United States of America et al v. Novartis AG et al

Filing 153

Judge William G. Young: ORDER entered. MEMORANDUM AND ORDERAssociated Cases: 1:06-cv-10465-WGY, 1:10-cv-11728-WGY, 1:12-cv-10962-WGY(Sonnenberg, Elizabeth)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

UNITED STATES OF AMERICA ET AL.,
EX REL. FRANK GARCIA ET AL.
Plaintiffs,
v.
NOVARTIS AG, NOVARTIS
PHARMACEUTICALS CORPORATION,
AND GENENTECH, INC.,
Defendants.

UNITED STATES OF AMERICA ET AL.,
EX REL. STEPHEN FAUCI,
Plaintiffs,
v.
NOVARTIS
PHARMACEUTICALS CORPORATION,
GENENTECH, INC., AND
ROCHE HOLDINGS, INC.,
Defendants.

UNITED STATES OF AMERICA ET AL.,
EX REL. ALLISON KELLY,
Plaintiffs,
v.
NOVARTIS PHARMACEUTICALS
CORPORATION, NOVARTIS AG,
NOVARTIS CORPORATION,
GENENTECH, INC.,
ROCHE HOLDINGS, INC.,
AND THE ROCHE GROUP,
Defendants.

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CIVIL ACTION
NO. 06-10465-WGY

CIVIL ACTION
NO. 10-11728-WGY

CIVIL ACTION
NO. 12-10962-WGY

)
MEMORANDUM AND ORDER
YOUNG, D.J.

I.

March 17, 2015

INTRODUCTION
In these qui tam actions, two former employees of

Genentech, Inc. and a former employee of Novartis
Pharmaceuticals Corporation brought lawsuits against their
former employers alleging unlawful and fraudulent practices
in the marketing of a drug called Xolair, in violation of
the federal False Claims Act (“FCA”) and individual states’
qui tam statutes.

Relators Frank Garcia (“Garcia”) and

Allison Kelly (“Kelly”) (collectively, the “Relators”), as
well as a third relator, Stephen Fauci (“Fauci”), filed
complaints in the name of the United States and of
individual states1 against various pharmaceutical companies

1
The Plaintiff states named in the action filed by
Garcia are: California, Delaware, Florida, Hawaii,
Illinois, Indiana, Louisiana, Michigan, Nevada, New
Hampshire, New Mexico, Tennessee, Texas, the Commonwealths
of Massachusetts and of Virginia, the District of Columbia,
New York, and Georgia.
The Plaintiff states named in the action filed by
Kelly are: California, Colorado, Connecticut, Delaware,
Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana,
Maryland, Michigan, Minnesota, Montana, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North
Carolina, Oklahoma, Rhode island, Tennessee, Texas, the
Commonwealths of Massachusetts and of Virginia, and
Wisconsin.
2

including Novartis Pharmaceuticals Corporation
(“Novartis”),2 Novartis AG, and Genentech, Inc.
(collectively, the “Defendants”) accusing them of causing
health care providers to overbill federal and state health
insurance programs.3

Garcia Docket, Compl. (“Garcia

Compl.”), ECF No. 1, ¶ 2; Garcia Docket, First Am. Compl.,
(“Garcia Am. Compl.”) ¶ 270, ECF No. 17; Kelly Docket,
Compl. Damages, Civil Penalties, & Other Relief Under Qui
Tam Provisions Federal Civil FCA & Similar State Statutes
(“Kelly Compl.”) ¶ 1 ECF No. 1; Fauci Docket, Pl.’s Compl.

The Plaintiff states named in the action filed by
Fauci are: California, Connecticut, Delaware, Florida,
Georgia, Hawaii, Illinois, Indiana, Louisiana, Michigan,
Montana, Nevada, New Hampshire, New Jersey, New York, North
Carolina, Oklahoma, Rhode island, Tennessee, Texas, the
Commonwealths of Massachusetts and of Virginia, Wisconsin,
and the District of Columbia.
2

Novartis is also a defendant in a currently pending
case brought by a former Novartis sales manager in the
Southern District of New York. There, the United States
government and individual states have intervened. That
case is based upon alleged kickback activities to induce
pharmacies to purchase other Novartis drugs and to cause
them to submit false or fraudulent statements or claims, in
violation of the FCA. United States v. Novartis Pharms.
Corp., No. 11-08196 (S.D.N.Y. filed Nov. 14, 2011).
3

Garcia filed his complaint under Case No. 06-10465,
which will be referred to as the “Garcia Docket.” Fauci
filed his complaint under Case No. 10-11728, which will be
referred to as the “Fauci Docket.” Kelly filed her
complaint under Case No. 12-10962, which will be referred
to as the “Kelly Docket.” 
3

Fed. FCA 31 U.S.C. §§ 3729 et seq. & Pendent St. FCA
(“Fauci Compl.”) ¶ 1, ECF No. 1.
On June 17, 2014, the Defendants filed a motion before
the Court to dismiss the actions brought in 2006 by Garcia
(the “First Action”), in 2012 by Kelly (the “Second
Action”),4 and in 2010 by Fauci (“Fauci’s Action”).5

Garcia

Docket, Defs.’ Joint Mot. Dismiss Compls. Relators Garcia,
Fauci, & Kelly (“Defs.’ Mot. Dismiss”), ECF No. 123.

The

Defendants argue that the Relators, as well as Fauci,
failed to plead fraud with sufficient particularity in
accordance with Federal Rule of Civil Procedure 9(b).
Garcia Docket, Defs.’ Joint Mem. Law Support Mot. Dismiss
Compls. Relators Garcia, Fauci, & Kelly (“Defs.’ Mem.
Dismiss”) 2, 27-32, ECF No. 125.

The Court holds that the

Relators’ pleadings do not meet the requirements of Rule
9(b) and therefore grants the Defendants’ motion to
dismiss.

4
The “First Action” and the “Second Action” are
identified as such because of the first-to-file rule as it
applies to these two actions. As to Fauci, since he
voluntarily dismissed his case on June 16, 2014, the
analysis will not focus on his action, which, therefore,
can simply be identified as “Fauci’s Action.”
5

On June 16, 2014, Fauci filed a notice of voluntary
dismissal, which he corrected on June 17, 2014. Garcia
Docket, Relator Fauci’s Notice of Voluntary Dismissal, ECF
No. 120; Garcia Docket, Relator Fauci’s Corrected Notice
Voluntary Dismissal, ECF Nos. 121, 122. The Relators
proceeded with their actions against the Defendants.
4

A.

Factual Background

Beginning in 2003, Novartis and Genentech, Inc. comarketed Xolair in the United States.
Kelly Compl. ¶ 2.

Garcia Compl. ¶ 6;

Xolair is the brand name for a

medication approved by the Food and Drug Administration
(“FDA”) to treat moderate to severe, persistent allergic
asthma in patients aged twelve and older whose symptoms are
inadequately controlled with inhaled corticosteroids.
Garcia Compl. ¶¶ 5, 27; Kelly Compl. ¶ 3.

According to

Kelly, the Defendants had hoped that the FDA would approve
Xolair for “much wider use, including the treatment of mild
asthma.”

Kelly Compl. ¶ 3.

Garcia worked as a Xolair sales representative at
Genentech, Inc. in the New York area from June 2003 through
May 2004.

Garcia Compl. ¶ 23.

Kelly worked as a Xolair

sales representative for Novartis from 2003 until late 2006
in the Bronx and Westchester County, New York.

Kelly

Compl. ¶¶ 23, 52.
The Relators allege that the Defendants, in an effort
to increase sales of Xolair and despite FDA’s approval for
limited uses, engaged in off-label marketing and kickback
schemes to broaden their patient population and increase
sales.

Garcia Compl. ¶¶ 30-31, 38; Kelly Compl. ¶¶ 12-13,

15-18.

Specifically, the Relators allege that the

5

Defendants’ pharmaceutical representatives told health care
providers (“HCPs”) that Xolair was effective for “mild
asthma,” as well as for “allergy symptoms that may precede
an asthma attack in patients suffering from ‘allergic
asthma,’” called “allergic cascade,” and also for “other
allergic conditions not associated with asthma, like peanut
allergy.”

Kelly Compl. ¶¶ 9-10.

According to the

Relators, Defendants also instructed their Xolair sales
managers and sales representatives to speak with HCPs about
“active asthma,” which “generally refers to patients who
have been diagnosed with asthma, or experienced asthma
symptoms to any extent, within the past year.”

Id.

According to the Relators, the Defendants also urged HCPs
to use Xolair on children.
Compl. ¶ 10.

Garcia Compl. ¶ 35; Kelly

The Relators assert that the Defendants also

provided kickbacks like free cash equivalents and expensive
gifts, free medical and office equipment, and free services
to HCPs in order to induce them to prescribe Xolair.
Garcia Compl. ¶ 38; Kelly Compl. ¶ 18.
The Relators declare that the Defendants’ campaign to
boost Xolair sales was extremely successful.
¶ 20.

Kelly Compl.

In 2003, the year in which Xolair was launched,

revenue was only about $25,000,000, whereas it increased to
$187,000,000 in 2004 and $320,000,000 in 2005.

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Garcia

Compl. ¶ 26; Kelly Compl. ¶ 20.

From 2003 through 2008,

Xolair sales in the United States approximated
$2,000,000,000.

Kelly Compl. ¶ 21.

The Relators contend that the Defendants have
misbranded Xolair, “making it ineligible for reimbursement”
under government healthcare programs, especially Medicare
and Medicaid.

Id. ¶ 15.

They also allege that the

Defendants have illegally induced HCPs to submit claims for
reimbursement at improper rates by advising them to use
improper medical codes, called “upcoding,” for the
administration of Xolair.

Kelly Compl. ¶ 17, 280-92.

The

Relators allege that the Defendants have abused government
health care programs such as Medicare, Medicaid, the
Civilian Health and Medical Program of the Uniformed
Services (“CHAMPUS,” now known as “TRICARE”), the Veteran
Health Administration, and the Federal Employees Health
Benefits Program (“FEHBP”).

Id. ¶¶ 27, 41.

The Relators

also cite legislation that prohibits or restricts the
prescription of drugs and prohibits kickback activity in
relation to payments made under a government health care
program, such as the Federal Food, Drug and Cosmetic Act
(“FDCA”), the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), and the Medicare and
Medicaid Anti-Kickback Act (“AKA”), as amended by the

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Patent Protection and Affordable Care Act.

Garcia Compl.

¶¶ 12-14, 21; Kelly Compl., ¶¶ 19, 46, 102-10.
B.

