United States Court of Appeals
For the First Circuit
No. 09-1728
UNITED STATES ex rel. JACQUELINE KAY POTEET and JOHN DOE,
Plaintiffs, Appellants,
v.
BAHLER MEDICAL, INC., et al.,
Defendants, Appellees,
LAWRENCE G. LENKE, M.D., et al.,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lipez, Howard and Thompson,
Circuit Judges.
John R. Knight, with whom Everett B. Gibson, Andrew R. Carr
and Bateman, Gibson, LLC were on brief, for appellants.
John W. Lundquist, with whom Dulce J. Foster and Fredrikson &
Byron, P.A. were on brief, for appellees John Bendo, M.D., et al.
Ara B. Gershengorn, with whom Nicholas C. Theodorou and Foley
Hoag, LLP were on brief for appellees Bahler Medical, Inc., et al.
A. Neil Hartzell, with whom Kevin G. Kenneally, LeClairRyan,
Dean A. McConnell, Mark A. Fogg and Kennedy Childs & Fogg, P.C.
were on brief for appellee George A. Frey, M.D.
Kent Wicker, with whom Reed Wicker, PLLC was on brief for
appellees Steven Glassman, M.D.; John Dimar, M.D; and Mladen
Djurasovic, M.D.
September 8, 2010
HOWARD, Circuit Judge. The False Claims Act (FCA) allows
private persons to file qui tam actions on behalf of the United
States against persons or entities who knowingly submit false
claims to the federal government. 31 U.S.C. § 3730. In 2007,
Jacqueline Kay Poteet brought a qui tam action against 120 spine
surgeons1 and eighteen medical device distributors. Poteet, a
former employee of Medtronic Sofamor Danek USA, Inc. (MSD), claimed
that the defendants defrauded the federal government by, among
other things, unlawfully promoting the medical products of MSD and
its parent Medtronic Inc.
The district court dismissed Poteet's action with
prejudice. The court held that the claims against the doctor
defendants were jurisdictionally barred by the FCA's public
disclosure provision, id. § 3730(e)(4)2, and that the claims
against the distributor defendants were not pled with the
particularity required by Federal Rule of Civil Procedure 9(b) for
claims sounding in fraud.
Poteet appeals, arguing that the district court erred
when it (1) dismissed her complaint against the doctor defendants
1
Poteet later voluntarily dismissed eighty-four of the
original doctor defendants.
2
The public disclosure provision was recently amended by the
Patient Protection and Affordable Act, Pub. L. 111-148, 124 Stat.
119. This amendment, however, is not retroactive. Graham County
Soil & Water Conservation Dist. v. United States ex rel. Wilson,
130 S. Ct. 1396, 1400 n.1 (2010). Accordingly, we decide this case
under the previous iteration of the provision.
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based on the public disclosure provision; (2) dismissed all claims
with prejudice; and (3) denied her motion for leave to file a
second amended complaint. We affirm.
I. Statutory scheme
The primary focus of this appeal is on the FCA's public
disclosure provision. We start with the statutory scheme.
The FCA prohibits the knowing submission of false or
fraudulent claims to the United States. 31 U.S.C. § 3729(a).3 The
federal government may bring a civil action to enforce the FCA, id.
§ 3730(a), and the statute also contains a qui tam provision
authorizing private persons to bring, as relators, civil actions on
behalf of the United States. Id. § 3730(b). The government has
3
The Act provides, in relevant part,
Any person who --
(1) knowingly presents, or causes to be presented, to an
officer or employee of the United States Government . .
. a false or fraudulent claim for payment or approval;
[or]
(2) knowingly makes, uses, or causes to be made or used,
a false record or statement to get a false or fraudulent
claim paid or approved by the Government;
...
is liable to the United States Government for a civil
penalty of not less than $5,000 and not more than
$10,000, plus 3 times the amount of damages which the
Government sustains because of the act of that person .
. . .
31 U.S.C. § 3729(a).
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the option to intervene in a qui tam action and assume primary
responsibility over it. Id. § 3730(b)(2), (b)(4), (c)(1).
