Case 2:18-cv-01479-KOB-HNJ Document 532 Filed 01/28/21 Page 1 of 10
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`FILED
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` 2021 Jan-28 PM 01:04
`U.S. DISTRICT COURT
`N.D. OF ALABAMA
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ALABAMA
`SOUTHERN DIVISION
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`ROCHE DIAGNOSTICS
`CORPORATION, et al.,
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`vs.
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`PRIORITY HEALTHCARE
`CORPORATION, et al.,
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`Plaintiffs,
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` ) Civil Action No.: 2:18-cv-01479-KOB-HNJ
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`Defendants.
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`MEMORANDUM OPINION
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`This matter is before the court on Defendant Phillip Minga’s “Motion to Set Aside
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`Default Judgment” (doc. 489) and Defendants Konie Minga; Priority Healthcare Corporation;
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`Medpoint, LLC; and Medpoint Advantage, LLC’s “Motion to Set Aside Default” (doc. 491). The
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`court refers to these five Defendants as the “Defaulted Defendants.” Plaintiffs Roche Diagnostics
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`Corporation and Roche Diabetes Care, Inc., filed a response in opposition to the Defaulted
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`Defendants’ motions. (Doc. 495). The motions are ripe for review. For the reasons discussed
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`below, the court DENIES the Defaulted Defendants’ motions to set aside the default judgment.
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`I. Background
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`Roche—an international healthcare conglomerate and diabetic test strip manufacturer—
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`filed the instant suit on September 11, 2018, bringing claims against approximately 40
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`Defendants for common law and statutory fraud, conspiracy to commit fraud,
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`negligent misrepresentation, unjust enrichment, and violations of the Racketeer Influenced and
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`Corrupt Organizations Act. (Docs. 1, 90, 306). Roche alleges that both Individual and Corporate
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`Defendants1 submitted fraudulent rebate adjudications to insurance companies and pharmacy
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`benefit managers (PBMs) for Roche’s test strips, costing Roche more than $30 million. Roche
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`avers that spouses Konie and Phillip Minga led the enterprise, with Konie Minga owning the
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`Corporate Defendants and Phillip Minga acting as the de facto director of the scheme. Roche
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`specifically contends that the primary Corporate Defendant, PHC, owns or operates all the other
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`Corporate Defendants as subsidiaries for the purpose of generating, submitting, and processing
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`fraudulent insurance claims related to Roche’s test strips.
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`On January 3, 2020, Roche moved the court to issue case-ending sanctions. (Doc. 362).
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`On May 8, 2020, the court entered case-ending sanctions—a default judgment—against five of
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`the Defendants—Phillip Minga; Konie Minga; Priority Healthcare Corporation; Medpoint, LLC;
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`and Medpoint Advantage, LLC. (Doc. 424). In the memorandum opinion accompanying its
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`order, the court reasoned that issuing case-ending sanctions was appropriate because evidence
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`“clearly and convincingly” showed that the Defaulted Defendants “engaged in egregious bad-
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`faith behavior by falsifying hundreds of key discovery documents and refusing to acknowledge
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`their fraud,” undermining the integrity of the judicial process. (Doc. 423 at 2).
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`On June 8, 2020, Defaulted Defendant Phillip Minga and Defaulted Defendants Konie
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`Minga; Priority Healthcare Corporation; Medpoint, LLC; and Medpoint Advantage, LLC filed
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`motions to set aside the default. (Docs. 442, 443). Shortly thereafter, the Defaulted Defendants
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`filed for bankruptcy, and the court stayed the case and struck the motions to set aside the default.
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`The court has identified which Defendants are the “Individual Defendants” and
`which Defendants are the “Corporate Defendants” in a previous memorandum opinion. (Doc.
`212 at 2–3 nn. 1–2).
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`(Doc. 446). On October 21, 2020, shortly after Defendants’ bankruptcy cases were dismissed, the
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`court lifted the stay. (Doc. 480). On October 29, 2020, Defendant Phillip Minga refiled his
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`Motion to Set Aside Default Judgment. (Doc. 489). Defendants Konie Minga; Priority
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`Healthcare Corporation; Medpoint, LLC; and Medpoint Advantage, LLC also refiled a Motion to
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`Set Aside Default, adopting and incorporating Mr. Minga’s arguments. (Doc. 491).2
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`II. Legal Standard
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`Under Federal Rule of Civil Procedure 55(c), a court may set aside an entry of default
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`for good cause and set aside a final default judgment in accordance with Rule 60(b). The
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`Advisory Committee notes to the 2015 amendment of Rule 55 state that
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`Rule 55(c) is amended to make plain the interplay between Rules 54(b), 55(c), and 60(b).
