UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Colleen Perry

v. Civil No. 18-cv-1190-JD Opinion No.

Insys Therapeutics, Inc.

O R D E R

Colleen Perry brings claims against Insys Therapeutics,

Inc. that arise from Insys’s actions to induce Physician

Assistant Christopher Clough to prescribe Subsys, an opioid

manufactured by Insys, to Perry. Insys moves to dismiss Perry’s

claims on the grounds that they are barred by the statute of

limitations and that she fails to adequately allege fraud and a

civil conspiracy.1 Perry objects.

Standard of Review

A motion under Federal Rule of Civil Procedure 12(b)(6)

seeks to dismiss on the ground that the plaintiff fails “to

state a claim on which relief can be granted.” A motion to

1 The court notes that Insys provides all citations to sources and authorities in footnotes rather than in the body of its memorandum. That is contrary to the usual practice in this district. See LR 5.1(a); cf. The Bluebook; A Uniform System of Citation R. 1.1(a), at 57 (Columbia Law Review Ass’n et al. eds., 20th ed. 2015) (instructing that citations are provided in footnotes for law review pieces). Here, citations should be included in the body of the filing, following the text they support. dismiss may be based on a defense that the claims are barred by

the statute of limitations. Abdallah v. Bain Capital LLC,

(1st Cir. 2014). To decide the motion, the court

accepts as true all of the properly pleaded facts and draws

reasonable inferences in favor of the nonmoving party. Lemelson

v. Bloomberg L.P.,

(1st Cir. 2018).

Background

Colleen Perry had pain in both knees caused by a prior

injury. Beginning in 2013, she was treated at the PainCare

Clinic in Somersworth, New Hampshire. Physician Assistant

Christopher Clough treated her at PainCare with numerous opioid

medication injections.

A. Perry’s Treatment with Subsys

In June of 2013, Clough told Perry that he had a new

miracle drug for her treatment. When Perry protested that she

was doing well on her current medication, Clough told her that

the new drug, Subsys, was much better and persuaded her to

switch. Clough prescribed Subsys, at the dosage of 400 mcg, and

had the drug sent to Perry by FedEx from a company called

Lindencare in New York. Clough continued to prescribe other

opioid medications for Perry to use along with Subsys.

2 Clough increased Perry’s Subsys dose in July of 2013 to 800

mcg. In September of 2013, he increased the dose to 1200 mcg

every four hours. Clough continued to increase the dose,

without any medical justification, until Perry was taking 1600

mcg every four hours in February of 2014.

As a result, Perry became dependent on Subsys. Several

times, she lost consciousness and had to be revived by her

husband who thought she had stopped breathing. On other

occasions she was in a “zombie like state” and even comatose.

She fell asleep at work, at dinner, and while having

conversations. Perry told Clough she could not tolerate such

high doses of Subsys and that the drug was causing her to pass

out. She asked him to reduce the dose. Despite her concerns,

Clough continued to prescribe Subsys at 1600 mcg every four

hours until November of 2014.

In November of 2014, Clough cut the dose of Subsys in half,

which caused Perry to have withdrawal symptoms. Perry called

Clough’s office to report the symptoms. Clough told Perry that

he was leaving the practice to work for his mother and to go

back to school. In reality, Clough was under investigation by

the New Hampshire Board of Medicine. His license was suspended

in 2015 and revoked in 2016. A new physician at Pain Care

attempted to wean Perry off of Subsys beginning in December of

2014. She suffered extreme symptoms of withdrawal.

3 B. Subsys and Insys Therapeutics

Subsys, which is manufactured by Insys Therapeutics, is a

sublingual fentanyl spray. Perry alleges that Subsys is

classified as a schedule II substance, which is more powerful

than morphine or heroin. The FDA approved Subsys in January of

2012 for treatment of breakthrough cancer pain in adults who had

become tolerant of other opioid medications. The approved dose

was no more than 100 mcg. Because of its potency and the risk

of misuse, addiction, and overdose, the FDA imposed rigorous

controls on prescribing and dispensing Subsys.

The New Hampshire Attorney General’s office began an

investigation into Clough’s dealings with Insys. The office

learned that 84% of the Subsys prescriptions in New Hampshire

were written by Clough in 2013 and 2014. Clough was one of the

highest prescribers of Subsys in the country and was the highest

prescriber in New Hampshire.

