525 F.Supp.3d 447
S.D.N.Y.2021Background
- Qui tam FCA suit by relators Arash Mohajer and Chris Peterson against Omnicare (later owned by CVS) alleging widespread dispensing of drugs to residents of assisted-living/unskilled residential facilities without valid prescriptions and submission of false reimbursement claims to Medicare/Medicaid/TRICARE.
- Earlier qui tam by Uri Bassan (filed 2015 in S.D.N.Y.) alleged substantially the same fraud; the United States intervened in both matters and filed identical intervenor complaints.
- Government’s theory: Omnicare’s dispensing systems (OmniDX and Oasis) and its “cycle fill” processes were routinely configured/used to “roll over” expired/exhausted prescriptions (auto-populating refills or assigning new order numbers), enabling illegal refills and false claims.
- Mohajer/Peterson filed their complaint in 2017 (after Bassan) and later amended it to add more factual detail and 25 state/D.C. law counts; the United States’ intervention made the government’s complaint the operative federal pleading.
- Court held Mohajer/Peterson’s federal FCA claim barred by the FCA first-to-file rule (31 U.S.C. § 3730(b)(5)) because Bassan’s earlier complaint put the Government on notice of the essential fraudulent scheme; amendment could not cure the bar.
- Court declined to exercise supplemental jurisdiction over the state-law claims and dismissed the entire amended complaint without prejudice; case closed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether relators' FCA claim is barred by the FCA first-to-file rule | Mohajer/Peterson argued their complaint added new, materially different details beyond Bassan and thus was not "related." | Omnicare (and the court) argued Bassan’s earlier complaint alleged the same essential fraudulent scheme and put the Government on notice, so later-filed related actions are barred. | Held: First-to-file bar applies; federal FCA claim dismissed. |
| Whether amending the later complaint in 2020 cures a first-to-file violation | Relators argued amendment supplies new allegations that make the action distinct. | Defendants argued amendment cannot cure a first-to-file defect because amending does not create a new action. | Held: Amendment does not cure the bar; dismissal stands. |
| Whether the court should retain supplemental jurisdiction over state/DC law claims after dismissal of federal claim | Relators sought to proceed on state-law FCA claims joined in their amended complaint. | Defendants and court noted lack of original federal jurisdiction and that many state claims overlap with Bassan (and some states have their own first-to-file rules). | Held: Court declined supplemental jurisdiction and dismissed state-law claims without prejudice. |
| Whether government intervention or public-disclosure bars require different result | Relators suggested procedural defenses and distinctions might save their suit. | Court observed intervention made the government the real party in interest and that public-disclosure/other jurisdictional arguments were addressed by precedent but did not negate the first-to-file analysis. | Held: Government intervention confirmed the government complaint as operative; first-to-file analysis dispositive. |
Key Cases Cited
- Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989 (2016) (context on FCA focus and purpose)
- United States v. Bornstein, 423 U.S. 303 (1976) (historical context for FCA enforcement)
- United States ex rel. Wood v. Allergan, Inc., 899 F.3d 163 (2d Cir. 2018) (first-to-file doctrine interpretation and "operative complaint" rule)
- United States ex rel. Chorches for Bankruptcy Estate of Fabula v. Am. Med. Response, Inc., 865 F.3d 71 (2d Cir. 2017) (public-disclosure and jurisdictional discussion)
- United States ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80 (2d Cir. 2017) (first-to-file rule treated as merits-related, not jurisdictional)
- United States ex rel. Heath v. AT&T Inc., 791 F.3d 112 (D.C. Cir. 2015) (definition of "related" actions under § 3730(b)(5))
- United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011) (government notice and relatedness analysis)
- United States v. Millennium Labs, Inc., 923 F.3d 240 (1st Cir. 2019) (policies underlying first-to-file bar)
- United States ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111 (1st Cir. 2014) (relatedness and government’s ability to discover related frauds)