Court Opinion

ID: 2999497
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:54:40.787521+00
Date Added: 2024-06-11T15:03:12.863879
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                       ____________

No. 04-4000
UNITED STATES OF AMERICA ex rel.
DENISE CREWS & STATE OF ILLINOIS
ex rel. DENISE CREWS,
                                       Plaintiffs-Appellants,
                             v.

NCS HEALTHCARE OF ILLINOIS, INC. &
NCS HEALTHCARE, INC.,
                                 Defendants-Appellees.
                   ____________
          Appeal from the United States District Court
               for the Southern District of Illinois.
        No. 99 C 4020—G. Patrick Murphy, Chief Judge.
                       ____________
  ARGUED FEBRUARY 13, 2006—DECIDED AUGUST 17, 2006
                   ____________

  Before KANNE, EVANS, and WILLIAMS, Circuit Judges.
  KANNE, Circuit Judge. Denise Crews filed suit against
several related entities and individuals pursuant to the
qui tam provisions of the False Claims Act, 31 U.S.C.
§ 3729 et seq. (the “FCA”), and the Illinois Whistleblower
Reward and Protection Act, 740 ILCS § 175/1 et seq. Crews
alleged that the various entities and individuals schemed to
fraudulently obtain money from the Illinois Department of
Public Aid (and indirectly, from the Social Security Admin-
istration) on a regular basis. The district court granted
summary judgment for the defendants, explaining that
2                                                No. 04-4000

Crews did not point to any particular claim that was false.
Crews suffers the same fate on appeal, and we affirm.

                       I. HISTORY
  Jeffrey Knute Connell owned and operated a shoddy
pharmacy in Herrin, Illinois, that provided pharmaceu-
tical services to nursing homes in the area. He later sold his
business to NCS Healthcare, Inc. which later transferred
ownership to its subsidiary, NCS Healthcare of Illinois, Inc.
(collectively, “NCS”). Connell remained as Pharmacist-in-
Charge.
   NCS hired pharmacists (including Denise Crews) and
pharmaceutical technicians to fill and deliver prescriptions.
Approximately 60% of the nursing home patients were on
Illinois Medicaid. Illinois Medicaid is jointly funded by the
State of Illinois and the Social Security Administration, and
administered by the Illinois Department of Public Aid (the
“IDPA”). NCS would submit vouchers to the IDPA for
payment for those drugs distributed to Illinois Medicaid
patients.
  Prescriptions were typically filled by a machine. The
machine, of course, was not perfect. Occasionally, the
machine would package too many or too few pills, for
example. Employees would manually add, remove, or
replace pills as needed. They did this using piles of pills
they kept on their desk or in their desk drawers. By not
properly storing the pills, NCS was violating state law.
Furthermore, NCS was violating state and federal law by
mixing together pills with different expiration dates.
  For various reasons, prescriptions would often return to
NCS unused, such as when a patient died. In that case,
employees simply dumped the unused pills in large garbage
cans, separated by drug type. When filling prescriptions
with the machine, employees would sometimes take drugs
from the garbage cans and load the machine with these
No. 04-4000                                                 3

pills. Here again, the storage of the pills was improper, as
was the label on the final packages, as the expiration dates
would not be accurate.
  In 1998, the pharmacy was raided by law enforcement
personnel pursuant to a search warrant. Ultimately,
Connell, another pharmacist, and NCS pled guilty to one
count of misbranding drugs under the federal Food, Drug
and Cosmetic Act, for the repackaging and recycling of
drugs without regard to lot numbers or expiration dates.
See 21 U.S.C. §§ 331(b),(k), 333(a)(1). Connell also pled
guilty to causing an employee to submit a false certification
in connection with federal regulations regarding the storage
and handling of controlled substances. See 18 U.S.C.
§§ 1001, 2. Connell was sentenced to prison while NCS was
ordered to pay $200,000 in restitution.
  Crews filed her qui tam suit in 1999. In effect, Crews
attempted to be a whistleblower a full year after law
enforcement raided the pharmacy, and two years after
she stopped working there. It is unclear from the record
what new or additional information, if any, Crews brought
to the table. Crews’s complaint alleged NCS submitted false
claims to the IDPA by submitting claims for medications
that had been recycled, repackaged, and previously paid for
by Illinois Medicaid for another patient. She further alleged
that NCS resold medications that had been returned by
nursing homes without crediting the IDPA for the returned
medications. She also alleged NCS submitted false claims
by dispensing medication without regard for expiration
dates and lot numbers.