Procedural Posture

These cases were first assigned to Judge Nancy Gertner
on March 14, 2006.

They were then transferred to Judge

Joseph L. Tauro on September 23, 2011, and then again
transferred to this session of the Court on March 13, 2014.
Garcia Docket, Elec. Clerk’s Notes, Sept. 23, 2011 & March
13, 2014, ECF No. 91.
1. The Relators
On March 14, 2006, the Relators jointly filed a qui
tam action against the Defendants (the “Garcia Complaint”).
Garcia Compl.

The Relators amended the complaint on

December 19, 2007 to add claims under New York’s and
Georgia’s qui tam statutes.

Garcia Am. Compl. ¶¶ 269-88.6

The United States declined to intervene on January 18,
2011, Garcia Docket, Notice of Election to Decline
Intervention by United States of America, ECF No. 38, and
the individual states named in the Garcia Complaint
declined to intervene on February 7, 2011, Garcia Docket,
Notice of Election to Decline Intervention by States, ECF

6
While the Relators filed the complaint and the
amended complaint jointly, Kelly voluntarily dismissed the
case on August 1, 2011, hence the names “Garcia Complaint”
and “Garcia Amended Complaint.”
8

No. 41.

On January 19, 2011, Judge Gertner ordered that

the file in the First Action remain under seal and not be
made public.

Garcia Docket, Order, ECF No. 39.

On August 1, 2011, Kelly moved voluntarily to dismiss
herself from the First Action.

Garcia Docket, Mot.

Voluntary Dismissal, ECF No. 45.

On August 2, 2011, Kelly

filed a motion to keep her name under seal.

Garcia Docket,

Relator Mot. Keep Name Under Seal (“Kelly Mot. Keep Name
Sealed”), ECF No. 49.
shortly thereafter.

Judge Gertner allowed this motion

Garcia Docket, Order, ECF No. 50.

On

August 8, 2011, Judge Gertner ordered the dismissal of
Kelly without prejudice and ordered Garcia “to file a
complaint within [sixty] days” removing all references to
Kelly.

Garcia Docket, Order (“August 2011 Order”), ECF No.

51.
On August 19, 2011, Garcia asked for an additional
thirty-day extension.
ECF No. 53.
2011.

Garcia Docket, Mot. Extension Time,

Judge Tauro denied the extension on October 3,

Garcia Docket, Order, ECF No. 54.

Garcia was

granted additional time to obtain counsel on March 6, 2012.
Garcia Docket, Order, ECF No. 56.
At an April 24, 2012, status conference, Judge Tauro
ordered that the “Relators have until May 31, 2012, to file
a complaint in a new case.”

Garcia Docket, Order (“April

9

2012 Order”), ECF No. 64.

On May 31, 2012, Judge Tauro

allowed the Relators an extension of time to file a
complaint.

Garcia Docket, Order (“May 2012 Order”), ECF

No. 67.
On June 6, 2012, Kelly brought the Second Action by
filing a complaint against the Defendants as well as
against Novartis Corporation, Roche Holdings, Inc., and the
Roche Group (the “Kelly Complaint”).

Kelly Compl.

Novartis Corporation and Roche Holdings, Inc. are parent
holding companies that do not develop, manufacture, sell,
or market any pharmaceuticals or other products.7

Garcia

Docket, Joint Mem. Law Supp. Novartis Corp.’s & Roche
Holdings, Inc.’s Mot. Dismiss Compls. Relators Fauci &
Kelly (“Novartis & Roche Mem. Dismiss”) 2, ECF No. 126.
On October 10, 2012, Garcia filed a motion to amend
his Complaint and consolidate it with the Kelly Complaint.
Garcia Docket, Relators’ Unopposed & Ex Parte Mot. Am. &
Consol. FCA Compl. With Proposed Attach. Consol. First Am.
Compl. in Civil Action No. 12-CV-10962-JLT (“Relators’ Mot.
Am.”), ECF No. 70.

Fauci jointly sought to amend and

consolidate his complaint filed on October 8, 2010 (the

7
Novartis Corporation and Roche Holdings, Inc. assert
that Roche Group is a trade name and is not a legal entity.
Novartis & Roche Mem. Dismiss 2 n.1. The Relators do not
challenge this. 
10

“Fauci Complaint”), Fauci Compl., with the Kelly Complaint.
Id.
On May 14, 2013, Judge Tauro ordered the Kelly
Complaint “be unsealed and served upon the defendants” by
Kelly.

Kelly Docket, Order 1, ECF No. 6.

In this order,

it also appears that the United States and all of the
individual states, except Indiana, declined to intervene in
the Second Action, just as they had in the First Action.
Id.
On June 13, 2013, Judge Tauro closed the First Action
without entry of judgment and further ordered that the
action might be reopened upon motion.
Order, ECF No. 83.

Garcia Docket,

On January 14, 2014, the United States

moved to reopen the First Action to alert the Defendants
about a potential issue in the Second Action regarding the
“first-to-file” rule in qui tam actions under 31 U.S.C. §
3730(b)(5).

Garcia Docket, United States Mot. Reopen Case

and Partial Seal Lift, ECF No. 85.

The “first-to-file”

rule prevents a person from bringing an action based on the
same allegations of fraud as alleged in an earlier or
pending action.

Id.

On January 23, 2014, Judge Tauro

reopened the First Action and unsealed the contents of the
file.

Garcia Docket, Order, ECF No. 88.

11

On March 7, 2014, following Garcia and Fauci’s October
2012 motion to amend their complaints and consolidate them
with the Kelly Complaint, the Relators and Fauci filed a
consolidated first amended complaint.

Garcia Docket,

Consol. First Am. Compl. For Damages, Civil Penalties, &
Other Relief Under Qui Tam Provisions Federal Civil FCA &
Similar State Statutes, ECF No. 90.

On April 17, 2014, the

Defendants opposed Garcia and Fauci’s October 2012 motion
to amend.

Garcia Docket, Defs.’ Opp’n Relators’ Mot. Amend

& Consol., ECF No. 113.

On April 18, 2014, this Court

denied the motion to amend and struck from the docket the
consolidated first amended complaint.

Garcia Docket, Order

(“April 2014 Order”), ECF No. 114; Fauci Docket, Order, ECF
No. 27; Kelly Docket, Order, ECF No. 33.

That same day,

the Court consolidated the First and the Second Actions, as
well as Fauci’s Action, for pre-trial and administrative
purposes only.

Id.

On June 12, 2014, the Relators and Fauci, together
with the Defendants, Novartis Corporation and Roche
Holdings, Inc., jointly moved: (1) to request leave for
Novartis Corporation and Roche Holdings, Inc. to file two
consolidated memoranda of law in support of the motions
they intended to file to dismiss Garcia’s, Kelly’s and
Fauci’s complaints; (2) to extend Novartis AG’s time to

12

file a motion to dismiss; and (3) to extend the Relators’
time to reply to the motions to dismiss.

Garcia Docket,

Joint Mot. Consol. Defs.’ Mem. Law Support Mot. to Dismiss
& Extend Novartis AG’s and Relators’ Time Resp., ECF No.
118.

The Court granted this joint motion the next day.

Garcia Docket, Elec. Order, ECF No. 119.
On June 17, 2014, the Defendants filed a motion to
dismiss the First and Second Actions, as well as Fauci’s
Action.

Defs.’ Mot. Dismiss.

Novartis Corporation and

Roche Holdings, Inc., which are defendants only in the
Second Action and Fauci’s Action, filed a motion to dismiss
both of those actions.

Garcia Docket, Notice Novartis

Corp.’s and Roche Holdings, Inc.’s Joint Mot. Dismiss
Compls. Relators Fauci and Kelly, ECF No. 124.
AG, however, never filed a motion to dismiss.

Novartis
On August 5,

2014, the Relators opposed the Defendants’ motion to
dismiss.

Garcia Docket, Opp’n Defs.’ Mot. Dismiss

(“Relators’ Opp’n Defs.’ Mot. Dismiss”), ECF No. 141.

On

September 10, 2014, the Defendants, together with Novartis
Corporation and Roche Holdings, Inc., filed a consolidated
reply memorandum in support of the Defendants’ motion to
dismiss and Novartis Corporation’s and Roche Holdings,
Inc.’s motion to dismiss.

Garcia Docket, Defs.’ Consol.

13

Reply Mem. Supp. Mot. Dismiss Relators’ Compls. (“Reply”),
ECF No. 147.
During a motion session held on September 19, 2014,
the Court addressed the motions to dismiss filed by the
Defendants and by Novartis Corporation and Roche Holdings,
Inc. and took the motions under advisement.

Garcia Docket,

Elec. Clerk’s Notes Mot. Hr’g, Sept. 19, 2014, ECF No. 148.
2. Fauci
On October 8, 2010, Fauci filed his complaint against
Novartis, Genentech, Inc., and Roche Holdings, Inc. in the
name of the United States pursuant to 31 U.S.C. §§ 3729 et
seq. and a number of individual states under those
individual states’ qui tam statutes provisions.
Compl.

Fauci

At the United States’ request, on November 4, 2010,

Judge Gertner administratively consolidated Fauci’s Action
with the First Action.

Garcia Docket, Order, ECF No. 37;

Fauci Docket, Order, ECF No. 7.

The June 17, 2014, motions

to dismiss filed by the Defendants as well as by Novartis
Corporation and Roche Holdings, Inc. applied both to
Fauci’s Action, as well as to the First and the Second
Actions.

Defs.’ Mem. Dismiss 1; Novartis & Roche Mem.

Dismiss 2.
On June 16, 2014, corrected on June 17, 2014, Fauci
filed a notice of voluntary dismissal of all claims raised

14

in his complaint.

Garcia Docket, Relator Fauci’s Notice of

Voluntary Dismissal, ECF No. 120; Garcia Docket, Relator
Fauci’s Corrected Notice Voluntary Dismissal.

Fauci sought

to dismiss the case with prejudice as to himself and
without prejudice as to the United States and the
individual states named in the Fauci Complaint.
Corrected Notice Dismissal.

Fauci

Garcia, Novartis, Genentech,

Inc., and Roche Holdings, Inc. stipulated to Fauci’s
dismissal of his action.

Id.

On July 1, 2014, the United

States consented to Fauci’s dismissal of his action.
Garcia Docket, United States Notice Consent Relator Fauci’s
Notice Voluntary Dismissal, ECF No. 130.

On July 18, 2014,

amended on July 21, 2014, Fauci notified the Court that the
individual states named in his Complaint had provided
written consent to the dismissal with prejudice as to him
but without prejudice as to them.

