US, ex rel. Sun v. Baxter Healthcare Corporation, 1st Cir. (2014)

7/26/2019 US, ex rel. Sun v. Baxter Healthcare Corporation, 1st Cir. (2014)

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United States Court of AppealsFor the First Circuit

No. 13- 1732

UNI TED STATES, EX REL. VEN- A- CARE OF THE FLORI DA KEYS, I NC. ,

Pl ai nt i f f , Appel l ee,

v.

BAXTER HEALTHCARE CORPORATI ON,

Def endant , Appel l ee,

v.

LI NNETTE SUN AND GREG HAMI LTON,

Appel l ant s.

No. 13- 2083

UNI TED STATES, EX REL. LI NNETTE SUN;UNI TED STATES, EX REL. GREG HAMI LTON,

Pl ai nt i f f s , Appel l ant s,

v.

BAXTER HEALTHCARE CORPORATI ON,

Def endant , Appel l ee.

APPEALS FROM THE UNI TED STATES DI STRI CT COURT

FOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. Pat t i B. Sar i s, U. S. Di str i ct J udge]


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Bef or e

Howar d, Li pez and Bar r on,Ci r cui t J udges.

Davi d J . Chi zewer , wi t h whomCour t ney R. Baron, Gol dber g KohnLTD. , Laur en J ohn Udden, Freder i ck M. Mor gan, J r . , J enni f er M.Verkamp, Mor gan Ver kamp, LLC, and Mar k Al l en Kl ei nman were onbr i ef , f or appel l ant s.

St even J . Roman, wi t h whom Mer l e M. DeLancey, J r . , Di ckst ei nShapi r o LLP, Pet er E. Gel haar , and Donnel l y, Conr oy & Gel haar , LLPwer e on br i ef , f or Baxt er Heal t hcar e Cor por at i on, appel l ee.

J ames J . Br een, wi t h whomThe Br een Law Fi r m, Rand J . Ri kl i n,J ohn E. Cl ar k, and Goode Casseb J ones Ri kl i n Choate & Wat son wer eon br i ef , f or Ven- A- Car e of t he Fl or i da Keys, I nc. , appel l ee.

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BARRON, Circuit Judge. Thi s appeal i nvol ves a l awsui t

agai nst a pharmaceut i cal company f or al l egedl y def r audi ng t he

f eder al Medi cai d and Medi care pr ogr ams. The sui t i s based on t he

Fal se Cl ai ms Act , 31 U. S. C. 3729- 3733, an unusual f eder al

st at ut e t hat al l ows pr i vat e par t i es, cal l ed "r el at or s, " t o st and i n

f or t he Uni t ed St ates and br i ng what are known as qui t amact i ons. 1

Because qui t amact i ons l et pr i vat e i ndi vi dual s r ecover damages f or

wr ongs done t o t he Uni t ed St at es, a speci al t hr eshol d bar - - t he

"f i r st- t o- f i l e" rul e - - somet i mes st ands i n t hei r way. I t i s t hat

bar t hat i s i n di sput e her e.

The f i r st - t o- f i l e r ul e i s so named because i t bl ocks qui

t am sui t s t hat ar e f i l ed whi l e si mi l ar enough ones ar e al r eady

pendi ng. I n t hi s case, t he Di st r i ct Cour t r ul ed appel l ant s' qui

t am sui t coul d not go f orward because a Fl or i da pharmacy years

bef or e had br ought one a l ot l i ke i t . We agr ee wi t h t he Di st r i ct

Cour t on t hat poi nt and t hus af f i r m t he di smi ssal of appel l ant s'

sui t . Because t hat deci si on t akes car e of t hi s appeal , we do not

deci de t he ot her i ssues t he par t i es di scuss.

1 " Qui t am i s shor t f or t he Lat i n phr ase qui t am pr o domi nor ege quam pr o se i pso i n hac part e sequi t ur , whi ch means ' whopur sues t hi s act i on on our Lor d t he Ki ng' s behal f as wel l as hi sown. ' " Vt . Agency of Nat ur al Res. v. Uni t ed St at es ex r el .St evens, 529 U. S. 765, 768 n. 1 ( 2000) .

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I.

To underst and why we ar e onl y now consi der i ng t he f i r st -

t o- f i l e r ul e i n a case t hat began ni ne year s ago, we need t o

descr i be t he t wo qui t am act i ons i nvol ved, t he al l eged f r aud each

i dent i f i ed, and t he compl i cat ed pr ocedur al pat h t hat l ed t he

Di st r i ct Cour t t o deci de t hei r si mi l ar i t i es requi r ed t he l at er

sui t ' s di smi ssal . To do al l of t hat , t hough, we f i r st need t o go

back near l y t wo decades, t o 1995.

That was when Ven- A- Car e of t he Fl or i da Keys, I nc. , t he

phar macy, f i l ed t he f i r st of t he t wo qui t amact i ons i nvol ved her e.

Ven- A- Care al l eged a number of pharmaceut i cal compani es had

f r audul ent l y i nf l at ed t he pr i ces of t hei r dr ugs, t hus secur i ng

hi gher r ei mbur sement s t hrough Medi car e and Medi cai d t han t hey

deser ved. Among t he many compani es named i n Ven- A- Car e' s compl ai nt

was Baxt er Heal t hcare Corporat i on.

Baxt er ' s st at us as a def endant was kept f r ompubl i c vi ew

f or mor e t han a decade because Ven- A- Car e f i l ed i t s qui t am sui t

under seal . See 31 U. S. C. 3730( b) ( 2) , ( 3) ( Fal se Cl ai ms Act

compl ai nt s must be f i l ed i n camera and may be kept under seal at

t he gover nment ' s behest ) . But i n 2010, t he Uni t ed St ates deci ded

not t o i nt er vene i n Ven- A- Car e' s case, and t hat l ed t o t he

compl ai nt ' s unseal i ng. 2 See i d. 3730( b) ( 4) ( B) . The J udi ci al

2 By t hat poi nt , Ven- A- Care had amended i t s compl ai nt on f ouroccasi ons. The oper at i ve Ven- A- Car e compl ai nt f or pur poses of t hi sappeal i s t he Four t h Amended Compl ai nt , whi ch was f i l ed on December

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Panel on Mul t i di st r i ct Li t i gat i on t hen consol i dat ed Ven- A- Car e' s

sui t wi t h near l y one hundr ed si mi l ar act i ons - - most f i l ed under

l aws ot her t han t he Fal se Cl ai ms Act - - i n t he Uni t ed St at es

Di st r i ct Cour t f or t he Di st r i ct of Massachuset t s. See I n r e Phar m.

I ndus. Aver age Whol esal e Pr i ce Li t i g. , 491 F. Supp. 2d 20 ( D. Mass.

2007) ; I n r e Phar m. I ndus. Aver age Whol esal e Pr i ce Li t i g. , 230

F. R. D. 61 ( D. Mass. 2005) .

About a year l at er , i n Oct ober of 2011, Baxt er and

Ven- A- Care r eached a set t l ement agr eement . Baxt er agreed t o pay

t ens of mi l l i ons of dol l ar s t o be shar ed bet ween Ven- A- Car e and t he

Uni t ed St ates. I n r et ur n, t he Set t l ement Agr eement and Rel ease

pur por t ed t o "f ul l y and f i nal l y rel ease[ ] , acqui t [ ] , and f or ever

di schar ge[ ] " Baxt er f r om "any and al l ci vi l , r egul at or y, and/ or

admi ni st r at i ve cl ai m, act i on, sui t , demand, r i ght , cause of act i on,

l i abi l i t y, j udgment , damage, or pr oceedi ng . . . whi ch has been

asser t ed, coul d have been asser t ed, or coul d be asser t ed i n t he

f ut ur e . . . f or or ar i si ng f r om any of t he Cover ed Conduct . " The

agr eement def i ned "Covered Conduct " as Baxt er ' s submi ss i on of

i nf l at ed pr i ce and cost f i gur es, and i t s subsequent r ecei pt of

hi gher - t han- deserved rei mbur sement s, f or "any and al l dr ugs

manuf act ur ed, mar ket ed and/ or sol d by or on [ i t s] behal f . "

11, 2002 - - mor e t han t wo years bef or e t he ot her r el at or s i n t hi scase br ought t hei r sui t agai nst Baxt er i n 2005.

