Coastal Rehabilitation Services, P.A. V. Cooper

• Decision Date: 31 March 2003
• Docket Number: No. C/A 2:02-4081-18.,C/A 2:02-4081-18.
• Citation: 255 F.Supp.2d 556
• Parties: COASTAL REHABILITATION SERVICES, P.A., Plaintiff, v. Charles COOPER, Gary C. Cooper, individually and d/b/a Winyah Home Health Care, and Winyah Convalescent Center, Defendants. Charles Cooper, Gary C. Cooper, individually and d/b/a Winyah Home Health Care, and Winyah Convalescent Center, Defendants and Interpleader Plaintiffs, Coastal Rehabilitation Services, P.A., Counterclaim Defendant The United States of America, Interpleader Defendant.
• Court: U.S. District Court — District of South Carolina

255 F.Supp.2d 556

COASTAL REHABILITATION SERVICES, P.A., Plaintiff, v. Charles COOPER, Gary C. Cooper, individually and d/b/a Winyah Home Health Care, and Winyah Convalescent Center, Defendants Charles Cooper, Gary C. Cooper, individually and d/b/a Winyah Home Health Care, and Winyah Convalescent Center, Defendants and Interpleader Plaintiffs Coastal Rehabilitation Services, P.A., Counterclaim Defendant The United States of America, Interpleader Defendant.

No. C/A 2:02-4081-18.

United States District Court, D. South Carolina, Charleston Division.

March 31, 2003.

Lawrence S. Connor, IV, Surfside Beach, SC, for plaintiff.

Celeste T. Jones, Susan M. Hayes, Columbia, SC, for defendant.

ORDER

NORTON, District Judge.

This matter is before the court on the United States's motion to dismiss the interpleader complaint against it pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure.

I. Background¹

This case originated in state court as a lawsuit brought by plaintiff Coastal Rehabilitation Services ("Coastal") against defendants (collectively "Winyah Defendants"). Coastal is a speech and occupational therapy services provider. Charles Cooper, now deceased, was the owner and employee of Winyah Home Health Care and Winyah Home Health Care and Winyah Convalescent Center. The Estate of Charles Cooper now owns these companies. Gary Cooper was an employee of Winyah Home Health Care and Winyah Convalescent Center. Coastal entered into contractual agreements with Winyah Home Health Care and Winyah Convalescent Center wherein Coastal agreed to provide speech therapy services for their patients and residents. On a monthly basis, Coastal submitted bills to Winyah Convalescent Center for services performed that month for patients who were covered by Medicare. Winyah Convalescent Center then submitted these bills to the United States under the Medicare program and was reimbursed. Winyah Convalescent Center began to suspect that Coastal's bills were fraudulent and eventually refused to pay Coastal $153,409.97 for services rendered to these patients. As a result of this non-payment, Coastal filed suit on August 13, 1998, against Winyah Defendants in state court.

While the state court action was pending, the United States began an investigation into the bills submitted by Winyah Defendants for Coastal's alleged services. The state court stayed its case while the United States was conducting its investigation. In July 2002, the United States and Winyah Defendants entered into a settlement agreement ("Settlement Agreement") under which Winyah Defendants reimbursed the United States $154,612.00 for all services that were not properly billed to Medicare based on Coastal's allegedly fraudulent billings. Winyah Defendants moved to amend their answer in state court to file an interpleader action against the United States. Winyah Defendants were concerned that they "may be subject to double liability in that they have already reimbursed the United States for all services that were not properly billed to Medicare based on Coastal's fraudulent Medicare billings and ... could also be required to pay Coastal's fraudulent claim for these funds." (Interpleader Compl. at 6.) The state court granted Winyah Defendant's motion to amend its answer to include an interpleader complaint against the United States. The state court noted that "the USA raised other substantive issues asserting defenses to the proposed Amended Complaint itself ... [that] are more properly addressed to the federal courts following removal." United States then removed the case to this court and filed this motion to dismiss.

II. Law/Analysis

Interpleader under Fed.R.Civ.P. 22² is a procedural device that allows a disinterested stakeholder to bring a single action joining two or more adverse claimants to a single fund. See Chase Manhattan Bank v. Mandalay Shores Coop. Housing Ass'n, (In re Mandalay Shores Coop. Housing Ass'n), 21 F.3d 380, 383 (11th Cir.1994); White v. FDIC, 19 F.3d 249, 251 (5th Cir.1994); Sec. Ins. Co. of Hartford v. Arcade Textiles, Inc., 40 Fed. Appx. 767, 769, 2002 WL 1473417, *1 (4th Cir. July 10, 2002) (UNPUBLISHED TABLE OPINION). Interpleader is an equitable remedy designed to protect the stakeholder from multiple, inconsistent judgments and to relieve it of the obligation of determining which claimant is entitled to the fund. Sec. Ins. Co. of Hartford, 40 Fed. Appx. at 769, 2002 WL 1473417 at *1 (citing 4 James Wm. Moore et al, Moore's Fed. Practice § 22.02[1] (3d ed.2001)). Although an interpleader action is often brought as an original action by a plaintiff, a defendant can bring an interpleader action as a counterclaim against the plaintiff and may join additional parties under the joinder provisions of Fed. R.Civ.P. 19 and 20. Grubbs v. General Elec. Credit Corp., 405 U.S. 699, 705 n. 2, 92 S.Ct. 1344, 31 L.Ed.2d 612 (1972); Moore's Fed. Practice, § 22.02[4]. Here, Winyah Defendants filed an interpleader action as a counterclaim against Coastal and joined the United States as an interpleader defendant under Fed.R.Civ.P. 20.