Whether or not the government intervenes, the relator is
eligible to collect a portion of any damages awarded. Id. §
3730(d). Although this financial incentive encourages would-be
relators to expose fraud, it also serves to attract those looking
to capitalize on fraud already exposed by others. To prevent
opportunistic plaintiffs from bringing parasitic qui tam actions,
the FCA contains a provision disallowing qui tam actions that are
based on prior public disclosures of fraud, as long as the
disclosures were made in statutorily specified sources. Id. §
3730(e)(4)(A). This provision is often referred to as the "public
disclosure bar." See, e.g., United States ex rel. Ondis v. City of
Woonsocket, 587 F.3d 49, 52 (1st Cir. 2009); United States ex rel.
Rost v. Pfizer, Inc., 507 F.3d 720, 729 (1st Cir. 2007). It
provides:
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).
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II. Facts
With the legal framework in place, we turn to the
specifics of the case.
In 2007, Poteet brought this action against the doctor
and distributor defendants in federal district court in
Massachusetts. Her claims against the defendants centered around
their relationship with Medtronic, a medical technology firm that
manufactures and distributes medical equipment and supplies, and
Medtronic's subsidiary MSD, which manufactures and sells spinal
implants and other surgical devices.4
With respect to the physician defendants, Poteet alleged
inter alia that they had unlawfully promoted a Medtronic device to
third-party doctors, knowing that this promotion would result in
the third-party doctors submitting false claims for reimbursement
to the federal government.
The district court dismissed Poteet's claims against the
doctor defendants with prejudice, after determining that those
claims were based on prior public disclosures in a series of
lawsuits brought against Medtronic and various doctor defendants
and in media coverage of these lawsuits. We briefly recap those
lawsuits, and the media coverage they generated.
4
Neither Medtronic nor MSD were named as defendants in the
action. We will refer to these companies collectively as
"Medtronic."
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In 2001, Scott Wiese, a former employee of Medtronic,
sued Medtronic in California state court for wrongful termination.
In his complaint, Wiese alleged that Medtronic fired him after he
refused to pay illegal kickbacks to doctors in exchange for their
business.
In 2002, a "John Doe" relator filed a qui tam action
against Medtronic and ten doctors in the Western District of
Tennessee. This complaint, filed under seal, alleged that
Medtronic had paid kickbacks to the doctors and that these
"improper inducements . . . cause[d] the submission of false claims
for payment in violation of the [FCA]." The New York Times
published an article about a government investigation into the
claims entitled, "Inquiry into Possible Kickbacks at Medtronic
Unit." Reuters, Inquiry into possible kickbacks at Medtronic unit,
Sep. 9, 2003, at C.4. The Times published a second story about the
investigation, entitled, "An Operation to Ease Back Pain Bolsters
the Bottom Line, Too." Reed Abelson & Melody Petersen, An
Operation to Ease Back Pain Bolsters the Bottom Line, Too, N.Y.
Times, Dec. 31, 2003, at A.1.
In 2003, Poteet herself filed a qui tam action against
twelve doctors and five healthcare providers, also in the Western
District of Tennessee where the John Doe complaint had been filed.
United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 508
(6th Cir. 2009) ("Poteet I"). Poteet alleged that Medtronic paid
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kickbacks to the defendant doctors to get them to use Medtronic
products. Id. at 508-09. Thereafter, Poteet claimed, the doctors
submitted numerous false, fraudulent, and ineligible claims for
Medicare and Medicaid reimbursement to the federal government in
violation of the FCA. Id. at 509. Poteet further alleged that the
doctors promoted Medtronic products to third-party doctors, that
they "improperly influenced" the third-party doctors, and that the
third-party doctors subsequently submitted false claims to the
federal government for reimbursement. Poteet claimed that the
actions of the defendants violated both the FCA and the federal
Anti-Kickback statute, 42 U.S.C. § 1320a-7(b)(b). Like the John
Doe action, Poteet's lawsuit was covered by the news media. The
New York Times published a story entitled, "Medtronic says a 2nd
suit is filed over alleged kickbacks." Bloomberg News, N.Y. Times,
Medtronic says a 2nd suit is filed over alleged kickbacks, Sep. 3,
2004, C3. Following this, the Times published another story
entitled, "Whistle-Blower Suit Says Device Maker Generously Rewards
Doctors." Reed Abelson, Whistle-Blower Suit Says Device Maker
Generously Rewards Doctors, N.Y. Times, Jan. 24, 2006, C1.
