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United States ex rel. Kester v. Novartis Pharms. Corp.

United States District Court, S.D. New York

September 3, 2014

UNITED STATES OF AMERICA ex rel. DAVID M. KESTER, STATE OF CALIFORNIA ex rel. DAVID M. KESTER, STATE OF COLORADO ex rel. DAVID M. KESTER, STATE OF CONNECTICUT ex rel. DAVID M. KESTER, STATE OF DELAWARE ex rel. DAVID M. KESTER, DISTRICT OF COLUMBIA ex rel. DAVID M. KESTER, STATE OF FLORIDA ex rel. DAVID M. KESTER, STATE OF GEORGIA ex rel. DAVID M. KESTER, STATE OF HAWAII ex rel. DAVID M. KESTER, STATE OF ILLINOIS ex rel. DAVID M. KESTER, STATE OF INDIANA ex rel. DAVID M. KESTER, STATE OF LOUISIANA ex rel. DAVID M. KESTER, STATE OF MARYLAND ex rel. DAVID M. KESTER, STATE OF MASSACHUSETTS ex rel. DAVID M. KESTER, STATE OF MICHIGAN ex rel. DAVID M. KESTER, STATE OF MINNESOTA ex rel. DAVID M. KESTER, STATE OF MONTANA ex rel. DAVID M. KESTER, STATE OF NEVADA ex rel. DAVID M. KESTER, STATE OF NEW JERSEY ex rel. DAVID M. KESTER, STATE OF NEW MEXICO ex rel. DAVID M. KESTER, STATE OF NEW YORK ex rel. DAVID M. KESTER, STATE OF NORTH CAROLINA ex rel. DAVID M. KESTER, STATE OF OKLAHOMA ex rel. DAVID M. KESTER, STATE OF RHODE ISLAND ex rel. DAVID M. KESTER, STATE OF TENNESSEE ex rel. DAVID M. KESTER, STATE OF TEXAS ex rel. DAVID M. KESTER, STATE OF VIRGINIA ex rel. DAVID M. KESTER, and STATE OF WISCONSIN ex rel. DAVID M. KESTER, Plaintiffs and Relator,
v.
NOVARTIS PHARMACEUTICALS CORPORATION, ACCREDO HEALTH GROUP, INC., BIOSCRIP CORPORATION, CURASCRIPT, INC., CVS CAREMARK CORPORATION, Defendants

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September 3, 2014, Filed

For United States of America, ex rel. DAVID M. KESTER, Plaintiff: Tara Marie La Morte, LEAD ATTORNEY, Li Yu, Robert William Yalen, U.S. Attorney's Office, SDNY (Chambers Street), New York, N.Y. USA; Ellen Melissa London, U.S. Attorney Office SDNY, New York, N.Y. USA; Rebecca C. Martin, U.S. Attorney's Office, Sdny (86 Chambers St.) 86 Chambers Street, New York, N.Y. USA.

For State of California, ex rel. DAVID M. KESTER, Plaintiff: David B. Zlotnick, Nicholas N. Paul, Steven U Ross, California Attorney General's Office, Bureau of Medi-Ca, San Diego, CA USA; Rachel Coles, Office of The Attorney General, Sacramento, CA USA.

For State of Georgia, ex rel. DAVID M. KESTER, Plaintiff: Elizabeth White, PRO HAC VICE, Georgia Attorney General's Office, Atlanta, GA USA.

For State of Illinois, ex rel. DAVID M. KESTER, Plaintiff: Clemon D Ashley, PRO HAC VICE, Assistant Attorney General, Illinois Attorney General Office Medicaid Fraud Control Unit 100 W. Randolph Street., 12th Floor, Chicago, IL USA; Elisa Cervantes Hamilton, Office of The Illinois Attorney General, Chicago, IL USA.

For State of Indiana, ex rel. DAVID M. KESTER, Plaintiff: Lawrence Joseph Carcare, II, Office of IN Attorney General, Indianapolis, IN USA.

For State of Maryland, ex rel. DAVID M. KESTER, Plaintiff: Jeremy Dykes, PRO HAC VICE, Maryland Attorney General, Baltimore, MD USA.

