Hopper v. Solvay Pharmaceuticals, Inc., No. 08-15810.

• Decision Date: 04 December 2009
• Docket Number: No. 08-15810.
• Citation: 588 F.3d 1318
• Parties: James HOPPER, Colin Hutto, Plaintiffs-Appellants, v. SOLVAY PHARMACEUTICALS, INC., Unimed Pharmaceuticals, Inc., United States of America, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

588 F.3d 1318

James HOPPER, Colin Hutto, Plaintiffs-Appellants, v. SOLVAY PHARMACEUTICALS, INC., Unimed Pharmaceuticals, Inc., United States of America, Defendants-Appellees.

No. 08-15810.

United States Court of Appeals, Eleventh Circuit.

December 4, 2009.

Frederick M. Morgan, Jr., Volkemia, Thomas, LPA, Cincinnati, OH, for Hopper and Hutto.

Jack E. Fernandez, Jr., Marcos E. Hasbun, Zuckerman Spaeder, L.L.P., Tampa, FL, John R. Fleder, Hyman Phelps & McNamara, PC, Washington, DC, for Defendants-Appellees.

Richard A. Samp, Washington Legal Found., Washington, DC, for Amicus Curiae, Washington Legal Found.

Appeal from the United States District Court for the Middle District of Florida.

Before BLACK, WILSON and COX, Circuit Judges.

COX, Circuit Judge:

Solvay Pharmaceuticals, Inc. and its wholly owned subsidiary, Unimed Pharmaceuticals, Inc., manufacture and market Marinol, a synthetic form of THC, a hallucinogenic compound found naturally in marijuana. Qui tam relators James Hopper and Colin Hutto allege that Solvay engaged in an off-label marketing campaign to increase sales of Marinol for purposes not approved by the United States Food and Drug Administration. The relators sought recovery on behalf of the United States pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., for claims paid by government health programs as a result of the marketing campaign. The district court dismissed their action because the relators' Second Amended Complaint failed to plead the submission of specific false claims with particularity as required by Federal Rule of Civil Procedure 9(b). The relators appeal. We affirm.

I. BACKGROUND & PROCEDURAL HISTORY

Relevant sections of the False Claims Act, 31 U.S.C. § 3729 et seq., prohibit the presentment of false claims to the government and the use of false records or statements to get a false claim paid or approved. The Act may be enforced through civil actions initiated by the government or suits by private individuals on behalf of the United States, called qui tam actions. The private plaintiffs in qui tam actions are known as "relators," and the Act entitles them to a percentage of any recovery made on behalf of the government from a False Claims Act defendant.

We summarize the allegations of the relators in this case, Hopper and Hutto, from their Second Amended Complaint. Solvay employed the relators as sales representatives in its Mental Health Division. One of their duties was to implement what they allege to be an illegal marketing scheme for Marinol, a prescription drug manufactured and sold by Solvay.

In 1999, Solvay acquired Unimed, which owned the rights to manufacture and distribute Marinol, a synthetic form of THC, the active compound in marijuana.¹ Marinol is approved by the FDA for use as an appetite stimulant for AIDS patients and for the treatment of nausea and vomiting associated with cancer chemotherapy. According to the relators, Marinol is not particularly effective for these on-label uses, so sales of the drug did not generate substantial profits for Solvay. To increase Marinol sales, the relators allege, Solvay implemented an off-label marketing campaign for the drug beginning in 2001. The relators assert that Solvay instructed its sales representatives to encourage physicians to prescribe Marinol for appetite loss in cancer patients and for treatment of nausea in HIV patients, purposes for which Marinol was not approved. Because the FDA prohibits the marketing of drugs for off-label uses, the relators allege that Solvay's marketing scheme was illegal.

The relators assert that sales generated from the marketing scheme caused the government to pay false claims through Medicaid and other programs that provide prescription drug benefits. The government does not knowingly pay for drugs through these programs if they are prescribed for off-label uses. The relators allege that the marketing campaign convinced doctors to prescribe Marinol for off-label uses, and claims were ultimately submitted by state health programs and other third parties to the federal government to pay for some of those prescriptions. The relators do not allege that Solvay itself submitted any false claims. Rather, they allege that every time federal funds were used to pay for an off-label prescription, the third party who requested payment from the government made a false claim. (R.2-84 at 52-53.) Those false claims were attributable to Solvay, according to the relators, because the off-label marketing campaign caused the claims to be submitted against federal funds and because Solvay intended that its campaign cause the filing of false claims. (Id. at 60.) To support their allegations that the government paid false claims, the relators point to a marked increase in prescriptions for Marinol and an increase in Medicaid payments for Marinol between 2001 and 2005, years in which Solvay is alleged to have engaged in the marketing campaign.