In 2006, the government successfully moved to dismiss the
Poteet I complaint. Poteet I, 552 F.3d at 509. In its motion, the
government argued that Poteet's action was based on public
disclosures made in Wiese and Doe and, as a result, was barred by
the FCA's public disclosure provision. Id. The government also
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informed the district court that it had entered into a settlement
agreement with Medtronic, an agreement which, among other things,
included a condition that the Poteet and Doe qui tam actions be
dismissed. Id. at 509-10. The Sixth Circuit affirmed the
dismissal of Poteet's action. Id. at 510. The court held that
Poteet's suit was "based upon" the Wiese complaint and that, as a
result, the public disclosure bar stripped the courts of subject
matter jurisdiction over Poteet's complaint. Id. at 514-15.
In the present case, the district court held that the
allegations made in these previous lawsuits, along with the
accompanying media coverage of the lawsuits, prevented jurisdiction
over Poteet's claims against the doctor defendants. The district
court further ruled that Poteet had not pled her claims against the
distributor defendants with the requisite particularity.
III. Discussion
Poteet presents three claims on appeal. We consider them
in turn.
A. Public disclosure provision
Poteet first argues that the district court erred when it
held that the FCA's public disclosure provision barred her claims
against the doctor defendants. Ordinarily, we review a district
court's dismissal for lack of subject matter jurisdiction de novo,
Ondis, 587 F.3d at 54, and that holds true here. Poteet, as the
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proponent of federal jurisdiction, bears the burden of proving its
existence by a preponderance of the evidence. Id.
We employ a multi-part inquiry to determine whether the
public disclosure bar applies. Ondis, 587 F.3d at 53. The first
three parts of this inquiry ask: (1) whether there has been a
prior, public disclosure of fraud; (2) whether that prior
disclosure of fraud emanated from a source specified in the
statute's public disclosure provision; and (3) whether the
relator's qui tam action is "based upon" that prior disclosure of
fraud. See id. If any of these questions are answered in the
negative, the public disclosure bar is inapplicable. Id.
Conversely, if all three questions are answered in the affirmative,
the public disclosure bar applies unless the relator qualifies
under the "original source" exception. Id. at 53-54l. Although we
are aware of no command to address the first three questions in any
particular order, we here consider each in the order described
above. As Poteet does not claim that she qualifies as an "original
source," we do not address that exception.
1. Prior, public disclosures of fraud.
The disclosures at issue primarily come from three
different sources: disclosures made in the news media (the New
York Times articles generally discussing the allegations made in
Doe and Poteet I), disclosures made in a civil complaint filed in
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state court (the Wiese complaint), and disclosures made in a civil
complaint filed in federal court (the Poteet I complaint).5
A prior, public disclosure of fraud occurs "when the
essential elements exposing the particular transaction as
fraudulent find their way into the public domain." Ondis, 587 F.3d
at 54. To be a disclosure "of fraud" the disclosure must contain
either (1) a direct allegation of fraud, Poteet I, 552 F.3d at 513,
or (2) both a misrepresented state of facts and a true state of
facts so that the listener or reader may infer fraud. Ondis, 587
F.3d at 54.6
There is no dispute that there have been prior
disclosures of fraud. The Wiese and Poteet I complaints contain
direct allegations of fraud against Medtronic and various doctor
defendants. Moreover, articles published in the New York Times
discuss some of those allegations. The only issue is whether those
disclosures of fraud were "in the public domain."
Any transactions and allegations discussed in the news
media would seem to qualify as public disclosures, and Poteet does
not argue otherwise. But because the civil complaints contain
5
We do not address the allegations in the Doe complaint, as
that complaint apparently was under seal when Poteet filed this
action.