For State of Michigan, ex rel. DAVID M. KESTER, Plaintiff: Deborah J Harper, PRO HAC VICE, Assistant Attorney General, Health Care Fraud Division, East Lansing, MI USA; Deborah J. Harper, State of Michigan/Attorney General/Health Care Fraud Divisio, East Lansing, MI USA.

State of Minnesota, ex rel. DAVID M. KESTER, Plaintiff, Pro se.

For State of Oklahoma, ex rel. DAVID M. KESTER, Plaintiff: Niki Suzanne Batt, LEAD ATTORNEY, Oklahoma Office of The Attorney General, Oklahoma City, OK USA; Christopher P Robinson, PRO HAC VICE, Assistant Attorney General, Medicaid Fraud Control Unit Oklahoma Office Of Attorney General 313 Ne 21st Street, Oklahoma City, OK USA; Niki S Batt, PRO HAC VICE, Assistant Attorney General, Medicaid Fraud Control Unit Oklahoma Office Of Attorney General 313 Ne 21st Street, Oklahoma City, OK USA.

For State of Wisconsin, ex rel. DAVID M. KESTER, Plaintiff: Katie M Wilson, PRO HAC VICE, Assistant Attorney General, Wisconsin Department Of Justice, Madison, WI USA.

For State of New York, Plaintiff: Diana Elkind, LEAD ATTORNEY, Office of the New York State Attorney General, New York, N.Y. USA; Christopher Yates Miller, New York State Office of the Attorney General (NYC), New York, N.Y. USA.

For David M. Kester, ex rel, Relator, Plaintiff: Robert Lawrence Vogel, LEAD ATTORNEY, Vogel, Slade & Goldsteinm LLP, Washington, DC USA; Arun Srinivas Subramanian, William Christopher Carmody, Susman Godfrey LLP (NYC), New York, N.Y. USA; Janet Lyn Goldstein, PRO HAC VICE, Vogel, Slade & Goldstein, Washington, DC USA; Jonathan Bridges, PRO HAC VICE, Susman Godfrey LLP, Dallas, TX USA; Kristin Malone, Susman Godfrey LLP, Seattle, WA USA; Shawn Raymond, PRO HAC VICE, Susman Godfrey LLP, Houston, TX USA; Shelley R. Slade, PRO HAC VICE, Vogel, Slade & Goldstein, LLP, Washington, DC USA; Steven M. Shepard, PRO HAC VICE, Susman Godfrey LLP (NYC), New York, N.Y. USA.

For Novartis Pharmaceuticals Corporation, Defendant: Evan R Chesler, LEAD ATTORNEY, Benjamin Gruenstein, Rachel G Skaistis, Cravath, Swaine & Moore LLP, New York, N.Y. USA; Manvin Singh Mayell, Michael A. Rogoff, LEAD ATTORNEYS, United States Attorney's Office, Southern District Of New York, New York, N.Y. USA; Faith E. Gay, Quinn Emanuel, New York, N.Y. USA; Manisha M. Sheth, Quinn Emanuel Urquhart & Sullivan LLP, New York, N.Y. USA; Nina M. Dillon, Cravath, Swaine & Moore LLP, U.S. District Court E.D.N.Y., Brooklyn, N.Y. USA.

For State of Washington, Intervenor Plaintiff: Carrie L. Bashaw, PRO HAC VICE, Washington State Attorney General's Offic, Medicaid Fra, Olympia, WA USA; Douglas D. Walsh, PRO HAC VICE, Washington State Attorney General's Office, Medicaid Fr, Olympia, WA USA; Paul F. James, PRO HAC VICE, Steve Edwin Dietrich, PRO HAC VICE, Wa Attorney General's Office, Medicaid Fraud Control Unit, Olympia, WA USA.

For State of Washington, Interpleader Plaintiff: Carrie L. Bashaw, Washington State Attorney General's Offic, Medicaid Fra, Olympia, WA USA; Douglas D. Walsh, PRO HAC VICE, Washington State Attorney General's Office, Medicaid Fr, Olympia, WA USA.

Colleen McMahon, United States District Judge.

