UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Colleen Perry
v. Civil No. 18-cv-1190-JD Opinion No. 2019 DNH 084 Insys Therapeutics, Inc.
O R D E R
Colleen Perry brings claims against Insys Therapeutics,
Inc. that arise from Insys’s actions to induce Physician
Assistant Christopher Clough to prescribe Subsys, an opioid
manufactured by Insys, to Perry. Insys moves to dismiss Perry’s
claims on the grounds that they are barred by the statute of
limitations and that she fails to adequately allege fraud and a
civil conspiracy.1 Perry objects.
Standard of Review
A motion under Federal Rule of Civil Procedure 12(b)(6)
seeks to dismiss on the ground that the plaintiff fails “to
state a claim on which relief can be granted.” A motion to
1 The court notes that Insys provides all citations to sources and authorities in footnotes rather than in the body of its memorandum. That is contrary to the usual practice in this district. See LR 5.1(a); cf. The Bluebook; A Uniform System of Citation R. 1.1(a), at 57 (Columbia Law Review Ass’n et al. eds., 20th ed. 2015) (instructing that citations are provided in footnotes for law review pieces). Here, citations should be included in the body of the filing, following the text they support. dismiss may be based on a defense that the claims are barred by
the statute of limitations. Abdallah v. Bain Capital LLC, 752
F.3d 114, 119 (1st Cir. 2014). To decide the motion, the court
accepts as true all of the properly pleaded facts and draws
reasonable inferences in favor of the nonmoving party. Lemelson
v. Bloomberg L.P., 903 F.3d 19, 23 (1st Cir. 2018).
Background
Colleen Perry had pain in both knees caused by a prior
injury. Beginning in 2013, she was treated at the PainCare
Clinic in Somersworth, New Hampshire. Physician Assistant
Christopher Clough treated her at PainCare with numerous opioid
medication injections.
A. Perry’s Treatment with Subsys
In June of 2013, Clough told Perry that he had a new
miracle drug for her treatment. When Perry protested that she
was doing well on her current medication, Clough told her that
the new drug, Subsys, was much better and persuaded her to
switch. Clough prescribed Subsys, at the dosage of 400 mcg, and
had the drug sent to Perry by FedEx from a company called
Lindencare in New York. Clough continued to prescribe other
opioid medications for Perry to use along with Subsys.
2 Clough increased Perry’s Subsys dose in July of 2013 to 800
mcg. In September of 2013, he increased the dose to 1200 mcg
every four hours. Clough continued to increase the dose,
without any medical justification, until Perry was taking 1600
mcg every four hours in February of 2014.
As a result, Perry became dependent on Subsys. Several
times, she lost consciousness and had to be revived by her
husband who thought she had stopped breathing. On other
occasions she was in a “zombie like state” and even comatose.
She fell asleep at work, at dinner, and while having
conversations. Perry told Clough she could not tolerate such
high doses of Subsys and that the drug was causing her to pass
out. She asked him to reduce the dose. Despite her concerns,
Clough continued to prescribe Subsys at 1600 mcg every four
hours until November of 2014.
In November of 2014, Clough cut the dose of Subsys in half,
which caused Perry to have withdrawal symptoms. Perry called
Clough’s office to report the symptoms. Clough told Perry that
he was leaving the practice to work for his mother and to go
back to school. In reality, Clough was under investigation by
the New Hampshire Board of Medicine. His license was suspended
in 2015 and revoked in 2016. A new physician at Pain Care
attempted to wean Perry off of Subsys beginning in December of
2014. She suffered extreme symptoms of withdrawal.
3 B. Subsys and Insys Therapeutics
Subsys, which is manufactured by Insys Therapeutics, is a
sublingual fentanyl spray. Perry alleges that Subsys is
classified as a schedule II substance, which is more powerful
than morphine or heroin. The FDA approved Subsys in January of
2012 for treatment of breakthrough cancer pain in adults who had
become tolerant of other opioid medications. The approved dose
was no more than 100 mcg. Because of its potency and the risk
of misuse, addiction, and overdose, the FDA imposed rigorous
controls on prescribing and dispensing Subsys.
The New Hampshire Attorney General’s office began an
investigation into Clough’s dealings with Insys. The office
learned that 84% of the Subsys prescriptions in New Hampshire
were written by Clough in 2013 and 2014. Clough was one of the
highest prescribers of Subsys in the country and was the highest
prescriber in New Hampshire.
