USA et al v. Guidant Corporation
Filing
54
Judge Richard G. Stearns: ORDER entered granting 43 Defendants' Motion to Dismiss. (RGS, law1)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 09-11927-RGS
UNITED STATES OF AMERICA et al.1,
ex rel. HEIDI HEINEMAN-GUTA
v.
GUIDANT CORP. and BOSTON SCIENTIFIC CORP.
MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO DISMISS
AMENDED COMPLAINT
July 5, 2012
STEARNS, D.J.
In this qui tam action, relator Heidi Heineman-Guta, a former employee of
defendants Guidant Corp. and Boston Scientific Corp. (BSC)2, alleges that defendants
engaged in a scheme of illegal kickbacks to promote the sales of their cardiac rhythm
management devices in violation of the False Claims Act (FCA), 31 U.S.C. § 3729 et
seq. Defendants move to dismiss relator’s first amended complaint (FAC).
PROCEDURAL HISTORY
In her original Complaint, filed under seal in November of 2009, Heineman-Guta
accused defendants of illegally promoting the off-label use of cardiac rhythm
1
Twenty-three States and the District of Columbia are also named as parties to
this action.
2
Guidant was acquired by BSC in 2006.
management devices and the payment of kickbacks to physicians to induce them to
select and recommend the devices for patient implants. The United States, after a
preliminary investigation, declined to intervene in October of 2011, and the court
ordered the Complaint unsealed. Subsequently, in January of 2012, Heineman-Guta
filed the FAC, focusing only on the kickback allegations. The court heard arguments
on defendants’ motion to dismiss the FAC on July 2, 2012.
ALLEGATIONS
Heineman-Guta worked as an account manager for the heart failure management
group at Guidant, later BSC, from April of 2003 until November of 2007. During her
tenure, she observed and participated in Guidant/BSC’s scheme to induce and reward
doctors for referring and implanting Guidant/BSC cardiac rhythm management devices.
This scheme included: (1) offering referring and implanting physicians valuable trips,
entertainment, and/or grants; (2) treating referring and implanting physicians to lavish
meals; (3) making payments, in the guise of honoraria and speaking fees, to referring
and implanting physicians for participating in case studies; (4) remunerating loyal
referring and implanting physicians for “participation” in sham clinical trials; and/or (5)
providing similar benefits and job placement assistance to medical residents and
fellows to cultivate future brand loyalty. Identifying various participants by their
initials, Heineman-Guta provides numerous examples of specific incidents of kickbacks
2
in the FAC. She alleges that these kickbacks violated the Anti-Kickback Statute and
induced and caused physicians to present false claims or false statements or records in
support of claims for reimbursement by Medicare and/or Medicaid in violation of the
FCA (Count I), and that defendants conspired to violate the FCA (Count II).
DISCUSSION
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation omitted). While a complaint
“does not need detailed factual allegations, a plaintiff’s obligation to provide the
grounds of his entitlement to relief requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotations omitted). “A
suit will be dismissed if the complaint does not set forth ‘factual allegations, either
direct or inferential, respecting each material element necessary to sustain recovery
under some actionable legal theory.’” United States ex rel. Hutcheson v. Blackstone
Med., Inc., 647 F.3d 377, 384 (1st Cir. 2011), quoting Gagliardi v. Sullivan, 513 F.3d
301, 305 (1st Cir. 2008).
3
Heineman-Guta’s claims are based on 31 U.S.C. § 3729(a)(1) and (a)(2).3
Subsection (a)(1) prohibits the knowing presentment of a false claim for payment to the
government, or (as alleged here) causing such a presentment to be made. Subsection
(a)(2) prohibits the creation or use of false records and statements as part of a scheme
to persuade the government to pay a false claim.
Defendants argue that Heineman-Guta’s claims must be dismissed for lack of
subject matter jurisdiction based on the first-to-file bar.4 “When a person brings an
action under this subsection, no other 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). Courts have uniformly interpreted § 3730(b)(5) to “bar 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. Duxbury v. Ortho Biotech
3
These and other provisions of the FCA were significantly amended by the Fraud
Enforcement and Recovery Act of 2009 (FERA), Pub. L. No. 111-21, 123 Stat. 1617
(2009). Most FERA amendments took effect on May 20, 2009. The amendment to
Section 3729(a)(2) applies retroactively to claims pending on or after June 7, 2008.
See United States ex rel. Carpenter v. Abbott Labs., Inc., 723 F. Supp. 2d 395, 401403 (D. Mass. 2010) (analyzing FERA’s effective date and retroactivity provisions).
