370 F. Supp. 3d 483
E.D. Pa.2019Background
- Relators SMSPF, LLC and Panzey Belgium Harris (a former Pfizer employee) filed a qui tam suit under the False Claims Act alleging that pharmaceutical companies (EMD Serono, Pfizer) and vendors (Quintiles IMS/IQVIA, RXC) engaged in "white coat marketing" and provided allegedly unlawful free nursing/reimbursement support that violated the Anti‑Kickback Statute.
- The government investigated for ~18 months, reviewed documents, interviewed witnesses, met with defendants and relators, and consulted multiple OIG and DOJ components.
- After investigation, the United States declined to intervene and moved to dismiss the relators’ suit under 31 U.S.C. § 3730(c)(2)(A), explaining the allegations lacked sufficient legal and factual support and that litigation costs and policy considerations counseled dismissal.
- Relators objected, arguing the government’s decision was arbitrary, inadequately investigated, and that the matter could yield large recoveries; they also alleged animus toward the corporate relator.
- The court considered conflicting circuit standards and adopted the Ninth/Tenth Circuit "rational relationship" test for evaluating a government motion to dismiss under § 3730(c)(2)(A).
- Applying that test, the court found the government articulated legitimate interests (resource conservation and policy-based views that the challenged practices were permissible/beneficial) and that the investigation was adequate; relators failed to show dismissal was arbitrary, fraudulent, or illegal. The court granted the government’s motion and dismissed the action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for government motion to dismiss under 31 U.S.C. § 3730(c)(2)(A) | Relators urged judicial review to prevent arbitrary dismissal | Government urged deference / limited review of dismissal decision | Court adopted Ninth/Tenth Circuit "rational relationship" test (government must show dismissal serves a valid governmental purpose and is rationally related to that purpose) |
| Adequacy of government's investigation before dismissing | Investigation was insufficient; government failed to do due diligence and ignored potential large recoveries | Government conducted extensive multi‑office investigation over 18 months and collected substantial materials | Court found investigation adequate and not arbitrary |
| Legitimacy of government reasons (costs, policy) for dismissal | Cost concerns are generic and do not justify dismissal; free services were inducements violating AKS | Preservation of resources and policy judgments about permissible educational/support services are legitimate governmental interests | Court held resource conservation and policy concerns are legitimate and rationally related to dismissal |
| Relators' claim that dismissal was fraudulent, arbitrary, or an abuse of discretion | Relators asserted arbitrariness and possible animus toward corporate relator | Government denied improper motive; presented investigatory record and rationale | Court found relators did not present colorable evidence of fraud, illegality, or arbitrary conduct; dismissal affirmed |
Key Cases Cited
- United States ex rel. Sequoia Orange Co. v. Baird‑Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998) (articulates "rational relationship" test for gov't dismissal under § 3730(c)(2)(A))
- Ridenour v. Kaiser‑Hill Co., 397 F.3d 925 (10th Cir. 2005) (adopts Sequoia standard and emphasizes test is not exacting)
- Swift v. United States, 318 F.3d 250 (D.C. Cir. 2003) (holds government has virtually unfettered right to dismiss under § 3730(c)(2)(A))
- Heckler v. Chaney, 470 U.S. 821 (1985) (executive prosecutorial discretion and limited judicial review)
- Kellogg Brown & Root Servs. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015) (government need not intervene to move to dismiss under § 3730(c)(2)(A))
- Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409 (2005) (relator procedures and government intervention rights under the FCA)