Fourth Circuit Allows Writs of Attachment against Defendants’ Property in False Claims Act Case

The United States Court of Appeals for the Fourth Circuit recently published a decision involving the government’s ability to execute writs of attachment against real and personal property as well as writs of garnishment against banks accounts. (See BlueWave Healthcare v. United States of America.)

In the underlying fraud case, Relators Lutz and Webster filed a qui tam action against a number of defendants including Robert Bradford Johnson, Floyd Calhoun Dent, and BlueWave HealthCare Consultants.  In April 2015, the United States government intervened in the case.  The relators and the government alleged that the defendants violated the Anti-Kickback Statute (42 U.S.C. 1320a-7b) and the False Claims Act (31 U.S.C. 3729 et seq.).

In 2016, the United States filed an application for prejudgment remedies under the Federal Debt Collection Procedure Act (FDCPA) before the trial court.  Specifically, the government pursued writs of attachment against personal and real property and writs of garnishment against bank accounts totaling approximately $16.7 million dollars.  This property is owned by a number of BlueWave entities, Dent and Johnson personally, and related nonparties.  The government argued that, because Defendants violated the Anti-Kickback Statute and the False Claims Act, Defendants owed the United States and the relators at least $298 million.  The government also alleged that prejudgment seizure was necessary because the defendants were actively concealing and disposing of assets.

In February 2016, the district court granted all but one of the government’s requested writs.  Defendants each filed motions to quash the writs.   In May 2016, the District Court found that the government had satisfied all of the FDCPA’s statutory requirements and denied the motions.  The defendants filed a notice of appeal to the 4^th Circuit Court of Appeals.

Appellants (the defendants in the underlying case) challenged the District Court’s denial of their motions to quash.   The appellants asserted that the order was reviewable as either a collateral order or an injunction.  The Court of Appeals rejected both arguments.  First, the Court looked to the three conditions required to apply the collateral order: “The order must (1) conclusively determine the disputed question, (2) resolve an important issue separate from the merits of the action and (3) be effectively unreviewable on appeal from a final judgment.” The Court focused on the second condition that requires that the order must resolve an important issue separate from the merits of the action.  The Court found that the order was so intertwined with the merits of the qui tam action, that the collateral order doctrine could not be applied.

Next, the Court turned to the argument that the order could be reviewed as an injunction.  The Court ruled that the order denying the motion to quash could not be reviewed as such because it did not meet the basic requirements of an injunction.  The Court concluded that the denial was an unreviewable interlocutory order and dismissed for lack of jurisdiction.

The ruling allows the government to keep the writs of attachment active and preserve the defendants’ funds until a final judgment is reached in the qui tam case.