United States Ex Rel. Heineman-Guta v. Guidant Corp. , 718 F.3d 28 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-1867
UNITED STATES OF AMERICA,
ex rel. HEIDI HEINEMAN-GUTA, Relator,
Plaintiff, Appellant,
v.
GUIDANT CORPORATION; BOSTON SCIENTIFIC CORPORATION,
individually and as Successor-in-Interest to Guidant Corporation,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Torruella, Stahl, and Thompson,
Circuit Judges.
Loren Jacobson, with whom Charles S. Siegel and Waters &
Kraus, LLP, were on brief for appellant.
Jonathan S. Franklin, with whom Frederick Robinson, Mark
Emery, and Fulbright & Jaworski LLP, were on brief for appellees.
May 31, 2013
THOMPSON, Circuit Judge. Appellant Heidi Heineman-Guta
("Heineman-Guta"), on behalf of the United States, brought a qui
tam action under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et
seq., against Guidant Corporation ("Guidant") and Boston Scientific
Corporation ("BSC") alleging they engaged in a kickback scheme to
promote the sale and use of their cardiac rhythm management
devices. The district court dismissed Heineman-Guta's complaint
for lack of subject matter jurisdiction under Federal Rule of Civil
Procedure 12(b)(1) on the basis that an earlier-filed complaint
barred consideration of Heineman-Guta's complaint under the first-
to-file rule of the FCA, id. § 3730(b)(5). Heineman-Guta
challenges the dismissal, arguing on appeal, as she did below, that
the earlier-filed complaint cannot adequately serve as a preclusive
first-filed complaint to trigger the first-to-file bar because it
does not meet the heightened pleading standard under Rule 9(b).1
Heineman-Guta raises an issue of first impression in this
circuit; that is, whether § 3730(b)(5) requires the first-filed
complaint to meet the heightened pleading standards of Rule 9(b) to
bar a later-filed complaint. We hold it does not and affirm the
district court.
1
Rule 9(b) provides in relevant part that "[i]n alleging fraud
or mistake, a party must state with particularity the circumstances
constituting fraud or mistake." Fed. R. Civ. P. 9(b).
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BACKGROUND
A. The FCA
To set the stage, we start with a brief overview of the
FCA and the provisions that are relevant to this case. The FCA
prohibits the knowing submission of false or fraudulent claims for
payment, or causing the submission of such claims, to the federal
government and prescribes fines and treble damages to penalize
offenders. 31 U.S.C. § 3729(a).2 The FCA's qui tam provisions
"supplement federal law enforcement resources by encouraging
private citizens to uncover fraud on the government." United
States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 727 (1st Cir.
2007). Such provisions permit private persons (known as relators)
to bring certain fraud claims on behalf of the United States
Government. 31 U.S.C. § 3730(b).3 Qui tam actions are filed under
2
The FCA provides, in pertinent part:
"[A]ny person who--(A) knowingly presents, or causes to
be presented [to an officer or employee of the United
States Government] a false or fraudulent claim for
payment or approval; . . . [or] (G) knowingly makes,
uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit
money or property to the Government; . . . is liable to
the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, as adjusted
. . . plus 3 times the amount of damages which the
Government sustains because of the act of that person."
31 U.S.C. § 3729.
3
"'Qui tam' comes from the phrase 'qui tam pro domino rege
quam pro se ipso in hac parte sequitur,' which translates as 'who
pursues this action on our Lord the King's behalf as well as his
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seal and remain that way for at least 60 days. Id. § 3730(b)(2).
This procedure gives the government an opportunity to assess the
relator's complaint and decide whether to intervene and assume
primary responsibility for prosecuting the case. Id. § 3730(b)(2),
(b)(4), (c)(1). A relator is entitled to recover a share of the
proceeds from the action, subject to the requirements of the
statute, regardless of whether the government decides to intervene.
Id. § 3730(d).