`A default judgment that does not dispose of all of the claims among all parties is not a
`final judgment unless the court directs entry of final judgment under Rule 54(b). Until
`final judgment is entered, Rule 54(b) allows revision of the default judgment at any time.
`The demanding standards set by Rule 60(b) apply only in seeking relief from a final
`judgment.
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`Fed. R. Civ. P. 55(c) advisory committee’s note (emphasis added).
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`In his motion to set aside default judgment, Defendant Phillip Minga argues that the court
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`should have entered a default, not a default judgment, because “the issue of damages, if any, has
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`not been determined.” (Doc. 489 at 2). As the court explains further below, the court did not err
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`in entering a default judgment instead of a mere default. Mr. Minga makes this argument in part
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` 2
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`Ms. Minga; Priority Healthcare Corporation; Medpoint, LLC; and
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`Medpoint Advantage join in Mr. Minga’s arguments in their Motion to Set Aside Default. (Doc.
`491). Throughout this opinion, the court refers to Mr. Minga’s arguments for ease of reading.
`Mr. Minga’s arguments are, however, joined by the other Defaulted Defendants, and the court’s
`analysis applies to all the Defaulted Defendants.
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`because he would like the court to apply the “good cause” standard, rather than the Rule 60(b)
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`standard in reviewing his motion to set aside the default. For a normal default judgment, Rule
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`54(b) is the appropriate standard to apply because a default judgment that does not resolve all
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`claims among all parties is not a final judgment. However, “if a party willfully defaults by
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`displaying either an intentional or reckless disregard for the judicial proceedings, the court need
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`make no other findings in denying relief” when considering a motion to set aside an entry of
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`default. Compania Interamericana Export-Import, S.A. v. Compania Dominicana de Aviacion,
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`88 F.3d 948, 951–52 (11th Cir. 1996).
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`Plaintiffs argue that the Defaulted Defendants’ motions are more properly characterized
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`as motions for reconsideration, not motions to aside the default judgment. Even if the court
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`considers the motions as motions for reconsideration, Rule 54(b) is the standard, as Rule 54(b) is
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`the more proper standard of review for interlocutory orders, rather than Rule 59(e). Under Rule
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`54(b), a court may revise “any order or other decision . . . that adjudicates fewer than all claims
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`or the rights and liabilities of fewer than all the parties” at “any time before the entry of a
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`judgment adjudicating all the claims and all the parties’ rights and liabilities.” Whether to grant a
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`motion to reconsider under Rule 54(b) is “committed to the sound discretion of the district
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`judge.” Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 993 F.2d 800, 806 (11th
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`Cir. 1993).
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`Rule 54(b) “does not delineate the parameters of a district court’s discretion to reconsider
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`interlocutory orders, [but the Eleventh Circuit] ha[s] at least indicated that Rule 54(b) takes after
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`Rule 60(b).” Hermann v. Hartford Life & Accident Ins. Co., 508 Fed. Appx. 923, 927 n. 1 (11th
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`Cir. 2013) (citing Fernandez v. Bankers Nat’l Life Ins. Co., 906 F.2d 559, 569 (11th Cir. 1990)).
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`Under Rule 60(b), a court may provide relief for reasons such as “mistake, inadvertence,
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`surprise, or inexcusable neglect” and “any other reason that justifies relief.” But the court finds
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`that no reason justifies relief from its previous order issuing a default judgment against the
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`Defaulted Defendants.
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`III. Discussion
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`On June 10, 2020, this court stayed this case after the Defaulted Defendants filed a
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`suggestion of bankruptcy. (Doc. 446). In staying the case, the court also struck the first motions
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`to set aside default Mr. Minga and the Defaulted Defendants filed. (Id.). In its order, the court
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`stated, “Even if the court considered the motions for reconsideration on their merits, the court
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`would deny both of them for the reasons explained in the memorandum opinion accompanying
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`the order granting default judgment.” (Id.). The court now DENIES the Defaulted Defendants’
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`motions to set aside default judgment for the reasons explained below, as well as the reasons
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`explained in the memorandum opinion accompanying the order entering default judgment (doc.
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`423).
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`A. Entry of Default vs. Default Judgment
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`Mr. Minga first argues that the court erred in entering a default judgment, rather than an
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`entry of default, because the issue of damages has not yet been determined. (Doc. 489 at 2).
