MedPricer.com, Inc. v. Becton, Dickinson and Co
ORDER. For the reasons stated herein, MedPricer's 96 motion for reconsideration is GRANTED in part and DENIED in part but the relief requested is DENIED. Becton's Renewed Motion for Summary Judgment as to the Children's Hospital tr ansaction is GRANTED. The 97 Motion to Seal is GRANTED. The 105 Amended Motion to Seal is GRANTED, and the 103 Motion to Seal is DENIED as moot.The clerk is directed to close the case. Signed by Judge Michael P. Shea on 4/3/2017. (Connelly, L.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
No. 3:13-cv-1545 (MPS)
BECTON, DIXON AND COMPANY,
RULING ON MOTIONS
By Order dated March 6, 2017 (ECF No. 95), I granted in part and denied without prejudice
in part Defendant Becton, Dickinson and Company’s (“Becton”) Motion for Summary Judgment
and denied without prejudice Plaintiff MedPricer.com, Inc.’s (“MedPricer”) Motion for Summary
Judgment. (ECF Nos. 62, 70.) Now pending is Plaintiff’s Motion for Reconsideration (ECF No. 96)
and a response from the Defendant that I construe as a renewed Motion for Summary Judgment.
(ECF No. 102.) For the reasons set forth below, reconsideration is GRANTED in part and DENIED
in part, but all the relief sought is DENIED, and Becton’s Renewed Motion for Summary Judgment
as to Children’s Hospital of Alabama is GRANTED.
Motion for Reconsideration
Rule 7(c) of the Local Rules of Civil Procedure of the District of Connecticut authorizes
motions for reconsideration. “The standard for granting such a motion is strict, and reconsideration
will generally be denied unless the moving party can point to controlling decisions or data that the
court overlooked—matters, in other words, that might reasonably be expected to alter the
conclusion reached by the court.” Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995).
“[A] motion to reconsider should not be granted where the moving party seeks solely to relitigate an
issue already decided.” Id. Motions for reconsideration may not be used to supplement the
record. Smith v. New York City Dept. of Educ., 524 Fed. Appx. 730, at *3 (2d Cir. May 2, 2013)
("Smith also sought to supplement record, which is inappropriate on a motion for
reconsideration."). “A motion for reconsideration cannot be employed as a vehicle for asserting
new arguments or for introducing new evidence that could have been adduced during the pendency”
of the underlying motion. Palmer v. Sena, 474 F. Supp. 2d 353, 355 (D. Conn. 2007) (citation
MedPricer makes three arguments why the Court should reconsider its decision, and all
three fail. First, MedPricer argues that the Court failed to consider “controlling Second Circuit
precedent” that requires evidence of a scienter to establish a violation of the Anti-Kickback Statute
(“AKS”). As I suggested in the summary judgment ruling, however, this argument misapprehends
the nature of a contract illegality defense, which calls for a different inquiry than whether the
government can prove all the elements of a criminal statute. The reason courts do not enforce
illegal contracts is that doing so would harness their enforcement powers in the service of an
arrangement that violates public policy. The Supreme Court put it this way:
There is no statutory code of federal contract law, but our cases leave no doubt that
illegal promises will not be enforced in cases controlled by the federal law…. The
authorities from the earliest time to the present unanimously hold that no court will
lend its assistance in any way towards carrying out the terms of an illegal contract….
To permit a recovery in [such a] case is in substance to enforce an illegal contract,
and one which is illegal because it is against public policy to permit it to stand. The
court refuses to enforce such a contract and it permits defendant to set up its
illegality, not out of any regard for the defendant who sets it up, only on account of
the public interest.
Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 77-78 (1982). The law of Connecticut – which the
parties in this case chose to govern their agreement – is the same. Dowling v. Slotnik, 244 Conn.
781, 808 (1998) (“[I]t is in order to effectuate an underlying public policy, rather than to sanction a
party seeking to enforce an illegal contract, that courts refuse to lend assistance to those who have
contributed to the illegality that taints the contract.”).
