good morning everybody good morning judge rover we have on the phone good morning we're here today for oral argument we are going to begin with case number one our advertisements whether dr silverman may be libelous and officer and whether the default judgment should have been that you believe that he has standing because the creditors of medicare may come back or may come after him well the corporation has filed an assignment for benefit of creditors in florida and they are looking at fraudulent conveyance actions against the two principles of the company so it's possible that  someday have assets which would come from dr silverman i don't know that that gives him standing to appeal in a case where he's defaulted  something like that so you know if the court wants to see what he has to say i don't have a problem with that but initially the district court while i'm gone a lot of them file anything on his behalf and they went ahead and did it and that was additional question with respect to medicare medicare filed for bankruptcy at some point during the proceedings below is that correct not exactly they filed an assignment for the benefit of creditors so all the assets are now in the hands of essentially a trustee but it's not a federal bankruptcy as a court proceeding so they never officially filed for bankruptcy which would have kicked in the automatic stay correct ok and a state under which that proceeding is proceeding is only do they say that they're not realize there's a medications are available but they tell the doctor to do various things to place an order it's the doctor that's placing the order trial court and correctly found the patient had already negotiated a transaction and this was just a rubber stamp but the fact of the facts tells the doctor that we multiply you know supply and order from the list then you need to make a diagnosis you need to tell us how many refills what frequency the medication should be taken and none of that had been negotiated and the evidence in the form of internal procedures d congressional testimony and internal documents establish that that was medicare's procedure and medicare's procedure was even though they go to the patient to line them up st then they need to get an order from the doctor and then they go back to the patient there's are you disputing that the patient and medicare before the facts were sent had agreed to the purchase of the nebulizer subject to the signature of the physician who had ordered it in the st place right there's evidence that would make that a disputed issue that would make it a disputed that makes it a disputed this what's the evidence that again i understand your argument that it's not finalized until the doctor signs on it but what's the evidence that makes it disputed in the st instance that they had agreed to the purchase of it well one  testified to congress and i really have to say this for medicare for post says there's no order until the doctor initiate says the doctor makes the order that was part of prescription is and there's an important document i wish i put it in the  st but then you go down and hard graft for those after receiving a prescription from the treating physician medicare contacts the patient to go over the prescription discuss the medication answer questions or concerns and during this call the patient for granted with yet another opportunity to decline mature services so it's only and what is that document that you're that is there overview of their prescription well it's generally considered that the default admits the allegations of the complaint and incidentally before defaulting medicare had made a motion to dismiss on the basis that on their face these were not advertisements their status which according to medicare they do that so the doctors will not think they're being defrauded when they go so there is the court initially denied medicare's motion to dismiss on that basis and they defaulted later when they finally assignments for benefit or predators is there any evidence or are you arguing that to faxes were intended to do it them i do provide for repeat prescriptions so in that sense it's not just a one time only for the individual patient who's the subject of the facts correct but you're not arguing that the purpose suspects was too get the doctor to use and purchase additional nebulizers products from that care are you well it's certainly theoretically possible that a doctor would say hey patient i just got this information about this great company but that's not the business model dafter on the company's products right that's correct and waypoints of the two rd circuit mousie just stations from earlier this year that set exactly that in the context of prescribe medications that the most powerful parodic matic example of where a fax to person a for goods to be sold to person b would be an advertisement is saying dr you should prescribe our medications to your patient because the doctor is so much influence over the patients listen that essentially they're selling the products to the patient through the doctor's recommendation and prescription but in the  circuit cases wasn't the company attempting to encourage the chiropractor to prescribe a particular drug as opposed to here where the client and medicare had already had that discussion and greta that that seems to be a significant difference well i don't see the distinction actually it could be that most companies would send a fax to the doctor saying we've got great now july's are prescribed them for your patients plural but here they go to the patient st and say your patient wants you to  prescribe this form for them now they don't get they only get fifty percent return