Garcia Docket, Notice

State Consent Relator’s Mot. Dismissal, ECF No. 134; Garcia
Docket, Am. Notice State Consent Relator’s Notice Voluntary
Dismissal and Request Entry Final Order Closing Case, ECF
No. 135.
C.

The Relators’ Claims and the Defendants’ Motion
To Dismiss

The Relators sued the Defendants, first, for
violations of 31 U.S.C. § 3729(a)(1) and (2); second, for

15

conspiracy to defraud pursuant to 31 U.S.C. § 3729(a)(3);
third, for reverse false claims violations pursuant to 31
U.S.C. § 3729(a)(7);8 and fourth, for violations of the
individual states’ equivalent qui tam provisions.

Garcia

Compl. ¶¶ 15-20, 46-268; Kelly Compl. ¶¶ 325-819.

Novartis

Corporation and Roche Holdings, Inc. are also targeted in
the Kelly Complaint.

Kelly Compl. ¶¶ 325-819.

The Relators allege that the Defendants engaged in
unlawful and fraudulent practices such as: 1) illegal off                                                       
8
 These provisions have been amended and renumbered by
the Fraud Enforcement and Recovery Act of 2009 (FERA), Pub.
L. No. 111-21, 123 Stat. 1617. FERA Section 4(f)
stipulates that the amendments shall take effect on the
date of enactment of FERA and shall apply to conduct on or
after this date. Id. at 1621. FERA took effect on May 20,
2009, id. at 1631, after the period that Relators were
employed by the Defendants. See Defs.’ Mem. Dismiss 5 n.8.
Therefore, the amended provisions do not apply to this
case. United States ex rel. Loughren v. Unum Group, 613
F.3d 300, 306 n.7 (1st Cir. 2010). There is an exception
in FERA as to the amended section 3729 (a)(2), which was
made retroactive to June 7, 2008, applicable to “all claims
under the False Claims Act . . . that [were] pending on or
after that date.” FERA § 4(f)(1), 123 Stat. 1621. Circuit
courts disagree as to the meaning of “claims” and as to
whether Congress intended the amended section 3729(a)(2) to
apply retroactively to pending “actions,” or rather to
pending requests or demands for money. The First Circuit
has not taken a position. Loughren, 613 F.3d at 306 n.7;
United States ex rel. Hutcheson v. Blackstone Med., Inc.,
647 F.3d 377, 381 n.3 (1st Cir. 2011). Under the prior
definition, the amended section 3729(a)(2) would apply to
the Second Action; under the latter definition, the former
version would apply. See Loughren, 613 F.3d at 306 n.7.
This Court need not address this issue here because neither
party in the Second Action alleges the application of the
amended section 3729(a)(2) or argues that the amendment is
relevant to this case. See Hutcheson, 647 F.3d at 381 n.3.
16

label marketing of Xolair for unapproved indications; 2)
encouraging, aiding, abetting, and causing HCPs to falsely
represent facts on Statement of Medical Necessity (“SMN”)
forms for Xolair; 3) offering and paying illegal kickbacks
to HCPs if they promoted Xolair; 4) illegally and
misleadingly instructing HCPs to use improper medical
codes, or “upcoding,” for the administration of Xolair; and
5) improperly targeting Disproportionate Share Hospitals
(“DSHs”) and other hospitals receiving federal funds, all
to increase reimbursement for Xolair from governmental
health insurance programs.

Id. ¶ 1.

The Relators seek damages for joint liability,
including but not limited to, treble damages and civil
penalties in favor of the United States.

Garcia asks for

$11,000 per false claim and Kelly for $5,500 to $11,000 per
false claim.

Garcia Compl. 70-71; Kelly Compl. ¶ 820.

The

Relators also request damages and civil penalties in their
favor and in favor of the individual states, as well as the
payment of attorneys’ fees, costs, expenses and interest.
Garcia Compl. 70-72; Kelly Compl. ¶ 820.
In their motion to dismiss, the Defendants argue,
first, that the Court lacks jurisdiction over the Second
Action because it is barred by the first-to-file rule;
second, that the Court lacks jurisdiction over both actions

17

under the public disclosure bar; third, that the Relators
failed to plead fraud with particularity in accordance with
Rule 9(b); fourth, that the Relators failed to state claims
of conspiracy and reverse false claims violations under
Federal Rule of Civil Procedure 12(b)(6); fifth, that both
actions ought be dismissed with prejudice; and sixth, that
the Court ought dismiss, or in the alternative, decline to
exercise jurisdiction over, the Relators’ state qui tam
claims.

Defs.’ Mem. Dismiss 1-2, 35-36.

The Defendants

also briefly suggest that insufficient service of process
is an additional ground for dismissing the Kelly Complaint.
Id. 11 n.11.
Novartis Corporation’s and Roche Holdings, Inc.’s
motion to dismiss incorporates “all of the reasons for
dismissal” set forth in the Defendants’ motion to dismiss
and adds additional bases for dismissal: first, under Rule
12(b)(6) for failure to state a plausible claim for relief
as to them; and second, under Rule 9(b) for failure to
plead fraud with particularity as to them.

Novartis &

Roche Mem. Dismiss 1.
On September 19, 2014, after hearing oral arguments,
the Court from the bench granted Novartis Corporation’s and
Roche Holdings, Inc.’s motion to dismiss.

Consequently,

all claims asserted in the Kelly Complaint against Novartis

18

Corporation, Roche Holdings, Inc., and Roche Group are
dismissed with prejudice as to Kelly.
Mot. Hr’g, ECF No. 148.

Elec. Clerk’s Notes

The Court specifies here that

these claims are dismissed without prejudice as to the
United States and to the individual states named in the
Kelly Complaint.
During the same motion session, the Court also
dismissed the Relators’ claims of conspiracy and of reverse
false claims violations for failure to state a claim under
Rule 12(b)(6).

Id.

As a consequence, the claims of

conspiracy and of reverse false claims violations alleged
by the Relators against the Defendants pursuant to 31
U.S.C. § 3729(a)(3) and (7) are dismissed with prejudice as
to the Relators.

Id.

The Court specifies that these

claims are dismissed without prejudice as to the United
States and to the individual states named in the Garcia
Complaint, the Garcia Amended Complaint, and the Kelly
Complaint.
Accordingly, the remaining issues before the Court
concern the Defendants’ motion to dismiss the Second Action
because of the first-to-file jurisdictional bar, the First
and Second Actions because of the public disclosure
jurisdictional bar, and the First and Second Actions for
failure to plead fraud with particularity in accordance

19

with Rule (9)(b) in the claims alleged pursuant to 31
U.S.C. § 3729(a)(1) and (2).
II.

ANALYSIS
A.

Legal Standards
1.

Motion to Dismiss for Lack of Subject Matter
Jurisdiction

The Relators assert that the Court has subject matter
jurisdiction over this action pursuant to 28 U.S.C. § 1331
and 31 U.S.C. § 3732, the latter of which confers
jurisdiction on this Court for actions brought pursuant to
31 U.S.C. §§ 3729 and 3730.
Compl. ¶ 47.

Garcia Compl. ¶ 1; Kelly

In their motion to dismiss, the Defendants

dispute subject matter jurisdiction by raising two
jurisdictional bars based upon the first-to-file rule and
public disclosure.
Federal Rule of Civil Procedure 12(b)(1) permits a
defendant to move for dismissal when a court lacks subject
matter jurisdiction to entertain a matter under
consideration.

Fed. R. Civ. P. 12(b)(1).

“Whether a

relator is qualified to bring a qui tam action under the
FCA is a question of subject matter jurisdiction.”

United

States ex rel. Nowak v. Medtronic, Inc., 806 F. Supp. 2d
310, 326 (D. Mass. 2011) (Woodlock, J.) (citing Rockwell
Int’l Corp. v. United States, 549 U.S. 457, 468 (2007)).

20

The party invoking the jurisdiction of a federal court has
the burden of proving jurisdiction exists.

Murphy v.

United States, 45 F.3d 520, 522 (1st Cir. 1995).

The

relators, “as the proponent[s] of federal jurisdiction,
bear[] the burden of proving its existence by a
preponderance of the evidence.”

United States ex rel.

Poteet v. Bahler Med., Inc., 619 F.3d 104, 109 (1st Cir.
2010) (“Poteet I”).

Amorphous or conclusory allegations

that federal jurisdiction exists are not sufficient to
survive a motion to dismiss.

United States ex rel. Duxbury

v. Ortho Biotech Prods., L.P., 579 F.3d 13, 28 (1st Cir.
2009) (“Duxbury I”).

Since subject matter jurisdiction is

based on allegations contained in the Fauci Complaint and
the Kelly Complaint, the Court takes “as true all wellpleaded facts in the [complaints], scrutinize[s] them in
the light most hospitable to the plaintiffs' theory of
liability, and draw[s] all reasonable inferences therefrom
in the plaintiffs' favor.”

Id. at 20 (quoting Fothergill

v. United States, 566 F. 3d 248, 251 (1st Cir. 2009)).
2.

Motion to Dismiss for Failure to Plead Fraud
Adequately

The Defendants move to dismiss the Relators’ claims
under 31 U.S.C. § 3729(a)(1) and (2) for failure to plead
fraud with particularity under Rule 9(b).

21

Rule 9(b) requires that “[i]n alleging fraud or
mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”
P. 9(b).

Fed. R. Civ.

FCA allegations under federal law and their state

counterparts are subject to the heightened pleading
standards of Rule 9(b).

Nowak, 806 F. Supp. 2d at 351

(citing United States ex rel. Rost v. Pfizer, Inc., 507
F.3d 720, 731 (1st Cir. 2007), abrogated on other grounds
by Allison Engine Co., Inc., v. United States ex rel.
Sanders, 553 U.S. 662 (2008)).

According to the standard

of Rule 9(b), “a complaint must specify the ‘time, place,
and content of an alleged false representation.’”

Rost,

507 F.3d at 731 (quoting Doyle v. Hasbro, Inc., 103 F.3d
186, 194 (1st Cir. 1996)).
B.

Insufficient Service of Process

In their motion to dismiss, the Defendants also
briefly challenge the sufficiency of process of the Kelly
Complaint.

Under Federal Rule of Civil Procedure 12(b)(5),

a party may assert insufficient service of process as a
ground for dismissing a complaint.
12(b)(5).

Fed. R. Civ. P.

When a defendant files a motion to dismiss under

Rule 12(b)(5) challenging the sufficiency of process, “the
plaintiff bears the burden of proving its adequacy.”