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Despi t e t hat agr eement , t he Fal se Cl ai ms Act pr event ed

Ven- A- Car e f r om vol unt ar i l y di smi ssi ng i t s act i on agai nst Baxt er

wi t hout t he f eder al gover nment ' s consent . See 31 U. S. C.

3730( b) ( 1) . But Ven- A- Car e soon di d get t hat consent , and t he

Di st r i ct Cour t t hen ent er ed j udgment di smi ssi ng Ven- A- Car e' s act i on

agai nst Baxt er , t hus seemi ngl y endi ng Baxt er ' s r ol e i n t he case.

Baxt er ' s i nvol vement i n Fal se Cl ai ms Act l i t i gat i on, however , was

not over . I nst ead, a new f r ont of l i t i gat i on had opened.

Years bef or e t he di smi ssal of Ven- A- Car e' s sui t , Li nnet t e

Sun, one of Baxt er ' s f ormer empl oyees, and Gr eg Hami l t on, an

empl oyee of one of i t s l ongt i me cust omers, 3 had teamed up to f i l e

a qui t am act i on of t hei r own agai nst Baxt er , and t hat act i on was

st i l l pendi ng when Baxter set t l ed wi t h Ven- A- Car e. 4 Ven- A- Care and

Baxter were aware of Sun and Hami l t on' s sui t when t hey concl uded

t hei r set t l ement t al ks, but t hey di d not di r ect l y al er t Sun and

3 Sun was a r esear ch di r ect or f or Baxt er , and i n t hat capaci t ywas r esponsi bl e f or pr i ci ng one of t he dr ugs l i st ed i n her andHami l t on' s compl ai nt . Hami l t on worked f or a pharmacy t hatpur chased Baxter ' s pr oduct s and used one of t he commerci alr epor t i ng compendi a al l egedl y cr uci al t o t he f r aud Baxt er car r i edout .

4 Par t l y as a r esul t of t he f act t hat Sun and Hami l t on f i l edt hei r act i on bef or e Ven- A- Car e' s was publ i cl y di scl osed, t hi s casedoes not i mpl i cat e t he Fal se Cl ai ms Act ' s " publ i c di scl osur e" bar ,31 U. S. C. 3730( e) ( 4) . See gener al l y Uni t ed St at es ex r el .Duxbur y v. Or t ho Bi ot ech Pr ods. , L. P. , 579 F. 3d 13, 20- 28 ( 1st Ci r .2009) ( anal yzi ng t ext , hi st or y, and st r uct ur e r el evant t o "publ i cdi scl osur e" bar ) . The par t i es do not ar gue ot her wi se.

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Hami l t on t o t hei r i mpendi ng agr eement . 5 I nst ead, af t er t he Uni t ed

St at es s i gned of f on Baxter ' s set t l ement wi t h Ven- A- Car e and t hat

sui t had been di smi ssed, Baxt er moved f or part i al 6 summar y j udgment

i n Sun and Hami l t on' s case.

I n doi ng so, Baxt er argued t he Ven- A- Care set t l ement

r el eased not onl y t he phar macy' s cl ai ms agai nst i t , but al so Sun

and Hami l t on' s cl ai ms as wel l . Sun and Hami l t on count er ed t hey

wer e not par t i es t o t he Ven- A- Car e act i on and t he Uni t ed St at es' s

consent t o t he set t l ement was, as t he gover nment put i t , " t o t he

di smi ssal wi t h pr ej udi ce onl y of cl ai ms pl ed i n r el at or

Ven- A- Car e' s compl ai nt agai nst [ Baxt er ] . " St at ement of t he Uni t ed

St ates Regardi ng t he Consent of t he Uni t ed St ates t o t he Di smi ssal

wi t h Pr ej udi ce of Cl ai ms Pur suant t o 31 U. S. C. 3730( b) ( 1) i n a

Rel at ed Mat t er , I n r e Phar m. I ndus. Aver age Whol esal e Pr i ce Li t i g. ,

No. 1: 01- cv- 12257- PBS (D. Mass. Nov. 14, 2011) , ECF No. 7897

( emphasi s added) . Sun and Hami l t on t hus ar gued t he Ven- A- Care

set t l ement agr eement shoul d not be read to rel ease t hei r cl ai ms.

5 Ven- A- Care di d f i l e t he Set t l ement Agr eement and Rel ease ont he docket t hat appl i ed f or t he ent i r e mul t i di st r i ct l i t i gat i onagai nst al l t he pharmaceut i cal - company- def endant s, but Ven- A- Care

di d not pr ovi de Sun and Hami l t on wi t h any f ur t her not i ce of t heagr eement .

6 Sun and Hami l t on had pr evi ousl y amended t hei r compl ai nt t oadd r et al i at i on and empl oyment di scr i mi nat i on cl ai ms not now bef oreus, but Baxter ' s summary j udgment mot i on was br ought wi t h respectt o t he Fal se Cl ai ms Act cl ai ms onl y.

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The Di st r i ct Cour t di sagreed, however , and grant ed summar y

j udgment .

But Baxt er was st i l l not f r ee and cl ear . Sun and

Hami l t on ar gued i n a mot i on f or r econsi der at i on t hat even i f t he

Ven- A- Car e set t l ement di d cover t hei r cl ai ms, t he agr eement coul d

not r el ease t hose cl ai ms unt i l Sun and Hami l t on got a hear i ng on

whet her " t he pr oposed set t l ement i s f ai r , adequat e, and r easonabl e

under al l t he ci r cumst ances. " 31 U. S. C. 3730( c) ( 2) ( B) . Thei r

argument depended on t hei r charact er i zat i on of t he set t l ement as an

"al t er nate remedy" t he Uni t ed St ates had chosen t o pur sue f or

Baxt er ' s f r aud. See i d. 3730( c) ( 5) .

The Di st r i ct Cour t agreed wi t h Sun and Hami l t on t hat t he

set t l ement was an "al t er nate remedy" under t he Act , but t hat

present ed a pr ocedural puzz l e about how Sun and Hami l t on coul d get

t he f ai r ness hear i ng. Af t er al l , t he Ven- A- Car e sui t had al r eady

been di smi ssed, and t hus that case was over . The Di st r i ct Cour t

suggest ed a possi bl e sol ut i on mi ght be avai l abl e t hr ough an

ar guabl y novel const r uct i on of Feder al Rul e of Ci vi l Pr ocedur e

60( b) , whi ch al l ows par t i es t o move t o reopen j udgment s i n cer t ai n

l i mi t ed ci r cumst ances. I n r esponse, Sun and Hami l t on f i l ed a

mot i on i n Ven- A- Care' s case agai nst Baxt er - - t o whi ch Sun and

Hami l t on wer e not par t i es - - t hat ar gued t hey had a r i ght t o a

f ai r ness hear i ng under t he Fal se Cl ai ms Act t hat r equi r ed r eopeni ng

t he Ven- A- Care j udgment .

