ABC v. DEF

Filing 83

MEMO ENDORSEMENT on 78 Letter Response denying 75 Letter Motion to Stay. ENDORSEMENT: No stay at this time. Relators must respond to the pending motions. What happens after motions are decided is another matter. (Signed by Judge Colleen McMahon on 7/13/2020) (mml)

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--------------- Case 1:15-cv-04179-CM Document 83 Filed 07/15/20 Page 1 of 4 USDCSDNY DOCUMENT LAW OFFICES ELECTRONICALLY Fll:.ED DOC#: _ _--rt+--+-- WILLIA MS S CONNOLLY LLP WASHINGTON, D. C 20005 -590 ! I JOLLY \I. CONl.1'.Y (2il.!) -t .'--l 569(\ hcc1nky(, 'l I,tJ)o DATE FILED: 725 TWELFTH STREET, N.W. r.r:,.x,ARD 8 1?.NNF.T T ,Wll.LI A M.\ (1 920 , JQBB ) f'A lll R CO N NOLLY 0 0 22•1tl 78 , (202) 434-5000 \\C .1 1nn : FAX (202) 434-5029 ~~ ~1/3 jfl~ ~~:.~ 2 July\3, ViaECF g~:f~~1;~~ ~~t~d•~~;tes District Court (\ Jo _',~ f \.i for the Soulhern District of New York _f ~ 500 Pearl Street, Room 2550 {) New York, New York 10007 ~l)'.A.J R_c, f.A ,11 l', J ll , j }ti tf) ( ~ ~J;V . rrvv . '. , r ~ / ~ I~ _;ti _.,,, ..r('A v' f/ 1 ,5,Jg} e;: Un~ed States rel. Bosson el al. e Ommcnre. Inc and CVS Ilea/th o. Corp., 15C.tv.4179(CM); ~ United Srates ex rel. A rash Mohajer and Christopher C. Peterson v. Omnicare, Inc. and Cf~ llea~hr <;:::P;: 17 ~~- _ 7~J~M) ') 4 ~ ! Dear Chief Judge McMahon, J ' Y L, ~ ,_," ~ I ·write on behalf of Defendants Omnicare, lnc . and CVS Health Corporation (collectively, "Omnicare"), in response to Relators ' motions to stay their state-law claims (the " Motions"). See Rassan Dkt. 75 ; Mohajer Dkt. 79. The Motions, filed at the eleventh hour before Rclators ' opposilions to Omnicare's long-pending motions to dismiss arc due, do not justify the "'extraordinary remedy" of a stay. Grand River Enterprises Six Nations, Ud. v. Pryor, 2004 WL 2480433 , at *3 (S .D.N.Y . Nov. 3, 2004), aff'd, 425 F.3d 158 (2d Cir. 2005) (internal quotation marks omitted). Nor could they. Ornnicare's motions to dismiss raise a host of pleading and procedural defects that doom Rclators' state-law claims at the outset. Staying those claims would leave Bassan 's entire Complaint (which is operative as to statc-FCA claims only) and Mohajcr's 25 statc-FC/\ claims languishing on the Court' s docket for years, despite Omnicare' s well-recognized '·interest in clearfingl !'itsl name .. . in a timely manner." SRC v. Blaszczak, 20l8 WL 301091, at *2 (S.D .N.Y. Jan. 3, 2018) (internal quotation marks omitted). Delaying the inev itable dismi ssal of the state-FCA claims would not benefit the parties, the Court, or the public. L .~ .. j Relator U ri Bassan filed the first of these cases on June 1, 2015 , bringing claims under the False Claims Act ("FCA"), 31 l J.S .C. §§ 3729- 3733 and the analogous laws of'30 states. regarding allegations that Omnicare "obtainred I reimbursement for prescription . . . drugs dispensed hy Omnicare without valid prescriptions." Hassan Dkt. 16 ii 3. The case remained under seal for over four years while the government investigated Bassan 's allegations. Partway through this investigation, Rclators Arash Mohajcr and Christopher Peterson filed their own ~ Case Case 1:15-cv-04179-CM Document 83 07/13/20 Page Page 2 of 4 1:15-cv-04179-CM Document 78 Filed Filed 07/15/20 2 of 4 WILLIAMS S CONNOLLY LLP Hon. Colleen McMahon July 13, 2020 Page 2 case, bringing a materially identical federal FCA claim, but no state-FCJ\ claims. Mohajer Dkt. 25 . The investigation concluded in late-2019 and the parties began to litigate these cases. In December 2019, the federal government intervened to pursue the fcderal-FCA claims. See Hassan Dkt. 17; Mohajer Dkt. 26. Over the course of the next few months, each state government (save Indiana) informed the Court that it would not intervene to pursue 13assan's state-FCA claims. See Bassan Dkt. 22, 64. 