United States District Court, N.D. Alabama, Southern Division
MEMORANDUM OPINION
KARON
OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE
This
matter comes before the court on “Plaintiffs'
Motion for an Order Freezing Certain Assets of
Defendants.” (Doc. 252.) On October 23, 2019, the court
entered a temporary restraining order that froze five
financial accounts associated with the Minga
Defendants.[1] (Doc. 261.) Pursuant to the restraining
order, the court set a hearing to consider whether to enter a
preliminary injunction and maintain the freeze until the
underlying case is resolved.
Plaintiffs
and Defendants filed briefs with the court (Docs. 277, 276),
and Plaintiffs presented evidence in advance via affidavit
and during the hearing; Defendants could cross-examine any
affiants they wished. For the reasons explained at the end of
the hearing, as more thoroughly addressed below, the court
will GRANT Plaintiffs' motion for a
preliminary injunction to maintain the freeze on the Minga
Defendants' accounts. (Doc. 252.)
Background
On
December 21, 2018, Plaintiffs Roche Diagnostics Corporation
and Roche Diabetes Care, Inc., filed an amended complaint
against 40 Defendants affiliated with Priority Healthcare
Corporation, alleging multiple violations under the Racketeer
Influenced and Corrupt Organizations Act, as well as claims
of common law and statutory fraud, conspiracy to commit
fraud, negligent misrepresentation, unjust enrichment, and
money had and received. (Doc. 90.)
Roche,
a diabetic test strip manufacturer, alleges that Individual
and Corporate Defendants operate as a cooperative enterprise
to defraud medical insurance companies by billing insurance
companies for Roche test strips that are either not shipped
to patients at all, or are different from-and priced much
higher than-the products that patients actually receive.
Roche avers that spouses Konie and Phillip Minga lead the
enterprise, with Konie Minga owning the Corporate Defendants
and Phillip Minga acting as the de facto director of
the scheme. Roche specifically contends that Defendant
Priority Healthcare Corporation (“PHC”) owns or
operates all of the other Corporate Defendants as
subsidiaries for the purpose of generating, submitting, and
processing fraudulent insurance claims related to Roche's
test strips. Roche avers Defendants' scheme caused Roche
to pay multiple millions of dollars in unwarranted rebates
from which Defendants profited.
In
support of its motion for a temporary restraining order and
preliminary injunction, Roche submitted four affidavits and
numerous pages of deposition testimony and financial
documents, among other records. Roche contends that this
evidence portrays that (1) Priority Care's fraud scheme
is now undisputed, with Priority Care's corporate witness
Geneva Oswalt and former Defendant Christopher Daniel Knotts
both stating under penalty of perjury that Roche's
allegations of fraud are true; (2) the proceeds of this fraud
are held in identifiable investment accounts in the names of
shell entities owned by Konie Minga that were created to
conceal Defendants' assets; (3) Phillip and Konie Minga
withdrew or transferred $15 million from their business
accounts within days after Roche filed this lawsuit; and (4)
Defendants doctored over one hundred business records
produced in discovery in an effort to falsely understate the
magnitude of their theft.
Standard
of Review
Federal
Rule of Civil Procedure 65 governs preliminary injunctions.
Based on this rule, a preliminary injunction is appropriate
if the movant can establish: 1) a substantial likelihood that
it will prevail on the merits; 2) a substantial threat that
it will suffer irreparable injury if the injunction is not
granted; 3) that its threatened injury outweighs the
threatened harm the injunction may cause the opponent; and 4)
that granting the preliminary injunction will not disserve
the public interest. W. Point-Pepperell, Inc. v.
Donovan, 689 F.2d 950, 956 (11th Cir. 1982).
Analysis
Because
“the standard of review for a temporary restraining
order is the same as the standard of review for a preliminary
injunction, ” Butler v. Ala. Judicial Inquiry
Comm'n, 111 F.Supp.2d 1224, 1229 (M.D. Ala. 2000),
the court considers the same elements, and many of the same
facts, featured in the temporary restraining order. Beyond
challenging the four elements required for an injunction,
Defendants also raise several other arguments against
maintaining the asset freeze. The court considers the four
injunction elements and each of Defendants' ancillary
arguments below.
1.
Preliminary Injunction Elements
A.
Roche has demonstrated a substantial likelihood of success on
the merits.
Through
the evidence presented in its briefs and at the hearing,
Roche has shown a high likelihood of success on its unjust
enrichment claim against Defendants. First, Roche supported
the instant motion with evidence from former Defendant and
PHC employee Daniel Knotts, the estranged son-in-law of the
Mingas. Mr. Knotts admitted that the Defendants falsified
insurance claims based upon his review of pertinent records.
Second, the declaration of forensic accountant and certified
fraud examiner Kenneth Yormark demonstrates that the
Mingas' accounts likely contain profits derived from
Defendants' alleged fraud. Third, Geneva Oswalt's
testimony as Defendants' Rule 30(b)(6) witness further
corroborates Roche's claims that Defendants engaged in
large-scale fraud. Taken as a whole, this evidence exhibits a
substantial likelihood that the Defendants unjustly enriched
themselves at Roche's expense.
B.
Roche will suffer immediate and irreparable injury without a
preliminary injunction.
Roche
claims it is entitled to restitution and disgorgement based
on unjust enrichment. Roche compliance analyst Kerri
McAleavey testified that Roche has paid between approximately
$30.7 and $32.3 million in unwarranted rebates because of
Defendants' alleged fraud. Kenneth Yormark testified that
the Minga Defendants have transferred, via circuitous routes,
at least $32.7 million in profits from their alleged criminal
enterprise to the specific, non-business accounts the court
froze via the restraining order. Based on Roche's unjust
enrichment claim, and the court's upholding the viability
of that claim in denying the Defendants' most ...