Opinion ID: 3214415
Heading Depth: 2
Heading Rank: 2

Heading: Relators' Federal-Law Claims

Text: Relators next contend the court erred in its March 17, 2015 order when it dismissed the FCA claims in the 2006 Garcia and 2012 Kelly Actions and, again, denied leave to amend. We review the granting of a motion to dismiss de novo, Buntin v. City of Bos., 813 F.3d 401, 404 (1st Cir. 2015), accepting as true all well-pleaded facts, analyzing those facts in the light most hospitable to the plaintiff's theory, and drawing all reasonable inferences for the plaintiff, United States ex rel. Hutcheson v. Blackstone Med. Inc., 647 F.3d 377, 383 (1st Cir. 2011). In its decision, the district court rejected Defendants' argument that the 2012 Kelly Complaint should be dismissed under the first-to-file bar. Instead, the court dismissed the federal claims in both the 2006 Garcia and 2012 Kelly Actions based on - 11 - their failure to plead the alleged fraud with sufficient particularity to satisfy Federal Rule of Civil Procedure 9(b).
We first examine Defendants' contention that the district court should have dismissed the 2012 Kelly Action based on the first-to-file rule. This rule bars a later-filed related action, 31 U.S.C. § 3730(b)(5), that alleges all the essential facts or the same elements of a fraud described in an earlier-filed complaint while that complaint is still pending, Wilson, 750 F.3d at 117. In this case, all of the parties agreed, and the court found, that the two suits involved the same basic facts and issues and were virtually identical to each other. United States ex rel. Garcia v. Novartis AG, 91 F. Supp. 3d 87, 99 (D. Mass. 2015). Yet, the court held that the first-to-file rule ought not bar the exercise of jurisdiction over the [2012 Kelly Action] in this particular case because Kelly and Garcia cofiled the Garcia Complaint. Id. In so holding, the district court erred. Neither the text nor the purpose of the statute permit such an exception. The stark no person language of the rule is plainly stated and exception-free. Wilson, 750 F.3d at 117; see also United - 12 - States ex rel. Duxbury v. Ortho Biotech Prods., L.P. (Duxbury), 579 F.3d 13, 16, 32-33 (1st Cir. 2009). The resulting bar furthers the FCA's goal of avoiding piecemeal and duplicative ligation that does not advance the government's investigation of alleged fraud. Once the government has sufficient notice to launch [an] investigation[,] . . . [a] later-filed complaint that mirrors the essential facts as the pending earlier-filed complaint does nothing to help reduce fraud of which the government is already aware. United States ex rel. HeinemanGuta v. Guidant Corp., 718 F.3d 28, 35-36 (1st Cir. 2013). It is true that Kelly was not the prototypical opportunistic or parasitic plaintiff, Novartis, 91 F. Supp. 3d at 99; however, Kelly cannot escape the fact that she voluntarily requested dismissal without prejudice from the 2006 Garcia Action. 'Without prejudice' does not mean 'without consequence.' Powell v. Starwalt, 866 F.2d 964, 966 (7th Cir. 1989). Nothing about her prior involvement in the 2006 Garcia Action could serve to dissolve the independent statutory bar to her bringing a new, and essentially identical, action in 2012. See United States ex rel. Shea v. Cellco P'ship, 748 F.3d 338, 342-43 (D.C. Cir. 2014), cert. granted, judgment vacated on other grounds, 135 S. Ct. 2376 (2015) (holding that [n]o rule - 13 - of grammar, logic, or the law compels a reading that the first-to-file bar applies only to litigants other than the relator who filed the original action); United States ex rel. Moore v. Pennrose Props., LLC, No. 3:11-cv-121, 2015 WL 1358034, at  (S.D. Ohio Mar. 24, 2015) (finding that a relator's status as an earlier filer did not prevent the first-to-file rule from barring his subsequent complaint); United States ex rel. Syzmoniak v. ACE Sec. Corp., C/A No. 0:13-cv-00464-JFA, 2014 WL 1910876, at -2, -6 (D.S.C. May 12, 2014) (dismissing second qui tam suit on first-to-file grounds even though same relator had filed earlier suit and second suit named additional defendants); United States ex rel. Smith v. Yale-New Haven Hosp., Inc., 411 F. Supp. 2d 64, 75-76 (D. Conn. 2005) (dismissing second qui tam complaint filed by the same relator on first-to-file grounds because the bar applies equally to the original relator as any other person). Although Relators argue that Kelly brought her claims with her when she left the 2006 Garcia Action, this is little more than a thin fiction. When Kelly was dismissed from the 2006 Garcia Action, the court only ordered that Garcia file an amended complaint and remov[e] all references to Relator Allison Kelly; an order which, in any event, was not followed. - 14 - Kelly may have left the 2006 Garcia Action, but the essential allegations remained behind. For these reasons, the 2012 Kelly Complaint should have been dismissed under the first-to-file bar. This does not, however, end our inquiry. Complaints dismissed under the firstto-file bar are usually dismissed without prejudice. See United States ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 3 (1st Cir. 2015) ([T]he dismissal of a section 3730(b)(5) claim ordinarily should be without prejudice, because the claim could be refiled once the first-filed action is no longer pending.). Yet, this case presents a procedural wrinkle. If the court properly dismissed the 2006 Garcia Complaint based on its failure to allege fraud with sufficient particularity, then the presently pending case would drop out and the first-to-file bar on the 2012 Kelly Complaint might be lifted. See id. at 6. In such circumstances, Kelly could conceivably supplement or refile her complaint. See id. at 7-8. In this case, however, remanding would be a wasteful formality. Even if the district court were to find on remand that it now had jurisdiction, that court has already held that the 2012 Kelly Complaint is insufficiently particularized to offset a Rule 9(b) challenge. Because we would send the action - 15 - back to a fate certain and the merits of the district court's particularity decision are undoubtedly correct, we will spare the litigants a costly and unnecessary round trip and address the district court's particularity decisions with respect to both complaints now.9 Cf. Bullard v. Hyde Park Sav. Bank (In re Bullard), 752 F.3d 483, 485 n.1 (1st Cir. 2014), aff'd sub nom. Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015).
