Court Opinion

ID: 2807524
Source: CourtListenerOpinion
Date Created: 2015-06-11 17:00:57.818359+00
Date Added: 2024-06-11T12:09:10.577314
License: Public Domain

ALD-200                                           NOT PRECEDENTIAL

                   UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT
                             ____________

                                  No. 14-3377
                                 ____________

                    UNITED STATES OF AMERICA ex rel.
                         GURSHEEL S. DHILLON,
                                              Appellant

                                       v.

                 ENDO PHARMACEUTICALS; PEGGY RYAN

                       (E.D. Pa. Civ. No. 2-11-cv-07767)

          UNITED STATES OF AMERICA ex rel. MAX H. WEATHERSBY,
                JR.; MK LITIGATION PARTNERSHIP 2011, LLP

                                       v.

      ENDO PHARMACEUTICALS, INC.; ENDO PHARMACEUTICALS
          HOLDINGS, INC.; JAMES R. HAILEY; PEGGY RYAN

                       (E.D. Pa. Civ. No. 2-10-cv-02039)

              UNITED STATES OF AMERICA ex rel. PEGGY RYAN

                                       v.

                      ENDO PHARMACEUTICALS, INC.

                       (E.D. Pa. Civ. No. 2-05-cv-03450)
                    __________________________________

                 On Appeal from the United States District Court
                    for the Eastern District of Pennsylvania
                         District Judge: Robert F. Kelly
                        __________________________________

                     Submitted on a Motion for Summary Affirmance
                    Pursuant to Third Circuit LAR 27.4 and I.O.P. 10.6
                                      May 14, 2015

            Before: RENDELL, CHAGARES and SCIRICA, Circuit Judges

                                  (Filed: June 11, 2015)

                                   ________________

                                       OPINION*
                                   ________________

PER CURIAM

       Gursheel Dhillon (“Dhillon”) appeals from an order of the District Court holding

that Peggy Ryan is the sole Relator eligible to receive the settlement award, an order

which effectively brought an end to his case. For the reasons that follow, we will

summarily affirm.

       In February, 2011, Dhillon filed a False Claims Act (“FCA”) case against Endo

Pharmaceuticals (“Endo”), alleging that Endo’s sales representatives promoted the off-

label use of Lidoderm, which Dhillon learned about as a physician.1 Lidoderm is an

adhesive patch and is approved only for the treatment of pain related to post-herpetic

neuralgia, a complication of shingles. Thousands of ineligible Lidoderm prescriptions

were submitted to Medicaid and Medicare for reimbursement. When Dhillon filed his

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
 Because the parties are familiar with the background of this case, we only briefly
summarize it here.
                                             2
case, two other cases involving the off-label marketing of Lidoderm were already

pending: Peggy Ryan’s case filed in 2005, U.S. ex rel. Ryan v. Endo Pharmaceuticals,

Inc., D.C. Civ. No. 05-cv-03450, and Max Weathersby’s case filed in 2010, U.S. ex rel.

Weathersby v. Endo Pharmaceuticals, Inc., D.C. Civ. No. 10-cv-02039. Ryan also filed

an Amended Complaint -- on March 31, 2009 -- before either Weathersby or Dhillon

initiated their actions.

       On February 21, 2014, the Government elected to intervene on behalf of the

Relators for settlement purposes. On this same day, the Relators entered into a settlement

agreement whereby Endo agreed to pay $171.9 million in exchange for being released

from liability. The settlement expressly resolved the off-label FCA allegations of all

three Relators. Dhillon was represented by counsel when he signed the settlement

agreement and waived and forever discharged any claims against Endo for the covered

conduct. The settlement agreement included a provision expressly reserving the issue of

entitlement to a Relator’s share, which the District Court would decide. The Government

took no position on this issue.

       Briefing ensued in the District Court, and Ryan requested that she be awarded the

sole Relator’s share as the first-to-file. Dhillon argued that he was the first to state a

plausible claim to relief and thus was entitled to a Relator’s share. He argued that,

although Ryan’s Amended Complaint filed on March 31, 2009 was filed before his

complaint, it failed to satisfy Federal Rule of Civil Procedure 9(b)’s particularity

requirement; thus the first-to file rule was inapplicable. Ryan rebutted this argument, and

also argued that Dhillon’s claims were precluded by the public disclosure bar. Dhillon

                                               3
countered that the public disclosure bar was inapplicable because he qualified as an

“original source.” Dhillon made certain additional arguments.