The FCA also, however, includes certain jurisdictional
bars, limiting a district court's subject matter jurisdiction over
qui tam actions. United States ex rel. Duxbury v. Ortho Biotech
Prods., 579 F.3d 13, 16 (1st Cir. 2009). As relevant to this case,
the "first-to-file" rule bars a "person other than the Government"
from "bring[ing] a related action based on the facts underlying the
pending action." 31 U.S.C. § 3730(b)(5). With this statutory
scheme in mind, we turn to the two complaints against Guidant and
BSC and detail the allegations made in each below.4
B. The FCA Allegations Against BSC
1. The Bennett Complaint
On October 16, 2008, Elaine Bennett filed a qui tam
action against BSC in the United States District Court for the
own.'" Rost, 507 F.3d at 727 n.4 (quoting Rockwell Int'l Corp. v.
United States, 549 U.S. 457, 463 n.2 (2007)).
4
BSC acquired Guidant in 2006. For simplicity, we refer to
Guidant and BSC as "BSC" throughout this opinion.
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District of Maryland.5 In that action, Bennett, a former employee
of BSC, claimed that between 2003 and early October 2008, BSC
engaged in an unlawful kickback scheme within its Cardiac Rhythm
Management ("CRM") division to induce physicians and hospitals to
use BSC's pacemakers, internal cardiac defibrillators, and cardiac
resynchronization therapy ("CRT"), thereby increasing the company's
market share of these devices. BSC has allegedly offered various
types of renumeration to hospitals and physicians in exchange for
their use of BSC's devices in violation of the Anti-Kickback
Statute, 42 U.S.C. § 1320a-7b, and has caused physicians who
received kickbacks to make false claims for reimbursement under
Medicare in violation of the FCA.
BSC furthers its alleged kickback scheme in a number of
ways: first, by "provid[ing] doctors and hospitals with kickbacks
in the form of follow-up medical services in exchange for the
providers' use of BSC's cardiac rhythm devices"; second, by
"induc[ing] doctors and hospitals to bill for medical services and
procedures they d[id] not perform"; third, by "requir[ing] BSC
sales personnel to provide medical care in the absence of a
licensed physician or staff member"; fourth, by "improperly
conduct[ing] Medicare billing for physicians and hospitals through
non-licensed, non-medical staff"; fifth, by "provid[ing] monetary
5
Donald Boone, a Virginia resident and Guidant employee from
1986 to 1996, joined the Bennett Complaint as a relator.
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'grants' to foundations set up by physicians and physician groups
in return for favored status by such physicians," and; sixth, by
"sponsor[ing] dinner meetings for implanting physicians to invite
potential 'referring physicians' to, in order for the implanting
physician to increase the number of patients he receives for
implants from those referring physicians." In most instances, "the
benefitting implanting physician also receives an 'honorarium' for
speaking about his or her expertise at the program."
BSC provides physicians access to an internet-based
monitoring system called "The Latitude Patient Management System"
("Latitude"), which allows patients to receive post-implant care
from their residences without having to meet with a physician in-
person. Latitude transmits information obtained from the implanted
device through the internet to the physician's office. The
physician can then use the information to determine whether the
device is working properly, and whether any adjustments are
necessary. Part of BSC's representatives' follow-up care for a
patient's device includes office visits, "phone checks," and
driving to rural areas to conduct follow-up site visits. Because
phone checks cost less than office visits, BSC representatives
often conduct more phone consultations so that physicians can
increase their billing to Medicare. BSC representatives advise
physicians' offices on how to bill Medicare for the maximum
reimbursement for Latitude services.
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In addition, BSC organizes networking events where
surgeons can meet physicians who might provide referrals. The
"host" surgeon is allegedly paid "as if the event were a speaking
engagement when in fact it is simply a marketing ploy to increase
the surgeon's" and BSC's business. BSC "incentivizes the use of
[its] devices by planning and funding dinner programs held by
implanting physicians." BSC identifies implanting physicians and
"organizes and pays for lavish dinner programs so that the
physician in question can network with potential referring
physicians." In many instances, BSC "improperly pays the
benefitting physician 'honoraria' for 'speaking' at these dinner
programs."
