Buth v. Walmart Inc
Filing
56
ORDER signed by Magistrate Judge Nancy Joseph GRANTING IN PART AND DENYING IN PART Defendant's 38 Motion to Dismiss. Counts Two, Three, Four, and Seven through Thirty-Eight are DISMISSED WITHOUT PREJUDICE. Counts Five and Six are DISMISSED WITHOUT PREJUDICE except insofar as they relate to Count One. IT IS FURTHER ORDERED that Buth may file a second amended complaint, if desired, within thirty (30) days of this Order. (cc: all counsel) (blr)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
UNITED STATES OF AMERICA, ex rel.
JENNIFER BUTH, et al.
Plaintiffs,
v.
Case No. 18-CV-840
WALMART INC.
Defendant.
DECISION AND ORDER ON DEFENDANT’S MOTION TO DISMISS
Jennifer Buth brought this qui tam action 1 against Walmart Inc. on behalf of the
United States, thirty-one individual states, the District of Columbia, and the City of
Chicago. 2 (Docket # 1, Docket # 17.) Buth alleges that Walmart violated the False Claims
Act (“FCA”), 31 U.S.C. § 3729, and similar state statutes through various pharmacy
practices. (Docket # 1, Docket # 17.) Walmart has moved for dismissal for failure to state a
claim on which relief can be granted. (Docket # 38.) For the reasons below, Walmart’s
motion to dismiss will be granted in part and denied in part.
LEGAL STANDARD
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a
plaintiff must satisfy Rule 8(a) by providing a “short and plain statement of the claim
Private individuals (“relators”) may file civil actions on behalf of the United States (“qui tam actions”) to
recover money the government paid as the result of an FCA violation. United States ex rel. Yannacopoulos v.
General Dynamics, 652 F.3d 818, 822 (7th Cir. 2011) (citing Glaser v. Wound Care Consultants, Inc., 570 F.3d 907,
912 (7th Cir. 2009)).
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showing that the pleader is entitled to relief . . . in order to give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 545 (2007) (quoting Conley vs. Gibson, 355 U.S. 41, 47 (1957)). Additionally,
the allegations must suggest that the plaintiff is entitled to relief beyond the speculative level.
E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 777 (7th Cir. 2007). I must construe
the complaint “in the light most favorable to the plaintiff, taking as true all well-pleaded
factual allegations and making all possible inferences from those allegations in his or her
favor.” Lee v. City of Chicago, 330 F.3d 456, 459 (7th Cir. 2003). However, in deciding a
motion to dismiss, I am not bound to accept as true legal conclusions couched as facts. Bonte
v. U.S. Bank, N.A., 624 F.3d 461, 465 (7th Cir. 2010).
FCA claims are subject to the heightened pleading requirements of Rule 9(b). United
States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 775 (7th Cir. 2016)
(citing United States ex rel. Gross v. AIDS Research All.–Chi., 415 F.3d 601, 604 (7th Cir. 2005)).
Under Rule 9(b), a plaintiff alleging fraud must state with particularity the circumstances
constituting fraud—the “who, what, when, where, and how.” Presser, 836 F.3d at 776
(quoting United States ex rel. Lusby v. Rolls–Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009))
(internal quotation marks omitted). The precise details that must be included may vary
depending on the facts of the case, and courts must “remain sensitive to information
asymmetries that may prevent a plaintiff from offering more detail.” Pirelli Armstrong Tire
Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 443 (7th Cir. 2011) (citing In re
Rockefeller Center Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002)). Nevertheless,
The United States, thirty individual states, and the District of Columbia have elected not to intervene in this
case at this time. (Docket # 48.) The City of Chicago forfeited its right to intervene, and the claim asserted on
behalf of the State of Maryland was dismissed without prejudice. (Id.)
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plaintiffs must “use some . . . means of injecting precision and some measure of
substantiation into their allegations of fraud.” Presser, 836 F.3d at 776 (quoting 2 James
Wm. Moore et al., Moore’s Federal Practice § 9.03[1][b], at 9-22 (3d ed. 2015)); see also
Pirelli, 631 F.3d at 442.
BACKGROUND
Buth is a licensed pharmacist who worked as a pharmacy manager at Walmart’s
New Berlin, Wisconsin pharmacy from July 2017 to May 2018. (Docket # 17 ¶¶ 27–28.)
