Suppressed v. Suppressed

Filing 40

Enter MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 6/26/2015. Mailed notice (jdh)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

Richard J. Carmel
Plaintiff,

v.

CVS Caremark Corporation, et. al
Defendants.

)
)
)
)
)
) Case Nos. 13 C 5930
)
13 C 7683
)
)
)
)
)
)
)

MEMORANDUM OPINION AND ORDER
In these related qui tam actions, relator Richard J. Carmel
alleges that CVS Caremark Corporation—a pharmacy and healthcare
services provider—and its affiliates violated, and conspired to
violate, the federal False Claims Act, 31 U.S.C. § 3730 (“FCA”),
and the Anti-Kickback Statute, 42 U.S.C. § 1320a–7b(b) (“AKS”),
through certain discount programs they offered to CVS pharmacy
customers. 1

Relator claims that these programs violated the AKS

by incentivizing customers covered by Medicare and/or Medicaid
to purchase prescription drugs at CVS, and by remunerating such
customers through price reductions that were neither disclosed

1

Relator’s complaints also asserted claims under the Civil
Monetary Penalties Law (“CMPL”), but he later withdrew those
claims.

nor passed on to these federal programs.

Defendants violated

the FCA, relator asserts, by presenting claims for payment that
falsely

certified

compliance

with

the

AKS,

and

by

making

or

using false records for the purpose of seeking payment of false
or fraudulent claims.
Defendants
relator’s

articulate

claims

under

Fed.

multiple
R.

grounds

Civ.

P.

for

12(b)(6),

dismissing
several

of

which appear to have merit, and some of which relator concedes. 2
But because I conclude that under the law of this circuit, the
FCA’s “public disclosure” bar compels dismissal of both actions
for lack of subject matter jurisdiction, I begin and end with
that issue.
I.
The

FCA

is

“the

primary

vehicle

by

the

Government

for

recouping losses suffered through fraud.” U.S. v. Sanford-Brown,
Ltd.,

---F.3d---,

2015

WL

3541422,

(quoting 31 U.S.C. § 3729 et seq.).

2

at

*4

(7th

Cir.

2015)

It authorizes, in addition

Relator withdrew his CMPL claims in his response briefs, and he
further acknowledged that he has no free-standing claim under
the AKS.
In addition, relator did not respond to defendants’
arguments for dismissing the conspiracy count he asserts in
Count I, or for dismissing certain defendants from these
actions.
I construe his silence as a concession that his
conspiracy
claim,
and
defendants
Long
Drug
Stores
and
Silverscript Insurance Company, should be dismissed.
See
Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th
Cir. 1999); Count of McHenry v. Ins. Co. of the West, 438 F.3d
813, 818 (7th Cir. 2006).
2

to actions by the Attorney General, qui tam suits by private
citizens (“relators”) to recover money the government paid based
on

false

or

fraudulent

claims.

Glaser

v.

Wound

Consultants, Inc., 570 F.3d 907, 912 (7th Cir. 2009).
qui

tam

action

is

successful,

the

relator

“substantial share” of the funds recovered.

is

Care
If the

entitled

to

a

Id.

To ensure that qui tam suits are brought by individuals
having “first-hand knowledge of fraudulent misconduct,” id. at
918 (original emphasis), rather than by “opportunists trying to
capitalize on publicly disclosed allegations of wrongdoing,” id.
at 915, the FCA includes a public disclosure bar, which requires
courts to dismiss qui tam actions:
if substantially the same allegations or transactions
as alleged in the action or claim were publicly
disclosed—
...
(iii) from the news media
...
unless...the person bringing the action is an original
source of the information.
31 U.S.C. § 3730(e)(4)(a)(2010).
To
circuit

determine
apply

a

whether
three-step

this

bar

analysis,

applies,
asking:

courts
1)

in

whether

this
the

relator’s allegations have been “publicly disclosed”; 2) whether
the lawsuit is “substantially similar to” the publicly disclosed

3

information; and, if so, 3) whether the relator is nevertheless
an “original source” of the information.
913.

The

Seventh

Circuit

has

Glaser, 570 F.3d at

explained

that

the

public

disclosure bar applies not only where an allegation of fraud has
already

been

made,

but

also

where

the

“facts

disclosing

the

fraud itself are in the government’s possession or the public
domain.”

U.S.

ex

rel.

Absher

v.