On September 28, 2011, the United States declined to
intervene in Bennett's case. One month later, the government and
Bennett agreed to voluntarily dismiss the matter. The district
court dismissed the case and the seal was lifted.6
6
Before Bennett filed her October 16, 2008 complaint, she
filed a complaint (under her previous name, Elaine George) against
BSC in November 2006. United States ex rel. Bennett v. Bos.
Scientific Corp., No. 07-2467, 2011 WL 1231577, at *1 (S.D. Tex.
Mar. 31, 2011). The complaint, originally filed in the United
States District Court for the Northern District of Illinois, was
transferred to the United States District Court for the Southern
District of Texas in July 2007. On July 10, 2009, Bennett filed an
amended complaint ("the George Complaint"). The George Complaint
alleged inter alia that BSC and Guidant violated the FCA through an
"off-label marketing campaign and the use of illegal kickbacks"
that caused physicians to perform an increased number of inpatient
surgical ablation procedures when less invasive and less expensive
procedures could have been performed. The George Complaint was
dismissed without prejudice for failure to satisfy Rule 9(b). Id.-7-
2. The Heineman-Guta Complaint
On November 10, 2009, while the Bennett complaint was
still pending and under seal, Heineman-Guta filed a qui tam
complaint under seal alleging BSC violated the FCA. Heineman-Guta
amended her complaint on January 30, 2012.
Like Bennett, Heineman-Guta made numerous allegations
concerning BSC's kickback scheme. Heineman-Guta, a former account
manager in BSC's heart failure management group from April 2003
until November 2007, claimed that over her four-year employment
with BSC, it defrauded the Government by engaging in a scheme to
provide kickbacks in various forms to physicians to encourage them
to both implant its cardiac rhythm management devices and refer
patients that would be implanted with such devices.
Specifically, Heineman-Guta says that BSC instructed her
to provide "lavish trips and entertainment to physicians in order
to encourage them to refer patients for implantation of Guidant
cardiac rhythm management devices." BSC offered physicians all-
expense paid trips and used expensive meals to induce them to
at *28, *35. In the present case, BSC argued in its motion to
dismiss that the previously dismissed George Complaint, in addition
to the Bennett Complaint, served as a preclusive first-filed
complaint. Agreeing with Heineman-Guta, the district court
rejected the notion that the George Complaint could serve as a
preclusive first-filed complaint because it did not allege a
kickback scheme to promote the sale of cardiac rhythm management
devices. United States ex rel. Heineman-Guta v. Guidant Corp. et
al., 874 F. Supp. 2d 35, 38 (D. Mass. 2012). Since BSC does not
challenge that conclusion, the George Complaint is not at issue in
this appeal.
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insist on the implantation of BSC devices or refer patients for
implantation. BSC required sales representatives to prepare
customer management plans on how to retain customers, grow their
business or win back their support and gain market share from them.
BSC paid physicians as speakers to gain their loyalty,
repeatedly paying one high-volume implanting physician between
$1200 and $2500 per engagement over the course of two years. A
July 2005 company power point presentation on sales-representative
training allegedly instructed that "best practices" at the company
included compensating physicians by providing them with speaking
opportunities.
BSC used "case reviews" to funnel money to referring
physicians and to provide a steady stream of patient referrals for
implanting physicians who were loyal to BSC. Under the "case
review" program, BSC invited an implanting physician along with
several referring physicians to an expensive dinner. At the
dinner, the implanting physician "reviewed" cases for possible
referral. In addition to paying for the dinner, BSC allegedly paid
each referring physician a $250 fee for each patient chart they
brought to the dinner. BSC used the case review program as a means
to not only funnel money to referring physicians, but also to
ensure the commitment of participating implanting physicians to
implant BSC cardiac rhythm management devices.
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In addition, BSC conducted "sham clinical trial"
programs. Heineman-Guta pointed to one specific "sham program"
called ADVANCENT, which was an "observational registry" of patients
with certain symptoms of cardiac failure. Through this program,
BSC allegedly targeted physicians who were loyal to BSC and paid
them for each patient they entered into the database who had those
symptoms.
BSC also assisted fellows in finding employment in
practices that primarily implanted BSC devices. BSC helped place
fellows in certain practices and hospitals in exchange for promises
from those practices and hospitals that they would mainly use BSC
devices.
