Jurisdiction to Freeze Assets but Not to Thaw Them

A recent Fourth Circuit opinion in a False Claims Act case demonstrates that while the government can freeze defendants’ assets before trial with lightning speed, getting them unfrozen can take anywhere from many years to never.

In 2014 whistleblowers filed a qui tam action against BlueWave Healthcare Consultants and related parties, alleging that they violated the Anti-Kickback Statute and False Claims Act by paying kickbacks to physicians for referring lab work to BlueWave clients—lab work that Medicare and TRICARE paid for.  The government intervened on the plaintiffs’ side.

On February 5, 2016, the government filed an application to attach various assets of defendants valued at $16.7 million, alleging that defendants were concealing and disposing of assets.  Within five days the district court granted the attachment.

When the district court denied the defendants’ motion to quash the attachment, they appealed to the Fourth Circuit.  On March 23 that court dismissed defendants’ appeal—not on the merits but because the court lacked jurisdiction to unfreeze the assets.

The court reasoned that Article III gives federal Courts of Appeal jurisdiction over only final judgments, subject to two very narrow exceptions.  This appeal didn’t fall within the collateral order exception because it wasn’t separable from the merits of the underlying case and didn’t involve an interest extending beyond the parties and implicating a broader public interest. Nor did the attachment fall within the injunction exception, because—surprise!—it wasn’t an injunction.

So the defendants must wait until conclusion of the underlying qui tam case—something that typically takes many years—for review of the attachment that the government got in five days.

But the defendants have a lot more to worry about than the frozen $16.7 million in assets.  The government alleges that the false claims totaled $333 million and that it’s entitled to treble damages plus penalties of up to $11,000 per tainted lab bill.  That means the defendants could face liability of over one billion dollars.

 

The case is United States ex rel. Lutz v. BlueWave Healthcare, No. 16-1597 (4^th Cir. 2017).