3M Company v. APO Health, Inc. et al

Filing 44

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER granting 35 Motion for Default Judgment as to APO Health, Inc. and Universal Medical Distributors International, Ltd (Written Opinion). Signed by Judge Susan Richard Nelson on 11/19/12. (LPH)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
3M Company,
Plaintiff,

Case No: 11-CV-02120 (SRN/FLN)

v.
APO Health, Inc. (d/b/a Universal
Medical Distributors), and Universal
Medical Distributors International, Ltd.,
(d/b/a Universal Medical Distributors) ,
Defendants.

FINDINGS OF FACT,
CONCLUSIONS OF LAW AND
ORDER GRANTING 3M
COMPANY’S MOTION FOR ENTRY
OF DEFAULT JUDGMENT AGAINST
APO HEALTH, INC. AND
UNIVERSAL MEDICAL
DISTRIBUTORS INTERNATIONAL,
LTD.

This matter came before the Court on the Motion for Default Judgment [Doc.
No. 35] brought by Plaintiff against Defendants APO Health, Inc. (“APO”) and
Universal Medical Distributors International, Ltd. (“UMDI”). Having carefully
considered the Motion, and all the files, records, and proceedings herein, the Court
makes the following:
FINDINGS OF FACT
1.

The Summons and Complaint were filed with the Court on July 28,

2011. Service was accomplished upon APO on August 1, 2011 and upon UMDI on
August 1, 2011 and August 30, 2011. (Executed Summons [Doc. Nos. 3 & 9].)
2.

Plaintiff has settled all claims against former Defendants Kenneth R.

Leventhal and Universal Medsurg Supplies, Inc.

3.

Former Defendants Kenneth R. Leventhal and Universal Medsurg Supplies,

Inc. have settled all claims against Plaintiff.
4.

Former Defendants Kenneth R. Leventhal and Universal Medsurg Supplies,

Inc. deny all wrongdoing alleged in the Complaint and do not admit any liability or
responsibility to Plaintiff.
5.

Defendants APO and UMDI failed to plead or otherwise defend in this

action (Aff. of Matthew J. McClenahan ¶ 5 [Doc. No. 38]), resulting in the Clerk’s Entry
of Default against them entered January 30, 2012. (Entry of Default [Doc. No. 21].)
6.

Plaintiff 3M Company (“3M”) is a manufacturer of industrial, medical and

consumer products whose global operations are headquartered in Maplewood, Minnesota.
3M sells its products through distributor agreements with authorized distributors
worldwide.
7.

APO and UMDI acted through themselves and other Defendants as

authorized distributors of 3M products between approximately 1997 and February 10,
2011.
8.

3M’s distributor agreement with Defendants APO and UMDI required

each distributor to provide 3M monthly point-of-sale reports (“POS Reports”)
itemizing sales of 3M products made by the distributor during the preceding month. A
distributor could then claim rebates for products sold to certain end-users identified
under a 3M National or Local Agreement.
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9.

The distribution agreement required distributors to provide accurate and

truthful information regarding a distributor’s sales and requested rebates.
10.

Defendants APO and UMDI submitted false information to 3M on their

POS Reports for the purposes of obtaining millions of dollars in rebates from 3M to
which they were not entitled.
11.

3M terminated its distribution agreement with Defendants APO and UMDI

on February 14, 2011 as a result of finding that Defendants had been submitting false POS
Reports in order to receive rebate payments from 3M that were not owed.
12.

3M terminated its distribution agreement with Defendants APO and UMDI

on February 14, 2011 as a result of its findings.
13.

Defendants APO and UMDI submitted hundreds of false statements to 3M

for the purpose of defrauding 3M and, as a result, were paid a total sum of $3,172,224 to
which they were not entitled.
CONCLUSIONS OF LAW
1.

Defendants APO and UMDI are in default, and Plaintiff is entitled to

Entry of Default Judgment.
2.

Defendants APO and UMDI were part of a Racketeer Influenced and

Corrupt Organization (“RICO”) enterprise under 18 U.S.C.§§ 1961(3) and 1962(c), the
purpose of which was to submit false rebate reports and to collect unearned rebates from
3M.
3.

Defendants APO and UMDI are liable to Plaintiff for all rebate monies
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wrongfully paid to APO and UMDI based on their fraudulent representations to Plaintiff,
for administrative fees paid by Plaintiff to Group Purchasing Organizations in reliance
upon the fraudulently reported sales by Defendants’ RICO enterprise, for treble damages
under RICO, and for reasonable attorneys’ fees and costs incurred as a result of this
litigation.
4.

Defendants APO and UMDI are liable to Plaintiff in the amount of

$3,172,224 for rebates they received, but to which they were not entitled.

(Affidavit of

Shawn Mothershead ¶ 9 [Doc. No. 39].)
5.

Defendants APO and UMDI are liable to Plaintiff in the amount of $50,067

for administrative fees Plaintiff paid to Group Purchasing Organizations in reliance on the
fraudulently reported sales by the RICO enterprise. (Id.)
6.

Defendants APO and UMDI are liable to Plaintiff in the amount of

$96,662.35 resulting from Defendants’ failure to pay invoices for product sold and
delivered. (Id. ¶ 10.)
7.

Defendants APO and UMDI are liable to Plaintiff in the amount of

$117,160.76 for their costs and reasonable attorneys’ fees, pursuant to 18 U.S.C.
§1964(c). (Id.¶ 9.)
8.

Pursuant to 18 U.S.C. §1964(c), “Any person injured in his business or

property by reason of a violation of section 1962 of this chapter [the RICO statute] may
sue therefor in any appropriate United States district court and shall recover threefold the
damages he sustains and the cost of the suit, including a reasonable attorney's fee. . . .” 18
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U.S.C. § 1964(c). Pursuant to this provision, Defendants APO and UMDI are liable to
Plaintiff for the rebates ($3,172,224.00) and administrative fees ($50,067.00), resulting in
trebled damages of $ 9,666,873. 00.
ORDER
IT IS ORDERED:
1.

That Plaintiff’s Amended Motion for Entry of Default Judgment Against

APO Health, Inc. and Universal Medical Distributors International, Ltd. [Doc. No. 35] is
GRANTED;
2.

Defendants APO Health, Inc. and Universal Medical Distributors

International, Ltd. are liable in the following amounts:
(a)

$9,666,873.00 for damages related to rebates fraudulently collected
by Defendants APO and UMDI,

(b)
(c)
3.

$96,662.35 for unpaid invoices; and
$117,160 for costs and reasonable attorneys’ fees.

This Order shall have no force or effect on former Defendants Kenneth R.

Leventhal and Universal Medsurg Supplies, Inc.
4.

Judgment shall be entered accordingly.

Date: November 19, 2012

s/Susan Richard Nelson
Susan Richard Nelson
United States District Court Judge

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