The principal public policy behind the AKS is the protection of the public fisc. United
States v. Bay State Ambulance and Hosp. Rental Svc., Inc., 874 F.2d 20, 32 & n. 21 (1st Cir. 1989).
An agreement may violate that policy even if the parties did not harbor a “’bad purpose to disobey
or to disregard the law,’” United States v. Mittal, 36 Fed. Appx. 20, 21 (2d Cir. 2002) (quoting
district court’s jury instruction), because the fiscal impact of an agreement does not depend on
whether the parties entered into it with a “bad purpose.”1
The statutory language Congress chose to implement its policy of protecting the public fisc
was broad and prophylactic, with the result that arrangements may violate the AKS – and thus be
contrary to public policy – without proof that they actually harm the public fisc. Bay State
Ambulance and Hosp. Rental Svc., 874 F.2d at 32 n. 21 (“Although the reason for enacting the
statute was to prevent drains on the public fisc, the statute does not require that there be a drain on
the public fisc in order for payments to be illegal.”). As I explained in the summary judgment
ruling, the agreement between the parties in this case falls within the AKS’s broad language and
thus violates public policy as formulated by Congress. Cf. Hurd v. Hodge, 68 S. Ct. 847, 853
(1948)(“The power of the federal courts to enforce the terms of private agreements is at all times
exercised subject to the restrictions and limitations of the public policy of the United States as
manifested in … federal statutes ….” (emphasis added)).
It is true, of course, that while Congress chose to describe in broad terms the types of
arrangements that implicate the public policy it sought to promote, it also chose to mitigate the
impact of its ban on prohibited “remuneration” by creating statutory safe harbors, authorizing the
Mittal, the only “Second Circuit precedent” cited by MedPricer, is a criminal case that does not
address the enforceability of a contract.
Office of the Inspector General of the Department of Health and Human Services (“OIG”) to create
additional regulatory safe harbors, and further authorizing the OIG to issue advisory opinions with
respect to specific arrangements. It is also true that before the Department of Justice could secure
criminal penalties for any prohibited “remuneration,” Congress required it to prove that the parties
acted “knowingly and willfully.” But neither of these features of the statute helps MedPricer here.
In the summary judgment proceedings, MedPricer never suggested that it qualified for any safe
harbors (more on this below), and MedPricer has not sought an advisory opinion from the OIG.
And whether the parties acted knowingly and willfully has no bearing on whether their agreement
involves payment of the type of “remuneration” described by the statute and, thus, whether it
violates the public policy of protecting the public fisc that Congress sought to promote.
Accordingly, whether the parties to such an agreement acted knowingly and willfully also has no
bearing on its enforceability.2
MedPricer also argues, for the first time, that there “was no evidence in the record of a nonfair market value payment,” which MedPricer says was “necessary to establish the receipt of
remuneration.” (ECF No. 96-1 at 1.) This is a new legal theory – one not mentioned in the
summary judgment briefs or at oral argument, where both parties apparently assumed that the
Were I to accept MedPricer’s argument to the contrary, I could be required to enforce the
agreement even if the OIG had opined that it involved the payment of prohibited remuneration and
posed a serious risk of fraud and abuse; an OIG advisory opinion does not address the subjective
intent of the parties and thus would not speak to whether they had acted “knowingly and willfully”
– proof of which is left to the Department of Justice. See Interim Final Rule, 62 Fed. Reg. 7350-01
(Feb. 19, 1997) (“[I]t is not practical for the [OIG] to make an independent determination of the
subjective intent of parties based only upon written materials submitted by the requestor.”); 42
C.F.R. § 1008.59(a)&(b)(“An advisory opinion will state only the OIG’s opinion regarding the
subject matter of the request…. An advisory opinion issued under this part will not bind or obligate
any agency other than the Department [of Health and Human Services].”); Final Rule, 63 Fed. Reg.