22

Beatie and Osborn LLP v. Patriotic Sci. Corp., 431 F. Supp.
2d 367, 384 (S.D.N.Y. 2006).
According to Federal Rule of Civil Procedure 4(b),
“after filing the complaint, the plaintiff may present a
summons to the clerk for signature and seal.

If the

summons is properly completed, the clerk must sign, seal,
and issue it to the plaintiff for service on the
defendant.”

Fed. R. Civ. P. 4(b).

The plaintiff is

responsible for serving a summons with a copy of the
complaint on the defendant within the time allowed by Rule
4(m).

Fed. R. Civ. P. 4(c)(1).

The time limit for service

is 120 days after the complaint is filed and dismissal is
required if the plaintiff fails to make a showing of good
cause on or before the tenth day following the expiration
of this 120-day period.
R. 4.1(b).

Fed. R. Civ. P. 4(m); D. Mass. L.

See also Figueroa v. Rivera, 147 F.3d 77, 83

(1st Cir. 1998).
According to the Defendants, Kelly failed to serve
them with a summons and a copy of her complaint until on or
about January 9, 2014, Kelly Docket, Summons, ECF Nos. 1014, more than 240 days after the service deadline had
passed.

Defs.’ Mem. Dismiss 11 n.11.

As the Relators

correctly point out, however, the summonses for the Kelly
Complaint were not issued until September 20, 2013.

23

Kelly

Docket, Summons, ECF No. 8.

The Defendants were served

between January 9, 2014 and January 16, 2014, which is
before the 120-day deadline had expired.
Opp’n Defs.’ Mot. Dismiss 35 n.4.

See Relators

The Court therefore

rejects this grounds for dismissal.
C.

Subject Matter Jurisdictional Bars
1.

The First-to-File Rule in Relation to the
Second Action

The Defendants argue that the Court lacks jurisdiction
over the Second Action since this later action filed by
Kelly is based on the same facts underlying the First
Action.

Defs.’ Mem. Dismiss 11.

The first-to-file rule under 31 U.S.C. § 3730(b)(5)
creates a jurisdictional bar in qui tam actions.

This rule

provides that “[w]hen a person brings an [FCA qui tam
action], no person other than the Government may intervene
or bring a related action based on the facts underlying the
pending action.”

31 U.S.C. § 3730(b)(5).

The first-to-

file rule “serves the dual purpose of preventing parasitic
claims based on allegations already available to the
government and of avoiding duplicative suits.”

Nowak, 806

F. Supp. 2d at 334 (citing Duxbury I, 579 F.3d at 32).
This rule is jurisdictional and “exception-free.”
I, 579 F.3d at 33.

Duxbury

It is intended to “provide incentives

24

to relators to ‘promptly alert[] the government to the
essential facts of a fraudulent scheme.’”

United States ex

rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28, 34 (1st
Cir. 2013) (quoting Duxbury I, 579 F.3d at 32) (alteration
in original).
The First Circuit has held that 31 U.S.C. § 3730(b)(5)
“bar[s] a later allegation if it states all the essential
facts of a previously-filed claim or the same elements of a
fraud described in an earlier suit.”

United States ex rel.

Wilson v. Bristol Meyers Squibb, Inc., 750 F.3d 111, 117
(1st Cir. 2014) (quoting Duxbury I, 579 F.3d at 32)
(internal quotation marks omitted).

Under the “essential

facts” test, the “first-to-file rule bars a later complaint
even if that complaint ‘incorporates somewhat different
details.’”

Heineman-Guta, 718 F.3d at 34 (quoting Duxbury

I, 579 F.3d at 32).
At first blush, the essential facts test seems to bar
this action.

Indeed, the Relators explained in Garcia’s

October 2012 motion to amend that “[t]here is no question
that the [First Action and the Second Action] share common
issues of law and fact.

In fact, the lawsuits involve the

same basic facts and issues . . . [i]ndeed, the two suits
would be virtually identical to each other.”
Mot. Am. 5.

Relators’

In addition, the Defendants give evidence of

25

numerous similarities between the two actions in their
motion to dismiss.

See Defs.’ Mem. Dismiss 13-15.

The

Defendants argue that despite the additional information
incorporated in the Kelly Complaint, the government had
sufficient notice from the Garcia Complaint about the
potential fraud.

Simply put, according to the Defendants,

the Garcia Complaint satisfied the purpose of the qui tam
action.

Heineman-Guta, 718 F.3d at 35-36 (holding that “if

the first-filed complaint contains enough material
information (the essential facts) about the potential
fraud, the government has sufficient notice to launch its
investigation” and “the purpose of the qui tam action . . .
is satisfied”).
The “essential facts” rule however, ought not bar the
exercise of jurisdiction over the Second Action in this
particular case.

Kelly and Garcia co-filed the Garcia

Complaint in 2006 and together promptly informed the
government about the existence of a potential fraud.

For

Kelly then, the Second Action is not that of an
opportunistic or parasitic plaintiff taking advantage of
the facts and allegations advanced in an earlier action
filed by another.

Kelly subsequently moved voluntarily to

dismiss herself from the First Action five years after
initiating the litigation “based in substantial part on her

26

interest in minimizing the risk of adverse career impacts
from proceeding in an unsealed case.”
Sealed 3.

Kelly Mot. Keep Name

Judge Gertner ordered Kelly’s dismissal from the

First Action without prejudice, August 2011 Order, meaning
that she was not barred “from returning later, to the same
court, with the same underlying claim.”

Semtek Int 'l,

Inc. v. Lockheed Martin Corp., 531 U.S. 497, 505 (2001).
After Kelly’s dismissal, Judge Tauro held a status
conference on April 24, 2012 that concerned the First
Action.

The Relators’ attorney requested permission to

file a new complaint in Kelly’s name.

Garcia Docket, Mot.

Hr’g Tr., April 24, 2012, ECF No. 142, 8:1-2.

Judge Tauro

allowed the request and that same day ordered that the
“Relators have until 5/31/2012 to file a complaint in a new
case.”

April 2012 Order.

An extension of time to file

this complaint was ordered on May 31, 2012.

May 2012

Order.
The first-to-file rule under 31 U.S.C. § 3730(b)(5) is
“part of the larger balancing act of the FCA's qui tam
provision, which ‘attempts to reconcile two conflicting
goals, specifically, preventing opportunistic suits, on the
one hand, while encouraging citizens to act as
whistleblowers, on the other.’”

Wilson, 750 F.3d at 117

(quoting United States ex rel. LaCorte v. SmithKline

27

Beechem Clinical Labs., Inc., 149 F.3d 227, 233 (3d Cir.
1998)).

Here, as Congress encouraged by enacting 31 U.S.C.

§ 3730 (b)(5), there is no doubt that Kelly blew her
whistle in 2006 to highlight potential fraud by the
Defendants.
Some district courts have disallowed successive
actions filed by the same relator.

In United States ex

rel. Smith v. Yale New Haven Hosp. Inc., the court held
that the difference alleged by the relator to support the
filing of two successive qui tam actions was not material.
411 F. Supp. 2d 64, 74-75 (D. Conn. 2005).

In United

States ex rel. Bane v. Life Care Diags., the court
sanctioned the relator for bringing a second qui tam action
to target another defendant.

No. 8:06-cv-467-T-33MAP, 2008

WL 4853599, at *7 (M.D. Fla. Nov. 10, 2008) (dismissing
second qui tam suit filed by same relator on first-to-file
grounds because the only difference was that the first qui
tam action “identifie[d] the Breathe Easy Defendants as a
party and [the second qui tam action] identifie[d] Life
Care instead” and noting that “[p]iecemeal litigation by a
relator is not allowed under the FCA”).
The logic of these decisions, however, does not apply
to this case.

These courts penalized the relators who

filed a second qui tam action because they did so with the

28

intention to modify or add elements or allegations that
were not claimed in the first qui tam action.

Here,

because Kelly does not seek to modify or add allegations in
the Second Action that were missing in the Garcia
Complaint, the grounds for the above-cited holdings do not
apply.
Rather, Kelly’s situation reflects a combination of
circumstances that, concurring together, lead to the
conclusion that she ought not be barred by the first-tofile rule.

Though Kelly voluntarily dismissed herself from

the First Action after the United States and the individual
states declined to intervene, she did so five years after
having alerted the government in the Garcia Complaint to
the existence of a potential fraud.

She decided to bring

the Second Action less than one year thereafter, relying on
Judge Tauro’s April 2012 Order which expressly permitted
her to do so.9

9
  The Court’s conclusion that the Second Action here is
not barred by the first-to-file rule will not be undermined
by the ruling of the United States Supreme Court in Kellogg
Brown & Root Servs., Inc., et al. v. United States, ex rel.
Carter, No. 12-1497 (Sup. Ct. cert. granted July 1, 2014);
see United States ex rel. Carter v. Halliburton Co., 710
F.3d 171 (4th Cir. 2013). This Supreme Court case will
resolve a different question: whether the first-to-file bar
under 31 U.S.C. § 3730(b)(5) functions as a “one-case-at-atime” rule such that when there is no prior claim pending,
a relator may file a duplicative claim. This question is
29

2.

Public Disclosure

Section 3730(e)(4)(A)(2005) of Chapter 31 lays out a
public disclosure bar for qui tam actions, according to
which “[n]o court shall have jurisdiction over an action
under this section based upon the public disclosure of
allegations or transactions in a . . . civil . . . hearing,
. . .

unless . . . the person bringing the action is an

original source of the information.”

31 U.S.C. §

3730(e)(4)(A)(2005).10

not relevant to Kelly’s case because the First Action was
still pending when Kelly filed the Second Action.
10

The public disclosure bar was amended as part of the
Patient Protection and Affordable Care Act, Pub. L. No.
111-148, § 10104(j)(2), 124 Stat. 119, 901, effective March
23, 2010. It is the “timeless and universal” principle of
non-retroactivity “that the legal effect of conduct should
ordinarily be assessed under the law that existed when the
conduct took place,” see United States ex rel. May v.
Purdue Pharma L.P., 737 F.3d 908, 915 (4th Cir. 2013)
(citing Landgraf v. USI Film Prods, 511 U.S. 244, 265
(1994)), and not when the complaint was filed. Landgraf,
511 U.S. at 265; see Defs.’ Mot. Dismiss 17 n.14. The
Supreme Court has ruled that “[t]he presumption against
retroactivity, however, is limited to statutes ‘that would
have genuinely ‘retroactive’ effect.’” May, 737 F.3d at
915 (citing Landgraf, 511 U.S. at 277). “Applying these
principles, the Supreme Court has twice held that the 2010
FCA amendments may not be applied to cases arising before
the effective date of the amendments.” Id. (citing Graham
Cnty. Soil & Water Conservation Dist. v. United States ex
rel. Wilson, 559 U.S. 280, 283 n.1 (2010)). The amendment
thus does not apply to the First Action, which addresses
conduct that occurred before 2006, well before the
amendment took effect. Nor does it apply to the Second
Action filed in 2012 because it does not apply to pre-2010
30

The Defendants argue that the Relators’ allegations
were disclosed publicly by two earlier employment lawsuits
made by former employees of Genentech, Inc., including
Fauci, and are therefore barred under the public disclosure
rule.

