United States ex rel. Nargol v. Depuy Orthopaedics, Inc.

• Decision Date: 02 February 2016
• Docket Number: Civil Action No. 12-10896-FDS
• Citation: 159 F.Supp.3d 226
• Court: U.S. District Court — District of Massachusetts
• Parties: United States of America et al. ex rel. Antoni Nargol and David Langton, Plaintiffs, v. Depuy Orthopaedics, Inc., Depuy, Inc., and Johnson & Johnson Services, Inc., Defendants.

159 F.Supp.3d 226

United States of America et al. ex rel. Antoni Nargol and David Langton, Plaintiffs,

v.Depuy Orthopaedics, Inc., Depuy, Inc., and Johnson & Johnson Services, Inc., Defendants.

Civil Action No. 12-10896-FDS

United States District Court, D. Massachusetts.

Signed February 2, 2016

George B. Henderson, III, United States Attorney's Office, Boston, MA, Russell L. Kornblith, Inayat Hermani, Ross B. Brooks, Sanford Heisler Kimpel, LLP, New York, NY, Christopher M. Hennessey, David E. Valicenti, Kevin M. Kinne, Cohen Kinne Valicenti & Cook, LLP, Pittsfield, MA, Grant Morris, Law Offices of Grant Morris, David W. Sanford, H. Vincent McKnight, Jr, John McKnight, Jr., Marissa Abraham, Sanford Heisler, LLP, Washington, DC, for Plaintiffs.

D. Danielle Pelot, Hannah R. Bornstein, Mark D. Seltzer, Nixon & Peabody, LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER ON MOTION TO DISMISS

F. Dennis Saylor IV

, United States District Judge

This is a qui tam action alleging the submission of false claims to government health-care programs for a defective hip-replacement device. Relators Dr. Antoni Nargol and Dr. David Langton, who are expert witnesses in a related products-liability case involving the same device, have brought suit against defendants DePuy Orthopaedics, Inc., DePuy, Inc., and Johnson & Johnson Services, Inc.¹ DePuy manufactured and sold, among other hip-replacement devices, the Pinnacle metal-on-metal total hip-replacement device (“Pinnacle MoM”). The second amended complaint alleges that DePuy directly submitted and indirectly caused third parties to submit false claims for payments to government health-care programs for the Pinnacle MoM. According to the second amended complaint, the claims were false because DePuy made numerous misrepresentations to the FDA and surgeons concerning, among other things, the Pinnacle MoM's failure rates.

The relators filed the original complaint in this action under seal on May 18, 2012. On December 2, 2013, the relators filed a first amended complaint. The government declined to intervene on July 29, 2014. On June 5, 2015, the Court granted the relators' request to file a second amended complaint (“SAC”). Although the 168-page SAC alleges that DePuy made numerous misrepresentations about two of their devices—the ASR device and the Pinnacle MoM device—the specific counts in the SAC seek damages only as to the latter device. The SAC alleges claims of (1) causing false or fraudulent claims for payment to be presented to the United States in violation of 31 U.S.C. § 3729(a)(1)(A)

(Count One); (2) knowingly making, using, or causing to be made or used false records or statements material to a false or fraudulent claim paid by the United States in violation of 31 U.S.C. § 3729(a)(1)(B) (Count Two); (3) conspiracy to violate the FCA in violation of 31 U.S.C. § 3729(a)(1)(C) (Count Three); and (4) violations of various state and municipal analogues to the Federal FCA (Counts Four through Thirty-Seven).

DePuy has moved to dismiss the SAC under Fed. R. Civ. P. 12(b)(6)

for failure to state a claim upon which relief can be granted and under Fed. R. Civ. P. 9(b) for failure to satisfy the heightened pleading requirements for fraud. The relators have since moved to unseal the SAC, and DePuy has assented to that motion while requesting that documents concerning the motion to dismiss also be unsealed. Finally, while they have not formally filed a motion to amend the SAC, the relators contend in the conclusion of their opposition memorandum, sur-reply, and a post-hearing supplemental filing that they should be granted leave to amend and file a third amended complaint.

The essence of a False Claims Act violation is making, or causing the making, of one or more false claims—that is, claims for payment—against the United States. The statute provides large awards to qui tam relators as an incentive to bring such cases. The prospect of such an award may also, however, provide an incentive for individuals to try to convert virtually any set of allegations arising out of a defective product or faulty service into an FCA case. That is particularly true in the medical field, where the government purchases medical supplies and services on a large scale through Medicare, Medicaid, the VA, and other health-care programs. Normally, it requires no great leap of logic to conclude that if a medical device or a pharmaceutical is defective, the government must have purchased that product in great quantities, and therefore the manufacturer must have caused, directly or indirectly, the submission of false claims.