1 On March 12, 2020, Mohajer and Peterson amended their complaint, adding claims under 25 state FCAs. See Mohajcr 0kt. 61. They did not serve the states or otherwise give them an opportunity to elect whether to intervene. On May 4, 2020, Omnicare moved to dismiss each complaint in this matter. As re levant here, Omnicare raised pleading and procedural defects that apply to each of the Relators' statefCA claims. As to Bassan, Omnicare raised the failure to allege: (1) the submission of false claims to any state with the particularity demanded by Federal Rule of Civil Procedure 9(b); (2) that any claim to any state was "false"; (3) the sci enter demanded by each state FCA; or (4) that any alleged falsehood was material to any of the states. See Bassan Dkt. 70 at 8- 21 . Omnicare raised these same defects as to the state-FCA claims brought by Mohajer and Peterson, as wel l as those Relators' violations of state-FCA (1) first -to-file rules, (2) public-disclosure bars, and (3) mandatory-sealing requirements. See Mo hajer Dkt. 71 at 23-25. These arguments apply equally across the state-FCA claims and do not turn on the nuances of any state-FCA law. 2 Rclators' oppositions to these motions are due today, July 13, 2020 . On July 8 and 9, 2020, Relators first raised with Om nicare their desire to stay their state claims entirely, pendi ng resolution of the federal-FCA claim the government is pursuing. The Motions, which fo llowed on July 9, 2020, should be denied. A "stay of a civil case is an extraordinary remedy," Grand River Enterprises, 2004 WL 2480433, at +3 (internal quotation marks omitted), and "Lt]he proponent of a stay bears the burden of establishing its need," Clinton v. Jones , 520 U.S. 681, 708 (1997). Accordingly, where "there is even a fair possibility" that a stay "will work damage to so me one else," the party seeking a stay "must make out a clear case of hardship or inequity in being required to go forward." Pippins v. KPMG LLP, 2011 WL 1143010, at *6 (S.O.N.Y. Mar. 21, 2011) (internal quotation marks omitted). In addition to this consideration of the relative interests of the parties, the Cow1 may also consider "[1 ] the interests of the courts; [2] the interests of persons not parties to the civil litigation; and [3] the public interest." Id. (internal quotation marks omitted). None of these factors favors a stay. 1 Indiana did not file anything and thereby missed both the deadline for intervention and the March 12, 2020 deadline for the filing of amended complaints. 2 The only exception is Bassan 's New Mexico claim, about which Omnicare raised additional pleading defects under requirements unique to that state. Bassan Dkt. 70 at 21 - 22. The New Mexico claim also fails for the various other reasons that Omnicare raised as to every other state. - Case Case 1:15-cv-04179-CM Document 83 07/13/20 Page Page 3 of 4 1:15-cv-04179-CM Document 78 Filed Filed 07/15/20 3 of 4 WILLIAMS 8 CONNOLLY LLP Hon. Colleen McMahon July 13 , 2020 Page 3 Relators do not identify a single " hardship or inequity" they face " in being required to go forward" with the state-FCA claim s they chose to bring against Omnicare. Id. Yet a stay plainly would "work damage to" Omnicare's interests, id., by requiring it to litigate these cases twice. See Medien Patent Verwaltung AG v. Warner Bros. Entm 't Inc., 2014 WL I 169575, at *2 (S.D.N .Y. Mar. 21, 2014) ("In addition to the axiom that 'justice delayed is justice denied,' it is a practical reality that the longer litigation lasts, the more expensive it wi ll be."). J\.s Rclators admit, their statc-FCA claims "arc based on the same conduct as the claims al leging violations of the federal FCA ." Bassan Dkt . 75 at l ; accord Mohajer Dkt. 79 at 1. Staying those claims while the parties litigate the federal -FCA claims would mean that no matter the outcome, Re lators would have a second bite at the apple in each stage of litigating about " the same conduct." (In Bassan's case, a stay would mean that Bassan's Complaint, which is operative as to state-FCA claims only, would be entirely dormant until after the federal government ' s case is concl uded.) In addition, Omnicare would be subject to "serious and stigmatizing allegations of fraud" for the duration of the stay, which can "damage[] the reputation of those accused so long as the lawsuit remains pending." Riviera Drilling & Exp!. Co. v. Gunnison Energy Corp., 412 F. App' x 89, 93- 94 (10th Cir. 20 11 ) (internal quotation marks omitted); see also Blaszczak, 2018 WL 30109 1, at *2 ("Courts in this district have recognized that a defendant has