1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, No. 2:09-cv-03010-MCE-EFB ex rel. FRANK SOLIS, 12 Plaintiff, 13 MEMORANDUM AND ORDER v. 14 MILLENNIUM PHARMACEUTICALS, 15 INC., SCHERING-PLOUGH CORP., and MERCK & CO., 16 Defendants. 17
18 19 This lawsuit was originally filed under seal on November 4, 2009, pursuant to the 20 qui tam provisions of the Federal False Claims Act, 31 U.S.C. §§ 3729, et seq. (“FCA”) 21 The Defendants, who are pharmaceutical companies, include Millennium 22 Pharmaceuticals, Inc., Schering-Plough Corp., and Merck & Co. (“Defendants” unless 23 otherwise indicated). The so-called “Relator” plaintiff, Frank Solis, (“Relator” or 24 “Plaintiff”) a former sales employee who at various points worked for all three 25 Defendants, claims that the companies fraudulently marketed and/or promoted the use 26 of two drugs, Integrilin and Avelox. Relator alleges that Defendants promoted so-called 27 “off label” uses for Integrilin not approved by the Food and Drug Administration (“FDA”). 28 In so doing, according to Relator, Defendants “caused” physicians to improperly 1 prescribe the drugs and to submit false claims to Medicare, Medicaid and TRICARE 2 (United States Military Healthcare) for federal reimbursement which the government 3 allegedly paid without knowing the claims were ineligible for reimbursement. In addition, 4 Relator alleges that Defendants paid illegal kickbacks to entice physicians to prescribe 5 the drugs. Following a three-year investigation, the United States and all twenty-four 6 states named in the initial complaint chose not to intervene, and Relator’s Complaint was 7 subsequently unsealed on December 20, 2012. 8 Presently before the Court are Motions brought by Defendants Schering-Plough 9 Corp. and Merck & Co., Inc, (collectively “Schering”) and Defendant Millennium 10 Pharmaceuticals, Inc. (“Millennium”). ECF Nos. 195, 199. Both Motions are brought 11 pursuant to Federal Rule of Civil Procedure 12(b)(1)1 and allege this Court lacks subject- 12 matter jurisdiction over Relator’s allegations, as set forth in his operative Third Amended 13 Complaint (“TAC”). Defendants contend that Relator’s Integrilin-related allegations as to 14 both off-label promotion and kickbacks are barred by the FCA’s public disclosure bar 15 (which divests federal courts of jurisdiction where the alleged fraud has already been 16 publicly disclosed) since Relator cannot qualify as an “original source” as to those 17 allegations. 31 U.S.C. § 3730(e)(4). In addition, by way of a separate Motion to 18 Dismiss, Defendant Schering argues that Relator’s allegations as to the improper 19 promotion of Avelox also fail to state a viable claim under Rule 12(b)(6) or to allege fraud 20 with the requisite particularity under Rule 9(b). 21 As set forth below, Defendants’ Motions under Rule 12(b(1) are GRANTED 22 because Relator has not shown he is an original source as to the allegations at issue. 23 Because the Court consequently concludes that it has no jurisdiction over Relator’s 24 claims, Defendants’ concurrently filed additional motions challenging the TAC are 25 /// 26 /// 27 1 All further references to “Rule” or “Rules” are to the Federal Rules of Civil Procedure unless 28 otherwise noted. 1 DENIED2 as moot except for Defendant Schering’s Motion to Dismiss under Rule 9(b), 2 which is GRANTED since Relator’s allegations with respect to the fraudulent promotion 3 of Avelox remain insufficient.3 4 5 FACTUAL BACKGROUND 6 7 Integrilin helps reduce blood clots and thereby helps to prevent heart attacks and 8 death in patients suffering from acute coronary syndrome (“ACS”). ACS is an umbrella 9 term that covers a variety of diseases related to clotting in the coronary arteries that 10 supply blood to the heart muscle, including unstable angina, mild heart attacks known as 11 non-ST-segment elevation myocardial infarctions, and more severe heart attacks called 12 ST-segment elevation myocardial infarctions (“STEMI”). Avelox, on the other hand, is an 13 antibiotic approved by the FDA for treating adult patients with infections caused by a few 14 susceptible strains of microorganisms. 15 With respect to Integrilin, FDA approval was first obtained in May 1998 by a 16 company named COR Therapeutics, Inc. (“COR”), which thereafter promoted the drug 17 along with Defendant Schering-Plough. In February of 2002, Defendant Millennium 18 acquired COR and thereby obtained the right to co-promote Integrilin. In September of 19 2005, Defendant Millennium transferred its right to market Integrilin within the United 20 States to Defendant Schering-Plough, thereby relinquishing any responsibility for the 21 drug after a period of less than four years. Schering-Plough later merged with Merck in 22 November of 2009 to form a new company, also known as Merck. 23 /// 24
25 2 Those Motions include Motions to Dismiss brought by Defendants Millennium, Schering-Plough and Merck to dismiss pursuant to Rules 9(b) and 12(b)(6) (ECF Nos. 196, 200); a Joint Motion to Strike portions of the TAC under California’s so-called “anti-SLAPP” statute, Cal. Code Civ. Proc. § 425.16 (ECF 26 No. 198) brought by both Defendants; and a Motion to Strike portions of the TAC pursuant to Rule 12(f) (ECF No. 197), also brought by both Defendants. 27
