US v. DBB, Inc.

• Decision Date: 14 July 1999
• Docket Number: 99-2058.,No. 98-3447,98-3447
• Citation: 180 F.3d 1277
• Parties: UNITED STATES of America, Gary E. Flewelling, et al., Plaintiffs-Appellees, v. DBB, INC., G.S. Care Corp., et al., Defendants-Appellants. United States of America, State of Florida, Plaintiffs-Appellants Cross-Appellees, v. Gold Star Medical Services, Inc., Unknown Company # 1, et al., Defendants-Appellees, Bay Area Medical Products, Inc., Delphi Solutions, Inc., et al., Defendants-Appellees Cross-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

180 F.3d 1277

UNITED STATES of America, Gary E. Flewelling, et al., Plaintiffs-Appellees, v. DBB, INC., G.S. Care Corp., et al., Defendants-Appellants.

United States of America, State of Florida, Plaintiffs-Appellants Cross-Appellees, v. Gold Star Medical Services, Inc., Unknown Company # 1, et al., Defendants-Appellees, Bay Area Medical Products, Inc., Delphi Solutions, Inc., et al., Defendants-Appellees Cross-Appellants.

Nos. 98-3447, 99-2058.

United States Court of Appeals, Eleventh Circuit.

July 14, 1999.

John F. Rudy, II, Tampa, FL, for Defendants-Appellants.

Richard K. Fueyo, Tampa, FL, for Defendants-Appellants, Defendants-Appellees, Defendants-Appellees Cross-Appellants.

Alisa B. Klein, U.S. Department of Justice, Washington, DC, Jay G. Trezevant, Assistant U.S. Attorney, Tampa, FL, for Plaintiffs-Appellees.

Douglas N. Letter, U.S. Department of Justice, Washington, DC, for Plaintiffs-Appellees and Plaintiffs-Appellants Cross-Appellees.

Richard M. Fishkin, Asst. Attorney General, Ft. Lauderdale, FL, for Plaintiffs-Appellants Cross-Appellees.

Lee William Atkinson, Tew, Zinober, Barnes, Zimmet & Unice, Clearwater, FL, for Defendants-Appellees and Defendants-Appellees Cross-Appellants.

Before COX and BIRCH, Circuit Judges, and GODBOLD, Senior Circuit Judge.

COX, Circuit Judge:

The United States and various defendants separately appeal from a district court order granting a preliminary injunction pursuant to 18 U.S.C. § 1345(a)(2) freezing the defendants' assets that were traceable to their fraudulent activities. We consolidated the appeals, and for the reasons that follow, we affirm in part and vacate and remand in part.

I. Procedural History and Background

This action was originally filed by Gary E. Flewelling in August 1997 on behalf of the United States and the State of Florida pursuant to the qui tam provisions of the federal False Claims Act, 31 U.S.C. §§ 3729 et seq., and Florida law. Flewelling's complaint alleges that various defendants in the medical business had engaged in a comprehensive scheme to defraud the Medicare and Medicaid programs. In September of 1998, the United States and the State of Florida ("the Government") jointly intervened and assumed control of the litigation.

After its entry into the case, the Government filed an amended complaint that named forty-six defendants. The complaint divides the defendants into three categories: individual defendants, provider defendants, and laundering defendants. The individual defendants are directors and officers of various companies that provide Durable Medical Equipment ("DME") to Medicare/Medicaid beneficiaries or offer services such as billing to DME providers. The complaint alleges that the individual defendants are using the provider defendants to operate a scheme to defraud the United States and the State of Florida through the submission of false or fraudulent Medicare and Medicaid claims.¹ It further alleges that the individual defendants are using the laundering defendants to divert the money obtained through this fraud to off-shore accounts. The Government claims that the defendants have obtained more than $7.2 million through their fraud. (R.1-21, Ex. 1 at 77-79.)

The amended complaint seeks damages and civil penalties under the False Claims Act and injunctive relief under 18 U.S.C. § 1345 to prevent further dissipation of assets. It also includes a claim by the State of Florida for a violation of the Florida False Claims Act, Fla. Stat. §§ 68.081 to 68.092, and state law claims for unjust enrichment, payment by mistake of fact, and breach of contract.

After filing the amended complaint, the United States filed an ex parte motion pursuant to 18 U.S.C. § 1345(a)(2) seeking a temporary restraining order ("TRO") and a preliminary injunction. The United States offered evidence in support of its motion in the form of an affidavit of Special Agent Gregory Hendrickson of the Federal Bureau of Investigation. The district court granted the United States' motion for a TRO ex parte on September 8, 1998, and entered a TRO freezing all of the defendants' assets. It also entered an order indefinitely extending the duration of the TRO until a ruling was entered on the motion for a preliminary injunction.