                      II. ANALYSIS
  We review a district court’s grant of summary judgment
de novo. Isbell v. Allstate Ins. Co., 418 F.3d 788, 793 (7th
Cir. 2005) (citation omitted). Summary judgment is appro-
priate if “ ‘the pleadings, depositions, answers to interroga-
tories, and admissions on file, together with the affidavits,
4                                                    No. 04-4000

if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law.’ ” Id. (quoting Fed. R. Civ. P.
56(c)); Ezell v. Potter, 400 F.3d 1041, 1046 (7th Cir. 2005)
(citation omitted); see Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986).
   “A qui tam action is brought by a private party, called the
‘relator,’ on behalf of the government.” United States ex rel.
Lu v. Ou, 368 F.3d 773, 774 (7th Cir. 2004). For our pur-
poses, the FCA imposes liability against any person who:
    (1) knowingly presents, or causes to be presented,
    to an officer or employee of the United States
    Government . . . a false or fraudulent claim for
    payment or approval; (2) knowingly makes, uses, or
    causes to be made or used, a false record or state-
    ment to get a false or fraudulent claim paid or
    approved by the Government; [or] (3) conspires to
    defraud the Government by getting a false or
    fraudulent claim allowed or paid.
31 U.S.C. § 3729(a)(1)-(3); see United States ex rel. Gross v.
AIDS Research Alliance-Chicago, 415 F.3d 601, 604 (7th
Cir. 2005) (citation omitted). We need only concern our-
selves with § 3729(a)(2),1 which “has three essential
elements: (1) the defendant made a statement in order to
receive money from the government, (2) the statement
was false, and (3) the defendant knew it was false.” Gross,
415 F.3d at 604 (citations omitted).

1
  Although Crews based her federal claim on § 3729(a)(1)-(3), we
will ignore her claim based on subsection (1), as it is undisputed
at summary judgment that NCS never filed any claim with an
officer or employee of the United States. Rather, all claims
were filed with and administered by the State. As for § 3729(a)(3),
Crews apparently abandoned this claim, as this subsection (and
any related argument) appear nowhere in her opening brief.
No. 04-4000                                                 5

  A. False Claims Involving Recycled Medications
  Crews’s overarching argument is that “[a]ll claims for
recycled and redispsensed [sic] medications submitted by
NCS [ ] are false claims.” Crews repeatedly points out that
NCS provided prescription medication to nursing home
residents, 60% of whom were on Medicaid. Furthermore,
10% to 20% of the dispensed medications were returned
unused by the patients. Therefore, according to Crews,
“basic math proves that 6% to 12% of recycled drugs would
have been [re]distributed to Medicaid recipients [and thus
rebilled to IDPA].” NCS frames the issue as follows:
“Whether a failure by Plaintiff to tie one particular recycled
medication to a particular false claim is fatal to a cause of
action under the False Claims Act . . . .”
  Three other courts of appeals have faced this same issue,
one of which involved virtually identical circumstances. See
United States ex rel. Quinn v. Omnicare, Inc., 382 F.3d 432
(3d Cir. 2004); United States ex rel. Clausen v. Lab Corp. of
Am, Inc., 290 F.3d 1301 (11th Cir. 2002); United States ex
rel. Alfatooni v. Kitsap Physicians Serv., 314 F.3d 995 (9th
Cir. 2002). All three are in agreement, in that the respective
relators’ claims failed because each relator did not provide
a single false claim that was actually submitted. In Quinn,
the Third Circuit reasoned as follows:
    Quinn . . . did not come forward with a single claim
    that [the pharmacy] actually submitted to Medicaid
    which covered a medication for which [the phar-
    macy] had previously submitted a claim. . . . Quinn
    failed to link [the pharmacy]’s recycling and credit-
    ing practices to the actual submission of a false
    claim. Without proof of an actual claim, there is no
    issue of material fact to be decided by a jury.
    Quinn’s theory that the claims ‘must have been’
    submitted cannot survive a motion for summary
    judgment.
6                                                No. 04-4000