3 Having determined that oral argument was not of material assistance, the Court ordered this 28 matter submitted on the briefs in accordance with Local Rule 230(g). 1 Relator Solis was a pharmaceutical sales representative for Millennium covering 2 the Los Angeles area between July 2003 and September of 2005. At that time he 3 transitioned to employment for Schering-Plough. Then, in November of 2009, after the 4 Schering/Merck merger, he became a Merck sales representative. Relator was 5 terminated by Merck on March 9, 2010. 6 Relator’s operative TAC alleges that Defendants promoted improper uses of 7 Integrilin, including its early use for STEMI patients, despite the fact that such early use 8 is “extremely dangerous, off-label and fraudulent.” TAC, ¶¶ 5, 11. Relator further claims 9 that Defendants violated the so-called Anti-Kickback Statute (“AKS”), which prohibits a 10 drug company from knowingly and willfully offering or paying remuneration to purchase 11 goods or services for which payment may be made by a federal healthcare program. 12 See 42 U.S.C. § 1320a-7(b)(2)(B). Relator alleges that Defendants violated the AKS by 13 “funnel[ing] millions of dollars” in grants, honoraria, and meals to physicians in order to 14 induce Integrilin prescriptions and to drive “off label” sales, all in violation of the AKS. 15 See TAC, ¶¶ 7-8.4 16 While most of the TAC focuses on allegations pertaining to the use and promotion 17 of Integrilin, Relator also includes more limited averments concerning Avelox, which 18 Schering marketed and Relator claims he also promoted. Id. at ¶ 32. Those allegations 19 are based solely on alleged kickbacks; no off-label claims pertaining to Avelox are 20 asserted. 21 22 PROCEDURAL HISTORY 23 24 As indicated above, Relator’s initial lawsuit was filed on November 4, 2009. After 25 a three-year investigation, the United States and the twenty-four states named in the 26 /// 27 4 Off-label use of a drug occurs when it is used either for a purpose not approved by the FDA, of 28 where non-indicated dosing regimens for the drug are promoted. 1 initial complaint chose not to intervene, and Relator’s complaint was unsealed on 2 December 20, 2012. 3 In response to earlier Motions to Dismiss filed on behalf of each of the 4 Defendants, Relator filed a First Amended Complaint (“FAC”) on June 27, 2013. The 5 viability of Plaintiff’s FAC was attacked through three separate motions. Defendant 6 Schering filed a Motion to Dismiss for lack of subject matter jurisdiction under Federal 7 Rule of Civil Procedure 12(b)(1) on grounds that Relator’s complaint was barred by the 8 FCA’s so-called “public disclosure” limitation. Defendant Millennium subsequently joined 9 in that motion. Additionally, two other motions, one filed jointly by Schering and Merck 10 and the other by Millennium, argued that the various causes of action pled in the FAC 11 were substantively deficient in contravention of Rule 12(b)(6). By Memorandum and 12 Order filed March 26, 2014 (ECF No. 105), this Court granted Defendants’ Rule 12(b)(1) 13 motion agreeing that the public disclosure bar applied to Relator’s “combination use” 14 allegations. Because Relator’s FAC contained other allegations beyond combination 15 use, however, including assertions pertaining to a completely different drug, Avelox, as 16 well as allegations of fraud, improper billing, and impermissible kickbacks, the Court 17 permitted Relator to file a Second Amended Complaint (“SAC”) omitting the combination 18 use allegations.5 19 Relator’s SAC was also met by motions to dismiss. The Court again granted 20 Millennium’s motion to dismiss for lack of subject matter jurisdiction and denied as moot 21 Millenium’s concurrently filed dismissal request under Rules 12(b)(6) and 9(b). See 22 March 26, 2015 Mem. and Order, (ECF No. 157) at 15. It held that both the kickback 23 and off-label claims brought under federal law were substantially similar to allegations 24 first raised in civil actions filed in 2007. Id. at 11-15. The Court further found that Relator 25 was not an “original source” so as to escape the FCA’s public disclosure bar as to those
26 5 Because the Rule 12(b)(6) motions challenged the sufficiency of the FAC’s allegations at a point when the question of the Court’s jurisdiction over this qui tam action had not yet been determined, and 27 since the parameters of a SAC without the combination use allegations would likely be far different than its predecessor, the Court denied those motions without prejudice to being renewed following submission of 28 the SAC. 1 allegations because he “presented no evidence that he ‘had a hand’ in the prior 2007 2 litigation.” Id. at 15. Finally, the Court dismissed Relator’s state law claims through 3 application of the same analysis and because the Court declined to exercise 4 supplemental jurisdiction over the state law claims in any event.” Id. at 16. Although the 5 Court denied Schering’s initial motion under Rules 12(b)(6) and 9(b) challenging the 6 SAC (Mar. 30, 2015 Mem. and Order, ECF No. 158), it ultimately dismissed Relator’s 7 claim against Schering following a subsequently filed Rule 12(b)(6) motion, ruling that 8 the prior public disclosures were “equally applicable” to both Schering and Millennium, 9 and that consequently Schering’s dismissal was proper for the same reasons set forth in 10 the Court’s earlier March 26, 2015 Memorandum. Sept. 1, 2015 Mem. and Order, ECF 11 No. 164. 12 Relators appealed from the Rule 12(b)(1) dismissal of his claims, and Defendants 13 cross-appealed the Court’s denial of their substantive motions to dismiss. On March 15, 14 2018, the Ninth Circuit affirmed in part and vacated in part, remanding the case with 15 instructions. United States ex rel. Solis v. Millennium Pharm., Inc. (“Solis”), 885 F.3d 16 623 (2018). The Ninth Circuit affirmed this Court’s determination that Relator’s claims as 17 to Integrilin were “substantially similar to those in . . . prior public disclosures” and found 18 that they were then precluded by the FCA’s public disclosure bar unless Relator can 19 show he qualified as an “original source” of the claims. Id. at 627. Although this Court 20 had found that Relator did not so qualify, the Ninth Circuit pointed out that intervening 21 circuit law had in fact undercut the basis for that determination by repudiating an earlier 22 recognized requirement that the Relator must have “had a hand” in the disclosure in 23 order to qualify for the original source exception to the public disclosure bar. Id. at 628, 24 citing United States ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121, 1129 25 (9th Cir. 2015) (en banc). Consequently, the Ninth Circuit remanded for consideration of 26 whether Relator had satisfied the original source test as articulated in Hartpence, which 27 requires, in pertinent part, that Relator have “direct and independent knowledge” of the 28 information on which his allegations are based in order to qualify as an additional 1 source. Moreover, with regard to Relator’s Avelox claims, while the Ninth Circuit 2 rejected the notion that those claims had been previously disclosed, it nonetheless 3 affirmed dismissal of the Avelox allegations under Rule 9(b), finding that Relator had 4 failed to plead them with the requisite particularity. Id. at 629. The Ninth Circuit’s 5 decision instructed this Court to decide upon remand whether leave to amend should be 6 permitted so as to give Relator another opportunity to make viable allegations 7 concerning Avelox. 