The Attorney General’s office also learned that Insys paid

Clough $44,000 to promote Subsys at speaking events, which were

shams. The events actually were social gatherings at high end

restaurants for Clough’s family and friends, which were paid for

by Insys sales representatives. The sales representatives

forged the guest lists to inflate the numbers of attendees.

Clough also spoke at Insys programs during 2013 and 2014, called

4 the “Speakers Bureau,” to promote Subsys. Clough was paid for

participating in those events.

Insys sales representatives were paid bonuses based on the

amount of Subsys they sold. Insys completed forms for

prescribers to induce prescribers and insurance companies to

prescribe and pay for Subsys. Insys had its sales

representatives remove Perry’s records from Clough’s office in

order to deceive Perry’s insurer into paying for Subsys even

though Perry had not been diagnosed with cancer.

When Clough was notified in August of 2014 that the New

Hampshire Board of Medicine was investigating his prescription

practices, he informed Insys that he would no longer participate

in their speaker program. Federal authorities arrested Clough

in March of 2017 for receiving financial kickbacks in exchange

for prescribing Subsys. He was convicted in December of 2018 on

charges of conspiracy to pay and receive kickbacks and receiving

kickbacks.2

C. Perry Learns of Alleged Scheme

One of Perry’s doctors told her in September of 2018 that

Clough’s supervising physician at PainCare had been disciplined

2 United States v. Clough, 17-cr-37-JL (D.N.H. Dec. 18, 2018)

5 for failing to properly supervise Clough. Before that, Perry

was unaware of the investigation into Clough’s prescribing

practices and his relationship with Insys. Perry then

researched Clough on the internet and discovered that he had

been arrested and that Insys had been involved in a fraudulent

scheme to bribe Subsys prescribers. Perry also read about

lawsuits against Insys.

Perry filed her complaint against Insys on December 19,

2018. She then filed an amended complaint in which she alleges

claims for fraud, Count I; negligence, Count II; violation of

the New Hampshire Consumer Protection Act, Count III; and civil

conspiracy, Count IV.

Discussion

Insys moves to dismiss all four claims on the ground that

they are time barred. Insys also moves to dismiss the fraud and

civil conspiracy claims on the ground that no cognizable cause

of action is alleged. Perry objects to the motion.

I. Timeliness

Insys asserts that Perry should have known about her

alleged injury and Insys’s connection to that injury by March of

2015 at the latest. In response, Perry acknowledges that her

6 treatment with Subsys, her injuries caused by over prescription,

and Insys’s actions to induce Clough to over prescribe Subsys

all occurred beyond the three-year limitation period. She

argues, however, that under the discovery rule, she did not know

of the causal relationship between her injuries and Insys’s

actions until September of 2018 and, therefore, her claims are

not untimely. Perry also argues that the time is tolled because

Insys fraudulently concealed its involvement in the bribery

scheme with Clough.

Under RSA 508:4, I, as is pertinent for this case, “all

personal actions, . . . may be brought only within 3 years of

the act or omission complained of.” An exception to that time

limit is also provided so that “when the injury and its causal

relationship to the act or omission were not discovered and

could not reasonably have been discovered at the time of the act

or omission, the action shall be commenced within 3 years of the

time the plaintiff discovers, or in the exercise of reasonable

diligence should have discovered, the injury and its causal

relationship to the act or omission complained of.” RSA 508:4,

I. For purposes of the claim under RSA 358-A, transactions are

exempt from liability if they were “entered into more than 3

years prior to the time the plaintiff knew, or reasonably should

7 have known, of the conduct alleged to be in violation of this

chapter.” RSA 358-A:3, IV-a.3

The defendant bears the initial burden to show that the

action was not brought within three years of the underlying

events. Beane v. Dana S. Beane & Co.,

(2010).

If that burden is met, the plaintiff bears the burden of showing

that the time is tolled by operation of the discovery rule or

fraudulent concealment. Fuller Ford, Inc. v. Ford Motor Co.,

, at *6 (D.N.H. Aug. 6, 2001).

In this case, Perry filed her complaint in state court in

October of 2018. Insys’s alleged kickback and bribery scheme

with Clough and Clough’s prescription of Subsys had ended by

October of 2015, three years before the complaint was filed.

Therefore, the issue for purposes of the motion to dismiss is

whether the discovery rule or the fraudulent concealment rule

tolls the limitation period.

A. Discovery Rule

The discovery rule has two parts. “First, a plaintiff must

know or reasonably should have known that [she] has been

injured; and second, a plaintiff must know or reasonably should

3 In its motion to dismiss, Insys does not address the separate statute of limitations for the Consumer Protection Act. Perry does not raise that issue in response. Therefore, the court will use the RSA 508:4 analysis for all three claims.

8 have known that [her] injury was proximately caused by the

conduct of the defendant.” Beane,

. Therefore,

the discovery rule will apply to toll the limitations period

unless the plaintiff knew or should have known of her injury AND

knew or should have discovered that the defendant caused her

injury.

“[A] plaintiff need not be certain of this causal

connection; the possibility that it existed will suffice to

obviate the protections of the discovery rule.” Id.; accord

Lamprey v. Britton Constr., Inc.,

(2012). For

purposes of the discovery rule, whether the plaintiff exercised

reasonable diligence is a question of fact. Black Bear Lodge v.

Trillium Corp.,

(1993).

Because Perry filed her complaint on December 19, 2018, the

three-year limitation period began on December 20, 2015.

Perry’s allegations show that Clough’s over prescription of

Subsys caused her injury before December of 2015. It is

important in this case, however, to distinguish between Clough’s

actions that caused injuries and Insys’s actions that caused

injuries. Perry’s claim accrued when she knew or should have

known that Insys caused her injuries.

Perry contends that she did not know until September of

2018 that Insys had been involved in a bribery scheme to induce

Clough to improperly prescribe Subsys, including the over

prescription to her that caused her injuries. Therefore, the

9 issue here is when Perry knew or should have discovered Insys’s

involvement in Clough’s prescription misconduct.

Insys argues that the discovery rule does not save Perry’s

claims because she could have discovered Insys’s potential

liability as soon as she experienced the symptoms she describes.

In support, Insys states that Franz v. Purdue Pharma. Co.,

(D.N.H. Feb. 22, 2006), is “on all fours” with this

case. Insys also relies on a New Hampshire Superior Court order

finding that claims against Clough and Insys were untimely.

Neither case is persuasive here.

1. Franz

Franz is a product liability case in which the plaintiff

sued the companies that manufacture, market, and distribute

OxyContin, collectively referred to as Purdue, alleging that the

drug was defective and unreasonably dangerous because of its

addictive qualities. The question there was when the plaintiff

reasonably should have known that her injuries were caused by

OxyContin, which was manufactured by Purdue. The court reasoned

that when the plaintiff was hospitalized because of OxyContin

related illness, she knew or should have known of the addictive

qualities of the drug, which was manufactured and marketed by

Purdue. Id. at *3.

10 In this case, Perry is not bringing a product liability

claim and does not allege that there is anything wrong with

Subsys. Instead, she alleges that Insys caused her injuries by

bribing and otherwise inducing Clough to prescribe Subsys to her

for knee pain, when the drug is only approved for break through

cancer pain, and to prescribe Subsys at dosages far in excess of

the approved amounts. In other words, Insys’s conduct that is

at issue in this case is the alleged bribery and kickback scheme

with Clough.4 For that reason, Franz is not “on all fours” with

this case and is not persuasive authority to find the claims are

time barred.

2. Superior Court Case

In the superior court case, the plaintiffs brought suit

against Clough, the PainCare clinic, doctors at the PainCare

clinic, and Insys, alleging claims of negligence, medical

malpractice, respondeat superior, and loss of consortium. Doc.

8-2; Kyle v. Clough, 219-2018-CV-00163 (Strafford Count Sup. Ct.

Sept. 20, 2018). Considering the claims together, the court

4 Insys does not explain why Perry’s withdrawal symptoms would have put her on notice that Insys was involved in a scheme with Clough to prescribe Subsys for non-approved uses and at much higher dosages than had been approved. Unlike the plaintiff in Franz, Perry does not claim that Subsys was defective or unreasonably dangerous or that Insys represented that Subsys would not cause addiction or withdrawal symptoms.

