247 F. Supp. 3d 724
D.S.C.2017Background
- BlueWave, a marketing company, promoted lab tests for Health Diagnostic Laboratory (HDL) and Singulex from ~2010–2014; Relator Chris Riedel filed a qui tam FCA action alleging kickbacks and medically unnecessary testing.
- Government intervened on some claims; Riedel amended his complaint after the court dismissed his original complaint for failing to plead fraud with particularity and under the FCA first-to-file bar.
- FAC alleges FCA violations under 31 U.S.C. § 3729(a)(1)(A), (B), (C), and (G) based on five schemes: co-pay waivers, deductible waivers, inflated packaging/handling fees (P&H), Speakers Bureau payments, and medically unnecessary tests.
- BlueWave moved to dismiss asserting: (1) some claims are barred by the first-to-file rule and law of the case; (2) Riedel lacks Article III standing on government-intervened claims; and (3) the FAC fails Rules 8, 9(b), and 12(b)(6) pleading standards.
- The court dismissed claims tied to P&H fees and Unnecessary Tests as first-to-file barred and rejected the reverse-false-claims theory under § 3729(a)(1)(G).
- The court denied dismissal of claims based on the Speakers Bureau kickbacks, co-pay/deductible waiver kickbacks, false records (§ 3729(a)(1)(B)), and conspiracy (§ 3729(a)(1)(C)).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| First-to-file bar for P&H fees and unnecessary tests | Riedel preserved those theories for appeal but does not seek reconsideration | BlueWave: those schemes are barred by 31 U.S.C. § 3730(b)(5) and law of the case | Dismissed: P&H fees and Unnecessary Tests claims are first-to-file barred |
| Article III standing as to government-intervened claims | Riedel remains a party and may continue participation despite government intervention | BlueWave: Riedel lacks Article III standing on claims where the government intervened | Court treated government complaint as operative; did not dismiss intervened claims for lack of standing in this Order (discussion of operative complaint and party rights) |
| Pleading AKS-based kickback claims (Speakers Bureau; co-pay/deductible waivers) under Rule 9(b) | FAC identifies physicians, payments, marketing conduct, and alleges payments induced referrals to HDL/Singulex | BlueWave: FAC lacks specific claims, dates, patient examples, amounts tied to specific false claims and lacks scienter allegations | Denied: FAC pleads who/what/when/where/how sufficiently for Speakers Bureau and waiver schemes and alleges required scienter for pleading stage |
| Reverse false claims (§ 3729(a)(1)(G)) and conspiracy (§ 3729(a)(1)(C)) | Riedel: BlueWave obtained >$218M via arrangements tied to government reimbursement and thereby had an obligation to return proceeds; also alleged agreements to induce referrals | BlueWave: no legal obligation to repay under (G); intracorporate-immunity defeats conspiracy | Mixed: § 3729(a)(1)(G) claims dismissed (no identified statutory/contractual obligation to repay); conspiracy claims survived (court found sufficient agreement, intent, overt acts and intracorporate immunity not applicable) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility standard for Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (requires factual plausibility and limits conclusions on Rule 12(b)(6))
- U.S. ex rel. Nathan v. Takeda Pharms. N. Am., Inc., 707 F.3d 451 (4th Cir.) (discusses Rule 9(b) and indicia of reliability for FCA claims)
- U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370 (4th Cir.) (who/what/when/where/how standard under Rule 9(b))
- Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir.) (Rule 9(b) pleading guidance)
- United States v. Triple Canopy, Inc., 775 F.3d 628 (4th Cir.) (operative complaint after government intervention; materiality and causation discussion)
- U.S. ex rel. DeCesare v. Americare In Home Nursing, 757 F. Supp. 2d 573 (E.D. Va.) (proximate causation in FCA false-record theories)
- United States v. McClatchey, 217 F.3d 823 (10th Cir.) (scienter/purpose requirement for AKS violations)
- Buschi v. Kirven, 775 F.2d 1240 (4th Cir.) (intracorporate conspiracy doctrine)