6
Two separate disclosures, one containing a misrepresented
state of facts and the other a true state of facts, may combine to
create an inference of fraud. Id. ("The two states of facts may
come from different sources, as long as the disclosures together
lead to a plausible inference of fraud.").
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crucial allegations not discussed in the news media, we consider
whether the filing of a civil complaint in a state or federal court
qualifies as a public disclosure. See Rost, 507 F.3d at 728 n.5
("It could be that disclosure in the form of a filing to a
government body such as a court (not under seal) where all records
are public could be public disclosure . . . [but this] is not our
case.").
The general rule is that a disclosure is "public" if it
is generally available to the public. United States ex rel.
Maxwell v. Kerr-McGee Oil & Gas Corp., 540 F.3d 1180, 1185 (10th
Cir. 2008) ("[W]e interpret 'public disclosure' to require release
of information such that it is generally available and not subject
to obligations of confidentiality."); United States ex rel.
Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 495 (7th Cir.
2003) (defining "public" in "public disclosure" as "accessible to
or shared by all members of the community"); see also Kennard v.
Comstock Res., Inc., 363 F.3d 1039, 1043 (10th Cir. 2004) (noting
that the public disclosure requirement "clearly contemplates that
the information be in the public domain in some capacity"); United
States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v.
Prudential Ins. Co., 944 F.2d 1149, 1160 (3d Cir. 1991) ("We read
section 3730(e)(4) as designed to preclude qui tam suits based on
information that would have been equally available to strangers to
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the fraud transaction had they chosen to look for it as it was to
the relator.").
We see no reason to depart from the accepted rule.
Holding that a disclosure is "public" if it is generally available
to members of the public is consistent with the purposes of the qui
tam provision and the public disclosure bar. Qui tam actions are
intended to help the federal government expose fraud on the United
States that has escaped the government's detection. If the
materials necessary to ground an inference of fraud are generally
available to the public, however, there is nothing to prevent the
government from detecting it. Concomitantly, the likelihood of
parasitic qui tam actions in such circumstances is high, providing
a reason for the public disclosure bar.7
It follows that a civil complaint filed in court
qualifies as a public disclosure. The cases are in agreement.
United States ex rel. Paranich v. Sorgnard, 396 F.3d 333, 334 (3d
Cir. 2005) ("[A] complaint in a civil action . . . is sufficiently
within the meaning of the Act to constitute a public disclosure.");
Kennard, 363 F.3d at 1043 ("Once a complaint is filed, a civil
7
A disclosure may be "public" even if it is not generally
available to members of the public. For example, in Ondis we held
that, under certain circumstances, the government's actual
disclosure to one member of the public may qualify as a public
disclosure for purposes of the FCA. Ondis, 587 F.3d at 55 (holding
that the government's response to an individual's "FOIA request is
an act of public disclosure because the response disseminates (and,
thus, discloses) information to members of the public (and, thus,
outside the government's bailiwick)").
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action has commenced and public disclosure has occurred.");
Stinson, 944 F.2d at 1156 (holding that information "on file in the
clerk's office" was publicly disclosed); United States ex rel.
McKenzie v. Bellsouth Telcoms., Inc., 123 F.3d 935, 939 (6th Cir.
1997) ("'Public disclosure' also includes documents that have been
filed with a court, such as . . . a plaintiff's complaint."); Fed.
Recovery Servs. v. United States, 72 F.3d 447, 450 (5th Cir. 1995)
("'Any information disclosed through civil litigation and on file
with the clerk's office should be considered a public disclosure of
allegations in a civil hearing for purposes of section
3730(e)(4)(A).' . . . This includes civil complaints.") (quotation
omitted); United States ex rel. Siller v. Becton Dickinson & Co.,
21 F.3d 1339, 1350 (4th Cir. 1994) ("A civil complaint is
unquestionably a 'public disclosure of allegations.'"); United
States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645,
652 (D.C. Cir. 1994) (holding that materials "made public through
filing" were publicly disclosed); Stinson, 944 F.2d at 1156
(holding that information "on file in the clerk's office" was
publicly disclosed); see also United States ex rel. West v. Ortho-
McNeil Pharm., Inc., 538 F. Supp. 2d 367, 377 (D. Mass. 2008)
("[I]t is generally accepted that publicly available documents,
such as a complaint filed in conjunction with a civil lawsuit,
qualify as public disclosures under the statute.").