According to the amended complaint, these kickbacks
caused certain physicians to implant or recommend the use of BSC
devices. In addition to providing the initials of the specific
referring and implanting physicians, the initials of the patients
who received implantations due to the purported scheme and the
dates and places of implantation, the amended complaint detailed
the trips, meals and hotel reimbursements for physicians who
implanted BSC devices. BSC, knowing that Medicare would pay for
the vast majority of these implants, allegedly promoted the highly
lucrative nature of implanting its devices by pointing out to
implanting physicians the extent to which Medicare would provide
reimbursement for implantations and the profit margins physicians
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could make from such reimbursement. Lastly, Heineman-Guta claimed
that BSC caused physicians and hospitals, who must certify
compliance with the federal Anti-Kickback Statute, to make false
certifications that were material to the government's decision to
pay for the implantation of the companies' cardiac devices.
3. The Dismissal of the Amended Complaint
On July 5, 2012, about nine months after the government
and Bennett voluntarily dismissed the Bennett Complaint, the
district court in this case granted BSC's motion to dismiss
Heineman-Guta's amended complaint for lack of subject matter
jurisdiction under Rule 12(b)(1). Guidant Corp., 874 F. Supp. 2d
at 41. The court held that the first-to-file rule under 31 U.S.C.
§ 3730(b)(5) barred consideration of the amended complaint because
it alleged the same "essential facts" of the kickback scheme as the
Bennett Complaint. Id. at 38-39, 41. The court found that the
essential facts contained in the Bennett Complaint provided the
government sufficient notice that it was the potential victim of
fraud worthy of investigation and, that as a result, it served as
the preclusive first-filed complaint for the purposes of §
3730(b)(5). Id. at 40-41.
Despite the fact that the Bennett Complaint had been
voluntarily dismissed in another court which had not been called
upon to examine its Rule 9(b) sufficiency, Heineman-Guta's main
argument below was that the Bennett Complaint did not satisfy that
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rule's particularity requirements. She contended that the Bennett
Complaint lacked specific details about the alleged kickback scheme
such as dates, places and names of physicians involved. According
to Heineman-Guta, the Bennett Complaint's failure to satisfy Rule
9(b) pleading requirements meant it could not serve as a preclusive
first-filed complaint under § 3730(b)(5) to bar her qui tam action.
The district court, recognizing we had yet to rule on whether
preclusive first-filed complaints must comply with Rule 9(b),
rejected her argument. Id. at 40 n.10. In doing so, it adopted
the reasoning of the D.C. Circuit in United States ex rel. Batiste
v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011), which held that
a complaint need not satisfy Rule 9(b) requirements to serve as a
preclusive first-filed complaint under § 3730(b)(5). Id. at 40.
Heineman-Guta timely appealed.
DISCUSSION
Heineman-Guta argues that the district court erred in
dismissing her amended complaint based on its conclusion that the
FCA's first-to-file rule does not require the first-filed complaint
to meet the particularity requirements for pleading fraud under
Rule 9(b). We review de novo the dismissal of an action under the
FCA for lack of subject matter jurisdiction. United States ex.
rel. Estate of Cunningham v. Millennium Labs. of Cal., Inc., No.
12-1258, 2013 WL 1490435, at *6 (1st Cir. Apr. 12, 2013).
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The question in this case is narrow. It is whether a
first-filed complaint under the FCA's first-to-file rule, §
3730(b)(5), must comply with Rule 9(b) particularity requirements
in order to give sufficient notice to the government of an alleged
fraudulent scheme. To that narrow question, for reasons explained
below, we hold it does not.
The first-to-file rule bars a plaintiff from bringing "a
related action based on the facts underlying the pending action."
31 U.S.C. § 3730(b)(5).7 The rule is intended to "provide
incentives to relators to 'promptly alert[ ] the government to the
essential facts of a fraudulent scheme.'" Duxbury, 579 F.3d at 32(alteration in original) (quoting United States ex rel. Lujan v.
