United States of America et al v. Exactech Inc

Filing 191

MEMORANDUM OF OPINION AND ORDER - Exactech's Motion for Reconsideration (Doc. 189 ) is hereby DENIED. Signed by Judge L Scott Coogler on 9/8/2022. (MEB2)

FILED
2022 Sep-08 PM 02:48
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
UNITED STATES OF
AMERICA, et al., ex rel.
BROOKS WALLACE,
ROBERT FARLEY and
MANUEL FUENTES, et al.
Plaintiffs,
vs.
EXACTECH, INC.,
Defendants.

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2:18-cv-01010-LSC

Memorandum of Opinion and Order
I.

BACKGROUND AND LEGAL STANDARD
Before this Court is Defendant Exactech’s Rule 59(e) Motion for

Reconsideration (Doc. 189) of this Court’s Memorandum of Opinion and Order
(Doc. 184) denying their previous Motion for Summary Judgment (Doc. 143) and
Motion to Dismiss (Doc. 161). 1
II.

DISCUSSION
Exactech’s Rule 59(e) motion primarily proffers two arguments. The Court

addresses each in turn.

1

A comprehensive factual summary of this case is contained in that opinion. (Doc. 184).
Page 1 of 7

A. Whether the Public-Disclosure Bar Applies
Exactech’s first argument involves the Court’s previous determination that
the FCA’s public-disclosure bar did not apply in this case because it failed the
second prong of Cooper. (See Memorandum Op., Doc. 184 at 12-13). Even if the
Court’s reasoning is flawed, the decision to deny Exactech’s Motion to Dismiss
was nevertheless proper because Relators satisfy the original-source exception.
The public-disclosure bar attempts to strike a balance between the FCA’s
goals of encouraging people with inside information to expose fraud against the
government and avoiding parasitic suits brought by people that played no role in
bringing fraud to light. See U.S. ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1497
(11th Cir. 1991). In other words, the purpose of the public-disclosure bar is to
differentiate between whistleblowers and freeloaders. It functions by barring qui
tam actions based on publicly disclosed information, unless the relator bringing that
action is the original source of said information. See U.S. ex rel. Osheroff v. Humana
Inc., 776 F.3d 805, 812 (11th Cir. 2015). A relator is an original source if their
knowledge was “direct and independent” of the publicly disclosed information. Id.
at 814. A relator is not an original source if their knowledge was mere “background
information which enable[d] him to understand the significance of a more general
public disclosure.” Id. at 815.
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Exactech claims multiple instances of overlapping facts between this action
and the previous products liability suits filed by Cory Watson trigger the public
disclosure bar. For example, Exactech cites to the fact that Relators in this qui tam
action pleaded in their complaint: “In early 2008. . . Exactech had definitive
knowledge that the [Device] was defective.” (Doc. 1 at 19). Similarly, the
complaint filed by one of five plaintiffs in the products liability suits alleged: “By at
least April 2008, [Exactech] became aware of a high rate of early failures with the
[Device].” (Doc. 160, Ex. A at 26).
The parties agree that, because the Cory Watson lawsuits were filed before
this qui tam action, Exactech’s awareness of the Device’s defect was publicly
disclosed information. Exactech argues that because that allegation is central to this
qui tam action, the Relators’ claims were based on that publicly disclosed
information. But even if the Court accepted that argument, the public-disclosure
bar would still not apply in this case if the Relators were the original source of that
publicly disclosed information.
They were. All evidence before the Court demonstrates that the Relators’
knowledge of Exactech’s awareness of the Device’s defect was “direct and
independent” from the publicly disclosed information. Osheroff, 776 F.3d at 814.
The independence of the Relators’ knowledge from the public disclosures is selfPage 3 of 7

evident: Cory Watson only learned of Exactech’s awareness of the Device’s defect
because the Relators told them.2 Likewise, all evidence before the Court
demonstrates that the Relators’ knowledge was direct: the Relators originally
learned of Exactech’s awareness of the Device’s defect from meetings Relator
Fuentes personally attended where Exactech’s “top executives and engineers”
met to discuss and strategize about “data demonstrating significant device failure.”
(Doc. 1 at 7). This knowledge cannot be characterized as mere “background
information” enabling the Relators to “understand the significance of a more
general public disclosure.” Osheroff, at 815.
The remainder of Exactech’s attempts to persuade this Court that the
Relators were not the original sources of other information publicly disclosed
through the Cory Watson lawsuits range from unmeritorious to completely
divorced from logic.3 The public-disclosure bar does not apply to this case.
Exactech’s Motion for this Court to reconsider this holding is due to be DENIED.