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Poteet's three arguments for a different result are
unavailing. First, she argues that a civil complaint filed in
state or federal court does not qualify as a public disclosure
because there is no "real audience" to the disclosure. We take the
argument to be that there must be proof that the information has
actually been disclosed to members of the public outside of the
government filing clerk and interested parties. That argument is
a nonstarter, in view of our holding that if the relevant
information is generally available to members of the public, then
the information has been publicly disclosed. See Kennard, 363 F.3d
at 1043 ("It is not necessary that the filing clerk or any member
of the public read the complaint.").
Her second argument is more narrow and is limited to the
Wiese complaint, which was filed in state court. Poteet says that
while a civil complaint filed in federal court may qualify as a
public disclosure, one filed in state court may not.8 Her
rationale for distinguishing between the two appears grounded in
concerns about FCA enforcement. Poteet claims that the federal
government is less likely to become aware of state court complaints
alleging fraud on the United States, and so is also less likely to
8
The defendants argue that Poteet is precluded from making
this argument for two reasons: (1) she waived this argument by
failing to make it in the district court, and (2) she is
collaterally estopped from making the argument by the Sixth
Circuit's decision in Poteet I. Regardless, the claim fails on the
merits in any event.
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initiate an FCA case to combat such fraud. This creates an
enforcement gap. To help fill this perceived gap, Poteet suggests
that we should hold that allegations in state court complaint are
not "public" disclosures and thus are fair game for would-be qui
tam relators.
We are not persuaded. First, the state/federal
distinction Poteet draws is not supported by the plain language of
the statute.9 Disclosures need not occur in a federal forum to
qualify as "public." 31 U.S.C. § 3730(e)(4)(A) (noting that
disclosures in the "news media" qualify as public disclosures).
Second, Poteet's argument fails to acknowledge what we have said is
the purpose of the public disclosure bar. The bar is designed to
preclude parasitic qui tam actions. Ondis, 587 F.3d at 53 (noting
that the public disclosure bar "is designed to foreclose qui tam
actions in which a relator, instead of plowing new ground, attempts
to free-ride by merely repastinating previously disclosed badges of
9
The recent amendment to the public disclosure provision
narrows the sources from which a public disclosure may emanate.
This provision now reads, in relevant part:
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
. . . .
31 U.S.C. § 3730(e)(4)(A)(i) (emphasis added).
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fraud"). The focus, then, is on whether state court complaints are
less likely than federal court complaints to spawn parasitic qui
tam actions. The answer is "no," given that state court
complaints, on the whole, are just as accessible to members of the
public as federal court complaints and thus equally likely to
provide fodder for parasitic qui tam actions. Poteet makes no
argument to the contrary.
Finally, Poteet argues that we should carve out an
exception to the public disclosure bar where the relator's qui tam
action is based on prior, public disclosures made by the relator
herself. In her view, applying the public disclosure bar in such
a case does not further the purpose of the bar, as a qui tam
relator is not being a parasite if she is merely feeding off
herself. If we were to accept this argument, the allegations in
Poteet I would not be considered "public disclosures" for purposes
of this qui tam action, but still would be for qui tam actions
brought by others.
Even if such an exception were to exist, it would be
inapplicable here. Poteet's prior public disclosures were
themselves parasitic. As previously noted, the Sixth Circuit held
that the public disclosure provision barred Poteet's action in
Poteet I, concluding that the action was based upon prior public
disclosures made in Wiese and that Poteet did not qualify as an
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original source. 552 F.3d at 514-15. Poteet's current qui tam
action is also parasitic of Wiese.
Moreover, such an exception strikes us as unnecessary.
