United States Ex Rel. Steury v. Cardinal Health, Inc.
735 F.3d 202
| 5th Cir. | 2013Background
- Steury, a former salesperson, sold Cardinal’s Signature Edition infusion pumps to VA hospitals from 1997 until Cardinal suspended sales for a separate defect in 2006; she discovered and reported a suspected air-embolism defect in 2000–2001.
- Steury sued Cardinal under the False Claims Act (FCA) in 2007 alleging (1) implied false certification that the pumps were merchantable and (2) a worthless-goods theory; the government declined to intervene.
- The district court dismissed Steury’s complaints under Rule 9(b); this Court previously affirmed in part, remanding for more particularized pleading (Steury I).
- On remand, Steury filed a third amended complaint asserting the FCA claim based solely on an implied certification of merchantability (and again asserting worthless-goods); the district court dismissed for failure to plead with particularity.
- The Fifth Circuit affirms, holding Steury’s pleading fails to identify the contractual or regulatory source making merchantability a prerequisite to payment and fails to plead particular facts supporting the worthless-goods theory (no VA-specific harm, suits, or defective-unit allegations).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an implied false-certification FCA claim (merchantability) was adequately pleaded | Steury: Cardinal implicitly certified pumps were merchantable and VA contracts required merchantability, so false claims were presented | Cardinal: Pleadings are conclusory; payment was not conditioned on merchantability under VA procurement rules | Held: Dismissed — plaintiff failed under Rule 9(b) to identify contract/regulatory provisions making merchantability a prerequisite to payment or describe how pumps deviated from specs |
| Whether an implied warranty (vs. express warranty) can ground FCA liability | Steury: Implied warranty of merchantability was incorporated into VA contracts, supporting implied certification | Cardinal: Implied warranties can be overridden; conclusory assertion insufficient | Held: Dismissed — pleading an implied certification of an implied warranty is too conclusory and inconsistent with precedents requiring clear prerequisite-to-payment allegations |
| Whether a worthless-goods theory under the FCA was adequately pleaded | Steury: Pumps were effectively worthless because defect risk (tort liability) exceeded benefit | Cardinal: No particularized allegations that VA units were defective, caused harm, or led to suits | Held: Dismissed — plaintiff failed to plead who/what/when/where/how; no allegations that any VA-sold pump was found deficient or caused injury |
| Sufficiency under Rule 9(b) for FCA fraud claims | Steury: Amended complaint cured prior defects by asserting contract requirements and merchantability | Cardinal: Still lacks the who/what/when/where/how; conclusory assertions persist | Held: Dismissed — Rule 9(b) requires particularized allegations of falsity and the prerequisite relationship to payment; Steury’s complaint does not meet the standard |
Key Cases Cited
- U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262 (5th Cir. 2010) (earlier appellate decision framing prerequisite-to-payment requirement for implied certifications)
- U.S. ex rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) (use of express statutes/regulations to ground implied certification theory)
- U.S. ex rel. Marcy v. Rowan Cos., Inc., 520 F.3d 384 (5th Cir. 2008) (dismissing implied-certification claims where compliance was not a condition of payment)
- U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997) (analyzing whether payment was conditioned on certification)
- United States v. Southland Mgmt. Corp., 326 F.3d 669 (5th Cir. 2003) (distinguishing FCA liability from ordinary contract breaches)
- Williams v. United States, 458 U.S. 279 (1982) (Supreme Court caution on inferring implied certifications from nonfactual instruments)
- United States v. Sci. Applications Int’l Corp., 626 F.3d 1257 (D.C. Cir. 2010) (discussing risks of expansive implied-certification theory and need to limit abuse)