All of Heineman-Guta’s allegations involve events occurring between 2003 and 2007,
before FERA’s effective date and prior to the retroactive application of Section
3729(a)(2). Accordingly, the pre-FERA version of the FCA applies in this case.
4
The United States filed a “statement of interest” regarding defendants’ motion
to dismiss, but took no position on the contention that the suit is barred because of the
first-to-file rule.
4
Prods., L.P., 579 F.3d 13, 32 (1st Cir. 2009), quoting United States ex rel. LaCorte v.
SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 232-233 (3d Cir. 1998)
(quotation marks omitted). The first-to-file rule is intended to “provide incentives to
relators to promptly alert the government to the essential facts of a fraudulent scheme,”
Duxbury, 579 F.3d at 24, citing United States ex rel. Lujan v. Hughes Aircraft Co.,
243 F.3d 1181, 1188 (9th Cir. 2001), and to prevent parasitic repeat claims based on
allegations already known to the government. Duxbury, 579 F.3d at 23-24 (citation
omitted). This is a jurisdictional rule that is “exception-free.” Id. at 33, citing Lujan,
243 F.3d at 1187.
Defendants rely on two earlier-filed complaints as barring Heineman-Guta’s
claims: United States ex rel. George v. Boston Scientific Corp., No. H-07-02467 (S.D.
Tex. 2007) (George Complaint), filed on November 6, 20065; and United States ex rel.
Bennett v. Boston Scientific Corp., No. 1:08-cv-02733 (D. Md. 2008) (Bennett
Complaint), filed on October 16, 2008. Defendants assert that these two complaints
disclosed the “essential elements” of the alleged fraud in Heineman-Guta’s complaint,
namely, the provision of trips, entertainment, meals, grants, honoraria, and other
remuneration as kickbacks to physicians to increase defendants’ market share in
5
The George Complaint was initially filed in the Northern District of Illinois in
2006, and was transferred to the Southern District of Texas in 2007.
5
cardiac rhythm management devices.
The George Complaint alleged that defendants “promoted the FlexView
microwave surgical-ablation system for an off-label use and that these promotional
activities caused physicians and hospitals to submit false claims for reimbursement
from Medicare or Medicaid.” United States ex rel. Bennett6 v. Boston Scientific Corp.,
2011 WL 1231577 (S.D. Tex. Mar. 31, 2011). Heineman-Guta argues, and the court
agrees, that the George Complaint is not a preclusive first-filed complaint because it
does not disclose an alleged kickback scheme to promote the sales of cardiac rhythm
management products.7
The Bennett Complaint, on the other hand, alleged, that
[s]ince at least 2003, and continuing through [at least 2008], Boston
Scientific Corporation (and, prior to being acquired by Boston Scientific,
Guidant Corporation) has engaged in an illegal kickback scheme within
its Cardiac Rhythm Management (“CRM”) division designed to induce
physicians and hospitals to use Boston Scientific pacemakers, internal
cardiac defibrillators (“ICD’s”), cardiac resynchronization therapy
(“CRT’s”), and cardiac resynchronization therapy with defibrillators
(“CRTD’s”), thereby increasing the Company’s market share of these
devices.
6
The relator in George and Bennett is the same person, whose name changed
from George to Bennett after the filing of the first complaint.
7
Although the George Complaint also alleged kickbacks, they are “in the form
of free advertising, press, and referral services” relating to the off-label promotion of
a different line of products. George Compl. ¶ 10.
6
Bennett Compl. ¶ 3. This alleged scheme included
inter alia, (1) provid[ing] doctors and hospitals with kickbacks in the form
of follow-up medical services in exchange for the providers’ use of BSC’s
cardiac rhythm devices; (2) induc[ing] doctors and hospitals to bill for
medical services and procedures they do not perform; (3) requir[ing] BSC
sales personnel to provide medical care in the absence of a licensed
physician or staff member; and (4) improperly conducting Medicare
billing for physicians and hospitals through non-licensed, non-medical
staff; (5) provid[ing] monetary “grants” to foundations set up by
physicians and physician groups in return for favored status by such
physicians; and (6) sponsor[ing] dinner meetings for implanting
physicians to invite potential “referring physicians” to, in order for the
implanting physician to increase the number of patients he receives for
implants from those referring physicians. In most cases, the benefitting
implanting physician also receives an “honorarium” for speaking about his
or her expertise at the program.
Id. ¶ 4.
