Case ID: f-appx_61/html/0860-01.html
Source: Caselaw Access Project
Author: {"author": "PER CURIAM.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

UNITED STATES of America, EX REL. Syed RAHMAN, M.D., Plaintiff-Appellee, and Syed Rahman, M.D.; Oncology Associates, P.C., Plaintiffs, v. Douglas COLKITT, M.D.; Derdel Riverside Oncology Associates, P.C.; Derdel Chesapeake Oncology Associates, P.C.; Key West Oncology Associates, P.A.; Tampa Oncology Associates, P.A.; Community Radiation Therapy Associates, P.C.; Jefferson Radiation Oncology Center, LP; Oncology Services Corporation; Nixon Equipment Corporation; Thomas Jefferson Real Estate Corporation; George Washington Real Estate Corporation; Oaktree Cancer Care, Incorporated; Keystone Oncology, LLC; Rosewood Cancer Care, Incorporated, Defendants-Appellees, DVI Financial Services, Incorporated, Party in Interest-Appellant, Merrill Cohen, Chapter 7 Interim Trustee of EquiMed, Incorporated, Intervenor-Defendant-Appellee, and Jeny Derdel, M.D.; Joanne Russell; Oncology Funding Corporation; Stoneboro Oncology Associates, P.C.; Warren Oncology Associates, P.C.; Phoenixville Oncology Associates, P.C.; Littlestown Oncology Associates, P.C.; Lehighton Oncology Associates, P.C.; Exton Oncology Associates, P.C.; Bucks County Oncology Associates, P.C.; Greenbelt Cancer Treatment Center, L.P.; Atlantic Radiation Oncology, L.L.C.; Derdel Randallstown Oncology Associates, P.C.; Derdel Union Memorial Oncology Associates, P.C.; Treasure Coast Oncology Associates, P.A.; Lauderdale Lakes Oncology; St. Lawrence Oncology, P.C.; Liberty Oncology Associates, P.C.; Kings Plaza Radiology, P.C.; Southern New Jersey Cancer Treatment; Williams County Oncology Associates, P.C.; Park Oncology Associates, P.C.; Parks Oncology Associates, Incorporated; Greater Harrisburg Cancer Center, Incorporated; MGH Cancer Treatment Center, L.P.; Oncology Services Corporation of Lawnwood; Keys Cancer Center Limited Partnership; XCC, Incorporated; GPCC, Incorporated; IRCC, Incorporated; KRTC, Incorporated; LVCC, Incorporated; MGHCC, Incorporated; MHCC, Incorporated; Maryland General Cancer Center, Incorporated; St. Lucie County Radiation Oncology, Limited; Oncology Associates, PC of Indiana; Oncology Associates, PCOF Albemarle; Oncology Associates, PCOF Life Care; Oncology Associates, PCOF Heritage Hills; Derdel Maryland General Oncology Associates, PC; Kankakee Oncology Associates, PC; Oncology Associates, PCOF Pittsburgh; Oncology Associates, PCOF Harrisburg; Pleasant Hills Oncology Associates, PC; Oncology Associates, PCOF Lebanon; Flagstaff Oncology Associates, PC; Fort Pierce Oncology Associates, PC; Greenway Oncology Associates, PC; Greater Pittsburgh Oncology Associates, PC; Northwest Radiation Treatment Services, Incorporated; Marlton Oncology, PC; Randallstown Oncology Center, Incorporated; Westchester Oncology, PC; Chesapeake Regional Cancer Center, Incorporated; Union Memorial Oncology Center, Incorporated; Cancer Center of Northern Arizona Partnership; Tri State Oncology Associates, Incorporated; Salisbury Radiation Oncology Center, Incorporated; Heritage Hills Medical, LP; Riverside Oncology; Medtrend Health Systems, Incorporated; Broward Radiation Therapy Corporation; Lake Okeechobee Cancer Center, Incorporated; Lawnwood Regional Cancer Center, LP; St. Lawrence Oncology PCOF Ogdensburg; PMCB, Incorporated; St. Lawrence Oncology, PCOF Brooklyn; Oncology Services Corporation of Key West, Incorporated; Oneonta Radiation Oncology, PC; Oncology Services Corporation of Tampa, Incorporated; Greenbelt Cancer Treatment Center, L.P.; Billing Services, Incorporated; National Medical Financial Services Corporation; Colkitt Oncology Group, Incorporated; Skyline Oncology Associates, P.C.; Malone Oncology Associates, P.C.; JMR Medical Associates, P.C.; Carolina Cancer Care, LLC; Southern Oncology, P.A.; Eastern Pennsylvania Oncology, LLC; Massachusetts Radiation Oncology Services, P.C.; Chester County Oncology, LLC; Florida Oncology, P.A.; Coastal Oncology, LLC; Albemarle Regional Cancer Center, LP; Kings Plaza Incorporated, Defendants, v. Highmark, Incorporated, d/b/a Xact Medicare Services; Noridian Mutual Insurance Company, d/b/a Blue Cross/ Blue Shield of North Dakota; Aetna Incorporated; Blue Cross/Blue Shield of Florida, Inc.; Health Care Service Corporation, A Mutual Legal Reserve Company; Trailblazer Health Enterprises, Incorporated; Blue Cross & Blue Shield of Maryland, Incorporated; Empire Blue Cross and Blue Shield; Group Health Incorporated; Blue Cross/Blue Shield of Western New York, Incorporated; Cigna Corporation; Connecticut General Life Insurance Company; Nationwide Mutual Insurance Company, Third