Walmart is a publicly traded Delaware corporation with its principal place of business in
Arkansas, but doing business throughout all of the party states, the District of Columbia,
and the City of Chicago. (Id. ¶ 63.)
Medicare is a government healthcare program that pays for reasonable and necessary
healthcare for beneficiaries. (Id. ¶ 69.) Under Medicare Part D, the government pays a
percentage of the cost of covered drugs dispensed with valid prescriptions. (Id. ¶¶ 78, 84.)
The U.S. Department of Health and Human Services oversees the Medicare program and
makes payments through the Center for Medicare and Medicaid Services (“CMS”). (Id. ¶
72.) CMS does not pay pharmacies directly; it pays Medicare Part D “Plan Sponsors,”
typically private insurance companies, who pay pharmacies directly or through
intermediaries known as Pharmacy Benefit Managers (“PBMs”). (Id. ¶¶ 78–79.) When a
pharmacy dispenses a drug to a Medicare beneficiary, it submits an electronic claim to the
Plan Sponsor and receives payment for the price minus any portion that must be paid by the
beneficiary. (Id. ¶ 80.)
Walmart generates “Prescription Drug Event” (“PDE”) records to support its claims
for government payment, which it sends to CMS via PBMs and the Plan Sponsor. (Id. ¶ 87.)
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A PDE record must include accurate data including the drug dispensed, the prescription
number, the dispensing fee paid to the pharmacy, the cost of the drug, the quantity
dispensed, and the provider who ordered the medication. (Id. ¶ 88.) That such data be “true,
accurate, and complete” is a condition of payment under the Medicare Part D program. (Id.
¶ 89.)
Buth’s first amended complaint alleges that Walmart pharmacies nationwide
defrauded the government through four “schemes”: 1) dispensing less medication than
prescribed but billing for the full amount (“short-filling”); 2) dispensing and billing for more
medication than necessary for a particular period (“days’ supply”); 3) dispensing and billing
for 90-day supplies instead of 30-day supplies without consent or clinical need
(“conversion”); and 4) billing for medications dispensed with inaccurate expiration dates.
(Id. ¶¶ 143–283.) Buth asserts that these alleged schemes resulted in the submission of false
claims and materially false PDE data to CMS and improper retention of money owed to the
government. (Id. ¶¶ 284–93.)
ANALYSIS
The FCA is the primary vehicle used by the government for recouping losses suffered
through fraud. United States v. Sanford-Brown, Ltd., 788 F.3d 696, 700 (7th Cir. 2015),
reinstated in part, superseded in part by United States v. Sanford-Brown, Ltd., 840 F.3d 445 (7th
Cir. 2016). The FCA imposes liability on one who:
(A) knowingly presents, or causes to be presented, a false or fraudulent claim
for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim; [. . .]
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(G) knowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to
the Government, or knowingly conceals or knowingly and improperly avoids
or decreases an obligation to pay or transmit money or property to the
Government.
31 U.S.C. § 3729(a)(1). “Knowingly” means that a person has actual knowledge of the
falsity of the information or acts with purposeful ignorance or reckless disregard of its
falsity, but not necessarily specific intent to defraud. Sanford-Brown, 788 F.3d at 700 (citing
31 U.S.C. § 3729(b)(1); United States ex rel. Sheet Metal Workers Int’l Ass’n v. Horning Invs.,
LLC, 828 F.3d 587, 593 (7th Cir. 2016)); see also United States ex rel. Berkowitz v. Automation
Aids, Inc., 896 F.3d 834, 842 (7th Cir. 2018) (mistake or negligence does not give rise to
FCA claim). Falsity includes express misrepresentations and misrepresentation by omission.
See United States ex rel. Lisitza v. Par Pharm. Cos., 276 F. Supp. 3d 779, 789 (N.D. Ill. 2017). A
“claim” under the statute “includes direct requests to the Government for payment as well
as reimbursement requests made to the recipients of federal funds under federal benefits
programs.” Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989, 1996 ((citing 21
U.S.C. § 3729(b)(2)(a)).
To establish civil liability under the FCA, a relator generally must prove (1) that the
defendant made a statement in order to receive money from the government; (2) that the
statement was false; and (3) that the defendant knew the statement was false. Id. (citing
United States ex rel. Gross v. AIDS Research Alliance–Chicago, 415 F.3d 601, 604 (7th Cir.
2005)). The FCA also imposes a rigorous materiality requirement. United States ex re.