OPINION

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MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

McMahon, J.:

Plaintiff-relator David M. Kester (" Relator" ) filed a sealed qui tam action asserting claims arising under the False Claims Act (" FCA" ), 31 U.S.C. § 3729 et seq., and related state laws. The Defendants named in the complaint include Novartis Pharmaceuticals Corporation (" Novartis" ) and certain specialty pharmacies, including CVS Caremark Corporation (" Caremark" ), Accredo Health Group, Inc. (" Accredo" ), and Curascript, Inc. (" Curascript" ) (collectively, the " Pharmacy Defendants" ). The Relator alleges that Novartis and these pharmacies violated the FCA and the Anti-Kickback Statute (" AKS" ), 42 U.S.C. § 1320a-7b(b), in connection with a kickback scheme.

Pending before the Court are the Defendants' motions to dismiss the Relator's Second Amended Complaint pursuant to Rules 12(b)(1), 12(b)(6), and 9(b) of the Federal Rules of Civil Procedure. For the

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reasons discussed below, those motions are granted in part and denied in part.[1]

BACKGROUND[2]

A. The Plaintiffs

Pursuant to the False Claims Act (" FCA" ), private persons known as " relators" may file qui tam actions and recover damages on behalf of the United States. See 31 U.S.C. § 3730(b). Plaintiff Kester (" Relator" ) originally filed this FCA action in November 2011 on behalf of the United States, 27 states, and the District of Columbia.

The Relator filed a Second Amended Complaint (" the Relator's Complaint" ) on January 30, 2014. He brings claims against Novartis and the Pharmacy Defendants on behalf of the United States, 26 states, and the District of Columbia. The Relator asserts claims (Counts 1a, 1b, 1c, and 1d)[3] under four subsections of the FCA--31 U.S.C. § § 3729(a)(1)(A), (a)(1)(B), (a)(1)(C), and (a)(1)(G). He also asserts claims (Counts 2-28) under 27 different state law analogues of the FCA, including the parallel false claim statutes in California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, and Wisconsin.

The United States government (" the Government" ) elected to intervene as a co-plaintiff in this case. On January 8, 2014, the Government filed an Amended Complaint-in-Intervention (" the Government's Complaint" ) asserting claims against Novartis (but not the Pharmacy Defendants) under the FCA and related state laws.

Eleven states have since intervened as co-plaintiffs against Novartis alone, asserting claims under state law analogues of the FCA.

Generally, the FCA outlaws the submission of a false or fraudulent " claim" for payment ( i.e., a request for reimbursement) to the government. See 31 U.S.C. § 3729(a)(1). Such claims may be rendered " false" in a variety of ways. In this case, the Relator's FCA claims are predicated on underlying violations of the Anti-Kickback Statute (" AKS" ). Under the AKS, it is illegal to offer a person " remuneration" ( i.e., kickbacks) in order to " induce" that person to " recommend" the purchase of a drug covered by a federal health care program. 42 U.S.C. § 1320a-7b(b)(2). It is likewise illegal to receive remuneration " in return for . . . recommending purchasing" such drugs. Id. at § 1320a-7b(b)(1).

The reader is presumed to be familiar with this Court's previous orders in this case: denying Novartis's motion to dismiss the Government's Complaint pursuant to Rule 9(b), see U.S. ex rel. Kester v. Novartis Pharmaceuticals Corp., No. 11 Civ. 8196 (CM), 23 F.Supp.3d 242, 2014 WL 2324465 (S.D.N.Y. May 29, 2014) (" Novartis I " ); granting in part and denying in part Defendants' motions to dismiss the Relator's Second Amended Complaint pursuant to Rule 9(b), see U.S. ex rel. Kester v. Novartis Pharm. Corp., 11 Civ. 8196 (CM),

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2014 WL 2619014 (S.D.N.Y. June 10, 2014) (" Novartis II " ); denying Defendants' motion for reconsideration of this Court's order in Novartis II (" Novartis III " ), see Docket No. 216; and granting in part and denying in part Novartis's motion to dismiss the Government's Complaint pursuant to Rules 12(b)(6) and 9(b) (" Novartis IV " ), see Docket No. 227.

B. The Alleged Kickback Schemes

Defendant Novartis is a pharmaceutical company that develops, manufactures, and markets prescription drugs. It sells these drugs through various avenues, one of which is " specialty" pharmacies which sell drugs that are not available at normal retail pharmacies. See Compl.[4] at ¶ 1. The Relator alleges that Novartis conducted five illegal kickback schemes involving drugs covered by federal health care programs, and that the Pharmacy Defendants participated in those schemes.

