Humana Inc. v. Medtronic Sofamor Danek USA, Inc.

• Decision Date: 25 September 2015
• Docket Number: Case No. 2:14–cv–02405–JTF–cgc.
• Citation: 133 F.Supp.3d 1068
• Court: U.S. District Court — Western District of Tennessee
• Parties: HUMANA INC., Plaintiff, v. MEDTRONIC SOFAMOR DANEK USA, INC., and Medtronic, Inc., Defendants.

133 F.Supp.3d 1068

HUMANA INC., Plaintiff,

v.MEDTRONIC SOFAMOR DANEK USA, INC., and Medtronic, Inc., Defendants.

Case No. 2:14–cv–02405–JTF–cgc.

United States District Court, W.D. Tennessee, Western Division.

Signed Sept. 25, 2015.

April Ann Wimberg, John Kenneth Bush, Bingham Greenbaum Doll LLP, Louisville, KY, David B. Gray, Goldberg Simpson, Prospect, KY, Ryan L. Woody, Matthiesen Wickert & Lehrer S.C., Hartford, WI, Virgil Brandon McGrath, Bingham Greenebaum Doll, LLP, Cincinnati, OH, for Plaintiff.

Nathan A. Bicks, Charles Silvestri Higgins, Gary Scott Peeples, Jennifer Shorb Hagerman, Burch Porter & Johnson PLLC, Memphis, TN, Lauren S. Colton, Marc A. Marinaccio, Hogan Lovells U.S. LLP, Baltimore, MD, Mitchell E. Zamoff, Hogan & Hartson LLP, Washington, DC, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

JOHN T. FOWLKES, JR., District Judge.

Before the Court comes Defendants' Motion to Dismiss Plaintiff's First Amended Complaint filed December 5, 2015. (ECF No. 33). On January 16, 2015, Plaintiff filed a Response in Opposition, (ECF No. 34), to which Defendants filed a Reply in Support on February 13, 2015, (ECF No. 36). On March 19, 2015, Plaintiff provided this Court with a Notice of Supplemental Authority, (ECF No. 38), to which Defendants responded on March 24, 2015, (ECF No. 39). On May 22, 2015, oral arguments were held before this Court on Defendants' Motion to Dismiss. (ECF No. 45). Defendants filed a Notice of Supplemental Authority on August 17, 2015, (ECF No. 47), to which Plaintiff responded on August 20, 2015, (ECF No. 48). Plaintiff filed another Notice of Supplemental Authority on September 3, 2015, (ECF No. 49) to which Defendant responded on September 14, 2015, (ECF No. 50). After reviewing the Motion, Response, Reply, supplemental authorities, and oral arguments by the parties, the Court GRANTS in PART and DENIES in PART Defendants' Motion to Dismiss.

I. FACTUAL BACKGROUND

The Infuse Bone Graft ("Infuse") is FDA approved for spinal fusion procedures when used in combination with the LT–Cage. (ECF No. 31 at ¶ 12, 29) (approving Premarket Approval status for Anterior Lumbar Interbody Fusion on July 2, 2002). Such is used as an alternative to bone grafting. Id. at ¶ 14. As further described in the Important Medical Information ("IMI") for the Infuse,

[t]he InFUSETM Bone Graft component is inserted into the LT–CAGETM Lumbar Tapered Fusion Device component to form the complete InFUSETM Bone Graft /LT–CAGETM Lumbar Tapered Fusion Device. These components must be used as a system. The InFUSE0 Bone Graft component must not be used without the LT–CAGE0 Lumbar Tapered Fusion Device Component.

(ECF No. 33–2 at p. 2). The IMI further details "Warnings" and "Potential Adverse Effects" for the Infuse. Specifically, the "Warnings" in the IMI state that,

[t]he safety and effectiveness of the InFUSE Bone Graft component with other spinal implants, implanted at locations other than the lower lumbar spine, or used in surgical techniques other than open anterior or anterior laparoscopic approaches have not been established. When degenerative disc disease was treated by a posterior lumbar interbody fusion procedure with cylindrical threaded cages, posterior bone formation was observed in some instances.

Id. at p. 5. Lastly, the IMI outlines the various "Potential Adverse Events" that can occur because of the Infuse, such as bone fracture, cessation of any potential growth of the operated portion of the spine or loss of spinal function, ectopic and/or exuberant bone formation, infection, neurological system compromise, tissue or nerve damage, scar formation, or retrograde ejaculation, and noting that "[a]dditional surgery may be necessary to correct some of these potential adverse events". Id. at 10–11.

