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2010 WL 3707408 (Mich.Cir.Ct.) For Opinion See 2010 WL 3286269 (Trial Order), 2009 WL 6767587 (Trial Order), 2009 WL 6767588 (Trial Order), 2009 WL 6767586 (Trial Order), 2009 WL 6767589 (Trial Order), 2009 WL 6767590 (Trial Order) Copyright (c) 2010 Thomson Reuters/West WEST'S JURY VERDICTS - MICHIGAN REPORTS Plaintiffs Net $4.5M From Blue Cross for Breach of Agreement, Tortious Interference Circuit Court of Michigan, Sixth Judicial Circuit, Oakland County. TheraMatrix v. Blue Cross Blue Shield of Mich. Type of Case: Contracts Breach Unfair Competition & Business Practices Business Interference Insurance Health Negligence-Other Specific Liability: Health insurer signed a vendor agreement with an outpatient physical therapy company with regard to a carve-out plan and then worked behind the scenes to prevent implementation of the plan General Injury: Monetary damages Jurisdiction: State: Michigan County: Oakland Related Court Documents: Plaintiffs' first amended complaint: 2009 WL 6766319 Defendant's brief in support of motion for summary disposition respecting count I: 2009 WL 6766322 Plaintiffs and defendant's joint final pretrial order: 2009 WL 6766320 Plaintiffs' proposed theory of the case: 2010 WL 3267618 Joint proposed jury instructions: 2010 WL 3267562 Verdict form: 2010 WL 3265311 Case Name: TheraMatrix Inc. d/b/a TheraMatrix Physical Rehabilitation Inc., a Michigan corporation, and TheraMatrix Physical Therapy Network LLC, a Michigan limited liability company v. Blue Cross Blue Shield of Michigan, a Michigan corporation Docket/File Number: 08-093506-CZ Verdict: Plaintiffs, $4,549,345.00 Verdict Range: $2,000,000 - 4,999,999

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Verdict Date: July 22, 2010 Judge:Edward Avadenka Attorneys: Plaintiffs: Rodger D. Young and Sara K. MacWilliams, Young & Susser, Southfield, Mich. Defendant: Joseph Fink, Robert P. Hurlbert, Michael Bossenbroeck and Jennifer L. Newby, Dickinson Wright PLLC, Bloomfield Hills, Mich.; Leo A. Nouhan, Detroit, Mich. Trial Type: Jury Experts: Plaintiffs: Barry Lefkowitz, CPA, accountant, Baker Tilly Virchow Krause, Southfield, Mich.; D. Dale Hyers, actuary, Wakely Consulting Group, Louisville, Ky. Defendant: Van Conway, CPA, accountant, Conway MacKenzie & Dunleavy, Birmingham, Mich.; Mark D. Beissel, physical therapist, Jackson, Mich. Breakdown of Award: $4,100,293.00 to plaintiff TheraMatrix Inc. for damages for breach of the vendor agreement $449,052.00 to plaintiffs for damages for tortious interference with business expectancies or relationships Summary of Facts: TheraMatrix Inc., based in Auburn Hills, Mich., said it was a provider of outpatient physical therapy through its own clinics and a network of affiliated clinics for over 25 years. TheraMatrix said it had provided physical therapy services to Ford Motor Company employees since the mid-1980s. In 2003, Ford sought proposals for an outpatient physical therapy network carve-out. TheraMatrix said it approached Blue Cross Blue Shield of Michigan about partnering on a response to the Ford request, and the two agreed to work together. Per TheraMatrix's request, Ford directed BCBSM to provide data about Ford's physical therapy costs, TheraMatrix said, but the information BCBSM provided was inaccurate and incomplete. Nonetheless, TheraMatrix said, it determined Ford's outpatient physical therapy was being over-prescribed and it proposed a carve-out plan. It reportedly formed a sister company, TheraMatrix Physical Therapy Network LLC, in September 2003 to manage a network of physical therapy providers to provide services to Ford through the carve-out plan. BCBSM reportedly indicated it would like to participate in the plan as the third party administrator (TPA), and TheraMatrix and BCBSM reportedly signed a vendor agreement Aug. 18, 2004, which laid out BCBSM's duties as TheraMatrix's subcontractor under the plan. While Ford reportedly informed TheraMatrix it was the leading contender for the carve-out program in early February 2005, BCBSM allegedly informed Ford that Ford's annual outpatient physical therapy costs were only a fraction of what TheraMatrix had represented. Ford then reportedly insisted TheraMatrix reduce its network carve-out price. TheraMatrix and Ford entered into a written contract for the carve-out plan Feb. 7, 2005. Less than ten days later, BCBSM allegedly announced it would not carry out its responsibilities under the vendor agreement. BCBSM also allegedly said that if it could not find a suitable subcontractor for TheraMatrix pursuant to the vendor agreement, it would simply breach the agreement. It also allegedly announced it intended

