Schnupp v. Blair Pharmacy, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

UNITED STATES ex rel. TIMOTHY

SCHNUPP,

Relator,

v. Civil No. ELH-17-2335

BLAIR PHARMACY, et al.,

Defendants.

MEMORANDUM OPINION

In this qui tam1 action, filed on August 15, 2017, the Relator, Timothy Schnupp, has sued

his former employer, Blair Pharmacy, Inc. (“BPI,” “Blair Pharmacy,” or “Pharmacy”), and its

owner, Matthew Blair (“Mr. Blair”) (collectively, “Blair”), pursuant to the False Claims Act

(“FCA” or the “Act”), 31 U.S.C. §§ 3728 et seq. See ECF 1 (“Complaint”). BPI was, at the

relevant time, a compounding pharmacy.2 Schnupp, who previously worked as “Pharmacist in

Charge” for BPI, alleged that defendants knowingly submitted false claims to the Medicare

Program, 42 U.S.C. § 1395 et seq. (“Medicare”), a federally funded health insurance program for

people ages 65 and older and for certain people with disabilities, and to the Department of Defense

TRICARE health insurance program (“TRICARE”).3

1 “Qui tam is short for ‘qui tam pro domino rege quam pro se ipso in hac parte sequitur,’

which means ‘who pursues this action on our Lord the King’s behalf as well as his own.’”

Rockwell Int’l Corp. v. United States, 549 U.S. 457, 463 n.2 (2007).

2 As explained, infra, “compounding” involves alteration or mixing of ingredients to create

a customized medication.

3 TRICARE was formerly known as the Civilian Health and Medical Program of the

Uniformed Services or “CHAMPUS.” See 32 C.F.R. § 199.17.

In the Complaint, the Relator alleged that, pursuant to 31 U.S.C. § 3730(b)(2) and Fed. R.

Civ. P. 4(d)(4), he served a copy of the Complaint on the United States on August 15, 2017,

“together with written disclosure of substantially all material evidence and information in his

possession . . . .” ECF 1, ¶ 57; see ECF 47-1 (the “Disclosure Memorandum”). The Disclosure

Memorandum is dated August 14, 2017. ECF 47-1. It states that the “document and its

attachments [were] voluntarily provided to the United States in connection with the filing of an

action under the Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. for false claims submitted to

the Medicare and TRICARE Programs.” Id. at 1–2.4 The Disclosure Memorandum also states:

“Relator did not come forward sooner because he feared retaliation and loss of his job.” Id. at 7.

In May 2022, following a lengthy investigation, the United States declined to intervene in

the case. ECF 28. Nevertheless, the Relator opted to pursue the case, see 31 U.S.C.

§ 3730(b)(4)(B), and on May 11, 2022, he filed his “First Amended False Claims Act Complaint.”

ECF 30 (the “Amended Complaint”).5 The Amended Complaint contains two counts: Count I

asserts false claims under 31 U.S.C. § 3729(a)(1)(A) and Count II asserts false claims under 31

U.S.C. § 3729(a)(1)(B).

In the Amended Complaint, Schnupp again alleges, inter alia, that defendants knowingly

submitted false prescription claims to Medicare and TRICARE. In particular, the Relator claims

4 Throughout the Memorandum Opinion, the Court cites to the electronic pagination.

However, the electronic pagination does not always correspond to the page number imprinted on

a particular submission.

5 Schnupp included four exhibits with the Complaint, see ECF 1-1 through ECF 1-4, and

one exhibit with the Amended Complaint. See ECF 30-1. In the Amended Complaint, Schnupp

refers to Exhibit 1, Exhibit 2, Exhibit 3, Exhibit 4, and Exhibit 5. See, e.g., ECF 30, ¶¶ 28, 29,

30, 45. But, as noted, he only appended one exhibit to the Amended Complaint. See ECF 30-1.

Exhibits 1 through 4 do not have titles. Although Schnupp makes reference to them, he

does not explain the exhibits, nor is it entirely clear what they are intended to establish.

that Blair knowingly submitted false claims for certain compound drugs by substituting a less

expensive drug for a more expensive drug; by billing for medication that was not provided; by

overcharging for certain medications; and by committing violations of the Anti-Kickback Statute

(“AKS”), 42 U.S.C. § 1320a-7b(b). See ECF 30, ¶¶ 28–43.

