SIMPSON v. BAYER PHARMACEUTICAL CORP. et al

Filing 86

OPINION. Signed by Judge Jose L. Linares on 8/21/12. (jd, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
UNITED STATES of AMERICA, et al.,
Ex rel. LAURIE SIMPSON and TIMOTHY
DANIELS

Civil Action No.: 05-3895 (JLL)

OPINION
Plaintiffs! Relators,
V.

BAYER CORPORATION; BAYER
HEALTHCARE; PHARMACEUTICALS,
INC.; BAYER HEALTHCARE, LLC; and
BAYER AG,
Defendants.

LINARES, District Judge.
This matter comes before the Court by way of a motion to vacate the
consolidation of relator Timothy Daniels to this action and to strike the Fifth Amended
and Consolidated Complaint (“Compi.”) pursuant to Federal Rule of Civil Procedure
12(b)(l) by Defendants Bayer Corporation, Bayer Healthcare, Pharmaceuticals, Inc.,
Bayer Healthcare, LLC (collectively “Bayer” or “Defendants”)’ (CM!ECF No. 62). No
oral argument was heard. Fed. R. Civ. P. 78. For the reasons set forth below,
Defendants’ motion is GRANTED.

‘In the motion, Defendants specify that Defendant Bayer AG has not been served with
the complaint or waived service of process and therefore does not join in this motion.
(Defs.’ Mot., 2).
I

I. Background and Procedural History
The Court will not set forth the underlying facts and procedural history at length
as it writes only for the parties. The relators in this case, Laurie Simpson and Timothy
Daniels (“Plaintiffs” or “Relators”), separately filed qui tam actions under the False
Claims Act (“FCA”), 31 U.S.C.

§ 3730, as well as various state False Claims Acts. Both

relators are former employees of Bayer who allege “misconduct with respect to Bayer’s
marketing of the prescription medicine Trasylol, which is used to minimize blood loss
and reduce the need for transfusions in open heart surgery.” (Defs.’ Mot., 2; see Pis.’
Opp’n., 3). Defendants since removed Trasylol from the U.S. market due to adverse
effects on patient health. (Pis.’ Opp’n., 3).
Ms. Simpson filed a qui tam action on August 5, 2005, in the United States
District Court for the District of New Jersey. (Defs.’ Mot., 3, Ex. A). On November 1,
2005, Mr. Daniels filed an action in the United States District Court for the Eastern
District of Pennsylvania. (Defs.’ Mot., 3, Ex. B). Both actions alleged that “Defendants
violated the federal and state False Claims Acts by marketing Trasylol unlawfully and,
thereby, submitting or causing to be submitted false claims for payment to the United
States and to several states.” (Pls.’ Opp’n., 4). In 2010, after consideration of the claims
therein, the United States Attorney’s Office for the District of New Jersey declined to
intervene in the action filed by Ms. Simpson. (Defs.’ Mot., 3). The United States
decided not to intervene in the Daniels action in 2006. (Defs.’ Mot., 3). Defendants
submit that “[ajlthough the Simpson case was unsealed after the United Sates declined to
intervene, the Daniels case, for reasons unknown to the defendants, remained under seal.”
(Defs.’ Mot., 3).

Thereafter, in January of 2011, Defendants state that counsel for Mr. Daniels
“inquired as to whether defendants would object to consolidation of the two actions, and
defendants indicated that they would oppose consolidation.” (Defs.’ Mot., 3, Ex. C).
otwithstanding, counsel filed a motion to consolidate in the Daniels case, which was
still under seal at that time, and said motion was granted in March 201 1. (Defs.’ Mot., 3).
Defendants contend that they had neither notice nor the opportunity to be heard on that
motion. (Defs.’ Mot., 3). They further submit that “as of today, Bayer still has not seen
plaintiffs’ as-filed consolidation motion and is unaware of what authorities plaintiffs
presented for the Court’s consideration” and that the Daniels action was never served on
Bayer. (Defs.’ Mot., 3-4). In addition, Bayer submits that it wrote to the Court on April
26, 2011, stating that it would like to be heard on the issue of consolidation, should it
arise, but by that time the relators’ motion had been filed and granted. (Defs.’ Mot., 4).
On the issue of consolidation, Plaintiffs provide that “the Daniels action was transferred
to this District with the approval of the United States Attorney for the Eastern District of
Pennsylvania on the basis that Counsel would seek to consolidate that action with the
Simpson case and, thereby, conserve judicial and government resources.” (Pls.’ Opp’n.,
4).
The Court unsealed the Consolidated Complaint on March 14, 2012, and ordered
that the Relators serve a copy on Defendants. (CM/ECF No. 58). On May 3, 2012,
Defendants filed the instant motion. (CM/ECF No. 62).

