Citizens for Consume, et al v. Abbott Laboratories,, et al

Filing 8184

Judge Patti B. Saris: MEMORANDUM AND ORDER entered DENYING Motion to Reconsider (document no. 159 in Baxter, individual case no. 08-cv-11200). (Anderson, Jennifer)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

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THIS DOCUMENT RELATES TO:
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UNITED STATES ex rel. LINNETTE )
SUN and GREG HAMILTON, RELATORS)
v. BAXTER HEALTHCARE
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CORPORATION
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IN RE PHARMACEUTICAL INDUSTRY
AVERAGE WHOLESALE PRICE
LITIGATION

MDL NO. 1456
CIVIL ACTION NO. 01-12257-PBS
SUBCATEGORY NO. 08-11200-PBS

MEMORANDUM AND ORDER
August 7, 2012
Saris, U.S.D.J.

I.

INTRODUCTION

In this qui tam action under the federal False Claims Act,
Relators Linette Sun and Greg Hamilton (“Relators”) claim, among
other things, that Baxter Healthcare Corporation (“Baxter”)
fraudulently inflated the prices of the drugs, Recombinate and
Advate, and caused overpayments by Medicaid and Medicare.

On

January 26, 2012, this Court allowed Baxter’s motion for partial1

1

The other counts related to relator Linnette Sun's
retaliation and employment discrimination claims were not
challenged.
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summary judgment.

See In re Pharm. Indus. Average Wholesale

Price Litig., No. 01-12257-PBS, 2012 WL 366599 (D. Mass. Jan. 26,
2012).

Baxter’s partial motion for summary judgment was allowed

based upon the broad release that qui tam relator Ven-A-Care of
the Florida Keys (“Ven-A-Care”), with the government’s consent,
provided to Baxter in connection with Ven-A-Care’s settlement of
similar claims against Baxter involving Recombinate and other
drugs.
Relators have moved for reconsideration pursuant to Fed. R.
Civ. P. 59(e).

They argue they are entitled to a hearing

regarding the fairness, adequacy, and reasonableness of the
settlement agreement between Ven-A-Care and Baxter.
seek a share of the proceeds of that settlement.

They also

Neither of

these arguments was raised during the summary judgment
proceeding, though they could have been.

Both the government and

Ven-A-Care have been allowed to weigh in on the novel procedural
issues raised by the case. The motion for reconsideration is
denied without prejudice.

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II.

DISCUSSION

A. Standard of Review
There are generally only four recognized grounds upon which
the Court can grant a Rule 59(e) motion: (1) manifest errors of
law or fact, (2) newly discovered or previously unavailable
evidence, (3) manifest injustice, and (4) an intervening change
in controlling law.

See Marie v. Allied Home Mortgage Corp., 402

F.3d 1, 7 n. 2 (1st Cir. 2005) (citing 11 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 2810.1 (2d ed.
1995)).
B.

Settlement as “Alternate Remedy”
Under the False Claims Act, a person may bring an action “in

the name of the Government” seeking civil remedies for fraud
against the United States.

31 U.S.C. § 3730(b)(1).

“The action

may be dismissed only if the court and the Attorney General give
written consent to the dismissal and their reasons for
consenting.”

Id.

In addition,

[n]otwithstanding subsection (b), the Government may
elect to pursue its claim through any alternate remedy
available to the Government, including any
administrative proceeding to determine a civil money
penalty. If any such alternate remedy is pursued in
another proceeding, the person initiating the action
shall have the same rights in such proceeding as such
person would have had if the action had continued under
this section.

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31 U.S.C. § 3730(c)(5) (emphasis added).

Thus, relators do not

lose their rights under the False Claims Act when the government
pursues an alternate remedy with respect to their claims.
If the government pursues an alternate remedy, one of the
rights to which the relator is entitled is the right to obtain a
share “of the proceeds of the action or settlement of the claim.”
31 U.S.C. § 3730(d)(1); see U.S. ex rel. Bledsoe v. Community
Health Systems, Inc., 342 F.3d 634, 649 (6th Cir. 2003).

In

addition, if the alternate remedy is a settlement, the relator
has a right to have “the court determine[], after a hearing,
[whether] the proposed settlement is fair, adequate, and
reasonable under the all the circumstances.”

31 U.S.C. §

3730(c)(2)(B); see United States ex rel. LaCorte v. Wagner, 185
F.3d 188, 191 (4th Cir. 1999).

