Roche Diagnostics Corp. v. Priority Healthcare Corp.

          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 ...