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cl ai ms agai nst Baxter . Baxter and Ven- A- Car e def end bot h r ul i ngs

as appel l ees.

II.

The " f i r st - t o- f i l e" r ul e i s, at l east i n t hi s Ci r cui t ,

j ur i sdi ct i onal . Uni t ed St at es ex r el . Wi l son v. Br i st ol - Myer s

Squi bb, I nc. , 750 F. 3d 111, 117 ( 1st Ci r . 2014) ( "The FCA

f i r s t - t o- f i l e r ul e i s j ur i sdi ct i onal . . . . " ) . But cf . Uni t ed

St at es ex r el . Shea v. Cel l co P' shi p, 748 F. 3d 338, 345- 46 ( D. C.

Ci r . 2014) ( Sr i ni vasan, J . , concur r i ng i n par t and di ssent i ng i n

par t ) ( not i ng t hat D. C. Ci r cui t has not def i ni t i vel y r ul ed on

f i r s t - to- f i l e bar ' s j ur i sdi ct i onal character ) . I f we af f i rm on

t hat gr ound, t her ef ore, we woul d not r each whet her Baxt er ' s

set t l ement agr eement wi t h Ven- A- Care i ndependent l y r el eased Sun and

Hami l t on' s cl ai ms, as t he Di st r i ct Cour t i ni t i al l y hel d. Nor woul d

we reach whet her t he gover nment , by consent i ng t o t he Ven- A- Care

set t l ement , secur ed an "al t er nat e remedy" f or Baxt er ' s al l eged

f r aud, such t hat Sun and Hami l t on wer e ent i t l ed t o a f ai r ness

hear i ng bef or e t hat set t l ement agr eement coul d t ake ef f ect , as t he

Di st r i ct Cour t l at er det er mi ned. Nor , f ur t her , woul d we r each

whether Sun and Hami l t on, as non- par t i es, coul d move to reopen t he

Ven- A- Car e j udgment , as t he Di st r i ct Cour t al so r ul ed. And so we

ski p over t hese var i ous i ssues - - t he Di st r i ct Cour t acknowl edged

t hey pr esent ed a "pr ocedur al pr et zel " - - so we may f ocus on an

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i ssue t hat pr ecedes t hem al l : whet her t he Di st r i ct Cour t was r i ght

t o accept Baxt er ' s f i r st - t o- f i l e def ense.

We begi n wi t h t he port i on of t he Fal se Cl ai ms Act t hat

gi ves r i se t o t he f i r st- t o- f i l e r ul e: 31 U. S. C. 3730( b) ( 5) . I t

st at es t hat , when a pr i vat e par t y f i l es a qui t am act i on under t he

Fal se Cl ai ms Act , "no per son ot her t han t he Gover nment may

i nt er vene or br i ng a r el at ed act i on based on t he f act s under l yi ng

t he pendi ng act i on. " 7

Of cour se, l awsui t s, l i ke anyt hi ng el se, may be " r el at ed"

al ong many di mensi ons. And t he ways i n whi ch a subsequent f i l i ng

mi ght be "based on t he f act s" of an ear l i er one are many as wel l .

But t hi s Ci r cui t has expl ai ned t hat what mat t er s, gi ven t hi s

st at ut or y l anguage and t he Act ' s under l yi ng pur poses, are t wo

t hi ngs: ( 1) t he r el at i onshi p bet ween t he f r aud al l eged i n t he t wo

qui t am act i ons, and ( 2) t he ext ent t o whi ch t he f act s al l eged i n

t he f i r st - f i l ed qui t am act i on suf f i ce t o pr ovi de t he gover nment

wi t h not i ce of t he f r aud t hat has been al l eged by t he second. See

Wi l son, 750 F. 3d at 117- 19; Uni t ed St ates ex rel . Hei neman- Gut a v.

7 Because Sun and Hami l t on f i l ed t hi s act i on agai nst Baxterwhi l e Ven- A- Car e' s was st i l l under seal - - and t hus was st i l l"pendi ng" - - t he f i r st- t o- f i l e r ul e appl i es t o t hi s act i on even

t hough t he ear l i er - f i l ed act i on has now been di smi ssed. See Uni t edSt ates ex r el . Hei neman- Gut a v. Gui dant Corp. , 718 F. 3d 28, 34 n. 7( 1st Ci r . 2013) ; cf . Uni t ed St at es ex r el . Car t er v. Hal l i bur t onCo. , 710 F. 3d 171, 182- 84 ( 4t h Ci r . 2013) ( al l owi ng a rel at edact i on t o be f i l ed af t er t he or i gi nal act i on was di smi ssed) , cer t .gr ant ed sub nom. Kel l ogg Br own & Root Ser vs. , I nc. v. Uni t ed St atesex rel . Car t er , 134 S. Ct . 2899 ( 2014) .

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Gui dant Cor p. , 718 F. 3d 28, 35- 36 ( 1st Ci r . 2013) ; Uni t ed St at es ex

r el . Duxbur y v. Or t ho Bi ot ech Pr ods. , L. P. , 579 F. 3d 13, 32- 33 ( 1st

Ci r . 2009) .

Thi s f ocus makes good sense. By l i mi t i ng when f ol l ow- on

qui t am sui t s may be br ought , t he Act i n sect i on 3730( b) ( 5) does

not guar ant ee t hat anyone wi t h usef ul i nf or mat i on about f r audul ent

conduct agai nst t he Uni t ed St at es may r ecover damages by br i ngi ng

a sui t based on such knowl edge. Rather , t he Act seeks t o ensure

t he f eder al gover nment r ecei ves t he i nf or mat i on i t needs t o l aunch

a meani ngf ul i nvest i gat i on i nt o f r audul ent conduct . Wi l son, 750

F. 3d at 117. That "pur pose of t he qui t am act i on under 3730( b)

i s sat i sf i ed" when t he gover nment r ecei ves a compl ai nt t hat

cont ai ns "' genui nel y val uabl e i nf or mat i on' " of suf f i ci ent l y not i ce-

suppl yi ng qual i t y. Hei neman- Gut a, 718 F. 3d at 35- 36 ( quot i ng

Uni t ed St at es ex r el . LaCor t e v. Smi t hKl i ne BeechamCl i ni cal Labs. ,

I nc. , 149 F. 3d 227, 234 ( 3d Ci r . 1998) ) . And t r eat i ng such a

f i r st - f i l ed compl ai nt as pr ecl udi ng a si mi l ar enough l at er - f i l ed

one f ur t her s t he Act ' s pur poses i n another way. Such t r eatment

"pr ovi de[ s] i ncent i ves t o r el at or s t o pr ompt l y al er t t he

gover nment " of any f r aud. Wi l son, 750 F. 3d at 117 ( ci t at i on and

i nt er nal quot at i on mar ks omi t t ed) . Ther e i s t hus no r eason t o r ead

sect i on 3730( b) ( 5) t o l et l at er - f i l i ng r el at or s sue mer el y because

t hey of f er addi t i onal i nf or mat i on t hat mi ght al so hel p t he

gover nment car r y out i t s i nvest i gat i on.

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Agai nst t hi s backgr ound, t he f i r st - t o- f i l e r ul e r equi r es

t hat we check t o see whet her t he compl ai nt i n t he f i r st qui t am

sui t pr ovi ded enough det ai l t o ensure t hat " t he gover nment knows

t he essent i al f act s of a f r audul ent scheme" - - f or once t he

government knows t hat much, " i t has enough i nf ormat i on t o di scover

r el at ed f r auds. " I d. at 118 ( quot i ng Uni t ed St at es ex r el . Br anch

Consul t ant s v. Al l st at e I ns. Co. , 560 F. 3d 371, 378 ( 5t h Ci r .