Momence

Meadows

Nursing

Center, Inc., 764 F.3d 699, 708 (7th Cir. 2014).
II.
Relator’s
offered

to

“ExtraBucks”
single

complaints

CVS

customers.

rewards

‘points’

challenge
The

program,

for

each

several
first

which

discount
is

provides

prescription

CVS

programs

pharmacy’s

customers

filled,

and

“with
then

provid[es] customers a five dollar discount coupon for each 10
prescriptions filled or refilled, for use in purchase of goods,
wares and merchandise” at CVS stores.
(“5930 Cmplt.”) at ¶ 17.
a

“brochure”

CVS

Complaint in 13 C 5930

In this connection, relator describes

Caremark

distributed,

which

was

captioned,

“Extra pharmacy & Health REWARDS” and included the following
language:
•
•
•
•

Fill 10 prescriptions, earn $5 Pharmacy & Health ExtraBucks
RewardsTM.
Earn on prescriptions, immunizations and more.
Look for more ways to earn throughout the year.
Maximize earnings! Family members can join to earn up
to $50 Pharmacy & Health ExtraBucks Rewards per person
every year.
4

5930 Cmplt. at ¶ 36 (A).
join” and

was

designed,

The brochure stated, “Everyone can
relator

claims,

“as

an

incentive

attract customers to fill prescriptions at a CVS/Pharmacy.”

to
The

brochure did not include any disclaimer stating that rewards
were

not

available

Medicare.

Id.

“distributed
restrict

to

Relator

discount

Medicare

customers

by

alleges

also

coupons

and

covered

that

that

Medicaid

on

Medicaid

their

recipients

CVS
faces

from

and/or

Caremark
did

not

gaining

the

benefit of a coupon at the expense of Medicare and Medicaid.”
Id. at ¶ 23.
Relator

next

describes

a

“flyer”

CVS

Caremark

sent

to

members of the ExtraBucks Rewards program, which states:
More ways to earn $5 ExtraBucks® Rewards! Along with
credit for the prescriptions you fill, you now can earn on
vaccinations and CVS.com® activities.
Prescriptions Fill or refill a prescription 1 credit
Fill or refill a 90-day prescription 3 credits
...
Vaccinations
Get a flu shot or vaccination from a CVS pharmacist 1
credit
GET 10 credits
EARN $5 ExtraBucks® Rewards
Id. at ¶ 36 (B).

These flyers were distributed through the

mail, without regard for whether the addressees were Medicare or
Medicaid recipients.

Id. at ¶ 36 (B)(i).

Relator alleges that

CVS Caremark “used ExtraBucks Rewards that, on their face and in
practice,

remunerated

Medicare

and

5

Medicaid

recipients

as

an

inducement
that

for

purchasing

remuneration

on

to

prescription
Medicare

and

drugs

without

Medicaid,”

id.

passing
at

¶ 36

(B)(vi), and that CVS Caremark did not “report[] the discounts
to Medicaid or Medicare.”

Id. at ¶ 38.

Relator states that on June 16, 2013, July 5, 2013, and
July 28, 2013, he purchased prescriptions at a CVS pharmacy in
Highland

Park,

received

a

Illinois,

receipt

and

reflecting

that
his

with

each

“ExtraCare

purchase,

Card

he

balances.”

The last of these included a $5 ExtraBucks Reward that relator
used to purchase general merchandise at the pharmacy. Id. at
¶¶ 45-47.
In the second action, relator alleges that CVS customers
who got flu shots at CVS pharmacies received a flyer stating:
I got my
Flu Shot!
Shopping Pass
20% Off
Non-pharmacy purchases*
up to $100 with your ExtraCare card
Save 20%
On your non-pharmacy
purchases up to $100
with your ExtraCare card
Valid one time only 8/19/13-3/31/14.
Complaint in 13 C 7683 (“7683 Cmplt.”) at ¶ 33.
that

these

flyers

“proclaim[ed]
6

in

bold,

Relator states

large-font,

colored

lettering

that

customers,”

CVS

and

PHARMACY

“were

will

provide

distributed

discounts

without

regard

recipient’s status as a recipient of federal benefits.”
¶ 33(iii),

(vi).

He

further

alleges

that

“a

to

all

to

the

Id. at

Medicaid

or

Medicare recipient was allowed to purchase inoculation medical
services at full price and then bill the cost back to Medicaid
or Medicare in contravention of the law.”

Id. at ¶ 33 (ix).