Defs.’ Mem. Dismiss 18-21.

The issue before the

Court, then, is whether these prior employment actions
trigger the public disclosure bar.
In 2004, James Rediehs (“Rediehs”), a former Xolair
sales representative, filed a complaint against Genentech,
Inc., for wrongful termination.

Defs.’ Mem. Dismiss, Ex.

A, Complaint (the “Rediehs Employment Compl.”), ECF No.
125-4.

Referring to this complaint (the “Rediehs

Employment Complaint”), the Defendants argue that “Rediehs
alleged that Genentech had retaliated against him for
raising concerns about ‘off-label marketing practices and
other illegal marketing strategies’ regarding Xolair.”
Defs.’ Mem. Dismiss 3.

The Defendants add that the

“[Rediehs Employment Complaint] accused Genentech of (1)
illegally promoting Xolair for off-label uses, . . . (2)
encouraging doctors to use improper billing codes for
Xolair to obtain higher reimbursement — a practice known as
‘upcoding,’ . . . (3) encouraging [DSHs] . . . to bill

conduct, even where the complaint was filed after the
effective date of the amendment. See id.
31

Medicare at inflated rates for Xolair, . . . and (4) paying
honoraria and other alleged ‘kickbacks’ to induce doctors
to prescribe Xolair.”

Id.

The Defendants also suggest

that “Rediehs claimed that Genentech had violated the FCA
by terminating him after he confronted management about
these practices.”

Id.

Rediehs’ action against Genentech,

Inc. settled in 2005. Id.
In January 2006, Fauci filed a complaint against
Genentech, Inc., for wrongful termination (the “Fauci
Employment Complaint”).

Defs.’ Mem. Dismiss, Ex. B,

Complaint and Jury Demand (“Fauci Employment Compl.”), ECF
No. 125-5.

According to the Defendants, Fauci “repeated

many of the allegations” that Rediehs had previously made.
Defs.’ Mem. Dismiss 4.

The Defendants assert that Fauci

accused Genentech, Inc., of “‘encourag[ing] its sales
representatives to engage in unlawful sales practices to
improve Xolair sales, including paying kickbacks to doctors
and illegally completing SMN forms” and also “of illegally
marketing Xolair for ‘off-label’ uses, encouraging doctors
to use improper medical codes for the administration of
Xolair, or “upcoding,” and engaging in a sales practice
known as ‘marketing the spread.’”
33-35.

Id.; Garcia Compl. ¶¶

Fauci’s employment action was dismissed in 2008.

Defs.’ Mem. Dismiss 4.

32

“For the purpose of the FCA, public disclosure occurs
when the essential elements exposing the particular
transaction as fraudulent find their way into the public
domain.”

United States ex rel. Ondis v. City of

Woonsocket, 587 F.3d 49, 54 (1st Cir. 2009).

A fraud is

publicly disclosed if “‘the information is sufficient to
put the government on notice of the likelihood of related
fraudulent activity.’”

United States ex rel. Poteet v.

Lenke, 604 F. Supp. 2d 313, 319 (D. Mass. 2009) (Stearns,
J.) (quoting United States ex rel. Poteet v. Medtronic,
Inc., 552 F.3d 503, 512 (6th Cir. 2009)).

Consequently,

“‘once the government knows the essential facts of the
fraudulent scheme, it has enough information to discover
related fraud.’”

United States ex rel. Bartz v. Ortho-

McNeil Pharm., Inc., 856 F. Supp. 2d 253, 265 (D. Mass.
2012) (Stearns, J.) (quoting United States ex rel. Branch
Consultants v. Allstate Ins. Co., 560 F.3d 371, 380 (5th
Cir. 2009)).
Courts follow a sequential three-step analysis to
determine whether a lawsuit is precluded by the public
disclosure bar.

Courts evaluate: “(1) whether there has

been a prior, public disclosure of fraud; (2) whether that
prior disclosure of fraud emanated from a source specified
in the statute's public disclosure provision; and (3)

33

whether the relator's qui tam action is ‘based upon’ that
prior disclosure of fraud. . . .

If all three questions

are answered in the affirmative, the public disclosure bar
applies unless the relator qualifies under the ‘original
source’ exception.”

Poteet I, 619 F.3d at 109.

See also

Bartz, 856 F. Supp. 2d at 260.
a. The Three-Step Analysis
Concerning the three-step analysis, there is little
question but that the first two steps are met.

The

employment complaints by Rediehs and Fauci were filed in
the context of a civil hearing within the meaning of step
one.

“Allegations contained in a civil

. . . complaint

that are on file in a court clerk's office . . . are
‘publicly disclosed’ for purposes of § 3730(e)(4)(A).”
at 261 (citing Poteet I, 619 F.3d at 111).

Id.

The filing of

these employment actions in federal court in 2004 and in
January 2006 also means that they are public and pre-date
the Garcia and Kelly Complaints within the meaning of step
two.
The question to answer, then, is whether the First and
Second Actions are “based upon” Rediehs’ and Fauci’s
Employment Complaints within the meaning of step three.

To

determine if the public disclosure bar applies, the Court
must compare the complaints at issue and extract any

34

“substantial similarit[ies]” in their factual assertions.
Id. (alteration in original) (quoting Poteet I, 619 F.3d at
114).

“[A]s long as the relator's allegations are

substantially similar to information disclosed publicly,
the relator's claim is ‘based upon’ the public disclosure
even if he actually obtained his information from a
different source.”

Id. (alteration in original) (quoting

Ondis, 587 F.3d at 57).
331.

See also Nowak, 806 F. Supp. 2d at

Although additional details may “add some color to

the allegation, [if] the allegation ultimately targets the
same fraudulent scheme, [it] is enough to trigger the
public disclosure bar.

Poteet I, 619 F.3d at 115.

“[T]he

allegations disclosed publicly need not be identical to or
as detailed as the allegations contained in the complaint.”
Nowak, 806 F. Supp. 2d at 330.

The identity of the

defendant is a “material element of a fraud claim.”

United

States ex rel. Lisitza v. Johnson & Johnson, 765 F. Supp.
2d 112, 122 (D. Mass. 2011) (Stearns, J.) (quoting In re
Natural Gas Royalties Qui Tam Litig., 566 F.3d 956, 962
(10th Cir. 2009)).

“Only when an earlier filed suit has

named a member of the same corporate family are courts
inclined to find generic allegations sufficient to put the
government on notice of a fraudulent scheme involving a
specific defendant.”

Id.

35

The Court agrees with the Defendants that the
complaints filed previously by Rediehs and Fauci described
to a certain extent unlawful practices that the Relators
later alleged in their complaints.

Defs.’ Mem. Dismiss 19,

21; Rediehs Employment Compl.; Fauci Employment Compl.
These described practices include 1) inducing HCPs to
prescribe Xolair for unapproved uses, including, for
example, by illegally completing and influencing SMN forms,
Rediehs Employment Compl. ¶¶ 15, 17-18; Fauci Employment
Compl. ¶¶ 19, 38; Garcia Compl. ¶¶ 30-35; Kelly Compl. ¶¶
230-31, 273-76; 2) providing improper payments, or
“kickbacks” to physicians, Rediehs Employment Compl. ¶¶ 2426; Fauci Employment Compl. ¶ 47; Garcia Compl. ¶¶ 25, 38;
Kelly Compl. ¶¶ 18, 255-57; 3) manipulating coding and
billing to obtain higher reimbursement rates, Rediehs
Employment Compl. ¶¶ 14, 16, 19-22; Fauci Employment Compl.
¶ 21; Garcia Compl. ¶¶ 33, 36, 40; Kelly Compl. ¶¶ 276,
281-90; and 4) “marketing the spread,” which refers to the
difference between acquisition price of Xolair and the
reimbursement rates provided by Medicare, Medicaid and
other government heath programs, Fauci Employment Compl. ¶¶
18-22.

Also, despite what the Relators argue, see Relators

Opp’n Defs.’ Mot. Dismiss 12, Medicare is also named in the

36

Fauci Employment Complaint.

Fauci Employment Compl. ¶¶ 18,

21; Kelly Compl. ¶ 297.
In addition, the Court observes that both employment
actions were against Genentech, Inc., and not against
Novartis.

Genentech, Inc., and Novartis are not members of

the same corporate family, but the District of
Massachusetts has held that “for purposes of prior
disclosure, specifying a formulaic drug as part of a
kickback scheme is synonymous with naming the company that
produces it.”

Lisitza, 765 F. Supp. 2d at 122 n.15.

Also,

a marketing partner of Novartis, Robert Rindini, who
participated in meetings and discussions about these
practices, is mentioned in the Fauci Employment Complaint.
Fauci Employment Compl. ¶ 26.
While the Court recognizes some overlap between the
facts underlying the Rediehs and Fauci Employment
Complaints and the Garcia and Kelly Complaints, the earlier
employment actions cannot be said to have sufficiently
exposed the essential elements of the alleged fraud so as
to have put the government on notice and “enable [it] to
adequately investigate the case,” Nowak, 806 F. Supp. 2d at
330 (citing United States ex rel. Findley v. FPC-Boron
Emps.’ Club, 105 F.3d 675, 688 (D.C. Cir. 1997)),
especially as far as Novartis is concerned.

37

Moreover, for

the following reasons, the allegations contained in the
Garcia and Kelly Complaints cannot be considered
“substantially similar” to those earlier publicly
disclosed.
The Court concurs with the Relators that their
complaints contain allegations that go far beyond what is
alleged in the Rediehs and Fauci Employment Complaints.
Relators Opp’n Defs.’ Mot. 13.

The Garcia Complaint

provides critical details about unlawful practices, such as
targeting physicians of specific clinics and hospitals.
Garcia Compl. ¶¶ 40-42.

Garcia’s and Kelly’s complaints

also offer significant details about the off-label
marketing practices.
191-255.