The Attorney General’s office also learned that Insys paid
Clough $44,000 to promote Subsys at speaking events, which were
shams. The events actually were social gatherings at high end
restaurants for Clough’s family and friends, which were paid for
by Insys sales representatives. The sales representatives
forged the guest lists to inflate the numbers of attendees.
Clough also spoke at Insys programs during 2013 and 2014, called
4 the “Speakers Bureau,” to promote Subsys. Clough was paid for
participating in those events.
Insys sales representatives were paid bonuses based on the
amount of Subsys they sold. Insys completed forms for
prescribers to induce prescribers and insurance companies to
prescribe and pay for Subsys. Insys had its sales
representatives remove Perry’s records from Clough’s office in
order to deceive Perry’s insurer into paying for Subsys even
though Perry had not been diagnosed with cancer.
When Clough was notified in August of 2014 that the New
Hampshire Board of Medicine was investigating his prescription
practices, he informed Insys that he would no longer participate
in their speaker program. Federal authorities arrested Clough
in March of 2017 for receiving financial kickbacks in exchange
for prescribing Subsys. He was convicted in December of 2018 on
charges of conspiracy to pay and receive kickbacks and receiving
kickbacks.2
C. Perry Learns of Alleged Scheme
One of Perry’s doctors told her in September of 2018 that
Clough’s supervising physician at PainCare had been disciplined
2 United States v. Clough, 17-cr-37-JL (D.N.H. Dec. 18, 2018)
5 for failing to properly supervise Clough. Before that, Perry
was unaware of the investigation into Clough’s prescribing
practices and his relationship with Insys. Perry then
researched Clough on the internet and discovered that he had
been arrested and that Insys had been involved in a fraudulent
scheme to bribe Subsys prescribers. Perry also read about
lawsuits against Insys.
Perry filed her complaint against Insys on December 19,
2018. She then filed an amended complaint in which she alleges
claims for fraud, Count I; negligence, Count II; violation of
the New Hampshire Consumer Protection Act, Count III; and civil
conspiracy, Count IV.
Discussion
Insys moves to dismiss all four claims on the ground that
they are time barred. Insys also moves to dismiss the fraud and
civil conspiracy claims on the ground that no cognizable cause
of action is alleged. Perry objects to the motion.
I. Timeliness
Insys asserts that Perry should have known about her
alleged injury and Insys’s connection to that injury by March of
2015 at the latest. In response, Perry acknowledges that her
6 treatment with Subsys, her injuries caused by over prescription,
and Insys’s actions to induce Clough to over prescribe Subsys
all occurred beyond the three-year limitation period. She
argues, however, that under the discovery rule, she did not know
of the causal relationship between her injuries and Insys’s
actions until September of 2018 and, therefore, her claims are
not untimely. Perry also argues that the time is tolled because
Insys fraudulently concealed its involvement in the bribery
scheme with Clough.
Under RSA 508:4, I, as is pertinent for this case, “all
personal actions, . . . may be brought only within 3 years of
the act or omission complained of.” An exception to that time
limit is also provided so that “when the injury and its causal
relationship to the act or omission were not discovered and
could not reasonably have been discovered at the time of the act
or omission, the action shall be commenced within 3 years of the
time the plaintiff discovers, or in the exercise of reasonable
diligence should have discovered, the injury and its causal
relationship to the act or omission complained of.” RSA 508:4,
I. For purposes of the claim under RSA 358-A, transactions are
exempt from liability if they were “entered into more than 3
years prior to the time the plaintiff knew, or reasonably should
7 have known, of the conduct alleged to be in violation of this
chapter.” RSA 358-A:3, IV-a.3
The defendant bears the initial burden to show that the
action was not brought within three years of the underlying
events. Beane v. Dana S. Beane & Co., 160 N.H. 708, 712 (2010).
If that burden is met, the plaintiff bears the burden of showing
that the time is tolled by operation of the discovery rule or
fraudulent concealment. Fuller Ford, Inc. v. Ford Motor Co.,
2001 WL 920035, at *6 (D.N.H. Aug. 6, 2001).
In this case, Perry filed her complaint in state court in
October of 2018. Insys’s alleged kickback and bribery scheme
with Clough and Clough’s prescription of Subsys had ended by
October of 2015, three years before the complaint was filed.
Therefore, the issue for purposes of the motion to dismiss is
whether the discovery rule or the fraudulent concealment rule
tolls the limitation period.