The Relator, David M. Kester, is a former sales employee of Novartis who discovered that Novartis was engaging in practices that allegedly violated the AKS and the FCA. See id. at ¶ ¶ 15-16. According to the Relator, Novartis realized that certain pharmacies had influence over doctors or patients. So beginning in January 2007 it decided to " leverage" these pharmacies' influence--it offered them kickbacks in the form of rebates, discounts, and patient referrals to induce them to " recommend" its drugs to doctors or patients. Id. at ¶ 2.

The Relator's Complaint contains a detailed description of the mechanics of the kickback schemes. It alleges that Novartis gave the pharmacies several types of remuneration: " first category rebates," which were volume-based rebates of about 1-3% of all sales of Novartis drugs; " second category rebates," which were performance-based payments depending on quantity sold or market share; and patient referrals, which Novartis controlled through its exclusive distribution networks. See id. at ¶ ¶ 63-65.

When a new patient received a prescription for a specialty medication manufactured by Novartis, the patient would contact a Novartis call center (or " reimbursement hub" ). Id. at ¶ 57. The reimbursement hub would then steer the patient to one of the specialty pharmacies in its exclusive drug distribution networks. See id. at ¶ ¶ 58, 65. One of these reimbursement hubs was operated by a Caremark subsidiary, Theracom, LLC. See id. at ¶ 59.

In return for rebates and patient referrals, the pharmacies (including Caremark, Accredo, and Curascript) allegedly agreed to promote Novartis drugs. Generally, the pharmacies would recommend to doctors and patients that patients switch to Novartis drugs, remain on Novartis drugs (as opposed to discontinuing treatment), or order more refills. The pharmacies implemented " high touch" programs in which pharmacy staff at call centers would proactively " intervene" --they called patients or doctors under the guise of providing counseling services, but their true goal was to push Novartis drugs. Id. at ¶ ¶ 68, 89, 91. Novartis allegedly provided scripts for the pharmacy staff to use during these calls. See id. at ¶ 68. Novartis also encouraged Caremark, Accredo, and Curascript to channel patients from their retail pharmacies to their specialty pharmacies, which had more patient contact and were, thus, better positioned to influence patients. See id. at ¶ 70. The Relator alleges that he learned about the pharmacies' promotional efforts from viewing internal documents and attending Novartis sales meetings and

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presentations. See id. at ¶ ¶ 86-88, 96, 106-08, 112-19.

Novartis kept track of the pharmacies' success in promoting its drugs through " scorecarding" --comparing the specialty pharmacies in its networks (including Caremark, Accredo, and Curascript) to their peers. Id. at ¶ ¶ 89, 95-96. Higher performing pharmacies ( i.e., pharmacies which sold more Novartis drugs) were rewarded with more rebates and patient referrals. See id. at ¶ 65. The Relator claims that he attended meetings in which these scorecards were discussed. See id. at ¶ ¶ 96, 100.

Novartis referred to this system of offering pharmacies rebates and referrals in exchange for their promotional efforts as the " specialty pharmacy model." Id. at ¶ ¶ 88, 100-01.

The Relator alleges that, by implementing the " specialty pharmacy model," Novartis orchestrated kickback schemes for five of its drugs--Myfortic, Exjade, Gleevec, Tasigna, and TOBI. The model was first used to sell Exjade and Gleevec in 2007. It was later " export[ed]" to the sales teams for Tasigna, TOBI, and Myfortic. Id. at ¶ ¶ 80, 101, 125. Caremark, Accredo, and Curascript allegedly participated in the Gleevec, Tasigna, and TOBI schemes. Accredo also participated in the Exjade scheme. See id. at ¶ ¶ 32, 37, 41, 77-127.

The Relator alleges that the " specialty pharmacy model" harmed patients because it compromised the pharmacists' ethical duty to recommend the safest, most effective drug; some of the drugs involved in the schemes had serious side effects. The Relator further alleges that the pharmacy staff members at the call centers lacked the requisite training and education to make therapeutic recommendations. See id. at ¶ ¶ 73, 91-92. Finally, Novartis induced the pharmacists to recommend drugs that were more costly for patients than the alternatives. See id. at ¶ 74.