38311-01, 38321 (July 16, 1998) (rejecting notion that advisory opinions should be binding on DOJ
and stating that “[t]he Department [of Health and Human Services] lacks the authority to bind DOJ
through the Department’s rulemaking.”) Given the prominent role the AKS assigns the OIG in
interpreting and enforcing its terms, it is highly unlikely that Congress contemplated that courts
would enforce agreements flagged by the OIG as posing a risk of fraud and abuse.
agreement involved the payment of remuneration. (See, e.g., ECF No. 108 at 13-14.) New legal
theories are improper on a motion for reconsideration, especially where, as in this case, there has
been no showing of an intervening precedent or other basis for excusing the failure to raise the
argument earlier. See, e.g., Chemical Overseas Holdings, Inc. v. Republica Oriental Del Uruguay,
2005 WL 927153 *1 (April 20, 2005) (“A party may not advance new facts, issues or arguments not
previously presented to the Court. To the extent that counsel seeks to relitigate the underlying
motion to permit his client to make new legal or factual arguments, this will not be a proper basis
for reconsideration.” (internal citation and quotation marks omitted).)
In any event, MedPricer’s new argument is not persuasive. The OIG, in its advisory
opinions, has stated that “[f]or purposes of the anti-kickback statute, ‘remuneration’ includes the
transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.” See,
e.g., OIG Advisory Opinion No. 16-10, 2016 WL 6138038, at *3. In United States v. Narco
Freedom, Inc., 95 F. Supp. 3d 747, 756 (S.D.N.Y. 2015), the court elaborated on the meaning of
Section 1320a–7b(b) defines remuneration to include “any kickback, bribe, or
rebate” and payments “in cash or in kind.” Federal courts consistently have held that
remuneration is not limited to out-and-out bribes. See, e.g., Hanlester Network v.
Shalala, 51 F.3d 1390, 1398 (9th Cir.1995) ( “The phrase ‘any remuneration’ was
intended to broaden the reach of the law which previously referred only to
kickbacks, bribes, and rebates.”); Klaczak v. Consol. Med. Transp., 458 F.Supp.2d
622, 678 (N.D.Ill.2006) ( “Remuneration, for purposes of the AKS, is defined
broadly, meaning ‘anything of value.’ ”).
There is no doubt that MedPricer received remuneration in exchange for its services. In its Rule
56(a)(2) Statement it said that its 1.5% fee “is in consideration for the services [MedPricer]
provi[d]es.” (Pl.’s L.R. 56(a)(2) Stmt., ECF No. 81-2 at ¶ 12.) This is enough to show that
MedPricer receives something of value in exchange for its services, which is all that is required to
show remuneration. MedPricer’s reliance on a statement in a different statute that “[t]he term
‘remuneration’ includes . . . transfers of items or services for free or for other than fair market
value,” 42 U.S.C. § 1320a-7a(i)(6) (emphasis added), is beside the point, both because it does not
apply to the AKS, 42 U.S.C. § 1320a-7a(i) (“For purposes of this section, . . . . [t]he term
‘remuneration’ includes ….”) (emphasis added), and because a statement of what a statutory term
“includes” is generally considered illustrative, not exhaustive. United States v. Huber, 603 F.2d
387, 394 (2d Cir. 1979).
Finally, MedPricer now asserts that it meets the group purchasing organization (“GPO”)
Safe Harbor requirements, which directly contradicts statements in its summary judgment papers
and at oral argument, not to mention the sworn testimony of its witness designated under Fed. R.
