United States Ex Rel. Poteet v. Bahler Medical, Inc.

619 F.3d 104, 2010 U.S. App. LEXIS 18778, 2010 WL 3491159
CourtCourt of Appeals for the First Circuit
DecidedSeptember 8, 2010
Docket09-1728
StatusPublished
Cited by56 cases

This text of 619 F.3d 104 (United States Ex Rel. Poteet v. Bahler Medical, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States Ex Rel. Poteet v. Bahler Medical, Inc., 619 F.3d 104, 2010 U.S. App. LEXIS 18778, 2010 WL 3491159 (1st Cir. 2010).

Opinion

HOWARD, Circuit Judge.

The False Claims Act (FCA) allows private persons to file qui tam actions on behalf of the United States against persons or entities who knowingly submit false claims to the federal government. 31 *107 U.S.C. § 3730. In 2007, Jacqueline Kay Poteet brought a qui tam action against 120 spine surgeons 1 and eighteen medical device distributors. Poteet, a former employee of Medtronic Sofamor Danek USA, Inc. (MSD), claimed that the defendants defrauded the federal government by, among other things, unlawfully promoting the medical products of MSD and its parent Medtronic Inc.

The district court dismissed Poteet’s action with prejudice. The court held that the claims against the doctor defendants were jurisdictionally barred by the FCA’s public disclosure provision, id. § 3730(e)(4) 2 , and that the claims against the distributor defendants were not pled with the particularity required by Federal Rule of Civil Procedure 9(b) for claims sounding in fraud.

Poteet appeals, arguing that the district court erred when it (1) dismissed her complaint against the doctor defendants based on the public disclosure provision; (2) dismissed all claims with prejudice; and (3) denied her motion for leave to file a second amended complaint. We affirm.

I. Statutory scheme

The primary focus of this appeal is on the FCA’s public disclosure provision. We start with the statutory scheme.

The FCA prohibits the knowing submission of false or fraudulent claims to the United States. 31 U.S.C. § 3729(a). 3 The federal government may bring a civil action to enforce the FCA, id. § 3730(a), and the statute also contains a qui tam provision authorizing private persons to bring, as relators, civil actions on behalf of the United States. Id. § 3730(b). The government has the option to intervene in a qui tam action and assume primary responsibility over it. Id. § 3730(b)(2), (b)(4), (c)(1).

Whether or not the government intervenes, the relator is eligible to collect a portion of any damages awarded. Id. § 3730(d). Although this financial incentive encourages would-be relators to expose fraud, it also serves to attract those looking to capitalize on fraud already exposed by others. To prevent opportunistic plaintiffs from bringing parasitic qui tam actions, the FCA contains a provision disallowing qui tam actions that are based on prior public disclosures of fraud, as long as the disclosures were made in statutorily specified sources. Id. § 3730(e)(4)(A). This provision is often referred to as the “public disclosure bar.” See, e.g., United States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 52 (1st Cir.2009); United *108 States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 729 (1st Cir.2007). It provides:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(A).

II. Facts

With the legal framework in place, we turn to the specifics of the case.

In 2007, Poteet brought this action against the doctor and distributor defendants in federal district court in Massachusetts. Her claims against the defendants centered around their relationship with Medtronic, a medical technology firm that manufactures and distributes medical equipment and supplies, and Medtronic’s subsidiary MSD, which manufactures and sells spinal implants and other surgical devices. 4

With respect to the physician defendants, Poteet alleged inter alia that they had unlawfully promoted a Medtronic device to third-party doctors, knowing that this promotion would result in the third-party doctors submitting false claims for reimbursement to the federal government.

The district court dismissed Poteet’s claims against the doctor defendants with prejudice, after determining that those claims were based on prior public disclosures in a series of lawsuits brought against Medtronic and various doctor defendants and in media coverage of these lawsuits. We briefly recap those lawsuits, and the media coverage they generated.

In 2001, Scott Wiese, a former employee of Medtronic, sued Medtronic in California state court for wrongful termination. In his complaint, Wiese alleged that Medtronic fired him after he refused to pay illegal kickbacks to doctors in exchange for their business.

In 2002, a “John Doe” relator filed a qui tarn action against Medtronic and ten doctors in the Western District of Tennessee. This complaint, filed under seal, alleged that Medtronic had paid kickbacks to the doctors and that these “improper inducements ... causefd] the submission of false claims for payment in violation of the [FCA].” The New York Times published an article about a government investigation into the claims entitled, “Inquiry into Possible Kickbacks at Medtronic Unit.” Reuters, Inquiry into possible kickbacks at Medtronic unit, Sep. 9, 2003, at C.4. The Times published a second story about the investigation, entitled, “An Operation to Ease Back Pain Bolsters the Bottom Line, Too.” Reed Abelson & Melody Petersen, An Operation to Ease Back Pain Bolsters the Bottom Line, Too, N.Y. Times, Dec. 31, 2003, at A.l.

In 2003, Poteet herself filed a qui tam action against twelve doctors and five healthcare providers, also in the Western District of Tennessee where the John Doe complaint had been filed. United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 508 (6th Cir.2009) (“Poteet I”). Po-teet alleged that Medtronic paid kickbacks to the defendant doctors to get them to use Medtronic products. Id. at 508-09. *109 Thereafter, Poteet claimed, the doctors submitted numerous false, fraudulent, and ineligible claims for Medicare and Medicaid reimbursement to the federal government in violation of the FCA. Id. at 509.

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619 F.3d 104, 2010 U.S. App. LEXIS 18778, 2010 WL 3491159, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-poteet-v-bahler-medical-inc-ca1-2010.