Judge Affirms Default Judgment in Testing Strip Fraud Case

On Thursday, the court issued a decision regarding a motion to set aside default judgment in the case brought by Roche Diagnostics Corporation and others against Priority Healthcare Corporation. The decision, filed in the Northern District of Alabama, was issued after the court had issued a default judgment as a part of the discovery sanction incurred by the defendants.

The defendants include several corporate entities owned and operated Konie and Phillip Minga and were set up to submit rebate adjudications to insurance companies and pharmacy benefit managers regarding the purchase of diabetic test strips manufactured by the plaintiff Roche Diagnostics. Roche’s original complaint stated that these submissions were fraudulent and included counts for fraud, negligent misrepresentation, unjust enrichment, and violations of the Racketeer Influenced Corrupt Organizations Act.

However, during the discovery process, the defendants submitted documents that the court determined to be “clearly and convincingly” part of a pattern of “egregious bad-faith behavior … falsifying hundreds of key discovery documents and refusing to acknowledge the documents.” The court, as a part of the sanctions regarding this discovery fraud, issued a declaratory judgment in favor of the plaintiffs.

The defendants submitted a motion to set aside the default judgment, arguing that it should have been a default instead of a default judgment. The court indicated that there was indeed a difference between a default, where the party has failed to plea or otherwise defend a suit, and a default judgment, which resolves a case. However, the court confirmed that the proper entry was as a default judgment, as the defendant did respond to the suit, and the default judgment was entered as a sanction. Per the court’s determination, as the liability was thus resolved, the damages would be resolved via a hearing, at which the determination as to fault has already been decided and damages related to the degree of the damages would be presumptively in the plaintiff’s favor.

Roche Diagnostics is represented by Patterson Belknap Webb & Tyler, and Lanier Ford Shaver & Payne. Priority is represented by Bainbridge Mims Rogers & Smith and Mitchell, McNutt & Sams