2000.

The premium income began at around $ 100,000 per month

but decreased some each month. During that time period,

Millennium did not pay the previous claims from

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HealthStrategies, nor did it pay the vast majority of the

claims of AHA members enrolled in the health plan. 

(12) In September 2000, Millennium terminated its

health plan retroactive to June 30, 2000, and refunded to

Capital Risk three months of premium payments for July,

August, and September. However, Millennium has not

refunded the initial $ 105,000 claims-account payment and

the January-through-June premiums. Millennium has also

failed to return Capital Risk’s stock and release its

assignment. 

(13) As a result of Millennium’s failure to pay the

previous HealthStrategies claims and the claims of AHA

members enrolled in the Millennium health plan, Capital

Risk was the subject of 42 lawsuits and suffered a severe

blow to its reputation as well as lost profits. 

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II. CONCLUSIONS OF LAW

(1) Millennium is in default and, accordingly,

default judgment will be entered against it. See Fed.

R. Civ. P. 55.

(2) Millennium has fully breached its contract with

Capital Risk, and the damages from that breach of

contract constitute the following: 

(a) payment of $ 105,000 to the AHA claims

account; 

(b) January-through-June premium payments

totaling $ 427,000.00; and

(c) pre-judgment interest for the AHA claimsaccount payment and the January-through-June payments at

a 6 % interest rate. See 1975 Ala. Code § 8-8-8 (“All

contracts, express or implied for ... the performance of

any act or duty, bear interest from the day such money or

thing, estimating it at its money value, should have been

paid, or such act, estimating the compensation therefor

in money, performed.”); Alabama Pattern Jury Instructions

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Civil 10.18 (2d ed. 1993) (interest on damages for breach

of contract are calculated at a rate of 6 % per annum).

(3) Millennium’s conduct was wanton and performed in

conscious disregard of its duty to Capital Risk to

properly administer the AHA health plan. The damages

from Millennium’s wanton conduct are: 

(a) injury to Capital Risk’s reputation in the

amount of $ 500,000; and 

(b) lost profits to Capital Risk in the amount of

$ 125,000. 

(4) Capital Risk is entitled to the total sum of

$ 1,157,000 in compensatory damages, calculated as

follows:

AHA claims-account $ 105,000

January-through-June premiums 427,000

Injury to reputation 500,000

Lost profits 125,000

Total $ 1,157,000

(5) Millennium’s wanton conduct was sufficient to

require the imposition of punitive damages. The court

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has provided Capital Risk with a substantial economic

recovery in this order in an amount exceeding one million

dollars. The court finds that a one-to-one punitive

damages ratio in this case is sufficient to deter

Millennium from such future conduct, and awards Capital

Risk punitive damages on its claim against Millennium in

the amount of $ 1,157,000.00. See BMW v. Gore, 517 U.S.

559 (1996).

(6) Capital Risk is entitled to the return of its

stock certificate from Millennium.

An appropriate judgment will be entered. 

DONE, this the 12th day of September, 2006.

_____________________________ /s/ Myron H. Thompson

UNITED STATES DISTRICT JUDGE

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