2009) ) . Or , as we have put t he poi nt el sewher e, " t o pr ovi de

suf f i ci ent not i ce t o t he gover nment of t he al l eged f r aud and bar a

l at er - f i l ed compl ai nt under 3730( b) ( 5) [ , ] ear l i er - f i l ed

compl ai nt s must pr ovi de onl y the essent i al f act s t o gi ve t he

gover nment suf f i ci ent not i ce t o i ni t i at e an i nvest i gat i on i nt o

al l egedl y f r audul ent pr acti ces" al so al l eged i n t he l at er - f i l ed

act i on. Hei neman- Gut a, 718 F. 3d at 36- 37.

I n t hi s way, t he st atement i n Hei neman- Gut a t hat a

f i r st - f i l ed compl ai nt need pr ovi de onl y "suf f i ci ent not i ce t o

i ni t i at e an i nvest i gat i on i nt o al l egedl y f r audul ent pr acti ces, " i d.

at 36- 37, i nf or ms t he "essent i al f act s" t est , i t does not suppl ant

i t . Bef ore barr i ng a second compl ai nt , we must ask not mer el y

whet her t he f i r st - f i l ed compl ai nt pr ovi des some evi dence f r omwhi ch

an ast ut e gover nment of f i ci al coul d arguabl y have been put "on

not i ce, " i d. at 35, 38, but al so whet her t he f i r st compl ai nt

cont ai ned "al l t he essent i al f acts" of t he f r aud i t al l eges, i d. at

34 ( ci t at i on omi t t ed) .

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Under t hi s "essent i al f acts" st andar d, a l at er - f i l ed

cl ai m cannot go ahead i f i t " ' st at es al l t he essent i al f acts of a

pr evi ousl y- f i l ed cl ai m' or ' t he same el ement s of a f r aud descr i bed

i n an ear l i er sui t . ' " Wi l son, 750 F. 3d at 117 ( quot i ng Duxbur y,

579 F. 3d at 32) . I t f ol l ows that t her e need not be i dent i t y

bet ween t he t wo compl ai nt s t o t r i gger t he f i r st - t o- f i l e r ul e.

" [T]he f i r s t - to- f i l e rul e ' st i l l bar [ s] a l at er c l ai meven i f that

cl ai m i ncor por at es somewhat di f f er ent det ai l s. ' " I d. at 118

( al t er at i on i n or i gi nal ) ( quot i ng Duxbur y, 579 F. 3d at 32) .

Wi t h t hi s l egal f r amework i n mi nd, we compar e t he Ven- A-

Care compl ai nt t o t he Sun and Hami l t on compl ai nt . See I n r e

Nat ur al Gas Royal t i es Qui Tam Li t i g. ( CO2 Appeal s) , 566 F. 3d 956,

964 ( 10t h Ci r . 2009) ( "The f i r st - t o- f i l e bar i s desi gned t o be

qui ckl y and easi l y det er mi nabl e, si mpl y requi r i ng a si de- by- si de

compar i son of t he compl ai nt s. " ) ; Uni t ed St at es ex r el . Pot eet v.

Medt r oni c, I nc. , 552 F. 3d 503, 516 ( 6t h Ci r . 2009) ( "I n or der t o

det er mi ne whet her a r el at or ' s compl ai nt r uns af oul of . . .

3730( b) ( 5) ' s f i r st - t o- f i l e bar , a cour t must compar e t he

r el at or ' s compl ai nt wi t h t he al l egedl y f i r st - f i l ed compl ai nt . ") .

I n doi ng so, we revi ew de novo whet her t he f i r st compl ai nt meet s

t he "essent i al f act s" t est , as t hat t est pr esent s a quest i on of l aw

about t he st at ut or i l y r equi r ed t hr eshol d f or not i f yi ng t he

gover nment of t he f r aud al l eged i n t he l at er - f i l ed sui t . Wi l son,

750 F. 3d at 117.

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A.

I n many qui t am sui t s i nvol vi ng t he f i r st- t o- f i l e r ul e,

a cent r al quest i on i s whet her t he two act i ons concer n t he same

f r aud or di st i nct ones. But Sun and Hami l t on l ead wi t h a di f f er ent

cont ent i on. They cl ai m t he Ven- A- Care compl ai nt was so vague and

concl usory when i t came t o Baxt er ' s conduct t hat i t was as i f t he

compl ai nt al l eged no f r aud at al l . Thus, t hey ar gue t hat onl y t hey

"pr ovi ded t he t ype of i nf ormat i on necessary t o gi ve t he Gover nment

a meani ngf ul head st ar t on i t s i nvest i gat i on" i nt o Baxt er ' s f r aud.

They st r ess t hey i dent i f i ed "names, meet i ngs, st at ements, and

document s" speci f i c t o Baxt er ' s f r audul ent scheme, whi l e, t hey

argue, Ven- A- Care set f or t h none.

But Sun and Hami l t on are not f ai r t o t he Ven- A- Care

compl ai nt . The Ven- A- Car e compl ai nt di d l ack t he det ai l Sun and

Hami l t on' s set s f or t h, but i t was not ber ef t of f acts speci f i c t o

Baxter ' s al l egedl y f r audul ent conduct . The Ven- A- Car e compl ai nt

di d at numer ous poi nt s at t r i but e t he f r aud t o t he def endant s

t hr ough t he use of pl ur al i ndef i ni t e pr onouns, such as " each" or

"al l . " But t hat way of i dent i f yi ng t he def endant s does not make

t he Ven- A- Car e compl ai nt any l ess usef ul t o t he f eder al gover nment .

Baxt er was covered by those same words, and t he Fal se Cl ai ms Act

sur el y shoul d not be r ead t o di scour age a r el at or f r om al l egi ng a

f r aud per pet r at ed by many def endants.

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I n any event , Ven- A- Car e' s compl ai nt cont ai ned a separ at e

sect i on devot ed sol el y t o Baxt er . I n t hat sect i on, Ven- A- Car e

al l eged Baxter knowi ngl y made f al se r epr esent at i ons about t he pr i ce

and cost of i t s dr ugs i n or der t o r ecei ve f r audul ent l y i nf l at ed

r ei mbur sement s f r omMedi car e and Medi cai d and " f ur t her made or used

f al se r ecor ds or st at ement s r egar di ng i t s pr i ces and cost s of t he

dr ugs . . . and submi t t ed same t o [ Medi care and Medi cai d] . " Ven- A-

Care al so al l eged Baxt er got r ei mbur sed f or a number of dr ugs - -

i ncl udi ng t he ant i - hemophi l i a dr ug Recombi nate, whi ch Baxt er

manuf act ur ed - above t hei r t r ue cost s and pr i ces. I ndeed, even

Sun and Hami l t on acknowl edge Ven- A- Care "di scl osed a pr i ci ng spr ead

f or Recombi nate. " The cont ent i on t hat Ven- A- Care' s compl ai nt

ent i r el y l acked Baxt er - speci f i c al l egat i ons, t her ef or e, i s si mpl y

wr ong.