The qui tam mechanism is intended to encourage people to blow the
whistle on fraud. If they have already done so, whether to take
advantage of a qui tam reward or for other reasons, there seems to
be little need to encourage them to give the whistle a second toot.
Furthermore, the "original source" exception already ensures that
the most valuable relators -- typically insiders with direct and
independent knowledge of fraud -- will not be barred by prior
public disclosures, whether made by the relators themselves or
others. 31 U.S.C. § 3730(e)(4)(B). If Congress wants to expand
this exception, it is of course free to do so, but this case
provides no reason for us to engage in an expansive reading of the
exception.
2. Sources specified in the statute.
We next ask whether the prior disclosures emanated from
a source specified in the statute. The Supreme Court has recently
divided these sources into three categories: (1) "criminal, civil,
or administrative hearing[s]," (2) "congressional, administrative,
or Government Accounting Office report[s], hearing[s], audit[s], or
investigation[s]," or (3) "from the news media." Graham County,
130 S. Ct. at 1401-02. The issue here is whether a disclosure in
a civil complaint qualifies as a disclosure in a "civil hearing."
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Although the word "hearing" may invoke the image of a
formal session for taking testimony or argument, the cases hold
that, as it is used in the first category, "hearing" is synonymous
with "proceeding." Stinson, 944 F.2d at 1155; Springfield Terminal
Ry. Co., 14 F.3d at 652. In Springfield Terminal Railway Co., the
D.C. Circuit noted that courts frequently use the word hearing "to
connote informal, 'paper' proceedings," undermining an argument
that the word had any one accepted meaning. 14 F.3d at 652. The
court also observed that limiting the word "hearing" to formal
proceedings would cut against the Supreme Court's holding in United
States ex rel. Marcus v. Hess, 317 U.S. 537 (1943) that a
disclosure in a criminal indictment qualified as a disclosure in a
criminal "hearing." Id. ("If court documents could be copied at
will to provide the basis for qui tam suits, a half-century of
precedent would be swiftly refuted without a flicker of recognition
from Congress.").
We agree with the D.C. Circuit's reasoning and hold that,
as used in the statute, "hearing" is synonymous with "proceeding."
Because a disclosure in a civil complaint is a disclosure in a
civil proceeding, we conclude that the disclosures in Wiese and
Poteet I emanate from a statutorily listed source.10
10
At the risk of belaboring the point, we note that if the
Supreme Court disagreed with this understanding of the word
"hearing", it passed up an opportunity to say so in Graham County.
In that case, the Court, citing Springfield Terminal Railway Co.,
observed that "a number of lower courts have concluded that, as
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For her part, Poteet again asks us to draw a distinction
between complaints filed in state court and those filed in federal
court. According to her, only allegations made in the latter
should qualify as disclosures made in civil hearings.
Graham County, decided after the parties submitted briefs
in this case, largely disposes of this argument. In Graham County,
the question presented was whether "administrative report" in the
second category refers only to federal administrative reports or
whether it also encompasses state administrative reports. Id. at
1400. The Supreme Court held that "administrative report"
encompasses both federal and state administrative reports. Id. at
1406. In arriving at this conclusion, the Court considered the
other two categories as well, and in so doing noted that, with
respect to the sources listed in the first category, "There is . .
. no textual basis for assuming that the 'criminal, civil, or
administrative hearing[s]' . . . must be federal hearings." Id. at
1404 (alteration in original). We are not going to march in a
different direction.11
used in Category I, 'hearing' is roughly synonymous with
'proceeding.'" Graham County, 130 S. Ct. at 1404 n.8.
11
This holding has a limited shelf life. As stated in footnote
9, as amended the statute now includes only disclosures made in
"Federal" hearings (among other sources) "in which the government
or its agent is a party." 31 U.S.C. § 3730(e)(4)(A)(i). U.S. ex
rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 103 n.4 (2nd
Cir. 2010).
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3. Based upon a prior disclosure of fraud.