A. Discovery Rule
The discovery rule has two parts. “First, a plaintiff must
know or reasonably should have known that [she] has been
injured; and second, a plaintiff must know or reasonably should
3 In its motion to dismiss, Insys does not address the separate statute of limitations for the Consumer Protection Act. Perry does not raise that issue in response. Therefore, the court will use the RSA 508:4 analysis for all three claims.
8 have known that [her] injury was proximately caused by the
conduct of the defendant.” Beane, 160 N.H. at 713. Therefore,
the discovery rule will apply to toll the limitations period
unless the plaintiff knew or should have known of her injury AND
knew or should have discovered that the defendant caused her
injury. Id. “[A] plaintiff need not be certain of this causal
connection; the possibility that it existed will suffice to
obviate the protections of the discovery rule.” Id.; accord
Lamprey v. Britton Constr., Inc., 163 N.H. 252, 257 (2012). For
purposes of the discovery rule, whether the plaintiff exercised
reasonable diligence is a question of fact. Black Bear Lodge v.
Trillium Corp., 136 N.H. 635, 638 (1993).
Because Perry filed her complaint on December 19, 2018, the
three-year limitation period began on December 20, 2015.
Perry’s allegations show that Clough’s over prescription of
Subsys caused her injury before December of 2015. It is
important in this case, however, to distinguish between Clough’s
actions that caused injuries and Insys’s actions that caused
injuries. Perry’s claim accrued when she knew or should have
known that Insys caused her injuries.
Perry contends that she did not know until September of
2018 that Insys had been involved in a bribery scheme to induce
Clough to improperly prescribe Subsys, including the over
prescription to her that caused her injuries. Therefore, the
9 issue here is when Perry knew or should have discovered Insys’s
involvement in Clough’s prescription misconduct.
Insys argues that the discovery rule does not save Perry’s
claims because she could have discovered Insys’s potential
liability as soon as she experienced the symptoms she describes.
In support, Insys states that Franz v. Purdue Pharma. Co., 2006
WL 455998 (D.N.H. Feb. 22, 2006), is “on all fours” with this
case. Insys also relies on a New Hampshire Superior Court order
finding that claims against Clough and Insys were untimely.
Neither case is persuasive here.
1. Franz
Franz is a product liability case in which the plaintiff
sued the companies that manufacture, market, and distribute
OxyContin, collectively referred to as Purdue, alleging that the
drug was defective and unreasonably dangerous because of its
addictive qualities. The question there was when the plaintiff
reasonably should have known that her injuries were caused by
OxyContin, which was manufactured by Purdue. The court reasoned
that when the plaintiff was hospitalized because of OxyContin
related illness, she knew or should have known of the addictive
qualities of the drug, which was manufactured and marketed by
Purdue. Id. at *3.
10 In this case, Perry is not bringing a product liability
claim and does not allege that there is anything wrong with
Subsys. Instead, she alleges that Insys caused her injuries by
bribing and otherwise inducing Clough to prescribe Subsys to her
for knee pain, when the drug is only approved for break through
cancer pain, and to prescribe Subsys at dosages far in excess of
the approved amounts. In other words, Insys’s conduct that is
at issue in this case is the alleged bribery and kickback scheme
with Clough.4 For that reason, Franz is not “on all fours” with
this case and is not persuasive authority to find the claims are
time barred.
2. Superior Court Case
In the superior court case, the plaintiffs brought suit
against Clough, the PainCare clinic, doctors at the PainCare
clinic, and Insys, alleging claims of negligence, medical
malpractice, respondeat superior, and loss of consortium. Doc.
8-2; Kyle v. Clough, 219-2018-CV-00163 (Strafford Count Sup. Ct.
Sept. 20, 2018). Considering the claims together, the court
4 Insys does not explain why Perry’s withdrawal symptoms would have put her on notice that Insys was involved in a scheme with Clough to prescribe Subsys for non-approved uses and at much higher dosages than had been approved. Unlike the plaintiff in Franz, Perry does not claim that Subsys was defective or unreasonably dangerous or that Insys represented that Subsys would not cause addiction or withdrawal symptoms.
11 found that they arose when Clough abruptly discontinued Subsys
in September of 2014 and that the discovery rule did not apply
because the plaintiffs knew about the high prescription levels,
the changes, and their injuries. The claims were dismissed.