Relators argue the Settlement

Agreement and Release executed by Baxter and Ven-A-Care, and to
which the government consented, constitutes an “alternate remedy”
for the claims it brought against Baxter.
3730(c)(5).

31 U.S.C. §

As a result, Relators maintain, they are entitled to

a hearing regarding the fairness of the settlement and to a share
of the resulting proceeds.
As background, after Relators brought their action, the
government consented under 31 U.S.C. § 3730(b)(1) to the
dismissal with prejudice of similar claims that Ven-A-Care had
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previously made against Baxter on behalf of the government.

The

government’s consent was provided “pursuant to, and as limited
by, the Settlement Agreement and Release” between Ven-A-Care and
Baxter.

Consent of the United States of America to the Relator’s

Dismissal with Prejudice of Claims Pursuant to 31 U.S.C. §
3730(b)(1), Civil Action No. 1:01-cv-12257-PBS (Oct. 7, 2011)
(Master Doc. No. 7831-1).

In exchange for the payment of

$25,000,000, the release “fully and finally releases, acquits,
and forever discharges” Baxter from any “claim, action, suit,
demand, right, cause of action, liability, judgment, damage, or
proceeding . . . which has been asserted, could have been
asserted, or could be asserted in the future . . . for or arising
from any of the Covered Conduct . . . .”

Settlement Agreement

and Release at ¶ III.7, Civil Action No. 1:01-cv-12257-PBS (Oct.
7, 2011) (Master Doc. No. 7832-1).

The agreement defines the

term “Covered Conduct” to include the submission of false claims
to Medicaid and Medicare and the reporting of false prices for
“any and all drugs manufactured, marketed and/or sold by or on
behalf of any Baxter Party . . . .”

Id. at ¶ II.E (emphasis

added).
Although this broad release language extinguished Relators’
claims regarding Recombinate and Advate, see In re Pharm. Indus.
Average Wholesale Price Litig., No. 01-12257-PBS, 2012 WL 366599
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(D. Mass. Jan. 26, 2012), no one notified the court nor Relators
Sun and Hamilton that the settlement effectively extinguished
their claims.2

The government, which had not intervened in the

action, contends that it did not understand or intend that the
broad release language cover drugs not asserted in the Ven-A-Care
complaint.

See Statement of the United States in Response to the

Electronic Order of February 24, 2012 (Doc. No. 166) at 1-2.
Relators argue the government pursued an “alternate remedy”
to the False Claims Act claims they brought against Baxter by
consenting to the settlement between Ven-A-Care and Baxter.
U.S.C. § 3730(c)(5).

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In U.S. ex rel. Bledsoe v. Community Health

Systems, Inc., 342 F.3d 634 (6th Cir. 2003), the Sixth Circuit
held that “‘alternate remedy’ refers to the government’s pursuit
of any alternative to intervening in a relator’s qui tam action .
. . . [A] settlement pursued by the government in lieu of
intervening in a qui tam action asserting the same FCA claims
constitutes an ‘alternate remedy’ for purposes of 31 U.S.C. §
3730(c)(5).”

Id. at 647-49.

The Court further observed that it

was

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The settlement was docketed on the multi-district
litigation docket, which at that point had over 7,000 docket
entries. It was not separately filed in the subcategory
applicable to Relators. Nonetheless, Relators received actual
notice of the settlement.
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not alone in our view of a § 3730(c)(5) “alternate
remedy.” The Ninth Circuit has held that an
administrative suspension or debarment proceeding
pursued by the government, and a settlement agreement
arising therefrom, constituted an “alternate remedy”
within the meaning of § 3730(c)(5), even though the
government had not intervened in a qui tam suit
alleging the conduct contemplated in the settlement.
United States ex rel. Barajas v. United States, 258
F.3d 1004, 1010-13 (9th Cir. 2001). Similarly, the
Fourth Circuit appears to view § 3730(c)(5) as
protecting a relator’s rights when the government
pursues an alternative to intervening in the relator’s
qui tam action. [See United States ex rel. LaCorte v.
Wagner, 185 F.3d 188, 191 (4th Cir. 1999)].
Id. at 649.

The Sixth Circuit explained that if the government’s

extinguishing of a relator’s claims by reaching a separate
settlement with the defendant were not considered an “alternate
remedy” under 31 U.S.C. § 3730(c)(5), then
the government could decline to intervene in a qui tam
suit, then settle that suit’s claims separately and
deny the relator his or her share of the settlement
proceeds simply because the government had not formally
intervened in the qui tam action. Consequently, the
government would frequently carry the incentive to
decline to intervene in an action and, having been
apprised of possible FCA violations by a private
citizen, to independently pursue an investigation of
the alleged FCA violator(s). Such a result would not
further Congress’ legislative intent that the
government and private citizens collaborate in battling
fraudulent claims, and it would impede, not further,
Congress’ legislative intent to encourage private
citizens to file qui tam suits.
Id. at 649.

Thus, to encourage private citizens to file qui tam

suits, the False Claims Act provides relators with the right to
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claim a share of the proceeds, and a hearing regarding the
fairness, of the government’s settlement of their claims.
Here, the government’s consent to the dismissal of Ven-ACare’s claims against Baxter pursuant to the broad Settlement
Agreement and Release, which, albeit unwittingly, extinguished
Relators’ claims, constitutes an “alternate remedy” under 31
U.S.C. § 3730(c)(5).

The government effectively settled

Relators’ claims by approving the settlement between Ven-A-Care
and Baxter, and such a separate settlement constitutes an
“alternate remedy.”

See Bledsoe, 342 F.3d at 647-49; Barajas,

258 F.3d at 1010-13.
The government maintains it “believed its consent [to the
Settlement Agreement and Release between Ven-A-Care and Baxter]
would be effective only with respect to the claims pled by Ven-ACare -- and not those pled by Sun and Hamilton -- based on the
plain language and structure of the False Claims Act.”

Statement

of the United States in Response to the Electronic Order of
February 24, 2012 (Doc. No. 166) at 1-2.

While the government’s

position is unclear, it appears to be arguing that it could not
have settled any claims against Baxter not contained in the VenA-Care case.

This is partly true, as the government cannot

settle a claim brought by another relator without a hearing on
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the fairness of the settlement.

However, contrary to the

government’s argument, the statute does not require the
government to intervene in a relator’s action in order to settle
it with an “alternate remedy.”

See Bledsoe, 342 F.3d at 647-49

(rejecting the government’s claim that “Congress intended the
‘alternate remedy’ provision to apply only when the government
has intervened in the action.”); Barajas, 258 F.3d at 1006; cf.
U.S. ex rel. Schweizer v. Oce N.V., 677 F.3d 1228, 1233 (D.C.
Cir. 2012) (“Intervention is necessary ‘only if the government
wishes to ‘proceed with the action . . . . Here, the government
did not seek to proceed with the qui tam portion of the case; it
sought to end it.

It follows that the government did not have to

intervene before filing its motion [to dismiss the relator’s qui
tam claims after reaching a settlement agreement with the
defendant].”).

The government has not sought to rescind, or

withdraw its consent from, the Settlement Agreement and Release
between Ven-A-Care and Baxter now that the Court has construed
the meaning of the release contrary to its understanding.
Baxter makes several arguments opposing Relators’ motion for
reconsideration.

Although Baxter recognizes that relators “are

entitled to notice of settlement of their own False Claims Act
case.

See 31 U.S.C. § 3730(c)(2)(B),” it contends that “Relators
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cite no authority for the proposition that a relator in one FCA
case has the right to notice and a hearing about a different FCA
case.”

Baxter Opp. at 5 (emphasis in original).

It is true that

unlike the situation here, in Bledsoe and Barajas the separate
settlement was not a part of a different False Claims Act case.
However, these cases stand for the proposition that when the
government has not intervened in a relator’s case, its separate
settlement of the relator’s claim constitutes an “alternate
remedy” under 31 U.S.C. § 3730(c)(5) and therefore the court must
hold a hearing regarding the settlement.
Baxter also argues Relators’ request to be heard regarding
Baxter’s settlement with Ven-A-Care comes too late because
Relators had actual notice of the settlement and prior
opportunities to object to, or request a hearing regarding, the
settlement.3

Of course, it would have been preferable

(particularly with respect to Recombinate) if the issue had been
vetted at the summary judgment hearing, but Relators
(consistently with the government) believed that the settlement
and release did not apply to their claims at that point.

But

once I construed the release, they timely raised 31 U.S.C. §

3

As clarified in the Declaration of Mark Kleiman (Doc. No.
176), Relators did have actual notice of the Ven-A-Care
settlement before the court approved it.
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3730(c)(2)(B), which applies when the government pursues its
claim through any alternate remedy.
Finally, Baxter maintains that even if 31 U.S.C. §
3730(c)(2)(B) could potentially apply (because the government
pursued “any alternate remedy” under 31 U.S.C. § 3730(c)(5)
through its approval of the Ven-A-Care settlement), that
provision is not relevant here because it applies only when the
government has settled a relator’s action and not when the
government merely settles a relator’s claim asserted on the
government’s behalf.

According to the statute, “[t]he Government

may settle the action with the defendant notwithstanding the
objections of the person initiating the action if the court
determines, after a hearing, that the proposed settlement is
fair, adequate, and reasonable under all the circumstances.”
U.S.C. § 3730(c)(2)(B) (emphasis added).

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Baxter argues the Ven-

A-Care settlement did not settle Relators’ “action,” and thus §
3730(c)(2)(B) does not apply.

However, the settlement

extinguished all of Relators’ pending federal False Claims Act
pricing claims and thus effectively settled that aspect of their
action.

Moreover, Baxter has not cited any cases limiting the

application of 31 U.S.C. § 3730(c)(2)(B) when the government
settles at least one but not all of a relator’s claims; such a
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limitation would be inconsistent with “Congress’ legislative
intent to encourage private citizens to file qui tam suits.”
Bledsoe, 342 F.3d at 649.
C. Procedural Issue
The difficult procedural question is what to do next.
Relators have moved “pursuant to Federal Rule of Civil
Procedure 59(e), this Court to reconsider and vacate its January
26, 2012 Memorandum Opinion and Order allowing Baxter Healthcare
Corporation’s (“Baxter”) motion for partial summary judgment
dismissing the Relators’ pending federal False Claims Act
claims.”

Relators’ Combined Motion to Reconsider and Memorandum

in Support (Doc. No. 159) at 1.

Relators’ primary argument

appears to be that “the Court’s partial summary judgment ruling
failed to consider, and thus violated, the express statutory
rights of the Relators in this case to notice and a hearing on
any settlement of their case, and a right to their share of the
settlement proceeds.”

Id. at 2.

Pressing an argument that the

Court erred in granting Baxter’s motion for partial summary
judgment on the meaning of the release does not lead to the
requested relief.

Instead, it is the Court’s allowance of

Baxter’s motion for partial summary judgment and the consequent
extinguishing of Relators’ claims that provides Relators with the
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right they claim to a hearing regarding the fairness of the VenA-Care settlement and a share of the proceeds. See 31 U.S.C. §
3730(c)(2)(B).

While no cases are directly on point to assist in

sorting out this procedural pretzel, at least one case suggests
that Relators should move to reopen the judgment in the Ven-ACare case to obtain a fairness hearing with respect to the Ven-ACare settlement.

Cf. LaCorte v. Wagner, 185 F.3d 188, 191 (4th

Cir. 1999) (“Indeed, an original qui tam plaintiff [can]
vindicate his rights when the government pursues an alternate
remedy . . . . If the relator believes that the government acted
improperly in procuring a settlement, then he may return to the
court which had jurisdiction over the settlement and move to
reopen the judgment under Fed. R. Civ. P. 60(b)(6).”).
At that hearing, the court will address whether the
settlement is fair in light of its release of Relators’ claims.
Ven-A-Care alleges the court lacks subject matter jurisdiction
over Relators’ Recombinate and Advate claims under the first-tofile requirement.

I should add that it is not clear from the

most recent filings that Relators are pressing for a share of the
settlement related to their Recombinate, as opposed to their
Advate, claim.

See Doc. No. 159.

However, with respect to

Advate, the Court will have to determine whether it has
jurisdiction.
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III. ORDER
Relators’ Combined Motion to Reconsider (Doc. No. 159) is
DENIED without prejudice.

Plaintiffs may file a motion to reopen

the judgment under Fed. R. Civ. P. 60(b)(6) in United States of
America ex rel. Ven-A-Care of the Florida Keys, Inc. v. Baxter
Healthcare Corporation and Baxter International, Inc., Civil
Action No. 01–CV-12257-PBS, Subcategory No. 06-11337.

/s/ PATTI B. SARIS
PATTI B. SARIS
UNITED STATES DISTRICT JUDGE

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