In 2004, the relators filed a complaint based on these allegations, under seal, pursuant to the qui tam provisions of the False Claims Act. See 31 U.S.C. § 3730(b)(2) (requiring complaints be filed under seal and submitted to the government so it can conduct an investigation). They filed a First Amended Complaint in 2005. The Government was served with these complaints, investigated the allegations, and in 2006 ultimately chose not to intervene in the case. Shortly thereafter, the court ordered the lawsuit unsealed, and the relators sought leave to file a Second Amended Complaint ("Complaint"), which the court granted.

The Complaint alleges that Solvay violated two subsections of the False Claims Act, 31 U.S.C. § 3729(a)(1) and (a)(2)², and parallel Illinois, California, and Massachusetts statutes. In a nutshell, it alleges that Solvay executed a sophisticated marketing plan for the purpose of inducing physicians to prescribe Marinol for uses not approved by the FDA, and this conduct "caused submission for reimbursement by Government Healthcare Programs of millions of dollars worth of prescriptions which were ineligible for such reimbursement." (R.2-84 at 2.) It also alleges that Solvay gave kickbacks to physicians and other healthcare providers to induce them to prescribe Marinol for off-label purposes. (Id. at 3.) The complaint does not identify any specific false claims presented to a government healthcare program or any person or entity who submitted a claim. Nor does it allege that Solvay intended that the government rely on the alleged false statements or records in deciding whether to pay claims. Instead, it alleges that Solvay's marketing campaign caused healthcare providers to submit claims to state healthcare programs, and the state programs submitted false claims to the federal government. (Id. at 62.)

Solvay filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), and 12(b)(6). The Rule 12(b)(6) motion was grounded in an assertion that the relators failed to plead their allegations of fraud with particularity as required by Rule 9(b). Solvay also asserted that the court lacked subject matter jurisdiction over the case because some of the allegations were based on publicly disclosed information, and the relators were not the original source. See 31 U.S.C. § 3730(e)(4)(A) (creating jurisdictional bar to claims where plaintiffs are not the original source for information in the complaint). The district court referred the matter to a magistrate judge who recommended that the motion to dismiss be denied as to subject matter jurisdiction. He recommended, however, that the federal claims be dismissed for failing to satisfy Rule 9(b) because the relators failed to plead with particularity their allegations that Solvay's marketing scheme caused the submission of actual false or fraudulent claims to the government. (R.2-101 at 26-27.) The magistrate judge also recommended that the court decline to retain supplemental jurisdiction over the state law claims. The relators filed objections to the magistrate judge's report, but the district court adopted it in full, dismissed the relators' federal claims with prejudice, and declined to exercise supplemental jurisdiction over the state law claims. The relators appeal.

II. ISSUE ON APPEAL & CONTENTIONS OF THE PARTIES

The sole issue on appeal is whether the Complaint, which does not include allegations of specific false claims or allege that Solvay intended for its statements to influence the government's decisions to pay any claims, satisfies the particularity requirements of Rule 9(b). The relators brought claims under 31 U.S.C. § 3729(a)(1) and (a)(2). Subsection (a)(1) makes liable any person who presents, or causes to be presented, a false or fraudulent claim. Subsection (a)(2) makes liable any person who knowingly makes, uses, or causes to be made or used, a false record or statement to get a false claim paid or approved. Solvay contends that to satisfy the particularity requirements under either 31 U.S.C. § 3729(a)(1) or (a)(2), a complaint must identify actual false claims. The relators counter that the requirements of Rule 9(b) may be satisfied as to subsection (a)(1) without identifying specific false claims as long as the complaint contains factual allegations which reliably indicate that false claims were submitted to the government. As to subsection (a)(2), the relators argue that the presentment of a false claim to the government is not an element of the cause of action. So, they claim the particularity requirements of Rule 9(b) are satisfied by alleging that the defendants made false statements for the purpose of causing the payment of false claims. For claims under subsection (a)(2), the relators argue they need not allege that false or fraudulent claims were actually submitted to or paid by the government.

III. STANDARD OF REVIEW

We review de novo the grant of a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief...