The United States of America et al v. Safeway, Inc.
Filing
147
OPINION entered by U.S. Magistrate Judge Tom Schanzle-Haskins. Defendant's Motion to Compel Government Agency to Allow Former Government Employee to Testify in Accordance with Deposition Subpoena [135-1] is DENIED, and Defendant's Renewed Motion for Leave to Extend the Deadline for Deposing Former Government Employee in Light of New Circumstances 134 is DENIED as moot. See written order. (LB, ilcd)
E-FILED
Tuesday, 05 March, 2019 11:32:35 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS, SPRINGFIELD DIVISION
UNITED STATES OF
AMERICA ex rel.
THOMAS PROCTOR, et al.,
Relator,
v.
SAFEWAY, INC.,
Defendant.
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No. 11-cv-3406
OPINION
TOM SCHANZLE-HASKINS, U.S. MAGISTRATE JUDGE:
This matter comes before the Court on Defendant Safeway Inc.’s
(Safeway) Motion to Compel Government Agency to Allow Former
Government Employee to Testify in Accordance with Deposition Subpoena
(d/e 135-1) (Motion to Compel), and Safeway’s Renewed Motion for Leave
to Extend the Deadline for Deposing Former Government Employee in
Light of New Circumstances (d/e 134) (Renewed Motion for Leave). For
the reasons set forth below, the Motion to Compel is DENIED and the
Renewed Motion for Leave is DENIED AS MOOT.
BACKGROUND
The Relator Thomas Proctor brings this qui tam action for violation of
the False Claims Act, 31 U.S.C. § 3729 et seq., and supplemental claims
Page 1 of 17
for violation of state false claims statutes. Amended Complaint (d/e 50).
Safeway operates pharmacies. Proctor alleges that the Defendant illegally
overcharged the federal and state government programs. The alleged
overcharging involved, among other things, fraudulently overstating
Safeway’s Usual & Customary prices for prescription medications. See
Amended Complaint, ¶¶ 90-140.
Proctor filed the action on November 7, 2011. The United States
declined to intervene August 21, 2015. Notice of Election (d/e 23). The
matter was unsealed, and Safeway received notice of the lawsuit on
December 9, 2015. Safeway waived service on December 9, 2015.
Waiver of Service or Summons (d/e 28). Discovery commenced in
February 2017. See Opinion entered July 14, 2016 (d/e 67) (staying
discovery until resolution of pending Motion to Dismiss); Scheduling Order
entered February 2, 2017 (d/e 76).
On November 16, 2018, Safeway issued a subpoena (Subpoena) to
Cynthia Tudor, Ph.D., to appear and be deposed on November 28, 2018.
Safeway issued the Subpoena more than 17 months after discovery
commenced. Discovery was scheduled to close 14 days later on
November 30, 2018. See Text Order entered October 4, 2018.
Page 2 of 17
Dr. Tudor formerly was the Deputy Center Director of the Centers for
Medicare and Medicaid Services (CMS) and former Director of the
Medicare Drug Benefit and C&D Data Group. This Court previously noted
that Dr. Tudor authored a memorandum relevant to this case for discovery
purposes at least:
Dr. Tudor authored a memorandum dated October 11, 2006,
which provided guidance regarding situations in which covered
individuals can purchase prescriptions drugs from pharmacies
at cash discount prices (Lower Cash Price Policy
Memorandum). Proctor quoted from the Lower Cash Price
Policy Memorandum in paragraph 102 of the First Amended
Complaint (d/e 50). The Lower Cash Price Policy, set forth in
the Lower Cash Price Policy Memorandum, is incorporated into
Chapter 14, § 50.42 of the Centers for Medicare and Medicaid
Services’ 2006 Medicare Prescription Drug Benefit Manual. See
Relator’s Response to Defendant’s Motion for Leave to
Schedule Deposition of Former Government Representative
Within Two Weeks of Discovery Cutoff [d/e121] (d/e 124)
(Relator’s Response), at 3.
Opinion entered December 3, 2018 (d/e 126) (Opinion 126), at 3.
On November 16, 2018, Safeway’s counsel also sent a letter to
Seema Verma, Acting Administrator for CMS, asking CMS to authorize Dr.
