Court Opinion

ID: 3170896
Source: CourtListenerOpinion
Date Created: 2016-01-20 20:01:01.608564+00
Date Added: 2024-06-11T11:48:02.487195
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 15-1459

UNITED STATES OF AMERICA ex rel. JUAN N. WALTERSPIEL, M.D.,
F.A.A.P.,

                Plaintiff - Appellant,

          v.

BAYER AG; QUINTILES TRANSNATIONAL CORPORATION; JOHN DOE; JOE
DOE; JANE DOE,

                Defendants - Appellees.

Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. Loretta C. Biggs,
District Judge. (1:12-cv-00773-LCB-JEP)

Submitted:   October 30, 2015             Decided:   January 20, 2016

Before KEENAN and HARRIS, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

Mick G. Harrison, Bloomington, Indiana, for Appellant. Kathleen
McDermott, Holly Barker, MORGAN LEWIS & BOCKIUS LLP, Washington,
D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       Juan N. Walterspiel, M.D., filed a five count complaint

under the False Claims Act (FCA), 31 U.S.C. §§ 3729-33 (2009)

(current version at 31 U.S.C. §§ 3729-33 (2012)), against Bayer

AG,    Quintiles         Transnational         Corporation,     and     three      Doe

defendants.      Walterspiel alleged that Bayer AG and Quintiles

conspired to falsify study data and that Bayer AG submitted the

falsified data to the Food and Drug Administration (FDA) as part

of an application for a six-month extension of its patent for

Ciprofloxacin       (Cipro).       Walterspiel        further   alleged    that    the

extension of Bayer AG’s patent for Cipro enabled Bayer AG to

sell   Cipro   at    a    higher   price       to   the   government    because    the

patent delayed the production and sale of less expensive generic

equivalents to Cipro.

       A magistrate judge issued a recommendation concluding that

(1) Walterspiel’s complaint with respect to Quintiles failed to

satisfy Fed. R. Civ. P. 9(b)’s heightened pleading standard;

(2) Walterspiel’s “request” for leave to amend his complaint did

not comply with Fed. R. Civ. P. 7(b)(1) and M.D.N.C. Local R.

15.1 because he did not file a motion for leave to amend or a

proposed     amended      complaint;     and        (3)   Walterspiel     failed    to

complete service of process on Bayer AG and the Doe defendants.

Over Walterspiel’s objections, the district court adopted the

magistrate     judge’s       memorandum         recommendation     in     full     and

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dismissed Walterspiel’s action.                   On appeal, Walterspiel argues

that (1) his complaint contained particularized facts to sustain

his claims against Quintiles under the FCA; (2) the district

court erred in not permitting him leave to amend his complaint

to cure any deficiency in his pleading; (3) the district court

erred in dismissing his claims against Bayer AG for failure to

complete service of process; and (4) the district court erred in

adopting        the   magistrate        judge’s         report     and    recommendation

without addressing his objections.                  We affirm.

                                              I

       We turn first to the question whether Walterspiel properly

completed service of process on Bayer AG.                            “In reviewing an

order to dismiss for insufficient service of process, we review

de     novo     the     determination         that       service     of    process      was

insufficient and we review for abuse of discretion the decision

to dismiss the complaint.”              Marshall v. Warwick, 155 F.3d 1027,

1030     (4th    Cir.    1998).         Service         of   process      on   a     foreign

corporation can be accomplished by serving either (1) an agent

of the corporation in the United States in accordance with forum

state service of process rules, in this case Indiana’s service

of   process      rules,   and    the    Due      Process     Clause      of   the    United

States     Constitution;         or     (2)       the    corporation       overseas      in

accordance        with     the        Hague       Service        Convention.             See

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Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 705-

08   (1988);    see    also       Fed.   R.   Civ.    P.     4(e)(1),       (f),    (h).

Walterspiel contends that he completed service of process by

both means.     We disagree.

      Under Indiana Rule of Trial Procedure 4.6(A)(1), service of

process    on   a   foreign     organization    may     be      completed    “upon    an

executive officer thereof, or if there is an agent appointed or

deemed by law to have been appointed to receive service, then

upon such agent.”           Under Indiana law, the mere existence of a

parent-subsidiary relationship between two entities, even if the

subsidiary is wholly owned by the parent, is not sufficient to

render the subsidiary the parent’s agent for purposes of service

of process.     Gen. Fin. Corp. v. Skinner, 426 N.E.2d 77, 84 (Ind.

Ct. App. 1981).        Instead, an unappointed subsidiary is an agent

of   the   parent     for   purposes     of   service      of    process     when    the

subsidiary lacks a will of its own and operates at the direction

of   the   parent     company     such   that   the   subsidiary        is    a    “mere

instrumentality       of    the    foreign    corporation.”          Id.     at    85-86

(internal quotation marks omitted).

      Based on the record, including the materials in the joint

appendix on appeal, we find no basis to conclude that Bayer AG

appointed Bayer Corporation as its actual agent for service of

process or that Bayer Corporation’s operations are sufficiently

controlled by Bayer AG to render Bayer Corporation Bayer AG’s

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agent   as     a    matter      of     Indiana       law.         In    the     absence    of    any

evidence       regarding         Bayer       AG’s       actual          control     over    Bayer

Corporation, as opposed to evidence merely showing that Bayer

Corporation         is    wholly       owned     by    Bayer       AG,     we    conclude       that

Walterspiel’s attempt to serve process on Bayer AG by way of

service on Bayer Corporation was ineffective.

       Turning       to    Walterspiel’s          attempt         to     serve    Bayer     AG    in

Germany    via       FedEx,      the    Hague     Service         Convention       governs       the

service        of        foreign       corporations               abroad.        Volkswagenwerk

Aktiengesellschaft, 486 U.S. at 698.                         Although Article 10(a) of

the Hague Service Convention states that the “Convention shall

not interfere with . . . the freedom to send judicial documents,

by postal channels, directly to persons abroad,” the Article

permits a “State of destination” to object to the delivery of

judicial documents by postal channels.                            Hague Service Convention

art.    10,    Nov.       15,    1965,      20   U.S.T.          361,    363.      Germany       has

objected       to        Article       10(a),        and     has        established        Central

Authorities         to    execute      requests       for        international      service       of

process.           See    Davies       v.   Jobs      &     Adverts       Online,       GMBH,     94

F.Supp.2d          719,    722       n.6    (E.D.          Va.     2000).          Accordingly,

Walterspiel’s use of FedEx to complete service of process on

Bayer AG was ineffective under the Hague Service Convention.

       Walterspiel         argues       that     even      if     he     failed    to     complete

service       of    process      properly,       the       district        court    abused       its

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discretion in dismissing his complaint.                  We again disagree.        At

the     time   of    the    district      court’s      dismissal,     Walterspiel’s

litigation had been pending for over five years.                       Furthermore,

the district court had inquired four times about Walterspiel’s

completion of service of process on Bayer AG, and Walterspiel

twice      represented     that   he   intended     to   hire   a    German   process

service to complete service of process in accordance with German

law.       Nothing in the record suggests Walterspiel undertook any

steps to act on his representation to the court.                       Accordingly,

the district court did not abuse its discretion by dismissing

Walterspiel’s claims against Bayer AG and the Doe defendants for

failure to complete service of process. *

                                          II

       Having concluded that Walterspiel did not properly complete

service of process on Bayer AG, we turn to the district court’s

dismissal      of   Quintiles     under    Fed.   R.     Civ.   P.   12(b)(6).    We

review de novo a district court’s dismissal of an action under

Fed. R. Civ. P. 12(b)(6), accepting factual allegations in the

complaint as true and drawing all reasonable inferences in favor

       *
       We note that, contrary to Walterspiel’s contention on
appeal, the magistrate judge’s recommendation clearly states
that Fed. R. Civ. P. 4(m)’s 120-day time limitation for
completing service of process did not apply because Bayer AG was
a foreign corporation.

