Court Opinion

ID: 4166518
Source: CourtListenerOpinion
Date Created: 2017-05-05 15:04:26.569044+00
Date Added: 2024-06-11T07:46:57.116037
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 16-1506
                        ___________________________

United States of America ex rel. Shara Ambrosecchia, States of CA, CO, CT, DE,
District of Columbia, FL, GA, HI, IL, IN, LA, MD, MS, MI, MN, MO, MT, NV,
                 NH, NJ, NM, NY, OK, RI, TN, TX, VA and WI

                       lllllllllllllllllllll Plaintiff - Appellant

 State of California; State of Colorado; State of Connecticut; State of Delaware;
District of Columbia; State of Georgia; State of Hawaii; State of Illinois; State of
Indiana; State of Louisiana; State of Massachusetts; State of Michigan; State of
 Montana; State of Nevada; State of New Jersey; State of New Mexico; State of
 New York; State of North Carolina; State of Oklahoma; State of Rhode Island;
    State of Tennessee; State of Texas; State of Virginia; State of Wisconsin

                             lllllllllllllllllllll Plaintiffs

                                           v.

Paddock Laboratories, LLC, a wholly-owned subsidiary of Perrigo Co.; Perrigo
                              Company, PLC

                      lllllllllllllllllllll Defendants - Appellees
                                       ____________

                    Appeal from United States District Court
                  for the Eastern District of Missouri - St. Louis
                                  ____________

                             Submitted: March 7, 2017
                                Filed: May 5, 2017
                                 ____________
Before RILEY, Chief Judge,1 GRUENDER, Circuit Judge, and GRITZNER,
District Judge.2
                              ____________

GRUENDER, Circuit Judge.

      Relator Shara Ambrosecchia appeals the district court’s3 dismissal of claims
she brought against two pharmaceutical manufacturers under the False Claims Act
(“FCA”). For the following reasons, we affirm.

                                  I. Background

      In November 2012, Ambrosecchia filed suit on behalf of the United States of
America, twenty-seven states, and the District of Columbia against Paddock
Laboratories and Perrigo Company (“Defendants”) for violations of the FCA and
analogous state statutes. In 1962, amendments to the Food, Drug, and Cosmetic Act
required drugs previously approved by the Food and Drug Administration (“FDA”)
to undergo a review for effectiveness under the Drug Efficacy Study Implementation
Program (“DESI”). Drugs determined to be “less than effective” and for which a
notice of opportunity for a hearing was published (“DESI-LTE”) are not eligible for
Medicare and Medicaid reimbursement unless re-approved. Ambrosecchia, a former
employee of both Defendants, alleged that the Defendants reported reimbursement-

      1
       The Honorable William Jay Riley stepped down as Chief Judge of the United
States Court of Appeals for the Eighth Circuit at the close of business on March 10,
2017. He has been succeeded by the Honorable Lavenski R. Smith.
      2
      The Honorable James E. Gritzner, United States District Judge for the
Southern District of Iowa, sitting by designation.
      3
       The Honorable Ronnie L. White, United States District Judge for the Eastern
District of Missouri.

                                        -2-
eligible classification codes to the Center for Medicare and Medicaid Services
(“CMS”) for certain DESI-LTE drugs, thereby causing the United States and relevant
state governments to provide reimbursement for ineligible drugs.

       Defendants filed a motion to dismiss the second amended complaint under
Federal Rule of Civil Procedure 12(b)(6), arguing that the public disclosure bar, 31
U.S.C. § 3730(e)(4), requires dismissal. The public disclosure bar requires an FCA
claim to be dismissed where the allegations are based on information that has been
publicly disclosed, unless the person making the claim “is an original source of the
information.” Id. § 3730(e)(4)(A). The district court granted the motion and
dismissed the FCA claims, finding that the public disclosure bar applies and that
Ambrosecchia does not fit within the original source exception. Additionally, the
district court declined to exercise supplemental jurisdiction over the state law claims
and dismissed them without prejudice. Ambrosecchia appeals, arguing that the public
disclosure bar cannot be determined on a motion to dismiss and, in the alternative,
that the public disclosure bar does not apply. Ambrosecchia also contends that the
district court should have granted her leave to amend her complaint and that the court
erred in permitting Perrigo Company, PLC to join Paddock’s motion to dismiss rather
than entering default judgment against it. Ambrosecchia does not challenge dismissal
of her state law claims. Defendants raise as an alternative basis for affirmance the
argument that Ambrosecchia’s complaint does not satisfy Federal Rule of Civil
Procedure 9(b).