Civ. P. 30(b)(6).3 (Def.’s L.R. 56(a)(1) Stmt., ECF No. 68 at ¶ 3; Pl.’s L.R. 56(a)(2) Stmt., ECF
No. 81-2 at ¶ 3.) After litigating the case on the basis that it is not a GPO, MedPricer cannot now
assert that it is one, both because judicial estoppel bars this last-minute switch and because, as
noted, raising new legal theories is improper on a motion for reconsideration.4 Accordingly, I will
MedPricer attempts to show that it complies with the GPO safe harbor requirements by submitting
a new affidavit from MedPricer’s Controller and annual written disclosures to the hospitals it works
with that are intended to satisfy 42 C.F.R. § 1001.952(j)(2). This is improper new evidence, as it is
not “truly newly discovered” and “could . . . have been found by due diligence,” and thus I will not
consider it. Palmer, 474 F. Supp.2d at 355.
In its reply brief, MedPricer states that “Second Circuit law is clear that judicial estoppel only
applies to positions taken in separate legal proceedings,” not to positions taken at different times in
the same case. This has not been the law in the Second Circuit for some time. Intellivision v.
Microsoft Corp. 484 Fed. Appx. 616, 621 (2d Cir. 2012) (“Contrary to plaintiffs’ claims, our Court,
like the Supreme Court, has recognized that a prior inconsistent representation made in a prior
phase of the same case can trigger judicial estoppel.” (citing New Hampshire v. Maine, 121 S. Ct.
1808 (2001)(judicial estoppel “generally prevents a party from prevailing in one phase of a case on
an argument and then relying on a contradictory argument to prevail in another phase.” (internal
quotation marks omitted))). The other requirements of judicial estoppel are satisfied here too. First,
I relied on MedPricer’s representations that it was not a GPO, a point it made in part to emphasize
that it was not acting on behalf of the hospitals for purposes of the “arranging” issue discussed in
the summary judgment ruling. Second, as Becton points out (ECF No. 102 at 9 & n.5), it has been
prejudiced by MedPricer’s switch, as it would likely have taken further discovery on whether
MedPricer qualified as a GPO had MedPricer not conceded that it did not.
not consider MedPricer’s new-found argument that it is a GPO after all, or the new evidence it has
submitted in support of that argument with its motion for reconsideration.
Becton’s Renewed Motion for Summary Judgment
Because there was no evidence in the record about whether Children’s Hospital of Alabama
provides services for which payment may be made under a federal health care program, I denied
Becton’s Motion for Summary Judgment as to that transaction without prejudice. I also denied
MedPricer’s Motion for Summary Judgment on the breach of contract claim (Count One) as to the
Children’s Hospital transaction, because granting MedPricer’s motion would create a risk of
inconsistent judgments. (Order, ECF No. 95 at 20.) I allowed Becton to submit supplemental
evidence related solely to the question whether Children’s Hospital provides services for which
payment may be made under a federal health care program, and provided MedPricer an opportunity
to respond to the filing.
For the same reasons that I granted summary judgment for Becton as to the Barnabas
transactions, I grant summary judgment for Becton as to the Children’s Hospital transaction.
(Order, ECF No. 95.) I declined to grant Becton summary judgment as to the Children’s Hospital
transaction because there was no evidence in the record at the time that it provides services for
which payment may be made under a federal health care program. Both Becton and MedPricer
have now submitted the contract between Children’s Hospital of Alabama and MedPricer, and, like
the contract between Barnabas and MedPricer, it explicitly states that Children’s Hospital provides
services which may be paid for by a federal health care program. (ECF No. 104 at 1.) As set forth
in my analysis in the summary judgment ruling, that is enough to meet “the minimal requirement of
showing that the Contract involved the sale of items for which payment may be made under a
federal health care program.” (Order, ECF No. 95 at 17.)
For the reasons stated above, MedPricer’s motion for reconsideration is GRANTED in part
and DENIED in part but the relief requested is DENIED. Becton’s Renewed Motion for Summary
Judgment as to the Children’s Hospital transaction is GRANTED. The clerk is directed to close the
IT IS SO ORDERED.
Michael P. Shea, U.S.D.J.
April 3, 2017
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