Tudor to testify. Federal regulations require agency authorization before an
employee or former employee of CMS may testify concerning information
acquired in the course of performing official duties. 45 C.F.R. §§ 2.1- 2.6
Page 3 of 17
(Touhy Regulations).1 The regulations apply to all employees of the
Department of Health and Humans Services (Department) other than the
employees of the Food and Drug Administration. 445 C.F.R. § 2.1. CMS
could only allow Safeway’s request for Dr. Tudor’s testimony if CMS
determined, “after consultation with the Office of General Counsel, that
compliance with the request would promote the objectives of the
Department.” 45 C.F.R. § 2.3. CMS has previously authorized another
former CMS employee, Leslie Norwalk, to testify in this case. November
16 Letter, Attachment B, Letter from Demetrios Kouzoukas, Deputy
Administrator and Director of CMS to Attorney Robinson dated October 2,
2018.
Safeway requested authority for Dr. Tudor to testify on the following
topics (Deposition Topics):
Specifically, Ms. Tudor is expected to testify on the following
specific topics:
1.
Memorandum, dated October 11, 2006, from
Cynthia Tudor to All Part D Sponsors, regarding the
HPMS Q & A- Lower Cash Price Policy (See
Attachment A); and
2.
Medicare Part D’s “Lower Cash Price Policy,”
including but not limited to CMS’s objectives for the
Policy (see Attachment A; see also Medicare
1
The name Touhy comes from the Supreme Court decision that upheld this type of regulations, United
States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951).
Page 4 of 17
Prescription Drug Benefit Manual, Ch. 14, 50.4.2 –
Beneficiary Cash Purchases (Rev. 12, 03/19/2010)
and (Rev. 17, 08/23/2010)).
Safeway Inc.’s Supplemental Memorandum in Support of Motion to Compel
Government Agency to Allow Former Government Employee to Testify in
Accordance with Deposition Subpoena (d/e 142) (Safeway Memorandum),
Exhibit A, Letter dated November 16, 2018, from attorney Frederick
Robinson to Seema Verma (November 16 Letter), at 1. Safeway noted that
CMS previously authorized Norwalk to testify as an expert in this case.
Safeway explained that it sought Dr. Tudor’s testimony to resolve a dispute
between Norwalk’s opinions and those of the Relator’s expert:
Please note that CMS has previously approved a Touhy
request in this matter, thus recognizing the importance of this
type of agency testimony, with respect to the expert testimony
of Leslie Norwalk, one of Defendant’s experts. Because Ms.
Norwalk did not author the “Lower Cash Price Policy”
memorandum and Relator’s counsel has a contrary
interpretation of the policy, Ms. Tudor’s testimony as to the
policy she authored is needed to clarify a key piece of evidence
in this matter.
November 16 Letter, at 1. Safeway stated further:
Relator’s expert, Dr. Kenneth Scafermeyer, provided an opinion
regarding CMS’s interpretation of the Lower Cash Price Policy
in his expert report. Ms. Leslie Norwalk, former Acting
Administrator of CMS and Defendant’s expert witness in the
Proctor case, has opined that Relator’s interpretation of the
Lower Cash Price Policy as applicable to Defendant’s discount
pharmacy programs is incorrect. Ms. Tudor, as the author of
the memo and an individual with firsthand knowledge regarding
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CMS’s reasoning for developing the policy, is in a unique
position to provide specific, limited fact witness testimony
regarding the interpretation and application of CMS’s Lower
Cash Price Policy, and such testimony is directly relevant to
Relator’s claims in the litigation.
Id. at 3. Safeway stated that Dr. Tudor’s testimony would be “likely to
include Ms. Tudor’s understanding of CMS’s intent and objectives that were
driving the policy and the resulting Memorandum,” and the “reasons for
developing this policy, changes to the Policy over time, and explain how
this policy functions in practice, particularly with respect to prescription drug
discount programs.” Id.
Safeway further stated that Dr. Tudor had special experience and
expertise that allowed her to provide evidence that Safeway could not get
elsewhere:
Ms. Tudor is uniquely suited to discuss authoritatively and
comprehensively the [Deposition Topics]. Ms. Tudor worked at
CMS for almost 25 years, during which time she served as
Deputy Center Director of CMS and as the Director for the
Medicare Drug Benefit and C&D Data Group, among others.
During her tenure in these high-ranking positions within CMS,
Ms. Tudor gained a deep familiarity with the statutes,
regulations, and CMS guidance governing Medicare Part D,
including the Lower Cash Price Policy for Medicare Part D. With
the experience and expertise noted above, Ms. Tudor is in a
unique position to accurately and comprehensively educate the
finder of fact in the Proctor action regarding the Lower Cash
Price Policy and 2006 memorandum regarding the policy, which
she authored. These issues are complicated and outside the
scope of knowledge of most juries and judges.
Page 6 of 17
Id. at 3.
Safeway stated that the testimony was in the interest of the
Department to present complete and accurate testimony about the Lower
Cash Price Policy in this action. Safeway stated further, that, “[T]he United
States government, more broadly, has an interest in this lawsuit, and full
disclosure of decision-making information, would promote the government’s
objectives.” Id. at 4.
Proctor moved to quash the Subpoena and Safeway moved to extend
the discovery deadline to secure permission from CMS to depose Dr.
Tudor. The Court denied the request to quash the Subpoena and gave
Safeway until December 14, 2018 to depose Dr. Tudor. Opinion 126, at
11.
On December 7, 2018, CMS Deputy Director Kouzoukas denied
Safeway’s request to authorize Dr. Tudor to testify pursuant to the
Subpoena. Kouzoukas recited the applicable Touhy regulations and
caselaw which established that former CMS employees may not testify on
matters learned while performing official duties unless CMS determines
that the requested testimony would promote the objectives of the
Department. Kouzoukas then explained the basis of the denial of
Safeway’s request:
Page 7 of 17
CMS not been provided a compelling argument that
would support allowing CMS to authorize this testimony, and
permitting Dr. Tudor’s testimony would not promote the
objectives of the Department. First, based on conversations
with CMS employees who worked most closely with Dr. Tudor,
she may lack personal knowledge about your proposed topics.
Second, the specific topics about which you seek Dr. Tudor’s
testimony seem calculated to elicit Dr. Tudor’s opinions as
opposed to her personal knowledge. Finally, the proposed
topics risk eliciting testimony that would be protected by the
deliberative process privilege and/or attorney-client privilege.
Safeway Memorandum, Exhibit C, Letter dated December 7, 2018, from
Deputy Director Kouzoukas to Attorney Robinson (December 7 Letter).
On December 14, 2018, Safeway filed the Motion to Compel in the
United States District Court for the District of Maryland because Dr. Tudor
resided in that District and filed in this Court a Motion for Leave to extend
the time to depose Dr. Tudor. On January 2, 2019, this Court denied
Safeway’s request to extend the time further to depose Dr. Tudor. Text
Order entered January 2, 2019. On January 3, 2019, the District Court for
the Eastern District of Maryland transferred the Motion to Compel to this
Court. District of Maryland Docket Sheet (d/e 135), at 2, Order entered
January 3, 2019 (District of Maryland d/e 8). On January 4, 2019, Safeway
filed the Renewed Motion for Leave to extend the time to depose Dr. Tudor.
The parties completed briefing the Motion to Compel on February 25, 2019
when the Court granted Safeway leave to file a reply. Text Order entered
Page 8 of 17
February 25, 2019; Safeway Inc.’s Reply in Support of Motion to Compel
Government Agency to Allow Former Government Employee to Testify in
Accordance with Deposition Subpoena (d/e 146).
ANALYSIS
Safeway seeks judicial review of CMS’s decision not to authorize Dr.
Tudor to testify pursuant to the Subpoena. Courts have allowed parties to
use a motion to compel as a means of seeking judicial review of such
decisions. See Estate of Belbachir ex rel Belbachir v. United States, 2010
WL 3239444, at *2 (N.D. Ill. August 13, 2010); Barnett v. Illinois State Bd.
of Illinois, 2002 WL 1560013, at *1 (N.D. Ill. July 2, 2002).
The Court reviews the decision under the Administrative Procedures
Act (APA), 5 U.S.C. § 701 et seq. Edwards v. United States Department of
Justice, 43 F.3d 312, 316-17 (7th Cir. 1994). The APA authorizes this Court
to set aside CMS’s decision to not allow Dr. Tudor to testify if the decision
is arbitrary and capricious. 5 U.S.C. § 706(2)(A). The Supreme Court has
discussed at length the scope of review under this standard:
The scope of review under the “arbitrary and capricious”
standard is narrow and a court is not to substitute its judgment
for that of the agency. Nevertheless, the agency must examine
the relevant data and articulate a satisfactory explanation for its
action including a rational connection between the facts found
and the choice made. In reviewing that explanation, we must
consider whether the decision was based on a consideration of
the relevant factors and whether there has been a clear error of
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judgment. Normally, an agency rule would be arbitrary and
capricious if the agency has relied on factors which Congress
has not intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or
is so implausible that it could not be ascribed to a difference in
view or the product of agency expertise. The reviewing court
should not attempt itself to make up for such deficiencies: we
may not supply a reasoned basis for the agency's action that
the agency itself has not given. We will, however, uphold a
decision of less than ideal clarity if the agency's path may
reasonably be discerned.