In order to avoid so-called “parasitic” claims, and to try to guard against misuse of the FCA, the First Circuit has construed the statute fairly strictly. In doing so, the court has emphasized that the statute “attaches liability, not to the underlying fraudulent activity or to the government's wrongful payment, but to the claim for payment.” United States v. Rivera , 55 F.3d 703, 709 (1st Cir.1995)

. Among other things, FCA complaints must satisfy the particularity requirements of Fed. R. Civ. P. 9(b). The law requires relatively specific allegations of false claims, rather than generalized allegations based on supposition and logic; the relator must set forth with particularity the “who, what, when, where, and how” of actual claims that are alleged to be false. United States ex rel. Ge v. Takeda Pharm. Co. , 737 F.3d 116, 123 (1st Cir.2013).

Here, the SAC includes hundreds of paragraphs of allegations, covering dozens of pages, of claimed fraudulent activity by DePuy. That satisfies one of the components of an FCA claim, but it does not satisfy them all. As set forth below, the allegations as to specific claims for payment for the specific device actually at issue in this case are sparse indeed. For that reason, and the other reasons set forth below, DePuy's motion to dismiss will be granted.

The relators' request for leave to amend the SAC and file a third amended complaint will be denied. The present case is nearly four years old, has had three iterations of the complaint, and has seen the desks of three judges in this district. The relators have had ample opportunity to file a complaint that complies with the requirements of Rule 9(b)

, and have failed to do so. Finally, the parties' motions to unseal the SAC and other filings related to the motion to dismiss will be granted.

I. Background

The facts summarized below are set forth in the SAC unless otherwise noted.

A. Factual Background

1. The Parties

Relator Dr. Antoni Nargol is an orthopedic surgeon residing in the United Kingdom. (SAC ¶ 63). In 2003 he became one of the earliest British adopters of the Pinnacle MoM device, and DePuy invited him to be on its “Pinnacle user group team.” (SAC ¶ 66). Dr. Nargol served as a testifying expert for the plaintiffs in Strum v. DePuy Orthopaedics, Inc. and Premier Orthopaedic Sales, Inc. , No. 2011 L 009352 2404 (Cook Cty., Ill., Cir.Ct.) (“Strum litigation”). (SAC ¶ 68). Dr. Nargol also provided expert assistance to the plaintiffs' executive committee in Kransky v. DePuy, Inc. , No. BC 456086 (Cal.Sup.Ct.), in which the plaintiffs' allegations focused on perceived design defects in the “ASR,” a device that is similar to the one at issue in this case, the Pinnacle MoM. (SAC ¶ 68). Dr. Nargol also served as a fact witness in Herlihy–Paoli v. DePuy Orthopaedics, Inc. , No. 3:11–CV–04975–K (N.D.Tex.) (“Herlihy–Paoli litigation”). (SAC ¶ 68).

Relator Dr. David Langton is an orthopedic surgeon residing in the United Kingdom. (SAC ¶ 69). Dr. Langton has performed research on failed hip-replacement surgeries and devices, including the Pinnacle MoM device. (SAC ¶ 70). The United States Food and Drug Administration (“FDA”) has retained Dr. Langton as a consultant regarding “failure rates and dimensions of MoM products sold in the United States, including the Pinnacle.” (SAC ¶ 72). Dr. Langton served as an expert witness in the Strum litigation and as a fact witness in the Herlihy–Paoli litigation. (SAC ¶ 72). According to the SAC, both the relators had personal experience in implanting the Pinnacle MoM device in their patients and began to alert defendants of the device's defects in 2009. (SAC ¶ 24).

Defendant DePuy Orthopaedics, Inc. is a designer, manufacturer, and distributor of orthopedic products that is based in Warsaw, Indiana. (SAC ¶ 73). DePuy Orthopaedics manufactured the Pinnacle MoM device. (SAC ¶ 73). DePuy Orthopaedics is a wholly-owned subsidiary of Delaware-based DePuy, Inc., which in turn is a subsidiary of New Jersey-based Johnson & Johnson Services, Inc. (SAC ¶¶ 75-77).

2. Government Health-Care Programs

Medicare is a health-insurance program administered by the United States Department of Health and Human Services (“HHS”). (SAC ¶ 85). Medicare provides payment for, among other things, medical services and equipment to persons over 65 years of age and those who are 18 years of age or older and are eligible for disability benefits. (SAC ¶ 82). For inpatient treatment, Medicare reimburses hospitals and other treating facilities through Medicare Part A. (SAC ¶ 83). For outpatient treatment, Medicare reimburses physicians and health-care providers through Medicare Part B. (SAC ¶ 83).

Under the Medicare program, “no payment may be made under Part A or Part B for any expenses incurred for items or services which ... are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of the malformed body member.” (SAC ¶ 84) (citing 42 U.S.C. § 1395y(a)(1)(A)

). To satisfy that standard, providers must provide, among other things, economical medical services, along with evidence that the service will be of a quality that meets professionally recognized standards of healthcare and will be supported by evidence of medical necessity and quality. (SAC ¶ 84) (citing 42 U.S.C. § 1320c–5(a)(1–3) ). The SAC alleges that Medicare reimbursed qualified individuals for...