an interest in clear[ing] his name .. . in a timely manner." (internal quotation marks omitted)) . Nor would there be any benefit to staying the state-FCA claims while the federal claims proceed . In fact, "a court's interest is usually best served by discouraging motions to stay," as " [c-Jourts have an interest in managing their cases and efficiently resolv ing litigation." Exp. Imp. Bank of U S. v. Hi-Films SA. de C.V , 2010 WL 3743826, at * 13 (S.D.N .Y. Sept. 24, 2010) (internal quotation marks omitted) . Relators ' so le argument is to cite this Court's decision in United States v. TE VA Pharmaceuticals USA , Inc., 2016 WL 750720 (S .D.N.Y. Feb. 22, 2016), for the proposition that a stay can avoid the unnecessary expenditure of the effort of delving into "the arcana of myriad (as in, more than 30) state and local false claims laws." Id. at *28. But TE VA was a declined qui tam in which the Rclator was pursuing both federal and state causes of action. The federal FCA claims had largely surv ived a motion lo dismiss, while the remaining argument against the state-FCA claims turned on nuanced interpretations of each of the state and local laws and regulations regarding kickbacks, which were better lef1 to " fora where local laws are well known and frequently appl ied" and might be avoided entirely by resolving the federal -FCA claims. Id. Here, by contrast, Relators' statc-FCA claims fail for a host of much simpler reasons that do not requ ire the Court to delve into the specifics of any state FCA. Indeed, the state FCAs all largely "parallel" each other and the federal FCA. E. g. , United States ex rel. Kester v. Novartis Pharm. Corp., 43 F. Supp. 3d 332, 339 (S .D.N.Y. 2014) . Omnicare' s arguments can be assessed globally as to all stale claims. To be sure, Omnicare's pending motions to dismiss raise the specifics of state pharmacy laws. See Bassan Dkt. 70 at 13- 16; Mohajer Dkt. 71 at 18 . But those laws are implicated regardless of whether the state-FCA claims are stayed . The fedcral -FCA claims in this case allege that Omnicare failed to comply with slate-specific pharmacy laws, compliance the government and Re lators claim was required by the Medicare, Medicaid, and Tricare programs. Case Case 1:15-cv-04179-CM DocumentFiled Filed 07/15/20 Page 4 of 4 1:15-cv-04179-CM Document 78 83 07/13/20 Page 4 of 4 WILLIAMS 8 CONNOLLY LLP Hon. Colleen McMahon July 13, 2020 Page 4 See Bassan 0kt. 70 at 13; Bassan Dkt. 72 at 1O; Mohajer Dkt. 7 1 at I 7- 18 ; Mohajer Dkt. 73 at 10. Because the vast majority of state laws explicitly permit Omnieare's alleged conduct, the fodcral -FCA claims fail. See Bassan Dkt. 72 at 11 - 14; Mohajer 0kt. 73 at 11 -14. Although that state-specific analysis is also relevant to the statc-FCA claims, a stay will not avoid that analys is, which is needed to assess whether the federal government has stated a plausible claim under the federal FCJ\. Accordingly, the interests of "j udicial economy and docket management" that were served by abstaining from deciding the state-law issues implicated in TEVA, 2016 WL 750720, at *28, could not be served here . * * * Un like the situation in U.:VA, a stay of Rclators ' state-FCA claims here would not prevent or alleviate the Court' s task in resolving Omnicare's motions to dismiss and, if those motions are not granted in full, in adjudicating tho se claims. At the same time, a stay would force Omnicare to litigate claims about "the same conduct" twice. This would be particularly inequitable because the state-FCA clai(J1s suffer from myriad, fundamental defects that require that they be dismissed in their entirety at the outset of this case. The Motions therefore should be denied because ''the Court's interest lies in concluding this matter.'· l11edien Patent, 2014 WL 1169575, at *3. We appreciate the Court's attention to these matters and are prepared to address them further at the Court's convenience. Holly M. nlcy (pro hue Williams & Connolly LLP 725 Twelfth St. NW Washington, D.C. 20005 T: (202) 434-5696; F: (202) 434-5029 hco nlc y@ wc .com Attorney for Omnicare, Inc. and CVS l Ical th Corp. cc: All counsel of record (via ECF)

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