Party Defendants, Steadfast Insurance Company; Reliance Insurance Company; Herbard, Limited; Johnson & Johnson Finance Corporation; Mobile Diagnostech, Incorporated; A. Jerome Digiacobbe, Jr.; Calvin Zontine; Treatment Centers Limited Partnership; PFG Capital Corporation; Regional Medical Services, Incorporated, Parties in Interest, Sovereign Bank, Movant. In re EquiMed, Incorporated, a/k/a EquiVision, Incorporated, Debtor. Merrill Cohen, Interim Trustee for the Bankruptcy Estate of EquiMed, Incorporated, Plaintiff-Appellee, and Mobile Diagnostech, Incorporated; A. Jerome Digiacobbe, Jr.; Calvin Zontine, Plaintiffs, v. Douglas Colkitt, M.D.; George Keister; Paul Castro; Edward Russell, Jr.; Donald Gallo; Jude Spak; Jefferson Radiation Oncology Center, LP; Oaktree Cancer Care, Incorporated; Keystone Oncology, LLC; Rosewood Cancer Care, Incorporated; Marcy L. Colkitt; Oncology Services Corporation; Derdel Riverside Oncology Associates, P.C.; Derdel Chesapeake Oncology Associates, P.C.; Key West Oncology Associates, P.A.; Tampa Oncology Associates, P.A.; Community Radiation Therapy Associates, P.C., formerly known as Community Radiology Associates, P.C.; Salisbury Oncology Associates, P.C.; Albemarle Oncology Associates, P.C.; Oaklane Cancer and Hematology Clinic, P.C., Defendants-Appellees, and Joanne Russell; Lawnwood Regional Cancer Center, LP; St. Lucie County Radiation Oncology, Limited; Oncology Associates, PC of Harrisburg; Oncology Associates, PCOF Indiana; Oncology Associates, PCOF Lebanon; Pleasant Hills Oncology Associates, PC; Greater Pittsburgh Oncology Associates, PC; Stoneboro Oncology Associates, P.C.; Phoenixville Oncology Associates, P.C.; Littlestown Oncology Associates, P.C.; Lehighton Oncology Associates, P.C.; Exton Oncology Associates, P.C.; Bucks County Oncology Associates, P.C.; Derdel MGH Oncology Associates, PC; Greenway Oncology Associates, PC, a/k/a Greenway Oncology Associates, P.A.; Derdel Randallstown Oncology Associates, P.C.; Derdel Union Memorial Oncology Associates, P.C.; Fort Pierce Oncology Associates, PC, a/k/a Fort Pierce Oncology Associates, P.A.; Okeechobee Oncology Associates, P.A.; Treasure Coast Oncology Associates, P.A.; Liberty Oncology Associates, P.C., formerly known as St. Lawrence Oncology, P.C.; Oneonta Radiation Oncology, PC; Skyline Oncology Associates, P.C.; Malone Oncology Associates, P.C.; Marlton Oncology, PC; Southern New Jersey Cancer Treatment; Williams County Oncology Associates, P.C.; Tri-State Oncology Associates, Incorporated; Flagstaff Oncology Associates, PC; Kankakee Oncology Associates, PC; Holyoke Oncology Associates, P.C.; JMR Medical Associates, P.C.; Carolina Cancer Care, LLC; Southern Oncology, P.A.; Eastern Pennsylvania Oncology, LLC; Massachusetts Radiation Oncology Services, P.C.; Chester County Oncology, LLC; Florida Oncology, P.A.; Coastal Oncology, LLC; Comprehensive Physics and Regulatory Services, Limited; John Does 1-25, Defendants, v. Nixon Equipment Corporation, Movant-Appellee, DVI financial services, incorporated, Movant-Appellant, The Provident Bank, Party in Interest-Appellee, and United States of America; Response Oncology, Incorporated; Steadfast Insurance Company; Reliance Insurance Company (In Rehabilitation); Treatment Centers Limited Partnership; PFG Capital Corporation; Indiana Hospital; Indiana Healthcare, Incorporated; Indiana Healthcare Properties, Incorporated; Herbard, Limited; Johnson & Johnson Finance Corporation; Regional Medical Services, Incorporated, Parties in Interest, Sovereign Bank, Movant. In re Nixon Equipment Corporation; George Washington Real Estate Corporation; Thomas Jefferson Real Estate Corporation, Debtors. DVI Financial Services, Incorporated, Claimant-Appellant, v. Merrill Cohen, Trustee-Appellee, and EquiMed, Incorporated, Creditor, v. Steadfast Insurance Company; Reliance Insurance Company; Indiana Hospital; Indiana Healthcare, Incorporated; Indiana Healthcare Properties, Incorporated; Treatment Centers Limited Partnership; PFG Capital Corporation; United States of America, Parties in Interest. In re EquiMed, Incorporated, Debtor. Douglas Colkitt, M.D., Plaintiff-Appellee, DVI Financial Services, Incorporated, Claimant-Appellant, and Billing Services, Incorporated, a Delaware corporation; Joanne Russell; Jerome Derdel, M.D., Plaintiffs, v. Steadfast Insurance Company, a Delaware corporation; Reliance Insurance Company of Illinois, an Illinois corporation, Defendants, and Merrill Cohen, Chapter 7 Trustee of EquiMed, Incorporated, Trustee-Appellee.
    Nos. 01-2386, 01-2389, 01-2387, 01-2388.
    United States Court of Appeals, Fourth Circuit.
    Argued Jan. 21, 2003.
    Decided April 2, 2003.
    