Sun and Hami l t on are on st r onger gr ound i n sayi ng t hei r

compl ai nt showed gr eat er f ami l i ar i t y wi t h how Baxt er pul l ed of f t he

supposed f r aud. By dr awi ng on t hei r i nsi de knowl edge as a f ormer

empl oyee of Baxter and a f ormer empl oyee of a l ongst andi ng cust omer

of Baxt er , r espect i vel y, Sun and Hami l t on di d of f er f ar mor e det ai l

t han Ven- A- Car e about par t i cul ar act or s wi t hi n Baxt er and t he rol e

t hose act or s pl ayed. Whet her t hat mat t er s, however , i s a di f f er ent

i ssue.

We have made cl ear t he f i r st - t o- f i l e r ul e does not

necessar i l y pr ot ect mor e det ai l ed, l at er - f i l ed compl ai nt s f r oml ess

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det ai l ed, ear l i er - f i l ed ones. See Wi l son, 750 F. 3d at 118- 19. So

l ong as t he f i r st compl ai nt set s f or t h t he "essent i al f act s" of t he

f r aud al l eged i n t he second compl ai nt , i t does al l i t needs t o do

under t he f i r st - t o- f i l e r ul e. I d. at 117. Thus, Sun and Hami l t on

must show not onl y t hat t hey pr ovi ded more detai l t han Ven- A- Care,

but al so that Ven- A- Car e di d not pr ovi de enough det ai l - - even i f

i t pr ovi ded some.

Exact l y how speci f i c a compl ai nt must be t o pr ovi de t he

"essent i al f act s" i s not somet hi ng we have pr evi ousl y descr i bed

wi t h pr eci si on. And pr eci si on may be t oo much t o ask, gi ven t he

cont ext - speci f i c nat ur e of t he i nqui r y. St i l l , i mpor t ant gui dance

may be f ound i n our deci si on i n Hei neman- Guta.

Ther e, we expl ai ned t hat , f or pur poses of 31 U. S. C.

3730( b) ( 5) , a compl ai nt need not cont ai n t he ki nd of det ai l ed and

par t i cul ar i zed al l egat i ons of f r audul ent conduct - - such as t he

names of t he par t i cul ar per sons r esponsi bl e f or car r yi ng out

cer t ai n aspects of an al l eged f r aud - - r equi r ed t o f ul f i l l t he

hei ght ened pl eadi ng st andar d f or f r aud cases set f or t h i n Feder al

Rul e of Ci vi l Pr ocedur e 9( b) . 8 See Hei neman- Gut a, 718 F. 3d at 36-

8 Rul e 9( b) - - whi ch commands t hat "a par t y must st at e wi t hpar t i cul ar i t y t he ci r cumst ances const i t ut i ng f r aud or mi st ake" - -

r equi r es a compl ai nt maki ng such an al l egat i on t o "speci f y t het i me, pl ace, and cont ent of an al l eged f al se r epr esent at i on. "Hei neman- Gut a, 718 F. 3d at 34 ( quot i ng Uni t ed St ates ex rel . Rostv. Pf i zer , I nc. , 507 F. 3d 720, 731 ( 1st Ci r . 2007) ) . Thespeci f i ci t y needed t o make out a cl ai m of l i abi l i t y agai nst apar t i cul ar def endant , however , may be gr eat er t han t he amount ofdetai l needed t o ensur e the government has what i t needs t o l aunch

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37. We al so addressed an ar gument much l i ke t he one Sun and

Hami l t on now pr ess - - t hat an ear l i er - f i l ed qui t am compl ai nt was

t oo unspeci f i c to bar a l at er - f i l ed qui t amsui t , even i f Rul e 9( b)

di d not est abl i sh t he mi ni mum amount of det ai l a qui t am compl ai nt

must pr ovi de t o t r i gger t he Fal se Cl ai ms Act ' s f i r st - t o- f i l e bar .

Hei neman- Gut a i nvol ved a rel at or who br ought a qui t am

act i on t hat cl ai med her empl oyer and one of i t s af f i l i at es had

engaged i n a ki ckback scheme t o pr omot e t he sal e and use of car di ac

devi ces t hey manuf actur ed. I d. at 29. Thi r t een mont hs bef ore t hat

r el ator sued, however , anot her f ormer empl oyee had f i l ed a qui t am

compl ai nt agai nst t he same company. I d. at 30, 32. The second

r el at or ar gued t he compl ai nt f i l ed by t he f i r st , whi ch t he par t i es

agr eed "di scl osed a f r audul ent scheme near l y i dent i cal t o t he one

al l eged i n [ t he second r el at or ' s] compl ai nt , " i d. at 34 n. 8,

"f ai l [ ed] t he essent i al f acts t est because i t l ack[ ed] al l egat i ons

t hat t he scheme act ual l y caused physi ci ans t o i mpl ant [ t he

empl oyer ' s] devi ces or t hat t hose devi ces wer e cover ed by

Medi care, " i d. at 38 n. 12. We r ej ected t hat ar gument because a

compl ai nt "need not cont ai n a det ai l ed pl ay- by- pl ay nar r at i on of

how t he scheme l ed to t he submi ssi on of f al se cl ai ms" t o t r i gger

t he f i rst - t o- f i l e rul e. I d. I nstead, we f ound "suf f i ci ent " f or

a meani ngf ul i nvest i gat i on i nt o t he al l eged f r aud. See i d. at 35( "[ T] he al l egat i ons of a pr ecl usi ve f i r st - f i l ed compl ai nt under 3730( b) ( 5) need not compor t wi t h Rul e 9( b) ' s pl eadi ngr equi r ement s t o pr ovi de t he gover nment wi t h suf f i ci ent not i ce ofpot ent i al f r aud. ") .

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pur poses of sect i on 3730( b) ( 5) t he f i r st compl ai nt ' s al l egat i ons

t hat t he company "caused f al se st at ement s and cl ai ms t o be made to

t he government f or r ei mbur sement under Medi care" " t hr ough mul t i pl e

f or ms of ki ckbacks desi gned t o i nduce physi ci ans and hospi t al s t o

use [ t hei r ] devi ces. " I d.

Ven- A- Car e' s compl ai nt , t oo, di d not of f er a "pl ay- by-

pl ay" of event s or a det ai l ed nar r at i on of how t he al l eged f r aud

pl ayed out . But t he compl ai nt di d i dent i f y t he key hi ghl i ght s

about how Baxter conduct ed t he supposed f r aud. The compl ai nt

det ai l ed t he par t i cul ar pr i ci ng mechani smBaxt er used f or car r yi ng

out t he al l eged f r aud ( l ever agi ng t he knowl edge t hat Medi care and

Medi cai d based t hei r r ei mbur sement payment s on cost and pr i ce

est i mat es t hat wer e repor t ed by var i ous commer ci al l y avai l abl e dr ug

pr i ci ng compendi a, and t hus ent er i ng i nt o speci al "char ge- back"

ar r angement s wi t h sel ect whol esal er s i n or der t o ar t i f i ci al l y

i nf l ate t he est i mates t hat wer e suppl i ed t o t he compendi a and t hen

r epor t ed by t hem) . The compl ai nt speci f i ed t he dr ugs i nvol ved

( i ncl udi ng, among many other s, t he ant i - hemophi l i c Recombi nate) .

The compl ai nt descr i bed t he t i me per i od dur i ng whi ch t he scheme

occur r ed ( " t he per i od st ar t i ng f r omon or bef or e December 31, 1993

and cont i nui ng thr ough" t he date on whi ch i t was f i l ed, December

11, 2002) . And t he compl ai nt set f or t h what Ven- A- Care cont ended

was cor r obor at i ng evi dence of Baxter ' s f r aud ( namel y, a char t

l i st i ng var i ous r epor t ed cost s and pr i ces) .