The plaintiffs then moved to amend their complaint to add a
claim of fraud against Insys. Doc. 8-3. Although Insys
objected, the court allowed the amendment. Id. Therefore, that
case was not resolved completely on the statute of limitations
issue and suggests that a separate fraud claim against Insys
would be evaluated differently from the limitations analysis
that involved Clough. In any event, this court does not find
the analysis in Kyle persuasive to show that the discovery rule
would not apply here.
3. Result
Insys provides no factual basis or legal theory to show
that Perry knew or should have known of its alleged kickback and
bribery scheme with Clough before September of 2018. Insys does
not show that Perry could have reasonably discovered that scheme
earlier. Therefore, the causal connection was missing until
Perry had reason to know of Insys’s alleged scheme, which she
alleges did not happen until September of 2018. As a result,
Insys has not shown that Perry’s claims are barred by the
statute of limitations.
12 B. Fraudulent Concealment
Perry also contends that the fraudulent concealment rule
applies to toll the limitations period. “[T]he fraudulent
concealment rule states that when facts essential to the cause
of action are fraudulently concealed, the statute of limitations
is tolled until the plaintiff has discovered such facts or could
have done so in the exercise of reasonable diligence.” Bricker
v. Putnam, 128 N.H. 162, 165 (1986). The equitable purpose of
the fraudulent concealment rule in tolling the limitations
period is to prevent the wrongdoer from receiving and keeping
the benefit of its fraudulent conduct. Lakeman v. LaFrance, 102
N.H. 300, 303 (1959).
Insys argues that the fraudulent concealment rule does not
apply because it had no relationship with Perry, it did not take
any affirmative act to prevent her from acquiring information,
and she should have discovered its scheme when she became ill.
Perry contends that Insys’s actions were fraudulent, illegal,
and necessarily covert.
As is explained above, the limitations period is tolled by
the discovery rule. In addition, however, the allegations of
Insys’s efforts to induce Clough to improperly prescribe Subsys
to Perry and the subterfuge Insys used to hide improper
13 prescriptions and the kickback scheme would also support
application of the fraudulent concealment rule.5
II. Fraud Claim
Insys moves to dismiss the fraud claim on the ground that
Perry does not state a cognizable claim. Under New Hampshire
law, to state a fraud claim, a plaintiff must allege facts that
show “the defendant made a representation with knowledge of its
falsity or with conscious indifference to its truth with the
intention to cause another to rely upon it.” Snierson v.
Scruton, 145 N.H. 73, 77 (2000). The plaintiff must also
establish that her reliance was justified. Id. Fraud may
consist of the intentional concealment of a material fact.
Leavitt v. Stanley, 132 N.H. 727, 729 (1990) (citing Batchelder
v. N. Fire Lites, Inc., 630 F. Supp. 1115, 1118 (D.N.H. 1986)
(citing LeClerc v. Ins. Co., 93 N.H. 234, 237 (1944)). For “a
failure to disclose to be actionable fraud, there must be a duty
arising from the relation of the parties to so disclose.”
Batchelder, 630 F. Supp. at 1118.
In support of her fraud claim, Perry alleges actions by
Insys and its sales representatives to conceal the payments made
5Under New Hampshire law, the fraudulent concealment rule for purposes of tolling the statute of limitations is different from a cause of action for fraud. Cf. Bricker, 128 N.H. at 165, with Batchelder, 630 F. Supp. at 1118.
14 to Clough and to improperly obtain insurance coverage for Subsys
prescriptions. She does not allege any false representations
that Insys made to her or any material fact that Insys concealed
from her, when it had a duty to disclose. In other words, Perry
alleges facts that might show fraud by Insys against insurance
companies and improper or illegal payments to Clough, but she
does not allege facts that show that Insys defrauded her.
Perry argues in her objection that it is not necessary for
Insys to make a false representation to her, and instead fraud
may be based on a false representation to “another”. Even if
that were true, which the court does not determine, Perry has
not alleged a cognizable claim based on that theory. She
contends that Insys made false representations to unnamed
others, including insurance companies, but she does not allege
how she reasonably relied on those representations or that she
even knew about them. That is all missing from the complaint.6
To the extent Perry relies on a theory of fraud by
omission, she fails to allege facts to support the claim. She
does not allege what Insys concealed from her or that Insys owed
her a duty to disclose information that was concealed. Given
6 Perry does not allege or argue that Insys is responsible for misrepresentations or omissions by Clough. See Patch v. Arsenault, 139 N.H. 313, 317 (1995).