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983) (internal citations and quotations omitted).
In this case, CMS’s explanation reasonably showed a rational
connection between the facts and choice made. CMA had to determine
whether allowing Dr. Tudor to testify on the Deposition Topics would
promote the objectives of the Department. 45 C.F.R. § 2.3. CMS
determined that letting Dr. Tudor testify about the Deposition Topics would
not promote the objectives of the Department for three reasons: (1) CMS
representatives talked to employees who worked most closely with Dr.
Tudor and determined that she may lack personal knowledge about the
topics on which Safeway wanted her to testify; (2) the Deposition Topics
seemed calculated to elicit opinions rather than facts based on personal
knowledge; and (3) testimony on the Deposition Topics posed a risk of
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disclosure of information protected by the deliberative process privilege or
the attorney-client privilege.
The extent of Dr. Tudor’s knowledge about the Lower Cash Price
Policy and the Lower Cash Policy Memorandum would be relevant to
determining whether she could provide testimony that would promote the
objectives of the Department. Employees who worked closely with Dr.
Tudor were likely to know the extent of her personal knowledge about the
Lower Cash Price Policy and the circumstances of the drafting of the Lower
Cash Price Policy Memorandum. Upon learning from these employees that
Dr. Tudor had limited knowledge on the Deposition Topics, CMS could
reasonably conclude that Dr. Tudor’s proposed testimony would not
promote the objectives of the Department.
CMS also reasonably determined that the Deposition Topics posed
the risk that Dr. Tudor would provide opinions in her deposition. Safeway
specifically included in the Deposition Topics, testimony about “CMS’s
objectives for the” Lower Cash Price Policy. November 16 Letter, at 1.
Safeway further stated it wanted to elicit testimony from Dr. Tudor to
resolve the conflicting opinions of experts Norwalk and Scafermeyer.
November 16 Letter, at 3. Safeway said that it wanted Dr. Tudor’s
testimony because she had the expertise to “educate the finder of fact” on
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complicated issues in this case that were “outside the scope of knowledge
of most juries and judges.” Id. Safeway’s description of Dr. Tudor’s
proposed testimony closely tracked Rule of Evidence 702(a) the purpose of
expert testimony, “[T]he expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand the evidence or to
determine a fact in issue.” Fed. R. Evid. 702(a). CMS could reasonably
conclude that Safeway would elicit expert testimony from Dr. Tudor to
educate the Court, and that such testimony would likely result in her
rendering opinions on matters of interest to CMS, including CMS goals and
policies underlying the Lower Cash Price Policy. CMS could reasonably
conclude that allowing a former employee to opine on such matters would
not promote the objectives of the Department.
Lastly, CMS also reasonably determined that the testimony would
create a risk that Dr. Tudor would disclose privileged information, and that
creating such a risk would not promote the objectives of the Department.
The deliberative process privilege protects communications within a
governmental agency that were part of such agency’s decision-making
process. United States v. Zingsheim, 384 F.3d 867, 872 (7th Cir. 2004);
United States v. Farley, 11 F.3d 1385, 1389 (7th Cir. 1993). The attorneyclient privilege protects confidential communications between a client and
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his attorney that constitute legal advice or tend to reveal the substance of a
client’s confidence. See Judson Atkinson Candies, Inc. v. Latini-Hohberger
Dhimantec, 529 F.3d 371, 388 (7th Cir. 2008); United States v. Evans, 113
F.3d 1457, 1461 (7th Cir. 1997). Safeway stated that it wanted Dr. Tudor to
testify about the formulation of the Lower Cash Price Policy and the
preparation of the Lower Cash Price Policy Memorandum. November 16
Letter, at 3. Safeway further stated that her testimony would provide “full
disclosure of decision-making information,” presumably full disclosure of
CMS’s decision-making. Id., at 4. CMS could reasonably conclude that
disclosure of decision-making information concerning the development and
implementation of the Lower Cash Price Policy could put at risk the
disclosure of confidential information protected by these two privileges.
For all these reasons, the decision by CMS that the proposed
testimony did not promote the objectives of the Department are rational and
are not arbitrary or capricious.
