United States v. Smith & Nephew, Inc.
749 F. Supp. 2d 773
W.D. Tenn.2010Background
- Relator brought a qui tam action under the False Claims Act against Smith & Nephew for allegedly false certifications under the Trade Agreements Act (TAA).
- Relator alleges Smith & Nephew sold non-TAA-compliant products to the U.S. government through contracts with VA and GSA, disguising origin of foreign-made goods.
- Relator worked in Smith & Nephew's Tennessee office and gained knowledge of ongoing non-compliant sales and attempted to address them.
- Company allegedly purchased products from Straits Orthopaedics in Malaysia and repackaged them in Memphis to obscure origin, failing to maintain proper country-of-origin tracking.
- Smith & Nephew disclosed voluntary information to the DoD IG and VA in 2008 about potential non-compliance; DoD referred the matter to VA with DOJ concurrence.
- Relator seeks relief under FCA as of the time of his employment and as amended by FER A changes; the court addresses public disclosure bar and pleading standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject matter jurisdiction under 12(b)(1). | Relator asserts jurisdiction remains proper for FCA claims. | Smith & Nephew contends certain bar doctrines may defeat jurisdiction. | Denied; court retains jurisdiction. |
| Whether the public disclosure bar (former § 3730(e)(4)(A)) applies. | Public disclosures are insufficient to bar where relator is original source or where disclosures do not meet bar. | Disclosures to competent public officials trigger the public disclosure bar and undermine relator's standing. | Public disclosure bar does not require dismissal; not applicable to this case. |
| Sufficiency of pleadings under Rule 9(b) for FCA violations. | Amended complaint provides substantial detail and first-hand knowledge supporting fraud allegations. | Plaintiff must plead specific false claims with exact time/place/content. | Relator pled with sufficient particularity; 9(b) satisfied. |
| Retaliation claim under former § 3730(h). | Relator engaged in protected activity by voicing concerns about violations and seeking remediation. | Actions were passive or not protected activity. | Relator adequately alleged protected activity and causation; retaliation claim survives. |
Key Cases Cited
- United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (1st Cir. 2007) (public disclosure bar does not equate government knowledge with public disclosure)
- United States ex rel. McKenzie v. BellSouth Telecomm., Inc., 123 F.3d 935 (6th Cir. 1997) (public disclosures include court filings and pleadings)
- United States ex rel. Bledsoe v. Community Health Sys., Inc., 501 F.3d 493 (6th Cir. 2007) (Rule 9(b) pleading for FCA requires specifics or ends of the scheme)
- Marlar v. BWXT Y-12, L.L.C., 525 F.3d 439 (6th Cir. 2008) (protective activity can constitute protected conduct for retaliation)
- Caremark RX, L.L.C. v. United States ex rel. caremark,, 496 F.3d 730 (7th Cir. 2007) (disclosures to government officials can qualify as public disclosure)
- Poteet v. Medtronic, Inc., 552 F.3d 503 (6th Cir. 2009) (6th Cir. discussion of FCA amendments and public disclosure concepts)