Aldridge v. Corp. Mgmt., Civil Action 1:16-CV-00369 HTW-LGI
| Decision Date | 07 June 2022 |
| Docket Number | Civil Action 1:16-CV-00369 HTW-LGI |
| Parties | JAMES ALDRIDGE, RELATOR, on behalf of the UNITED STATES OF AMERICA PLAINTIFF v. CORPORATE MANAGEMENT INC., et al DEFENDANTS |
| Court | U.S. District Court — Southern District of Mississippi |
Before this court is the motion [doc no. 572] of the Defendants Corporate Management, Inc. (“CMI”), Stone County Hospital, Inc. (“SCH”), H. Ted Cain (“Ted Cain”), Julie Cain, and Thomas Kuluz (collectively “Defendants”), requesting that this Court stay its preliminary injunction [doc. no. 557] pending their appeal of the issuance of the injunction to the Fifth Circuit Court of Appeals. Plaintiff, the United States, opposes the motion. Defendants also have filed a motion [doc. no. 581] requesting a ruling on their motion for a stay pending appeal [doc. no. 572]. Briefing is completed and this court is ready to make its ruling.
This qui tam case, brought under the False Claims Act (“FCA”), was tried before a jury for almost nine weeks beginning January 13, 2020. The jury found all but one of the Defendants liable for Medicare fraud in violation of the FCA and rendered a verdict against them for over $10 million dollars. This court trebled these damages, as required by the FCA, and imposed appropriate civil penalties pursuant to the Act. The total verdict is for $32, 637, 827 against Ted Cain (formerly the 100% owner of Stone County Hospital, CMI and numerous other business enterprises), Julie Cain (the wife of Ted Cain and former hospital administrator for Stone County Hospital), Tommy Kuluz (the Chief financial officer of CMI), CMI (a company that provided administrative services for Ted Cain's businesses) and Stone County Hospital (a Critical Access Hospital). The five defendants are jointly and severally liable, up to the amount of their respective judgement totals. A sixth defendant in this case was found not liable on all of the claims brought against her and this court dismissed all claims against her.
Because of defendants' transfers and attempted sales of property immediately prior to and during the trial, as discussed in more detail below, this court was persuaded to enter an order during the pendency of the trial, prohibiting the defendants from dissipating, transferring, selling, or otherwise disposing of assets. When the court entered its Final Judgment in this case, on May 10, 2020, it included the following language: “The Court continues its Order forbidding the defendants from transferring, dissipating selling or disposing of any of their assets.” Judgment [doc. no. 409 p. 3].
On the eve of trial, Ted Cain listed for sale certain real properties that he owned, directly or indirectly, including the Cain's personal residence in Ocean Springs Mississippi, and commercial property located at 400 Beach Blvd., Bay St Louis, Mississippi. The Government and the Court became aware of the potential sales only after the trial began.
It was also revealed during the trial that Ted Cain had closed Stone County Hospital approximately two months before the trial, and began leasing the physical plant which had housed Stone County Hospital to Gulfport Memorial Hospital. At the time of trial, Gulfport Memorial was operating a hospital at the site and making lease payments to Wiggins Acute Care which, according to Ted Cain, owned the real property that had housed Stone County Hospital and now housed Gulfport Memorial Hospital. Ted Cain had formerly been the sole owner of Wiggins Acute Care, and Ted Cain executed and signed the lease agreement between Wiggins Acute Care and Gulfport Memorial Hospital.
Additionally, in late January 2020, shortly after the trial began, the United States and the Court also learned that many of the businesses that had been wholly owned by Ted Cain, including Wiggins Acute Care, in the latter part of 2019, had been transferred into trusts created in 2019, allegedly for the benefit of the Cains' two children. As the trial progressed it became apparent that most-if not all- business entities and assets previously wholly owned by Ted Cain, Julie Cain or CMI had been transferred to the trusts. Ted Cain and his attorneys acknowledged to this court, however, that Ted Cain maintained control over the trusts.