A. Sovereign Immunity

The United States filed a motion to dismiss under Fed. R. Civ. P 12(b)(1) for lack of subject matter jurisdiction on the ground that it may not be joined as an interpleader defendant in this case because it has not waived its sovereign immunity. "Absent a waiver of sovereign immunity, the Federal Government is immune from suit." Loeffler v. Frank, 486 U.S. 549, 554, 108 S.Ct. 1965, 100 L.Ed.2d 549 (1988). The absence of such a waiver is a jurisdictional defect. Kulawy v. U.S., 917 F.2d 729, 733 (2d Cir.1990). When the United States has challenged subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), the plaintiff bears the burden of persuasion on the jurisdictional issue because "the party who sues the United States bears the burden of pointing to ... an unequivocal waiver of immunity." Williams v. U.S., 50 F.3d 299, 304 (4th Cir.1995) (internal citations and punctuation marks omitted). "In ruling on a Rule 12(b)(1) motion, the court may consider exhibits outside the pleadings." Id.

Winyah argues that sovereign immunity does not bar an interpleader suit against the United States. However, it is well-established that "[t]he United States may not be required to interplead when it has not waived its sovereign immunity." Ky. ex rel. United Pac. Ins. Co. v. Laurel County, 805 F.2d 628, 636 (6th Cir.1986) (quoting 7 Charles A. Wright, Arthur R. Miller, & Mary Kay Kane, Fed. Practice and Procedure § 1721, at 654 (2d ed.1986)); see also United States v. Dry Dock Sav. Inst., 149 F.2d 917, 918-19 (2d Cir.1945); Moore's Fed. Practice, § 22.08[1]. "An interpleader proceeding does not establish jurisdiction." Laurel County, 805 F.2d at 636. Thus, this court does not have jurisdiction over Winyah Defendants' interpleader action against the United States unless they can unequivocally show that the United States has waived its sovereign immunity.³

Winyah Defendants argue that the United States has waived its sovereign immunity under 28 U.S.C. § 2410(a)(5), which provides that "the United States may be named a party in any civil action or suit ... of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien."⁴ The United States argues that this statute does not apply because it has never had nor claimed to have "a mortgage or other lien" on any real or personal property of the Winyah Defendants. Winyah Defendants do not dispute that the United States never had a mortgage or lien against their property. Rather, Winyah Defendants argue that the United States had a "claim" against them because it sought to recover money from them based on allegations of false claims. (Winyah Response at 14-15.) Winyah Defendants argue that this claim was essentially a lien, and the United States should not be required to assert a formal lien before waiving its sovereign immunity to an interpleader action under § 2410(a)(5). (Winyah Response at 14-15.)

However, the plain text of § 2410(a)(5)—entitled "[a]ctions affecting property on which United States has lien"—refers only to "a mortgage or other lien." A "lien" is defined as "[a] legal right or interest that a creditor has in another's property, lasting usu[ally] until a debt or duty that it secures is satisfied." Black's Law Dictionary 922 (6th ed.1990). "[T]he United States contended] that it ha[d] certain civil claims against Winyah under the False Claims Act, 31 U.S.C. §§ 3729-3733, other federal statutes, and/or common law doctrines." (Settlement Agreement ¶ 11(D).) However, it never claimed to have "a mortgage or other lien" on these funds. The United States settled with Winyah Defendants without filing any complaint asserting these claims. In the cases cited by the Winyah Defendants in which courts have required the United States to interplead under § 2410(a)(5), the United States had formal tax liens. See TMG II v. United States, 778 F.Supp. 37, 42 (D.D.C.1991); Kulawy v. United States, 917 F.2d 729 (2d Cir.1990). Winyah Defendants have not cited any precedent for requiring the United States to interplead based on an investigation and settlement of potential claims under the False Claims Act on the grounds that such investigation and claims amount to a "mortgage or other lien" within the scope of § 2410(a)(5). Such an expansive interpretation of § 2410(a)(5) would vastly expand the scope of cases in which the United States would be required to interplead under this statute. Thus, under its plain language,⁵ § 2410(a)(5) does not apply to this case because there is no "real or personal property on which the United States has or claims a mortgage or other lien."⁶

Winyah Defendants also argue that this court has jurisdiction under 28 U.S.C. § 1331, the federal question subject matter jurisdiction statute. (Winyah Response at 10 n.1.) However, §...