II. LEGAL STANDARD

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Federal courts are courts of limited jurisdiction, and thus, are permitted to
adjudicate cases and controversies only as permitted under Article III of the Constitution.
U.S. Const. art. III,

§ 2; see also Philadelphia Federation of Teachers v. Ridge,

150 F.3d

319, 323 (3d Cir. 1998). Pursuant to Rule 12(b)(1), a court must dismiss a complaint if it
lacks subject matter jurisdiction to hear a claim. Fed. R. Civ. P. 12(b)(1).
Motions to dismiss under Rule 12(b)(1) may be treated as either a “facial or
factual challenge to the court’s subject matter jurisdiction.” Gould Elec. Inc. v. United
States, 220 F.3d 169, 176 (3d Cir. 2000). Under a facial attack, the movant challenges
the legal sufficiency of the claim and the Court considers only “the allegations of the
complaint and documents referenced therein and attached thereto in the light most
favorable to the plaintiff.” Id. In reviewing a factual attack, however, the challenge is to
the actual alleged jurisdictional facts. In that instance, a court is free to consider evidence
outside of the pleadings. Id. A challenge to subject matter jurisdiction constitutes a
factual attack. Foundation For Fair Contracting, Ltd. v. G&M, 259 F. Supp. 2d 329, 335
(D.N.J. 2003) (asserting lack of jurisdiction under the False Claims Act constitutes a
factual attack).

III. DISCUSSION
The premise of Defendants’ motion is that under the FCA this Court lacks
jurisdiction to adjudicate the claims as consolidated:
Mr. Daniels’ claims are based on the same essential facts as a complaint
filed earlier by relator Laurie Simpson. But the Third Circuit has
expressly held that the False Claims Act (“FCA”), 31 U.S.C. § 3730(b)(5),
bars individuals from intervening in or bringing related actions based on
the same essential facts as were alleged in a prior qui tam action. Because
Mr. Daniels’ claims are thus barred by the FCA, this Court lacks subject

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matter jurisdiction over his claims and the Fifth Amended Consolidated
Complaint improperly consolidates those claims with Ms. Simpson’s.
(Defs.’ Mot., 2).
On the other hand, Plaintiffs argue that although Ms. Simpson was the first to file
a claim under the federal False Claims Act, Mr. Daniels was the first to file under certain
state false claims acts. (Pls.’ Mot., 1). Therefore, they argue, “consolidation merely
allowed this Court to exercise its jurisdiction over all of the state-law claims” and that the
Court should exercise its jurisdiction pursuant to 31 U.S.C.

§

3732(b) or its supplemental

jurisdiction to retain those state-law claims. (Pls.’ Mot., 2-3). The Relators further
submit that “[s]everance of these two related and consolidated cases would be inefficient,
could lead to conflicting rulings and duplicative proceedings, would waste the time,
energy, and resources of this Court, the litigants, the United States Government and
numerous state governments, non-party witnesses, and potential witnesses and, thus, is
unwarranted and ill-advised.” (Pis.’ Mot., 3).

A. Federal False Claims Act

Referred to as the “first to file” rule, the FCA bars all related claims asserted by
an individual after the first complaint is filed: “When a person brings an action under this
subsection, 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 plain

language of this provision “clearly bars claims arising from events that are already the
subject of existing suits.” United States cx rel. LaCorte v. SmithKline Beechman Clinical
Labs., Inc., 149 F.3d 227, 232 (3d Cir. 1998). Therefore, as the Third Circuit explained,

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“if a later allegation states all the essential facts of a previously-filed claim, the two are
related and section 3730(b)(5) bars the later claim, even if that claim incorporates
somewhat different details.” Id.; see also Palladino ex rel. United States v. VNA of New
Jersey, Inc., 68 F. Supp. 2d 455, 477-79 (D.N.J. 1999).
Defendants argue that the consolidation of the Simpson and Daniels cases
violates the first to file rule: “as evidenced by the recently-filed Fifth Amended and
Consolidated Complaint naming both Ms. Simpson and Mr. Daniels as
‘Plaintiffs/Relators,’ the consolidation of the Daniels action with the Simpson action
amends the Simpson complaint to add an additional relator and violates the FCA’s
statutory bar.” (Defs.’ Mot., 6). Further, “the consolidation of these actions permits Mr.
Daniels and Ms. Simpson to merge their separate allegations into one, thereby obscuring
whether each relator has, as required by law, set forth the requisite factual allegations to
maintain their individual claims under the FCA or state false claims acts.” (Defs.’ Reply,
2).
Indeed, the Relators do not dispute that Daniels’ federal claim is barred.
Despite the recitations in Plaintiffs’ brief that they “are not attempting to bootstrap
Daniels’ second-filed FCA claim onto Simpson’s first filed FCA claim,” Defendants
bring to the Court’s attention paragraphs in the Consolidated Complaint which assert a
federal claim on behalf of both Relators. (Defs.’ Reply, 3; Compl.