8 Following remand of the matter this Court held a Status Conference on April 4, 9 2019, at which time it directed Relator to file a TAC. Relator’s TAC alleges causes of 10 action for false claims based on the AKS (Counts One and Two), false claims for causing 11 the submission of off-label billings (Counts Three and Four), and false claims for the 12 fraudulent promotion of Integrilin (Count Five). Plaintiff’s claims are all rooted in the 13 federal FCA, but additional causes of action based on corresponding state law statutory 14 provisions are also made on behalf of both California (Count Six) and twenty-seven other 15 states (Counts Eight through Thirty-Two).6 16 Although counsel for Relator indicated during the Status Conference that the 17 Avelox claims would not be pursued, the May 10, 2019, TAC continues to make Avelox 18 related claims stemming from alleged kickbacks, albeit with a few additional allegations 19 to remedy the earlier deficiencies identified by the Ninth Circuit. Relator also attempts to 20 augment allegations pertaining to his own knowledge of Defendant’s alleged fraudulent 21 activities in order to shore up his claim that he qualifies as an “original source” of those 22 allegations. 23 /// 24 /// 25 /// 26 /// 27 6 In his TAC, Relator drops some states (New Hampshire and Wisconsin) and adds others 28 (Colorado, Connecticut, Maryland, Minnesota, North Carolina, and Washington) 1 STANDARD 2 3 A. Dismissal under Rule 12(b)(1) 4 Federal courts are courts of limited jurisdiction and are presumptively without 5 jurisdiction over civil actions. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 6 377 (1994). The burden of establishing the contrary rests upon the party asserting 7 jurisdiction. Id. Because subject matter jurisdiction involves a court’s power to hear a 8 case, it can never be forfeited or waived. United States v. Cotton, 535 U.S. 625, 630 9 (2002). Accordingly, lack of subject matter jurisdiction may be raised by either party at 10 any point during the litigation, through a motion to dismiss pursuant to Federal Rule of 11 Civil Procedure 12(b)(1). Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006); see also Int’l 12 Union of Operating Eng’rs v. Cnty. of Plumas, 559 F.3d 1041, 1043-44 (9th Cir. 2009). 13 Lack of subject matter jurisdiction may also be raised by the district court sua sponte. 14 Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). Indeed, “courts have an 15 independent obligation to determine whether subject matter jurisdiction exists, even in 16 the absence of a challenge from any party.” Id.; see Fed. R. Civ. P. 12(h)(3) (requiring 17 the court to dismiss the action if subject matter jurisdiction is lacking).There are two 18 types of motions to dismiss for lack of subject matter jurisdiction: a facial attack, and a 19 factual attack. Thornhill Publ’g Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 20 (9th Cir. 1979). Thus, a party may either make an attack on the allegations of jurisdiction 21 contained in the nonmoving party’s complaint, or may challenge the existence of subject 22 matter jurisdiction in fact, despite the formal sufficiency of the pleadings. Id. 23 When a party makes a facial attack on a complaint, the attack is unaccompanied 24 by supporting evidence, and it challenges jurisdiction based solely on the pleadings. 25 Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). If the motion to 26 dismiss constitutes a facial attack, the Court must consider the factual allegations of the 27 complaint to be true, and determine whether they establish subject matter jurisdiction. 28 Savage v. Glendale High Union Sch. Dist. No. 205, 343 F.3d 1036, 1039 n.1 (9th Cir. 1 2003). In the case of a facial attack, the motion to dismiss is granted only if the 2 nonmoving party fails to allege an element necessary for subject matter jurisdiction. Id. 3 However, in the case of a facial attack, district courts “may review evidence beyond the 4 complaint without converting the motion to dismiss into a motion for summary judgment.” 5 Safe Air for Everyone, 373 F.3d at 1039. 6 In the case of a factual attack, “no presumptive truthfulness attaches to plaintiff’s 7 allegations.” Thornill, 594 F.2d at 733 (internal citation omitted). The party opposing the 8 motion has the burden of proving that subject matter jurisdiction does exist, and must 9 present any necessary evidence to satisfy this burden. St. Clair v. City of Chico, 10 880 F.2d 199, 201 (9th Cir. 1989). If the plaintiff’s allegations of jurisdictional facts are 11 challenged by the adversary in the appropriate manner, the plaintiff cannot rest on the 12 mere assertion that factual issues may exist. Trentacosta v. Frontier Pac. Aircraft Ind., 13 Inc., 813 F.2d 1553, 1558 (9th Cir. 1987) (quoting Exch. Nat’l Bank of Chi. v. Touche 14 Ross & Co., 544 F.2d 1126, 1131 (2d Cir. 1976)). Furthermore, the district court may 15 review any evidence necessary, including affidavits and testimony, in order to determine 16 whether subject matter jurisdiction exists. McCarthy v. United States, 850 F.2d 558, 560 17 (9th Cir. 1988); Thornhill, 594 F.2d at 733. If the nonmoving party fails to meet its 18 burden and the court determines that it lacks subject matter jurisdiction, the court must 19 dismiss the action. Fed. R. Civ. P. 12(h)(3). 