The last question to be considered is whether Poteet's
qui tam action is "based upon" the prior disclosures of fraud. As
we established in Ondis, an action is "based upon" prior
disclosures if the relator's complaint contains allegations that
are "substantially similar to" those disclosures. 587 F.3d at 58.
Consequently, when considering this question, we must compare the
substance of the prior disclosures with the substance of the
relator's complaint.
Here, there is no need for painstaking comparison, as
Poteet concedes that most of the allegations in her amended
complaint are substantially similar to allegations made in Wiese
and Poteet I, and allegations covered by the news media. She
maintains, however, that her allegation regarding the off-label use
of INFUSE, one of Medtronic's products, breaks new ground. In sum,
Poteet alleged that the doctor defendants promoted INFUSE to third-
party doctors by encouraging them to both use INFUSE off-label and
to seek Medicare reimbursement for this use from the federal
government. The defendant doctors did this, Poteet claimed,
despite knowing that the off-label use of INFUSE was not eligible
for Medicare reimbursement. The allegation, set forth in Count Two
of the amended complaint, reads:
Defendants have caused the submission of
hundreds of thousands of false claims by
knowingly purchasing and promoting to Medicare
providers sales of INFUSE for off-label uses
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which were not eligible for Medicare
reimbursement. Every sale of INFUSE which was
not made for an FDA unapproved [sic] use that
was submitted to Medicare, constitutes a false
claim. Defendants are liable, pursuant to 31
U.S.C. § 3729, for each of those false claims
which would not have been made but for
defendant's off-label promotion of INFUSE. At
the time they engaged in such unlawful
promotional activities, defendants knew that
off-label uses of INFUSE were ineligible for
Medicare reimbursement and that their
activities would, in fact cause numerous
ineligible claims to be submitted to Medicare.
Had defendants not engaged in such promotions,
federal funds would not have been used to pay
for unapproved uses of INFUSE that were not
qualified to be reimbursed by Medicare.
Despite Poteet's attempt to pitch this allegation as new,
it is in fact just a slightly more detailed version of a prior
allegation made in Poteet I. In her complaint in that case, Poteet
alleged that the doctor defendants promoted Medtronic products to
third-party doctors, "improperly influenced" these doctors, and
that, after this, the third-party doctors submitted false claims to
the federal government for reimbursement. The allegation in Poteet
I reads:
Plaintiff alleges that after accepting
excessive remuneration, unlawful perquisites,
and bribes in other forms for . . .
recommending the purchase of MSD goods to
other physicians, the defendant physicians, or
their respective employers, and in separate
and individual conspiracy with MSD, . . .
recommended the purchase of medical devices
for which payment or reimbursement may be made
in whole or in part under a federal healthcare
program. Plaintiff alleges that the
individual defendants, or their employers, as
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well as physicians improperly influenced by
the individual defendants, thereafter actually
submitted false claims for reimbursement for
such devices for which payment was made in
whole or in part under a federal healthcare
program.
The only notable differences between the two allegations
is that the allegation in this case identifies a specific Medtronic
device (INFUSE) and describes in greater detail how the defendant
doctors improperly influenced the third-party doctors (they falsely
told them that off-label use of INFUSE was eligible for Medicare
reimbursement). Although these details undoubtedly add some color
to the allegation, the allegation ultimately targets the same
fraudulent scheme. That is enough to trigger the public disclosure
bar. See Ondis, 587 F.3d at 58; see also Dingle v. Bioport Corp.,
388 F.3d 209, 215 (6th Cir. 2004) (noting that a contrary ruling
"would allow potential qui tam plaintiff's [sic] to avoid the
public disclosure bar by pleading their complaints with more and
more detailed factual allegations slightly different from more
general allegations already publicly disclosed").
B. Dismissals with prejudice
Poteet argues that the district court erred in dismissing
her claims against the doctor and distributor defendants with
prejudice. We first take up the district court's dismissal of
Poteet's claims against the doctors. The court held that the
public disclosure bar stripped it of subject matter jurisdiction
over those claims.