                                   II. Discussion

                               A. Motion to Dismiss

      First, Ambrosecchia contends that it is not appropriate to resolve whether the
public disclosure bar applies on a motion to dismiss because the public disclosure bar,
as amended in 2010, is no longer jurisdictional. Prior to 2010, 31 U.S.C. § 3730(e)(4)

                                         -3-
removed a court’s subject matter jurisdiction where the allegations and transactions
of an FCA action previously had been publicly disclosed. U.S. ex rel. Newell v. City
of St. Paul, Minn., 728 F.3d 791, 794-95 (8th Cir. 2013) (“No court shall have
jurisdiction over an action under this section based upon the public disclosure of [the]
allegations or transactions . . . .” (citation omitted)). Accordingly, courts determined
at the outset of a suit whether the public disclosure bar applied under Federal Rule
of Civil Procedure 12(b)(1). See id. at 795. In 2010, Congress amended § 3730(e)(4)
as part of the Patient Protection and Affordable Care Act. U.S. ex rel. Moore & Co.
v. Majestic Blue Fisheries, LLC, 812 F.3d 294, 298-300 (3d Cir. 2016). The amended
section 3730(e)(4) provides:

      The court shall dismiss an action or claim under this section, unless
      opposed by the Government, if substantially the same allegations or
      transactions as alleged in the action or claim were publicly disclosed—

      (i) in a Federal criminal, civil, or administrative hearing in which the
      Government or its agent is a party;
      (ii) in a congressional, Government Accountability Office, or other
      Federal report, hearing, audit, or investigation; or
      (iii) from the news media . . . .

31 U.S.C. § 3730(e)(4)(A). Ambrosecchia argues that this amended language does not
pose a jurisdictional question. Therefore, she argues, whether the public disclosure
bar applies is a factual question that cannot be resolved prior to summary judgment.

       However, this court has already determined that the amended public disclosure
bar is appropriately resolved on a motion to dismiss, even assuming that it no longer
poses a jurisdictional question. U.S. ex rel. Paulos v. Stryker Corp., 762 F.3d 688, 696
(8th Cir. 2014) (“Assuming the motion is best viewed as one made under Rule
12(b)(6), a court may still consider matters incorporated by reference or integral to the
claim, items subject to judicial notice, and matters of public record.” (quotation and

                                          -4-
alterations omitted)); U.S. ex rel. Kraxberger v. Kan. City Power & Light Co., 756
F.3d 1075, 1083 (8th Cir. 2014) (“Since the FCA requires a court to dismiss a claim
based on public disclosure, a court necessarily considers the alleged public documents
in its dismissal.”). We are not at liberty to disregard this authority as Ambrosecchia
advocates. Indeed, neither party disagrees with the conclusion that the amended
public disclosure bar is not jurisdictional. Defendants filed their motion to dismiss
under Rule 12(b)(6), not 12(b)(1), and the key case Ambrosecchia cites held that the
amended public disclosure bar should be evaluated under Rule 12(b)(6). Moore, 812
F.3d at 297 (“We agree that the public disclosure bar is no longer jurisdictional and
that the motion therefore should have been decided under Rule 12(b)(6) rather than
Rule 12(b)(1).”). Accordingly, we proceed to the merits of Defendants’ Rule 12(b)(6)
motion.

                              B. Public Disclosure Bar

       We review dismissal under Rule 12(b)(6) de novo. Miller v. Redwood
Toxicology Lab., Inc., 688 F.3d 928, 936 (8th Cir. 2012). To survive a motion to
dismiss, “[a] complaint must ‘state a claim to relief that is plausible on its face,’”
accepting the factual allegations in the complaint as true and viewing them in the light
most favorable to the plaintiff. Hager v. Ark. Dept. of Health, 735 F.3d 1009, 1013
(8th Cir. 2013) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
In evaluating whether the public disclosure bar applies, we may “consider matters
incorporated by reference or integral to the claim, items subject to judicial notice,
[and] matters of public record.” Paulos, 762 F.3d at 696 (quotation omitted). The
district court determined that the public disclosure bar applies because two separate
sources previously revealed substantially the same allegations or transactions as those
contained in Ambrosecchia’s complaint: (1) various federal reports and (2) the
complaint in a recent district court case, U.S. ex rel. Conrad v. Abbott Labs., Inc., No.
02-11738-RWZ, 2013 WL 682740 (D. Mass. Feb. 25, 2013). Ambrosecchia
challenges the district court’s reasoning as to Conrad, but she does not challenge the