Thornton v. Pfizer Inc., No. 16-cv-7142, 2019 WL 1200753, at *5 (N.D. Ill. Mar. 14, 2019)
(citing Escobar, 136 S. Ct. at 2002). “Material” means “having a natural tendency to
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influence, or be capable of influencing, the payment or receipt of money or property.” Id.
(citing 31 U.S.C. § 3729(b)(4)).
Walmart argues that Buth’s amended complaint should be dismissed because it fails
to plead a violation of the FCA under Rule 8(a), to plead the particularized facts required by
Rule 9(b), or to plead the required scienter and materiality. (Docket # 40.) Walmart also
argues that Buth’s state law claims should be dismissed, either because their pleading
requirements are parallel to the FCA claims or because Buth has failed to plead a
nationwide scheme with particularity. (Id. at 28–29.)
1.
Count One: Alleged Medication “Short-Filling” Scheme
Buth’s Count One alleges that Walmart violated 31 U.S.C. § 3729(a)(1)(A) by
dispensing less medication than prescribed but billing the government for the full amount.
(Docket # 17 ¶¶ 181–98, 260–65.) Buth alleges that “chronically untrained and timepressured staff” often “short-fill” medication, and Walmart’s standard operating
procedures do not require pharmacy managers to re-count the medication to correct
such errors. (Id. ¶¶ 144, 181–85.) Buth provides six examples of claims for short-filled
medications submitted by Walmart’s New Berlin, Wisconsin pharmacy, including
dates, beneficiary initials, and prescription numbers, and avers that even after
beneficiaries confirmed that their medications were short-filled, Walmart did not
correct the claims. (Id. ¶ 196.) Buth alleges that she found several thousand dollars
weekly in overages caused by such short-filling at the New Berlin, Wisconsin pharmacy.
(Id. ¶¶ 191–92.) Buth asserts that both pharmacy managers and beneficiaries brought
these issues to Walmart’s attention, and Walmart’s corporate management was aware
that managers routinely identified such “overages” and false claims. (Id. ¶¶ 144, 181,
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193–94.) Buth further alleges that Walmart profited from short-filling by using a
computerized inventory system to replace the electronic inventory count with the actual
on-the-shelf count, which enabled Walmart to re-sell and re-bill for medication that had
already falsely been billed to the government. (Id. ¶¶ 184–88.)
Billing for medication not actually dispensed clearly satisfies the first two prongs of
the test for an FCA violation: (1) a claim to the government (2) that is false. As for scienter,
the actual short-filling appears to have been the result of mistakes or negligence on the
part of pharmacy staff. Buth does not allege that Walmart, or any Walmart employee,
knew at the time a particular claim was submitted that the full amount of medication
had not been dispensed. Buth does, however, allege facts that at least plausibly suggest
that Walmart submitted claims with willful ignorance or reckless disregard of their
falsity. Buth alleges that short-filling is one of the most common types of medication
errors and she and others raised red flags with management about it, yet Walmart
maintained deficient standard operating procedures and poor training that failed to
prevent it and in fact enabled it. (Id. ¶¶ 181–84.) To the extent Walmart knew shortfilling was a problem as Buth alleges and submitted claims for medications dispensed
without proper safeguards against short-filling, Walmart plausibly could have acted in
willful ignorance of the truth or falsity of these claims. Discovery may reveal otherwise;
at this stage, however, Buth has alleged sufficient facts supporting the inference that
Walmart deliberately ignored concerns about short-filling. Fed. R. Civ. P. 9(b)
(“[K]nowledge . . . and other conditions of a person’s mind may be alleged generally.”);
see United States v. Brookdale Senior Living Communities, Inc., 892 F.3d 822, 837–38 (6th
Cir. 2018) (allegations supported inference that defendants were on notice of
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compliance problems with claim-submission process but failed to conduct an inquiry
and instead repeatedly pushed their employees to ignore problems in a rush to get the
claims submitted). And as for materiality, it is reasonable to infer at this stage that the
government would not choose to pay for medications that are not actually dispensed.
Walmart argues that, at most, Buth has pleaded that she failed in her own
responsibility to supervise pharmacy staff and implement company policy requiring her to
oversee the filling process and correct negligent miscounting. (Docket # 40 at 18–19.)
Walmart also argues that none of the six examples Buth provides states an FCA violation
with sufficient particularity, because the pharmacy might have corrected the errors by
providing the missing medication to the customers, in which case there would have been no
false claims. (Id. at 19.) But a complaint need not respond to every potential defense in order
to state a claim for an FCA violation. These arguments are more appropriate for summary
judgment when more facts are available.
