Taul ex rel. United States v. Nagel Enters., Inc.
| Decision Date | 25 January 2016 |
| Docket Number | Case No.: 2:14-CV-0061-VEH |
| Parties | BARRY TAUL, ex rel., UNITED STATES OF AMERICA, Plaintiff, v. NAGEL ENTERPRISES, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
I. Introduction
This is an opinion disposing of Nagel Enterprises Inc., and Jed Nagel's ("Defendants" or "Nagel") motion for summary judgment under Rule 56. After careful consideration of the pleadings and record, the motion is GRANTED IN PART and DENIED IN PART. On the court's own motion under Rule 56(f), summary judgment is GRANTED against Defendants.
The court takes up an additional matter in this opinion, a motion to reconsider its denial of a motion to compel. The motion to reconsider is GRANTED. The motion to compel is DENIED.
Although it is ancient history by comparison, there was a criminal case filed on August 31, 2011, arising from the same facts and circumstances as this whistleblower action. In the criminal case, Demosthenes Lalisan and Richard Alan Hicks were charged with a conspiracy to defraud the United States and two counts of healthcare fraud. They pleaded guilty in the spring of 2012, and around that time, funds held by Defendants were seized in rem by the United States. Because the only facts at issue in the motion are those pertaining to the in rem release and whether Taul was the original source of the information, only they will be discussed herein.1
On March 7, 2012, the United States filed an action in rem against the seized funds under 18 U.S.C. § 981. (Doc. 61-1, ¶ 1). The funds were seized from accounts held by Nagel Enterprises and Jed Nagel. The complaint against the funds was supported by an affidavit of FBI Special Agent Michael Marquet, who repeated, in whole or in part, allegations made by Barry Taul ("Taul" or "Plaintiff"). (Id., ¶ 2). The allegations therein also support this qui tam action. Id. The government settled the claim against the funds for $1.1 million. (Id. ¶, 4). Thereafter, a judgment of forfeiture was entered in favor of the United States for $1.1 million. (Id. ¶ 5).
The parties disagree about whether the settlement of the in rem action also released the claims in this case and about whether the settlement was an accord and satisfaction discharging the claims in this case. (Doc. 61-1, ¶ 3).
Defendants believe Taul claims that in August of 2010, he went to the Federal Bureau of Investigation, met with Special Agent Marquet, and gave him a statement about the alleged scheme involving the Defendants. They further claim that Taul admits he has no copy of this statement and claims he cannot get one from the FBI. (Id. ¶ 13). For his part, Taul denies this, saying only that he spoke to Marquet in approximately August 2010, but not specific as to the time. (Doc. 69 ¶ 13).
Defendants claim that the verified United States complaint for forfeiture in rem sought to recover sums of money allegedly received by the Defendants in the instant case which are the identical United States funds Taul now seeks to recover as Relator in the instant qui tam case brought by Taul on behalf of the United States. (Id. ¶ 14). Taul disputes this, asserting that neither the complaint nor the affidavit assert that money in the in rem forfeiture was identical to damages in this case. (Doc. 69 ¶ 14).
Defendants state Taul contends that he reported the full details of the alleged scheme in which Defendants in the instant case were allegedly involved in defrauding the United States to Special Agent Marquet of the Federal Bureau of Investigation in August of 2010, but the qui tam complaint was not filed until January of 2014. (Id. ¶ 15). Taul denies this, saying only that he spoke to Marquet in approximately August 2010, but was not specific as to the time. (Doc. 69 ¶ 13).
Defendants say Taul claims that he informed the FBI of the fraud and illegal kickback scheme in August of 2010 after discovering the matter in June of 2009. (Id. ¶ 16). Taul denies this, saying only that he spoke to the FBI in approximately August 2010, but not specific as to the time. (Doc. 69 ¶ 13).
On January 13, 2014, the complaint in this case was filed under seal. (Doc. 1). The complaint is brought pursuant to the False Claims Act. The United States declined to intervene on March 28, 2014. (Doc. 6). Nagel and Nagel Enterprises were served in April 2014. (Doc. 9-10). On May 5, 2014, Nagel filed a motion to dismiss for lack of subject matter jurisdiction. (Doc. 15). The court denied this motion without prejudice because further factual development was required. (Doc. 28). Taul filed an amended complaint on April 13, 2015. (Doc. 47). In it, he asserted five grounds for relief: violations of 1) 31 U.S.C. § 3729(a)(1)(A); 2) 31 U.S.C. § 3729(a)(1)(C); 3) 31 U.S.C. § 3729(a)(1)(B); 4) retaliation under 31 U.S.C. § 3730(h); and 5) violation of 42 U.S.C. § 1320a-7b(b)(2). (Doc. 47).