      ARGUED: Andrew C. Kassner, Drinker Biddle & Reath, L.L.P., Philadelphia, Pennsylvania, for Appellant. Philip H. Lebowitz, Pepper Hamilton, L.L.P., Philadelphia, Pennsylvania, for Appellees. ON BRIEF: Leslie Gillin Bohner, Kirke D. Weaver, Drinker Biddle & Reath, L.L.P., Philadelphia, Pennsylvania, for Appellant. Matthew R. Goldman, Wendy J. Gibson, Baker & Hostetler, L.L.P., Cleveland, Ohio; Richard A. Robinson, Baker & Hostetler, L.L.P., Orlando, Florida; Michael E. Tucci, Morrison & Hecker, L.L.P., Washington, D.C.; Robert D. MeCallum, Jr., Assistant Attorney General, Michael F. Hertz, Polly A. Dammann, J. Christopher Cohn, Daniel A. Spiro, Frances M. Toole, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C.; Thomas M. DiBiagio, United States Attorney, Tamera L. Fine, Assistant United States Attorney, Baltimore, Maryland; Robert Sanker, Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio, for Appellees.
    Before WIDENER, WILKINSON, and NIEMEYER, Circuit Judges.
    Affirmed by unpublished PER CURIAM opinion.
   OPINION

PER CURIAM.

In this appeal, DVI Financial Services, Inc. challenges the district court’s approval of a complex “global” settlement of several related cases, essentially contending that the global settlement agreement failed to recognize DYI’s security interests in assets that were disposed of by the agreement.

The cases covered by the global settlement agreement arose from claims that Dr. Douglas Colkitt, Dr. Jerome Derdel, Colkitt’s wife, and more than 80 healthcare entities (cancer centers and affiliated corporations) owned, operated, or controlled by Colkitt engaged in a fraudulent billing scheme, causing losses to the federal Medicare and CHAMPUS programs in excess of $12 million. Drs. Colkitt and Derdel were physicians specializing in radiation oncology.

In one action involved in the settlement, the United States prosecuted claims against Colkitt, his partners, and his businesses, demanding $86 million in treble damages and penalties.

The principal business through which Colkitt operated, EquiMed, Inc., was involuntarily placed into bankruptcy by its creditors, and a trustee was appointed. The trustee commenced an adversary action against many of the defendants named by the United States in its action, seeking to recover for the EquiMed estate losses that were allegedly caused by fraud, breach of contract, and other similar conduct.

