United States of America ex rel. John R. Borzilleri, M.D., et al v. Abbvie, Inc., et al

Filing 295

MEMORANDUM OPINION AND ORDER re: 274 MOTION to Dismiss Relator's Qui Tam Complaint Pursuant to 31 U.S.C. 3730(c)(2)(A). filed by United States of America, 260 JOINT MOTION to Dismiss Relator Borzilleri's Second Amen ded Complaint filed by Express Scripts Holding Company, CIGNA Corporation, UnitedHealth Group, Inc., Humana, Inc., CVS Health Corporation, Aetna, Inc., 258 JOINT MOTION to Dismiss Relator Borzilleri's Second Amended Compl aint filed by Pfizer, Inc, Amgen, Inc., Abbvie, Inc., AbbVie, Inc., Novartis Pharmaceuticals Corporation, Eli Lilly and Company, sanofi-aventis U.S. LLC, Bristol-Myers Squibb Company. For the foregoing reasons, the Government' ;s motion to dismiss is GRANTED, and Borzilleri's claims are dismissed (with prejudice in the case of his claims under the FCA and without prejudice to re-filing in state court as to his claims under state law). In light of that disposition, Def endants' motions to dismiss (Docket Nos. 258, 260) are DENIED as moot. The Clerk of Court is directed to terminate all motions and close the case. (Signed by Judge Jesse M. Furman on 7/16/2019) (ne) Transmission to Orders and Judgments Clerk for processing.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA, et al. ex rel. JOHN R. :
BORZILLERI, M.D.,
:
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Plaintiff,
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-v:
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ABBVIE, INC., et al.,
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Defendants.
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15-CV-7881 (JMF)
MEMORANDUM OPINION
AND ORDER

JESSE M. FURMAN, United States District Judge:
In this qui tam case, familiarity with which is presumed, Relator John R. Borzilleri
alleges a wide-ranging scheme between pharmaceutical manufacturers and companies acting as
“Pharmacy Benefit Managers” (“PBMs”) to defraud Medicare Part D, a federal prescription-drug
program, in violation of the False Claims Act (“FCA” or the “Act”), 31 U.S.C. § 3729 et seq.,
and various state laws. Docket No. 148 (“SAC”). The United States (the “Government”)
declined to intervene in the case and now moves to dismiss the action. See Docket Nos. 19, 274.
Although the FCA permits private plaintiffs to bring claims under the Act in the name of
the United States, see 31 U.S.C. § 3730(b)(1), the Government retains significant control over
any such litigation. As relevant here, the Act provides that “[t]he Government may dismiss” an
action brought under its provisions “notwithstanding the objections of the person initiating the
action if the person has been notified by the Government of the filing of the motion and the court
has provided the person with an opportunity for a hearing on the motion.” 31 U.S.C.
§ 3730(c)(2)(A). Lending truth to the Supreme Court’s observation that “[t]he False Claims
Act’s qui tam provisions present many interpretive challenges,” Kellogg Brown & Root Servs.,

Inc. v. United States ex rel. Carter, 135 S. Ct. 1970, 1979 (2015), the statute is silent as to what
standard of review, if any, applies to a decision by the Government to dismiss a case brought
under the Act, and courts of appeals are divided on the issue. The Ninth and Tenth Circuits have
held that the Government must demonstrate a “valid government purpose” for dismissal and “a
rational relation between dismissal and accomplishment of [that] purpose.” United States ex rel.
Sequoia Orange Co. v. Baird-Neece Packing Corp. (“Sequoia Orange”), 151 F.3d 1139, 1145
(9th Cir. 1998) (internal quotation marks omitted); accord Ridenour v. Kaiser-Hill Co., 397 F.3d
925, 936 (10th Cir. 2005). By contrast, the D.C. Circuit has described the Government’s right to
dismiss a relator’s action under the FCA as “unfettered” (even as it noted that a “fraud on the
court” might permit a court to look into the Government’s reasons for dismissal). Swift v. United
States, 318 F.3d 250, 252-54 (D.C. Cir. 2003). The Second Circuit has not yet weighed in on the
issue. See, e.g., United States ex rel. Piacentile v. Amgen Inc., No. 04-CV-3983 (SJ), 2013 WL
5460640, at *3 (E.D.N.Y. Sept. 30, 2013); United States ex rel. Pentagen Techs. Int’l Ltd. v.
United States, No. 00-CV-6167 (DAB), 2001 WL 770940, at *7 (S.D.N.Y. July 10, 2001). 1
The Court need not take a side in the dispute, however, because it concludes that the
Government may dismiss the case even under the more stringent standard articulated in Sequoia
Orange. That is, the Government demonstrates at least one “valid government purpose” for
seeking dismissal: Borzilleri’s continued prosecution of the case — assuming it would survive
the other motions to dismiss pending before the Court — would impose substantial burdens on

1

The Second Circuit has cited Sequoia Orange, but only in dicta and in a case that was
later reversed. See United States ex rel. Stevens v. Vermont Agency of Nat. Res., 162 F.3d 195,
201 (2d Cir. 1998) (“[A]lthough the qui tam plaintiff must be given a hearing, the court need not,
in order to dismiss, determine that the government’s decision is reasonable.” (citing Sequoia
Orange, 151 F.3d at 1145)), rev’d on other grounds, 529 U.S. 765 (2000).