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Ven- A- Care' s compl ai nt t hus har dl y r esembl es t he exampl e

Sun and Hami l t on ci t e i n t hei r br i ef of a compl ai nt t hey cont end

coul d not possi bl y t r i gger t he f i r st - t o- f i l e bar : "a one- sent ence

compl ai nt st at i ng not hi ng mor e t han: ' Baxt er i s commi t t i ng pr i ci ng

f r aud agai nst t he Gover nment . ' " Nor i s the Ven- A- Care compl ai nt

t he ki nd of "over l y br oad and specul at i ve compl ai nt " we have

i ndi cat ed cannot suf f i ce " t o not i f y t he gover nment of a f r audul ent

scheme. " I d. at 38. I nst ead, Ven- A- Car e' s compl ai nt cont ai ned

"t he essent i al f act s" of Baxt er ' s al l eged f r aud, and t hus gave "t he

gover nment suf f i ci ent not i ce t o i ni t i at e an i nvest i gat i on i nt o

al l egedl y f r audul ent pr act i ces. " I d. at 36- 37.

Thi s concl usi on i s consi st ent wi t h our ot her f i r st - t o-

f i l e pr ecedent s, even t hough Sun and Hami l t on say other wi se. Sun

and Hami l t on r el y i n part i cul ar on our deci si on i n Duxbur y. Ther e,

we hel d an ear l i er - f i l ed qui t am compl ai nt about an al l egedl y

f r audul ent scheme i nvol vi ng dr ug pr i ci ng di d not bar a second

r el at or ' s l at er - f i l ed sui t al l egi ng t he same def endant had engaged

i n an of f - l abel pr omot i on scheme. 9 579 F. 3d at 32- 33. St andi ng on

9 I n Duxbur y, t he or i gi nal compl ai nt f i l ed by t he f i r str el at or cont ai ned t wo count s, one al l egi ng "subst ant i ve" Fal seCl ai ms Act vi ol at i ons, and t he ot her al l egi ng conspi r acy. 579 F. 3dat 17. I n suppor t of t he "subst ant i ve" vi ol at i ons, t he compl ai nt

al l eged ( 1) t hat t he def endant had publ i shed a f r audul ent l yi nf l at ed aver age whol esal e pr i ce f or Pr ocr i t , an anemi a dr ug; ( 2)t hat i t had mar ket ed t he "spread" bet ween t he i nf l at ed pr i ce andt he t r ue pr i ce as a way of i nduci ng heal t hcar e pr ovi der s t opur chase t he dr ug; and ( 3) t hat i t had under t aken "phony dr ugst udi es" i n encour agi ng heal t hcar e pr ovi der s t o pr escr i be Pr ocr i tf or non- appr oved uses. I d.

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i t s own, Duxbur y mi ght be r ead to suppor t Sun and Hami l t on' s

posi t i on. Duxbur y di d say t he l at er - f i l ed compl ai nt "cont ai ned a

number of al l egat i ons t hat di scuss, i n si gni f i cant det ai l , " t he

al l eged of f - l abel pr omot i on scheme, and Duxbur y di d al l ow t hat

second, mor e det ai l ed compl ai nt t o sur vi ve t he f i r st - t o- f i l e bar .

I d. at 33 ( emphasi s added) .

But our deci si on t o al l ow t he second sui t t o go f or war d

i n Duxbur y di d not r est on t he gr eat er det ai l i n t he l at er

compl ai nt . I nst ead, as we l at er expl ai ned i n Wi l son, t he key

di f f er ence was t hat t he l at er - f i l ed compl ai nt "al l eged a compl ex

of f - l abel pr omot i on and di r ect mar ket i ng scheme, " whi l e t he

or i gi nal compl ai nt f ocused on ki ckbacks and i n f act " ' nowher e

The l at er - f i l ed compl ai nt - - whi ch, l i ke t he f i r st one, wasf i l ed by a f or mer sal es r epr esent at i ve of t he def endant company - -al so al l eged t he company had pai d ki ckbacks t o heal t hcare pr ovi der s

i n or der t o i nduce t hem t o wr i t e pr escri pt i ons f or Pr ocri t t hatwoul d ot her wi se not have been wr i t t en. I d. at 18. But t he newcompl ai nt addi t i onal l y al l eged t hat t he company had engaged i n acomprehensi ve scheme t o promot e "a dosi ng r egi men of 40, 000 uni t sonce per week even though i t had not r ecei ved appr oval f r omt he FDAf or such a hi gh dosage, " and t hat t he company' s wi despr ead"pr omot i on of t hi s of f - l abel use caused t he f i l i ng of f al se cl ai msf or r ei mbur sement wi t h Medi care and Medi cai d, i nsof ar as t hepr ovi ders sought r ei mbur sement f or nonr ei mbur seabl e uses. " I d.( i nt er nal quot at i on mar ks omi t t ed) .

I n suppor t of t hi s l at t er al l egat i on, t he second compl ai ntenumerat ed a number of pr omot i on ef f or t s t he def endant al l egedl y

had under t aken, det ai l i ng t he many ways i n whi ch t he companycar r i ed out t he of f - l abel pr omot i on scheme. See i d. at 33. Bycont r ast , t he f i r st compl ai nt r ef er enced onl y a si ngl e dr ug st udy" i n whi ch [ t he def endant ] al l egedl y pai d physi ci ans t o dose Pr ocr i tat 40, 000[ uni t s] i n a once per week dose i nst ead of t he FDAappr oved dosage of 10, 000[ uni t s] t hr ee t i mes per week dosage i ncancer - chemot her apy pat i ent s. " I d. at 17.

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r ef er [ r ed] t o an of f - l abel pr omot i on scheme. ' " Wi l son, 750 F. 3d at

119 ( al t er at i on i n or i gi nal ) ( quot i ng Duxbur y, 579 F. 3d at 33) .

Thus, even i f t he i ni t i al compl ai nt i n Duxbur y provi ded some

evi dence r el evant t o t he "compl ex of f - l abel pr omot i on and di r ect

mar ket i ng scheme, " i t st i l l di d not pr ovi de t he "essent i al f act s"

about t he compl ex f r aud because t hat f r aud was descr i bed and

i dent i f i ed onl y i n t he l at er - f i l ed compl ai nt and "nowher e" i n t he

ear l i er one. I d.

So under st ood, Duxbur y i s a ver y di f f er ent case f r omt hi s

one. Wi t h one possi bl e caveat we addr ess bel ow, Sun and Hami l t on

and Ven- A- Car e do not di sput e t hat t hei r r espect i ve compl ai nt s each

f ocused on t he same f r audul ent scheme. And, as we have expl ai ned,

each descr i bed t hat scheme i n si gni f i cant det ai l . The onl y

di ver gence i n t hei r compl ai nt s, t her ef or e, i s t he same one we

t hought t oo sl i ght i n Wi l son. As t her e, t he l at er r el at or s her e

( Sun and Hami l t on) i ncl uded many det ai l s about t he under l yi ng

scheme t he f i r st r el at or ( Ven- A- Car e) di d not suppl y. But t he use

of compar at i vel y gr eat er det ai l i n descr i bi ng t he same under l yi ng

f r aud i s not what mat t er s f or t he f i r st - t o- f i l e r ul e. Ot her wi se,

t he "essent i al f act s" t est woul d be r educed t o an "i dent i cal f act s"

t est . See Wi l son, 750 F. 3d at 118- 19. And, as we expl ai ned i n

Wi l son, such an under st andi ng of t he "essent i al f act s" t est cannot

be r i ght because "once t he government knows t he essent i al f act s of

a f r audul ent scheme, i t has enough i nf or mat i on t o di scover r el at ed

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f r auds. " 10 750 F. 3d at 118 ( quot i ng Br anch Consul t ant s, 560 F. 3d

at 378) .