The district court held that neither the 2006 Garcia Complaint nor the 2012 Kelly Complaint pled fraud with sufficient particularity to survive the demands of Federal Rule of Civil Procedure 9(b). Rule 9(b) requires that [i]n alleging fraud or mistake, a party must state with particularity the 9 We assume, but need not decide, that the first-to-file bar remains jurisdictional. This position is not without doubt. See Gadbois, 809 F.3d at 6 n.2 ([W]e have no need to consider the relator's back-up argument that the first-to-file bar is not jurisdictional in light of [Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015)].). Even if the first-to-file bar were non-jurisdictional, however, we would still be faced with a question of particularity and futility. See United States ex rel. Shea v. Verizon Commc'ns, Inc., No. 09–1050(GK), 2015 WL 7769624, at  (D.D.C. Oct. 6, 2015) (The Court has already concluded that Plaintiff's action must be dismissed without prejudice under § 3730(b)(5). . . . Accordingly, the only question the Court must consider is whether dismissal with prejudice under Rules 8 and 9(b) is warranted.). - 16 - circumstances constituting fraud or mistake. The particularity requirement means that a complaint must specify the time, place, and content of an alleged false representation. Doyle v. Hasbro, Inc., 103 F.3d 186, 194 (1st Cir. 1996) (quoting McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 228 (1st Cir. 1980)). Conclusory allegations and references to plans and schemes are not sufficient. Id. (quoting Hayduk v. Lanna, 775 F.2d 441, 444 (1st Cir. 1985)). Where, as here, it is alleged that the defendant caused a third party to submit a claim to the government, then the First Circuit applies a somewhat more flexible standard, allowing a relator to satisfy Rule 9(b) by providing factual or statistical evidence to strengthen the inference of fraud beyond possibility without necessarily providing details as to each false claim submitted. Duxbury, 579 F.3d at 29-30 (citations and internal quotation marks omitted). However, it is the fraud itself which must be pled with particularity, not just who benefits from the fraud and what pot of federal money may be the object of the fraud. United States ex rel. Gagne v. City of Worcester, 565 F.3d 40, 47 (1st Cir. 2009). In other words, it is not enough simply to rais[e] facts that suggest fraud was possible . . . [because, for - 17 - example, it] may well be that [those] doctors who prescribed [the drug] for off-label uses as a result of [the] illegal marketing of the drug withstood the temptation and did not seek federal reimbursement, and neither did their patients. United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 733 (1st Cir. 2007), overruled in part by Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008). Because [i]t may be that physicians prescribed [the drug] for off-label uses only where the patients paid for it themselves or when the patients' private insurers paid for it, id., the evidence necessary to strengthen the inference of fraud beyond possibility, id., generally requires the relator to plead, inter alia, specific medical providers who allegedly submitted false claims, the rough time periods, locations, and amounts of the claims, and the specific government programs to which the claims were made. United States ex rel. Ge v. Takeda Pharm. Co., Ltd., 737 F.3d 116, 121, 124 (1st Cir. 2013). Merely alleging that a scheme was wide-ranging--and, therefore, that a fraudulent claim was presumably submitted--will not suffice. Nor is evidence of illegal conduct alone sufficient to state an FCA claim. See Rost, 507 F.3d at 732. FCA liability attaches to a false or fraudulent claim for payment or - 18 - approval or to a false record or statement material to a false or fraudulent claim. 31 U.S.C. § 3729(a)(1)(A)-(B). FCA liability does not attach to violations of federal law or regulations, such as marketing of drugs in violation of the [Food, Drug & Cosmetic Act, 21 U.S.C. § 321 et seq.], that are independent of any false claim. Rost, 507 F.3d at 727. Rather, the complaint must identify the alleged fraud with a significant degree of specificity. In Duxbury, for example, the relator alleged that, through a company's illegal kickbacks, false claims to Medicare were filed by medical providers for reimbursement of drug purchases. 