Walmart also argues that Buth’s reliance on United States ex rel. Hunt v. Merck-Medco
Managed Care, L.L.C., 336 F. Supp 2d 430, 434–35 (E.D. Pa. 2004), is misplaced. (Docket #
54 at 13–14.) The allegations of short-filling in Hunt were indeed more compelling: the
pharmacy allegedly used an automatic prescription-dispensing system that was known to
routinely short-fill prescriptions. Id. Buth’s allegation that under-trained, time-pressured staff
often short-fill prescriptions requires significantly more inference. Still, Buth is entitled to
reasonable inferences at this stage. Whether Buth can prove that Walmart turned a blind eye
to potentially false claims arising from short-filling in violation of the FCA remains to be
seen. At this juncture, however, Buth’s allegations suffice to state a claim.
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Because Count One satisfies the pleading requirements for an FCA claim, I
decline to dismiss it at this stage.
2.
Count Two: Alleged “Days’ Supply” Scheme
Buth’s Count Two alleges that Walmart violated 31 U.S.C. § 3729(a)(1)(A) by billing
insulin and topical medications to the government as a patient’s “days’ supply” of
medication, when the amount was far more than the patient’s actual “days’ supply.”
(Docket # 17 at 266–71.) Buth explains that Medicare billing requirements direct
pharmacists to calculate the amount of insulin a patient requires for a certain number of
days (usually thirty) based on the prescription and determine how many insulin
injection pens are needed to provide that “days’ supply,” then round down to the
nearest full injection pen. (Id. ¶ 206.) Buth alleges that Walmart staff routinely skip the
calculation and instead dispense entire boxes of insulin injection pens, which they then
bill as 30-days’ supplies, even when a patient requires less than a full box of pens for
thirty days. (Id. ¶¶ 4, 202–08.) For example, a patient who requires only three insulin
injection pens in order to use insulin as prescribed for thirty days would be given a full
box of five pens, and Walmart would bill for the full box as a “30-days’ supply.” (Id. ¶¶
147, 200, 208, 210.) Buth offers two examples from Walmart’s New Berlin, Wisconsin
pharmacy, and states that Walmart did not reimburse the government for these claims.
(Id. ¶¶ 211, 222.) Buth also avers that an employee from Walmart’s Waukesha,
Wisconsin pharmacy stated that they do not break open insulin pen boxes at their store,
(id. ¶ 218), and that pharmacies in three cities in Arkansas, Kentucky, and North
Carolina either do not calculate days’ supply of insulin properly or have only recently
begun to break open boxes of insulin pens (id. ¶ 221).
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I find that Buth has not pleaded the requisite scienter for this claim. Buth argues that
Walmart’s policy of “rapid-fire dispensing” made it “impossible” for employees to properly
calculate and dispense these medications. Even if this were true, there is no indication in the
amended complaint that Walmart was aware of this practical reality. Buth does not indicate
that any employee submitted a claim he or she knew or should have known over-stated the
amount required for a patient’s “days’ supply.” Did the employee who over-filled the
prescription also submit the claim? If not, did the employee who submitted the claim know
that the employee who filled it had not performed the required calculations and/or had
dispensed more than necessary? Buth does not answer these critical questions. The most
factual support Buth can muster for her scienter allegations is a Walmart guideline
explaining how to properly dispense “days’ supplies” as part of a series of “answers to
common questions” (id. ¶ 220), but this supports only a limited inference that employees
had questions about dispensing days’ supplies. It does not support an inference that
Walmart was aware of actual over-dispensing, let alone the rampant, brazen overdispensing Buth alleges.
This case is easily distinguishable from the recently settled case Buth relies on, United
States ex rel. Rahimi v. Walgreens Boots Alliance, Inc., No. 15 Civ. 5686 (PAC) (S.D.N.Y.
2019). In Rahimi, a pharmacy chain had programmed its software to dispense only full
boxes of insulin pens regardless of the patient’s “days’ supply.” (Docket # 54-1 at 121–44.)
In this case, Buth does not allege that over-dispensing “days’ supplies” was Walmart’s
official policy, or even that Walmart management was aware of a single instance of such
over-dispensing. Buth’s assertion that this was “Walmart’s unofficial but regularly followed
policy,” even if true, is insufficient to allege the required scienter for an FCA claim.
