United States of America ex rel. et al v. D.S. Medical LLC et al

Filing 505

MEMORANDUM AND ORDER re: 494 MOTION to Stay Defendants' Motion for a Stay Pending Appeal and for Approval of a Supersedeas Bond filed by Defendant Deborah Seeger, Defendant Sonjay Fonn, Defendant Midwest Neurosurgeons, LLC. IT IS HEREBY ORDERED that Defendants' motion for to stay execution of the judgment pending appeal and for approval of a supersedeas bond is GRANTED in part and DENIED in part, as set forth above. (ECF No. 494.)IT IS FURTHER ORDERED that execution on the judgment is temporarily stayed until June 18, 2020, with no bond requirement, in order to permit the parties to engage in good-faith settlement negotiations. IT IS FURTHER ORDERED that, no later than May 22, 2020, the parties shall file a sta tus report confirming that all parties have agreed to engage in good-faith settlement negotiations. If Defendants advise that they are unwilling to engage in good-faith settlement negotiations, this Order may be modified accordingly. IT IS FURTHER OR DERED that, no later than June 18, 2020, the parties shall file a status report regarding their settlement negotiations. Absent a settlement or good cause shown, the temporary stay entered above will be lifted on June 18, 2020, and any further stay will require Defendants to post a supersedeas bond of $5,495,931.22. (Response to Court due by 6/18/2020, Status Report due by 5/22/2020.) Signed by District Judge Audrey G. Fleissig on 5/20/20. (CSG)

Case: 1:12-cv-00004-AGF Doc. #: 505 Filed: 05/20/20 Page: 1 of 5 PageID #: 12634

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISOURI
SOUTHEASTERN DIVISION

UNITED STATES OF AMERICA,
ex rel. PAUL CAIRNS, et al.,
Plaintiff,
vs.
D.S. MEDICAL, L.L.C., et al.,
Defendants.

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Case No. 1:12CV00004 AGF

MEMORANDUM AND ORDER
The Court entered judgment in this qui tam action under the False Claims Act
(“FCA”) on September 25, 2018, in the amount of $5,495,931.22 against D.S. Medical
LLC, Midwest Neurosurgeons, LLC, Dr. Sonjay Fonn, and Deborah Seeger, jointly and
severally. The Court thereafter denied Defendants’ motions for judgment as a matter of
law, for a new trial, and to dismiss.
The matter is now before the Court on Defendants’ motion for to stay execution on
the judgment pending appeal and for approval of security in the form of a parcel of real
property known as The Surgery Center, 65 Doctors Park Circle, Cape Girardeau,
Missouri (“Property”), in lieu of a supersedeas bond. The Court held a telephone
conference with the parties on May 19, 2020, regarding this motion and the status of the
case.
Defendants assert that the Property is owned by a non-party, Fonn Enterprises,
LLC, but that Defendant Dr. Sonjay Fonn owns 100% of Fonn Enterprises, LLC.
Defendants further assert that the Property has an appraised value of $5.2 million, based

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on a July 2019 appraisal attached to their motion, and that the Property has no
encumbrances. Defendants contend that, although they are able to satisfy the judgment,
their assets are not liquid and are primarily held in real estate and other property that
would have to be sold in order to post a supersedeas bond. 1
The government and relators oppose the motion on the ground that Defendants’
proposal does not provide adequate security for the full amount of the judgment. In
particular, the government argues that there is insufficient evidence of the value of the
Property or what it might be worth after any appeal is ultimately resolved; Defendants
have not adequately explained the logistics of their proposal; the Property is not owned
directly by a named party; and even assuming Defendants’ appraisal is accurate, the value
of the Property is still less than the principal amount of the judgment.
“At any time after judgment is entered, a party may obtain a stay by providing a
bond or other security. The stay takes effect when the court approves the bond or other
security and remains in effect for the time specified in the bond or other security.” Fed.
R. Civ. P. 62(b).
The purpose of a bond is to secure a prevailing party from loss resulting from the
stay of execution on the judgment in its favor. Miami Int’l Realty Co. v. Paynter, 807
F.2d 871, 873 (10th Cir. 1986). “[T]here is a presumption in favor of requiring a bond,
and the party seeking [to] dispense with the requirement bears the burden of showing
why a bond should not be required.” Barfield v. Sho-Me Power Elec. Co-op., No. 2:11-