20 A court granting a motion to dismiss a complaint must then decide whether to 21 grant leave to amend. Leave to amend should be “freely given” where there is no 22 “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice 23 to the opposing party by virtue of allowance of the amendment, [or] futility of the 24 amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. 25 Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to 26 be considered when deciding whether to grant leave to amend). Not all of these factors 27 merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . 28 carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 1 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that 2 “the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, 3 Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 4 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 5 1989) (“Leave need not be granted where the amendment of the complaint . . . 6 constitutes an exercise in futility . . . .”). 7 B. Pleading Fraud Claims 8 Rule 9(b) requires that “in all averments of fraud or mistake, the circumstances 9 constituting fraud or mistake shall be stated with particularity. To meet the requisite 10 particularity standards on a case like the present one, which asserts claims under the 11 federal FCA, Relator’s allegations must be accompanied by the “who, what, when, 12 where, and how of the misconduct charged.” Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 13 993, 998 (9th Cir. 2010) (quoting Vess v. Ciba-Geigy Corp., U.S., 317 F.3d 1097, 1106 14 (9th Cir. 2003)). In the Ninth Circuit, “it is sufficient to allege ‘particular’ details of a 15 scheme to submit false claims paired with reliable indicia that lead to a strong inference 16 that claims were also submitted.” Ebeid, 616 F.3d 998-99. 17 18 ANALYSIS 19 20 A. The “Public Disclosure” Bar: Initial Considerations 21 If a public disclosure has occurred and the Relator cannot qualify as an “original 22 source” of the false claim allegations, this Court lacks jurisdiction under the FCA over the 23 previously disclosed allegations. See Rockwell Int’l Corp. v. United States, 549 U.S. 24 U.S. 457, 472-73 (2007); United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 25 1195, 1199 (9th Cir. 2009). This “public disclosure” bar seeks to “strike a balance 26 between encouraging private persons to root out fraud and stifling parasitic lawsuits” in 27 which “opportunistic plaintiffs who have no significant information to contribute of their 28 /// 1 own” seek to collect a share of the government’s recovery. Graham Cnty. Soil & Water 2 Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 295 (2010). 3 By its Memorandum and Order filed March 26, 2014, (ECF No. 105) this Court 4 determined that the statutory bar in effect at the time Relator’s initial complaint was filed 5 on November 4, 2009, governs here. As amended in 2006, that public disclosure bar 6 precludes jurisdiction over a qui tam action “based upon” previously disclosed 7 allegations, unless the party bringing the action qualifies as an “original source of the 8 information already disclosed: 9 No court shall have jurisdiction over an [FCA qui tam] action . . . based upon the public disclosure of allegations 10 or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting 11 Office report, hearing, audit or investigation, or from the news media, unless the action is brought by the Attorney General 12 or the person bringing the action is an original source of the information. 13 14 31 U.S.C. § 3730(e)(4)(A) (2006) (emphasis added). 15 The 2006 statute goes on to define the term “original source” as follows: 16 For purposes of this paragraph, “original source” means an individual who has direct and independent knowledge of the 17 information on which the allegations are based and has voluntarily provided the information to the Government before 18 filing an action under this section which is based on the information. 19 20 Id. at § 3730(e)(4)(B) (2006). 21 B. The Original Source Exception 22 As indicated above, by Memorandum and Order dated March 26, 2015, this Court 23 determined that a public disclosure occurred. Therefore, Plaintiff can avoid the 24 jurisdictional bar posed by public disclosure only upon a showing that he is an “original 25 source” as defined by the statute and case law. A-1 Ambulance Ser., Inc. v. California, 26 202 F.3d 1238, 1243 (9th Cir. 2000) (under a two-part test, a court need only address 27 the original source issue if it first determines a prior public disclosure has occurred). 28 Relator bears the burden of establishing that he qualifies as an original source. See 1 United States ex rel. Harshman v. Alcan Elec. & Eng’g, Inc., 197 F.3d 1014, 1018 2 (9th Cir. 1999) (holding that a relator bears the burden of establishing subject matter 3 jurisdiction, including whether he is an “original source” under the statute). 4 Ninth Circuit law makes it clear that to qualify as an original source, Relator must 5 demonstrate (1) “direct and independent knowledge” of the information on which his 6 allegations rest; and (2) that he “voluntarily provided” that information to the government 7 before filing his action. Hartpence, 792 F.3d at 1128.7 In order to show the requisite 8 direct knowledge, Relator must demonstrate “firsthand knowledge of the alleged fraud, 9 and that he obtained this knowledge through his ‘own labor unmediated by anything 10 else.’” Harshman, 197 F.3d at 1020; United States ex rel. Aflatooni v. Kitsap Physicians 11 Servs., 163 F.3d 516, 524-25 (9th Cir. 1999). Former employment with a defendant 12 does not automatically make a Relator an original source with direct knowledge of 13 fraudulent behavior alleged to have occurred while Relator was employed. See, e.g., 14 United States ex rel. Bly-Magee v. Premo, 470 F.3d 914, 917 (9th Cir. 2006) (rejecting 15 as insufficient mere fact of employment as executive director absent “specifics”); 16 Harshman, 197 F.3d at 1021 (rejecting argument that “status as a member of the union” 17 sufficed to show direct knowledge); United States v. Scan Health Plan, No. CV 09-5013, 18 2015 WL 12778776 at *7 and n. 9 (rejecting assertion that everything “learned during the 19 course of [a relator’s] employment . . . constitutes ‘direct knowledge’” as “contrary” to 20 “Ninth Circuit authority”). 