The Relator's Complaint incorporates by reference the detailed allegations contained in the Government's Complaint relating to the involvement of Novartis and six other pharmacies (which are not named as defendants in the Relator's Complaint) in the Myfortic and Exjade schemes. See id. at ¶ ¶ 79, 121. Those allegations are described in Novartis I. See 2014 WL 2324465, at *2-4.

C. The Relator's Causes of Action

The Relator alleges that these kickback schemes caused the Pharmacy Defendants (and the other pharmacies involved in the schemes) to submit " false" claims for the reimbursement of Novartis drugs to several government programs: Medicare, Medicaid, the Federal Employee Health Benefits Plan (" FEHBP" ), and the Department of Defense TRICARE program (formerly known as " CHAMPUS" ). See Compl. at ¶ 19.

The Relator contends that compliance with the AKS is a precondition to payment of claims submitted to government programs. See id. at ¶ 48. The pharmacies that participated in the kickback schemes (including the Pharmacy Defendants) allegedly made both " express" and " implied" certifications ( i.e., representations) of compliance with the AKS in connection with the claims for Novartis drugs that they submitted to government programs. See id. at ¶ ¶ 24, 49-51, 78. Because those pharmacies were in fact receiving kickbacks in violation of the AKS, the Relator argues, the certifications were " false." Accordingly, every claim for Novartis drugs that was submitted while those certifications were in effect was " false" within the meaning of the FCA, since the pharmacies' AKS violations tainted those claims and

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rendered them ineligible for reimbursement.

Because the kickback schemes orchestrated by Novartis allegedly caused the Pharmacy Defendants to submit " false" claims to government programs, the Relator asserts several causes of action against Novartis and the Pharmacy Defendants under the False Claims Act.

Counts 1a, 1b, 1c, and 1d assert that the defendants violated four FCA subsections by: (a) " knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval," 31 U.S.C. § 3729(a)(1)(A) (Count 1a); (b) " knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim," id. § 3729(a)(1)(B) (Count 1b); (c) " conspir[ing] to commit a violation of ' another subsection of the FCA, id. § 3729(a)(1)(C) (Count 1c), and (d) " knowingly mak[ing], us[ing], or caus[ing] 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 conceal[ing] or knowingly and improperly avoid[ing] or decreas[ing] an obligation to pay or transmit money or property to the Government," id. § 3729(a)(1)(G) (Count 1d).[5]

The Relator also asserts claims (Counts 2-28) under 27 state analogues of the FCA generally, without identifying a specific subsection of any of those statutes. These state claims pertain to claims for repayment submitted to state Medicaid programs.

D. Procedural History

In Novartis II, the Court granted in part and denied in part the Defendants' motions to dismiss the Relator's claims pursuant to Rule 9(b) for failure to plead fraud with particularity. I concluded that the Relator's Complaint failed to plead the submission of false claims for Gleevec, Tasigna, and TOBI with sufficient particularity such that Defendants could reasonably identify the claims for those drugs that were involved in the scheme, and granted Defendants' motions to dismiss Counts 1a and 1b in part. However, I denied the Defendants' motions to dismiss those claims insofar as they concerned the Exjade and Myfortic schemes until I could rule on the viability of the Relator's theory of claim " falsity." See Novartis II, 2014 WL 2619014, at *7, *9. The Court has since concluded that the " false certification" theory of claim falsity asserted by both the Relator and the Government in this case is legally viable, for the reasons discussed at length in Novartis IV. See Docket No. 227 at 6-19.

In Novartis II, this Court also denied the Defendants' motions to dismiss the Relator's claims under the state analogues to the FCA (Counts 2-28). See 2014 WL 2619014, at *11.

The Pharmacy Defendants moved for reconsideration of the Court's decision in Novartis II. I denied that motion because defendants did not point to " an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Novartis III at 2 (quoting Doe v. New York City Dept. of Soc. Servs., 709 F.2d 782, 789 (2d Cir. 1983)).