15 the requirements of Federal Rule of Civil Procedure 9(b), these
facts cannot be presumed.
While the circumstances might suggest fraud, Perry has not
alleged facts to support a claim that she was the victim of
fraud by Insys. She also has not articulated a cognizable fraud
theory in her objection to Insys’s motion.7 Therefore, based on
the allegations in the complaint, Perry has not alleged a fraud
claim against Insys.
III. Civil Conspiracy
Insys moves to dismiss Perry’s civil conspiracy claim on
the ground that New Hampshire does not recognize a separate
claim for civil conspiracy. Insys contends that because the
civil conspiracy claim is based on the fraud claim, which is
deficient, the civil conspiracy claim also fails to state a
cognizable claim. Perry argues that the civil conspiracy claim
is adequately alleged.
Under New Hampshire law, “‘[t]o state a claim for civil
conspiracy the plaintiff must allege: (1) two or more persons
(including corporations); (2) an object to be accomplished
In support of her fraud claim, Perry quotes a statement 7
about fraudulent concealment from a case filed against Insys in a court in Leavenworth County, Kansas. New Hampshire substantive law governs the claims in this case. It is not clear how the quote shows that Perry has alleged sufficient facts to show fraud by omission under New Hampshire law.
16 (i.e., an unlawful object . . .); (3) an agreement on the object
or course of action; (4) one or more unlawful overt acts; and
(5) damages as the proximate result thereof.’” 8 Laura v. Gr.
Lakes Higher Ed. Guaranty Corp., 2018 DNH 023, 2018 WL 671174,
at *8 (D.N.H. Feb. 1, 2018) (quoting Jay Edwards, Inc. v. Baker,
130 N.H. 41, 47 (1987)); see also Isaacs v. Trs. Of Dartmouth
Coll., 2018 WL 734182, at *11 (D.N.H. Feb. 5, 2018). An action
for civil conspiracy is aimed at the damage that it caused. In
re Appeal of Armaganian, 147 N.H. 158, 162 (2001).
Perry alleges that Clough and Insys conspired through the
bribery and kickback scheme to prescribe Subsys to her for a
nonapproved use and in dosages that exceeded the highest
approved amounts. The object to be accomplished by the
conspiracy between Clough and Insys was for Insys to make money
from the sale of Subsys that it would not have made if Subsys
had been prescribed only for appropriate treatment and in
approved dosages. The means of accomplishing that object was
8 Although the “unlawful object” or “unlawful means” elements of civil conspiracy may be satisfied by an underlying tort, the New Hampshire Supreme Court has not held that the underlying tort must also be a viable claim against the named defendant. “[Civil conspiracy] is a legal doctrine under which liability for a tort may be imposed on people who did not actually commit a tort themselves but who shared a common plan for its commission with the actual perpetrators.” 15A C.J.S., Conspiracy § 1 (March 2019 Update) (earlier edition quoted by the New Hampshire Supreme Court in Jay Edwards, 130 N.H. at 47, for the elements of a claim for civil conspiracy). In any case, Perry alleges torts other than fraud.
17 the alleged bribery and kickback scheme used by Insys to sell
Subsys, which was arguably unlawful.9 The alleged result of the
conspiracy between Insys and Clough was that Perry suffered from
the effects of over prescription of an addictive drug that was
not medically necessary or even approved for her treatment.
Therefore, the civil conspiracy claim is not necessarily
dependent on the fraud claim. Perry alleges facts that state a
claim for civil conspiracy.
Conclusion
For the foregoing reasons, the defendant’s motion to
dismiss (document no. 13) is granted as to the fraud claim,
Count I, and is otherwise denied.
SO ORDERED.
______________________________ Joseph A. DiClerico, Jr. United States District Judge
May 14, 2019 cc: Michael P. Rainboth, Esq. Michael D. Ramsdell, Esq. Adam P. Schwartz, Esq. David J. Walz, Esq.
9 See, e.g., United States v. Clough, 17-cr-37-JL (D.N.H. Dec. 18, 2018) (jury verdict against Clough on charges of conspiracy to pay and receive kickbacks in violation of 18 U.S.C. § 371 and receiving kickbacks in violation of 42 U.S.C. § 1320a-7b(b) from a “pharmaceutical company”); United States v. Gurry, 16-cr-10343-ADB (D. Mass. May 2, 2019) (jury verdict against Insys executives).