United States v. Rogan
639 F.3d 1106
7th Cir.2011Background
- The United States has a judgment exceeding $60 million against Rogan for Medicare/Medicaid fraud; Rogan fled and concealed assets.
- Through tracing, the United States learned Rogan invested in 410 Montgomery LLC via foreign trusts, treated as Rogan's investment.
- Writ of garnishment under 28 U.S.C. § 3205 was issued against Rogan’s membership interest in 410 Montgomery.
- 410 Montgomery liquidated, with proceeds placed in escrow after paying secured creditors and closing costs; about $4 million remained for distribution.
- Whitlow parties claim approximately $175,000 of the escrow; they allege ownership of one-third of Taylor Row LLC, which is owed by 410 Montgomery.
- The district court held § 3205 displaces Georgia law, directing all escrow to the United States because Rogan’s writ attached his equity interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 3205(a) govern how a garnishment reaches non-debtor assets located in another state? | Whitlow | United States | No; § 3205(a) follows state law for co-owned property and does not automatically override Georgia law. |
| Does Rogan's writ extend to 410 Montgomery's assets or only to his equity interest? | United States | Whitlow | Writs cover Rogan's equity interests, not the LLC’s assets themselves; Georgia law governs distributions of the LLC assets. |
| Are the Whitlows' claims against 410 Montgomery's assets properly direct or must they proceed derivatively? | United States | Whitlow | Direct action by Whitlows against 410 Montgomery is not permitted under Georgia law without pursuing a derivative claim. |
Key Cases Cited
- Kollintzas v. United States, 501 F.3d 796 (7th Cir. 2007) (priority among writs; discusses when U.S. has seniority)
- Kimbell Foods, Inc. v. United States, 440 U.S. 715 (1979) (statutory priority and state-law attachment rules)
- Landreth Timber Co. v. Landreth, 471 U.S. 681 (1985) (ownership of investment interests separate from assets)
- Mid-State Fertilizer Co. v. Exchange National Bank, 877 F.2d 1333 (7th Cir. 1989) (derivative vs direct actions in corporate/LLC context)
- Southwest Health & Wellness, L.L.C. v. Work, 282 Ga.App. 619 (2006) (Georgia law on investor claims and direct actions against LLC)