United States District Court, D. New Jersey
UNITED STATES OF AMERICA, ex rel. MARC SILVER, et al., Relators,
OMNICARE, INC., et al., Defendants.
LISA J. RODRIGUEZ, NICOLE M. ACCHIONE, Schnader Harrison Segal & Lewis LLP, Woodland Falls Corporate Park Cherry Hill, NJ.
SHAUNA BRIE ITRI, BERGER & MONTAGUE PC, PHILADELPHIA, PA. Attorneys for Relators
JUDITH H. GERMANO, GERMANO LAW LLC, MONTCLAIR, NJ. Attorney for Defendant PharMerica Corp.
NOEL L. HILLMAN, District Judge.
Relator, Marc Silver, filed a qui tam action for violations of the False Claims Act ("FCA") against defendants alleging that defendants engaged in a scheme that violated the Anti-Kickback Statute by offering nursing homes below market prices for drugs to patients insured by Medicare Part A in exchange for referrals of prescriptions for nursing home patients insured by Medicare Part D or by Medicaid. Defendant PharMerica Corp. ("PharMerica") filed a motion to dismiss Relators' third amended complaint. For reasons explained below, PharMerica's motion will be denied in part and granted in part. PharMerica's motion will be granted as to the statute of limitations on Relator's federal FCA claims because federal FCA liability cannot extend to claims submitted to the government earlier than March 4, 2005. On all other issues raised in PharMerica's motion to dismiss, the motion is denied.
I. FACUTUAL AND PROCEDURAL BACKGROUND
On March 4, 2011, Relator filed a complaint, under seal, against several defendants for violations of the FCA. Marc Silver filed the complaint as a qui tam relator on behalf of the United States under the FCA, as well as 27 states and the District of Columbia under their respective state false claims acts.
The United States and all 27 states have declined to intervene in this matter. The matter was then unsealed and Relator has amended his complaint three times. The operative complaint is the third amended complaint.
In the third amended complaint,  Relator alleges defendants created an illegal kickback scheme which involved a practice known as "swapping." Specifically, that defendant "offered commercially unreasonable, below fair-market-value prices for prescription drugs to nursing homes for the nursing homes' Medicare Part A patients, in exchange for the opportunity to provide the same drugs, at a substantially higher, market-driven cost, to the nursing home's Medicaid and Medicare Part D patients." The complaint further alleges that the kickbacks inducements to nursing homes in exchange for the revenue provided by other government payors. Relator alleges that the kickbacks were provided in various forms, such as: 1) steeply discounted per diem prices for drugs, 2) steeply discounted average wholesale prices ("AWP") for drugs, and 3) free drugs. Relator alleges the scheme was nationwide and ran from 1998 to the present and that kickbacks were paid to skilled nursing facilities ("SNF") in New Jersey and California.
Defendant PharMerica argues that the third amended complaint must be dismissed because a FCA claim must be plead with particularity and Relator fails to adequately plead fraud with specificity as required under Federal Rule of Civil Procedure 9(b). PharMerica also argues that the complaint fails to state a claim for conspiracy and fails to plead facts that show PharMerica can be held liable for the acts of its subsidiaries Kindred or Chem Rx. PharMerica also raises a statute of limitations defense and argues that the state law claims should be dismissed.
Relator has alleged that defendant violated the federal False Claims Act, 31 U.S.C. § 3729, et seq., and the federal Anti-Kickback Statute, 42 U.S.C.A. § 1320a-7b, et seq. Therefore, this Court exercises subject matter jurisdiction pursuant to 28 U.S.C. § 1331 (federal question jurisdiction) and exercises supplemental jurisdiction over Relator's related state law claims pursuant to 28 U.S.C. § 1367.
A. Standard for 12(b)(6) Motion to Dismiss
When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the Relator. Evancho v. Fisher , 423 F.3d 347, 351 (3d Cir. 2005). It is well settled that a pleading is sufficient if it contains "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Under the liberal federal pleading rules, it is not necessary to plead evidence, and it is not necessary to plead all the facts that serve as a basis for the claim. Bogosian v. Gulf Oil Corp. , 562 F.2d 434, 446 (3d Cir. 1977). However, "[a]lthough the Federal Rules of Civil Procedure do not require a claimant to set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give defendant fair notice of what the Relator's claim is and the grounds upon which it rests." Baldwin County Welcome Ctr. v. Brown , 466 U.S. 147, 149-50 n.3 (1984) (quotation and citation omitted).