       In an order entered on June 23, 2014, the District Court granted Ryan’s motion,

holding that she was the sole Relator eligible for the settlement award. The Court began

with a first-to-file analysis, the threshold issue presented by the case, and determined that

Ryan’s March 31, 2009 Amended Complaint was adequately pled in accordance with our

recent decision in Foglia v. Renal Ventures Management, LLC, 754 F.3d 153 (3d Cir.

2014) (setting forth requisite pleading standard under Rule 9(b) for FCA claims). The

Court remarked that the issue was not even close. Ryan not only set forth particular

details of the scheme, but also supported them with solid evidence. The Court further

determined that Dhillon failed to raise any off-label marketing claims that were unique

from the claims raised by Ryan. Accordingly, Ryan was entitled to be awarded the sole

Relator’s share as the first-to-file.

       The District Court then further held, in the alternative, that Ryan had correctly

argued that Dhillon’s claims were precluded by the public disclosure bar. The Court

noted that the Government produced a number of news articles, which originated prior to

the filing of complaints by either Weathersby or Dhillon, and that these articles qualified

as public disclosures from news media under the plain language of 31 U.S.C. §

3730(e)(4). The Court held that Weathersby’s and Dhillon’s qui tam actions were based

upon the allegations set forth in the aforementioned public disclosures, and that they thus

would have to be dismissed for lack of jurisdiction, id. at § 3730(e)(4)(B), unless each

Relator could show that he was an “original source.” The Court held that Dhillon had

                                              4
failed utterly to show that he was an “original source” because he had no direct or

independent knowledge of the fraud.2 The Court also rejected as meritless Dhillon’s

other arguments based on the law of contracts, the statute of limitations, and the doctrine

of laches.

       Dhillon filed a notice of appeal from the District Court’s June 23 Order, and then

filed a timely motion for reconsideration. Ryan moved for an appellate bond of $25,000

pursuant to Federal Rule of Appellate Procedure 7, arguing that it was necessary to

ensure payment of costs on appeal. See Docket Entry No. 46, D.C. Civ. No. 05-cv-

03450. The District Court, in an order entered on August 26, 2014, denied Dhillon’s

motion for reconsideration. In a separate order entered on the same day, the Court

ordered Dhillon to prepay an appellate bond in the amount of $10,000.

       We have jurisdiction under 28 U.S.C. § 1291 and Federal Rule of Appellate

Procedure 4(a)(4)(B)(i) to review the order entered on June 23, 2014 as to Dhillon,3 now

that the District Court has denied his timely motion for reconsideration.4 Relator Ryan

2
 By way of comparison, the District Court determined that Weathersby was an “original
source.”
3
 The District Court consolidated the three cases solely with regard to the issue of the
Relators’ share of the settlement of federal claims relating to Endo’s off-label marketing
conduct. Apparently, certain of Weathersby’s claims under analogous state laws remain
pending in his case.
4
  Dhillon did not file a new or amended notice of appeal within the time required once his
motion for reconsideration was denied. The order denying the motion for reconsideration
is the final order, but because Dhillon did not file a new or amended notice of appeal
from it, we lack jurisdiction to review it to the extent that it decides new issues not
decided by the District Court’s June 23 Order. Fed. R. App. Pro. 4(a)(4)(B)(ii);
Carrascosa v. McGuire, 520 F.3d 249, 253-54 (3d Cir. 2008). We note also that Dhillon
                                             5
has moved for summary affirmance under Third Cir. LAR 27.4 and I.O.P. 10.6, and, in a

separate motion, has moved to dismiss or quash the appeal because Dhillon failed to pay

the appellate bond. Dhillon has submitted written opposition to these motions and filed a

pro se opening brief, which we will consider. In addition, Dhillon has moved to strike

Ryan’s motions for summary affirmance and to dismiss or quash the appeal. Ryan has

filed a motion to expedite disposition of her motions for summary affirmance and to

dismiss or quash. The briefing schedule has been stayed and these motions are ripe for

disposition. After the District Court denied his motion for reconsideration, Dhillon filed

a Rule 60(b) motion in the District Court, alleging newly discovered evidence. See

Docket Entry No. 60. The motion was stayed by the District Court pending the outcome

of this appeal, see Venen v. Sweet, 758 F.2d 117, 120 (3d Cir. 1985). Dhillon has filed

two motions in this Court, asking that we summarily remand the matter to the District

Court for disposition of that Rule 60(b) motion. These motions also are ripe for

disposition.

