Health Choice Alliance, LLC v. Eli Lilly and Company, Inc. et al
ORDER ADOPTING REPORT AND RECOMMENDATIONS for 163 Report and Recommendations re 66 Motion to Dismiss filed by VMS Biomarketing, 71 Motion to Dismiss filed by Eli Lilly and Company, Inc., 68 Motion to Dismiss filed by Covance, Inc., 69 Motion to Dismiss, filed by United Biosource Corporation, 88 Motion to Dismiss filed by HealthSTAR Clinical Education Solutions LLC. Signed by District Judge Robert W. Schroeder, III on 8/10/2018. (slo, )
IN THE UNITED STATES DISTRICT COURT
OF THE EASTERN DISTRICT OF TEXAS
HEALTH CHOICE ALLIANCE, LLC,
on behalf of the UNITED STATES OF
AMERICA, et al.
ELI LILLY AND COMPANY, INC.,
Case No. 5:17-CV-123-RWS-CMC
ORDER ADOPTING REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
The above-entitled and numbered civil action was heretofore referred to United States
Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. On July 25, 2018, the Magistrate
Judge issued a Report and Recommendation, recommending five separate motions to dismiss
Relator’s First Amended Complaint (“FAC”) be granted in part and denied without prejudice in part.
Specifically, the Magistrate Judge recommended Defendants’ motions to dismiss under FED. R. CIV.
P. 12(b)(6) be denied without prejudice. The Magistrate Judge further recommended Defendants’
motions to dismiss under FED. R. CIV. P. 9(b) be granted to the extent Relator’s federal and state law
FCA claims be dismissed without prejudice and Relator be allowed to re-plead, to the extent it
deems appropriate to address the deficiencies identified in the 125-page Report and
This False Claims Act (“FCA”) qui tam action was filed on June 15, 2017 by Health Choice
Alliance LLC (“Relator”) against Eli Lilly and Company, Inc., VMS BioMarketing, Covance, Inc.,
United BioSource Corporation, and HealthSTAR Clinical Education Solutions LLC (collectively,
“Defendants”). Relator alleges Defendants have engaged in three schemes that violate the AntiKickback Statute (“AKS”) and, thus, the FCA.
The July 25, 2018 Report and Recommendation of the Magistrate Judge which contains her
proposed findings of fact and recommendations for the disposition of Defendants’ motions to
dismiss has been presented for consideration. No objections to the Report and Recommendation
were filed. Thus, any aggrieved party is barred from de novo review of the proposed findings and
recommendations of the Magistrate Judge.
There being no grounds of plain error or manifest injustice, the Court hereby adopts the
Report of the United States Magistrate Judge as the findings and conclusions of this Court. The
Court denies without prejudice Defendants’ Rule 12(b)(6) motions to dismiss on public disclosure
and limitations grounds. The Court also denies Defendants’ Rule 12(b)(6) motions to dismiss
because the FAC fails to plead the FCA elements of falsity, scienter (or AKS element of intent), and
While sufficient to satisfy Rule 12(b)(6), the Court agrees with the Magistrate Judge the
allegations in the FAC are not sufficient to satisfy the pleading requirements of FED. R. CIV. P. 9(b).
(Report and Recommendation at 91-101). The FAC’s kickback schemes are not sufficiently
supported by specific facts as to each defendant as required by Rule 9(b). Relator has not met its
burden of “sufficiently pleading the time, place, or identity details of the traditional standard, in order
to effectuate Rule 9(b)’s function of fair notice and protection from frivolous suits.” United States
ex rel. Nunnally v. West Calcasieu Cameron Hosp., 519 Fed. Appx. 890, 895 (5th Cir. 2013). As
held by the Magistrate Judge, the FAC also fails to plead factual information with sufficient indicia
of reliability demonstrating a strong inference false claims were submitted to the Government. Thus,
Counts 1 and 2 are dismissed without prejudice.
The Court further agrees with the Magistrate Judge the FAC does not set forth facts alleging
an agreement to conspire. There is not a factual basis to determine the roles of each defendant in any
agreement or each defendant’s specific intent to defraud. Thus, the Count 3 conspiracy claims are
also dismissed without prejudice for failure to comply with the pleading requirements of Rule 9(b).
Finally, the state law claims (Counts 4-24) are dismissed without prejudice for the same
reasons. Like federal FCA claims, state law FCA claims are also subject to Rule 9(b). See United
States ex rel. Foster v. Bristol-Myers Squibb Co., 587 F. Supp. 2d 805, 827 (E.D. Tex. 2008). As
held by the Magistrate Judge, Relator has not sufficiently supported its allegations that Defendants
violated the false claims laws of the states on whose behalf they purport to sue. (Report and
Recommendation at 123).
Relator is granted leave to reassert its federal and state law FCA claims to properly allege
specific conduct by each defendant, as well as to plead with more specificity as required by Rule
9(b). See United States ex rel. Bennett v. Medtronic, Inc., 747 F. Supp. 2d 745, 785 (S.D. Tex.
2010). Relator shall also clarify in any amended complaint the timeframe for which it is asserting
claims for damages. (Report and Recommendation at 75).
Accordingly, it is hereby
ORDERED that Defendant VMS BioMarketing’s Motion to Dismiss (Dkt. No. 66);
Defendant Covance Inc.’s Motion to Dismiss (Dkt. No. 68); Defendant United BioSource
Corporation’s Motion to Dismiss Relator’s First Amended Complaint (Dkt. No. 69); Eli Lilly and
Company, Inc.’s Motion to Dismiss Relator’s First Amended Complaint (Dkt. No. 71); and
Healthstar Clinical Education Solutions LLC’s Motion to Dismiss Relator’s Amended Complaint
(Dkt. No. 88) are hereby GRANTED IN PART and DENIED WITHOUT PREJUDICE IN
PART. It is further
ORDERED Defendants’ motions to dismiss under Rule 12(b)(6) are denied without
prejudice. It is further
ORDERED Defendants’ motions to dismiss under Rule 9(b) are granted to the extent the
federal and state law FCA claims are dismissed without prejudice and Relator is allowed to re-plead
its claims, to the extent it deems appropriate to address the deficiencies identified in the July 25,
2018 Report and Recommendation. It is further
ORDERED that Relator shall re-plead its federal and state law FCA claims within twenty
(20) days following the date of this Order Adopting, to the extent it deems appropriate. Relator shall
also clarify in any amended complaint the timeframe for which it is asserting claims for damages.
When and if Relator files a Second Amended Complaint, it shall also attach a redlined copy as an
SIGNED this 10th day of August, 2018.
ROBERT W. SCHROEDER III
UNITED STATES DISTRICT JUDGE
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