579 F.3d at 29. Duxbury set[] forth allegations of kickbacks provided by [the company] that resulted in the submission of false claims by eight [named] healthcare providers in the Western United States . . . . As to each, Duxbury provide[d] information as to the dates and amounts of the false claims filed by these providers with the Medicare program. Id. at 30. Although the Duxbury court said the case was a close call, it found that the relator's claims satisfied Rule 9(b) because he alleged the who, what, where, and when of the allegedly false or fraudulent representation. Id. (quoting Rodi v. S. New Eng. Sch. of Law, 389 F.3d 5, 15 (1st Cir. 2004)). In particular, Duxbury ha[d] identified, as to each of - 19 - the eight medical providers (the who), the illegal kickbacks (the what), the rough time periods and locations (the where and when), and the filing of the false claims themselves. Id. Similarly, in United States ex rel. Westmoreland v. Amgen, Inc., the complaint contain[ed] allegations regarding particular medical providers who submitted legally and factually false claims at the Defendants' encouragement. 738 F. Supp. 2d 267, 276 (D. Mass. 2010). In particular: Relator pleads that the Defendants advised doctors at Balboa Nephrology . . . to capture all overfill profit, which led Balboa to issue a standing order for doctors to write Aranesp orders for an amount that was 10% more than the standard dosage that otherwise would have been administered for every patient, and a standing order that Medical Assistants were to administer as much Aranesp in the vial as possible. Relator also alleges that California Kidney Group . . . billed Aranesp 15% over the labeled dosage even though it is not actually possible to withdraw 15% overfill from a single dose vial, and sought reimbursement for dosages of Aranesp above the amount intended to be administered to the patient. Id. at 276-77 (citations omitted). In short, the defendants knew that their actions 'would, if successful, result in the submission by [providers] of compliance certifications required by Medicare that [the defendants] knew would be false.' Id. at - 20 - 277-78 (alterations in original) (quoting United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 244 (3d Cir. 2004)). When one compares the allegations made in the 2006 Garcia Complaint and the 2012 Kelly Complaint to the allegations made in Duxbury and Westmoreland, it becomes clear that the pleadings here do not meet the requisite level of specificity. In fact, the allegations in Duxbury, which outstrip those found here, were only barely adequate. See Ge, 737 F.3d at 124. The closest Relators get to positing the existence of fraud is to allege that certain doctors, at various points, (1) were enrolled in federal reimbursement programs, (2) received services and incentives from Defendants, and (3) prescribed Xolair. Relators failed, however, to tie these independently unexceptional allegations together into particularized charges about specific fraudulent claims for payment. With respect to the 2012 Kelly Complaint, for example, the district court found that Kelly pleaded no evidence of any false statement, SMN form, or claim that effectively was submitted, identif[ied] no claims for reimbursement to Medicare, Medicaid, or any other federal health care program, and fail[ed] to provide even a single example of fraudulent conduct resulting in reimbursement of Xolair by a federal health care program[.] Novartis, 91 - 21 - F. Supp. 3d at 109. The district court found that Kelly, like Garcia, had not provid[ed] reliable indicia that the alleged underlying schemes resulted in submission of false claims, nor had she br[ought] forward evidence that the physicians who prescribed Xolair sought federal reimbursement. Id. Of course, it may not be irrational to infer that, given [the allegations], some false claims for [Xolair] reimbursement were submitted to the government. Rost, 507 F.3d at 732. But this is not enough to satisfy Rule 9(b). Relators' allegations g[i]ve rise to only speculation as to whether the alleged scheme caused the filing of false claims with the government. Duxbury, 579 F.3d at 31. Because Relators' evidence and arguments proceed more by insinuation than any factual or statistical evidence [that would] strengthen the inference of fraud beyond possibility, Rost, 507 F.3d at 733, the district court properly dismissed Relators' federal claims. The court's further decision to dismiss the federal claims with prejudice likewise cannot be faulted. Relators had repeatedly failed to cure the deficiencies in their complaints, and the proposed Joint Complaint promised more of the same. Although the Joint Complaint added extra grist for speculation, it offered nothing new of substance to cure the inferential gaps - 22 - found in Relators' prior complaints. We need hardly rely upon the abuse-of-discretion standard to affirm the district court's decision to dismiss the federal claims with prejudice.