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to develop and market its own outpatient therapy network carve-out program for Ford and other companies. TheraMatrix said BCBSM never fulfilled its contractual obligations under the vendor agreement. After Ford was informed BCBSM had no intention of performing under the vendor agreement, Ford reportedly decided the carve-out program would be a pilot, Michigan-only program, with less ability for TheraMatrix to generate a profit. TheraMatrix claimed it was forced to find and hire a TPA to replace BCBSM and BCBSM's actions delayed the final implementation of the carve-out. TheraMatrix also contended BCBSM removed it from its network by unilaterally de-parring it as a provider, meaning TheraMatrix could no longer receive payments for treating BCBSM insureds. BCBSM reportedly terminated TheraMatrix because the carve-outs for customers like Ford were competitive and damaging. TheraMatrix said BCBSM's qualification standards under the provider agreement did not prohibit the establishment of carve-outs. It also claimed BCBSM's intent in terminating it from its network was to destroy its valuable business expectancies and relationships. In this same time period, BCBSM allegedly attempted to block the implementation of another TheraMatrix outpatient physical therapy network carve-out, this one for UAW/Chrysler. UAW and Chrysler reportedly began talks with TheraMatrix in late 2005 to implement a similar carve-out program, and according to TheraMatrix, in July 2006 UAW and Chrysler sent their insureds a joint communication informing eligible members that TheraMatrix would be administering outpatient physical therapy for Chrysler effective Aug. 1. BCBSM, which reportedly stood to lose money from the carve-out, allegedly took intentional and direct actions to sabotage the implementation of the carve-out by terminating the provider agreement with TheraMatrix, authorizing its representatives and board members to campaign for the UAW to revoke its support of the carve-out, encouraging medical providers to threaten to raise medical care prices if the carve-out was implemented, and misrepresenting the amount of money customers such as Ford actually spent on outpatient physical therapy costs under BCBSM. Less than a month before the implementation of the Chrysler carve-out, it was cancelled, and BCBSM allegedly then implemented its own network carve-out program. TheraMatrix Inc., doing business as TheraMatrix Physical Rehabilitation Inc., along with TheraMatrix Physical Therapy Network - collectively TheraMatrix - filed a lawsuit against BCBSM in the Circuit Court of Oakland County. In their first amended complaint dated June 1, 2009, the plaintiffs contended the defendant breached the vendor agreement and the inherent covenant of good faith and fair dealing by not acting as the TPA on the Ford carve-out, not keeping TheraMatrix's confidential business information confidential, working to block the implementation of the Ford carve-out, failing to disclose it had no intent to actually support the implementation of the carve-out, and failing to disclose it was simultaneously developing its own carve-out plan for customers. TheraMatrix also asserted BCBSM breached the provider agreement and its duties of good faith, fair dealing and fair process by terminating TheraMatrix as a par provider for reasons unrelated to the medical care it provided, failing to disclose the criteria by which it would judge providers, terminating it as a par provider with the intent to harm the company, and widely disseminating the news of its termination as a par provider. As a result of the defendant's actions, TheraMatrix said, its patients and referring physicians suffered harm since the outpatient physical therapy services were disrupted. In addition, TheraMatrix asserted a claim of tortious interference with economic and business expectancies and

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relationships, alleging BCBSM terminated the provider agreement, falsely maligned TheraMatrix, authorized its representatives to campaign for the UAW to revoke its support of the carve-out, encouraged medical providers to threaten to raise medical prices if the carve-out was implemented, and negligently or intentionally misreported the amount of money BCBSM customers actually spent on outpatient physical therapy. The plaintiffs also asserted a claim of negligence, alleging the defendant had a duty to promptly, accurately and completely report Ford's claims data pursuant to its subcontractor relationship with TheraMatrix, its partnership with TheraMatrix, and its duties to its customers. It asserted BCBSM intentionally delayed releasing requested data, released it piecemeal, released incomplete or error-ridden data, and failed to correct earlier representations when errors were found. The plaintiffs sought compensatory damages for all forms of economic and noneconomic loss, including incidental damages, consequential damages, and lost profits. BCBSM filed motions for summary disposition, which the court granted as to the plaintiffs' claims of breach of the provider agreement, tortious interference with the Ford national carve-out and the plaintiffs' relationships with referring physicians, and negligence. The motion was denied as to all other claims. BCBSM contended TheraMatrix breached the vendor agreement by signing the carve-out with Ford prior to obtaining BCBSM's consent and thus TheraMatrix was barred from maintaining a claim for breach of the vendor agreement. The defendant also contended Chrysler's decision to abandon that carve-out was made solely by Chrysler and UAW-Chrysler and it had nothing to do with the decision. According to the plaintiffs' counsel, BCBSM did not deny the actions forming the basis of the tortious interference claim but argued they were done with legitimate business purposes toward legitimate business interests. TheraMatrix argued that as a nonprofit healthcare corporation and as the dominant healthcare insurer in Michigan, BCBSM's business purpose was to promote quality healthcare at a reasonable cost and not protect its profits by acting like a for-profit company. The plaintiffs' counsel stated the court ruled that tortious interference could be accomplished by an abuse of market power and that the legitimate business purpose defense required an analysis of what the defendant's legitimate business purposes were. The case proceeded to a jury trial, and jurors determined TheraMatrix Inc. proved BCBSM breached the vendor agreement. The jury awarded TheraMatrix Inc. $4,100,293 in damages. The jury also decided the plaintiffs proved BCBSM tortiously interfered with their business expectancies or relationships as to Chrysler. The plaintiffs were awarded $449,052 on that claim. Court: Circuit Court of Michigan, Sixth Judicial Circuit, Oakland County. 2010 WL 3707408 (Mich.Cir.Ct.) END OF DOCUMENT

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