United States v. Coloplast Corp.
United States v. Coloplast Corp.
Opinion of the Court
*360Defendant Shield California Health Care Center, Inc. ("Shield"), moves pursuant to Fed. R. Civ. P. 12(c) for judgment on the pleadings. See Docket # 302. It argues that plaintiff-relators' action should be dismissed under the False Claims Act's ("FCA") "government action bar,"
I. Factual and Procedural Background
Following are the notable procedural events of this case and the relevant facts contained in the pleadings, which I view in the light most favorable to the non-moving relators. See R.G. Fin. Corp. v. Vergara-Nunez,
A. Relators' Case
This is a False Claims Act case brought by three qui tam relators. They allege that defendant, a medical supply provider to beneficiaries of California's Medicaid Program ("Medi-Cal"), perpetrated a phony invoicing scheme to evade Medi-Cal's "Upper Billing Limit" ("UBL") regulation.
Relators' operative complaint covers three Shield/Coloplast supplier agreements: the first was effective June 1, 2008 to September 30, 2010; the second, which relators Herman and Roseff helped negotiate, covered the period from October 1, 2010 through February 15, 2014; and the third, the period from February 16, 2014 through February 29, 2016. See Docket # 121 ¶¶ 157, 158, 163, 167.
Relators' original complaint was filed under seal on December 2, 2011. On August 21, 2014, the case was unsealed. Since that time, relators have filed three amended complaints. See Docket ## 21 (November 20, 2014); 40 (June 1, 2015); 121 (May 20, 2016). The United States and California declined to intervene. See Docket # 55. On February 5, 2016, Shield moved to dismiss the relators' claims as prohibited under the FCA's first-to-file bar. The government opposed, Docket # 84, and the court therefore denied the motion. See
B. The Donath Litigation
In support of the pending motion, defendant now argues that relators' case is *361barred because of the government's involvement in an earlier similar case, United States ex. rel. Donath v. Whitestone Corp., No. SACV 07-0995 (C.D. Cal. 2007). In that case, qui tam relator Terry Donath on August 23, 2007 filed a complaint alleging, inter alia, that Shield violated the FCA by submitting false claims to Medi-Cal. The modus operandi of that scheme was, in relevant part, identical to the one alleged by relators in this case, i.e. that Shield evaded the Medi-Cal UBL regulation by submitting reimbursement claims that omitted large off-invoice volume rebates from the net purchase price of products it supplied to patients.
Donath worked for Whitestone Corporation, a medical supply manufacturer, from December 1994 to February 2007. He handled Whitestone's account with Shield from the time he started until December 2000, and his original complaint concerned Shield's dealings with Whitestone and false claims "starting in or around March 2003 to the present," i.e. August 2007. Docket # 90-2 at 143, 150. On April 19, 2010, Donath filed an amended complaint which included allegations that, in addition to its arrangement with Whitestone, "Shield also entered into sham volume rebate agreements with ... most or all of its other suppliers" including Coloplast. Docket # 302-4 ¶ 148. It further alleged that Shield's invoice scheme "continues ... to this day," i.e. April 19, 2010.
Shield settled the Donath litigation with the United States, California, and the relator in November 2011. Docket # 121-1 at 165. The government entities had intervened in the action in conjunction with the settlement, which pertained to certain "Covered Conduct": "Shield's overbilling the Medi-Cal program by ... violat[ing] the [UBL regulation] during the period from March 2, 2003 to June 30, 2009." Shield paid five million dollars.
II. Legal Standard
A party may move for judgment on the pleadings at any time "[a]fter the pleadings are closed but within such time as not to delay the trial." Fed. R. Civ. P. 12(c). In ruling on such a motion, "the court must view the facts contained in the pleadings in the light most favorable to the nonmovant and draw all reasonable inferences therefrom to the nonmovant's behoof." R.G. Fin. Corp.,
III. Discussion
The FCA's qui tam provisions authorize private persons to bring civil enforcement actions on behalf of the United States and to collect a portion of damages that may be awarded if an FCA violation is proven. See
*362U.S. ex rel. S. Prawer & Co. v. Fleet Bank of Maine,
The restriction at issue in this case, the government action bar, prohibits any suit "based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party."
