Take the Fifth

Designated for publication

• Estate of Anne Milner Fields v. Commissioner of Internal Revenue, 25-60403, appeal from U.S. Tax Court
  • Duncan, J. (King, Higginson, Duncan) (no oral argument), tax law
  • Affirming tax court’s judgment upholding imposition of estate-tax liability and assessment of 20% negligence penalty.
  • As Anne Milner Fields’s health rapidly declined in 2016 due to end-stage Alzheimer’s, her great-nephew and agent Bryan Milner transferred approximately $17 million of her assets into a newly formed limited partnership, AM Fields, LP. Fields died just ten days after the final transfer. On the estate tax return, the Estate reported the value of Fields’s limited partnership interest at roughly $11 million rather than the $17 million value of the underlying assets. The IRS issued a notice of deficiency and assessed a 20% negligence penalty.
  • At issue on appeal were (1) whether the transfer of Fields’s assets into the partnership qualified for the “bona fide sale” exception under I.R.C. § 2036(a), which requires proof that the transfer served a substantial non-tax purpose; and (2) whether the 20% accuracy-related penalty for negligence under I.R.C. § 6662 was properly imposed.
  • The Estate advanced three non-tax justifications for the transfers—remedying limitations in the power of attorney (“POA”), consolidating asset management, and protecting against elder abuse—but the court found all three to be “post hoc ‘theoretical justification[s]'” rather than actual motivations. On the POA argument, the court noted the irony that Milner successfully transferred $17 million using the very POA he claimed was unreliable. On consolidation, the assets “were of a disparate character, promised no obvious synergies with each other,” and required no active management. On elder abuse, Milner waited years after the incidents occurred to form the partnership.
  • Six additional facts underscored the Tax Court’s conclusion: the compressed timeline between Fields’s declining health and the transfers; the absence of any discussion of a partnership before her health collapsed; no significant changes to her assets that would necessitate restructuring; an email from the estate-planning attorney seeking a “deeper discount”; Fields’s incapacitation during the transactions; and the depletion of her liquid assets so that bequests could not be paid without partnership distributions. The court called these facts “troublesome” and indicative that the stated non-tax purposes were after-the-fact rationalizations.
  • On the penalty, the court found that a $6 million reduction in reportable assets “should have struck a reasonable person in Mr. Milner’s position as very possibly too good to be true,” especially given Milner’s education in finance. Merely hiring professionals did not establish reasonable cause where the Estate could not show that any advisor actually told Milner the partnership-discount reporting was proper.

• United States v. Akula, 24-30315, appeal from E.D. La.
  • Higginson, J. (Smith, Wiener, Higginson) (oral argument), criminal, expert witness, sufficiency of evidence, sentencing
  • Affirming conviction and 240-month sentence for healthcare fraud.
  • Dr. Shiva Akula owned Canon Healthcare, LLC, a hospice business in New Orleans. From 2013 to 2019, Canon billed Medicare $84.1 million and received approximately $42.1 million in payments. Canon systematically billed patients at the higher General Inpatient Care (“GIP”) rate without adequate documentation, and also billed for physician services (H+Ps, inpatient visits, and home visits) under CPT codes for services it never actually provided. In 2015, a Medicare audit found 100% of sampled claims were non-compliant, but Dr. Akula concealed the letter from staff and made no changes. A jury convicted him on all 23 counts of health care fraud, and the district court imposed a 240-month sentence (a 52-month upward variance from the Guidelines range of 151–188 months), plus $42.1 million in restitution.
  • At issue on appeal were (1) whether the district court abused its discretion in declining to certify Dr. Gregg Davis as an expert in Medicare billing and coding; (2) whether sufficient evidence supported the jury’s finding that Dr. Akula knowingly and willfully committed health care fraud; and (3) whether the 240-month sentence was unconstitutionally excessive under the Eighth Amendment or substantively unreasonable.
  • On the excluded expert testimony, the court found any error harmless. Dr. Davis lacked coding certifications and had never been qualified as a billing expert; moreover, his proposed testimony that Canon’s billing was proper directly contradicted Dr. Akula’s own trial defense—that Canon committed billing errors but that others were responsible. Given the “overwhelming evidence” of guilt, there was “no reasonable probability that the exclusion . . . contributed to Dr. Akula’s conviction.”
  • On sufficiency, the court held that a rational jury could infer fraudulent intent from circumstantial evidence, including Dr. Akula’s concealment of the 2015 audit letter, his control over family-member billing staff, his rebuke of employees who raised concerns, and his execution of Medicare enrollment documents committing to compliance. The court noted the jury was “free to credit the Government’s evidence, and especially to discredit Dr. Akula’s testimony that other Canon staff members were responsible for the billing fraud.”
  • On the sentence, the court found the 240-month term was not grossly disproportionate given $84 million in fraudulent billing where the statutory maximum was 230 years. The district court properly weighed § 3553(a) factors, including the seriousness of the offense, the need for deterrence, and Dr. Akula’s refusal to accept responsibility—with the sentencing judge remarking that in “more than 30 years on the bench, he ‘had never seen a white-collar defendant less accepting of responsibility than Dr. Akula.'” The court also emphasized the deterrent message that “healthcare professionals and other business[] people . . . will pay attention to Dr. Akula’s sentence and his conduct.”

