The United States v. BlueWave Healthcare Consultants, Inc.
| Decision Date | 29 October 2021 |
| Docket Number | Civil Action 9:14-0230-RMG |
| Parties | The United States of America, et al., Plaintiffs, v. BlueWave Healthcare Consultants, Inc., et al. Defendants. |
| Court | U.S. District Court — District of South Carolina |
Before the Court is the United States of America's memorandum in support of enforcing its writs of execution on bank accounts held in the names of Defendant Floyd Calhoun Dent III's adult children, Hunter Dent and Hailey Dent (Dkt. No. 1143) and Hunter and Hailey Dent's motion to quash the writs of execution (Dkt. No. 1145). The Court conducted an evidentiary hearing on October 20, 2021. For the reasons set forth below Hunter Dent's and Hailey Dent's motion to quash is denied.
In January 2018, following a twelve-day trial, a jury unanimously found Floyd Calhoun Dent III liable for multiple violations of the False Claims Act (FCA), 31 U.S.C. § 3729. The jury assessed actual damages in excess of $16 million and, after trebling damages and adding civil penalties pursuant to the FCA, the Court entered judgment against Dent for a total of $114, 148, 661.86.
The Government filed for writs of execution on bank accounts in which Dent had a substantial and nonexempt interest, which the Court granted. Dent and members of his family moved to stay and quash the writs of execution. After extensive Court-ordered discovery into Dent's assets, the Court granted Dent a partial stay of execution on the judgment, pending his appeal of the judgment to the Court of Appeals for the Fourth Circuit, subject to Dent posting a $30, 000, 000 less-than-full supersedeas bond. To preserve the status quo and secure the bond, the Court required Dent to deposit into the court registry the contents of several bank accounts in which the Court found Dent had a substantial and nonexempt interest.
Included among the bank accounts were three accounts, purportedly created under the South Carolina Uniform Gift to Minors Act (UGMA), in the names of Dent's three children, adult Hailey, adult Hunter, and “Minor L.D.” The Dent Children moved to exclude the accounts from Dent's assets subject to the bond, arguing that the Government's writs of execution were overbroad, that the funds in the accounts belonged to them, and thus that Dent lacked a substantial and nonexempt interest in the funds. The writs remained stayed pending Dent's appeal of the judgment, and the Court directed the parties to brief the issue of the Children's accounts[1] on cross motions for summary judgment. On review of that limited record, the Court awarded summary judgment to the Government, finding there was no dispute of material fact that Dent had a substantial nonexempt interest in the accounts in Hailey's and Hunter's names and, therefore, ordered those funds to be held in the court registry to partially secure Dent's appeal bond. The Court declined to find that Dent had a substantial nonexempt interest in the account in Minor L.D.'s name, based on the record before it, and instead appointed Colonial Trust as successor custodian to the account in light of Dent and his interested-non-party wife's clear conflicts of interest. (Dkt. No. 1027.)
The Dent Children appealed. The Fourth Circuit dismissed their appeal, finding it lacked jurisdiction because this Court's order on summary judgment “determined only that the assets in the Dent children's accounts should be transferred to the court as part of Dent's supersedeas bond.” United States v. Dent, 845 Fed.Appx. 220, 223, 2021 WL 613780 (4th Cir. Feb 17, 2021). In other words, this Court's order was not final and appealable because the Government had not sought, and therefore the Court had not made, a determination of the ultimate ownership of the Children's accounts, which the Government instead contended was more properly adjudicated following the resolution of Dent's appeal of the judgment.
Dent's appeal was resolved shortly thereafter, when the Fourth Circuit “affirm[ed] the judgment of the district court in all respects.” United States v. Mallory, 988 F.3d 730, 735 (4th Cir. 2021). Dent petitioned for rehearing or rehearing en banc, which the Fourth Circuit denied and issued its final mandate. (Dkt. No. 1099.) In light of that resolution, the Government moved to modify the conditions of Dent's appeal bond so as to execute on the writs of attachment and collect judgment on the assets securing the bond. Dent and his family members opposed. After reviewing the parties' briefing, the Court granted the Government's request to execute on the cash in the court registry, “except for the UGMA accounts of the Dent Children[.]” (Dkt. No. 1106.) Deliberately parsing the accounts in the Children's names, the Court directed the Government to separately propose a limited discovery and briefing schedule on the issue of executing on the purported UGMA accounts in Hailey, Hunter and Minor L.D.'s names. (Dkt. No. 1107.) The parties conferred and the Court granted their proposal to conduct discovery on and brief whether Dent has a substantial nonexempt interest in the Children's accounts. (Dkt. No. 1113.) The parties engaged in discovery for several weeks, thoroughly briefed the issue, and presented extensive documentary and testimonial evidence at a hearing conducted on October 20, 2021.