Consequently, the United States filed its application for relief under the Federal Debt Collection Procedures Act (“FDCPA”)[1] on January 26, 2020, seeking writs of attachment on three pieces of real property, garnishment of the lease payments from Memorial Hospital, and discovery into the debtors' financial condition. Application for Writ of Garnishment and Attachment, [doc. no. 367 at 2] and Application for Writ of Garnishment and Attachment, [doc. no. 369 at 2-3]. The United States made several requests during the trial asking this court to approve the prejudgment debt collection measures provided for by the FDCPA, and this court heard oral arguments on the matter on several occasions. The specific properties at issue were named and discussed on these occasions, including the property at 400 Beach Blvd. in Bay St. Louis, Mississippi. The Defendants were also provided copies of the above applications for the writs of attachment which specifically named the property at 400 Beach Blvd.
This court declined to grant the specific relief sought by the United States under the FDCPA; instead, at the defendants' suggestion, this court issued an order that required Defendants not to transfer, expend, deplete, or dissipate assets without approval by the court. The intent of the order was to maintain the status quo and preserve the Cain assets needed to satisfy any future judgment, while allowing Gulfport Memorial Hospital (the hospital leasing the former Stone County Hospital facility), the only hospital located in Stone County, Mississippi, to continue to operate. This court's order permitted Defendants to pay the normal expenses necessary to conduct its business, requiring only that Defendants obtain the court's approval or approval of the government for any expenditures that exceeded $50, 000.
After the verdict was rendered and the United States had a multi-million-dollar verdict, the Government renewed its request for pre-judgment remedies under the FDCPA, including writs of attachment to protect the assets from dissipation until the judgment was entered. The Government was not without reasons to seek this protection based on Defendants' actions as previously described, and based on their fraudulent conduct concerning Medicare, as found by the jury.
After the verdict, but prior to entry of the judgment, this court on May 6, 2020, conducted a hearing on various post-trial matters, including the Government's “Motion for Entry of Judgment or, in the Alternative, Renewal of the United States' Application under the FDCPA.” The Government had concluded that these Defendants were attempting to make themselves judgment proof as evidenced by the previously described actions. At the conclusion of that hearing, this court stated that the court's previous order would remain in effect, forbidding the defendants to transfer, sell, dispose, or dissipate any of their assets. The Government submitted a proposed judgment, at this court's request, and this court entered its Judgment on May 10, 2020, which included continuation of its order prohibiting dissipation of assets.
This court did not grant the specific relief the United States was requesting, but the FDCPA grants broad discretion to the court to modify its procedures. Title 28 U.S.C. § 3013. As the Fifth Circuit has recognized, §3013 grants to the district court wide discretion, among other things, to “modify the use of any enforcement procedure under the FDCPA” F.T.C. v. Nat'l Bus. Consultants, Inc., 376 F.3d 317, 321 (5th Cir. 2004) (citing § 3013 as a basis to uphold the district court's actions of adding entities as defendants and judgment debtors without a motion by the United States).
This court, over the course of the trial, had been made aware of the actions of these defendants that might place significant obstacles in the way of collecting on the judgment against them. This court carefully reflected on these issues, balancing the impact that writs of attachment under the FDCPA would have on the defendants against the Government's need for protection from dissipation of the assets. This court was mindful of the Government's need to recoup fraudulently-obtained funds and penalties. This court agreed with the defendants, however, that that an order of forbearance would have the least detrimental impact on the lease agreement with Gulfport Memorial Hospital, while still offering some protection to the Government from dissipation of assets. This court did not want to take an action that would cause the closure of Gulfport Memorial Hospital.
A ruling on a motion to stay an injunction pending appeal does not decide the injunction's merits, but “consider[s] only” if the “injunction should be stayed pending complete review.” Barber v. Bryant, 833 F.3d 510, 511 (5th Cir. 2016) (citation omitted). Courts consider four factors in determining whether to stay a ruling pending appeal:
(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceedings; and (4) where the public interest lies.
E.T. v. Paxton, 19 F.4th 760, 764 (5th Cir. 2021) (quoting Nken v. Holder, 556 U.S. 418, 426 (2009)).
In February of 2022, the United States became aware that property...
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