United States v. Tdc Mgt. Corp., Inc.
263 F. Supp. 3d 257
D.D.C.2017Background
- The United States obtained a judgment (≈$1.285M) in 2001 against T. Conrad Monts and TDC Management Corp. for False Claims Act violations; TDC later dissolved and Monts died in 2009.
- WDG (Washington Development Group — A.R.D., Inc.) was a separate corporation wholly owned by Monts and his wife (tenants by the entireties); WDG obtained an $8.4M Superior Court judgment in unrelated litigation, which was later paid but $2.1M remained in escrow.
- In 2008 the government sought a writ of garnishment against the WDG settlement funds to satisfy the Monts/TDC judgment; WDG intervened in 2012 to assert ownership of the funds.
- The district court initially concluded Monts had a substantial interest in WDG funds and ordered payment to the government; the D.C. Circuit reversed that holding and remanded to consider reverse veil-piercing and third-party standing.
- On remand the government argued WDG was Monts’s alter ego (reverse veil-piercing) and sought disposition of the escrowed funds; the district court found (on the undisputed record) unity of interest, injustice if veil not pierced, and denied WDG third-party standing to assert Mrs. Monts’s tenancy-by-the-entireties rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Monts had a "substantial nonexempt interest" in the WDG settlement funds under the FDCPA to support garnishment | Government (earlier) argued Monts’s position as principal/shareholder/director gave him a sufficient property interest | WDG argued the funds are corporate assets and not Monts’s individual property | D.C. Circuit rejected that ground on appeal; district court on remand instead addressed veil-piercing (so Monts alone did not have the required substantial interest) |
| Whether the court may garnish WDG’s assets by piercing the corporate veil (reverse veil-piercing) | Government: WDG was Monts’s alter ego — domination, disregard of corporate formalities, commingling, and transfers/loan write-offs justify reverse piercing to reach funds to satisfy Monts’s judgment | WDG: No actual fraud shown; independent board; separate records; legitimate business purpose; industry practices justify behavior | Court: Granted reverse veil-piercing — found unity of interest (domination, sparse corporate formalities, commingling, intercompany loans and write-offs) and that equity requires piercing to avoid injustice |
| Whether tenancy by the entireties under D.C. law shields the WDG funds from garnishment | WDG: Because Monts and his wife owned WDG shares as tenants by the entireties, FDCPA and D.C. tenancy law bar garnishment of the funds | Government: Funds are corporate assets (not co-owned marital property); even if tenancy existed, WDG waived or lacks standing to assert Mrs. Monts’s tenancy rights | Court: Rejected WDG’s tenancy-by-the-entireties defense — funds are corporate assets and WDG lacks third-party standing to assert Mrs. Monts’s rights |
| Whether WDG has third-party standing to assert Barbara Monts’s tenancy-by-the-entireties exemption | WDG: May assert that Mrs. Monts’s co-ownership prevents garnishment of the funds | Government: WDG cannot assert a marital right that belongs to Mrs. Monts; Mrs. Monts can, but has not been hindered from doing so | Court: WDG lacks third-party standing — it has not shown close relation or that Mrs. Monts is hindered from asserting her own rights; thus WDG cannot assert tenancy-by-the-entireties exemption |
Key Cases Cited
- United States v. TDC Mgmt. Corp., Inc., 827 F.3d 1127 (D.C. Cir. 2016) (directing remand to consider reverse veil-piercing and noting FDCPA property-interest principles)
- United States v. TDC Mgmt. Corp., Inc., 288 F.3d 421 (D.C. Cir. 2002) (affirming underlying False Claims Act judgment)
- Labadie Coal Co. v. Black, 672 F.2d 92 (D.C. Cir. 1982) (describing veil-piercing to reach individuals who treat corporation as alter ego)
- Valley Fin., Inc. v. United States, 629 F.2d 162 (D.C. Cir. 1980) (reverse veil-piercing and equitable considerations to reach corporate assets for individual liabilities)
- Estate of Raleigh v. Mitchell, 947 A.2d 464 (D.C. 2008) (sets D.C. two-part veil-piercing test: unity of interest and inequity/fraud or other justice/equity considerations)
- Camacho v. 1440 Rhode Island Ave. Corp., 620 A.3d 242 (D.C. 1993) (discusses when separateness of shareholder and corporation has ceased)