Relator states that on October 7, 2013, he purchased a flu
shot

at

a

CVS

pharmacy

in

Highland

Park,

Illinois,

and

contemporaneously received the discount coupon described above.
Relator’s two actions assert identical claims for relief.
Counts I and IV are no longer at issue, as relator has either
withdrawn them or has failed to respond to defendants’ arguments
for dismissal.

See n. 2, supra. Counts II and III assert,

respectively, the presentation of false claims, and the knowing
creation and use of false records or statements for the purpose
of

seeking

claim

payment

from

the

federal

and

Illinois

governments. 3

3

Both complaints also contain a Count IV, captioned “Violations
of the Anti-Kickback Statute and the Civil Monetary Penalities
Law.” As noted previously, relator has withdrawn his CMPL claim
and has conceded that he has no free-standing claim under the
AKS, which indeed authorizes no private right of action.
Accordingly, to the extent any substance remains to Count IV, it
is duplicative of Counts II and III.
7

III.
Whether relator’s claims—which, for all that appears, are
grounded in facts sourced entirely from a brochure, two flyers,
and a sales receipt—are prohibited by the public disclosure bar
is

not

a

particularly

close

question.

The

more

difficult

question is whether the bar operates to deprive me of subject
matter jurisdiction, or whether, it presents, instead, a ground
for

dismissal

for

failure

to

state

a

claim.

Defendants

evidently believe it is the latter, as they brought their motion
pursuant to Rule 12(b)(6).

As explained below, however, the

issue is not so clear.
The FCA’s public disclosure bar was amended in 2010 by The
Patient

Protection

amendment,

the

and

bar

Affordable

was

explicitly

Care

Act.

Prior

jurisdictional

in

to

this

nature,

providing:
No court shall have jurisdiction over an action under this
section based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative
hearing, in a congressional, administrative, or Government
Accounting Office report, hearing, audit, or investigation,
or from the news media, unless the action is brought by the
Attorney General or the person bringing the action is an
original source of the information.
§ 3730(e)(4)(1986).
Intern.

Corp.

“jurisdiction”
jurisdiction.

v.

The Supreme Court confirmed, in Rockwell
U.S.,

in
Id.

549

this
at

467.

U.S.

457

section
The

8

2010

(2007),
connoted
version,

that

the

word

subject-matter
however,

which

governs this case because the complaints were filed in 2013 and
do not allege any fraudulent conduct prior to that year, omits
the word “jurisdiction,” and instead provides that the court
“shall

dismiss

allegations

an

have

action”
been

if

its

publicly

substantially
disclosed.

the
31

same
U.S.C.

§ 3703(e)(4)(2010).
The Seventh Circuit has observed that in view of the 2010
amendment, “it is no longer clear that Rockwell’s holding is
still good law.” U.S. ex rel. Absher v. Momence Meadows Nursing
Center, Inc., 764 F.3d 699, 706 (7th Cir. 2014) (declining to
reach whether the bar remains jurisdictional because the case
before it was governed by the pre-amendment version). Indeed,
the Fourth and Eleventh Circuits have expressly held that the
current public disclosure bar is not jurisdictional.

U.S. ex

rel. Osheroff v. Humana Inc., 776 F.3d 805, 810 (11th Cir. 2015)
(“[w]e conclude that the amended § 3730(e)(4) creates grounds
for dismissal for failure to state a claim rather than for lack
of jurisdiction.”); U.S. ex rel. May v. Purdue Pharma L.P., 737
F.3d 908, 916 (4th Cir. 2013) (“the public-disclosure bar is no
longer

a

articulate
that

jurisdiction-removing
compelling

Congress

jurisdiction

reasons

elected
from

§

to

provision.”).

for

delete

3730(e)(4),

this
the

These

conclusion,
explicit

while

cases

including

reference

leaving

to

similar

jurisdiction-stripping language intact in surrounding sections,
9

May, 737 F.3d at 916, and that the amended version provides that
the

court

“shall

Government,”

dismiss”

which

is

the

action

“unless

inconsistent

with

opposed

a

by

the

jurisdictional

construction since jurisdictional bases for dismissal cannot be
waived.

Id. at 917.

See also Osheroff, 776 F.3d at 810-11

(same).
Earlier

this

month,

however,

the

Seventh

Circuit

stated

squarely, in a case expressly applying the 2010 version of the
statute (“the 2010 version of § 3730(e)(4) is not retroactive
and it controls here”), that “the public disclosure bar is a
limitation on subject matter jurisdiction.”

Sanford-Brown, ---

F.3d.---, 2015 WL 3541422, at *4 (7th Cir. 2015).