Heineman-Guta does not deny that the Bennett Complaint disclosed a scheme
nearly identical to the one alleged in the FAC, but asserts that it does not qualify as a
first-filed bar under an exception to the first-to-file rule established by the Sixth
Circuit.8
8
Heineman-Guta also relies on Campbell v. Redding Med. Ctr., 421 F.3d 817,
825 (9th Cir. 2005), for the proposition that a jurisdictionally barred earlier-filed
complaint cannot bar a later-filed complaint. However, the Ninth Circuit’s holding was
much narrower than that of the Sixth Circuit. Campbell dealt with the situation where
the earlier-filed complaint was barred by the public disclosure rule, and was asserted
against a later-filed complaint by the original source. The Ninth Circuit held that “in
a public disclosure case, the first-to-file rule of § 3730(b)(5) bars only subsequent
complaints filed after a complaint that fulfills the jurisdictional prerequisites of §
3730(e)(4).” Campbell, 421 F.3d at 825 (emphasis added). That is not the situation
7
One important caveat to this first-to-file rule . . . is that, in order to
preclude later-filed qui tam actions, the allegedly first-filed qui tam
complaint must not itself be jurisdictionally or otherwise barred. See
Walburn [v. Lockheed Martin Corp.], 431 F.3d [966,] 972 [(6th Cir.
2005)] (finding that an earlier filed complaint’s failure to comply with
Rule 9(b) rendered it legally infirm from its inception, and thus unable to
preempt a later-filed action); Campbell v. Redding Med. Ctr., 421 F.3d
817, 825 (9th Cir. 2005) (holding that “the first-to-file rule of §
3730(b)(5) bars only subsequent complaints filed after a complaint that
fulfills the jurisdictional prerequisites of § 3730(e)(4)”). Indeed, if the first
complaint is either jurisdictionally precluded, see 31 U.S.C. § 3730(e), or
legally incapable of serving as a complaint, see Fed. R. Civ. P. 9(b);
United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493,
504 (6th Cir. 2007) . . . then it does not properly qualify as a “pending
action” brought under the FCA, 31 U.S.C. § 3730(b)(5). However, if the
first-filed qui tam action has been dismissed on its merits or on some other
grounds not related to its viability as a federal action, it can still preclude
a later-filed, but possibly more meritorious, qui tam complaint under the
first-to-file rule. See Lujan, 243 F.3d at 1188.
United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 516-517 (6th Cir. 2009).
Heineman-Guta contends, as did the plaintiff in Walburn, that the Bennett Complaint
was “legally incapable of serving as a complaint” because it lacked the particularity
required by Fed. R. Civ. P. 9(b),9 and therefore cannot act as a jurisdictional bar to the
prosecution of the FAC.
in this case.
9
Rule 9(b) requires that “[i]n alleging fraud . . . a party must state with
particularity the circumstances constituting fraud . . . .” Heineman-Guta argues that,
unlike her FAC, the Bennett Complaint failed the Rule 9(b) test because it did not
provide any examples of specific incidents of kickbacks.
8
This court has previously “share[d] the skepticism expressed by Judge
McKeague in his concurring opinion in Poteet, whether the [dismissal on the merits
element] of the first-to-file requirements found by the Sixth Circuit . . . is an accurate
(or wise) interpretation of the qui tam statute.” United States ex rel. Poteet v. Lenke,
604 F. Supp. 2d 313, 323 (D. Mass. 2009) (Lenke). However, in Lenke, it was
unnecessary for this court to decide the issue because the Lenke complaint was barred
by the wholly separate public disclosure rule. Since then, the D.C. Circuit has refused
to follow Poteet where an earlier-filed complaint is alleged to trip over Rule 9(b), and
therefore cannot serve as a bar.
We are unconvinced. Nothing in the language of Section 3730(b)(5)
incorporates the particularity requirement of Rule 9(b), which militates
against reading such a requirement into the statute. The statutory text
imposes a bar on complaints related to earlier-filed, “pending” actions.
The command is simple: as long as a first-filed complaint remains
pending, no related complaint may be filed. Further, Rule 9(b) is
designed to protect defendants in fraud cases from frivolous accusations
and allow them to prepare an appropriate response. Section 3730(b) is
designed to allow recovery when a qui tam relator puts the government
on notice of potential fraud being worked against the government, but to
bar copycat actions that provide no additional material information. As the
district court found, a complaint may provide the government sufficient
information to launch an investigation of a fraudulent scheme even if the
complaint does not meet the particularity standards of Rule 9(b). [United
States ex rel.] Batiste [v. SLM Corp.], 740 F.Supp. 2d [98,] 104 [(D.D.C.