11 found that they arose when Clough abruptly discontinued Subsys

in September of 2014 and that the discovery rule did not apply

because the plaintiffs knew about the high prescription levels,

the changes, and their injuries. The claims were dismissed.

The plaintiffs then moved to amend their complaint to add a

claim of fraud against Insys. Doc. 8-3. Although Insys

objected, the court allowed the amendment. Id. Therefore, that

case was not resolved completely on the statute of limitations

issue and suggests that a separate fraud claim against Insys

would be evaluated differently from the limitations analysis

that involved Clough. In any event, this court does not find

the analysis in Kyle persuasive to show that the discovery rule

would not apply here.

3. Result

Insys provides no factual basis or legal theory to show

that Perry knew or should have known of its alleged kickback and

bribery scheme with Clough before September of 2018. Insys does

not show that Perry could have reasonably discovered that scheme

earlier. Therefore, the causal connection was missing until

Perry had reason to know of Insys’s alleged scheme, which she

alleges did not happen until September of 2018. As a result,

Insys has not shown that Perry’s claims are barred by the

statute of limitations.

12 B. Fraudulent Concealment

Perry also contends that the fraudulent concealment rule

applies to toll the limitations period. “[T]he fraudulent

concealment rule states that when facts essential to the cause

of action are fraudulently concealed, the statute of limitations

is tolled until the plaintiff has discovered such facts or could

have done so in the exercise of reasonable diligence.” Bricker

v. Putnam,

(1986). The equitable purpose of

the fraudulent concealment rule in tolling the limitations

period is to prevent the wrongdoer from receiving and keeping

the benefit of its fraudulent conduct. Lakeman v. LaFrance,

(1959).

Insys argues that the fraudulent concealment rule does not

apply because it had no relationship with Perry, it did not take

any affirmative act to prevent her from acquiring information,

and she should have discovered its scheme when she became ill.

Perry contends that Insys’s actions were fraudulent, illegal,

and necessarily covert.

As is explained above, the limitations period is tolled by

the discovery rule. In addition, however, the allegations of

Insys’s efforts to induce Clough to improperly prescribe Subsys

to Perry and the subterfuge Insys used to hide improper

13 prescriptions and the kickback scheme would also support

application of the fraudulent concealment rule.5

II. Fraud Claim

Insys moves to dismiss the fraud claim on the ground that

Perry does not state a cognizable claim. Under New Hampshire

law, to state a fraud claim, a plaintiff must allege facts that

show “the defendant made a representation with knowledge of its

falsity or with conscious indifference to its truth with the

intention to cause another to rely upon it.” Snierson v.

Scruton,

(2000). The plaintiff must also

establish that her reliance was justified.

Fraud may

consist of the intentional concealment of a material fact.

Leavitt v. Stanley,

(1990) (citing Batchelder

v. N. Fire Lites, Inc.,

(D.N.H. 1986)

(citing LeClerc v. Ins. Co.,

(1944)). For “a

failure to disclose to be actionable fraud, there must be a duty

arising from the relation of the parties to so disclose.”

Batchelder,

.

In support of her fraud claim, Perry alleges actions by

Insys and its sales representatives to conceal the payments made

5Under New Hampshire law, the fraudulent concealment rule for purposes of tolling the statute of limitations is different from a cause of action for fraud. Cf. Bricker,

, with Batchelder,

.

14 to Clough and to improperly obtain insurance coverage for Subsys

prescriptions. She does not allege any false representations

that Insys made to her or any material fact that Insys concealed

from her, when it had a duty to disclose. In other words, Perry

alleges facts that might show fraud by Insys against insurance

companies and improper or illegal payments to Clough, but she

does not allege facts that show that Insys defrauded her.

Perry argues in her objection that it is not necessary for

Insys to make a false representation to her, and instead fraud

may be based on a false representation to “another”. Even if

that were true, which the court does not determine, Perry has

not alleged a cognizable claim based on that theory. She

contends that Insys made false representations to unnamed

others, including insurance companies, but she does not allege

how she reasonably relied on those representations or that she

even knew about them. That is all missing from the complaint.6

To the extent Perry relies on a theory of fraud by

omission, she fails to allege facts to support the claim. She

does not allege what Insys concealed from her or that Insys owed

her a duty to disclose information that was concealed. Given

6 Perry does not allege or argue that Insys is responsible for misrepresentations or omissions by Clough. See Patch v. Arsenault,

(1995).