The court

relied for this holding on Momence, however, which, as noted
above,

applied

questioned

the

pre-2010

whether

the

jurisdictional as amended.
the

court’s

ruling

in

version

public

of

the

disclosure

statute
bar

and

remained

Nevertheless, because I am bound by

Sanford-Brown,

I

conclude

that

I

must

continue to view the public disclosure bar as jurisdictional in
nature, regardless of how other courts of appeals characterize
it or how the parties have framed the argument. See Ricketts v.
Midwest Nat. Bank, 874 F.2d 1181 (7th Cir. 1989) (“a district
court’s obligation to review its own jurisdiction is a matter
that must be raised sua sponte, and it exists independent of the
‘defenses’ a party might either make or waive under the Federal
10

Rules.”).

Accordingly,

I

must

address

§

3730(e)(4)

before

reaching the merits of the parties’ remaining arguments, and
must

dismiss

the

case

without

resolving

their

additional

disputes if I determine that the bar applies.
Turning now to the substance of the issue, defendants argue
that

relator’s

claims

were

“publicly

disclosed”

because

the

allegations in his complaint were widely available, including in
a CVS press release, magazine articles, and the CVS website.
Relator

does

not

dispute

category

of

“news

media”

that

these

(nor

sources

does

he

fall

dispute

within
that

I

the
may

consider them for present purposes; see Osheroff, 776 F.3d at
812 n. 4).
programs

Indeed, relator’s allegations about CVS’s discount

quote

disseminated.

from

sources

Accordingly,

he

I

acknowledges

move

on

to

step

were
two

widely
of

the

analysis, which asks if relator’s allegations are “substantially
similar” to the publicly disclosed information.
I begin by observing that in Glaser, the Seventh Circuit
aligned its views with the majority of other circuits, which had
held that the substantial similarity standard was “intended to
be

a

quick

trigger
F.3d

for

the

more

exacting

at

920

(citing

570

Grynberg

v.

Praxair,

2004)).

Glaser explained that satisfying the standard does not

389

F.3d

1038,

States

source

analysis.”

Inc.,

United

original

1051

ex

rel.

(10th

Cir.

require an identity of allegations, and that “an FCA qui tam
11

action even partly based on publicly disclosed allegations or
transactions

is

transactions.”

nonetheless

‘based

upon’

such

allegations

or

Id.

In his response briefs, relator summarizes the fraudulent
conduct alleged in his complaints as “offering the $20 Coupon to
Medicare and Medicaid recipients” (i.e., the %20 off coupon),
and “offering
recipients”

the

(the

‘Free
$5

account, however,

CVS

money’

ExtraBucks

both

offers

to

Medicare

Reward).

were

in

By

the

and

Medicaid

relator’s

public

own

domain

and

stated “on their face” that they were available to “everyone.”
Relator

further

argues

that

his

allegations

are

not

substantially similar to publicly disclosed information because
the

brochures,

flyers,

and

other

public

documents

did

not

reveal, for example, that “CVS failed to disclose the ExtraBucks
Rewards

to

Medicare

or

Medicaid

and

failed

to

disclose

to

Medicare or Medicaid recipients that they had an obligation to
report the rewards,” and that “CVS failed to monitor or create a
monitoring

process

to

ensure

that

Medicare

recipients did not receive the ExtraBucks reward.”
at 9.

or

Medicaid

5930 Cmplt.

But the public disclosure bar applies when the “critical

elements” of the alleged fraud are in the public domain; every
fact on which a relator’s claims are based need not have been
disclosed. See Glaser, 570 F.3d at 913.

See also U.S. ex rel.

Davis v. District of Columbia, 679 F.3d 832, 836 (D.C. Cir.
12

2012)

(public

disclosure

bar

triggered

“when

the

government

already has enough information to investigate the case and to
make a decision whether to prosecute or where the information
could at least have alerted law-enforcement authorities to the
likelihood

of

wrongdoing.”)

citation omitted).

(internal

quotation

marks

and

Moreover, if the omitted allegations are

indeed “critical elements” of the alleged fraud, then relator’s
speculation about what CVS disclosed to Medicare or Medicaid,
and about how CVS monitored its rewards programs, fall far short
of Rule 9(b)’s particularity requirements.