Hughes Aircraft Co., 243 F.3d 1181, 1188 (9th Cir. 2009)). To
further that purpose, we have said that the first-to-file rule bars
a later-filed complaint if it "'states all the essential facts of
a previously-filed [complaint]' or 'the same elements of a fraud
described in an earlier suit.'" Duxbury, 579 F.3d at 32 (emphasis
omitted) (quoting United States ex rel. LaCorte v. SmithKline
Beecham Clinical Labs., Inc., 149 F.3d 227, 232-33 (3d Cir.
1998)).8 Under this essential facts test, the first-to-file rule
7
It is undisputed that the Bennett Complaint was pending when
Heineman-Guta filed her complaint.
8
The district court noted that Heineman-Guta did not deny the
Bennett Complaint disclosed a fraudulent scheme nearly identical to
the one alleged in the amended complaint. Guidant Corp., 874 F.
Supp. 2d at 39. Heineman-Guta does not expressly challenge that
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bars a later complaint even if that complaint "incorporates
somewhat different details." Duxbury, 579 F.3d at 32 (quoting
LaCorte, 149 F.3d at 232-33) (internal quotation mark omitted).
Heineman-Guta says the appropriate standard under which first-filed
complaints should be assessed is not an essential facts standard,
but rather the pleading standard set forth in Rule 9(b).
Under Rule 9(b), a party alleging fraud or mistake "must
state with particularity the circumstances constituting fraud or
mistake." Fed. R. Civ. P. 9(b). To satisfy Rule 9(b) pleading
requirements, the "complaint must specify 'the time, place, and
content of an alleged false representation.'" Rost, 507 F.3d at
731 (quoting Doyle v. Hasbro, Inc., 103 F.3d 186, 194 (1st Cir.
1996)). To discern whether § 3730(b)(5) imposes Rule 9(b)'s
pleading standard on earlier-filed complaints alleging FCA
violations, we start, as we must, with the language of the
statutory provision. United States v. Armstrong, 706 F.3d 1, 5
(1st Cir. 2013). "Where the language of the statute is plain and
the meaning unambiguous, we will do no more than enforce the
statute in accordance with those plain terms." United States v.
Booker, 644 F.3d 12, 17 (1st Cir. 2011). Section 3730(b)(5) says
"no person other than the Government" can "bring a related action
based on the facts underlying the pending action." 31 U.S.C. §
3730(b)(5). Nothing in the language of § 3730(b)(5) references
finding on appeal.
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Rule 9(b)'s particularity requirements. We will not ordinarily
read requirements into a statute that "do not appear on its face."
See Dean v. United States, 556 U.S. 568, 572 (2009) (quoting Bates
v. United States, 522 U.S. 23, 29 (1997)) (internal quotation mark
omitted). The language is plain and simple: an action is barred
if it is a "related action" that is "based on the facts underlying
the pending action." 31 U.S.C. § 3730(b)(5) (emphasis added).
Section 3730(b)(5) contains no exceptions, and certainly not one
requiring that the "pending" earlier-filed action comply with Rule
9(b)'s heightened pleading standard. Duxbury, 579 F.3d at 33(noting § 3730(b)(5) is "'exception-free'" (quoting Lujan, 243 F.3d
at 1187)).
Had Congress wanted to incorporate Rule 9(b)
particularity requirements into § 3730(b)(5), it could have done
so. Congress referenced the Federal Rules of Civil Procedure in
various FCA provisions. See, e.g., 31 U.S.C. §§ 3732(a),
3733(b)(1)(B), 3733(c)(2), 3733(h)(1), 3733(j)(6). Indeed, §
3730(b) twice refers to the Federal Rules of Civil Procedure. See
id. §§ 3730(b)(2), 3730(b)(3) (referring to Rule 4's service
requirements). As is the case here, when Congress includes
language in one section of a statute but omits it in another, "it
is generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion." Keene Corp. v.
United States, 508 U.S. 200, 208 (1993) (quoting Russello v. United
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States, 464 U.S. 16, 23 (1983)) (internal quotation mark omitted).