15 the requirements of Federal Rule of Civil Procedure 9(b), these

facts cannot be presumed.

While the circumstances might suggest fraud, Perry has not

alleged facts to support a claim that she was the victim of

fraud by Insys. She also has not articulated a cognizable fraud

theory in her objection to Insys’s motion.7 Therefore, based on

the allegations in the complaint, Perry has not alleged a fraud

claim against Insys.

III. Civil Conspiracy

Insys moves to dismiss Perry’s civil conspiracy claim on

the ground that New Hampshire does not recognize a separate

claim for civil conspiracy. Insys contends that because the

civil conspiracy claim is based on the fraud claim, which is

deficient, the civil conspiracy claim also fails to state a

cognizable claim. Perry argues that the civil conspiracy claim

is adequately alleged.

Under New Hampshire law, “‘[t]o state a claim for civil

conspiracy the plaintiff must allege: (1) two or more persons

(including corporations); (2) an object to be accomplished

In support of her fraud claim, Perry quotes a statement 7

about fraudulent concealment from a case filed against Insys in a court in Leavenworth County, Kansas. New Hampshire substantive law governs the claims in this case. It is not clear how the quote shows that Perry has alleged sufficient facts to show fraud by omission under New Hampshire law.

16 (i.e., an unlawful object . . .); (3) an agreement on the object

or course of action; (4) one or more unlawful overt acts; and

(5) damages as the proximate result thereof.’” 8 Laura v. Gr.

Lakes Higher Ed. Guaranty Corp.,

,

,

at *8 (D.N.H. Feb. 1, 2018) (quoting Jay Edwards, Inc. v. Baker,

(1987)); see also Isaacs v. Trs. Of Dartmouth

Coll.,

, at *11 (D.N.H. Feb. 5, 2018). An action

for civil conspiracy is aimed at the damage that it caused. In

re Appeal of Armaganian,

(2001).

Perry alleges that Clough and Insys conspired through the

bribery and kickback scheme to prescribe Subsys to her for a

nonapproved use and in dosages that exceeded the highest

approved amounts. The object to be accomplished by the

conspiracy between Clough and Insys was for Insys to make money

from the sale of Subsys that it would not have made if Subsys

had been prescribed only for appropriate treatment and in

approved dosages. The means of accomplishing that object was

8 Although the “unlawful object” or “unlawful means” elements of civil conspiracy may be satisfied by an underlying tort, the New Hampshire Supreme Court has not held that the underlying tort must also be a viable claim against the named defendant. “[Civil conspiracy] is a legal doctrine under which liability for a tort may be imposed on people who did not actually commit a tort themselves but who shared a common plan for its commission with the actual perpetrators.” 15A C.J.S., Conspiracy § 1 (March 2019 Update) (earlier edition quoted by the New Hampshire Supreme Court in Jay Edwards,

, for the elements of a claim for civil conspiracy). In any case, Perry alleges torts other than fraud.

17 the alleged bribery and kickback scheme used by Insys to sell

Subsys, which was arguably unlawful.9 The alleged result of the

conspiracy between Insys and Clough was that Perry suffered from

the effects of over prescription of an addictive drug that was

not medically necessary or even approved for her treatment.

Therefore, the civil conspiracy claim is not necessarily

dependent on the fraud claim. Perry alleges facts that state a

claim for civil conspiracy.

Conclusion

For the foregoing reasons, the defendant’s motion to

dismiss (document no. 13) is granted as to the fraud claim,

Count I, and is otherwise denied.

SO ORDERED.

______________________________ Joseph A. DiClerico, Jr. United States District Judge

May 14, 2019 cc: Michael P. Rainboth, Esq. Michael D. Ramsdell, Esq. Adam P. Schwartz, Esq. David J. Walz, Esq.

9 See, e.g., United States v. Clough, 17-cr-37-JL (D.N.H. Dec. 18, 2018) (jury verdict against Clough on charges of conspiracy to pay and receive kickbacks in violation of

and receiving kickbacks in violation of 42 U.S.C. § 1320a-7b(b) from a “pharmaceutical company”); United States v. Gurry, 16-cr-10343-ADB (D. Mass. May 2, 2019) (jury verdict against Insys executives).

18