Unpublished decisions

• United States v. Martinez-Padilla, 25-40429, appeal from S.D. Tex.
  • per curiam (Stewart, Graves, Oldham) (no oral argument), criminal
  • Granting Anders motion to withdraw, and dismissing appeal.

• United States v. Sanchez-Torres, 25-40401, appeal from S.D. Tex.
  • per curiam (Wiener, Haynes, Graves) (oral argument), criminal, search and seizure
  • Affirming conviction, upholding denial of motion to suppress.

• United States v. Leigh, 25-40317, c/w 25-40326, appeal from S.D. Tex.
  • per curiam (Wiener, Willett, Wilson) (no oral argument), criminal, sentencing, guilty plea
  • Affirming sentence on guilty-plea conviction of attempted escape from federal custody and possession of ammunition after a felony conviction.
  • On appeal, the defendant argued for the first time that the Government breached the plea agreements by failing to advocate for a full three-point acceptance-of-responsibility reduction and by allegedly advocating for an above-guidelines sentence. He also argued the district court procedurally erred by declining to run his federal sentences concurrently with anticipated state sentences.
  • Reviewing for plain error, the court found Leigh failed to show the Government breached the plea agreements. As to the sentencing claim, the court held that Leigh’s valid and enforceable appeal waivers barred the issue because they were entered knowingly and voluntarily and covered the claim raised.

• Frericks v. Rockwall County, 25-11152, appeal from N.D. Tex.
  • per curiam (Jones, Richman, Ramirez) (no oral argument), § 1983
  • Dismissing as frivolous appeal from dismissal of § 1983 claims.
  • Pro se plaintiff Michael Joseph Frericks, II, moved for leave to proceed in forma pauperis on appeal from the sua sponte dismissal of his civil rights action and denial of injunctive relief.
  • The court held that Frericks abandoned the critical issues by failing to brief them and did not demonstrate that his appeal involved a nonfrivolous issue.

• United States v. Mejia Lopez, 25-20538, appeal from S.D. Tex.
  • per curiam (Elrod, Smith, Stewart) (no oral argument), criminal
  • Granting Anders motion to withdraw, an d dismissing appeal.

• Reynolds-Stevens v. Bankers Specialty Insurance Co., 25-30548, appeal from W.D. La.
  • per curiam (Richman, Southwick, Willett) (no oral argument), insurance, timeliness
  • Affirming summary judgment for insurer.
  • Diana Reynolds-Stevens’s Lake Charles home was damaged by Hurricanes Laura and Delta (2020) and a subsequent flood (2021). She sued her insurer, Bankers Specialty (a Write-Your-Own carrier administering a National Flood Insurance Program policy), for breach of contract, bad faith, and negligent infliction of emotional distress under Louisiana law. The central issues were: (1) whether the breach-of-contract claim was time-barred under the SFIP’s one-year suit limitation, (2) whether the state-law tort claim for negligent infliction of emotional distress was preempted by federal law, and (3) whether the Louisiana bad-faith claim was likewise time-barred.
  • The court affirmed summary judgment for the insurer on all claims. The breach-of-contract claim was time-barred because Reynolds-Stevens did not file suit within one year of the written denial letters (December 22, 2020 and August 9, 2021), as required by both the SFIP and 42 U.S.C. § 4072. The negligent-infliction-of-emotional-distress claim was preempted because state-law tort claims arising from NFIP claims handling by a Write-Your-Own insurer are preempted by federal law. The bad-faith claim, even assuming it was not preempted, was also untimely under the SFIP’s one-year contractual suit limitation, which courts must strictly enforce because NFIP regulations implicate sovereign immunity.