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Generally, when a federal court dismisses a case for lack
of subject matter jurisdiction, the dismissal should be without
prejudice. Torres-Fuentes v. Motorambar, Inc., 396 F.3d 474, 475
(1st Cir. 2005). This is because a dismissal for lack of subject
matter jurisdiction is not a decision on the merits, and many
jurisdictional defects may be cured.
Here, however, the jurisdictional defect is incurable.
Because Poteet's claims against the doctor defendants were based on
prior public disclosures, they are forever barred. Poteet can do
nothing to cure that defect. United States ex rel. Meyer v.
Horizon Health Corp., 565 F.3d 1195, 1203 (9th Cir. 2009)
(affirming a district court decision dismissing a qui tam action
with prejudice based on the public disclosure bar); United States
v. N.Y. Med. Coll., 252 F.3d 118, 119 (2d Cir. 2001) (per curiam)
(same).
The next question is whether the district court erred in
dismissing Poteet's claims against the distributor defendants with
prejudice, based on her failure to plead fraud with the requisite
particularity. See Fed. R. Civ. P. 9(b). Poteet does not
challenge the basis for the dismissal, but rather only the court's
decision to dismiss her claims with prejudice.
We need not linger over this argument. While it is true
that dismissals for failure to comply with Rule 9(b) are often
without prejudice, which gives the plaintiff an opportunity to
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correct the pleading deficiencies, it is evident that such a
disposition would not make sense here. In her amended complaint,
Poteet admitted that she was unable to offer any further specifics
regarding the alleged fraud committed by the distributors.12 Since
then, Poteet has not added, attempted to add, or even suggested how
she might add, any details to the claims made against the
distributor defendants. Accordingly, we discern no error with the
district court's disposition. See United States ex rel. Karvelas
v. Melrose-Wakefield Hosp., 360 F.3d 220, 241-42 (1st Cir. 2004)
(holding that the district court did not err in dismissing a qui
tam complaint with prejudice where the complaint failed to plead
fraud with the requisite particularity).
C. Denial of motion to amend
Finally, Poteet argues that the district court erred when
it denied her motion to file a second amended complaint. Our
review is for an abuse of discretion. Windross v. Barton
Protective Servs., 586 F.3d 98, 105-06 (1st Cir. 2009).
A party may amend its complaint more than once "only with
the opposing party's written consent or the court's leave." Fed.
R. Civ. P. 15(a)(i)(2). In November and December of 2008, Poteet
12
The complaint read, in relevant part: "At the present time,
and without preliminary discovery, it is impossible to plead the
fraud perpetrated upon the United States with respect to every
false claim filed with greater particularity than furnished
herein."
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sought leave to file a second amended complaint.13 In this
complaint, Poteet replaced "plaintiff/relator John Doe," who was
previously said to "comprise a number of unidentified people with
direct knowledge of the information contained in the allegations
herein," with Bobbie Vaden, a former employee of MSD's Memphis
accounting office. Prior to seeking leave to file this second
amended complaint, however, Poteet had served complaints that did
name Vaden as a relator on the defendants. Although these
complaints had not been filed with the district court, Poteet did
not notify the defendants of this fact. Accordingly, the
defendants assumed that Vaden had been formally added to the case
and their responsive pleadings accounted for her presence.
Ultimately, the district court denied Poteet's motion to file a
second amended complaint, holding that it was "unduly delayed and
prejudicial to defendants."
Poteet argues that the district court abused its
discretion. In her view, the second amended complaint could not
have been prejudicial to the defendants because they had been
operating on the assumption that Vaden was party to the case.
Whether or not there was prejudice to the defendants in
the sense that Poteet denies, the district court acted within its
discretion in denying Poteet's motion. A contrary ruling would
incentivize deception, as a party may well think it the better
13
The defendants did not consent to the amendment.
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strategy to mislead an opponent into treating an unofficial
amendment as official and then argue to the district court that its
formal approval of the amendment is but a ministerial act endorsing
a fait accompli. This is not to say that the defendants were
without fault in failing to discern the true state of affairs, but
this is not a situation in which two wrongs make a right.
IV. Conclusion
For the reasons provided above, we affirm the judgment of
the district court.
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