Si mpl y put , once t he gover nment get s suf f i ci ent l y

val uabl e i nf or mat i on f r oma qui t am compl ai nt about t he same f r aud

al l eged by a f ol l ow- on compl ai nt , t he pur poses of t he f i r st - t o- f i l e

r ul e have been f ul l y ser ved. 11 And her e, both compl ai nt s f ocused

on t he ver y same f r aud Baxt er al l egedl y commi t t ed, and t he f i r st of

t he compl ai nt s, Ven- A- Car e' s, pr ovi ded enough speci f i c i nf or mat i on

about t he al l eged f r aud t o sat i sf y t he f i r st- t o- f i l e r ul e.

B.

Sun and Hami l t on do make one f i nal argument . Thi s one

does not f ocus on t he compar at i vel y gr eat er det ai l t hey suppl i ed

about t he f r aud i n quest i on, or on t he supposedl y i nsuf f i ci ent

det ai l Ven- A- Car e of f er ed. I nst ead, Sun and Hami l t on ar gue t hei r

compl ai nt - - and t hei r s al one - - sket ched out t he i nner wor ki ngs of

Baxter ' s f r audul ent scheme af t er t he year 2000, and t hat Baxter ' s

post - 2000 conduct r esul t ed i n a f r audul ent scheme separ at e f r omt he

f r aud Ven- A- Car e i dent i f i ed. Thus, at l east as t o Baxt er ' s post -

2000 conduct , Sun and Hami l t on por t r ay t hemsel ves t o be l i ke t he

10 Al l ot her Ci r cui t s t o have addr essed t he i ssue have t husr ej ect ed an "i dent i cal f act s" t est . See Uni t ed St at es ex r el .

Chovanec v. Apr i a Heal t hcar e Gr p. I nc. , 606 F. 3d 361, 363 ( 7t h Ci r .2010) ( col l ect i ng cases) .

11 At l east, t hi s i s tr ue so l ong as the f i r st r el at or ' s sui tr emai ns pendi ng. See gener al l y Car t er , 710 F. 3d at 182- 84, cer t .gr ant ed sub nom. Kel l ogg Br own & Root Ser vs. , I nc. v. Uni t ed St atesex rel . Car t er , 134 S. Ct . 2899 ( 2014) .

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second r el at or i n Duxbur y - - t he onl y one who suf f i ci ent l y al l eged

t he compl ex of f - l abel pr omot i on scheme. 12

Thi s ar gument woul d have some f or ce i f t r ue. But Sun and

Hami l t on' s compl ai nt suggest s Baxt er ' s f r aud di d not change much

af t er 2000 - - or , at l east , not enough t o di st i ngui sh i t f r om t he

f r aud descr i bed i n t he Ven- A- Car e compl ai nt .

Accor di ng t o Sun and Hami l t on, i n 2000 the New Yor k

Medi cai d Fr aud Cont r ol Uni t appr i sed var i ous phar macy di r ect or s of

a pat t er n of mi sr epr esent at i ons by dr ug manuf act ur er s of t he

aver age whol esal e pr i ces and acqui si t i on cost s of t hei r drugs. As

a r esul t , Sun and Hami l t on al l eged, some of t he i ndust r y r epor t i ng

compendi a agr eed t o st op r epor t i ng aver age whol esal e pr i ce val ues

publ i shed by dr ug manuf act ur er s and to i nst ead repor t f i gur es on

t he basi s of t r ue mar ket pr i ces.

Sun and Hami l t on al l eged Baxt er got around t hi s new

pr act i ce by pr ovi di ng t he compendi a wi t h what Baxt er cal l ed " l i st

sal es pr i ces. " Al t hough t hey went by a di f f er ent name, t hese " l i st

sal es pr i ces" - - l i ke t he manuf act ur er - pr ovi ded aver age whol esal e

pr i ces t he compendi a now r ef used t o accept - - al so ref l ect ed

ar t i f i ci al l y i nf l at ed amount s pai d by onl y a f ew sel ect whol esal er s

12At oral argument , Sun and Hami l t on expr essl y di scl ai med thatt hei r compl ai nt al l eged a new scheme by vi r t ue of t he f act t hatonl y t hey made al l egat i ons wi t h r espect t o Baxt er ' s pr i ci ng ofAdvat e, a dr ug Baxt er r el eased onl y af t er Ven- A- Car e f i l ed i t soper at i ve compl ai nt but t hat bot h par t i es agr ee i s, as t he Di st r i ctCour t f ound, ver y cl osel y r el at ed t o t he ot her Baxt er dr ug at i ssuei n Sun and Hami l t on' s compl ai nt , Recombi nat e.

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wi t h whom Baxter had ent er ed i nt o speci al "char ge- back" deal s. 13

Sun and Hami l t on f ur t her cl ai med t hat , by suppl yi ng as " l i st sal es

pr i ces" onl y what t he f ew "char ge- back" whol esal er s pai d, Baxter

pr ovi ded t he compendi a val ues t hat "bor e no rel at i onshi p t o the

pr i ce char ged i n t he market pl ace. " And because t he compendi a

ul t i mat el y accept ed t hese "l i st sal es pr i ces" and t hen r epor t ed

t hem, Sun and Hami l t on al l eged Baxt er was abl e to obt ai n "a

subst ant i al spread" bet ween t he pr i ces i t charged t he over whel mi ng

maj or i t y of i t s buyer s and t he amount s i t r ecei ved i n

r ei mbur sement s f r om t he gover nment .

Accordi ng t o Sun and Hami l t on, t hey al one descr i bed t hi s

post - 2000 f r aud. And, t o bol st er t hat cont ent i on, Sun and Hami l t on

argue Ven- A- Care' s compl ai nt coul d not possi bl y have pr ovi ded t he

"essent i al f act s" about Baxt er ' s post - 2000 f r aud because t hat

ear l i er - f i l ed compl ai nt "cont ai n[ ed] no al l egat i ons r el at i ng t o

[ Baxt er ' s] post - 1999 conduct . " But t he sect i on of Ven- A- Car e' s

compl ai nt speci f i c t o Baxt er began by al l egi ng t hat , " [ t ] hr oughout

t he per i od st ar t i ng f r om on or bef or e December 31, 1993 and

cont i nui ng thr ough t he pr esent dat e, " Baxt er "knowi ngl y caused

13 Al t hough Sun and Hami l t on r ef er r ed t o t hese deal s f r equent l y

i n t hei r compl ai nt , t hey di d not expl ai n t he nat ur e of t he "char ge-back" deal s. By cont r ast , Ven- A- Car e di d. I t s compl ai nt st at edt he "char ge- back" deal s i nvol ved sel ect whol esal er s pur chasi ngdr ugs f r om manuf act ur er s at f ar - above- mar ket pr i ces, knowi ng t hemanuf act ur er s woul d r epay t hem ( and pay t hem a ser vi ce f ee f ort hei r t r oubl es) af t er t hey sol d t he pr oduct s t o r et ai l er s at mar ketval ue.