Id. ¶¶ 13, 25, 30-31; Kelly Compl. ¶¶

Rediehs’ claims regarding off-label marketing, on

the other hand, consist of two paragraphs.
Employment Compl. ¶¶ 1, 20.

Rediehs

There is no express mention of

off-label promotion in the Fauci Employment Complaint.
Also, the kickback activity is detailed in the Garcia
Complaint, which lists numerous types of advantages offered
to HCPs.

Garcia Compl. ¶¶ 38-39.

This is even more true

for the Kelly Complaint, which details the type of
benefits, gives detailed examples, and also alleges an
entirely new target market - the patients themselves.
Kelly Compl. ¶¶ 18, 256-69.

See

Ultimately, the Garcia and

38

Kelly Complaints allege a wider scheme in terms of
geographic location, time period, and types of fraud.
Relators Opp’n Defs.’ Mot. Dismiss 14.

Both Relators

advance a nationwide scheme, “around the United States,” by
Novartis and Genentech, Inc.
¶ 1.

Garcia Compl. 2; Kelly Compl.

On the contrary, Fauci and Rediehs limited their

employment claims to Massachusetts, New York, New Jersey,
and Illinois.

Fauci Employment Compl. ¶¶ 11, 38; Rediehs

Employment Compl. ¶ 2.
The analysis of the three-step test leads this Court
to conclude that the public disclosure bar does not apply.
In the interest of completeness, the Court also analyzes
whether the Relators can qualify as “original sources” of
their allegations.
b. Original Sources
The Defendants argue that the Relators cannot qualify
as “original sources” because they have not demonstrated
direct and independent knowledge of the information on
which their fraud allegations are based, Defs.’ Mem.
Dismiss 21-26, and that they failed to provide information
about alleged fraud to the government before filing the
First and the Second Actions.

Id. 24 n.17, 26 n.18.

As a preliminary matter, the Defendants argue that
because of the six-year statute of limitations period

39

applicable to FCA cases, 31 U.S.C. § 3731(b)(1), the
original source exception to the public disclosure bar as
it applies to Kelly limits the time period during which
Kelly could be an original source to the seven-month period
between June 8, 2006, six years before the filing of the
Second Action, and “late 2006,” when Kelly left Novartis.
Defs.’ Mem. Dismiss 26 n.19.

The Relators answer that

Kelly filed her original complaint on March 14, 2006, so
the allegations going back to 2003 fall within the six-year
statute of limitations.
34.

Relators Opp’n Defs.’ Mot. Dismiss

The Relators posit that the Kelly Complaint amounts to

an amended complaint so that the allegations in it “are
timely pursuant to Federal Rule of Civil Procedure 15(c).”
Relators Opp’n Defs.’ Mot. Dismiss 34-35.
Under 31 U.S.C. § 3731(b)(1), “[a] civil action under
[§] 3730 may not be brought more than 6 years after the
date on which the violation of [§] 3729 is committed.”
U.S.C. § 3731(b)(1).

31

Rule 15(c) permits an amended

pleading to relate back to the date of an original pleading
“when the claim or defense asserted in the amended pleading
arose out of the conduct, transaction, or occurrence set
forth or attempted to be set forth in the original
pleading.”

Fed. R. Civ. P. 15(c).

Kelly dismissed herself

from the First Action on August 2011 and filed on June 8,

40

2012 a new and independent complaint for the Second Action.
The new complaint does not constitute an “amended
complaint” of the Garcia Complaint and is limited by the
six-year statute of limitations period.

The Court

therefore rules that the six-year statute of limitations
applies in this case.

This means that for the Second

Action, the claims alleged by Kelly are limited, in
accordance with 31 U.S.C. § 3731(b)(1), to the period
starting from June 8, 2006, six years before the filing of
the Second Action.
Turning back to the matter of original sources, even
if information is publicly disclosed, a relator may still
bring a qui tam action if he or she is the original source
of the information.
587 F.3d at 58.

31 U.S.C. § 3730(e)(4)(B); see Ondis,

The statute defines an “original source”

as “an individual . . . who has knowledge . . . and who has
voluntarily provided the information to the Government
before filing an action under this section.”

31 U.S.C. §

3730(e)(4)(B); see Ondis, 587 F.3d at 58; see also United
States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 719
F.3d 31, 34 (1st Cir. 2013).

“‘Direct’ is defined as

‘marked by absence of an intervening agency,
instrumentality, or influence: immediate.’”
F.3d at 59.

Ondis, 587

“Knowledge that is based on research into

41

public records, review of publicly disclosed materials, or
some combination of these techniques is not direct.”

Id.

Information learned secondhand cannot constitute direct and
independent knowledge.

United States ex rel. Estate of

Cunningham v. Millennium Labs. of Cal., Inc., 713 F.3d 662,
674 (1st Cir. 2013); see also Bartz, 856 F. Supp. 2d at
267.

In addition, direct and independent knowledge can be

shown by reference to, for example, “specific emails,
conversations, meetings, promotional materials, and sales
reports,” so long as these were collected directly and not
from public disclosures or another source.

Nowak, 806 F.

Supp. 2d at 333.
Garcia expressly alleges that he brought the First
Action “based upon direct and unique information obtained
during the period of [his] employment.”

Relators Opp’n

Defs.’ Mot. Dismiss 21; Garcia Compl. ¶ 4.

As a sales

representative at Genentech, Inc., Garcia: 1) attended
staff meetings, debriefings, and participated in
discussions or received instructions concerning Xolair
marketing for unapproved uses and how to increase Xolair
sales, Garcia Compl. ¶¶ 24-25, 40-41; 2) received
promotional literature about Xolair’s unapproved uses and
was encouraged to pass the information to physicians, id.
¶¶ 31, 42; and 3) acquired “first-hand knowledge that many

42

Novartis and Genentech representatives throughout the
country fill[ed] out [SMN forms] themselves . . . in order
to facilitate the transaction for the physicians and
increase sales.”

Id. ¶ 33.

The conclusion is similar as to Kelly.

She expressly

alleges that “[t]hrough her position . . ., [she] attained
and possesses extensive, intricate personal and inside
knowledge of the unlawful acts.”

Kelly Compl. ¶ 158.

Kelly describes emails in which Xolair sales managers of
Novartis distributed off-label studies to sales
representatives and discussed the “Competitive Acquisition
Program” (“CAP”), the purpose of which was to push doctors
to increase prescriptions of Xolair.

Id. ¶¶ 237, 259-66.

Kelly also describes in the complaint kickbacks in favor of
physicians.

Id. ¶¶ 257, 261-63.

The Court accepts that

Garcia and Kelly received first-hand information and
instructions, directly and independently, while they worked
as sales representatives at Genentech, Inc. and at
Novartis.
Concerning the requirement of providing information to
the government before filing suit, the Relators have met
this standard through the declarations attached as exhibits
B and C to their opposition to the Defendants’ motion to

43

dismiss.11

In these exhibits, the Relators testify that

they met on February 14, 2006 with several representatives
and government agents to whom they disclosed all of the
allegations stated in the Garcia Complaint.

Relators Opp’n

Defs.’ Mot. Dismiss, Ex. B, Decl. Frank Garcia, ECF No.
141-2; id., Ex. C, Decl. Allison Kelly, ECF No. 141-3.
Consequently, the Relators can qualify as “original
sources” of their allegations in accordance with 31 U.S.C.
§ 3730(e)(4)(B).
D.

Pleading Fraud with Particularity Under Rule 9(b)

The Relators filed this claim under 31 U.S.C. §
3729(a)(1) and (2), which sets forth liability for any
person who (1) “knowingly” presents a false or fraudulent
claim for payment or approval to the government, or (2)
“knowingly” makes a false record or statement to get a

11
In their opposition to the Defendants’ motion to
dismiss, the Relators attached four exhibits. Exhibits B
and C are declarations of Garcia and Kelly, dated August 5
and August 4, 2014, respectively. Exhibit D is the
“Disclosure Statement” that the Relators provided to the
government on March 16, 2006. Relators Opp’n Defs.’ Mot.
Dismiss, Ex. D, Relators’ Mandatory Disclosures
(“Disclosure Statement”), ECF No. 141-4. In their reply
memorandum, the Defendants argue that these exhibits are
attempts to supplement the pleadings and the Court should
therefore not consider them for purposes of Rule 9(b).
Reply 11 (citing Trans-Spec Truck Serv., Inc. v.
Caterpillar Inc., 524 F.3d 315, 321 (1st Cir. 2008). The
public disclosure bar, however, is not brought under Rule
12(b)(6). The Court may therefore consider the exhibits to
the Relators’ opposition.

44

false or fraudulent claim paid by the government.
U.S.C. § 3729(a)(1) & (2).

31

The Relators also sued the

Defendants in the name of individual states under these
states’ cognate qui tam provisions.

See Garcia Compl. ¶¶

20, 58-268; Kelly Compl. ¶¶ 50-51, 337-819.
The Defendants argue that the Garcia and Kelly
Complaints do not meet the pleading requirements of Rule
9(b).

According to them, Garcia’s and Kelly’s complaints

are “replete with sweeping and conclusory allegations
regarding off-label, kickback, and other purported
‘schemes,’” Defs.’ Mem. Dismiss 28, meaning that the
Relators did not plead fraud with particularity either as
to the scheme, id. at 27-28, or as to the existence of
actual false claims, id. at 30-32.

According to the

Relators, they amply pled specific facts alleging
especially that the Defendants provided to physicians
studies that purported to support off-label use of Xolair
and false statements that Medicaid and Medicare would pay
for the prescriptions.
Dismiss 28-30.

See Relators Opp’n Defs.’ Mot.

The Relators also state that their

Complaint meets the particularity requirement of Rule 9(b)
by relying on the Disclosure Statement.

Id. at 24-26.

Rule 9(b) requires, “at a minimum,” that the
complaints set forth “the who, what, where, when, and how

45

of the alleged fraud.”

United States ex rel. Worsfold v.

Pfizer Inc., No. 09-11522, 2013 WL 6195790, at *5 (D. Mass.
Nov. 22, 2013) (Gorton, J.).

“Conclusory accusations

related to ‘plans and schemes’ are insufficient.”

Id.

Rule 9(b) may be satisfied where “some questions remain
unanswered” as long as “the complaint as a whole is
sufficiently particular to pass muster under the FCA.”

Id.

(quoting United States ex rel. Gagne v. City of Worcester,
565 F.3d 40, 45 (1st Cir. 2009)).
When claiming a § 3729(a)(1) violation, the burden a
relator carries under Rule 9(b) depends in large part on
whether the relator has alleged that the defendant
submitted false claims directly (for example, by submitting
false claims itself) or indirectly (for example, by
inducing a third party to submit false claims by offering
payments or kickbacks).
29).

Id. (citing Duxbury I, 579 F.3d at

When alleging an indirect claim, a relator must

“provid[e] factual or statistical evidence to strengthen
the inference of fraud beyond possibility, without
necessarily providing details as to each false claim.”
at *5 (quoting Duxbury I, 579 F.3d at 29).

“Put

differently, absent evidence of each of the particular
false claims for reimbursement that were submitted, a
relator may satisfy Rule 9(b) by alleging particular

46

Id.

details of a scheme to submit false claims paired with
‘reliable indicia’ that lead to a strong inference that
false claims were actually submitted.”

Id.

When bringing a claim under § 3729(a)(2), “it is not
enough to allege that records or statements at issue were
made in violation of federal law; a relator must allege
that the statements were actually false.”
Rost, 507 F.3d at 733).

Id. (citing

In a factually analogous case,

Judge Gorton noted that “mere allegations that a company
intended to promote off-label uses and profit from such
sales fails to demonstrate that [the Defendants] intended
to do so at the government's expense.”

Id. at *8.

In this case, the Relators allege that the Defendants
have induced HCPs to submit false claims - that is to say,
the Defendants have violated the FCA by making “indirect
claims” rather than “direct claims.”12

Garcia Compl. 2;

Kelly Compl. ¶ 1.
1.

Garcia Complaint

Referring to the specific literature about unapproved
uses, Garcia alleges that his manager stressed the

12
Even when the Relators allege that sales
representatives of the Defendants filled out SMN forms
themselves, it appears that these representatives did so on
behalf of physicians. These representatives did not submit
anything directly to the government themselves. See Garcia
Compl. ¶ 33; Kelly Compl. ¶¶ 215, 273-76.
47

importance of “noting to allergists the ‘rush
immunotherapy’ educational literature.”
31.

Garcia Compl. ¶

Garcia also asserts that he was instructed to promote

Xolair for unapproved uses to doctors and to inform them
that the usages would be covered by Medicaid and Medicare.
Id. ¶¶ 25, 40-41.

In addition, he states that Xolair’s

sales increased in the 2000s.

Id. ¶ 26.

Garcia also

alludes to unlawful practices related to SMN forms, such as
filing them out with “inaccurate and misleading
information,” id. ¶ 33, as well as to illegal kickback
activity in violation with the AKA, id. ¶¶ 38-39.
Apart from these allegations, Garcia advances no
evidence of any SMN forms that were submitted because of
the Defendants.

Garcia can identify no claims for

reimbursement to Medicare, Medicaid, or any other federal
health care program.

Also, the Exhibits attached to the

Garcia Complaint are the official description, indications,
usage, and contradictions of Xolair, blank SMN forms, and
health insurance claim forms that do not evidence the
actual making of false claims.

Id., Ex. 1, Xolair Official

Description, ECF No. 1-4; id., Ex. 2, Xolair Statement
Medical Necessity, ECF No. 1-4; id., Ex. 3, Health
Insurance Claim Form, ECF No. 1-5.

48

Garcia is not required to provide details as to each
false claim under § 3729(a)(1), but he fails to provide
even a single example of fraudulent conduct resulting in
reimbursement of Xolair by a federal health care program
and does not advance information regarding the alleged
nationwide fraud and the importance of the false claims.
Garcia does not adduce any specific evidence of a
fraudulent scheme nor any reliable indicia that the alleged
fraudulent schemes resulted in the submission of false
claims to the government.

While Garcia names his manager,

Jerry Kelly, in his complaint, Garcia. Compl. ¶ 23, he does
not identify any physicians with whom either Garcia or his
supervisor discussed unapproved uses or the submission of
SMN forms.

The information contained in the Garcia

Complaint barely suggests that fraud took place, and it
provides no factual or statistical evidence to strengthen
the inference of fraud beyond possibility.

Accordingly,

the Garcia Complaint falls short of the pleading standard
of Rule 9(b).
2.

Kelly Complaint

The Kelly Complaint contains more detailed allegations
and provides more information about the Defendants’
practices than does the Garcia Complaint.

As determined

above, see supra p. 40-41 n.11, the six-year statute of

49

limitations applies to the Kelly Complaint and the Court
will thus examine the allegations claimed under the Second
Action that concern the period starting from June 8, 2006.
With regard to the allegations and evidence that
concern the period after June 2006, Kelly provides the
following: 1) examples of kickback activity such as
Novartis inviting HCPs to upscale meals and drinks to
promote sales of Xolair on October 24 and November 14,
2006, Kelly Compl. ¶¶ 262-63; 2) references to emails that
illustrate how the Defendants pushed for Xolair sales, id.
¶ 257; 3) references to a slide presentation reflecting the
objectives of the CAP, showing that seven doctors were
targeted in 2006 and 2007, id. ¶ 266, and reflecting the
Defendants’ “efforts to maximize billing of Medicaid
patients,” id. ¶ 267; 4) descriptions of unlawful practices
in general such as instructing HCPs to use improper medical
codes for the administration of Xolair, id. ¶¶ 280-92; 5)
affirmations that Xolair sales increased from 2003 through
2008, id. ¶¶ 20-21; 6) references to an FDA report
concerning Xolair, dated July 9, 2009 (“FDA Report”) that
demonstrates widespread off-label use of Xolair, id. ¶ 13;
7) a roster of Novartis sales representatives in 2006, id.,
Ex. A, Email dated August 25, 2006, ECF No. 1-3, and a
“Xolair Rapid Action Report” of 2006, id., Ex. C, Xolair

50

Rapid Action Report, ECF No. 1-5 (Part 1), ECF No. 1-6
(Part 2), ECF No. 1-7 (Part 3).
In sum, Kelly describes numerous sales practices of
the Defendants in relation to Xolair that she learned about
from her own experience at Novartis.

From this

perspective, she provides sufficiently detailed information
about Novartis’ sales and marketing practices seeking to
incentivize HCPs to prescribe Xolair and increase its
sales.
Yet the detailed information she provides regarding
the instructions she and her colleagues received from their
manager to promote Xolair to HCPs, even for unapproved
uses, are nothing more than improper marketing practices
and illegal kickback activities used by Novartis to
increase sales.

Such allegations are not sufficient by

themselves to make out a violation under the FCA.13

As with

13
The AKA provides no private right of action. United
States ex rel. Barrett v. Columbia/HCA Healthcare Corp.,
251 F. Supp. 2d 28, 37 (D.D.C. 2003). “Rather, it is a
statute providing for criminal penalties for its
violation.” Id. It has been ruled that “Courts, without
exception, agree that compliance with the [AKA] is a
precondition of Medicare payment, such that liability under
the [FCA] can be predicated on a violation of the [AKA]”,
but that “[t]he FCA ... attaches liability not to the
underlying fraudulent activity or to the government's
wrongful payment, but to the claim for payment,” and that
“a claim under [31 U.S.C. § 3729 (a)(1)] requires proof
that a false or fraudulent claim was ‘presented’ to the
government.” U.S. v. Infomedics, Inc., 847 F.Supp.2d 256,
51

Garcia, there is no evidence of any false statement, SMN
form, or claim that effectively was submitted.

Kelly

identifies no claims for reimbursement to Medicare,
Medicaid, or any other federal health care program.

Kelly

fails to provide even a single example of fraudulent
conduct resulting in reimbursement of Xolair by a federal
health care program and does not give sufficient
information regarding the nationwide fraud and the
importance of false claims she alleged.

On the contrary,

Kelly devotes almost 100 pages of her complaint to a
recitation of the 123 counts, Kelly Compl. ¶¶ 325-819,
11 pages to allegedly off-label studies that the Defendants
purportedly encouraged their sales forces to share with
physicians, id. ¶ 2240, and 60 paragraphs to a summary of
the law and the regulatory history of Xolair.
40, 165-90.

Id. ¶¶ 102-

The allegation that Novartis closely guarded

information in order to conceal fraudulent practices, id. ¶
163, does not exempt Kelly from the requirement to make
specific allegations in support of her claims.
Kelly’s allegations suggest that fraud was probable.
But the factual and statistical evidence resulting from the
information she gives in support of these allegations,

262 (D. Mass. 2012) (Gorton, J.) (emphasis added) (internal
citations and quotation marks omitted).
52

including the FDA Report, is not sufficient to strengthen
the inference of fraud beyond possibility.

Kelly does not

provide reliable indicia that the alleged underlying
schemes resulted in submission of false claims, nor does
she bring forward evidence that the physicians who
prescribed Xolair sought federal reimbursement.

The First

Circuit has noted that:
It is a serious matter to accuse a person or
company of committing fraud, . . . At most,
[relator] raises facts that suggest fraud was
possible . . . [i]t may well be that doctors who
prescribed [the drug] for off-label uses as a
result of [defendant]'s illegal marketing of the
drug withstood the temptation and did not seek
federal reimbursement, and neither did their
patients. It may be that physicians prescribed
[the drug] for off-label uses only where the
patients paid for it themselves or when the
patients' private insurers paid for it.
Rost, 507 F.3d at 733.

Consequently, absent proof of a

false statement that resulted in the submission of a single
claim, the Court concludes that Kelly has not met the
requirements of Rule 9(b).
Even were the Court to consider allegations and
evidence concerning the period prior to June 8, 2006, as
well as the allegations stemming from the course of her
employment at Novartis for which no date is given in her
complaint, the result would be the same.

In particular,

for the same reasons just mentioned, the pleading standard

53

of fraud is not met when Kelly refers to: 1) Novartis
managers that rejected sales representatives’ objections
about Xolair marketing practices, Kelly Compl. ¶ 196; 2)
the promotional literature Kelly received about Xolair’s
unapproved uses, id. ¶¶ 231, 240; 3) the “target list” of
hospitals and physicians she received, id. ¶ 235; 4) the
information that patients themselves were targeted for
kickbacks, that Kelly distributed around thirty gift
baskets to Xolair prescribers, or that an HCP was awarded
an all-expense paid trip to a Bahamas Resort, id. ¶¶ 18,
255-57; 5) the filing of SMN forms with misleading
information, id. ¶¶ 270-79; and 6) a document called
“Respiratory Field Sales 2003 Roster” for Novartis and
Genentech, Inc., Kelly Compl., Ex. B, Respiratory Field
Sales 2003 Roster, ECF No. 1-4.

These allegations fail to

meet the pleading standards articulated by Rule 9(b).
3.