The amended complaint and motion for a preliminary injunction were then served on the defendants. The district court referred the case to a magistrate judge to consider the United States' motion for a preliminary injunction. After a hearing, the magistrate judge issued a report and recommendation concluding that the United States had established a reasonable probability that the defendants were disposing of fraudulently-obtained funds. The magistrate judge therefore recommended that a preliminary injunction be issued pursuant to § 1345(a)(2)(A) to freeze the defendants' assets that were traceable to the alleged fraud.

The district court adopted the magistrate judge's report and recommendation, and a preliminary injunction was entered on December 10, 1998. The district court provided the United States 30 days to file a memorandum indicating the defendants' assets that were traceable to the alleged fraud. The United States filed a motion to amend the injunction to freeze assets equivalent in value to the amount obtained by the defendants through fraud whether traceable to the fraud or not. The district court denied the motion. It concluded that the plain language of the statute required the United States to trace to the fraud any assets that it wished to freeze through a preliminary injunction.

Both the United States and various defendants filed notices of appeal from the district court rulings. Defendants Goldstar Healthcare, Inc., DBB, Inc., G.S. Care Corp., Trans-Capital Investment Group, Inc., Fulcrum Services, Inc., Birotech Corp., Douglas Haught II, Peggy L. Haught, Brian Haught, and Robert Haught ("the Haught Defendants") jointly filed a notice of appeal challenging the district court's indefinite extension of the TRO. They later amended their appeal to include challenges to the preliminary injunction. The United States appealed the district court's decision to limit the injunction to the freezing of assets traceable to fraud.² Finally, Defendants Madden Delphi Solutions, Inc. and Universal Medical, Inc. cross-appealed, raising several challenges to the district court's entry of the preliminary injunction. On January 8, 1999, we consolidated the Haught Defendants' appeal with the United States' appeal.

II. Issues on Appeal and Contentions of the Parties

Although the parties raise numerous issues in their briefs, only one of them warrants discussion.³ The United States argues on appeal that the district court erred in concluding that § 1345(a)(2)(B) does not authorize the issuance of an injunction to freeze property equal in value to the amount a defendant obtains through fraud. The statutory section at issue in this case reads as follows:

(a)(2) If a person is alienating or disposing of property, or intends to alienate or dispose of property, obtained as a result of a Federal health care offense or property which is traceable to such violation, the Attorney General may commence a civil action in any Federal court—

(A) to enjoin such alienation or disposition of property; or

(B) for a restraining order to—

(i) prohibit any person from withdrawing, transferring, removing, dissipating, or disposing of any such property or property of equivalent value; and (ii) appoint a temporary receiver to administer such restraining order.

18 U.S.C. § 1345(a)(2) (emphasis added). Both parties agree that subsection (a)(2)(A) authorizes injunctions to freeze property obtained through fraud or traceable to fraud and that subsection (a)(2)(B) authorizes TROs that freeze property of equivalent value. Their disagreement arises over whether subsection (a)(2)(B), which may reach "property of equivalent value" whether or not it is traceable to fraud, also authorizes the court to grant injunctions. The United States contends that it does because the phrase "restraining order" in subsection (a)(2)(B) refers in a general sense to any injunctive relief, including preliminary injunctions. The defendants respond that the plain meaning of the term "restraining order" as it is used in the subsection refers only to TROs.

The issue that we must decide, therefore, is whether the term "restraining order" in subsection (a)(2)(B) authorizes a district court to grant any injunctive relief to freeze assets of equivalent value or whether it only authorizes the issuance of temporary restraining orders. This is an issue of statutory interpretation that we review de novo. United States v. Veal, 153 F.3d 1233, 1245 (11th Cir.1998).

III. Discussion

A. Introduction

The United States bases its argument upon three grounds. First, it argues that the plain language of the statute supports a broad reading of the term "restraining order." Second, it argues that its interpretation of the statute is consistent with congressional intent and that any other reading would frustrate that intent and lead to absurd results. Finally, it contends that the identical term was interpreted broadly in a statutory section included in the same act and that both terms should be construed consistently. Defendants argue that the plain language supports their reading of the statute and that any other interpretation would make sub-section (a)(2)(A) superfluous. We will address each of these contentions in turn.

There are several canons of statutory construction that guide our interpretation of the statute. The starting point for all statutory interpretation is the language of the statute itself. See, e.g., Watt v. Alaska, 451 U.S. 259, 265, 101 S.Ct. 1673, 1677, 68 L.Ed.2d 80 (1981). We assume that Congress used the words in a statute as they are commonly and ordinarily understood, and we read the statute to give full effect to each of its provisions. United States v. McLymont, 45 F.3d...