United States v. St. Jude Med.
| Decision Date | 29 December 2021 |
| Docket Number | Civil 16-3611-SAG |
| Court | U.S. District Court — District of Maryland |
| Parties | UNITED STATES OF AMERICA ex rel. DEBBIE BURKE, Plaintiff-Relator, v. ST. JUDE MEDICAL, INC., Defendant. |
Relator Debbie Burke (“Burke”) filed a Motion for Award of Relator's Share, ECF 33, in which she requests 20% of the $27 million settlement between the United States and St Jude Medical, Inc. (“St. Jude”) pursuant to the qui tam relator's share provisions of the False Claims Act (“FCA”), 31 U.S.C. § 3730(d)(1). The United States (hereinafter referred to as “the Government”) opposes Burke's motion and contends that she is not entitled to any share of its settlement proceeds, ECF 38. The issues have been fully briefed, ECF 33-1, ECF 38, ECF 39, and no hearing is necessary. See Loc. R. 105.6 (D. Md. 2021). For the reasons stated below, Burke's Motion shall be granted in part and denied in part, and Burke shall receive 0.5% of the settlement proceeds.
On September 16, 2016, Burke received a surgically implanted St. Jude-manufactured pacemaker-specifically, a Unify Assura Cardiac Resynchronization Therapy Defibrillators (“CRT-D”) device, model number CD3357-40C-at Johns Hopkins Hospital in Baltimore, Maryland. ECF 33-1 at 2. The cost of Burke's device was reimbursed by a private payer because she is not a Medicare beneficiary. ECF 1 ¶ 59. Roughly two weeks after Burke's procedure, on October 11, 2016, the United States Food and Drug Administration (“FDA”) issued a Class I recall of certain models of St. Jude's Fortify, Unify, and Assura Implantable Cardioverter Defibrillator (“ICD”) and CRT-D devices. ECF 38-6. The FDA recall notice (hereinafter referred to as “FDA Notice”) provided a full list of the affected models and specified that the recall was spurred by “reports of rapid battery failure caused by deposits of lithium (known as ‘lithium clusters'), forming within the battery, and causing a short circuit.” Id. The FDA Notice extended to specified device models manufactured from January, 2010 until May, 2015, and distributed from February, 2010 until October, 2016 (hereinafter referred to as “Recalled Devices”). Id.
Upon learning of the recall, Burke consulted St. Jude's online medical device database (hereinafter referred to as “St. Jude Device Database”) to determine whether her device was subject to the advisory. ECF 1 ¶ 41. By inputting her device's unique model and serial numbers into the St. Jude Device Database, Burke determined that her pacemaker had been manufactured on May 12, 2015, and was among the Recalled Devices. Id. Burke subsequently spoke with her operating surgeon, who informed her that he had no knowledge of the defect, and that her device had been provided by a St. Jude representative for implantation on the day of her procedure. Id. ¶ 45. “In other words, neither her surgeon nor Johns Hopkins kept an inventory of these devices, they are provided directly by St. Jude as needed.” ECF 33-1 at 3 (citing ECF 1 ¶ 45).
On November 2, 2016, Burke filed a qui tam complaint against St. Jude, alleging that it violated the FCA by submitting false claims to the Government for “implants of defective and faulty Fortify, Unify, and Assura ICD devices to the Medicare Program.” ECF 1 ¶ 66. Burke's complaint included five key allegations. First, Burke alleged that at some point between 2010 and 2015, St. Jude became aware that Recalled Devices “had defective batteries that lead to premature battery depletion, ” (“PBD”). Id. ¶ 5. Second, she alleged that St. Jude “took corrective manufacturing action to remedy” such defects in May, 2015. Id. ¶ 1. Third, she alleged that despite its actual knowledge of defects in Recalled Devices, St. Jude “did not take appropriate action to disclose the battery defect . . . to the FDA or healthcare providers.” Id. ¶ 6. Fourth, she alleged that St. Jude continued to knowingly “promote and sell the defective devices until they were recalled by the FDA on October, 11, 2016 [sic].” Id. ¶ 6. And fifth, Burke alleged that although she was not herself a Medicare beneficiary, “it is reasonably foreseeable that Medicare paid for the defective versions of St. Jude's ICD devices.” Id. ¶ 59.
After several extensions of time, [1] the Government elected to intervene in Burke's action for settlement purposes on July 7, 2021. ECF 28. The settlement agreement (“Settlement”) entered into among the Government, St. Jude, and Burke, provided that St. Jude would pay $27 million to the Government to resolve allegations that it “submitted, or caused the submission of, false claims to Medicare, TRICARE . . . and the Federal Employee Health Benefits Program [(‘FEHBP')].” ECF 38 at 14. In relevant part, the Settlement covered claims arising from the following alleged course of conduct: (i) in 2013, St. Jude began developing a new battery design to prevent PBD in its ICD and CRT-D devices; (ii) in August, 2014, St. Jude requested expedited FDA permission for its new design; (iii) in its FDA submission, St. Jude falsely represented that “no serious injury, permanent harm or deaths” had been associated with PBD in its existing devices, despite actual knowledge to the contrary; (iv) the FDA approved St. Jude's new design on November 20, 2014, but did not request a voluntary recall of older devices because St. Jude's had misrepresented their risks; (v) St. Jude continued to distribute defective devices for implantation into Medicare, TriCare, and FEHBP patients after November 20, 2014-when the new design was approved- until October 10, 2016-the day prior to the FDA Notice; and (vi) it did so despite continuing to receive reports of serious incidents associated with PBD in older devices. ECF 38-3 at 2-3 (). The Settlement specifically provided that the Government retained the right to oppose any award of shared proceeds to Burke. Id. On July 7, 2021, the Government and Burke filed a stipulation of dismissal, reserving the issue of relator share. ECF 30.
The FCA imposes civil liability upon any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, ” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A)-(B). “To encourage the disclosure of fraud that might otherwise escape detection, the FCA permits private individuals, denominated as relators, to file qui tam actions on behalf of the government and collect a bounty from any recovery.” U.S. ex rel. Beauchamp v. Academi Training Ctr., 816 F.3d 37, 39 (4th Cir. 2016) (citing § 3730(b)). To proceed with an FCA action as a private party, the “relator must file his or her complaint under seal and notify the government, who can either intervene or allow the relator to proceed alone.” Id. Should the government elect to intervene, “it shall have the primary responsibility for prosecuting the action.” § 3730(c).
Section 3730(e) enumerates several categories of actions that are barred under the FCA. As relevant here, the so-called “public disclosure bar, ” precludes actions if “substantially the same allegations or transactions as alleged in the . . . claim were publicly disclosed” in any of several specified sources unless “the person bringing the action is an original source of the information.” § 3730(e)(4)(A)-(B). Cases subject to the public disclosure bar shall be dismissed unless dismissal is opposed by the government. Id.
The FCA entitles relators of successful claims prosecuted by the government to a share of the proceeds of the action or settlement. Generally, relators in an action led by the government shall “receive at least 15 percent but not more than 25 percent” of the proceeds of a settled claim, depending “upon the extent to which the person substantially contributed to the prosecution of the action.” § 3730(d)(1). This standard range, however, is subject to exception for certain qui tam actions that are primarily based on public disclosures of information made by persons other than the relator. Id. Where a court finds this exception applicable, it may award a relator “no [] more than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the action in advancing the case to litigation.” Id.
Burke argues that she is entitled to a statutory payment within the 15%-25% range provided in § 3730(d)(1), and that within this range, a 20% award is appropriate. See ECF 33-1 at 10-11. The Government, for its part, contends that Burke's motion is foreclosed by § 3730(e)(4)(A), and that there is accordingly no need to analyze her award under § 3730(d)(1). The threshold question, then, is whether § 3730(e)(4)(A), which bars certain categories of qui tam complaints, is applicable to Burke's Motion for Award of Relator's Share.
“The public-disclosure bar aims ‘to strike a balance between encouraging private persons to root out fraud and stifling parasitic lawsuits' in which a relator, instead of plowing new ground, attempts to free-ride by merely reiterating previously disclosed fraudulent acts.” U.S. ex rel. Beauchamp, 816 F.3d at 43 (quoting Graham Cty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 295 (2010)). In furtherance of these goals, the public disclosure bar, as amended in 2010, provides that:
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:
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