The Federal Debt Collection Procedures Act (FDCPA), 28 U.S.C. § 3001 et seq., is the Government's exclusive procedure to recover a judgment as a debt. “All property in which the judgment debtor has a substantial nonexempt interest shall be subject to levy pursuant to a writ of execution.” 28 U.S.C. § 3203(a). “Levy on property pursuant to a writ of execution issued under this section shall be made in the same manner as levy on property is made pursuant to a writ of attachment issued under section 3102(d).” Id. § 3203(d). Fed.R.Civ.P. 69(a)(1). Reference to state law is moreover appropriate because the FDCPA was designed to create a uniform framework for the collection of federal debts from a patchwork of state laws governing collection procedure. See, e.g., United States v. Coluccio, 842 F.Supp. 663, 666 (E.D.N.Y. 1994), vacated on other grounds, 51 F.3d 337 (2d Cir. 1995). “In aid of the judgment or execution, the judgment creditor or a successor in interest whose interest appears of record may obtain discovery from any person-including the judgment debtor-as provided in these rules or by the procedure of the state where the court is located.” Fed.R.Civ.P. 69(a)(2).
“A writ of execution may be challenged by an individual or entity claiming an ownership interest in the property.” United States v. West Indies Transport Co., Inc., 57 F.Supp.2d 198, 203 (D.V.I. 1999) (citing Coluccio, 842 F.Supp. at 665); see also United States v. Cox, No. 3:05-cr-92-GCM, 2008 WL 2397615, at *2 (W.D. N.C. June 10, 2008). “In such a situation, the burden of proving ownership of the subject property is borne by the claimant, not the judgment creditor.” West Indies Transport Co., Inc., 57 F.Supp.2d at 203.[2] At the October 20, 2021 evidentiary hearing, the Government and the Dent Children agreed that the claimant must prove ownership by a preponderance of the evidence. (Dkt. No. 1177 at 8.)
First, “[t]o prove ownership, the claimant must . . . provide some evidence of control.” West Indies Transport Co., Inc., 57 F.Supp.2d at 203. “While ownership may be proven by actual possession, dominion, control, title and financial stake, the possession of bare legal title to the res may be insufficient, absent other evidence of control or dominion over the property.” United States v. One 1982 Porche 928, 732 F.Supp. 447, 451 (S.D.N.Y. 1990). “Ultimately, the claimant must prove that its alleged title to the property is superior to the judgment creditor's right to execute judgment on the property.” West Indies Transport Co., Inc., 57 F.Supp.2d at 203. But proving ownership “does not end the inquiry.” Coluccio, 842 F.Supp. at 666. Next, the Court “must decide whether the [claimant] has a ‘substantial . . . interest' in the property.” Id. Courts have remarked that there are “no cases construing the terms ‘property' or ‘interest' within the meaning of the FDCPA.” Id. But the legislative history of the FDCPA indicates that “‘property' is defined broadly to encompass all present and future interests in real and personal property.” H.R. Rep. No. 101-736, 101st Cong., 2d Sess. (1990).
Last, the claimant must demonstrate that his substantial ownership interest is exempt from judgment. Looking to South Carolina law pursuant to Rule 69, property is exempt from judgment where it is a gift to a child made during the donor's lifetime pursuant to the UGMA, SC Code Ann. § 63-5-500 et seq. A gift made under the UGMA “is irrevocable.” Id. § 63-5-530(A).
It “conveys to the minor indefeasibly vested legal title to the . . . money[.]” Id. Because the custodian makes a UGMA gift for the child's benefit, the custodian is charged with specific statutory responsibilities. Most significantly, and reflecting the obvious nature of a gift, “the custodian must deliver or pay over the custodial property to the minor on his attaining the age of twenty-one years.” Id. § 63-5-540(D).
At issue is whether Dent has a substantial nonexempt interest in the bank accounts that he opened in Hailey's and Hunter's names. If he does, the Government may execute on the funds to...
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