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`Typically, two steps lead to a default judgment: first, an entry of default and second, an entry of
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`default judgment. Fed. R. Civ. P. 55. Here, the court entered default judgment as a sanction; an
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`entry of default was never entered because default is typically used when a party fails to answer
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`or otherwise defend.
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`In support of his assertion that the court erred in entering default judgment, Mr. Minga
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`points to the Eleventh Circuit’s opinion in SEC v. Smyth, 420 F.3d 1225 (11th Cir. 2005). In
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`Smyth, the Eleventh Circuit held that a district court erred when it granted a motion for “final
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`judgment” without an evidentiary hearing. Id. at 1233. In considering whether the district court
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`had abused its discretion in not granting an evidentiary hearing, the Eleventh Circuit cited
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`approvingly the Seventh Circuit’s opinion in Lowe v. McGraw-Hill Cos., 361 F.3d 335 (7th Cir.
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`2004). Smyth, 420 F.3d 1225, 1231. In Lowe, the Seventh Circuit stated:
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`The Federal Rules of Civil Procedure make a clear distinction between the entry of
`default and the entry of default judgment. The default is entered upon the defendant’s
`failure to plead or otherwise defend, Fed. R. Civ. P. 55(a), but if an evidentiary hearing
`or other proceedings are necessary in order to determine what the judgment should
`provide, such as the amount of damages that the defaulting defendant must pay, those
`proceedings must be conducted before the judgment is entered.
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`Lowe, 361 F.3d 335, 339–40 (7th Cir. 2004) (emphasis added).
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`Mr. Minga relies on this language to support his argument that a “‘judgment’ cannot be
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`entered before a proceeding to establish the amount of the judgment (if any), i.e. the money
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`damages.” (Doc. 509 at 2). But he ignores the Seventh’s Circuit’s explanation of when a default
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`is entered: “upon the defendant’s failure to plead or otherwise defend.” The Defaulted
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`Defendants have failed to do many things, but they have not failed to defend, making a “default”
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`irrelevant and improper.
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` “[T]he controlling issue,” Mr. Minga continues his argument: “is whether a proceeding
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`is necessary to determine the amount of the judgment (money damages).” (Id.). In response,
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`Roche argues that Mr. Minga’s argument is “a purely semantic one.” (Doc. 495 at 10). The court
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`finds that, under Eleventh Circuit law, the court properly entered default judgment.
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`The court has imposed default judgment as to liability but not a final default judgment
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`awarding damages. As Plaintiffs point out, the Eleventh Circuit has referred to “the sanction of a
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`default judgment.” See Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536, 1542 (11th Cir.
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`1993) (“In this case, the defendants richly deserved the sanction of default judgment”). The
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`Eleventh Circuit has also repeatedly referenced district courts imposing default judgment when
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`damages have not yet been determined. See Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264,
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`1265 (11th Cir. 2003) (referring to a district court entering default judgment and then scheduling
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`an evidentiary hearing as to damages); Sloss Indus. Corp. v. Eurisol, 488 F.3d 922, 935 (11th
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`Cir. 2007) (stating that the “district court entered default judgment against [Defendants] on
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`liability, and set a trial on damages before a jury”); Adolph Coors v. Movement Against Racism
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`and the Klan, 777 F. 2d 1538, 1543 (11th Cir. 1985) (“The only effective remedy was the entry
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`of a default judgment and assessment of damages.”).
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`Unlike the Seventh Circuit, which—only speaking to a failure to defend—stated in Lowe
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`that “if an evidentiary proceeding or other proceedings are necessary in order to determine what
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`the judgment should provide . . . those proceedings must be conducted before the judgment is
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`entered,” the Eleventh Circuit appears to have made a distinction between entering default
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`judgment as to liability and entering final default judgment awarding damages. Compare Lowe v.
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`McGraw-Hill Cos., 361 F.3d 335, 339–40 (7th Cir. 2004) with Anheuser Busch, Inc. v. Philpot,
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`317 F.3d 1264, 1265 (11th Cir. 2003); Sloss Indus. Corp. v. Eurisol, 488 F.3d 922, 935 (11th Cir.
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`2007); and Adolph Coors v. Movement Against Racism and the Klan, 777 F. 2d 1538, 1543 (11th
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`Cir. 1985).