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Medi car e/ Medi cai d t o pay f al se or f r audul ent cl ai ms f or

pr escr i pt i on dr ugs and bi ol ogi cal s. " Si nce Ven- A- Car e' s

l ast - amended compl ai nt was f i l ed on December 11, 2002, Ven- A- Care' s

al l egat i ons cover ed near l y thr ee year s' wor t h of "post - 1999

conduct " speci f i c t o Baxt er . So, on t he t i mi ng poi nt , Sun and

Hami l t on are si mpl y wr ong. 14

Sun and Hami l t on al so ar gue Ven- A- Care' s compl ai nt ,

r egar dl ess of t he t i me- span i t addr esses, sai d t oo l i t t l e about

what Baxter di d to adj ust t o t he compendi a' s change i n pr act i ce

af t er 2000. But t hi s ar gument , t oo, i s not r i ght . Ven- A- Car e' s

compl ai nt st ated t he named def endant s ( Baxt er i ncl uded) f r equent l y

pr ovi ded cost and pr i ce f i gur es t o the repor t i ng compendi a i n t er ms

of "Li st Pr i ce" i nst ead of t r ue mar ket pr i ces. And t he compl ai nt

al l eged each or al l of t he named def endant s pr ovi ded t he compendi a

wi t h cost and pr i ce f i gur es f r om t he "char ge- back" whol esal er s,

t her eby obt ai ni ng t he pr obl emat i c gai ns. These are t he ver y same

mechani sms Sun and Hami l t on i dent i f y i n t hei r compl ai nt . I n f act ,

Ven- A- Car e' s compl ai nt of f er ed mor e det ai l s about t he "char ge- back"

mechani sm t han di d Sun and Hami l t on' s compl ai nt .

14 The Sevent h Ci r cui t has expl ai ned t hat t he f act t hat anear l i er - f i l ed compl ai nt cover s a ti me per i od pr i or t o t he per i odcover ed i n a l at er - f i l ed compl ai nt does not i n and of i t sel f r endert he t wo compl ai nt s unr el at ed f or f i r st - t o- f i l e pur poses, seeChovanec, 606 F. 3d at 363, but we need not r esol ve t hat quest i onsi nce t he Ven- A- Care compl ai nt does descr i be a f r aud t hat ext endedwel l past 2000.

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Thus, whi l e Sun and Hami l t on i n most r espect s provi ded

more det ai l about exact l y what Baxt er di d af t er t he compendi a

shi f t ed t hei r r epor t i ng pr act i ces, any meani ngf ul di f f er ences

bet ween Baxter ' s pr e- 2000 and post - 2000 f r aud were ones about whi ch

Ven- A- Car e' s compl ai nt pr ovi ded t he "essent i al f act s. " Thi s

concl usi on f ol l ows because a r evi ew of Ven- A- Care' s compl ai nt shows

t hat , what ever i t may have l ef t out , i t di d gi ve t he f eder al

gover nment suf f i ci ent not i ce t o l aunch a meani ngf ul i nvest i gat i on

of Baxt er ' s al l eged mi sconduct bot h bef or e and af t er t he repor t i ng

pr act i ces changed i n 2000. See Hei neman- Gut a, 718 F. 3d at 36- 37

( expl ai ni ng t hat " t o pr ovi de suf f i ci ent not i ce t o t he gover nment of

t he al l eged f r aud and bar a l at er - f i l ed compl ai nt under

3730( b) ( 5) [ , ] ear l i er - f i l ed compl ai nt s must pr ovi de onl y t he

essent i al f act s t o gi ve t he gover nment suf f i ci ent not i ce t o

i ni t i at e an i nvest i gat i on i nt o al l egedl y f r audul ent pr acti ces") .

III.

I n aski ng us t o r ever se t he Di st r i ct Cour t , Sun and

Hami l t on make an i nt ui t i vel y appeal i ng cont ent i on. The Supr eme

Cour t has expl ai ned t hat " [ s] eeki ng t he gol den mean between

adequat e i ncent i ves f or whi st l e- bl owi ng i nsi der s wi t h genui nel y

val uabl e i nf or mat i on and di scour agement of oppor t uni st i c pl ai nt i f f s

who have no si gni f i cant i nf or mat i on t o cont r i but e of t hei r own" i s

one cent r al pur pose of t he Fal se Cl ai ms Act ' s qui t am pr ovi si ons.

Gr aham Cnt y. Soi l & Wat er Conservat i on Di st . v. Uni t ed St at es ex

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r el . Wi l son, 559 U. S. 280, 294 ( 2010) ( quot i ng Uni t ed St ates ex

r el . Spr i ngf i el d Ter mi nal Ry. Co. v. Qui nn, 14 F. 3d 645, 649 ( D. C.

Ci r . 1994) ) . And her e, Sun and Hami l t on - - a f or mer hi gh- r anki ng

empl oyee of Baxt er and an empl oyee of one of Baxt er ' s l ongt i me

cust omer s, r espect i vel y - - ar e "whi st l e- bl owi ng i nsi der s, " not

"oppor t uni st i c pl ai nt i f f s who have no si gni f i cant i nf or mat i on t o

cont r i but e of t hei r own. " Fur t her more, Sun and Hami l t on warn t hat ,

i f we appl y t he f i rst - t o- f i l e rul e t o bar t hei r sui t , i ns i ders l i ke

t hem wi l l be di scour aged f r om comi ng f or war d wi t h val uabl e

i nf or mat i on about pot ent i al f r aud f or f ear a l ess knowl edgeabl e

r el at or al r eady beat t hem t o t he door .

But consi der ed mor e f ul l y, Sun and Hami l t on' s cont ent i on

i s not so power f ul . Al t hough achi evi ng t hat " gol den mean" i s

cer t ai nl y one key pur pose of t he Fal se Cl ai ms Act ' s f i r st - t o- f i l e

r ul e, we have pr evi ousl y expl ai ned t hat anot her i s " t o pr ovi de

i ncent i ves t o r el at or s t o pr ompt l y al er t [ ] t he gover nment t o t he

essent i al f act s of a f r audul ent scheme. " Wi l son, 750 F. 3d at 117

( al t er at i on i n or i gi nal ) ( quot i ng Duxbur y, 579 F. 3d at 24) . Sun

and Hami l t on' s pr ef er r ed appr oach mi ght wel l f r ust r at e t hat goal .

I f adopt ed, i nsi der s who knew more about a f r aud mi ght have l ess

r eason t o come f or war d qui ckl y. They woul d f ace l ess r i sk t hat

di l i gent r el at or s who di d not know as much, but st i l l knew enough

t o per mi t t he gover nment t o l aunch a meani ngf ul i nvest i gat i on i nt o

t hat same f r aud, woul d beat t hemt o cour t . I t i s not cl ear why t he

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pr ovi si on of t he Act t hat est abl i shes t he f i r st- t o- f i l e r ul e shoul d

be r ead t o di scour age i nsi der s f r om act i ng pr ompt l y on t hei r

knowl edge.

But however one mi ght choose t o make the t r adeof f bet ween

speed and qual i t y i n t he abst r act , our pr ecedent s make cl ear how we

must make i t her e. Sect i on 3730( b) ( 5) of t he Fal se Cl ai ms Act

pr event s Sun and Hami l t on' s sui t f r om goi ng f or war d. Thei r

compl ai nt mer el y pr ovi des " addi t i onal f act s and det ai l s about t he

same scheme" pl ed i n Ven- A- Car e' s ear l i er - f i l ed compl ai nt ,

Hei neman- Gut a, 718 F. 3d at 36, whi ch al r eady pr ovi ded t he

"essent i al f act s" about t hat same scheme. The deci si on di smi ssi ng

Sun and Hami l t on' s sui t i s t her ef ore AFFI RMED.

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US, ex rel. Sun v. Baxter Healthcare Corporation, 1st Cir. (2014)

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Transcript of US, ex rel. Sun v. Baxter Healthcare Corporation, 1st Cir. (2014)