JURY AWARDS $60 MILLION IN BREACH-OF-CONTRACT CASE

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JURY AWARDS $60 MILLION IN BREACH-OF-CONTRACT CASE

Attorneys John Klamann and Andy Schermerhorn of the Klamann Law Firm, alongside Ken McClain of Humphrey, Farrington & McClain and William L. Carr, of White, Graham, Buckley & Carr, won a $60 million verdict for Dennis Demetre and Lori Lewis, who sold their family-owned tech company, Allied Management Group – Special Investigations Unit (“AMG”), to HMS Holdings Corp. (“HMS”), a NASDAQ-traded company based in Irving, Texas.

Established by Lori Lewis in 1972, AMG was a family owned and operated company that provided an innovative proprietary forensic claim editing system capable of analyzing medical billing and claims data for patterns of fraud, waste and abuse.

The expertise of Lori Lewis and the proprietary software that she developed caught the attention of HMS, as the need for software solutions to the endemic problem of fraud and abuse grew with the technological advancements made in forensic computing. AMG was a small, but wildly successful company. Its revenue shot up from $400,000 in 2006 to $7 million in 2010.

After a lengthy courtship, HMS acquired AMG on June 30, 2010. The purchase price consisted of a cash payment of approximately $13 million up front, and two deferred contingent “earnout” payments, the amounts of which were to be determined based upon a multiple of the profits generated for the two years after the sale.

The crux of Plaintiffs’ claim was that HMS failed to use its best efforts to generate and produce profits during the two-year earnout period. Indeed, testimony presented during the trial revealed that HMS never paid any additional payments and failed to maintain any auditable record of its profits during the two-year earnout period.

After just two hours of deliberations, the six-member jury in New York City unanimously found HMS Holdings Corp. liable for $60 million in contract damages. In addition, Lori Lewis and Dennis Demetre will be entitled to statutory pre-judgment interest.

The trial started October 23rd in the Supreme Court of the State of New York County of New York. The Honorable Saliann Scarpulla presided over the trial.

In addition to Messrs. Klamann, Schermerhorn, McClain and Carr, the Plaintiffs were also represented by Michael S. Kilgore, Nichelle L. Oxley and Scott Britton-Mehlisch of Humphrey, Farrington & McClain; Steven W. White of White, Graham, Buckley & Carr, LLC; and Joshua B. Katz, of Kent, Beatty & Gordon, LLP.

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