       We grant Ryan’s motion for summary affirmance and will summarily affirm the

order of the District Court because no substantial question is presented by this appeal,

Third Circuit LAR 27.4 and I.O.P. 10.6. Our review of matters of statutory interpretation

is plenary. See U.S. ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149

F.3d 227, 232 (3d Cir. 1998). The False Claims Act (“FCA”) enables individuals, known

filed a second motion for reconsideration, which the District Court denied. This second
motion was untimely filed and did not toll the time for taking an appeal, Fed. R. App.
Pro. 4(a)(4)(B)(i). Moreover, Dhillon did not separately appeal the order denying this
second motion.
                                             6
as Relators, to bring enforcement actions, known as qui tam actions, on behalf of the

United States to recover funds which were fraudulently obtained, and to share in any

resulting damages award. 31 U.S.C. § 3729, et seq. See also U.S. ex rel. Wilkins v.

United Health Group, Inc., 659 F.3d 295, 304-05 (3d Cir. 2011). There are limitations to

recovery, however. The first-to-file bar, for example, prohibits a Relator from bringing a

case based on the same “essential facts” as an earlier-filed complaint, such that only the

first-filed case may proceed to a damages award. 31 U.S.C. § 3730(b)(5); LaCorte, 149

F.3d at 232-33 (if later filed allegation states all essential facts of previously-filed claim,

section 3730(b)(5) bars later claim even if it incorporates somewhat different details).

Only the first-filed Relator is entitled to a Relator’s share award from a settlement. Id.

Cf. U.S. ex rel. Ortega v. Columbia Healthcare, Inc., 240 F.Supp.2d 8, 12 (D.D.C. 2003)

(dividing the “bounty” has practical effect of reducing incentive to come forward with

information on wrongdoing). The District Court held that the first-to-file rule applied to

bar Dhillon’s claim for a share of the settlement.

       In his opening brief, Dhillon argues that once the Government intervenes, it cannot

deny a Relator his statutory share of at least 15% under 31 U.S.C. §§ 3730(d)(1) and

3730(c)(5). Appellant’s Informal Brief, at 11. In Rille v. PricewaterhouseCoopers LLP,

748 F.3d 818 (8th Cir. 2014), upon which Dhillon relies, the District Court awarded the

Relators over $8 million. The Government, which had intervened and had adopted the

Relators’ complaint, appealed and contended that the Relators were not entitled to any

share of the recovery because their complaint did not state a plausible claim for relief.

The Government contended that the claims it actually settled were unrelated to the

                                               7
Relators’ action and therefore the settlement funds did not constitute “proceeds of the

action or settlement of the claim” under § 3730(d)(1). The Court of Appeals for the

Eighth Circuit sided with the Relators, holding that they were entitled to a 15% finder’s

fee, so long as they were an “original source.” Rille, 748 F.3d at 825.

       In Dhillon’s case, the District Court decided -- adversely to him -- the threshold

question whether his action was barred by the first-to-file rule. Accordingly, Rille, which

does not concern the first-to-file issue, has no bearing on his case.5 Dhillon also argues

that he must necessarily be an “original source” because, after he filed his “home run”

complaint, Endo finally agreed to settle. Appellant’s Informal Brief, at 15. This

argument is meritless; it again ignores the fact that the District Court decided the

threshold first-to-file question adversely to Dhillon. Only the first-filed Relator is

entitled to a Relator’s share award from a settlement, LaCorte, 149 F.3d at 232-33, and

Dhillon is not a first-filed Relator. Although the first-to file issue is dispositive here, we

note further that Dhillon’s complaint was indeed the last one filed before the claims were

settled, but he provides no support for his argument that the temporal relationship

between a qui tam complaint and a settlement has any bearing at all on the “original

source” determination. He thus gives us no reason to overturn the District Court’s

determination that he is not an “original source.”

       Dhillon next argues that Ryan’s March 31, 2009 Amended Complaint is itself

subject to the first-to file and public disclosure rules because her original complaint

5
 We further note that this opinion was vacated by the court and that rehearing en banc
was granted. See Rille v. PricewaterhouseCoopers LLP, 2014 WL 5835459 (8th Cir.
August 27, 2014).
                                               8
contained all of the required “essential facts.” Id. at 23. In U.S., ex rel. Shea v. Cellco

Partnership, 748 F.3d 338 (D.C. Cir. 2014), petition for cert. filed, upon which Dhillon

relies, the Court of Appeals for the District of Columbia held that a Relator’s second

action under the FCA was barred by the first-to-file rule because the second action

incorporated the same material elements of fraud as his earlier-filed action, id. at 342-42.