A. Whether Relators' Case is "Based Upon" "Allegations or Transactions" Which "Are the Subject of" Donath
In support of its motion, Shield argues that relators' complaint puts forth "the exact same allegations made by Donath in his amended complaint"; that "Relators used language identical to that in Donath's amended complaint"; and that "arbitrary temporal distinctions" between relators' allegations and Donath's are insufficient to clear the government action bar. Docket # 302-1 at 12. Relators respond that they "are not parasites of the Donath litigation, even though they readily concede that they mirrored the allegations from the Donath complaint in drafting their UBL claims against Shield." Docket # 315 at 6. They argue that their case "does not merely allege different time periods" from Donath but instead goes further, alleging that "Shield executed an affirmative settlement of the fraudulent conduct at issue in Donath (covering the period of 2003-2009) and then continued to commit the very same fraudulent scheme ...."
In Prawer, the First Circuit analyzed the government action bar and recognized that "the breadth with which we should read the phrase 'allegations or transactions which are the subject of a civil suit' is not readily apparent from the text of the statute." Prawer,
Proceeding cautiously, therefore, this court determines applicability of the government action bar by "look[ing] first to whether the two cases can properly be viewed as having the qualities of a host/parasite relationship," i.e., "whether the qui tam case is receiving 'support, advantage, or the like' from the 'host' case (in which the government is a party) 'without giving any useful or proper return' to the government (or at least having the potential to do so)."
i. Whether Relators Are Receiving "Support, Advantage, or the Like" From Donath
Several factors distinguish this action. First and foremost, the present case is not receiving meaningful "support advantage, or the like" from the Donath litigation. While relators freely admit that Donath *363involved fraud by the same modus operandi as alleged in this case, Donath primarily concerned Shield's arrangements with Whitestone during the 2003 to 2010 time period. By contrast, this case focuses on Shield's dealings with a different manufacturer (Coloplast) and a largely different period (2010-2016). These disparities are significant and distinguishing. Cf. U.S. ex rel. Booker v. Pfizer, Inc.,
To be sure, Donath's April 2010 amended complaint alleged on information and belief that Shield was employing the fraudulent invoicing scheme with "most or all of its other suppliers." It also mentioned Coloplast and alleged that the fraud was, at that time, continuing. But these general statements do not lead to an inevitable conclusion that relators' case is meaningfully supported by the Donath litigation. The crux of relators' case here is that, subsequent to the November 2011 Donath settlement, "Shield has continued to defraud Medi-Cal" with a different supplier. Docket # 121 ¶143. Plaintiffs did not receive this information from the Donath litigation.
In comparison to Donath, relators' case goes far beyond the "unimpressive" differences which courts find insufficient to distinguish a claim from a previous complaint. See Bellevue v. Universal Health Servs. of Hartgrove, Inc.,
Nor is this case like U.S. ex rel. Poteet v. Bahler Medical, Inc. (a public disclosure bar case), in which the First Circuit upheld the district court's finding that the plaintiff's case was based on previously disclosed allegations or transactions.
ii. Whether Relators' Case Provides a "Useful or Proper Return to the Government"
I am further persuaded that whatever support or advantage relators have received from the Donath case is balanced by "useful or proper return to the Government." Prawer,
Relators have alerted the government to allegations that, in the wake of its settlement in the Donath case, Shield persisted in evading the UBL and submitting false claims-in effect, it allegedly "doubled down." The government benefits from rooting out recidivist FCA violators, especially where, as here, "this case is seeking to remedy a fraud that the government has not yet attempted to remedy." Id.; see Booker,
Finally, I note that the government itself does not view this case as parasitic of the Donath litigation. See Docket # 84 (United States objecting to dismissal of action under 3730(e)(4)(A) and stating that provision allows government "to inform the court that it does not view a particular qui tam action as parasitic"). While the government action bar does not provide the government with veto power over a defendant's motion as is effectively the case in the public disclosure bar context, the United States' perception is nevertheless instructive here because it goes directly to the question of "useful or proper return to the Government." See Berntsen v. Prime Healthcare Servs., Inc., No. 11-CV-8214 PJW,
IV. Conclusion
Because relators' case is not based upon the same allegations or transactions at issue in Donath, I need not decide the further question of whether, under language of the statute, the government "is a party" to the now-concluded Donath case. Shield has not shown this case should be dismissed under the government action bar. Its motion, Docket # 302, is therefore denied.
This Memorandum of Decision addresses the 12(c) motion only and does not concern Shield's pending motion for summary judgment, Docket # 301, or its pending motion to strike and exclude, Docket # 317.
These allegations form the basis of Counts IV, V, VI, and VII of relators' Third Amended Complaint and are the only claims brought against Shield. See Docket # 121 at 57-60.
Reference
- Full Case Name
- UNITED STATES of America and The State of California, ex rel. Kimberly Herman v. COLOPLAST CORP.
- Cited By
- 2 cases
- Status
- Published