United States of America v. Gray et al
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendants' Motion to Dissolve Preliminary Injunction (ECF No. 29 ) is DENIED. IT IS FURTHER ORDERED that Defendants' oral Motion for Evidentiary Hearing is DENIED. Signed by District Judge Ronnie L. White on June 3, 2016. (BRP)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
UNITED STATES OF AMERICA,
YEV GRAY, DPM,
NATALIE GRAY and
No. 4:15CV1580 RLW
MEMORANDUM AND ORDER
This matter is before the Court on Defendants' Motion to Dissolve Preliminary Injunction
(ECF No. 29). The motion is fully briefed, and on June 2, 2016, the Court heard oral argument
on said motion. Upon consideration of the arguments and evidence presented in support and in
opposition of the motion, the Court will deny Defendants' Motion to Dissolve Preliminary
On October 15, 2015 , Plaintiff United States of America ("United States") filed an Ex
Parte Complaint for Temporary Restraining Order and Preliminary and Permanent Injunction
under seal. On that same date, the United States filed an Emergency Ex Parte Motion for
Temporary Restraining Order and Preliminary Injunction pursuant to 18 U.S.C. § 1345 to
prevent further losses to the United States as a result of Defendants' conspiracy to execute a
health care fraud scheme. The United States averred that the government had identified losses to
Medicare of over $23 million stemming from the submission of fraudulent claims for podiatry
services that were either not covered, routine toenail trimmings, or services not performed or not
medically necessary. In the motion, the United States also noted that the Defendants were
indicted in a related criminal case on October 14, 2015 in this district. The motion sought to
freeze Defendants' assets derived from the fraud to ensure those assets were available to satisfy
On October 15, 2015, this Court granted a Temporary Restraining Order and set a
preliminary injunction hearing. On October 27, 2015, the Court held a telephone conference
during which time the parties discussed the United States' proposed order granting in part and
denying in part the motion for preliminary injunction. Upon agreement by the parties during the
teleconference, the Court issued an Order Granting in Part and Denying in Part the United States'
Motion for Preliminary Injunction. (ECF No. 11) The parties later agreed to an amendment of
that Order to allow the Defendants to withdraw funds for legal fees and fulfill payroll
obligations. (Order of 10/30/ 15, ECF No. 16) On November, 24, 2015 , the parties filed a Joint
Motion to Amend the Preliminary Injunction to Allow for Defendants' Reasonable Living
Expenses and Preservation of Real Property, which the Court granted the following day. (ECF
Nos. 26, 28)
On April 26, 2016, Defendant filed the instant Motion to Dissolve Preliminary
Injunction, claiming that Brady materials produced in the criminal case contained exculpatory
information rendering inaccurate the allegations in the United States' Complaint and Motion for
Preliminary Injunction. After the motion was fully briefed, the Court heard oral arguments on
June 2, 2016.
The parties agree that district courts have wide discretion to determine what
circumstances are appropriate for granting injunctive relief and under what circumstances the
dissolution of the injunction are warranted. Amado v. Microsoft Corp., 517 F.3d 1353, 1360
(Fed. Cir. 2008). Courts "look to equitable considerations to determine whether dissolution of
the injunction is warranted." Ams. United for Separation of Church & State v. Prison Fellowship
Ministries, 555 F. Supp. 2d 988, 991 (S.D. Iowa 2008). "The burden is on the party seeking
modification or dissolution of the injunction to demonstrate 'that a significant change in
circumstances warrants revision of the [injunction]. "' Id. at 992 (quoting Rufo v. Inmates of
Suffolk Jail, 502 U.S . 367, 383 (1992)). The burden may be satisfied by showing a significant
change in either the factual conditions or the law. Id. (citation and internal quotation omitted);
see also Sprint Commc 'ns Co. L.P. v. CAT Commc 'ns Int '!, Inc., 335 F.3d 235, 241-42 (3d Cir.
2003). The relevant issue is whether the grounds relied upon in issuing the preliminary
injunction are still sufficient to maintain the injunction in light of discovery. US Commodity
Futures Trading Comm 'n v. Garofalo, No. 10 C 2417, 2010 WL 11245430, at *7 (N.D. Ill. Dec.
21 , 2010).
Here, Defendants argue that the Brady materials produced by the United States materially
contradict the government' s pleadings and fundamentally undermine the grounds for injunctive
relief such that a significant change in circumstances has occurred. The Court disagrees. The
Court entered the Temporary Restraining Order ("TRO") on the grounds that Defendants were
committing and unless enjoined would continue to commit:
a Federal health care offense, by conspiring, in violation of 18 U.S.C. § 371, to
execute a health care fraud scheme in violation of 18 U.S .C. § 1347 and to make
and use false documents and statements concerning health care benefits and
services in violation of 18 U.S.C. § 1035, and by making and using false
statements and documents concerning health care benefits and services, in
violation of 18 U.S.C. § 1035.