21 To the contrary, courts have made it clear that a former employee does not 22 qualify as an original source absent direct knowledge of instances where a defendant 23 caused a false claim to be submitted. See, e.g., Harshman, 197 F.3d at 1021 (holding 24 relator failed to satisfy his burden in proving original source status, explaining that that 25 relator did “not allege that he played any role in submitting false claims to the 26 government”); United States ex rel. Green v. Serv. Contract Educ. & Training Trust
27 7 Defendants do not dispute, for purposes of these motions, that Relator provided information to the government before filing this action. See Schering Mot., ECF No. 199, p. 10, n. 6; Millennium Mot., 28 ECf No. 195, p. 7, n.2. 1 Fund, 843 F. Supp. 2d 20, 36 (D.D.C. 2012) (finding original source averments lacking 2 where relator “ha[d] not pled that he observed first-hand the pay vouchers or supporting 3 documentation allegedly submitted”). Relators must possess first-hand knowledge that 4 “make[s] a genuinely valuable contribution to the exposure of the alleged fraud.” United 5 States ex rel Devlin v. California, 84 F.3d 358, 362 (9th Cir. 1996).8 Moreover, 6 particularly given the presumption against federal jurisdiction, conclusory allegations will 7 not suffice. See. e.g., Bly-Magee, 470 F.3d at 917 (affirming dismissal despite “lengthy 8 explanation of [relator’s] involvement” and former employment where allegations made 9 were “short of specifics”); United States ex rel. Casady v. Am. Int’l Grp., Inc., 10 No. 10CV0431, 2013 WL 1702777 at * 5 (S.D. Cal. 2013) (finding no direct knowledge 11 where allegations made only in a “conclusory fashion”); Scan Health Plan, 2015 WL 12 12778776 at * 6 (conclusory statements or allegations” insufficient for purposes of 13 satisfying original source requirement). Instead, Relator must demonstrate facts that, if 14 accepted as true, show that he is an original source by a preponderance of the 15 evidence. Aflatooni, 163 F.3d at 525; United States ex rel. Hastings v. Wells Fargo 16 Bank, N.A., No. CV 12-03624, 2014 WL 3519129 at * 7 (C.D. Cal. July 15, 2014); aff’d, 17 656 F. App’x 328 (9th Cir. 2016). 18 C. Whether Relator Qualifies as an Original Source 19 With this background in mind, the Court looks to what Relator claims he knew 20 concerning the submission of fraudulent claims as a result of Defendants’ purported 21 misconduct. The focus must necessarily be on his knowledge concerning the improper 22 claims themselves since that is the relevant inquiry: “the FCA ‘attaches liability, not to the 23 underlying fraudulent conduct or to the government’s wrongful payment, but to the 24 claims for payment.’” United States ex rel. Kelly v. Serco, Inc., 846 F.3d 325, 333 25 (9th Cir. 2017) (quoting United states ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 26 8 While Hartpence abrogated earlier decisions finding that to qualify under the original source 27 exception, a Relator also had to show that he “had a hand” in the original disclosure, it did not change the “direct and independent knowledge” component of the exception and earlier caselaw remains viable as to 28 that component. 1 637 F.3d 1047, 1055 (9th Cir. 2011). As the Ninth Circuit has observed, “[i]t is not 2 enough . . . ‘to describe a [fraudulent scheme] in detail but then to allege simply and 3 without any stated reason . . . that claims requesting illegal payments must have been 4 submitted.’” Id. at 1058 quoting United States ex rel. Clausen v. Laboratory Corp. of 5 America, Inc., 290 F.3d 1301, 1311. 6 Relator points to various steps taken by Defendants while he was employed as a 7 sales representative to support the fraudulent practices he alleges. He claims he “lived 8 through the fraud” by speaking with other sales employees as well as physician clients 9 during the period of his employment with Defendants. Omnibus Opp., ECF No. 204: 10 3:27-4:1. As indicated above, however, the mere fact of employment is not enough 11 absent direct knowledge of instances where a qui tam defendant caused a false claim to 12 be submitted. Harshman, 197 F.3d at 1021. Nor can conversations with third parties 13 establish direct knowledge. Moreover, while Relator points to his participation “in regular 14 company training events” as well as “national and sales training conferences” at which 15 he purportedly received “training, communications and feedback” geared towards his 16 participation in the fraud he alleges,” and while he claims those activities “clearly 17 establish” a basis for his direct and independent knowledge of Defendants’ sales 18 scheme (see Omnibus Opp., 2:22-27), knowledge of a sales scheme is insufficient for 19 purposes of qualifying as an original source unless Relator can also show that actual 20 fraudulent claims were submitted as a result of the scheme. Mr. Solis has failed to set 21 forth any such claims here. Finally, Relator’s identification of aspirational business plans 22 enumerating sales objectives for Integrilin use also do not suffice in the absence of any 23 showing that those plans were actually executed, let alone that Relator had any role in 24 such execution or caused any false claims to be sumitted as a result. See TAC, ¶¶ 68, 25 124. 26 Given the foregoing, this case is analogous to Aflatooni, where a former employer 27 alleged that defendants submitted false claims to Medicare for treatment and services 28 that were not performed or were unnecessary. 