382 F.3d at 440; see Clausen, 290 F.3d at 1311 (holding
plaintiff cannot “merely . . . describe a private scheme in
detail but then . . . allege simply and without any stated
reason for his belief that claims requesting illegal payments
must have been submitted, were likely submitted or should
have been submitted to the Government”); Alfatooni, 314
F.3d at 1002-03 (holding plaintiff must come to court with
a “claim in hand” and “generalized, speculative supposi-
tions” will not suffice). Furthermore, the Third Circuit
agreed with the statement that the relator has the “burden
to establish, in at least one instance, that a given pharma-
ceutical had been paid for by Medicaid, returned to the
pharmacy, and then redispensed and rebilled to Medicaid.”
Quinn, 382 F.3d at 440. We agree with the analysis from
Quinn, and find Crews did not meet her burden.
  In an effort to circumvent the reasonings from Quinn,
Clausen, and Alfatooni, Crews attempts two contradictory
arguments. On the one hand, Crews points to IDPA
Voucher Number 6306580 as evidence of a false claim. On
the other hand, Crews argues she need not tie a recycled
pill to a particular claim because “such a showing is impossi-
ble,” given NCS’s contamination of the evidence; therefore,
the burden is on NCS to show its actions were legal, or so
the argument goes. We first turn to the Voucher.
  At the outset, we note Crews points to only one voucher.
Given the analysis above, Crews needs to point to at least
two vouchers to meet her burden: one voucher in which
the IDPA is billed for certain pills, and then a second
voucher in which the IDPA is billed again for at least one of
the same pills. Without more, the Voucher standing alone
proves nothing. Crews’s original claim is akin to alleging
the double-billing of the IDPA (and Medicaid) for drugs.
Another bill submitted to the IDPA for the same pills is
required; otherwise, it could be that the pills from the
Voucher were later returned, distributed to a non-Medicaid
patient, and billed to that patient’s insurance company. In
No. 04-4000                                                7

that case, Crews would have no case under the FCA. For
that matter, simply by chance, all recycled drugs could have
wound up in the hands of non-Medicaid patients. Statisti-
cally unlikely, to be sure, but possible. In fact, Crews
introduces no evidence that that is not what happened. The
burden is on Crews to show the link between two vouchers
that represent two separate charges for the same pill, a
burden Crews fails to carry.
  Crews’s failure to point to two vouchers brings us to her
second argument, namely that the burden of proof is on
NCS, as it was responsible for contaminating the evi-
dence. Crews has no case law legitimately supporting her
position. The cases she does cite involve retaliatory dis-
charge claims, as well as securities, unfair trade, and
antitrust cases. The securities, unfair trade, and antitrust
cases all involve the determination of damages, and are
of no relevance here. As for the retaliatory discharge
cases, they too have no relevance in this case, as they
involve a specific burden-shifting method that shifts the
burden of production to a defendant after a plaintiff has met
his, something we do not have here. Crews does not point to
one relevant case under the FCA that shifted the burden of
actually identifying a false claim from the relator to the
defendant. In effect, Crews is arguing that NCS must prove
that each and every claim it ever filed with the IDPA was
lawful, an argument that defies common sense and the
plain language of the FCA.
  This is not a case in which a defendant began destroying
evidence during discovery in an effort to thwart discovery.
Nor is it the case of employees in a backroom, shredding
documents due to a threat of potential litigation. At worst,
NCS was a criminal enterprise that kept poor records.
There is simply no legal authority under the FCA for the
proposition that Crews’s burden of proof must then be
shifted to NCS as a result.
8                                                    No. 04-4000