rate from the doubt of that's in the record but it's still marketing to the doctor to say prescribe this to your patient the fact that it's targeted marketing you know i'd open up google every day it says here's what you were shopping for on amazon yesterday we've got a great deal of just drop the price well that's still advertising even though i'd already been looking the day before targeted marketing is common with social media and that's essentially what this is case i decided by judge connally here in the northern district is on appeal correct i believe that's correct and as i understand it's being briefed and that issue of the personal liability of the t whole business is based on faxing these prescriptions it was set up that way by dr silver monday he knew what was going on he testified about it in maine two thousand and thirteen and congress which was just three months before set of faxes want out so it's well established you don't have to push the button on the fax machine to be libel you just have to either participate or controls a patient here would be the general fact that he set up the business to do this and the knowledge and control of the he's the head of the company he knew what they were doing and i don't want to get too exaggerated but if you set up a laundromat for purposes of money laundering you don't have to be the one collecting the coins so you have some liability for the wrongdoing where in your opinion or is your argument is so that line should be drawn well a could've on set it up it's not just that he knew about it but he created a business where the whole business model ninety five percent of their transactions was based on those facts and procedure that he put the lists together but other cases that have held for parole officers liable they didn't necessarily designed the facts or even through that they knew the facts authorized ninety five percent of the business of his company the fact that dr silver munk got summary judgment on two independent bases one of which had no bearing on medicare itself does not require the vacation  inconsistency that's described in cases like uranium and on t v is not it is not this kind of legal argument inconsistency what they would be worried about is say we got a judgment against dr silver money but the court said you know i don't find that half of your facts logs are admissible so i'm cutting your request a judgment and half th medicare would have to be cut in half they don't want you to funds to be jointly and severally liable for different amounts of money based on the fact that one defaulted but that's damages that's not liability particularly here we're one of the issues on the liability was whether the corporate officer participate as their control and that's offense just lost clients to the corporation what about if the court finds that the fax was not in the advertisement then how can the company be held liable for it the facts being in the advertising well one because they defaulted and two because there's another basis for liability here so for example suppose we filed a new case against medicare separately there would not be issue preclusion because the advertisement issue was not essential to this judgment there's not a claim preclusion other words if there's it's got to be essential to the determination and here doctor summary judgment would have been one value in that without the advertising if you have the rest of your time yeah well somebody has got a question they want me to address now you know thank you i will now to me please the court my name is jim chilton i'm here on behalf of doctors overman i think the one thing we could agree upon is generally the three issues that are involved in this case again i think there's also a few things that we could deal with in the front end as far as what th case is not about what is clear and what the record makes abundantly clear is that there was no attempt in this case to try to sell the point of our recovery practic anything there is no advertising directed to the recipient of this is also  evidence and there's an argument being made here that the sex that was sent to dr horowitz was to induce any future sales that question was directly asked counsel said no except maybe to the extent that there might be refill prescriptions important understand though medicare's business they were durable medical equipment supplier they don't supply medications the medications are provided by the nurse so to the extent that there would be future sales of romero there was a completed sale here there's a i think a distinction to be made between a commercial transaction and a medical diagnosis and here the patient were actually the patients mother reached out to med care because of her son's breathing condition he was known to have the breathing condition already by his actual treating physician or not being the doctor or work that's involved in this case regardless th the patient and med care had reached an agreement on the equipment that was to be supplied the price for that equipment and how that equipment was to be delivered that's the essential terms of the sale the fact that we needed to end the back and get authorization from the doctor to complete the sale doesn't alter that fact in this case then falls more in line with the eleven circuits decision in florence where what we're dealing with is an order fulfillment process at the time that medicare is sending this fax to dr arwa there's already agreement on all the essential kerman's of the purchase agreement between the patient and medicare and the fact that we need to get the approval of the doctor for medicare purposes doesn't change that especially when you consider the