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MANAGEMENT SERVICES OF ILLINOIS v. HEALTH MANAGE.

December 6, 1995

MANAGEMENT SERVICES OF ILLINOIS, INC., AN ILLINOIS CORPORATION, D/B/A MANAGEMENT SERVICES, INC., PLAINTIFF,
v.
HEALTH MANAGEMENT SYSTEMS, INC., A NEW YORK CORPORATION, AND VICTOR KUGAJEVSKY, DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, District Judge:

OPINION

Libel per se?

There are two tests.

Plaintiff passes the first, fails the second.

But let us examine the facts, discuss the law, and then give the reasons for our finding.

I. Background

Plaintiff Management Services of Illinois, Inc. ("MSI"), is an Illinois corporation. Since 1990, MSI has contracted with the Illinois Department of Public Aid ("IDPA") to provide services to aid in the recovery of certain funds expended by IDPA under Title XIX of the Social Security Act from various insurance companies. In 1990, MSI subcontracted with Defendant Health Management Systems, Inc. ("HMS"), a New York corporation, to provide services in support of MSI's contract with IDPA. Defendant Victor Kugajevsky is vice president of HMS.

As a subcontractor, HMS was to submit IDPA claims to various insurance companies for reimbursement to IDPA. When the claims were allowed, checks from the insurance company made payable to IDPA were sent to HMS. HMS was then required to submit the checks to MSI. Once the checks were received by MSI, MSI would deliver the checks to IDPA. Once IDPA received the checks, it paid MSI for MSI's services under the contract. MSI would then pay HMS for its services under the subcontract.

The complaint alleges that IDPA, MSI, and HMS acknowledged that timely transmission of the reimbursement checks from HMS to MSI was essential to effectuate the purpose of the contract. The failure to transmit the checks in a timely manner resulted in the expiration of the checks which then had to be reissued by the insurance carrier. Consequently, as a result of the delay caused by the reissuance of the checks, IDPA's use of the funds was postponed. Similarly, since MSI did not receive payment for its services until IDPA received the reimbursement from the insurance companies, the delay caused by the reissuance of the funds also delayed payment to MSI. The complaint alleges that HMS and Kugajevsky were aware of the problems resulting from the delayed submission of the checks to MSI and that the submission of the checks in a timely manner was necessary to fulfill its obligations under the subcontract between MSI and HMS.

Due to HMS's continued failure to submit the checks to MSI in a timely manner, MSI cancelled its subcontract with HMS in October of 1994. Following the cancellation of the subcontract, HMS attempted to contract directly with IDPA for the services performed by MSI under its contract with IDPA. In May of 1995, HMS sent to the Director of IDPA, Robert W. Wright, a letter which stated, in pertinent part:

  While it appears our contract with MSI is terminated,
  we have the ability to generate, processed and billed
  or ready to bill claims currently in hand, revenues
  for IDPA of approximately $2.6 to $3.7 million.
  Equally of a concern is that we have in the pipeline
  recoveries of approximately $2.6 to $3.7 million. MSI
  has instructed us to return this to insurance
  carriers.

The complaint alleges that the above statements from HMS to Director Wright were false and Defendants knew the statements were false.

After the cancellation of the subcontract, HMS was to continue forwarding the reimbursement checks to MSI for all claims submitted to the insurance companies prior to the cancellation of the subcontract. HMS received a letter from IDPA urging HMS to send MSI the reimbursement checks as quickly as possible. In response to that letter, in July of 1995, HMS sent ...


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