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3.
Count Three: Alleged “Conversion” Scheme
Buth’s Count Three alleges that Walmart violated 31 U.S.C. § 3729(a)(1)(A) by
converting prescriptions with sufficient remaining refills from 30-day supplies to 90-day
supplies and then billing the government for 90-day supplies, whether or not patients
consented or the pharmacist had reason to believe the patients needed 90-day supplies.
(Docket # 17 ¶¶ 272–77.) Buth reports that Walmart staff routinely converted
prescriptions without patient consent or reviewing the patients’ prescription history to
determine if there were compliance problems that might justify the conversion. (Id. ¶
244–45, 249.) Buth points to emails from Walmart Clinical Services Managers
acknowledging “high amounts [of changes] at certain stores” and that some staff are
“just signing off to complete” the switch and “not properly doing the claims.” (Id. ¶¶
231–36.) One email tells staff to “do these [conversions] properly,” to “make the calls”
to and “have the discussions” with patients. (Id. ¶ 235.) Buth also asserts that pharmacy
staff, at the direction of management, routinely failed to comply with state laws
governing how and when pharmacists may convert 30-day supplies to 90-day supplies.
(Id. ¶¶ 241–53.) Buth gives eight examples from Walmart’s New Berlin, Wisconsin store
of staff allegedly improperly converting 30-day supplies to 90-day supplies, which were
thereafter filled and billed. (Id. ¶ 245.)
Walmart argues that Buth has not alleged any false statement to the government
concerning these conversions. (Docket # 40 at 11–12.) Buth responds that the “implied false
certification” theory, articulated in Escobar, 136 S. Ct. at 1999, applies. (Docket # 51 at 33–
34.) Under the “implied false certification” theory, a defendant who fails to mention
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violations of statutory, regulatory, or contractual requirements may be liable under the FCA
if those omissions render the defendant’s representations misleading with respect to the
goods or services provided. Escobar, 136 S. Ct. at 1999. In Escobar, a mental health facility
defrauded the Medicaid program by submitting reimbursement claims for specific services
provided by specific types of professionals, but failed to disclose serious violations of
regulations pertaining to staff qualifications and licensing requirements. Id. at 1999–2001.
Here, Buth argues that Walmart was violating federal and state standards by converting
customers' 30-day prescriptions to 90-day prescriptions without patient consent, reviewing
prescription history, or exercising professional judgment. (Docket # 51 at 33–34.) Because
Medicare regulations require Walmart to comply with federal and state standards, Buth
argues that Walmart’s failure to do so constituted a misrepresentation to the government in
violation of the FCA. (Id.)
The “implied false certification” theory does not fit the facts of this case. In Escobar,
the defendant’s failure to adhere to regulations resulted in a material misrepresentation
about the goods or services themselves: the regulatory violations led the government to
believe it was paying for one thing, when it was actually paying for something else. Here, by
contrast, the government was led to believe it was paying for 90-day supplies of medications
with valid prescriptions, and that is precisely what it was paying for. Put another way, on
the facts alleged, the conversion of the prescriptions was not material to the government’s
decision to pay the claims. The “implied false certification” theory therefore provides no
basis for FCA liability in this case. Cf. Lisitza, 276 F. Supp. at 788–802 (filling prescriptions
with more expensive forms of drugs than originally prescribed did not constitute fraudulent
concealment under Escobar, nor was it false or misleading under the FCA). For these
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reasons, I find that the “conversion scheme” in the amended complaint does not state a
claim under the FCA.
4.
Count Four: Alleged “Expiration Date” Scheme
Buth moves to voluntarily dismiss this count. (Docket # 51 at 12, 38.) Accordingly,
the Count Four “expiration date” claim will be dismissed without prejudice.
5.
Count Five: Alleged Falsifying PDE Data
Count Five alleges that Walmart violated the 31 U.S.C § 3729(a)(1)(B) by falsifying
prescription drug event (PDE) data in support of false claims for prescription medications.
(Docket # 17 ¶¶ 284–88.) This count is dismissed insofar as it concerns the alleged “days’
supply,” “conversion,” and/or “expiration date” schemes for the reasons already discussed.
It is not dismissed only insofar as it may relate to Count One.
6.