Following EquiMed’s bankruptcy, three subsidiaries of EquiMed filed voluntary Chapter 11 proceedings, and those proceedings were consolidated with the EquiMed bankruptcy.

Contemporaneous with these proceedings, EquiMed and various other related plaintiffs commenced actions against two insurance companies, Steadfast Insurance Company and Reliance Insurance Company, in State court in Pennsylvania, seeking coverage for some of the losses sustained by EquiMed and other companies. Those cases were removed to federal court and transferred to the District of Maryland for consideration in the bankruptcy of EquiMed.

The parties to these various adversary actions negotiated a complex settlement agreement that involved the creation of an estate in the custody of the bankruptcy trustee, the sale of various properties of EquiMed’s subsidiaries, the modification of related settlement agreements entered into by some of the parties, and various releases.

DVI, a creditor of EquiMed and some of its subsidiaries, objected to the global settlement agreement, arguing that its security interest in various of EquiMed’s assets were not recognized by the agreement. DVI had provided equipment financing to EquiMed and its subsidiaries, and it secured its loans with a security agreement covering the equipment and other assets of EquiMed including its accounts receivable and contract rights. DVI asserted that its security agreement covered EquiMed’s interests in management services agreements under which EquiMed operated the cancer centers in exchange for net profits from those cancer centers. DVI also asserted that it had a security interest in offset rights in promissory notes given by subsidiaries Keystone Oncology, LLC, Oaktree Cancer Care, Inc., and Rosewood Cancer Care, Inc., all of which were surrendered as part of the settlement agreement.

The district court rejected DVI’s assertion of security interests in both the management services agreements and the offset rights in the surrendered notes. With respect to the management services agreements, the court stated that the agreements could not be characterized as “accounts receivable” or “contract rights,” which were covered by the security agreement. The court pointed to the fact that the Pennsylvania Uniform Commercial Code, which governed the security agreement, distinguishes “account” from “general intangible,” defining “account” (and “contract right”) as “[a]ny right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance,” and defining “general intangible” as “[a]ny personal property ... other than goods, accounts, chattel paper, documents, instruments, investment property and money.” 18 Pa. Cons.Stat. § 9106; see also U.C.C. § 9-106 Official Comment (stating that the term “contract right” is included in the definition of “account”). The court determined that the relationship between EquiMed and the various cancer centers to which it supplied management services was a continuing undertaking rather than a simple contract between the parties for the sale of services. On that basis, the court characterized the agreements as general intangibles, and because Provident Bank, not DVI, had the lien on EquiMed’s general intangibles, the court rejected DVI’s claim to any value in the management service agreements and any proceeds they contributed to the settlement.

The district court also stated that even if DVI did hold an interest in the management services agreements, that interest was likely extinguished prior to bankruptcy based on “convincing” evidence that the agreements were terminated pre-petition. The court also recognized that any valid interest of DVI in the agreements could not then attach because, given the extensive network of relationships between the various corporations owned and operated by Colkitt, settlement of the adversary proceeding “cannot be characterized as being the recovery of accounts receivable or contract rights” but rather “the bundle of various intangible rights” related to the entire operating business of the cancer centers. The court noted, as an example, that EquiMed’s right to control the cancer centers derived not only from the management services agreements but also from its option to purchase each center for one dollar.

With respect to DVI’s claimed interest in the proceeds contributed to the settlement through the surrender by Keystone, Rosewood, and Oaktree of their offset rights in the promissory notes, the district court held that DVI had no lien on the proceeds because DVI had no security interest in the rights themselves. The court also found that the rights were surrendered in exchange for a release from Provident Bank, the holder of the notes, rather than any release from the trustee as to liability for fraudulent conveyance of assets subject to interests claimed by DVI.

DVI appealed the district court’s order approving the global settlement agreement, asserting the same arguments that it did before the district court.

We have carefully reviewed the record and considered the arguments of counsel made in their briefs and at oral argument. For the reasons set forth in the district court’s opinion, see United States ex rel. Rahman v. Oncology Associates, P.C., CA-95-2241-H, CA-00-1216-H, BK-00-11147, AP-00-1180-8, CA-01-2676-H, BK-00-20825-PM, BK-00-20826-PM, BK-00-20827-PM, CA-01-3014-H, AP-00-1430 (D.Md. Nov. 1, 2001), we affirm the judgment of the district court.

AFFIRMED.