2

Jon Conlin, lead attorney for Cory Watson in all five of the products-liability cases, swore
under oath that the Relators were the first to tell his firm about Exactech’s definitive knowledge
of the defect. (Doc. 169, Ex. A). Or in legal terms, Cory Watson itself identified the Relators as
their original source of the information it publicly disclosed. In fact, the Relators brought this
information to Cory Watson for the very purpose of seeking representation by that firm for this
qui tam action. See (id.).
3

For example, Exactech argues that the fact that Relator Farley stated that Relator Fuentes
had first-hand knowledge of the Devices’ widespread history of failures somehow demonstrates
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B. Whether the Device is “Reasonable and Necessary”
Exactech’s second argument involves the Court’s conclusion that “the
evidence viewed in the light most favorable to Relators is sufficient to demonstrate
a genuine issue of material fact exists as to whether the [Device] was ‘reasonable
and necessary.’” (Doc. 189 at 10 (citing Memorandum of Opinion, Doc. 184 at 2224)).

As explained in this Court’s previous opinion, the “reasonable and

necessary” determination in this case comes down to the failure rate of the Device.
(Memorandum Op., Doc. 184 at 22-24). Relators allege the failure rate is between
28 and 35%, and Exactech alleges the rate is less than 1%. (Id).
In its Motion for Reconsideration, Exactech claims that “Relators’ own
evidence proves that the true failure rate is less than 1% . . . [b]ecause Relators have
identified at most 292 [failures] . . . out of 33,927 Devices sold during the relevant
period.” (Doc. 189 at 12) (emphasis added). Exactech reached that figure by
“divid[ing] the number of revisions by the total number of devices sold.” (Id. at 11)
(emphasis added). There are two glaring issues with this argument.
The first issue concerns the denominator Exactech used for their failure rate
calculation—the number of devices sold. Exactech provides no explanation for why
that Relator Farley lacks the same first-hand knowledge. By this logic, two persons could never
have first-hand knowledge of the same event. Furthermore, Exactech fails to recognize that on
the following page of Farley’s testimony, he specifically states that he too possessed first-hand
knowledge. See (Doc. 169-5 at 4).
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it used this number when this case obviously concerns the number of Devices
surgically implanted into human beings. Exactech’s argument only makes logical
sense by assuming that the number of devices sold is equal to the number of devices
surgically implanted, or that there is some sort of technical definition of a medical
device’s failure rate that does not ignore medical devices sitting unused on storage
shelves. 4 Exactech has proffered neither argument nor evidence supporting either
of these assumptions.
The second issue concerns the process Exactech used to calculate the
numerator it used for their failure rate calculation. That process reeks of sampling
bias. Exactech treated the number of Device failures the Relators identified as the
number of Device failures that have occurred. That is, Exactech assumed the
Relators identified every single Device failure that has occurred. The Court is
unwilling to accept the Relators possess such omniscience. Rather, and as is clearly
implied in this Court’s previous opinion, there is sufficient evidence to
demonstrate a genuine issue of material fact as to whether the total number of
device failures that have occurred is significantly greater than the number of device

4

This assumption could have support if the Device were one that could not be kept as
inventory, but this possibility is untenable, as Exactech’s CFO’s reason for not recalling the
Device in the first place was due to the fact that the company was “drowning in . . .[Device]
inventory.” (Doc. 149-34 at 3).
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failures the Relators have specifically identified. The true number of times the Device
has failed is an issue to be determined in trial.
III.

CONCLUSION
Exactech’s Motion for Reconsideration (Doc. 189) is hereby DENIED.
DONE and ORDERED on September 8, 2022.

_____________________________
L. Scott Coogler
United States District Judge
211854

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