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`Indeed, multiple district courts within the Eleventh Circuit have imposed a default
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`judgment when damages have not yet been determined. See Hinson v. Webster Industries, 240
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`F.R.D. 687, 689 (M.D. Ala. Feb. 8, 2007) (discussing the court’s entering a default judgment as
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`to liability and then setting a hearing to determine damages); Dixie Group v. Meadows, 2010 WL
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`11603085, at *2 (N.D. Ga. Jan. 12, 2010) (“The default judgment, however, is not final, because
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`the Court has not yet computed damages.”); Intercontinental Hotels Grp., Inc. v. Weis Builders,
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`Inc., 2007 WL 2705559, at *1 n. 1 (N.D. Ga. Sept. 12, 2007) (referencing “cases where default
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`judgment has been entered but is not final because damages have yet to be computed”).
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`Here, the court entered default judgment as to liability as a sanction for the Defaulted
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`Defendants’ bad-faith behavior. Federal Rule of Civil Procedure 55(b)(2) provides that “[t]he
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`court may conduct hearings or make referrals—preserving any federal statutory right to a jury
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`trial—when, to enter or effectuate judgment, it needs to: (A) conduct an accounting; [or] (B)
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`determine the amount of damages . . .” (emphasis added). Here, the court has decided to conduct
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`a hearing to determine the amount of damages. Once it does so, it will enter final default
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`judgment against the Defaulted Defendants for including damages.
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`Under Eleventh Circuit law, Mr. Minga’s argument that the court erred in entering
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`default judgment as to the Defaulted Defendants’ liability fails.
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`B. Setting Aside the Default Judgment
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`Mr. Minga urges the court to set aside its “draconian” default judgment and decide
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`the case on the merits. (Doc. 489 at 3–4). As Roche notes in its response to Mr. Minga’s motion,
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`Mr. Minga rehashes a number of arguments he made in opposition to Roche’s initial motion for
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`sanctions. (Doc. 496 at 7). Mr. Minga argues that the Defaulted Defendants should not be held
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`liable for action or inaction of their former counsel, that sanctions were inappropriate because the
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`misconduct occurred prior to the filing of the Second Amended Complaint, and that the
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`Defaulted Defendants were not personally involved in discovery misconduct. (Doc. 489). As to
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`the argument that the Defaulted Defendants should not be liable for former counsel’s failure to
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`correct “falsified discovery documents,” the court previously rejected the Defendants’ argument
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`that it was their attorneys’ conduct that should be sanctioned. (Doc. 423 at 4–5). The Defaulted
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`Defendants falsified the documents, not their attorneys.
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`The court also explicitly rejected Mr. Minga’s argument that sanctions were
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`inappropriate because the misconduct occurred before the filing of the Second Amended
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`Complaint, stating that “Phil Minga’s alleged misdeeds relate[d] to the case currently before the
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`court.” (Id. at 13). Lastly, this court previously found that case-ending sanctions were
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`appropriate because evidence “clearly and convincingly” showed that the Defaulted Defendants
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`“engaged in egregious bad-faith behavior by falsifying hundreds of key discovery documents and
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`refusing to acknowledge their fraud,” undermining the integrity of the judicial process. (Id. at 2).
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`The court stated that “Roche’s allegations and evidence pertaining to PHC; Medpoint
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`Advantage, LLC [as well as Medpoint, LLC]; Phil Minga; and Konie Minga are particularized
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`and convincing.” (Id. at 10). The court also stated that “Roche [] provided clear evidence that
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`Medpoint Advantage [as well as Medpoint, LLC] and PHC—acting through owners and
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`operators Phil and Konie Minga—deliberately perpetrated fraud on Roche and the court by
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`altering hundreds of critical discovery documents.” (Id. at 11).
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`The court explained at length its decision to use its inherent power to issue case-
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`ending sanctions against the Defaulted Defendants in its previous memorandum opinion and
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`does not need to repeat all of its reasoning here. The Defaulted Defendants displayed an
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`intentional disregard for the proceedings before this court and offered no evidence of any kind in
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`response to Roche’s motion for sanctions. (Doc. 423 at 8). In their response to the Defaulted
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`Defendants’ motions to set aside the default judgment, Roche argues that the Defaulted
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`Defendants continue to act in bad faith. (Doc. 495 at 5). The court does not need to consider the
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`Defaulted Defendants’ conduct since the time the default judgment was entered. The Defaulted
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`Defendants have given the court no just reason to set aside its default judgment. For the reasons
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`explained above, the court DENIES the Defaulted Defendants’ motions to set aside the default
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`judgment. The court will schedule a hearing to determine damages by separate order.
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`DONE and ORDERED this 28th day of January, 2021.
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`____________________________________
`KARON OWEN BOWDRE
`UNITED STATES DISTRICT JUDGE
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