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of    the    nonmoving     party.     Kensington            Volunteer   Fire    Dep’t,

Inc. v. Montgomery Cty., 684 F.3d 462, 467 (4th Cir. 2012).                         To

sustain an action under the FCA, “a plaintiff must allege four

elements: (1) a false statement or fraudulent course of conduct;

(2) made with the requisite scienter; (3) that is material; and

(4)    that    results     in   a   claim       to    the    Government.”       United

States v. Triple Canopy, Inc., 775 F.3d 628, 634 (4th Cir. 2015)

(brackets omitted), pet. for cert. filed, No. 14-1440 (June 8,

2015).

      Claims brought under the FCA are subject to Fed. R. Civ. P.

9(b)’s “more stringent particularity requirement.”                        Id.    “Rule

9(b) requires that an FCA plaintiff must, at a minimum, describe

the time, place, and contents of the false representations, as

well as the identity of the person making the misrepresentation

and what he obtained thereby.”                  Id. (internal quotation marks

omitted).

      Having reviewed Walterspiel’s complaint, we conclude that

it lacks particularized allegations regarding the claims Bayer

AG    made    to   the     Government.               Specifically,      Walterspiel’s

complaint     fails   to    identify,    with         particularity,     what   claims

Bayer AG made to the Government, the amount of the claims, or

the extent to which Bayer AG benefited from the alleged fraud it

perpetrated on the Government.                  In an effort to overcome this

omission from his complaint, Walterspiel argues that we should

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adopt a “relaxed” pleading standard for claims involving fraud

when    the    defendants       are    in         exclusive    possession       of    the

insufficiently alleged facts.                 This argument is not persuasive

because Quintiles, the only properly served defendant, was one

step removed from Bayer AG’s filing of claims on the Government,

and Walterspiel’s complaint lacks sufficient factual allegations

supporting the existence of a conspiracy between Bayer AG and

Quintiles that would place the relevant evidence regarding Bayer

AG’s    requests      for    payment     to       the   Government     in     Quintiles’

possession.      Therefore, we affirm the district court’s dismissal

of Walterspiel’s claims against Quintiles.

                                          III

       The district court denied Walterspiel’s request for leave

to amend his complaint because the request did not comply with

Fed.    R.    Civ.    P.    7(b)(1)    or         M.D.N.C.    Local    R.     15.1    when

Walterspiel filed neither a motion for leave to amend nor a

proposed amended complaint.               On appeal, Walterspiel fails to

present any challenge to the district court’s basis for denying

leave to amend.            Walterspiel instead argues that the district

court   abused       its    discretion      by     denying    him     leave    to    amend

because an amendment would not have been futile.                            Pursuant to

Fed. R. App. P. 28, we conclude that Walterspiel has waived

appellate review of this issue.                    See United States v. Bartko,

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728 F.3d 327, 335 (4th Cir. 2013) (holding that issue not raised

in opening brief, as required by Fed. R. App. P. 28(a)([8])(A),

is waived).

                                      IV

     Finally, Walterspiel argues that the district court erred

by   adopting    the     magistrate      judge’s        recommendation       without

specifically addressing his objections.                    Walterspiel cites no

case law in support of his argument; 28 U.S.C. § 636(b)(1)(C)

(2012) merely requires the district court to make a “de novo

determination    of     those    portions      of    the    report    or   specified

proposed findings or recommendation to which objection is made.”

The district court complied with this requirement.                     Accordingly,

we find no procedural error in the district court’s decision not

to address specifically Walterspiel’s objections.

     Therefore,    we    affirm    the       district      court’s    judgment   and

order.     We dispense with oral argument because the facts and

legal    contentions    are     adequately      presented      in    the   materials

before   this   court    and    argument     would    not    aid     the   decisional

process.

                                                                             AFFIRMED

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