Beginning in 2002, Plaintiff agreed to reimburse their insureds for off-label use¹ of Infuse, in reliance on medical literature that touted the benefits of and underreported the adverse events of Infuse. (ECF No. 31 at ¶ 145). Defendants edited and controlled such medical literature. Id. passim. Specifically, the Defendants have spent "millions of dollars" in fees to ghost-writers and Key Opinion Leaders ("KOLs") related to Infuse. Id. at ¶¶ 33, 40, 187. In late 2008, Plaintiff became aware of new medical literature that questioned the safety and efficacy of Infuse in off-label procedures. Id. at ¶ 162. In February of 2009, Plaintiff adopted a policy prohibiting the reimbursement of off-label Infuse procedures. Id. However, Plaintiff continued to reimburse for such off-label procedures based on representations of Defendants at meetings held on May 25 and October 27, 2010. Id. at ¶¶ 165–73. Within such meeting, Defendants cited to what Plaintiff now calls fraudulent medical literature.² Id. Apparently, Plaintiff mistakenly paid for many disguised off-label procedures. Id. at ¶¶ 176–81. Specifically, Plaintiff claims that Defendants provided medical practitioners with medical codes that would mask the use of off-label Infuse procedures. Consequently, reimbursements were made against Plaintiff's policy. Id. at ¶¶ 178, 181. Plaintiff identifies twelve claims, paid from May 2008 to April 2012. Id. at ¶¶ 188, 266.

Plaintiff states that many of Plaintiff's insureds were implanted with a debased version of the Infuse device by, inter alia, substitution of the cage component, implantation at unapproved locations of the spine, or utilization of a posterior approach. Id. Humana settled product liability claims related to Infuse. Id. at ¶ 350. As such, Plaintiff claims that it is entitled to reimbursement for certain Medicare benefits. Id. at ¶¶ 348, 352–55.

Due to Defendants' alleged fraudulent actions, Plaintiff pursues fourteen causes of action: (1) fraudulent misrepresentation; concealment; omission and fraud in the inducement; (2) violation of 18 U.S.C. § 1962(c) (RICO statute); (3) violation of 18 U.S.C. § 1962(d) by conspiring to violate 18 U.S.C. § 1962(c) ; (4) negligent misrepresentation; (5) subrogation; (6) violation of the consumer protection statutes of the fifty states, the District of Columbia, and the Commonwealth of Puerto Rico; (7) breach of express warranty; (8) breach of implied warranty; (9) unjust enrichment; (10) conversion; (11) Medicare Secondary Payer claim for declaratory judgment; (12) a private cause of action under the Medicare Secondary Payer claim; (13) right-to-charge action under the Medicare Secondary Payer claim; and (14) accounting. See generally id.

In Defendants' Motion to Dismiss, (ECF No. 34), Defendants argue four major contentions for why Plaintiff's First Amended Complaint should be dismissed: (1) Plaintiff fails to allege any injury in fact or causal connection for Count 1–10; (2) Plaintiff fails to state a claim for relief on all counts; (3) Plaintiff fails to allege fraud with particularity for Counts 1–4, 6, 9–10; and (4) Plaintiff is time-barred as to Counts 1–5, 7–10. (ECF No. 33 at p. 1). To the contrary, Plaintiff contends that all claims are timely and sufficiently pled for all purposes. (ECF No. 34).

II. LEGAL STANDARD

Fed.R.Civ.P. 12(b)(6) provides for dismissal of a complaint that "fail[s] to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). This allows the "defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993) (emphasis added) (citing Nishiyama v. Dickson Cnty., 814 F.2d 277, 279 (6th Cir.1987) ).

When evaluating a motion to dismiss under Fed. R. 12(b)(6), the Court must determine whether the complaint alleges "sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see also Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir.2012) (The court must "construe the complaint in the light most favorable to the plaintiff and accept all allegations as true." (citing Harbin–Bey v. Rutter, 420 F.3d 571, 575 (6th Cir.2005) )). The "[f]actual allegations must be enough to raise a right to relief above [a] speculative level." Ass'n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir.2007) (first alteration in original) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ). A claim is plausible on its face if "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). Although the complaint need not contain detailed factual allegations, a plaintiff's "[ ]bare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ) ("[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."). "[D]etermining whether a complaint states a plausible claim is context-specific, requiring the ... court to draw on its experience and common sense." Id. at 663–64, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). When undertaking a motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), the Court may look to " ‘matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint’ " for guidance. Barany–Snyder v. Weiner, 539 F.3d 327, 332 (6th Cir.2008) (quoting Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir.2001) ). If the complaint merely pleads facts that are parallel to the defendant's liability, then the complaint "stops short of the line between possibility and plausibility of ‘entitlement to relief.’ " Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, ...