2

government resources. 2 According to the Government, attorneys from multiple offices would be
required to monitor the litigation and likely coordinate third-party discovery, rather than pursue
other (and in the Government’s view, more meritorious) cases. Additionally, program staff from
the Centers for Medicare and Medicaid Services (“CMS”), the agency within the Department of
Health and Human Services that administers Medicare Part D, would likely have to divert time
and resources to respond to discovery requests. See Docket No. 275 (“Gov’t Mem.”), at 13-16.
The Government’s determination that it would prefer to avoid these costs and expend its finite
resources elsewhere is, as many courts have recognized, a “valid government purpose” rationally
related to dismissal of the case. See, e.g., Sequoia Orange, 151 F.3d at 1146 (“The district court
. . . properly noted that the government can legitimately consider the burden imposed on the
taxpayers by its litigation, and that, even if the relators were to litigate the FCA claims, the
government would continue to incur enormous internal staff costs.”); Swift, 318 F.3d at 254
(noting that dismissal would also be proper under Sequoia Orange because the Government’s
interest in not “expending resources monitoring the case, complying with discovery requests, and
so forth” was “a legitimate objective, and dismissal of the suit furthered that objective”).
Borzilleri’s arguments to the contrary are unpersuasive. The fact that the Government
could recover more in damages than it expends in resources, if he were to eventually prevail, see
Docket No. 281 (“Relator Mem.”), at 10, does not mean that avoiding resource expenditures now
is not a “valid government purpose.” Indeed, courts applying the Sequoia Orange standard have
made clear that the Government’s cost concerns are a valid justification for dismissal even where
“the FCA claims against the defendants [are] meritorious.” Sequoia Orange, 145 F.3d at 1143;

2

Because the burden of further litigation is a valid and sufficient justification for the
Government’s dismissal, the Court need not and does not reach the Government’s other
proffered justifications. See Gov’t Mem. 16-18.

3

see, e.g., United States v. EMD Serono, Inc., 370 F. Supp. 3d 483, 490-91 (E.D. Pa. 2019) 49091 (reiterating that “[p]reserving litigation costs is a valid interest even where the claims may
have merit,” and collecting cases); United States ex rel. Sibley v. Delta Reg’l Med. Ctr., No.
4:17-CV-000053 (GHD), 2019 WL 1305069, at *4 (N.D. Miss. Mar. 21, 2019) (same).
Because the Government offers a valid purpose for dismissal, the burden shifts to
Borzilleri to show that the dismissal is nonetheless “fraudulent, arbitrary and capricious, or
illegal.” Sequoia Orange, 145 F.3d at 1145 (internal quotation marks omitted). This he fails to
do. Borzilleri offers a hodgepodge of theories, the most coherent subset of which can be lumped
together as a “failure to investigate” — in a nutshell, that the Government’s decision to dismiss
the case, like its decision not to intervene, is arbitrary because the Government failed to
thoroughly investigate his allegations in the first place. 3 But none of Borzilleri’s allegations
about the Government’s investigative choices demonstrate that its stated rationale is fraudulent,
arbitrary and capricious, or illegal. The Government’s memoranda reveal, and the Court has no
basis to doubt, that the Government undertook a lengthy, costly, and substantial investigation
into Borzilleri’s claims that spanned several years and multiple offices and agencies. See Gov’t
Mem. 4, 16; Docket No. 292 (“Gov’t Reply”), at 5-6; see also EMD Serono, 370 F. Supp. 3d at
489 & n.15 (relying on representations in the Government’s briefing to conclude that the
Government “expended substantial time and resources” before determining “that it [was] better
to use its resources pursuing other claims”); United States ex rel. Toomer v. TerraPower, LLC,

3

More specifically, Borzilleri contends that the Government “failed to aggressively
pursue” the “central allegations” in his complaint, which relate to a kickback scheme between
manufacturers and PBMs; failed to investigate his allegations of fraud relating to catastrophic
coverage; focused on the PBM defendants rather than the more culpable manufacturer
defendants; deposed only one defendant witness; declined to interview other relevant witnesses;
and ignored “major new evidence” that has come to light since the Government declined to
intervene in March 2018. Relator Mem. 19-20, 21-26.