163 F.3d at 519-20, 525. The relator in 1 that case simply claimed, much as Mr. Solis does here, that he was an original source 2 simply “[b]y virtue of his position” as a treating physician at a facility operated by one of 3 the defendants where he discovered that “over 50 percent of Medicare radiology claims” 4 were missing information about the referring physician.” Id. at 525. The Ninth Circuit 5 found these allegations insufficient to qualify as an original source since the relator could 6 not identify any specific patient charged for unnecessary medical services. Id. at 526. 7 Without such information, the relator could not demonstrate knowledge of the 8 defendant’s “involvement in the submission of false Medicare claims.” Id. 9 Also on point is United States ex rel. Meyer v. Horizon Health Corp., 565 F.3d 10 1195 (9th Cir. 2002). There the Ninth Circuit found that two nurses did not qualify as 11 original sources where they had no “direct access” to the fraudulent invoices occasioned 12 by a patient who allegedly could not benefit from the care for which charges were being 13 submitted. Id. at 1205. In upholding dismissal under Rule 12(b)(1), the Ninth Circuit 14 held that there was “an important distinction” between “kn[owing] about alleged fraud” 15 and demonstrating “direct and independent knowledge of [defendants’] alleged 16 fraudulent billing . . . ” Id. at 1202. As Defendant Millenium points out, “not all 17 knowledge equates to “direct and independent” knowledge sufficient to qualify as an 18 original source.” Def. Millennium’s Mot., ECF No. 195, 9:11-12. 19 It is therefore clear that the Relator in this case cannot simply rely upon the fact of 20 his employment and must instead point to specific facts demonstrating his direct and 21 independent knowledge of fraudulent behavior. He has failed to do so. Turning first to 22 his off-label allegations, Relator makes no real attempt to show his own involvement in 23 the fraudulent scheme so as to show his direct and independent knowledge of the 24 scheme, let alone whether he had knowledge of actual claims submitted because of the 25 fraud. Indeed, his best argument is that Schering’s Medical Science Liaison (“MSL”) 26 provided letters and material which summarized publicly available studies about off-label 27 use of Integrilin in combination with other drugs. TAC, ¶¶ 51-58. Relator claims that 28 MSL letters also provided physicians with reprints of scientific studies published in 1 medical journals between 2001 and 2008 that discussed improper off-label “early use of 2 Integrilin.” See id. at 77-79. He does not allege, however, that he had any personal role 3 in preparing those letters, and he does not even identify any specific doctors to which 4 they were directed. 5 Moreover, even assuming Plaintiff had the requisite direct and independent 6 knowledge of these activities, he concedes that is was only later studies published in 7 2009 that called into question the reasoning of that prior research. Consequently, the 8 alleged “falsity” of those earlier studies was, at best, only apparent in hindsight. This is 9 insufficient. “[A]n actual false claim is the sine qua non of a[n FCA] violation.” Cafasso., 10 637 F.3d at 1055. Importantly, with respect to dissemination of false information after 11 the 2009 studies were published, only two paragraphs contend that such practices, 12 continued, and both of those allegations are made only on “information and belief,”9 13 probably because Relator ceased his employment with Defendants in March of 2010, 14 shortly after the 2009 studies were published. 15 Additionally, whether a use is on- or off-label is not dispositive of whether 16 Medicare properly reimburses providers in any event; the salient issue is instead 17 whether treatment is “reasonable and necessary for the diagnosis or treatment” of an 18 illness.” 42 U.S.C. § 1395y(a)(1)(A). Relator’s TAC, however, sweepingly alleges that 19 “bills for Integrilin . . . were ineligible for reimbursement under Medicaid and Medicare 20 because the drugs were used for off-label purposes.” TAC ¶ 45. As Defendants point 21 out, that is incorrect. The FDA itself has “long recognized that in certain circumstances, 22 new (off-label) uses are appropriate, rational, and accepted medical practices.” Schering 23 Mot., ECF No. 200, 12:2-6, citing Dissemination of Information on Unapproved/New 24 Uses for Marketed Drugs, Biologics, and Devices, 63 Fed. Reg. 31,143, 31,153 (June 8, 25 1998) (codified at 21 C.F.R. pts. 16, 99). The FDA accordingly protects certain off-label 26 9 See TAC, ¶ 65 (“On information and belief, Defendants’ promotion of Integrilin off-label as an 27 early treatment for ACS patents and as an off-label treatment for STEMI patients continue to this day.”); Id. at ¶ 100 (“[U]pon information and belief, Merck continues to promote Integrilin for off-label use in off-label 28 patient populations in the same manner as set forth in this Complaint today.”). 1 use by physicians as “not merely legitimate but important to the practice of medicine.” 2 Carson v. Depuy Spine, Inc., 365 F. App’x 812, 815 (9th Cir. 2010). There must be 3 allegations that distinguish between bona fide prescribing decisions for off-label use and 4 improper use. U.S. ex re. Rost v. Pfizer, 253 F.R.D. 11, 16-17 (D. Mass. 2008) (alleging 5 off labels marketing as criminal “is not sufficient, without more, to plead a false claims act 6 violation”). 7 Relator’s TAC is silent as to this crucial distinction, since he seemingly 8 characterizes all off-label use and promotion as fraudulent. He assumes that 9 Defendants’ off-label promotion of Integrilin, for example, would necessarily “cause 10 hospitals to submit false claims to Medicare, Medicaid, and TRICARE.” Omnibus Opp., 11 6:23-25. That sweeping characterization cannot carry the day. Without showing direct 12 and independent knowledge of an actual false claim being made as a result of such 13 activities, Relator cannot qualify as an original source. Speculation that a false claim 14 “must have been submitted” as a result of Defendant’s activities cannot suffice. 