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United States v. Medco Health Solutions, Inc.

United States District Court, D. Delaware

October 26, 2017


          Jeffrey S. Goddess, Esquire and P. Bradford deLeeuw, Esquire of Rosenthal, Monhait & Goddess, P.A., Wilmington, Delaware. Counsel for Plaintiffs. Of Counsel: David S. Stone, Esquire of Stone & Magnanini LLP, Berkeley Heights, New Jersey.

          Jack B. Blumenfeld, Esquire and Rodger D. Smith II, Esquire of Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware. Counsel for Defendants. Of Counsel: Enu Mainigi, Esquire, Craig D. Singer, Esquire, Holly Conley, Esquire, and D. Keith Clouser, Esquire of Williams & Connolly LLP, Washington D.C.



         Relator Paul Denis brings this qui tarn action against Medco Health Solutions, Inc. and its parent Express Scripts Holding Company (collectively, "Medco") alleging violations of the False Claims Act, 31 U.S.C. § 3729 etseq., and analogous state statutes. Denis' allegations mirror what many plaintiffs before him have charged: that Medco defrauded the government by favoring certain drugs in exchange for kickbacks from AstraZefteca disguised as discounts, and Medco failed to share these discounts with its clients as required. (D.I. 111 ¶¶ 1, 5). The court previously dismissed Denis' Third Amended Complaint under two separate provisions of the False Claims Act: the first-to-file rule and the public disclosure bar. U.S. ex rel Denis v. Medco Health Solutions, Inc., 2017 WL 63006, at *13 (D. Del. Jan. 5, 2017). Now pending before the court is Medco's motion to dismiss Denis' Fourth Amended Complaint. (D.I. 114). Medco raises several arguments, including the first-to-file rule, 31 U.S.C. § 3730(b)(5), the public disclosure bar, 31 U.S.C. § 3730(e)(4), and Federal Rules of Civil Procedure 12(b)(6) and 9(b). (D.I. 115). Because the court finds that dismissal is warranted under the public disclosure bar, it does not reach Medco's other arguments.

         I. BACKGROUND

         The essential facts of the Fourth Amended Complaint are identical to those of the Third Amended Complaint. (See D.I. 111-3). The new content is essentially (i) speculation that the same conduct continued after Denis left his employment with Medco in 2008, (ii) ancillary details about events already alleged, or (iii) legal argument. Accordingly, the court refers the reader to its previous memorandum opinion for a general factual background and will discuss any new allegations where relevant below. Denis, 2017 WL 63006, at *2-4.


         A. Rule 12(b)(1)

         Under Fed.R.Civ.P. 12(b)(1), the court must dismiss a complaint if it lacks subject matter jurisdiction. Challenges to subject matter jurisdiction may be facial or factual. Lincoln Ben. Life Co. v. AEILife, LLC, 800 F.3d 99, 105 (3d Cir. 2015). A facial attack contests the sufficiency of the pleadings, whereas a factual attack contests the sufficiency of jurisdictional facts. Id. The pre-2010 public disclosure bar is a factual attack on subject matter jurisdiction. Denis, 2017 WL 63006, at *4. In a factual attack, the court may weigh and consider evidence outside the pleadings, and no presumption of truthfulness attaches to plaintiffs allegations. Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).

         B. Rule 12(b)(6) & Rule 9(b)

         The post-2010 public disclosure bar, if applicable, requires dismissal under Fed.R.Civ.P. 12(b)(6). U.S. ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812 F.3d 294, 300 (3d Cir. 2016). To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a plaintiff must plead facts sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Courts must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. In re Rockefeller Ctr. Prop., Inc. Sec. Litig., 311 F.3d 198, 215 (3d Cir. 2002). The court's review is limited to the allegations in the complaint, exhibits attached to the complaint, documents incorporated by reference, and items subject to judicial notice. Siwulec v. J.M. Adjustment Serv., LLC, 465 Fed.Appx. 200, 202 (3d Cir. 2012).

         Because claims under the False Claims Act allege fraud, they are also subject to the heightened pleading requirements of Fed.R.Civ.P. 9(b). U.S. ex rel. Whatley v. Eastwick Coll., 657 Fed.Appx. 89, 93 (3d. Cir. 2016). Under Fed.R.Civ.P. 9(b), plaintiffs must "state with particularity the circumstances constituting fraud or mistake." In other words, the complaint must provide "all of the essential factual background that would accompany 'the first paragraph of any newspaper story'-that is, the 'who, what, when, where and how' of the events at issue." Whatley, 657 Fed.Appx. at 93 (quoting In re Rockefeller, 311 F.3d at 217).


         Denis alleges that Medco engaged in the same fraudulent scheme from 2005 to the present. (See, e.g., D.I. 111 ¶¶ 111-13). Congress, however, amended the public disclosure bar in 2010, and those changes do not apply retroactively. U.S. ex rel. Zizic v. Q2Administrators, LLC,728 F.3d 228, 232 n. 3 (3d Cir. 2013). When a relator alleges a continuing fraud that spans the time before and after the amendments, several courts in the Third Circuit have applied the pre-2010 version of the statute to pre-2010 conduct and the post-2010 statute to post-2010 conduct. See, e.g., U.S. ex rel. Juddv. Quest Diagnostics Inc., 2014 WL 2435659 (D.N.J. May 30, 2014). For reasons explained below, the court questions this approach, but will nevertheless follow it. Accordingly, the court will first ...

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