UNITED STATES OF AMERICA v. ROGAN (May 12, 2011)

After defrauding the Medicare and Medicaid programs and hiding his wealth, Peter Rogan fled the country. He left the United States with a $60 million judgment. The United States discovered a Georgia limited liability company in which Rogan had invested. It served the company, 410 Montgomery LLC, with a writ of garnishment. After liquidating and paying off secured creditors, Montgomery was left with approximately $4 million. The government wanted it all but Jerry and Diane Whitlow filed a claim for $175,000. Their claim is based on their one third interest in a company to which Montgomery owes $475,000. Judge Darrah (N.D. Ill.) concluded that federal law, which gives priority to writs of garnishment issued by the United States over later-issued writs, controls and denied the Whitlow's claims. The Whitlows appeal.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Sykes vacated and remanded. The Court rejected the government's position that § 3205 displaces state law when the United States issues a writ of garnishment. The section on which the government relies only establishes the priority of competing writs. If the Whitlows had a competing claim directly against Rogan's assets, for example, it would control. But that is not the case. The Court also noted that the statute only gives the government the power to issue a writ against Rogan's interest in Montgomery, not in Montgomery's actual assets. The statute also provides that state law dictates the treatment of co-owned property (like Montgomery?). The Court recognized that its conclusion left many unanswered state-law questions for the district court to deal with on remand.