Shea does not apply here because Mr. Shea’s first qui tam action came to an end when

the parties settled without admission of liability. Here, unlike Mr. Shea who filed a

second qui tam action after his first action settled and came to an end, id. at 340, Ryan

initiated only one qui tam action. Although an amended complaint supersedes an original

complaint, as Dhillon argues, the filing of an amended complaint does not begin a new

action; it is a continuation of the original action.

       Last, Dhillon argues that Ryan’s Amended Complaint did not comply with Rule

9(b)’s heightened pleading requirements under the standard that applies in the Sixth

Circuit Court of Appeals, see U.S. ex rel. Bledsoe v. Community Health Systems, Inc.,

501 F.3d 493, 510 (6th Cir. 2007); that Sixth Circuit law should apply because he

initiated his case in federal court in the Middle District of Tennessee; and that the District

Court incorrectly applied Foglia. Appellant’s Informal Brief, at 27-28. We note that in

Foglia we sided with those circuits that had used a “more nuanced” reading of the

heightened pleading requirements of Rule 9(b) in deciding FCA cases, and that the Sixth

Circuit Court of Appeals was not among those circuits.

       Dhillon’s case was originally filed in the Middle District of Tennessee but was

transferred to the Eastern District of Pennsylvania where Ryan’s and Weathersby’s qui

                                               9
tam actions already were pending. When a matter is not within the exclusive jurisdiction

of a court, the law of the circuit in which the district court sits applies. See Pharmacia &

Upjohn Co. v. Mylan Pharmaceuticals, Inc., 170 F.3d 1373, 1381 (Fed. Cir. 1999). The

issue of Rule 9(b)’s particularity requirement is not a matter within the exclusive

jurisdiction of any federal court, and, accordingly, Foglia applies to FCA cases decided in

the Eastern District of Pennsylvania. The District Court properly reviewed Ryan’s March

31, 2009 Amended Complaint under the test we adopted in Foglia, and correctly

determined that Ryan amply complied with Rule 9(b). In Foglia, we held that a

plaintiff’s claim must be accompanied by “particular details of a scheme to submit false

claims paired with reliable indicia that lead to a strong inference that claims were actually

submitted.” Id. at 157-58 (internal quotation marks removed). “Sufficient facts to

establish ‘a plausible ground for relief’ must be alleged.” Id. at 158 (quoting Fowler v.

UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009)).

       Ryan worked as a sales representative for Endo and assisted in the Government’s

investigation, which began in 2005. In her Amended Complaint, she described a scheme

undertaken by Endo to promote the off-label use of Lidoderm through the creation of

fraudulent studies, by directing the sales force to advocate such applications, and by

targeting and encouraging physicians through a system of kickbacks to prescribe the drug

for such uses. She asserted that Endo touted the effectiveness of Lidoderm for off-label

uses through supposedly independent studies, but these studies actually were financed

and directed by Endo. She alleged that Endo directed company sales representatives to

inform physicians of Lidoderm’s ability to treat carpal tunnel syndrome, osteoarthritis,

                                             10
low back pain and other off-label conditions, and provided the representatives with

literature and publications promoting Lidoderm’s off-label uses. She asserted that Endo

used a system of kickbacks in order to encourage physicians to prescribe Lidoderm for

unapproved uses. “High prescribers” were given honorariums to present at medical

conferences and round table dinners. Finally, she used statistical sales data to further

support her claim that Endo promoted the off-label use of Lidoderm. For instance,

although the number of patients suffering from post-herpetic neuralgia has remained

relatively constant, net sales of Lidoderm increased by 73% to $309.2 million in 2004.

Since 2004, net sales of Lidoderm have more than doubled, and in 2007 reached $705.6

million.

       Accordingly, Ryan’s Amended Complaint amply set forth “particular details of a

scheme to submit false claims” and additionally supported them with evidence that would

allow for a “strong inference” that false claims actually were submitted, Foglia, 754 F.3d

at 156, thus satisfying Rule 9(b). Dhillon’s argument that Ryan’s Amended Complaint

does not satisfy Rule 9(b)’s particularity requirement under the governing law is

meritless.

       For the foregoing reasons, we grant Ryan’s motion and will summarily affirm the

District Court’s June 23, 2014 Order. Ryan’s motion to expedite is granted. Ryan’s

motion to dismiss or quash the appeal is denied as unnecessary. Dhillon’s motion to

strike is denied. Dhillon’s two motions to summarily remand are denied as moot.

                                             11