ST. LOUIS — The Missouri Court of Appeals has upheld a lower court’s judgment awarding $18.9 million to EngagePoint Inc., and HHS Technology Group Holdings LLC involving a contract dispute.
The decision stems from a protracted legal battle that began after the state of Missouri terminated EngagePoint as the prime contractor in 2015.
In 2013, the state issued a request for proposals (RFP) for the Missouri Eligibility Determination and Enrollment System (MEDES) project, which was intended to streamline Medicaid eligibility determinations, according to an opinion filed Jan. 14 in the Missouri Court of Appeals, Western District.
EngagePoint was awarded a $147 million fixed-price contract to implement the system using IBM’s Curam software.
However, issues arose when the software failed to meet performance expectations and EngagePoint was required to make extensive modifications, leading to additional work outside the original contract terms.
In 2016, EngagePoint filed a lawsuit seeking compensation for the extra work performed at the state’s direction and the recovery of contractual holdbacks that had not been paid. The state countersued, alleging breach of contract.
A 2022 jury trial resulted in a $18.9 million verdict in favor of EngagePoint for the additional work. The trial court also awarded EngagePoint $4.1 million for unpaid holdbacks and prejudgment interest at a statutory rate of 9%. The state challenged these rulings on appeal, asserting four primary arguments.
First, the state claimed the jury’s award for extra work violated the Missouri Constitution by compensating EngagePoint for services beyond the written terms of the contract.
The state also claimed that prejudgment interest on the damages was barred under the contract and state law and alleged errors in the jury instructions related to its breach-of-contract counterclaim, asserting the instructions conflicted with the contract’s force majeure clause.
The state also contested the directed verdict in favor of EngagePoint on the holdbacks, arguing it contravened the contract terms.
The appeals court rejected all four points raised by the state. It concluded the extra work award was appropriate given the evidence that EngagePoint acted at the state’s direction to address Curam software defects and other unforeseen challenges.
The court also upheld the prejudgment interest, noting that the damages were calculable and owed under statutory provisions.
On the breach-of-contract counterclaim, the court found the State had failed to preserve its objections to the jury instructions during the trial. Additionally, the court ruled that allowing the State to retain the holdbacks after terminating EngagePoint’s contract for convenience would result in an unfair windfall for the State.
The ruling marks the conclusion of a years-long legal battle that has drawn attention to the complexities of large-scale government technology projects. While EngagePoint is set to receive substantial compensation, the case also highlights the significant risks and challenges inherent in such undertakings.
The decision was authored by Judge Karen King Mitchell and unanimously affirmed by a panel that included Chief Judge Anthony Rex Gabbert and Special Judge Alisha D. O’Hara.
The respondents were represented by Ken Barnes of Kansas City; Julian Dayal and Shawn Taylor of Chicago; and Charles W. Hatfield and Alexander C. Barrett of Jefferson City.
The appellant was represented by Attorney General Andrew Bailey, Deputy Attorney General Jeremiah J. Morgan, Chief Counsel J. Patrick Sullivan and Assistant Attorney General Matthew J. Laudano.
The parties declined to comment further on the case. The State of Missouri has not yet indicated whether it will seek further review.
Missouri Court of Appeals, Western District case number: WD86036