Brown v. American Institutes for Research, (Maryland U.S.D.C.) (Approved for Publication)

Opinion Issued May 17, 2007--Opinion by Judge Roger W. Titus. (Approved for publication.)

The first paragraph of the Court's opinion establishes its theme:

This case exemplifies the old adage that "you can lead a horse to water, but you can't make him drink." The Plaintiff is the horse of this story, and the water that she was led to, but would not drink, was effective service of process. In spite of repeated opportunities provided to the Plaintiff to effect valid service of process, she simply would not drink the water. However, valid service of process is essential to the concept of due process, and when it has not been effected, the due processes of the law cannot even begin. The details of this sad story follow.

The plaintiff first attempted to serve process on the corporation by serving an individual who was not an officer of the corporation. The name of the defendant as set forth in the complaint was also incorrect. Furthermore, the plaintiff used certified mail to make this first attempt, but failed to check the box on the return receipt requesting restricted delivery.

The defendant responded with a motion to dismiss under Fed.R.Civ.Proc. 12(b)(5) for failure to effect proper service. Attached to the motion was a printout from the Maryland State Department of Assessments and Taxation showing the correct name of the defendant and the name and address of the resident agent.

After the initial motion to dismiss was filed, the plaintiff made two additional attempts to effect service, one by certified mail to the same individual that the first attempt was made to, but at a different address, and another via private process server to the residence of a vice-president of the defendant. This time, the certified mail was signed for by an individual who was not authorized to accept service and the delivery by private process server was made only to the residence of the vice-president, not upon her personally. Oddly, the plaintiff's counsel again asserted that, after checking with appropriate authorities in Maryland and the District of Columbia, he could not identify a resident agent for the defendant even though this information had been provided in the motion to dismiss previously filed by the defendant.

After reviewing both the federal rules and the pertinent Maryland rules regarding service of process, the Court granted the defendant's motion. It allowed the plaintiff until May 30, 2007, to properly effect service and, sua sponte, amended the complaint to reflect the correct name of the defendant. In its opinion, the Court quoted at length the late Chief Judge of the Court of Special Appeals of Maryland from the opinion in Colonial Carpets, Inc. v. Carpet Fair, Inc., 36 Md. App. 583, 374 A.2d 419, 420-21 (1977):

[P]rocedural rules are "the lawyer's compass and serve to help him steer through the narrows of pleading, pass the rocks of default, around the shoals of limitation, and safely into the harbor of judgment. It is a reckless sailor, indeed, who puts to sea without a compass, and it is a reckless lawyer who fails to familiarize himself with" the applicable procedural rules before filing and trying a case. [Chief Judge Gilbert] went on to lament that notwithstanding the importuning of appellate courts that the "rules of procedure are not to be considered as mere guides or Heloise's helpful hints to the practice of law, but rather precise rubrics that are to be read and followed, admonitions go unheeded by some practitioners. When that occurs, we are left to wonder whether we are engaged in an endless struggle, just as waves beat upon the shore, fall back and then repeat over and over ad infinitum."

Id. at 584-85, 374 A.2d at 421.

A copy of the opinion is available in PDF, as is a copy of the order.

U.S. v. Srivastava (U.S.D.C.)(Approved for Publication)

Signed March 6, 2007--Memorandum Opinion and Order by Judge Roger W. Titus. (Approved for publication.)

Defendant is a cardiologist practicing medicine through a Subchapter S Corporation who became the subject of a health care fraud investigation. In the course of the investigation, SA Marrero of HHS-OIG submitted a single affidavit in support of applications for three search warrants, which were ultimately approved. Two of the warrants applied to Defendant's medical offices, and the third authorized a search of Defendant's residence. Each warrant contained identical substantive language that authorized the seizure of a list of enumerated "records including, but not limited to, financial business, patient and other records related to" the Defendant's "business . . . which may constitute evidence . . .." SA Marrero then forwarded copies of seized documents between Defendant and the Bank of India to the U.S. Attorney's office, which documents were then forwarded to IRS and ultimately led to a formal investigation regarding possible tax fraud committed by the Defendant. Defendant then filed a Motion to Suppress based on its conclusion that the evidence in question had been obtained in violation of the Fourth Amendment, which motion was granted August 4, 2006.

The Government raised six main arguments in its Motion for Reconsideration: (1) The Court incorrectly interpreted the warrant; (2) the documents were not seized unlawfully; (3) more documents are related to Srivastava's business than the Court concluded because Srivasatava operates a Subchapter S corporation; (4) the evidence obtained in the IRS investigation was lawful; (5) the evidence should not have been suppressed under the independent source and the inevitable discovery doctrines; and (6) specifically, the Bank of India faxes should not have been suppressed.

The Court addressed all these arguments in the August 2006 opinion but repackaged some of its analysis with respect to the first and third arguments.

First, the Government suggested that the modifying clauses "related to the business" and "may constitute evidence of violations" should not be viewed as limits on the types of documents that could be seized. The Court, however, found these clauses must be read to limit the scope of the warrant in order to save it from what would otherwise be unconstitutional overbreadth. The Court determined that suppression was appropriate because of two additional and important factors. First, the quantity of the materials seized was significant. Many of the documents seized were not related to the investigation as the Government later returned many of them to the Defendant, although not until tax investigators had had an opportunity to review the contents. Further, SA Marrero specifically testified that he did not advise his agents on any limits regarding what they could collect and resulted in the seizure of many documents not authorized by the warrant, such as an invitation to a cultural event and a CVS "Extra Care" card. Thus, the Court's suppression order was rooted in the actions of the seizing agents who grossly exceeded the scope of the warrants and not simply the interpretation of the text of the warrants and accompanying affidavit.

Second, the Government argues that the type of corporation, Subchapter S, operated by Defendant is significant with respect to the volumes of documents collected by the agents, including the Bank of India documents, since he declared his income from the corporation on his individual tax return. The Court reasoned that, regardless of the type of business operated by Defendant, the agents should not have seized personal financial records and tax returns, and they should not have seized business records unless they tended to show violations of 18 USC §1347. These were the two simple and basic restrictions contained in the warrant but disregarded by Marrero. It was clear from Marrero's testimony that it was not as if the agents became confused during the search as to whether the documents were business or personal -- they went on a wholesale fishing expedition and seized all documents and many other personal affects without regard as to whether the documents or items were business records or demonstrative of health care fraud. Further, the Government argued that "some of the documents demonstrating defendant's income from a lucrative occupation and the disposition of that income may constitute health evidence of fraud (sic)." While it is true that evidence of extreme wealth or extravagant spending is admissible under the Federal Rules of Evidence, such evidence cannot be said to be evidence of health care fraud in this case. Unlike a typical drug dealer who has no legitimate source of income that would support an affluent lifestyle, Defendant was engaged in a legitimate and lucrative profession. As such, the Court rejected the so-called "proceeds of the crime" argument. The rationale that the financial records and tax returns seized were related to the Section 1347 investigation is also negated by the fact that the Government returned approximately 80% of the seized documents to the Defendant.

The full opinion is available in PDF.