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Defendants further note that the government has withheld $400,000 in payments
from Medicare and Medicaid at issue in this litigation, which would also count toward
satisfying any judgment.
2

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CV-04321-NKL, 2015 WL 4159988, at *2 (W.D. Mo. July 9, 2015) (internal quotation
marks and citations omitted).
“The general rule is for the district court to set a supersedeas bond in the full
amount of the judgment plus interests, costs, and damages for delay.” Halbach v. GreatW. Life & Annuity Ins. Co., No. 4:05CV022399ERW, 2009 WL 214671, at *1 (E.D. Mo.
Jan. 28, 2009). While a district court has discretion to waive the bond requirement or to
only require a partial bond, “ a full supersedeas bond is the norm.” Id.
Defendants have not cited, and the Court has not found, any precedent in the
Eighth Circuit for accepting real property as security in lieu of a supersedeas bond under
Rule 62(b). And from the Court’s review, the few district courts in other jurisdictions
that have done so have required that the value of the property exceed the judgment
amount. Compare Brooktree Corp. v. Advanced Micro Devices, Inc., 757 F. Supp. 1101,
1104-05 (S.D. Cal. 1990) (“AMD’s request to stay the execution of this judgment without
the posting of a supersedeas bond is granted. However, AMD will be required to post real
property security with a value of twice the amount of the judgment.”), and Athridge v.
Iglesias, 464 F. Supp. 2d 19, 24 (D.D.C. 2006) (granting the defendants’ motion to post
real estate holdings as security for the judgment where the value of defendants’ real estate
holdings exceeded the amount of judgment awarded by more than $1 million), with
Leevson v. Aqualife USA Inc., No. 14CIV6905JBWVMS, 2017 WL 6541766, at *5
(E.D.N.Y. Dec. 8, 2017) (rejecting the defendants’ request, which was based on their lack
of liquid assets and interest in continuing to operate their businesses, to use a commercial
building they owned as collateral in lieu of obtaining a supersedeas bond where the value
of the property was equal to the judgment amount), report and recommendation
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adopted, No. 14-CV-6905, 2017 WL 6550683 (E.D.N.Y. Dec. 21, 2017).
Even accepting Defendants’ assessment of the Property’s value, the Property is
worth less than the judgment amount here. Moreover, the collection process with respect
to real property is neither simple nor certain to provide the “full and fast relief” that a
supersedeas bond would. See Leevson, 2017 WL 6541766, at *4. Further complicating
the process is that the Property is not owned by a named party. Finally, the Court is not
convinced that Defendants’ only option to obtain a supersedeas bond is to require Fonn to
sell the real property.
For all of these reasons, the Court thus exercises its discretion to deny Defendants’
request to use the Property as their form of security under Rule 62. The Court will set the
amount of the supersedeas bond at the principal amount of the judgment, $5,495,931.22,
without interest or costs.
However, for the reasons discussed with the parties during the May 19, 2020
telephone conference, and as agreed to by the parties during that conference, the Court
will grant a temporary stay of execution on the judgment for a period of 30 days, without
requiring Defendants to post a bond, in order to permit the parties to engage in good-faith
settlement negotiations. Absent a settlement or good cause shown, any further stay will
require Defendants to post a bond in the above-noted amount.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ motion for to stay execution of the
judgment pending appeal and for approval of a supersedeas bond is GRANTED in part
and DENIED in part, as set forth above. (ECF No. 494.)
IT IS FURTHER ORDERED that execution on the judgment is temporarily
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stayed until June 18, 2020, with no bond requirement, in order to permit the parties to
engage in good-faith settlement negotiations.
IT IS FURTHER ORDERED that, no later than May 22, 2020, the parties shall
file a status report confirming that all parties have agreed to engage in good-faith
settlement negotiations. If Defendants advise that they are unwilling to engage in goodfaith settlement negotiations, this Order may be modified accordingly.
IT IS FURTHER ORDERED that, no later than June 18, 2020, the parties shall
file a status report regarding their settlement negotiations. Absent a settlement or good
cause shown, the temporary stay entered above will be lifted on June 18, 2020, and any
further stay will require Defendants to post a supersedeas bond of $5,495,931.22.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE

Dated this 20th day of May, 2020.

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