After Novartis II and Novartis III, the following claims asserted by Relator remain

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before the Court: Counts 1a and 1b survived insofar as they concern the Myfortic and Exjade schemes (but not the Gleevec, Tasigna, and TOBI schemes), so they proceeded as against Novartis and Accredo, but were dismissed as against Caremark and Curascript. Counts 1c and 1d survived as against all Defendants for all five schemes. The Relator's claims under each of the state FCA statutes (Counts 2-27) likewise survived as against all Defendants for all five schemes.

Each of the Defendants has now moved to dismiss the Relator's Complaint pursuant to Rule 12(b)(6) for failure to state a claim. In addition, the Pharmacy Defendants have moved to dismiss the Relator's FCA claims pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction, and the state FCA claims pursuant to Rule 9(b) for failure to plead fraud with particularity.

DISCUSSION

I. Standard of Review

In deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court must liberally construe all claims, accept all factual allegations in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. See Cargo Partner AG v. Albatrans, Inc., 352 F.3d 41, 44 (2d Cir. 2003); see also Roth v. Jennings, 489 F.3d 499, 510 (2d Cir. 2007).

However, to survive a motion to dismiss pursuant to Rule 12(b)(6), " a complaint must contain sufficient factual matter . . . to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). " While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal quotations, citations, and alterations omitted). Thus, unless a plaintiff's well-pleaded allegations have " nudged [its] claims across the line from conceivable to plausible, [the plaintiff's] complaint must be dismissed." Id. at 570; see also Iqbal, 556 U.S. at 680.

This liberal pleading standard is modified by Rule 9(b), which requires a plaintiff asserting fraud claims to meet a heightened pleading standard. While Rule 8(a) usually requires only a " short and plain statement of the claim showing that the pleader is entitled to relief," Fed.R.Civ.P. 8(a), a plaintiff asserting fraud must " state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). Rule 9(b) applies to claims brought under the FCA and its state law analogues. See Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir. 1995); U.S. ex rel. Polansky v. Pfizer, Inc., No. 04 Civ. 704, 2009 WL 1456582, at *4 (E.D.N.Y. May 22, 2009).

To survive a motion to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff " must allege facts that affirmatively and plausibly suggest" that the court has jurisdiction. Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). The plaintiff bears the burden of establishing by a preponderance of the evidence that subject-matter jurisdiction exists over his complaint. See Makarova v. United States,

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201 F.3d 110, 113 (2d Cir. 2000). If the defendants challenge only the legal sufficiency of the jurisdictional allegations, " the court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of plaintiff." Robinson v. Gov't of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001). Where the defendants place jurisdictional facts in dispute, however, the court may properly consider " evidence relevant to the jurisdictional question [that] is before the court." Robinson, 269 F.3d at 140; see also Amidax, 671 F.3d at 145.

II. The Public Disclosure Bar

The Pharmacy Defendants argue that the Court lacks jurisdiction over the Relator's FCA claims pursuant to the FCA's " public disclosure bar," 31 U.S.C. § 3730(e)(4)(A), and they move to dismiss these claims pursuant to Rule 12(b)(1).

A. The Post-2010 Version of the Public Disclosure Bar Is Jurisdictional.

The " public disclosure bar" (Section 3730(e)(4)(A)) requires a court to dismiss a qui tam suit (as opposed to a suit brought by the government) where the defendant was publicly accused of similar wrongdoing prior to the filing of the relator's complaint. The purpose of this impediment to suit is to prevent " parasitic lawsuits by those who learn of the fraud through public channels and seek remuneration although they contributed nothing to the exposure of the fraud." U.S. ex rel. Doe v. John Doe Corp., 960 F.2d 318, 319 (2d Cir. 1992).

Section 3730(e)(4)(A) was amended by the Patient Protection and Affordable Care Act (" PPACA" ) in March 2010. See Pub. L. 111-148, § 10104(j)(2), 124 Stat. 119 (Mar. 23, 2010). Prior to 2010, the " public disclosure bar" was unambiguously jurisdictional in nature. It stated:

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) (2006) (emphasis added).

After the enactment of the PPACA in March 2010, Section 3730(e)(4)(A) now provides:

The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed--(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) 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. ยง 3730(e)(4)(A) (2010) (emphasis added). The amended version of the statute no longer uses the word " jurisdiction; " instead, it uses the phrase " The court shall dismiss." 31 ...


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