15 In addition to these off-label allegations, Relator thus further alleges that 16 Defendants provided kickbacks to physicians in connection with Integrilin and Avelox. In 17 support of his sweeping allegation that Defendants “illegally provided monetary and 18 other incentives for physicians who were willing to prescribe the drugs” (TAC, ¶ 15), 19 Relator primarily points to meals allegedly paid for by Defendants, as well as some 20 speaker fees and travel expenses provided to those physicians. Relator exhaustively 21 lists at least twenty separate and specific meals which he claims were kickbacks to 22 doctors prescribing Integrilin and Avelox. 23 Again, however, Relator does not identify payments that were actually intended 24 to, or did, induce doctors to prescribe Integrilin. At most, Relator alleges that the 25 “dramatic increase in Integrilin prescriptions at hospitals with a large number of Medicare 26 and Medicaid patients that Defendants specifically targeted creates a highly plausible 27 inference that the government reimbursed claims that were the direct results of 28 kickbacks, or were influenced by improper marketing.” ECF No. 204 at p.15. However, 1 Relator provides no factual support for that conclusory statement. Indeed, nowhere 2 does the TAC allege that attendees at the events hosted by Defendants were actually 3 asked, or agreed, to use Integrilin as a quid pro quo. Relator fails to identify even a 4 single claim submitted by anyone who attended the meals hosted by Defendants. 5 Indeed, the TAC fails to, at the very least, specifically allege that those meals 6 themselves had any concrete effect on physicians’ prescribing practices for Integrilin. To 7 the contrary, Relator concedes that the physicians who attended those meals had 8 already prescribed Integrilin extensively before the meals alleged. 9 Paying for a client’s meals in order to strengthen business relationships is, in and 10 of itself, hardly an unusual sales strategy. Relator consequently provides no indicia, 11 much less reliable indicia, that could give rise to a strong inference that claims for 12 Integrilin were submitted to the government as a result of an unlawful quid pro quo 13 arrangement between Defendants and any of the medical professionals attending the 14 events they hosted. More specifically, Relator makes no showing that he played any 15 independent role either in formulating a fraudulent promotion scheme or, more critically, 16 in knowing that the scheme actually resulted in false claims. Without such showing 17 Relator cannot qualify as an original source. He simply cannot sweepingly assert that 18 such activities must necessarily have resulted in false claims when none have been 19 identified. As the court in Aflatooni made clear, Relator must point to “information, as 20 opposed to speculation” concerning the submission of false claims. Aflatooni, 163 F.3d 21 at 526. Given the many opportunities the Court has granted Relator, he apparently 22 cannot do so. 23 Like the relators in Meyer and Aflatooni, the Relator here has not identified even a 24 single instance of a false claim for reimbursement allegedly caused by Defendants. As in 25 Aflatooni, Relator does not provide “the name of any [M]edicare patient who was 26 allegedly charged for” an Integrilin prescription purportedly caused by off-label promotion 27 or kickbacks allegedly received from Defendants. Id. at 526. And, as in Meyer, Relator 28 does not allege that he ever personally observed “allegedly fraudulent billing” by a 1 physician due to such off-label promotion or kickbacks. 545 F.3d at 1198-99, 1202. 2 While Relator does set forth conclusory allegations that the TAC rests “entirely upon [his] 3 personal observations” and that those allegations “were not learned through external 4 public disclosures” (TAC, ¶ 33), he offers little beyond such broad and unsubstantiated 5 declarations to support his claims. That is insufficient. See Bell Atl. Corp v. Twombly, 6 550 U.S. 544, 545 (2007) (holding mere “labels and conclusions” or “a formulaic 7 recitation of a cause of action’s elements” as insufficient). 8 To reiterate, there is “an important distinction” between “kn[owing about alleged 9 fraud” and demonstrating “direct and independent knowledge of ‘defendants’ allegedly 10 fraudulent billing”, which is necessary to qualify as an original source. Meyer, 565 F.3d 11 at 1198-1292 (overturned on other grounds by Hartpence, supra); see also Aflatooni, 12 163 F.3d 525. Relator must do more than simply provide a “lengthy explanation of [his] 13 involvement” while employed by Defendants; he must supply specifics to prove his direct 14 and independent knowledge of actual false claims. Bly-Magee, 470 F.3d at 917. 15 Instead here, Relator provides no specifics about his purported direct and independent 16 knowledge of actual false claims for reimbursement. His bid for original source status 17 accordingly still falls short. 18 This is four times in over ten years that Relator has been given the opportunity to 19 plead these fundamental jurisdictional facts, but he still has been unable to do so. As 20 such, the TAC is DISMISSED without leave to amend because it is “fatally short of 21 specifics” as to how Relator has direct and independent knowledge of false claims 22 allegedly caused by Defendants. Bly-Magee, 470 F.3d at 917; see also Casady, 23 2013 WL 1702777 at *5. 