• Karahogitis v. TPUSA, Inc., 25-11032, appeal from N.D. Tex.
  • per curiam (Smith, Willett, Ramirez) (oral argument), employment discrimination
  • Affirming summary judgment dismissing plaintiff’s claims that her employer discriminated against her based on sex, disability, and age upon termination; failed to accommodate her disability; breached her employment agreements; and fraudulently induced her into a new employment agreement. She argued genuine disputes of material fact existed.

• Berrospi v. Aldine Independent School District, 25-20533, appeal from S.D. Tex.
  • per curiam (Wiener, Willett, Wilson) (no oral argument), employment discrimination, appellate jurisdiction
  • Dismissing for lack of appellate jurisdiction appeal of district court’s grant of motion to enforce settlement agreement.
  • Pro se plaintiff Violet Berrospi appealed the district court’s order granting in part the school district’s motion to enforce a mediated settlement agreement. Berrospi had confirmed the settlement terms via email but later sought to backtrack. The threshold question was whether the order was a “final decision” under 28 U.S.C. § 1291 conferring appellate jurisdiction.
  • The court dismissed the appeal for lack of jurisdiction. The district court’s order was interlocutory because it conditioned dismissal on further acts by the parties—submission of a W-9, tender of $7,000, and restoration of sick leave—and no final judgment had been entered when Berrospi noticed her appeal. The court also held that the subsequent denial of reconsideration did not create appellate jurisdiction.

• United States v. Lujan, 25-50608, appeal from W.D. Tex.
  • per curiam (Wiener, Willett, Wilson) (no oral argument), criminal, guilty plea, sentencing
  • Affirming guilty plea conviction and sentence for six counts of possession with intent to distribute cocaine. The defendant argued that (1) his appeal waiver was invalidated by the district court’s statement at sentencing that he had a right to appeal, (2) the waiver could not bar review of an unconstitutional sentence, and (3) his above-guidelines sentence was unconstitutional. Both parties agreed Lujan’s constitutional challenge was foreclosed by existing circuit precedent.
  • The court pretermitted the appeal-waiver question and granted the Government’s motion for summary affirmance because Lujan’s constitutional challenge to his sentence was foreclosed by United States v. Hernandez, 633 F.3d 370 (5th Cir. 2011). The Government’s motion to dismiss based on the appeal waiver was denied.

• OXEA Corp. v. Certain Underwriters at Lloyd’s, London, 25-20138, appeal from S.D. Tex.
  • per curiam (Smith, Willett, Ramirez) (oral argument), insurance
  • Affirming summary judgment dismissing plaintiff’s claims for breach of an insurance contract and violations of the Texas Prompt Payment of Claims Act. OXEA argued the district court erred in finding that a policy exclusion and the fortuity doctrine barred coverage.

• United States v. Knight, 25-30633, appeal from M.D. La.
  • per curiam (Higginbotham, Engelhardt, Ramirez) (no oral argument), criminal, sentencing
  • Affirming 15-month sentence following a guilty plea to possession of a firearm by a convicted felon. The defendant argued (1) the district court gave significant weight to rehabilitation needs in violation of Tapia v. United States, 564 U.S. 319 (2011), and (2) the court failed to give sufficient weight to post-incarceration rehabilitation while overweighting his dangerousness based on unrelated charges.
  • Because Knight did not raise the Tapia argument below, the court reviewed for plain error and found the district court’s statements regarding rehabilitation, viewed in context, did not clearly or obviously violate Tapia. On the substantive-reasonableness challenge, the court found the district court thoroughly considered the § 3553(a) factors and imposed a within-guidelines sentence, and Knight failed to show any abuse of discretion.

• United States v. Sterling, 25-40585, appeal from S.D. Tex.
  • per curiam (King, Stewart, Haynes) (no oral argument), criminal
  • Granting Anders motion to withdraw, an dismissing appeal.