(TRO of 1011 5/15 p. 1, ECF No. 6) Further, the Court found that Defendants were alienating or
disposing of property and intended to alienate or dispose of property that was obtained as a result
of a Federal health care offense, said property being traceable to such violation or of equivalent
value. (Id. at 2) Thus, the Court granted the motion for TRO under 18 U.S.C. § 1345 to protect
the public interest. (Id. ) The Court then relied upon the reasons stated in the TRO and as agreed
by the parties to grant in part and deny in part the United States' Motion for Preliminary
Injunction. (ECF No. 11)
In the instant case, Defendants have failed to show a significant change in circumstances
warranting dissolution of the preliminary injunction. While the Brady materials may or may not
be exculpatory in the criminal case, the United States has demonstrated under either a probable
cause or preponderance of the evidence standard that a fraud is being committed or will be
committed by Defendants under 18 U.S.C. § 1345. 1 In its motion, Defendants attempt to cherry
pick certain statements and argue that this evidence undermines the government' s entire case.
However, the government' s Complaint states, inter alia, that a former Aggeus podiatrist
witnessed the fraud of another Aggeus podiatrist, including routine services not covered by
Medicare but billed to Medicare as medically necessary. (Compl. if 43, ECF No. 1) Further, the
Declaration of the Special Agent of the United States Department of Health and Human
Services, Office of Inspector General, Office of Investigations ("Agent Declaration") indicated
several facilities, not individuals, complained about charges for services such as trimming skin
lesions when the Aggeus doctor did nothing but clip toenails. (Agent Deel.
iii! 128, 144, ECF
No. 1-1) Additionally, the Agent Declaration indicates that Defendants encouraged podiatrists to
The parties disagree as to the applicable standard of proof to believe a fraud is being
committed sufficient to issue an injunction under 18 U.S.C. § 1345. Compare US. v. Barnes,
912 F. Supp. 1187, 1194-95 (N.D. Iowa 1996) (finding that§ 1345 "requires the government to
show by the preponderance of the evidence, not merely probable cause to believe, that a fraud is
being committed ... [or that]the defendant is ' about to ' commit such a fraud") (emphasis in
original) internal citations omitted) with US. v. Fang, 937 F. Supp. 1186, 1197 (D. Md. 1996)
(concluding that "the ' reasonable probability' standard of conventional preliminary injunction
analysis equates with ' probable cause" ' and applies to a motion under§ 1345). The Court finds
that the government prevails under either standard and thus declines to speculate as to which
standard the Eighth Circuit Court of Appeals would apply.
order Doppler studies, even on those that did not qualify, to fraudulently bill the tests to
Medicare. (Agent Deel.
69, 90, 93)
The Court finds that, while Defendants may use the Brady materials as a defense at their
criminal trial, the evidence and arguments presented by Defendants does not show an overall
significant change in circumstances regarding the alleged fraud committed by Defendants.
Under 18 U.S.C. § 1345(a), if a person is committing or about to commit a Federal health care
offense, the government may bring a civil action in federal court to enjoin said violation. 18
U.S.C. § 1345(a)(l)(C). Further, ifthe person is alienating or disposing of property, or intends to
do so, and the property was obtained as a result of a Federal health care offense, the government
may commence a civil action for a restraining order to prohibit the person from disposing of such
property. 18 U.S.C. § 1345(a)(2)(B). The Defendants' motion and Brady materials do not
overcome the government's evidence noted by the Court, as well as other evidence in the
Complaint, warranting an injunction under§ 1345. Therefore, the Court will deny Defendants'
Motion to Dissolve Preliminary Injunction.
The Court also notes that Defendants requested an evidentiary hearing under 18 U.S.C. §
1345(b) both in reply brief and orally at the hearing. Defendants provide no support for the
proposition that they are entitled an evidentiary hearing after agreeing to the terms of the
preliminary injunction and its amendments. Further, the Court does not read the statute as
applicable to a motion to dissolve, nor do Defendants contend that the statute applies to the
dissolution of an injunction against fraud. Thus, the Court will deny Defendants' oral motion for
an evidentiary hearing.
IT IS HEREBY ORDERED that Defendants' Motion to Dissolve Preliminary
Injunction (ECF No. 29) is DENIED.
IT IS FURTHER ORDERED that Defendants' oral Motion for Evidentiary Hearing is
Dated this 3rd day of June, 2016.
UNITED STATES DISTRICT JUDGE
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