The basis for these

allegations is a mystery; they appear to be sheer conjecture. 4
This brings me to the final step in the analysis, which is
to

determine

whether

relator

is

an

“original

information on which his claims are based.

source”

of

the

The 2010 version of

the FCA defines “original source” as an individual:
who either (i) prior to a public disclosure under
subsection (e)(4)(a), has voluntarily disclosed to the
Government the information on which allegations or
transactions in a claim are based, or (2) who has knowledge
that is independent of and materially adds to the publicly
disclosed allegations or transactions, and who has

4

While my conclusion that I lack jurisdiction over this action
precludes me from ruling on the merits of defendants’ remaining
arguments for dismissal, I note that relator’s failure to allege
the content, date, amount, or any other identifying feature of
even a single claim for payment alleged to contain a false
certification of compliance or other false statement undoubtedly
dooms his claims under U.S. ex rel. Lusby v. Rolls-Royce Corp.,
570 F.3d 849, 854 (7th Cir. 2009), the very authority on which
he purports to rely.
13

voluntarily provided the information to the Government
before filing an action under this section.
§ 3730(e)(4)(B)(2010).

Relator does not claim to satisfy the

requirements of the first subsection.
just noted,

the

knowledge

relator

As for the second, as

claims

to

possess

that

is

“independent of” and “materially adds” to the public disclosure
is entirely speculative.
Relator

“has

the

burden

of

proving

the

jurisdictional

facts,” Glaser, 570 F.3d at 922, yet neither his complaints, nor
his opposition briefs, identify the source of any information he
claims

to

have

disclosures.
special

obtained

“independently”

of

the

Relator does not claim to be an “insider” with

knowledge

of

CVS’s

billing

practices

administration of its customer rewards programs.
claim

to

public

have

seen

any

document,

spoken

to

or

the

Nor does he

any

person,

or

otherwise been privy to any information that was not in the
public domain.

A relator who declines to identify the source of

his information cannot establish that his putative knowledge is
“independent” of the public disclosures.

See id. at 921-922

(relator who claimed her attorney provided her information about
the

alleged

fraud

but

refused

to

disclose

how

the

attorney

learned of it could not establish her independent knowledge).
In sum, relator has not carried his burden of proving that he is

14

an “original source” of the information on which his claims are
based.
IV.
For

the

foregoing

reasons,

I

conclude

that

relator’s

actions are barred by § 3730(e)(4) and dismiss this case for
lack of jurisdiction.

Before closing, however, I note briefly

that while I believe U.S. v. Sanford-Brown, Ltd., ---F.3d---,
2015 WL 3541422 (7th Cir. 2015) binds me to the view that the
issue is jurisdictional, my outcome would have been the same if
I had viewed it through the lens of Rule 12(b)(6), which is,
indeed, how the parties framed it.
As

noted

above,

the

only

source

of

information

relator

cites for his allegations about CVS’s discount programs is the
printed

materials

touting

that

“everyone

can

join.”

That

relator may have “observed” CVS acting consistently with this
statement (by failing to exclude Medicare or Medicaid recipients
from

the

disclosed

programs)

adds

information. 5

nothing
Moreover,

material
relator

to

the

publicly

effectively

pleads

himself out of any argument that the alleged fraud depends on

5

This distinguishes the allegations here from those in U.S. ex
rel. Yarberry v. Sears Holdings Corp., No. 09-cv-588-MJR-PMF
(S.D. Ill. Nov. 20, 2013), where the coupons at issue facially
excluded Medicare and Medicaid recipients, and the relator
claimed to have knowledge of the defendant’s “covert policy and
practice of ignoring” their ineligibility.
Yarberry, 2013 U.S.
Lexis 44266, at *23.
15

non-public information he claims uniquely to possess with the
allegation:

“CVS/Caremark

used

ExtraBucks

Rewards

that,

on

their face and in practice, remunerated Medicare and Medicaid
recipients

as

drugs....”

5930

Accordingly,

an

inducement

Cmplt.

even

if

at
the

for

¶ 36

purchasing

(B)(vi)

Seventh

prescription

(emphasis

Circuit

added). 6

reconsidered

its

statement that even after the FCA’s 2010 amendment, “the public
disclosure bar is a limitation on subject matter jurisdiction,”
dismissal of these cases would still be appropriate under Rule
12(b)(6).
ENTER ORDER:

_____________________________
Elaine E. Bucklo
United States District Judge
Dated: June 26, 2015

6

True, this allegation continues, “...without passing that
remuneration on to Medicare and Medicaid.”
But since relator
does not assert any knowledge of how CVS/Caremark bills Medicare
or Medicaid, this is pure speculation.
16