¶J 28, 478-88).

However, as explained above, it is not disputed that Mr. Daniels’ qui tam action was filed
after Ms. Simpson’s. Therefore, Mr. Daniels’ federal claims are barred by the first to file
rule and the Court does not have jurisdiction to entertain said claims as they are closely
related, if not identical, to the claims asserted by Ms. Simpson. Having determined that

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the Court lacks jurisdiction over Mr. Daniels’ federal claims, it now turns the issue of
jurisdiction over the state claims he asserts.

B. State False Claims Acts
The Relators argue that section 3730(b)(5), analyzed above, does not trump
jurisdiction conferred on district courts regarding state law false claims or supplemental
jurisdiction. (Pis.’ Opp’n., 8). Plaintiffs submit that
LaCorte simply does not address the situation in the instant case. Contrary
to Defendants’ premise, the Consolidated Complaint is not an attempt to
allow Daniels to file later than Simpson regarding FCA violations. It
merely allows Daniels to pursue his related state-law allegations. Those
claims are related to Simpson’s federal claims, which put those claims
squarely within the purview of § 3 732(b), and consequently outside the
purview of § 3730(b)(5).
(Pis.’ Opp’n., 9).
Relators also contend that consolidation is appropriate because Daniels’ state law
claims arise from the same facts and circumstances as Simpson’s federal claims and, as a
result, the Court ‘may and should exercise jurisdiction pursuant to [31 U.S.C.

§

3732(b)]

or its supplemental jurisdiction and hear them together in this consolidated action.”
2
(Pis.’ Opp’n., 3).

2

Rule 42(a) of the Federal Rules of Civil Procedure provides that: “If actions before the
court involve a common question of law or fact, the court may. consolidate the
actions.” Fed. R. Civ. P. 42. Generally, “[t]he decision as to whether consolidation is
appropriate embraces concerns of judicial economy, as well as judicial discretion.” Inre
Lucent Technologies, Inc. Sec. Litig., 221 F. Supp. 2d 472, 480 (D.N.J. 200 l).Under
Rule 42(a), a court must consider “whether the specific risks of prejudice and possible
confusion [are] overborne by the risk of inconsistent adjudications of common factual
and legal issues, the burden on the parties, witnesses, lawsuits, the length of time required
to conclude multiple lawsuits as against a single one, and the relative expense to all
concerned of the single-trial, multiple-trial alternatives.” Id. (quoting In re Consolidated
Parlodel Litig., 182 F.R.D 441, 444 (D.N.J. 1998) (citations omitted)).
.

7

.

Section 3 732(b) sets forth false claims jurisdiction for claims under state law and
provides:
The district courts shall have jurisdiction over any action brought under
the laws of any State for the recovery of funds paid by a State or local
government if the action arises from the same transaction or occurrence as
an action brought under section 3730.
31 U.S.C.

§ 3732(b). Plaintiffs argue that “this section’s meaning is unambiguous: a

federal district court may hear related actions seeking recovery of state funds that arise
from the same transaction as FCA claims.” (Pls.’ Opp’n., 5). Indeed, as the Relators
urge, generally “federal courts have the power to hear state law claims that ‘derive from a
common nucleus of operative fact’ with substantive federal claims.” Laymon v.
Bombardier Transportation (Holdings USA, Inc. et al., Civ. No. 05-169, 2009 WL
793627, at * 15 (W.D.Pa. Mar 23, 2009) (citing United Mine Workers v. Gibbs, 383 U.S.
715, 725, 86 S.Ct. 1130(1966); Shaffer v. Bd. of Sch. Dir. of Albert Gallatain Area Sch.
Dist., 730 F.2d 910, 91 1-12 (3d Cir. 1984)).

