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

• Decision Date: 26 July 2017
• Docket Number: No. 16-1442,16-1442
• Citation: 865 F.3d 29
• Parties: UNITED STATES, EX REL., Antoni NARGOL and David Langton; State of Arkansas, State of California, City of Chicago, State of Colorado, State of Connecticut, State of Delaware, District of Columbia, State of Florida, State of Georgia, State of Hawaii, State of Illinois, State of Indiana, State of Iowa, State of Louisiana, State of Maryland, State of Michigan, State of Minnesota, State of Montana, State of Nevada, State of New Jersey, State of New Mexico, State of New York, State of North Carolina, State of Oklahoma, State of Rhode Island, State of Tennessee, State of Texas, Commonwealth of Virginia, State of Wisconsin, Commonwealth of Massachusetts, City of New York, State of New Hampshire, State of Missouri, State of Washington, ex rel., Antoni Nargol and David Langton, Plaintiffs, Appellants, v. DEPUY ORTHOPAEDICS, INC.; DePuy, Inc.; Johnson & Johnson, Services, Inc., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

865 F.3d 29

UNITED STATES, EX REL., Antoni NARGOL and David Langton; State of Arkansas, State of California, City of Chicago, State of Colorado, State of Connecticut, State of Delaware, District of Columbia, State of Florida, State of Georgia, State of Hawaii, State of Illinois, State of Indiana, State of Iowa, State of Louisiana, State of Maryland, State of Michigan, State of Minnesota, State of Montana, State of Nevada, State of New Jersey, State of New Mexico, State of New York, State of North Carolina, State of Oklahoma, State of Rhode Island, State of Tennessee, State of Texas, Commonwealth of Virginia, State of Wisconsin, Commonwealth of Massachusetts, City of New York, State of New Hampshire, State of Missouri, State of Washington, ex rel., Antoni Nargol and David Langton, Plaintiffs, Appellants,

v.DEPUY ORTHOPAEDICS, INC.; DePuy, Inc.; Johnson & Johnson, Services, Inc., Defendants, Appellees.

No. 16-1442

United States Court of Appeals, First Circuit.

July 26, 2017

Russell L. Kornblith, with whom David W. Sanford, Ross B. Brooks, Sanford Heisler, LLP, Kevin M. Kinne, and Cohen Kinne Valicenti & Cook, LLP, were on brief, for appellants.

Mark D. Seltzer, with whom D. Danielle Pelot, Hannah R. Bornstein, and Nixon Peabody LLP were on brief, for appellees.

Before Torruella, Thompson, and Kayatta, Circuit Judges.

KAYATTA, Circuit Judge.

In this action brought by two private individuals under the False Claims Act ("FCA"), 31 U.S.C. § 3729, and various state analogues, we review de novo the dismissal of a complaint under Federal Rules of Civil Procedure 9(b) and 12(b)(6). Applying and extending our holding in United States ex rel. D'Agostino v. ev3, Inc. , 845 F.3d 1 (1st Cir. 2016), we affirm the dismissal of the complaint to the extent it relies on the alleged falsity of statements made by the product manufacturer in securing approval from the U.S. Food and Drug Administration ("FDA") to market a hip-replacement device. At the same time, we reverse the district court's dismissal of the complaint to the extent it rests on allegations that the manufacturer palmed off latently defective versions of its FDA-approved product on unsuspecting doctors who sought government reimbursement for the defective products.

I. Background

Doctors Antoni Nargol and Robert Langton (together, "Relators") claim to be experts in hip-replacement techniques and devices. They brought this qui tam suit in May 2012 against DePuy Orthopaedics, Inc., DePuy, Inc., and Johnson & Johnson Services, Inc. (collectively, "DePuy") and filed an amended complaint under seal in November 2013. As in all other qui tam actions under the FCA, see Vt. Agency of Nat. Res. v. United States ex rel. Stevens , 529 U.S. 765, 769, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000), the U.S. Department of Justice was given time to conduct an investigation to determine whether the United States would intervene. In July 2014, it declined to do so. Relators then filed a second amended complaint (for our purposes, the "complaint") in May 2015. This is the complaint we now review, because it was the one the district court found lacking and dismissed with prejudice. Quite unhelpfully, it is 168 pages long and contains over 800 paragraphs of allegations, from which we distill the following:

Total hip replacement

surgery involves replacing the bone components of the joint—the ball-like femoral head and the cup-like acetabulum—with artificial substitutes. In addition, a standard prosthetic hip replaces the bit of femur directly below the femoral head with an artificial "femoral stem," the top of which is connected to a "trunnion" that inserts into a "taper" in the artificial head (this union is known as the "taper trunnion" or the "taper junction"). Hip replacements also typically include liners that form a buffer between the artificial cup and the artificial head. The particular hip-replacement device at issue on this appeal is a so-called metal-on-metal ("MoM") device employing a metal artificial acetabular cup and a metal artificial femoral head. DePuy marketed the device under its "Pinnacle" product line. We will use the name "Pinnacle MoM device" to refer to this device, as distinguished from other DePuy hip-replacement devices.