Congress's reference to the Federal Rules of Civil Procedure in
some of the FCA's provisions, particularly the subsections under §
3730(b), and the omission of any Rule 9(b) requirement from §
3730(b)(5), tells us that Congress did not intend the first-to-file
rule to incorporate Rule 9(b)'s heightened pleading standard.
Contrary to Heineman-Guta's contention otherwise, the
allegations of a preclusive first-filed complaint under §
3730(b)(5) need not comport with Rule 9(b)'s pleading requirements
to provide the government with sufficient notice of potential
fraud. In amending the FCA in 1986 to add § 3730(b)(5), Congress
sought to strike the appropriate balance "between adequate
incentives for whistle-blowing insiders with genuinely valuable
information and discouragement of opportunistic plaintiffs who have
no significant information to contribute of their own." LaCorte,
149 F.3d at 234 (quoting United States ex rel. Springfield Terminal
Ry v. Quinn, 14 F.3d 645, 650 (D.C. Cir. 1994)) (internal quotation
mark omitted); see False Claims Amendments Act of 1986, Pub. L. No.
99-562, § 3, 100 Stat. 3153, 3154-55 (1986). To achieve that
balance, § 3730(b)(5) "allow[s] recovery when a qui tam relator
puts the government on notice of potential fraud," and "bar[s]
copycat actions that provide no additional material information"
about the fraud. Batiste, 659 F.3d at 1210 (underline omitted);
see also LaCorte, 149 F.3d at 233-34 (Section 3730(b)(5) is
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intended to prevent parasitic suits and duplicative awards covering
the same behavior). This means that if the first-filed complaint
contains enough material information (the essential facts) about
the potential fraud, the government has sufficient notice to launch
its investigation. At that point, the purpose of the qui tam
action under § 3730(b) is satisfied. If a later-filed action,
filed while the first one is pending, offers merely additional
facts and details about the same scheme, the later-filed action
will be barred because it is duplicative of the first suit. The
reason for allowing private persons to bring qui tam actions is to
reduce fraud against the government. A later-filed complaint that
mirrors the essential facts as the pending earlier-filed complaint
does nothing to help reduce fraud of which the government is
already aware. LaCorte, 149 F.3d at 234.9
9
In arguing that only the particularity required by Rule 9(b)
suffices to provide the government with sufficient notice of
alleged fraud, Heineman-Guta challenges the district court's use of
the essential facts test in deciding whether the government had
such notice. At base, she argues that the essential facts test is
not used to decide whether the first-filed complaint provides
adequate notice to the government to justify barring subsequently
filed complaints under the first-to-file rule. Heineman-Guta's
argument ignores this court's precedent. As we noted in Duxbury,
and reiterate here, the purpose of the first-to-file rule is to
promptly notify the government about the essential facts of a
fraudulent scheme. Duxbury, 579 F.3d at 25, 32. In Duxbury, this
circuit adopted the essential facts standard and applied that
standard in determining whether the later-filed complaint was
barred under § 3730(b)(5). Id. at 32-33. The essential facts
standard is therefore applied to determine whether the government
has been adequately alerted of the essential facts of the
fraudulent scheme in the first-filed complaint such that the
later-filed complaint (filed while the first one is pending)
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Unlike the purpose served by § 3730(b)(5), Rule 9(b) is
not concerned with providing the government notice sufficient to
enable it to launch an investigation into alleged fraudulent
practices. Rule 9(b) is intended "to protect defendants in fraud
cases from frivolous accusations and allow them to prepare an
appropriate" defense. Batiste, 659 F.3d at 1210; see also United
States v. Williams Martin-Baker Aircraft Co., 389 F.3d 1251, 1256
(D.C. Cir. 2004) (Rule 9(b)'s requirements "discourage the
initiation of suits brought solely for their nuisance value, and
safeguard potential defendants from frivolous accusations of moral
turpitude" (citation and alteration omitted)); Fidelity Nat'l Title
Ins. Co. of N.Y. v. Intercounty Nat'l Title Ins. Co., 412 F.3d 745,
748 (7th Cir. 2005) (Rule 9(b)'s purpose is to "minimize the
extortionate impact that a baseless claim of fraud can have on a
firm or an individual"). Undoubtedly, as a general matter a
complaint alleging a fraudulent scheme under the FCA must comply
with Rule 9(b) pleading requirements or face dismissal. Duxbury,
579 F.3d at 29-30 (a relator must allege "the who, what, where, and
when of the allegedly false or fraudulent representation" (internal
quotation marks and citation omitted)); see United States ex rel.
Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009). But
the question of whether allegations in a complaint have been plead
with sufficient particularity under Rule 9(b) to withstand a
alleging the same essential facts is barred.
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defendant's motion to dismiss is distinct from whether the
allegations give the government adequate notice of potential fraud
to begin an investigation under the first-to-file rule. A
complaint that does not comply with Rule 9(b)'s particularity
requirements to protect the defendant's interests may nonetheless
provide the government sufficient notice to begin an investigation
of an alleged fraudulent scheme. See Batiste, 659 F.3d at 1210.
We therefore hold that, for the purposes of the
first-to-file rule, the earlier-filed complaint need not meet the
heightened pleading standard of Rule 9(b) to provide sufficient
notice to the government of the alleged fraud and bar a later-filed
complaint under § 3730(b)(5); earlier-filed complaints must provide
only the essential facts to give the government sufficient notice
to initiate an investigation into allegedly fraudulent practices.10
10
We thus reject Walburn v. Lockheed Martin Corp., 431 F.3d
966, 972 (6th Cir. 2005), which imposed Rule 9(b)'s heightened
pleading standard on first-filed complaints under § 3730(b)(5). In
grafting Rule 9(b) particularity requirements onto the
first-to-file rule, the Sixth Circuit did not address in-depth the
plain language of § 3730(b)(5), or the different purposes behind
Rule 9(b) and § 3730(b)(5). See id. We, like the district court,
agree instead with the D.C. Circuit's holding in Batiste, that
first-filed complaints under § 3730(b)(5) need not satisfy Rule
9(b) particularity requirements. In holding that first-filed
complaints need not meet Rule 9(b)'s standards under the
first-to-file rule, the D.C. Circuit noted, as we do here, that
nothing in the plain language of § 3730(b)(5) incorporates Rule
9(b) particularity requirements "which militates against reading
such a requirement into the statute." Id. at 1210. The D.C.
Circuit pointed out that the language of § 3730(b)(5) bars
complaints related to earlier-filed "pending" actions which plainly
means that "as long as a first-filed complaint remains pending, no
related complaint may be filed." Id. The D.C. Circuit further
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Applying that standard to this case, there is no question
that the Bennett Complaint provided the essential facts of BSC's
alleged fraud to give the government notice sufficient to initiate
its investigation and consequently bar Heineman-Guta's amended
complaint. We disagree with Heineman-Guta's characterization of
the Bennett Complaint's allegations as "barebones," cursory and
speculative. Like Heineman-Guta's amended complaint, the heart of
the Bennett complaint is that BSC and Guidant used kick-backs to
induce physicians and hospitals to submit false or fraudulent
claims to the government, specifically Medicare, as part of BSC's
scheme to induce implantation of BSC devices and thereby increase
its own market share. The Bennett Complaint alleged that BSC used
various forms of kickbacks to promote the same cardiac rhythm
management devices such as pacemakers, defibrillators, among
others, and encourage the use of the "Latitude" patient management
system. The Bennett Complaint described the same types of
kickbacks as disclosed in Heineman-Guta's amended complaint, such
as payment of honoraria to physicians, lavish meals and dinner
programs designed to generate referrals, payment of grants to
educational foundations used as a guide to funnel money to
physicians, and BSC's "coach[ing]" of physicians on the profits to
be made by charging Medicare for care related to cardiac rhythm
observed the different goals served by Rule 9(b) and § 3730(b)(5),
noting that Rule 9(b) is about deterrence, not preclusion. See id.
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devices.11 The complaint further alleged, like Heineman-Guta's
amended complaint, that as a result of BSC's kickback scheme, BSC
caused physicians and hospitals to make and use false statements to
obtain reimbursement for health care services provided under
Medicare.
Heineman-Guta says the Bennett Complaint cannot be
preclusive because it fails to allege particular incidents, dates,
times or names of physicians as alleged in her amended complaint.