Safeway argues that CMS is wrong about the extent of Dr. Tudor’s
knowledge of the Deposition Topics. Safeway presents evidence, including
a declaration of one of its attorneys to support this argument. Safeway
Memorandum, at 8-9, and Exhibit H, Declaration of Selina Coleman. In
conducting judicial review, this Court does not substitute its judgment for
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CMS. This Court only determines whether CMS provided a reasonable
basis for its decision. The scope of Dr. Tudor’s familiarity with the
Deposition Topics was a valid consideration when deciding whether her
proposed testimony would promote the objectives of the Department.
Relying on the opinions of fellow employees was reasonable.
Safeway noted that this Court found that Dr. Tudor had personal
knowledge of the Deposition Topics. Opinion 126, at 7. This Court,
however, did not address the level of her knowledge or whether her
knowledge of these topics would promote the objectives of the Department.
CMS used a reasonable process of inquiring of fellow employees to
ascertain Dr. Tudor’s knowledge of the Deposition Topics. CMS’s reliance
on such information was not arbitrary or capricious.
Safeway also argues that CMS’s decision was arbitrary and
capricious because this Court’s Opinion 126 already rejected all of CMS’s
reasons for not authorizing Dr. Tudor’s testimony. Safeway is mistaken. In
Opinion 126, this Court decided the Relator’s motion to quash the
Subpoena and Safeway’s motion to extend discovery schedule to allow Dr.
Tudor’s deposition. In doing so, the Court applied Federal Rules of Civil
Procedure 16, 26, and 45. Rules 16, 26, and 45 required the Court to
balance the principles of liberally allowing discovery of information that is
Page 14 of 17
proportional to the needs of the case, the burden of the discovery process
on the deponent and the parties, and the impact of extending the discovery
schedule on the parties and the public’s interest in prompt resolution of
cases. See Opinion 126, at 6-10; Fed. R. Civ. P. 16(a), 26(b)(1), 45(d).
This Court nowhere considered whether Dr. Tudor’s testimony promoted
the objectives of the Department. The Court, further, specifically
acknowledged that CMS might decide not to allow Dr. Tudor to testify.
Opinion 126, at 9. CMS did so. Opinion 126 does not conflict with CMS’s
determination.
Safeway argues that the Court should reverse CMS’s decision
because Dr. Tudor’s testimony is important to its case. Safeway relies on
the Supreme Court’s decision in Universal Health Services v. United States
ex rel. Escobar, __ U.S. __, 136 S.Ct. 1989 (2016). The Universal Health
Services case does not address judicial review under the APA. The case is
not relevant to the issue before the Court. The Department’s Touhy
regulations required CMS to decide whether the requested testimony
promoted the objectives of the Department. 45 C.F.R. § 2.3. CMS had to
follow that regulation. CMS did so. CMS denied the request and explained
the basis of that decision. CMS’s explanation showed that the decision
was “rationally connected to the facts presented.” Motor Vehicle Mfrs.
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Ass’n of U.S., Inc., 463 U.S. at 43. The decision was not arbitrary or
capricious. The Universal Health Services case does not apply.
Safeway finally argues that CMS must let Dr. Tudor testify because
the United States stands to benefit if the Relator prevails in this underlying
case. Safeway argues that the United States is a real party interest in this
case, and so, cannot properly withhold a key witness. The Court again
disagrees. CMS had to follow the Department’s Touhy regulation. That
regulation required CMS to decide, in consultation with the Department’s
Office of General Counsel, whether complying with the request would
promote the objectives of the Department. 45 C.F.R. § 2.3. CMS did so
and gave an explanation that showed a rational connection of the decision
to the facts. CMS was not authorized to consider whether the United
States generally had some obligation to let Dr. Tudor testify because of
some equitable sense of fairness. Judicial review standards under the APA
similarly do not allow this Court to consider this “fairness” argument when
reviewing the CMS decision.
Because the Court upholds CMS’s decision not to allow Dr. Tudor to
testify, Safeway’s request for additional time to take her deposition is moot.
THEREFORE, IT IS ORDERED that Defendant’s Motion to Compel
Government Agency to Allow Former Government Employee to Testify in
Page 16 of 17
Accordance with Deposition Subpoena (d/e 135-1) is DENIED, and
Defendant’s Renewed Motion for Leave to Extend the Deadline for
Deposing Former Government Employee in Light of New Circumstances
(d/e 134) is DENIED as moot.
ENTER: March 5, 2019
s/ Tom Schanzle-Haskins
TOM SCHANZLE-HASKINS
UNITED STATES MAGISTRATE JUDGE
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