    B. False Claims Involving Returned Medications
  Crews also claims that “[a]ll claims submitted to Illinois
Medicaid by NCS [ ] for medications returned by the
Medicaid recipient are false claims.” As support, Crews
points to undisputed evidence indicating that 10% to 20% of
the medication dispensed by NCS was returned. Crews
argues (without a citation to the record) that no credits
were provided to IDPA (or Medicaid) for these unused
medications. Therefore, according to Crews, 10% to 20% of
all claims submitted were false claims. Here again, Crews
fails to point to a specific voucher, one which billed for
drugs that were later returned, with no credit given.
Crews’s utter lack of evidence is underscored by the fact
that it is entirely possible that all returned drugs were from
non-Medicaid patients; there is no evidence to the contrary.
Once again, Crews’s argument is similar to that made in
Quinn, Clausen, and Alfatooni, in that some of the vouchers
must have been false, and for the reasons set forth earlier,
we reject this line of argument.
   As for Crews’s federal claim on this issue, a similar
argument was specifically rejected by the Third Circuit
in Quinn. The court found “that there [was] no regulatory
requirement of the reversal of a claim once a medication
[had] been returned.” Quinn, 382 F.3d at 438. Therefore, “if
there is no requirement to adjust the claim, there is no
liability for a failure to do so.” Id. As Crews fails to point to
a federal regulatory requirement here, we agree with this
analysis. Furthermore, we agree with the second line of
reasoning from Quinn rejecting this argument, namely that
the claim was not false when filed.2 Id. (“The fallacy of this
argument lies in the fact that the return of a medication,

2
  Although Crews does point to a state regulatory requirement,
namely 89 Ill. Adm. Code § 140.448, this does not save the day for
her, as the second line of reasoning from Quinn still holds true to
undercut her state law claim.
No. 04-4000                                                  9

which at the outset has been dispensed to the Medicaid
beneficiary, does not render the initial claim false or fraudu-
lent.”).
  We also note a theoretical problem with Crews’s claim
that there were false claims on account of NCS failing to
provide credit for returned medications. The problem is that
Crews can never point to a specific voucher on this issue;
effectively, Crews’s claim is a failure-to-file claim—NCS
failed to file a revised voucher or claim that credited IDPA
for the returned medications. This failure-to-file claim
necessarily precludes a FCA action, as that Act specifically
requires a claimant to point to a specific claim.

  C. False Claims Involving False Certifications
  The last argument we need address is Crews’s conten-
tion that the Voucher constitutes a false claim because
Connell was convicted of making a false statement with
respect to the Voucher. Connell pled guilty to making a
false statement, as he failed to disclose that NCS did
not comply with federal regulations regarding the stor-
age and handling of controlled substances, in violation of 18
U.S.C. §§ 1001 and 2. Connell’s conviction simply does not
stand for the proposition Crews is attempting to advance.
Crews’s argument reads as if Connell pled guilty to submit-
ting a false claim, which is not the case. The Voucher does
not turn into a false claim under the FCA just because NCS
stored or handled the drugs improperly. Besides, “[a]n FCA
claim premised upon an alleged false certification of
compliance with statutory or regulatory requirements also
requires that the certification of compliance be a condition
of or prerequisite to government payment.” Gross, 415 F.3d
at 604 (citations omitted). Crews does not introduce any
actual, relevant evidence on this issue.
10                                               No. 04-4000

                    III. CONCLUSION
  For the reasons set forth above, the decision of the district
court is AFFIRMED.

A true Copy:
       Teste:

                         ________________________________
                         Clerk of the United States Court of
                           Appeals for the Seventh Circuit

                    USCA-02-C-0072—8-17-06