But the statute does not require the facts alleged in both
complaints be identical; they need only overlap in their material
facts. See LaCorte, 149 F.3d at 233 ("[S]ection 3730(b)(5)'s plain
language is conclusive; the statute speaks of a 'related action,'
not an identical one."). If the earlier-filed complaint contains
enough material facts to alert the government to potential fraud,
a later-filed complaint, like Heineman-Guta's, containing the same
essential facts but incorporating additional or "somewhat different
details," is nonetheless barred. Duxbury, 579 F.3d at 32 (internal
quotation mark and citation omitted). The fact that the Bennett
complaint does not allege, for example, where lavish dinner
11
Although the Bennett Complaint, unlike Heineman-Guta's
amended complaint, does not explicitly mention the placement of
residents in practices in exchange for a commitment to use BSC
devices, this is an additional detail about the alleged fraudulent
scheme in inducing physicians and hospitals to implant BSC devices.
Because the Bennett Complaint's allegations provided the government
with notice sufficient to initiate its investigation, this
additional detail is one the government would have been able to
uncover in its investigation.
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programs were held does not change the essential fact that BSC used
gifts such as expensive meals as kickbacks to induce physicians to
use its devices. And, the Bennett Complaint alleges the essential
facts of BSC's fraudulent scheme: that it used various forms of
kickbacks including lavish dinner programs, honoraria and grants,
to induce physicians and hospitals to use its products and, in
doing so, caused false claims to be submitted to obtain
reimbursement from the government under Medicare.12 Because
Heineman-Guta's amended complaint alleges the same essential facts,
it merely echos the alarm sounded by Bennett's complaint and is
barred under § 3730(b)(5).
We further reject Heineman-Guta's argument, pulled from
the Sixth's Circuit's reasoning in Walburn, that failing to impose
Rule 9(b)'s particularity requirements on earlier-filed complaints
under § 3730(b)(5) would encourage would-be qui tam relators to
file overly broad, vague and speculative complaints simply to
prevent other potential relators from filing more-detailed
complaints. We do not see how an overly broad and speculative
12
Heineman-Guta claims that the Bennett Complaint fails the
essential facts test because it lacks allegations that the scheme
actually caused physicians to implant BSC devices or that those
devices were covered by Medicare. As explained above, the Bennett
Complaint need not contain a detailed play-by-play narration of how
the scheme led to the submission of false claims under Medicare.
The Bennett Complaint alleges inter alia that through multiple
forms of kickbacks designed to induce physicians and hospitals to
use BSC devices, BSC caused false statements and claims to be made
to the government for reimbursement under Medicare. We find those
allegations sufficient.
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complaint lacking essential facts would be sufficient in the first
instance to notify the government of a fraudulent scheme under the
FCA. A first-filed complaint that failed to do so would not
preclude a later-filed complaint that does allege the essential
facts of the alleged fraud. The purpose of the first-filed
complaint under § 3730(b)(5) is to provide notice of potential
fraud to the government so it may initiate its investigation into
the alleged fraudulent scheme, nothing more. So "[o]nce the
government is put on notice of its potential fraud claim, the
purpose behind allowing qui tam litigation is satisfied." Grynberg
v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1279 (10th Cir.
2004).13
CONCLUSION
For the aforementioned reasons, the district court's
dismissal of Heineman-Guta's amended complaint due to the first-to-
file rule under § 3730(b)(5) is affirmed. The parties shall bear
their own costs.
13
Heineman-Guta's reliance on Campbell v. Redding Med. Ctr.,
421 F.3d 817 (9th Cir. 2005), is misplaced. Campbell's holding was
limited to situations where a complaint fails to satisfy the public
disclosure rule under § 3730(e)(4)(A). Id. at 825. Since
Heineman-Guta does not contend on appeal that the Bennett Complaint
would be barred by the public disclosure rule, Campbell does not
support her contention that construing § 3730(b)(5) to bar later-
filed complaints would permit opportunistic plaintiffs with no
inside information to displace actual insiders with knowledge of
fraud.
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