fact that medicare was accredited by the center for medicare medicaid services and that this process for how they were going to be obtaining consent from the doctors for to authorize the final purchase was approved so they're accredited their review and the federal government is indorsing basically the process that  that consistent with herman's insistence in this appeal that's a fact is nothing more than the conclusion of an almost completed transaction from your question presumes that this is an advertisement just because it's asking the doctor prove it that's not the definition of the analysis for what is or is not an advertisement and advertisements to be something that's promoting the commercial availability of the product here it's not commercially available the product is not being sold to dr r or the recipient of the fact so what we have here instead is the parties have already agreed upon the sale it's a kin to if you into an auto dealership and you purchase a car and you agree to all the essential terms but then you've got to get your credit report right at the end to make sure you're going to qualify for the financing it's just the order for film and if that process is that ok are you going to meet that final threshold to close this deal but the deal terms have already been reached and most importantly there was no indication when the facts were in any communication that would have been had with the treating doctor of any change there wouldn't be alternate there wouldn't be any negotiations there wouldn't be any changes to the price the good the price of the delivery had already been established just like the cards already been established and so the fact that we just need a doctor to give a final sign off becomes of no merit or no consequence because the deal is already struck there are two parties to this deal and it's it's the patient and it's medicare and the fact that we need to get doctor approval for this to seek reimbursement through medicare doesn't change that and again it comes down to what would this otherwise be advertising to doctors are and here are we advertising the availability of any good or service to the doctor that the doctor could purchase and the answer there is unequivocally no there's no contest of facts in this case on that issue that at no point in time with doctors are will be asked to spend money or to purchase anything nor is doctor are we being asked to talk to his prescription it i think your honor generally you hit on the essential point and it's what doctors superman also told congress their marketing their advertisement is to the patients it's not to the doctors they specifically don't market and advertise to the doctor so if we circle back to was this an advertisement to doctor are wrong the answer is no and that's based on not only the content of the facts and the reason why the facts were sent but it also goes back to the to sign off for a prescription so i had a diagnosis because i don't understand d how any doctor could ethically sell this facts out without examin the patient making a diagnosis and determining whether the products are necessary and you said that it was the doctor are was who had made the diagnosis it was someone else correct right is what happened in this case your honor is the patient who was attempting to purchase nebulizers her son was being treated and treated by a different doctor our work so this fact was sent to the wrong doctor and the fact of the matter is though that had this fact gone to the correct doctor that doctor was the treating physician for the patient this doctor would have been aware of this patient's medical conditions this doctor would have already made the addressed by the fact that medicare's business is to communicate with the doctor that's treating the patient at the doctor who was treating the patient here made a recommendation that he get a we don't know that your honor we spent a lot of time and effort trying to get the mother's name misty even to appear for a deposition was scheduled several times in our office and communication with that she would appear but then she never showed up so exactly each or perch son's medical condition with their doctor are what may or may not have diagnosed we don't know at this point because it's not disputed that the mother reached out to medicare in the st instance and we know that of that in the record your honor what we know in the record is that dr silverman was a co founder of the company but i think it's important to note that as we sit here today dr steven was never depose actual role here and his personal participation in creating the company as a co founder and implementing any sort of faxing programs is on set up and it's the plaintiff the penguin here who has the obligation president of the company he was focused on the big picture business development aspects of it and he deferred delegated to the underlings below him for the actual implementation if you read point of complaint they make some pretty specific allegations about what dr silliman did his specific participation in designing and the choosing to send these faxes and where the facts were to go but that evidence never was developed there was never any evidence in the in the district court as to what dr civil may have done so all we have is dr silverman's unrebutted testimony about how he didn't have any involvement in sending these faxes about how he didn't have any involvement in choosing whether or not these faxes would go out how he didn't have any involvement in court meeting with any medical i'm sorry in fact broadcasting companies to send out these facts the reality is that there is actually not one piece of evidence in the record as