                                          -5-
district court’s reasoning as to the federal reports until her reply brief. Because
“[c]laims not raised in an opening brief are deemed waived,” FTC v. Neiswonger, 580
F.3d 769, 775 (8th Cir. 2009) (quotation and citation omitted), Ambrosecchia has
waived her opportunity to challenge the district court’s finding that the federal reports
publicly disclosed her claims. Because the federal reports are independently sufficient
to apply the public disclosure bar, we need not decide whether the district court
correctly assessed whether the Conrad case also qualified to raise the public disclosure
bar. Accordingly, we proceed to consider Ambrosecchia’s argument that she meets
the criteria for the original source exception to the public disclosure bar. We conclude
that she does not.

      A relator who qualifies as an original source is exempt from the public
disclosure bar. 31 U.S.C. § 3730(e)(4)(A). An original source is

      an individual who either (i) prior to a public disclosure under subsection
      (e)(4)(a) [sic], has voluntarily disclosed to the Government the
      information on which allegations or transactions in a claim are based, or
      (2) [sic] who has knowledge that is independent of and materially adds
      to the publicly disclosed allegations or transactions, and who has
      voluntarily provided the information to the Government before filing an
      action under this section.

Id. § 3730(e)(4)(B). The record reflects only that Ambrosecchia provided
information concerning her contemplated suit to the Government prior to filing her
lawsuit, not prior to the public disclosures. Ambrosecchia provided information to
the Government in mid-November 2012, a short time before filing her initial
complaint on November 20, 2012. The federal reports the district court found to
publicly disclose Ambrosecchia’s claims were published in the second quarter of
2012 or earlier. Accordingly, Ambrosecchia does not qualify as an original source
under subsection (i).

                                          -6-
        To qualify under subsection (2),4 Ambrosecchia must have (1) independent
knowledge that (2) “materially adds to the publicly disclosed allegations or
transactions,” in addition to providing the information to the Government before
filing.5 31 U.S.C. § 3730(e)(4)(B)(2). “Independent knowledge is knowledge not
derived from the public disclosure.” Newell, 728 F.3d at 797 (quotations omitted).
Although the court is obligated to take the allegations in the complaint as true, it is
not obligated to accept legal conclusions, and “[a] pleading that offers labels and
conclusions or a formulaic recitation of the elements of a cause of action will not do.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotations omitted). Ambrosecchia
conclusorily alleges that she has independent knowledge that materially adds to
publicly available information but does not provide more. This is not sufficient. The
complaint also conclusorily asserts that she gained the information from her
employment with Defendants, but the complaint does not detail the nature of that
information or explain how it relates to her employment. The complaint merely
implies that because of her employment in the pharmaceutical industry, she was
familiar with the regulatory framework underlying Medicare reimbursement. Thus,
when a relative asked her whether a certain drug could be reimbursed, she knew that
the drug in question was not eligible. The only independent knowledge in the
complaint comes from this relative, who purportedly received reimbursement for an
ineligible Paddock drug. This allegation only provides an example of a false claim;
it does not materially add to information regarding how Defendants perpetrated the
alleged fraud.

      4
          The statute inconsistently numbers the subsections in this provision.
      5
       The pre-2010 language required both independent and direct knowledge,
which this court interpreted to be first-hand knowledge. Newell, 728 F.3d at 797.
The post-2010 language requires only that the knowledge be independent, not that it
be direct.

                                           -7-
       Ambrosecchia claims that her information materially adds to the existing
information by demonstrating scienter. However, the complaint provides no more
than the simple, conclusory allegation that Defendants’ actions were knowing. The
complaint does not elaborate, and this “formulaic recitation of the elements of [the]
cause of action” alone is not sufficient. See Iqbal, 556 U.S. at 678 (quotations
omitted). Accordingly, Ambrosecchia’s complaint is insufficient to plausibly state
that she qualifies as an original source.