Count Six: Alleged Concealing Obligation to Pay the Government
Count Six alleges that Walmart violated 31 U.S.C. § 3729(a)(1)(G), which imposes
liability on one who “knowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to the
Government, or knowingly conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the Government.” (Id. ¶¶ 289–93.) Buth
alleges that Walmart’s failure to correct claims for allegedly “short-filled” medications and
return payments amounted to knowing concealment of money owed to the government.
(Id.) Buth alleges specific instances of customers and pharmacy staff notifying Walmart of
short-filling, but alleges that Walmart did not correct the claims or reimburse the
government for the overpayments. Because I find that Buth has alleged facts sufficient to
state a claim under 31 U.S.C. § 3729(a)(1)(G) with the alleged “short-filling” scheme, I will
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not dismiss it with regard to that alleged scheme. I will, however, dismiss it with regards to
the other alleged schemes for the reasons already discussed.
7.
Counts Seven through Thirty-Seven: State Law Claims
Walmart does not address the remaining counts individually, each of which alleges a
claim under a state version of the FCA. Rather, Walmart argues that each state law is
construed consistent with the FCA, and thus each claim fails for the same reasons Buth’s
FCA claim fails. (Docket # 40 at 28–29.) Walmart also argues that Buth failed to plead a
nationwide scheme with the particularity required under Rule 9(b), because Buth makes no
specific allegations based on personal knowledge beyond her own Wisconsin pharmacy.
(Docket # 40 at 26–27 (citing United States ex rel. Kroening v. Forest Pharm., Inc., 155 F. Supp.
3d 882, 895–97 (E.D. Wis. 2016)).)
Buth responds that her state law claims survive to the extent her FCA claims survive.
She also argues that the amended complaint adequately alleges the existence of a
nationwide scheme, pointing to cases in which courts have denied motions to dismiss even
when the relator’s knowledge was based on experiences at a single store or at just a few
locations. (Docket # 51 at 35 (citing United States ex rel. Strauser v. Stephen L. LaFrance
Holdings, Inc., No. 18-CV-673-GKF-FHM, 2019 WL 1086363, at *14 (N.D. Okla. Mar. 7,
2019); United States ex rel. Schutte v. Supervalu, Inc., 218 F. Supp. 3d 767, 774 (C.D. Ill. 2016);
United States ex rel. Spay v. CVS Caremark Corp., 913 F. Supp. 2d 125, 177–78 (E.D. Pa. 2012);
United States ex rel. Bibby v. Wells Fargo Bank, N.A., 165 F. Supp. 3d 1340, 1348 (N.D. Ga.
2015); United States ex rel. Drennen v. Fresenius Med. Care Holdings, Inc., No. 09-10179, 2012
WL 8667597, at *2 (D. Mass. Mar. 6, 2012)).)
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In cases alleging widespread fraud, it is true that courts typically require only
representative examples to be pleaded with a high level of particularity. See United States ex
rel. Morgan v. Champion Fitness, Inc., No. 13-cv-1593, 2018 WL 5114124, at *3 (collecting
cases). However, there must also be sufficient facts to support a reasonable inference that
the fraud was, in fact, widespread. See Kroening, 155 F. Supp. 3d at 895–97 (assertion that
relator had spoken with representatives in fifteen other states was insufficient to satisfy Rule
9(b)) (citing U.S. ex rel. Hagerty v. Cyberonics, Inc., 95 F. Supp. 3d 240, 270 (D. Mass. 2015);
U.S. ex rel. Acad. Health Ctr., Inc. v. Hyperion Found., Inc., 2014 WL 3385189, at *33 (S.D.
Miss. July 9, 2014); U.S. ex rel. Woods v. SouthernCare, Inc., 2013 WL 1339375, at *6 (S.D.
Miss. Mar. 30, 2013); U.S. ex rel. Wall v. Vista Hospice Care, Inc., 778 F. Supp. 2d 709, 723
(N.D. Tex. 2011)).
In connection with the only surviving claim, the alleged “short-filling” scheme, Buth
alleges six examples of “short-filling” from one Wisconsin pharmacy. (Docket # 17 ¶¶ 196.)
Buth has not pleaded that Walmart management was aware of the short-filling problem and
failed to remedy it anywhere other than Wisconsin. Compared to the cases Buth cites, this is
not particularly compelling. See, e.g., Strauser, 2019 WL 1086363 at *14 (allegations included
that managers at company headquarters programmed nationally uniform software to bill
fraudulent charges); Schutte, 218 F. Supp. 3d at 774 (allegations included that a pharmacy
chain had official multi-state policy of selling medications at discounts but reporting undiscounted prices to the government); Spay, 913 F. Supp. 2d at 173–78 (plaintiff identified
over 49,000 problematic claims in at least three states and Puerto Rico); Bibby, 165 F. Supp.