4

No. 4:16-CV-00226 (DCN), 2018 WL 4934070, at *6 (D. Idaho Oct. 10, 2018) (same).
Borzilleri’s subjective disagreement with the Government’s investigative strategy and ultimate
decision does not provide the Court with a basis to second-guess the Government’s decision to
dismiss the case.
Borzilleri’s remaining arguments fare no better. First, the Government’s inability or
unwillingness to provide him with a non-fraudulent explanation for “massive” increases in
Defendants’ drug prices, Relator Mem. 19, does not demonstrate that its stated reason for
dismissing the case is somehow fraudulent, arbitrary and capricious, or illegal. Second,
Borzilleri fails to clearly articulate how (1) the Government’s proffered rationale for not
intervening in his case was “false” and (2) the Government “verif[ied]” the entire massive
scheme he alleges, but then declined to act on it. See id. at 18-19. And finally, his allegations of
stonewalling by CMS and conflicts of interest among its leadership, see id. at 20-21, do not rise
above the level of speculation, see United States ex rel. Nasuti v. Savage Farms, Inc., No. 12CV-30121 (GAO), 2014 WL 1327015, at *12 (D. Mass. Mar. 27, 2014) (rejecting a relator’s
allegations that “nepotism or political connections played [a] role in the Government’s decision”
to dismiss as “little more than unsupported speculation”). In sum, nothing put forward by
Borzilleri suggests, let alone shows, that the Government’s stated reason for dismissing this
action is fraudulent, arbitrary and capricious, or illegal. And because he fails to even “present[] a
colorable claim” on that score, he is not entitled to discovery or an evidentiary hearing. See, e.g.,
Ridenour, 397 F.3d at 931 (noting that a relator is not entitled to a hearing absent a showing of
“substantial and particularized need” (internal quotation marks omitted)); accord United States
ex rel. Nicholson v. Spigelman, No. 10 C 3361, 2011 WL 2683161, at *3 (N.D. Ill. July 8, 2011);
Toomer, 2018 WL 4934070, at *6.

5

By its terms, the FCA vests the Government with broad discretion to end this action
“notwithstanding” Borzilleri’s “objections.” 31 U.S.C. § 3730(c)(2)(A). Under either Swift or
Sequoia Orange, the Government has exercised that discretion appropriately, and Borzilleri has
“been . . . provided . . . with an opportunity for a hearing” on the Government’s motion. 31
U.S.C. § 3730(c)(2)(A); see, e.g., Greene v. IRS, No. 1:08-CV-0280 (LEK), 2008 WL 5378120,
at *2 (N.D.N.Y. Dec. 23, 2008) (“This Court’s consideration of the arguments raised in the
Plaintiffs’ opposition has provided them with an opportunity to be heard on the Government’s
Motion.”), aff’d, 348 Fed. App’x 625 (2d Cir. 2009). That is all the statute requires.
Accordingly, Borzilleri’s FCA claims must be and are dismissed. 4 That leaves only Borzilleri’s
common-law claims brought on behalf of the United States and his claims under various state
analogues to the FCA. The former — claims for unjust enrichment and common-law fraud, see
SAC ¶¶ 915-21 — are dismissed because “the FCA does not give relators the right to assert
common law claims on behalf of the United States.” United States ex rel. Phipps v.
Comprehensive Cmty. Dev. Corp., 152 F. Supp. 2d 443, 451-52 (S.D.N.Y. 2001) (internal
quotation marks omitted). As for the latter — twenty-eight claims under various state-law
analogues to the FCA, see SAC ¶¶ 831-914 — the Court declines to exercise supplemental
jurisdiction in light of the fact that the sole federal claims have been dismissed. See, e.g., United
States ex rel. Vierczhalek v. MedImmune, Inc., 345 F. Supp. 3d 456, 466 (S.D.N.Y. 2018)
(declining to assert supplemental jurisdiction over “various state law false claims provisions”
after dismissing the relator’s federal claims on the merits).

4

Such dismissal is, of course, without prejudice as to the Government. See, e.g., Toomer,
2018 WL 4934070, at *6-7.

6

For the foregoing reasons, the Government’s motion to dismiss is GRANTED, and
Borzilleri’s claims are dismissed (with prejudice in the case of his claims under the FCA and
without prejudice to re-filing in state court as to his claims under state law). 5 In light of that
disposition, Defendants’ motions to dismiss (Docket Nos. 258, 260) are DENIED as moot. The
Clerk of Court is directed to terminate all motions and close the case.

SO ORDERED.
Dated: July 16, 2019
New York, New York

__________________________________
JESSE M. FURMAN
United States District Judge

5

In addition to seeking dismissal, the Government asks the Court in passing to strike
Borzilleri’s declarations and brief because they contain privileged material. See Gov’t Reply 7.
In light of the Government’s delay in seeking that relief (not to mention the cursory fashion in
which it does so), that request is denied. See, e.g., Fischman v. Mitsubishi Chem. Holdings Am.,
Inc., No. 18-CV-8188 (JMF), 2019 WL 3034866, at *2-3 (S.D.N.Y. July 11, 2019) (noting that
“where . . . a party fails to take immediate steps to request that publicly filed materials be sealed,
its request to redact or seal may be denied for that reason.”).

7