In support of their argument that the actions at issue should remain consolidated,
the Relators point to cases in which district courts found that they did in fact have subject
matter jurisdiction over a relator’s federal and state false claims. For example, as
Plaintiffs submit, in Schumann, et al. v. Astrazeneca PLC, et a!., in examining whether it
had subject matter jurisdiction over a relator’s state and federal claims, the court in that
case wrote: “If this court had jurisdiction over the federal claims pursuant to
would also have jurisdiction over the state claims pursuant to

§ 3732(a), it

§ 3732(b).” 2010 WL

4025904, at *3 (E.D.Pa. Oct. 13, 2010).
As the Relators acknowledge, the issue in this case is different from those relied
upon because the case at bar involves a single viable federal claim by Ms. Simpson and a

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number of state claims filed separately by Mr. Daniels. In other words, the question here
is not whether the Court has subject matter jurisdiction over a single relator’s state and
federal claims, but rather whether separately filed qul tam actions that arise out of the
same essential facts warrant this Court’s retention of jurisdiction over a subsequent
relator’s state claims where there is no jurisdiction over the federal claim. Plaintiffs cite
to no cases which involve the issue sub judice, but do explain that their “research did not
reveal any cases where, as here, one relator has first-filed FCA claims as well as state-law
claims, and another relator filed certain state-law claims first.” (Pis.’ Opp’n., 7). They
urge, however, that
this Circuit, as well as others, have used § 3732(b) as a means to allow a federal
court to exercise jurisdiction over related state-law claims brought by individual
relators and not only claims brought by the states themselves. Moreover, [they
found] no cases where a defendant moved to dismiss state-law claims brought
under § 3 732(b) on the ground that an individual relator, rather than a state, had
brought those claims. The statute itself is clear on this issue, and the fact that in
this case there are two relators rather than one, does not change the analysis.
(Pls.’ Opp’n., 7).
In their Reply, Defendants counter that “although a district court outside the Third
Circuit has interpreted

§ 3732(b) to permit a state to intervene in a pending qati tam

action, this provision has never been applied, as plaintiffs seek, to permit an individual to
intervene to assert state law claims.” (Defs.’ Reply, 5) (emphasis in original) (citing
ex rel. LaCorte v. Merck & Co., Inc., Civ. No. 99-3807, 2004 WL 595074, *6.g (E.D.La.
Mar 23, 2004)). Defendants also assert that
the general rule is that courts do not retain jurisdiction over an individual’s
state law claims following dismissal of his federal FCA claim. Plaintiffs
ignore these cases entirely. Instead, they cite a handful of inapposite cases
in which a court retained jurisdiction over a plaintiffs state law claims,
but only after determining that the plaintiff had a valid federal FCA claim.

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(Defs.’ Reply, 3) (citations omitted).
In this case, however, the Court has already determined that it does not have
jurisdiction over Daniels’ federal claims. A district court may decline to exercise
supplemental jurisdiction if: (1) the claim raises a novel or complex issue of State law;
(2) the state law claim substantially predominates over the claims over which the distric
t
court has original jurisdiction; (3) the district court has dismissed all claims over which
it
has original jurisdiction, or (4) in exceptional circumstances, there are other compe
lling
reasons for declining jurisdiction. 28 U.S.C.

§ 1367(c). Determining whether to exercise

jurisdiction is discretionary and the “general approach is for a district court to

.

.

.

hold

that supplemental jurisdiction should not be exercised when there is no longer any basis
for original jurisdiction.” Townsend v. N.J. Transit & Amalgamated Transit Union, 2010
U.S. Dist LEXIS 102451, at *14, 2010 WL 3883304 (D.N.J. Sept. 27, 2010); see also
City of Chicago v. Int’l Coil. Of Surgeons, 522 U.S. 156, 172, 118 S.Ct. 523 (1997)
(“pendent jurisdiction ‘is a doctrine of discretion, not of plaintiffs right,” and that district
courts can decline to exercise jurisdiction over pendent claims for a number of valid
reasons) (citing United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966)
). As
the Court has already dismissed Daniels’ federal claim, it declines to exercise jurisdiction
over his state claims. Nor does the Court find Plaintiffs argument that dismissing Daniel
s
for lack ofjurisdiction would deny the states their statutory right to intervene in the
consolidated case a sufficient basis to justify the retention ofjurisdiction. It is unclea
r to
the Court from the Relators’ submission why deconsolidating the cases would preven
t

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Mr. Daniels from proceeding on his own in connection with his viable state claims
and
why states could not intervene if they so choose.

IV. CONCLUSION

Thus, based on the reasons detailed above, Defendants’ motion to vacate the
consolidation of relator Timothy Daniels and strike the Fifth Amended Complaint is
GRANTED. Accordingly, Ms. Simpson may file an amended Complaint within 30 days
of the date herein. In addition, the Daniels action shall be transferred to the Eastern
District of Pennsylvania.
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An appropriate Order accompanies this Opinion.

DATED: August, 2012
/

‘se L.Linar:s
United States District Judge

As the Fifth Amended and Consolidated Complaint only asserts federal question
jurisdiction, 28 U.S.C. § 1331 (Compi. ¶ 22), and supplemental jurisdiction, 28 U.S.C.
1367 (Compi. ¶ 23), the Court cannot determine whether the exercise of diversity
jurisdiction would be proper.
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§