Defendant answered the complaint on June 24, 2015, asserting a litany of affirmative defenses, including the "affirmative defense" of plaintiff's failure to comply with Rule 9(b). (Doc. 52). No pre-answer motion was filed in response to the amended complaint. On July 30, 2015, Nagel moved for summary judgment. (Doc. 61; 61-1). Plaintiff filed a response on August 20, 2015. (Doc. 69). Nagel filed a reply on September 2, 2015. (Doc. 70). The court ordered that Taul file a surreply on September 16, 2015, and he did so on October 7, 2015. On November 23, 2015, the court entered a notice pursuant to Rule 56(f)(1) that it was contemplating granting summary judgment in Taul's favor on certain issues. Defendants filed a response to the court's notice on December 13, 2015. Taul filed a response in support of summary judgment in his favor on December 22, 2015. The court denied Defendants' motion to file a reply to Taul. The motion is now under submission.
Jed Nagel and Nagel Enterprises, Inc., are bedeviled by the distinction between an in rem proceeding and an in personam proceeding. This appears to be because the same allegedly fraudulent kickback scheme gave rise to a criminal prosecution and related asset forfeiture under 18 U.S.C. § 981 and the instant 31 U.S.C. § 3730(b) whistleblower action. Since the distinction is critical to this opinion, and the Defendants' misapprehension of it is almost the entire basis of their forty-two pages of briefing in support of their motion for summary judgment, I will begin with a primer on the subject before proceeding to their arguments in support of summary judgment.
Federal courts most often hear actions in personam, which is a phrase that describes both the nature of the suit and the effect of the suit. The nature is "brought against a person rather than property." BLACK'S LAW DICTIONARY (10th ed. 2014), in personam. The effect of the in personam action "is to determine the rights and interests of the parties themselves in the subject matter of the action," and "to bind the parties to" that determination. R.H. Graveson, Conflict of Laws 98 (7th ed. 1974).
In contrast, an in rem action is Latin for "against a thing;" such an action determines interests in a thing. BLACK'S LAW DICTIONARY (10th ed. 2014), in rem. An in rem judgment is "conclusive as to those interests with regards to all persons" but "does not bind anyone with respect to a personal liability." RESTATEMENT (SECOND) OF JUDGMENTS § 30. An in rem action may feature claimants to property, but the claimants are not formally parties to the action. See United States v. Four Parcels of Real Property in Greene and Tuscaloosa Counties in State of Ala., 941 F.2d 1428, 1435 (11th Cir. 1991).
"Quaint[]," Austin v. United States, 509 U.S. 602, 625 (1993) (Scalia, J., concurring in part and concurring in the judgment) though it may be, a civil forfeiture action is an action against a thing, notwithstanding the fact that forfeiture is in some sense (often quite directly) derivative of a person's illicit conduct. Drawing on the common law deodand,2 id. at 616 (Blackmun, J.), civil forfeiture actions proceed on the theory that "the thing is primarily considered the offender." J.W. Goldsmith, Jr., Grant Co. v. United States, 254 U.S. 505, 511 (1921). For this reason, a civil forfeiture may lie notwithstanding the innocence of the property's (soon to be) former owner. See Dobbin's Distillery v. United States, 96 U.S. (6 Otto) 395, 401 (1877).
While the line is somewhat fuzzy, in rem actions should be distinguished from quasi in rem actions, in which the court is sometimes said to be exercising attachment jurisdiction. It is "jurisdiction [...] exercised only with respect to the thing proceeded against and in which the plaintiff seeks not to determine the existence of interests in the thing but rather to apply the thing to the satisfaction of a claim against the defendant." RESTATEMENT (SECOND) OF JUDGMENTS § 32.
Proceedings under section 981 of Title 18, which exist in aid of the court's criminal jurisdiction, cf. Republic Nat. Bank of Miami v. United States, 506 U.S. 80, 87 (1992) (), are somewhat closer to quasi in rem actions than a prototypical in rem proceeding, like an action to quiet title. But it is well settled that they are truly in rem. United States v. Real Prop. Located at 475 Martin Lane, Beverly Hills, CA, 545 F.3d 1134, 1144 (9th Cir. 2008); accord United States v. Certain Real Prop., Located at 317 Nick Fitchard Rd., N.W., Huntsville, AL, 579 F.3d 1315, 1317 (11th Cir. 2009). See also Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 69 (2d Cir. 2009) ().
To summarize: a section 981 forfeiture is an in rem proceeding against a thing; such a proceeding does not adjudicate personal rights. The forfeiture...
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