To ensure that hip-replacement devices work properly and do not unexpectedly degrade over time, all of the components must be carefully designed and manufactured to be consistently and correctly sized, shaped, and smoothed. This is especially true for MoM devices because any time two metal components of an MoM device put pressure on or rub against one another, tiny metal shavings can make their way into the recipient's bloodstream, causing pain and Adverse Response to Metal Debris (ARMD), a soft-tissue reaction similar to a tumor, and requiring medical treatment or "revision" surgery (a surgery in which a hip-replacement device must itself be replaced). Friction between components of an MoM device can also cause the artificial cup to prematurely loosen, and can cause the device to corrode, leading to the same type of pain and difficulty walking that gave rise to the need for hip arthroplasty

in the first place.

In December 2000, DePuy received FDA approval under section 510(k) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 360e(b)(1)(B)(ii), to market and sell the Pinnacle MoM device. Ordinarily, a medical device like the Pinnacle MoM device would be required to undergo an extensive premarket approval process. The Pinnacle MoM device, however, was approved by way of a different, less arduous process because DePuy represented to the FDA that the Pinnacle MoM device was "substantially equivalent" to the "ASR," an earlier MoM hip-replacement device for which DePuy had previously received premarket approval. Although Relators describe both the ASR and the Pinnacle MoM device throughout their complaint, only the Pinnacle MoM device is at issue in this case.

Relators allege two types of fraud in DePuy's marketing of the Pinnacle MoM device. First, Relators allege that DePuy made a series of false statements to the FDA and doctors, but for which the FDA would not have approved the Pinnacle MoM device for hip replacements or would have withdrawn that approval, and doctors would not have certified the devices for government reimbursement. Second, Relators allege that DePuy falsely palmed off devices that, due to latent manufacturing defects, materially deviated from the design specification of the FDA-approved Pinnacle MoM device.

The alleged manufacturing defects at issue are of two types. One defect occurred when the sizes as manufactured of the artificial femoral head and its acetabular cup

caused them to fit too snugly, impeding the cushioning intervention of bodily fluid that precluded the head and cup from rubbing directly against each other. According to the complaint, "DePuy's manufacturing process fail[ed] to produce implant heads within specification 14.93% of the time and implant liners 50.41% of the time." The second defect occurred when the surface of the taper trunnion that interacted with the taper emerged from the manufacturing process with too much roughness. This roughness increased friction and the shedding of small metal debris when the trunnion moved against the taper. Over fifty percent of the Pinnacle MoM devices as sold allegedly suffered from this defect and were "well outside of their required manufacturing specifications." Combined with the first defect, it caused the devices sold as Pinnacle MoM devices to have a five-year failure rate of nearly fifteen percent, as compared to a five-year failure rate of 4.5% or lower as claimed by DePuy (and characteristic of or superior to the failure rates of other competing devices).

Relators allege that DePuy made direct claims to the federal government and various state governments seeking payment for some of the defectively manufactured Pinnacle MoM devices. They also allege that DePuy was indirectly responsible for the claims for payment that healthcare providers submitted to the federal and state governments for reimbursement for defectively manufactured Pinnacle MoM devices that the healthcare providers had purchased from DePuy.

The district court found that Relators failed to plead false claims under either the FCA or the cited state-law versions of the FCA with the particularity required by Federal Rule of Civil Procedure 9(b). See United States ex rel. Nargol v. DePuy Orthopaedics, Inc. , 159 F.Supp.3d 226, 248–55, 259–60 (D. Mass. 2016).¹ In so finding, the district court bifurcated its analysis by focusing first on all direct claims submitted by DePuy to the government, and then on indirect claims made through health care providers. The court found that the complaint's allegations concerning "direct" claims for payment that DePuy allegedly submitted to the Department of Veterans Affairs, the Naval Medical Center, and the Department of the Army failed to plead that the claims for government payment were for the Pinnacle MoM device at issue in this suit (as opposed to other hip-replacement devices) and failed to identify any specific false claims. See id. at 247–52. As for the "indirect" false claims for payment that DePuy caused others to submit, the district court found that Relators failed to identify even a single representative false claim for payment for a defective Pinnacle MoM device, and that the complaint did not cite sufficient "other factual and statistical evidence to strengthen the inference of fraud beyond a mere possibility." Id. at 252. Noting that the case had been pending for nearly four years and that Relators, even after their third try at drafting a compliant complaint, had yet to particularly plead a cognizable claim for relief under the FCA, the district court dismissed the complaint with prejudice, entered judgment in favor of DePuy, and rejected Relators' motion to reconsider its judgment by allowing the filing of a third amended complaint. Id. at 262.

Relators...