Disclosure Statement

The Relators attached a Disclosure Statement to their
opposition to the Defendants’ motion to dismiss.
Disclosure Statement.

The Disclosure Statement identifies

Garcia’s manager, who allegedly targeted doctors to induce
them to prescribe Xolair and instructed Garcia to do the
same.

Disclosure Statement 5.

Garcia also disclosed the

names of five doctors who prescribed Xolair.

54

Id.

He

outlines briefly the existence of discussions with these
physicians about the prescription of the drug for off-label
uses and about submissions of SMN forms despite patients
not meeting the approved indications.

Id. at 5-6.

A

“Genentech/Novartis Xolair Field Sales 2006 Roster” with
information about the Defendants’ sales representatives is
also attached to the Disclosure Statement, as is a list of
“High-Prescribing Physicians,” “Low-Prescribing Physicians”
and “Non-Prescribing Physicians.”

Id. at 16, 37.

The

Disclosure Statement also contains information about
kickback activities that occurred prior to 2006 that comes
mainly from Kelly’s calendars.

This information expressly

names physicians that benefited from these activities and
describes the kickbacks briefly, such as lunches and
dinners.

Id. at 5-6.

In Duxbury I, the First Circuit concluded that the
relator’s complaint satisfied Rule 9(b) because he had
identified by name and location “eight medical providers
(the who), the illegal kickbacks (the what), the rough time
periods and locations (the where and when), and the filing
of the false claims themselves.”

579 F.3d at 30.

Here, Kelly’s additional allegations directly suggest
the existence of illegal kickback activities and that fraud
was probable.

But again they do not strengthen the

55

inference of fraud beyond possibility: they do not provide
information about the filing of the false claims themselves
- the effective submission of false claims seeking federal
reimbursement to Medicare, Medicaid, or any other federal
health care program.
For the aforementioned reasons, Garcia and Kelly did
not plead fraud with particularity as required under Rule
9(b) for the claims alleging violations under 31 U.S.C. §
3729(a)(1) and (2).
E.

Dismissal with Prejudice and Leave to Amend

According to the Defendants, the Relators should not
be permitted further to amend the complaint and the Court
should dismiss the case with prejudice.

Defs.’ Mem.

Dismiss 35 (citing Gagne, 565 F.3d at 48 (affirming denial
of leave to amend because of “relators’ repeated failure to
cure the deficiencies in their pleadings”)); United States
ex rel. Walsh v. Eastman Kodak Co., 98 F. Supp. 2d 141, 147
(D. Mass. 2000) (Saris, J.) (dismissing complaint with
prejudice for failing to comply with Rule 9(b) in light of
the striking lack of detail the relator provided as to the
defendant in his argument for a violation of the FCA)).
The Defendants allege that the Relators have already filed,
collectively, five complaints: the Garcia Complaint, the
Garcia Amended Complaint, the Fauci Complaint, the

56

complaint filed jointly by Kelly and Garcia in 2006, and
the Kelly Complaint.

Defs.’ Mem. Dismiss 35.

The

Defendants refer also to the Consolidated First Amended
Complaint filed in 2014, which the Court struck from the
docket.

Id.

In their opposition to the Defendants’ motion to
dismiss, the Relators argue that they should be given leave
to amend if (as turns out to be the case) the Court rules
that they failed to plead fraud adequately.

To support

their request, the Relators argue that the complaints were
not unsealed until January 23, 2014, that this is the first
time they have faced a motion to dismiss, and that their
complaints have not been previously amended.
Opp’n Defs.’ Mot. Dismiss 37.

Relators

In addition, the Relators

explain that they can amend their complaints to provide far
more precise details of the wrongdoing alleged regarding
the voluminous disclosures provided to the Government and
excerpted in exhibits here.

Id.

Federal Rule of Civil Procedure 15(a)(2) states “[t]he
court should freely give leave [to amend a pleading] when
justice so requires.”

Fed. R. Civ. P. 15(a)(2).

The First

Circuit has held that a court should consider the “number
and nature of prior amendments to a complaint” in deciding

57

a motion for leave to amend.

ACA Fin. Guaranty Corp. v.

Advest, Inc., 512 F.3d 46, 56 (1st Cir. 2008).
Garcia’s original complaint was filed on March 14,
2006, eight years ago.
2007.

Garcia amended his complaint in

Later, on August 8, 2011, when granting Kelly’s

motion to dismiss herself from the case, Judge Gertner also
ordered Garcia to file a new complaint.

August 2011 Order.

Garcia did not comply with this order and did not take the
opportunity to amend his complaint at that point.

Instead,

more than one year later, on October 10, 2012, Garcia got
around to filing a motion to amend his complaint and
consolidate it with the Kelly Complaint.
Am.

Relators’ Mot.

On April 18, 2014, this Court denied Garcia’s motion

and accordingly decided to strike from the docket the
Consolidated First Amended Complaint.

April 2014 Order.

Also, because Kelly co-filed the Garcia Complaint in 2006,
she had six years after this date to get new evidence and
bring it to the Court when she filed her complaint in 2012.
Despite alleging more information than Garcia, the Kelly
Complaint does not give sufficient information under Rule
9(b).

The “voluminous disclosures” referred to by the

Relators seem to be a reference to the Disclosure Statement
attached to the opposition to the Defendants’ motion to
dismiss.

Disclosure Statement.

58

Setting aside the fact

that the Disclosure Statement was given to the government
long before the present motion before the Court (and could,
therefore, have been alleged in one of these many
complaints), the Disclosure Statement does not actually
help the Relators.

As discussed earlier, the information

in the Disclosure Statement is not sufficient to meet the
pleading standard set by Rule 9(b).
A court may deny leave to amend for the “repeated
failure to cure deficiencies, and futility of amendment,”
United States ex rel. Carpenter v. Abbott Labs., Inc., 723
F. Supp. 2d 395, 410 (D. Mass. 2010) (Stearns, J.);
precisely the failures present in this case.

Accordingly,

justice does not require the Court to give the Relators
leave to amend yet again.

Garcia’s and Kelly’s complaints

are dismissed with prejudice.
F.

The Relators’ State Law Claims

The Defendants argue that the Court ought dismiss the
individual states’ qui tam claims on the same grounds as
the dismissal of the FCA claims.
37.

Defs.’ Mem. Dismiss 35-

Garcia and Kelly admit that the states on whose behalf

they seek to sue the Defendants have statutory provisions
substantially similar to FCA § 3729(a)(1) and (2), 31
U.S.C. § 3729(a)(3), and 31 U.S.C. § 3729(a)(7).
Compl. ¶ 20; Kelly Compl. ¶ 51.

59

Garcia

When the states’ qui tam provisions and the FCA’s
provisions are “substantially similar,” “the state statutes
may be construed consistently with the federal act.”
E.g., New York v. Amgen Inc., 652 F.3d 103, 109 (1st Cir.
2011).

In any case, here the Court declines to exercise

supplemental jurisdiction over the state law claims as all
of the federal claims have been dismissed.
1367(c).

28 U.S.C. §

See also Rossi v. Gemma, 489 F.3d 26, 39 (1st

Cir. 2007) (quoting Rodriguez v. Doral Mortg. Corp., 57
F.3d 1168, 1177 (1st Cir. 1995)) (“As a general principle,
the unfavorable disposition of a plaintiff’s federal claims
at the early stages of a suit . . . will trigger the
dismissal without prejudice of any supplemental state-law
claims.”).
Here, the Relators’ claims for relief under §
3729(a)(1) and (2) are dismissed for pleading deficiencies
under Rule 9(b).

The Relators’ claims for relief under 31

U.S.C. § 3729(a)(3) and 31 U.S.C. § 3729(a)(7) were
dismissed by the Court on September 19, 2014.
Clerk’s Notes, Sept. 19, 2014, ECF No. 148.

Elec.

The Court

declines to exercise supplemental jurisdiction over the
state law claims pursuant to 28 U.S.C. § 1367(c).
Consequently, the Relators’ claims for relief under the

60

individual states’ qui tam statutes are dismissed, albeit
without prejudice.
G.

Fauci’s Action

Pursuant to Federal Rule of Civil Procedure 41(a) and
31 U.S.C. § 3730(b)(1), Fauci has filed a notice of
voluntary dismissal of his action with prejudice as to
himself, but without prejudice as to the United States and
the individual states named in the Fauci Complaint.
Relator Fauci’s Corrected Notice of Voluntary Dismissal.
Garcia, Novartis, Genentech, Inc., and Roche Holdings, Inc.
stipulated to Fauci’s dismissal of his action.

Id.

The

United States and the individual states have consented to
this dismissal with prejudice as to Fauci but without
prejudice as to them.

United States’ Notice of Consent to

Relator Fauci Notice Voluntary Dismissal; Am. Notice of
State Consent to Relator Notice Voluntary Dismissal &
Request for Entry Final Order Closing Case.
It is hereby ordered that Fauci’s Action is dismissed
with prejudice as to Fauci, but without prejudice as to the
United States and the individual states named in the Fauci
Complaint.

Accordingly, this opinion has not addressed any

issues raised in the motions to dismiss as they relate to
Fauci.

Defs.’ Mem. Dismiss; Novartis & Roche Mem. Dismiss.

61

III. CONCLUSION
All claims asserted in the name of the United States
and the individual states named in Fauci’s Action are
dismissed with prejudice as to Fauci, but without prejudice
as to the United States and to those individual states.
Although the Court has jurisdiction to hear Garcia’s
and Kelly’s claims alleging the Defendants’ fraudulent
practices, the claims alleged in Garcia’s and Kelly’s
complaints, pursuant to 31 U.S.C. § 3729(a)(1) and (2) and
to the individual states’ equivalent qui tam provisions,
lack the particularity required under Rule 9(b) for
pleading fraud.

Accordingly, all claims asserted in the

name of the United States and of the individual states
named in the First Action filed in 2006 by Garcia are
dismissed with prejudice as to Garcia, but without
prejudice as to the United States and the individual
states.

All claims asserted in the name of the United

States and of the individual states named in the Second
Action filed in 2012 by Kelly are dismissed with prejudice
as to Kelly, but without prejudice as to the United States
and the individual states.
The motions of Garcia and Kelly further to amend their
complaints are DENIED and the Defendants’ motion to dismiss

62

the First Action filed in 2006 by Garcia and the Second
Action filed in 2012 by Kelly is ALLOWED.
Judgment may be entered for the Defendants.

SO ORDERED.

/s/ William G. Young____
WILLIAM G. YOUNG
DISTRICT JUDGE

63