A district court, in weighing a motion to dismiss, asks "not whether a Relator will ultimately prevail but whether the claimant is entitled to offer evidence to support the claim.'" Bell Atlantic v. Twombly , 127 S.Ct. 1955, 1969 n.8 (2007) (quoting Scheuer v. Rhoades , 416 U.S. 232, 236 (1974)); see also Ashcroft v. Iqbal , 129 S.Ct. 1937, 1949 (2009) ("Our decision in Twombly expounded the pleading standard for all civil actions'...."); Fowler v. UPMC Shadyside , 578 F.3d 203, 210 (3d Cir. 2009) ("Iqbal... provides the final nail-in-the-coffin for the no set of facts' standard that applied to federal complaints before Twombly.").
Following the Twombly/Iqbal standard, the Third Circuit has instructed a three step approach in reviewing a complaint under Rule 12(b)(6). Santiago v. Warminster Tp. , 629 F.3d 121, 130 (3d Cir. 2010). "First, the court must tak[e] note of the elements a Relator must plead to state a claim.'" Id . (citing Iqbal , 129 S.Ct. at 1947). Second, the factual and legal elements of a claim should be separated; a district court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Id .; Fowler , 578 F.3d at 210 (citing Iqbal , 129 S.Ct. at 1950). Finally, a district court must then determine whether the facts alleged in the complaint are sufficient to show that the Relator has a "plausible claim for relief.'" Id . (quoting Iqbal , 129 S.Ct. at 1950). A complaint must do more than allege the Relator's entitlement to relief. Id .; see also Phillips v. County of Allegheny , 515 F.3d 224, 234 (3d Cir. 2008) (stating that the "Supreme Court's Twombly formulation of the pleading standard can be summed up thus: stating... a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element. This does not impose a probability requirement at the pleading stage, ' but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element"). A court need not credit either "bald assertions" or "legal conclusions" in a complaint when deciding a motion to dismiss. In re Burlington Coat Factory Sec. Litig. , 114 F.3d 1410, 1429-30 (3d Cir. 1997). The defendant bears the burden of showing that no claim has been presented. Hedges v. U.S. , 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc. , 926 F.2d 1406, 1409 (3d Cir. 1991)).
Finally, a court in reviewing a Rule 12(b)(6) motion must only consider the facts alleged in the pleadings, the documents attached thereto as exhibits, and matters of judicial notice. Southern Cross Overseas Agencies, Inc. v. Kwong Shipping Group Ltd. , 181 F.3d 410, 426 (3d Cir. 1999). A court may consider, however, "an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the Relator's claims are based on the document." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc. , 998 F.2d 1192, 1196 (3d Cir. 1993). If any other matters outside the pleadings are presented to the court, and the court does not exclude those matters, a Rule 12(b)(6) motion will be treated as a summary judgment motion pursuant to Rule 56. Fed.R.Civ.P. 12(b).
B. Standard Pursuant to Fed.R.Civ.P. 9(b)
The parties do not dispute that Relator's claims of violations of the federal FCA require that such allegations must satisfy the heightened pleading requirements of Fed.R.Civ.P. 9(b). United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc. , 149 F.3d 227, 234 (3d Cir. 1998). Accordingly, Relator must plead "with particularity the circumstances constituting fraud [, ]" but "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b); Iqbal, 556 U.S. at 686. The Third Circuit has held that "Fed.R.Civ.P. 9(b) requires Relators to plead the circumstances of the alleged fraud with particularity to ensure that defendants are placed on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of fraud." Craftmatic Sec. Litig. v. Kraftsow , 890 F.2d 628, 645 (3d Cir. 1989)). Although Rule 9(b) allows conditions of the mind to be alleged "generally, " the allegations must still meet the pleading requirements of Rule 8(a). Iqbal, 556 U.S. at 686-87. There is some relaxation of Rule 9(b) when factual information is peculiarly within the defendant's knowledge or control. Craftmatic , 890 F.2d at 645.
Recently, in Foglia v. Renal Ventures Management, LLC, 754 F.3d 153, 155-56 (3d Cir. 2014), the Third Circuit further clarified the Rule 9(b) standard applied in FCA cases. In order for a relator to satisfy the standards of Rule 9(b) in a FCA case, "... he must provide particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.'" Id. at 157-58 (rejecting a standard that would require relator to provide a representative sample of the alleged fraudulent conduct, specifying the time, place, and content of the acts and the identity of the actors). "Describing a mere opportunity for fraud will not suffice." Id. at 158. "Sufficient facts to establish a plausible ground for relief' must be alleged." Id . The Third Circuit acknowledged in Foglia that the relator's false claim was not presented clearly, but deduced what seemed to be the Relator's argument. Id . ...