24 B. Avelox Allegations 25 To reiterate, the Ninth Circuit affirmed dismissal of Relator’s claims pertaining to 26 Avelox on grounds that they were not pled with the requisite specificity to survive 27 challenge under Rule 9(b), which requires claims grounded in fraud to be pleaded with 28 particularity. That court explained that because “FCA claims are subject to Federal Rule 1 of Civil Procedure 9(b),” a relator “must state with particularity ‘the who, what, when, 2 where, and how of the misconduct alleged.’” Solis, 885 F.3d at 628. Application of this 3 heightened Rule 9(b) pleading standard is particularly justified in FCA cases “because 4 the FCA is geared primarily to encourage insiders to disclose information necessary to 5 prevent fraud on the government.” Ebeid, 616 F.3d at 999. In order to satisfy that 6 exacting standard, then, a relator must set out “what is false or misleading about a 7 statement, and why it is false.” Id. at 998. 8 As previously stated, once the matter was remanded to this Court, a status 9 conference was held to address, among other things, whether or not to afford Relator 10 the opportunity to amend in order to rectify that shortcoming. Although counsel for 11 Relator indicated in open court that he no longer intended to pursue allegations 12 pertaining to Avelox, amendment was nonetheless permitted with respect to Relator’s 13 alleged status as an original source of fraudulent allegations levied against Defendants. 14 The TAC as filed ran counter to Relator’s representations inasmuch as it 15 continued to include averments that Avelox was improperly marketed by Defendants 16 through the use of the same kickbacks identified above with respect to Integrilin. While 17 the Court would be within its authority to disregard any Avelox allegations under these 18 circumstances, because substantive examination of the TAC shows squarely that the 19 deficiencies identified by the Ninth Circuit have still not been rectified, dismissal of the 20 Avelox claims is nonetheless warranted in any event. 21 The TAC fails to meaningfully add to its allegations pertaining to Avelox so as to 22 address the Ninth Circuit’s concerns. Although the Ninth Circuit found that Relator 23 violated Rule 9(b) in failing to either “identify a single claim” submitted pursuant to 24 Defendants’ alleged scheme or to set forth “reliable indicia supporting a strong inference 25 that such claims were submitted” (Solis, 885 F.3d at 629), Relator makes virtually no 26 attempt to augment his allegations beyond a new one-sentence-long paragraph and 27 exhibit. TAC, ¶ 146, Ex. 52. The new sentence contained in the TAC simply avers that 28 a “sales spreadsheet from 2004 tracked 18,794,263 California patients who were 1 covered by Medicaid or Medicare Part D plans in order to determine the effectiveness of 2 Defendants’ efforts to put Avelox on Medicaid and Medicare formularies (Exhibit 52).” Id. 3 As Defendant Schering points out, however, whether or not Avelox was placed on 4 a hospital’s formulary still says nothing about whether actual “claims were submitted.” 5 ECF No. 200, 19:3-5, citing Solis, 885 F.3d at 629. Indeed, Solis had already rejected 6 Relator’s allegations pertaining to formularies as insufficient to show that actual claims 7 were submitted, since “[b]eing ‘on formulary’ merely means that the drug is available to 8 be used or prescribed” and does not prove in itself that actual false claims were 9 submitted. Id. Consequently, Relator’s claims pertaining to Defendant’s promotion of 10 Avelox still fail to satisfy Rule 9(b) standards, and Defendant Schering’s Motion to 11 Dismiss on that basis will be granted. 12 13 CONCLUSION 14 15 For all the reasons stated above, the Motions to Dismiss submitted by Defendants 16 Millennium and Schering asserting lack of subject matter jurisdiction under Rule 12(b)(1), 17 ECF Nos. 195 and 199, are GRANTED. Because Relator has not met his burden of 18 proof in showing that he was an original source of allegations made pertaining to 19 Integrilin, the public disclosure bar applies and prevents Relator from maintaining any of 20 the three causes of actions rooted in the federal FCA. 21 In addition, although Relator goes on to assert some additional claims predicated 22 on the false claim laws of some twenty-seven states, because those claims also hinge 23 on the same false claim analysis set forth above, they too fail. Moreover, even were the 24 state law claims to have some viability apart from the merits of the federal FCA claims, 25 which the Court believes they do not, in the absence of any predicate federal claim the 26 Court declines to exercise supplemental jurisdiction over the state law claims in any 27 event. 28 /// 1 Because the Court does not believe that the jurisdictional infirmities of Relator’s 2 | claims against Defendants can be rectified through further amendment, no additional 3 || leave to amend will be permitted. Relator has already had three opportunities to correct 4 | the fatal deficiencies in his pleadings, including a trip to the Ninth Circuit. That is enough. 5 Defendant Schering’s Motion to Dismiss pursuant to Rules 12(b)(6) and 9(b) (ECF 6 || No. 200) is also GRANTED to the extent that the TAC fails to state any claims pertaining 7 | to Avelox with the particularity required for claims sounding in fraud. Since the TAC 8 | makes virtually no attempt to remediate the deficiencies of its predecessor with respect 9 | to the promotion of Avelox, no further leave to amend will be permitted. 10 The remainder of Defendant Schering’s Motion to Dismiss (ECF No. 200) is 11 | DENED as moot. In addition, since the Court concludes that it lacks jurisdiction over 12 || Relator’s claims pertaining to Integrilin in the first instance, Defendants’ other motions 13 | challenging the substance of Relator’s claims are moot. Defendant Millennium’s Motion 14 | to Dismiss (ECF No. 196), as well as Defendants’ Joint Motion to Strike (ECF No. 197), 15 || and Motion to Dismiss under California’s Anti-SLAPP statue (ECF No. 198) are 16 || accordingly DENIED on that basis. 17 Since this now concludes the Court’s handling of this matter, the Clerk of Court is 18 || directed to close the file. 19 IT |S SO ORDERED. 20 21 | Dated: March 31, 2020 22
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