      As a result, the public disclosure bar applies, and the district court was correct
to dismiss Ambrosecchia’s FCA claims.6 Because we find in Defendants’ favor on
these grounds, we need not address their argument that Ambrosecchia’s complaint
does not satisfy Rule 9(b).

                                C. Motion to Amend

       Next, Ambrosecchia challenges the district court’s decision to deny her leave
to amend her second amended complaint. “We review the denial of a motion for
leave to amend a complaint for an abuse of discretion.” Fuller v. Sec’y of Def., 30
F.3d 86, 88 (8th Cir. 1994) (citation omitted). Although the district court “should
freely give leave [to amend] when justice so requires,” Fed. R. Civ. P. 15(a)(2), a
district court does not abuse its discretion in denying leave to amend where the
plaintiff “made no motion for leave to amend and did not explain the substance of his
proposed amendment,” Misischia v. St. John’s Mercy Health Sys., 457 F.3d 800, 805

      6
       Ambrosecchia also argues that the district court should have addressed each
defendant individually in resolving the motion to dismiss. However, she provides no
authority for this proposition, citing only to a case that individually assessed several
government officials’ entitlement to qualified immunity. See Wilson v. Northcutt, 441
F.3d 586, 591-92 (8th Cir. 2006). Moreover, given that Ambrosecchia’s complaint
usually refers to Defendants collectively instead of individually, we see no reason
why the district court could not frame its discussion in a similar manner.

                                          -8-
(8th Cir. 2006). Ambrosecchia “raised this issue with a one line request in [her] brief
opposing defendants’ motion to dismiss” and did not provide the substance of the
proposed amendments.7 See id. Accordingly, the district court did not abuse its
discretion in denying leave to amend.

                                 D. Joinder Motion

       Finally, Ambrosecchia’s contention that the district court should have entered
a default judgment against Perrigo Company, PLC instead of allowing it to join
Paddock’s motion to dismiss is without merit. Allowing one party to join another
party’s motion is a matter well within the district court’s “substantial case
management discretion.” See United States v. Edwards, 159 F.3d 1117, 1130 (8th
Cir. 1998) (reviewing a district court’s decision to enforce the parties’ pretrial
discovery agreement); cf. Mosley v. Gen. Motors Corp., 497 F.2d 1330, 1332 (8th Cir.
1974) (reviewing the decision to allow parties to join litigation for abuse of
discretion). Accordingly, we may reverse only if the district court abused its
discretion. See Edwards, 159 F.3d at 1130. Ambrosecchia originally named Perrigo
Company, Inc. (an American corporation) in her complaint. During the litigation,
Perrigo reincorporated in Ireland. As a result, its name changed to Perrigo Company,
PLC. The named party in the case remained Perrigo Company, Inc. Paddock and
Perrigo Company, Inc. jointly filed a motion to dismiss the second amended
complaint. Later, Ambrosecchia moved to amend the second amended complaint to
correct the party’s name from Perrigo Company, Inc. to Perrigo Company, PLC.
After the district court granted the motion, Perrigo Company, PLC filed a notice of
joinder in the motion to dismiss. The district court allowed the joinder.

      7
       Ambrosecchia’s request to amend read as follows: “However, should the Court
find Relator’s Second Amended Complaint lacking in detail or defective in any
manner, Relator hereby requests leave to Amend her Complaint to correct any such
defect.”

                                         -9-
Ambrosecchia contends that this decision violates due process, but she fails to offer
any relevant rationale for or cite any cases supporting this argument. Ambrosecchia
cannot demonstrate that she lacked notice and the ability to brief arguments relating
to Perrigo. Cf. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542 (1985) (“An
essential principle of due process is that a deprivation of life, liberty, or property be
preceded by notice and opportunity for hearing appropriate to the nature of the case.”
(quotation omitted)). Indeed, her response to the motion to dismiss included specific
arguments regarding Perrigo. Thus, the district court did not abuse its discretion.

                                   III. Conclusion

      For the foregoing reasons, we affirm.

                        ______________________________

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