2010) (Batiste I)]. Imposing the heightened pleading standard, moreover,
would create a strange judicial dynamic, potentially requiring one district
court to determine the sufficiency of a complaint filed in another district
court, and possibly creating a situation in which the two district courts
9
disagree on a complaint’s sufficiency.
United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011)
(Batiste II).
This court agrees with the reasoning of the D.C. Court of Appeals and the D.C.
District Court.10 The purpose of a qui tam action is to provide the government with
sufficient notice that it is the potential victim of a fraud worthy of investigation.
[I]t is entirely plausible that a complaint may provide sufficient information
to cause the government to launch its own investigation of a fraudulent
scheme without providing enough information under Rule 9(b) to protect
the defendant’s interests. In other words, there might be a situation where
there is sufficient notice for the government, but not for the defendant. In
that event, it would be proper to dismiss the complaint against the
defendant for purposes of Rule 9(b) but to allow the preemption of any
subsequent related actions for purposes of the “first-to-file” rule. After all,
once the whistle has sounded, the government has little need for additional
whistle-blowers.
10
The First Circuit has yet to rule on the issue.
10
Batiste I, 740 F. Supp. 2d at 104.11, 12
Furthermore, this case well demonstrates the “strange judicial dynamic” that
concerned the D.C. Circuit. See Batiste II, 659 F.3d at 1210. As defendants note, the
Bennett Complaint was not dismissed by the District of Maryland for failing to meet
Rule 9(b)’s requirements, but was voluntarily dismissed. Heineman-Guta is asking this
court to evaluate the legal sufficiency of a complaint filed in another jurisdiction, and
to make a judgment on an issue that neither the Maryland District Court nor the parties
11
The holding of the D.C. Circuit and the D.C. District Court is faithful to the
purpose of the qui tam statute. It is highly unlikely that prosecutors – the audience to
which the qui tam notice is directed – would decline to investigate serious allegations
of fraud against the government merely because a complaint failed to meet the
particularity requirement of Rule 9(b), or for that matter, that they would even think it
desirable to conduct a Rule 9(b) screening of a qui tam complaint before undertaking
an investigation of its allegations. Moreover, in the FCA context, where the complaint
is typically sealed, prosecutors must decide whether to initiate an investigation before
having the benefit (such as it might be) of a judicial determination of the complaint’s
sufficiency under Rule 9(b).
12
The court can imagine, as suggested by counsel for Heineman-Guta at oral
argument, the possibility of a first-filed complaint that is so spurious or vacuous as to
provide no real notice of fraud to the government, and therefore not serve to bar laterfiled complaints of genuine substance. It is also possible to imagine a complaint so rich
in details that later prove to be false that it would survive a Rule 9(b) analysis under a
motion to dismiss standard while leading prosecutors down a rabbit hole. Because the
Bennett Complaint is not either of these hypothetical cases, it is not necessary to
attempt to ascertain a limiting principle distinguishing complaints that are sufficiently
pled to act as a first-filed qui tam bar from complaints that are not. If one had to be
identified, defendants’ suggestion of a quasi-res judicata rule might make the most
sense. However, for present purposes, it is enough to say that Rule 9(b) does not, and
was never intended to, serve as a qui tam barring device.
11
to that case had the opportunity to address.
For present purposes it is sufficient that this court hold that the Bennett
Complaint is pled in sufficient detail to act as a first-filed complaint barring the FAC.
Like the FAC, the Bennett Complaint disclosed a kickback scheme to promote
defendants’ cardiac rhythm management products. The Bennett Complaint described,
inter alia, the same types of kickbacks – grants, honoraria, and lavish meals – as
disclosed in the FAC. Although the FAC provides different and somewhat richer
details, the Bennett Complaint exposed all of the essential facts of the scheme, and thus
acts as a bar precluding the filing of the FAC.13 See Duxbury, 579 F.3d at 32 (“Under
this ‘essential facts’ standard, § 3730(b)(5) can still bar a later claim ‘even if that claim
incorporates somewhat different details.’”) (citation omitted).
CONCLUSION
For the foregoing reasons, defendants’ motion to dismiss is ALLOWED. The
Clerk is directed to enter an order of dismissal for lack of subject matter jurisdiction
and close the case.
13
Defendants contend that dismissal is also warranted on several alternative
grounds. However, because the Bennett Complaint serves as an absolute bar, it is
unnecessary to address defendants’ other arguments.
12
SO ORDERED.
/s/ Richard G. Stearns
_______________________________
UNITED STATES DISTRICT JUDGE
13
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