to what dr silverman did regarding this fact and that's important it's not just what the company did on a holistic level we see some inflammatory language in the appellant's brief about made cures practices in this scheme about how they set up millions and millions of taxes this case isn't about that this case is about the facts is that was sent to dr r work and similarly situated people regarding the nebulizer in don't just mr schultz on some procedural questions about what happened in the district court when the at some juncture notification documentary judge least says if medicare is going to be represented they've got to have a lawyer it's going to appear by i think to some eight of seventeen correct correct and that never does end up happening right then the judgment the judge le correct it was a request made by counsel for silverman that that include medicare elucidate for us what happened the district court with regard to that so it was my office that well we creditors action in florida and the company closed up shop companies no longer going concern they don't exist anymore dr silverman essentially told us that the company was unable them painting sort of legal bills and that all its energ individual capacity to represent him and allow medicare to be defaulted because the company doesn't exist and to the extent that there's a claim or a judgment against medicare that could be sought in the  the process of seeking summary judgment and in the process of seeking to have judge lee's default against medicare vacated dr silliman did request that the district court vacate and enter judgment in favor of medicare and the reason for that is simple based upon representations that were made by plaintiff's counsel it was our understanding that the intention was to try to secure a judgment against medicare and then to go into that assignment for benefit of creditors and to seek to recover that either from the assets of the defunct company or the individual offices which would have been included dr silver so what we thought and what it appear default thank you very much specifically also deal with dr silver the district court correctly concluded that this was not a fax that advertised it wasn't trying to induce anybody to purchase and the district court also found that dr silverman was not personally liable for that because as we've talked about there was no record evidence that dr silverman personally participate in the sending of this and the facts of the undeniably not sent on his behalf so those two issues are certainly issues that apply with equal force to doctors  medicare to the extent that we get to the rd issue about the court's decision to vacate the default judgment it's important to keep in mind st off that a different standard applies the standard that we apply when deciding whether or not that vacating of that default was proper is an abuse of discretion so we have to ask the judge lead to abuse his discretion and in just choosing to vacate the default and why did he do it and judge lee's transcript the transcript of oral ruling on this illuminates quite well why it's not an discretion and it's quite actually the fundamentally fair result because this case whether it be against medicare or dr silverman arises from the same exact conduct and certainly in law and  equity there is this concept that there shouldn't be different judgments for the exact same time and so here we have a situation where as a matter of law on a disputed motion the district court has found that this was not fax advertisement and enters a judgment against the plaintiff awarding ciro damages it defies logic in creates an absurd result if we have that exact same facsimile found to be an advertise on entering a judgment of thirty two million dollars plus dollars to a class when the court knows that it was an advertisement so although under the fault we're required to resume the the truth of the allegations and the facts are true the court also does have a good keeping function here and that's why there's default hearings that's why the district court would have had a hearing on damages that's why several decisions out of this seven circuit have auld cautioned against this idea of inconsistent verdicts and that's what we're trying to guard against here whether it be medicare or dr silverman asking for the harm to be avoided is that inconsistent verdict three dash four subcouncil said that there was agreement on price before the fax was sound but there's no evidence in this record what the price was for those nebulizer a fact that came up in the congressional testimony and what dr silverman told senator mccaskill is that we sell these little or no cost to the patient well that sounds cheap but it doesn't tell us how cheap we don't know what little or no cost means there's no evidence that that was discussed with the mother in this case there's also no evidence about any treating physician having a doctor tommy in central illinois that's all that the mother told the person on the phone and then they looked up some database instead of finding is evidence that well that's a reasonable inference drawing the inference is in our favor of the dr silverman help set up ninety five percent of the business practices of his companies but there's direct evidence is the three months before these faxes were sent he was in the hot seat before a congressional committee defending those facts practice so before these faxes were sent he was the guy before congress saying what we're doing is ok we send these faxes it's not until the physician gives us the facts back that we would send anything to the patient so that's that may not be whether he set it up but it's he sure knew about it