3d at 1348 (relators reliably described violations occurring in seven states, including four of
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the ten most populous states in the nation). Therefore, I find that Counts Seven through
Thirty-Seven fail to state claims on which relief can be granted.
8.
Count Thirty-Eight: Wisconsin False Claims for Medical Assistance Act
Buth alleges that Walmart violated the Wisconsin False Claims for Medical
Assistance Act, Wis. Stat. § 20.931. On July 12, 2015, the Wisconsin legislature repealed the
Wisconsin False Claims Act in its entirety. See 2015 Wis. Act 55, § 945n. While Walmart
could be liable for fraudulent activities committed before the repeal date, Wis. Stat. §
990.04, Buth has not alleged with particularity any fraudulent activity occurring before July
12, 2015. The specific examples of “short-filling” she provides all occurred in 2017 and 2018
(Docket # 17 ¶ 196), the standard operating procedures she cites are both dated January
2018 (Docket # 40-3, 40-4), and Buth alleges that Walmart pharmacies experienced a
dramatic turnaround in profitability between 2015 and 2017 due to implementation of the
alleged schemes Buth complains of (Docket # 17 ¶¶ 9–13). Because Buth has not pleaded
sufficient facts to support a reasonable inference that Walmart engaged in any fraud prior to
July 12, 2015, Count Thirty-Eight fails to state a claim upon which relief could be granted.
9.
Statute of Limitations
Walmart moves the court to dismiss any surviving claims to the extent they reach
prior to ten years before the initiation of this action on June 1, 2018. 3 (Docket # 54 at 14.)
Buth indicates that she understands and accepts that claims must be limited to those within
the ten-year limitations period, but objects to any dismissal on this ground as premature. I
Walmart originally argued that the FCA imposed a six-year statute of limitations, on a reading of 31 U.S.C. §
3731(b) that has since been rejected by the U.S. Supreme Court. (Docket # 40 at 29–30.) See Cochise
Consultancy, Inc., vs. United States, ex rel. Hunt, 139 S. Ct. 1507 (2019) (abrogating United States ex rel. Sanders v.
North Am. Bus Industries, Inc., 546 F. 3d 288 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross
Blueshield of Utah, 472 F. 3d 702 (10th Cir. 2006)).
3
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agree, and decline to dismiss any part of Buth’s amended complaint on statute of limitations
grounds at this stage. Reiser v. Residential Funding Corp., 380 F.3d 1027, 1030 (7th Cir. 2004)
(citing Xechem, Inc. v. Bristol–Myers Squibb Co., 372 F.3d 899 (7th Cir. 2004) (collecting
authority)) (“Because the period of limitations is an affirmative defense it is rarely a good
reason to dismiss under Rule 12(b)(6).”).
CONCLUSION
Counts Two, Three, and Seven through Thirty-Eight of Buth’s amended complaint
fail to state any claim on which relief can be granted. Therefore, dismissal of these counts is
appropriate. Counts Five and Six also fail to state a claim except insofar as they relate to
Count One.
Although Walmart argues for dismissal with prejudice because it believes any
attempt to save the claims would be futile (Docket # 40-1 at 30), I find that Buth could
remedy at least some of the shortcomings identified herein, and the prejudice to Walmart of
allowing this would be minimal. I therefore find it appropriate to dismiss the relevant counts
without prejudice.
Finally, Count Four will be dismissed without prejudice at Buth’s request.
ORDER
NOW, THEREFORE, IT IS HEREBY ORDERED that Walmart’s Motion to
Dismiss (Docket # 38) is GRANTED IN PART AND DENIED IN PART. Counts Two,
Three, Four, and Seven through Thirty-Eight are DISMISSED WITHOUT PREJUDICE.
Counts Five and Six are DISMISSED WITHOUT PREJUDICE except insofar as they
relate to Count One.
17
IT IS FURTHER ORDERED that Buth may file a second amended complaint, if
desired, within thirty (30) days of this Order.
Dated at Milwaukee, Wisconsin this 13th day of August, 2019.
BY THE COURT
s/Nancy Joseph_____________
NANCY JOSEPH
United States Magistrate Judge
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