Of import, some of the claims lodged by the Relator were the subject of a federal criminal

prosecution of Mr. Blair. See United States v. Matthew Blair, ELH-19-410 (D. Md.) (“Criminal

Case”). Pursuant to a Plea Agreement in the Criminal Case (id., ECF 181; ECF 181-1), Mr. Blair

entered a plea of guilty on December 3, 2021, to one count charging payment of illegal

remunerations, in violation of the AKS, 42 U.S.C. § 1320a-7b(b)(2)(A). As discussed, infra, the

charge is predicated on Mr. Blair’s payment of kickbacks to Atlas Group, LLC (“Atlas”), owned

by Bahram Alavi,6 in connection with prescription claims paid by TRICARE.7

On February 10, 2022 (id., ECF 188), pursuant to Fed. R. Crim. P. 11(c)(1)(C), the Court

sentenced Mr. Blair to a term of imprisonment of twelve months and one day. See id., ECF 189

(Judgment). Mr. Blair was also ordered to pay restitution to the government in the sum of

$3,176,470.83. Id. That sum has since been paid. Id., ECF 194.

Several motions are now pending. The Relator has filed a post-discovery motion for

summary judgment. ECF 149 (the “Motion”).8 It pertains only to “the defendants’ violations of

6 In some submissions, Bahram Alavi is identified as “B.A.” See, e.g., ECF 181-1.

7 Blair has filed a Third-Party Complaint against Alavi and Atlas Medical Solutions, LLC,

f/k/a Atlas Group, LLC, seeking contribution and indemnification. ECF 76. Blair subsequently

filed an Amended Third-Party Complaint. ECF 127. By Memorandum (ECF 161) and Order

(ECF 162) of September 5, 2024, I stayed the proceedings as to the Third-Party Complaint,

pending resolution of Schnupp’s FCA claims.

8 Schnupp previously filed a pre-discovery motion for partial summary judgment. ECF 57.

I denied that motion by Memorandum Opinion (ECF 100) and Order (ECF 101) of May 23, 2023.

the Anti-Kickback statute which have been conclusively established in this action by Matthew

Blair’s criminal conviction.” Id. at 9. This corresponds to what the parties refer to as the Fifth

Scheme or Scheme 5.9 Schnupp states: “‘Scheme 5’ for which the pending motion seeks summary

judgment in favor of the United States involves the same transactions at issue in Blair’s criminal

proceedings.” ECF 165 at 15 (emphasis in ECF 165).

Schnupp also contends that, as a result of Mr. Blair’s criminal conviction under the AKS,

he is “estopped” from disputing a violation of the FCA. ECF 149 at 13. The Relator argues:

“Nothing revealed in discovery may change the facts established by Mr. Blair’s criminal

conviction and . . . overwhelming evidence indicates that Mr. Schnupp is an original source and

summary judgment in favor of the United States is now appropriate.” Id. at 11. Schnupp has

submitted as exhibits the deposition transcripts of Mr. Blair (ECF 149-1) and Mr. Schnupp (ECF

149-2).10

Defendants filed a combined opposition to the Motion as well as a cross-motion for

summary judgment. ECF 156 (the “Cross Motion”). The Cross Motion is aimed at all of the

schemes alleged in the Amended Complaint. Id. It is supported by thirty-three exhibits. ECF 156-

1 to ECF 156-33.

In the Cross Motion, Blair contends that the Relator helped to recruit “a network of

independent sales representatives to generate business for BPI.” ECF 156 at 17. For example,

9 The Amended Complaint does not identify the different schemes by number, as the parties

do in their submissions concerning the motions. I shall refer to the alleged conduct consistent with

the parties’ identification in their briefing of the motions. I note, however, that the facts identified

in the submissions as Scheme 1 corresponds to Scheme 2 in the Amended Complaint.

10 The deposition transcript of Mr. Schnupp appears at ECF 149-2. But, it does not contain

an ECF imprint or electronic page numbers. Accordingly, when citing to this transcript, I will use

the page number that appears at the top of the page to which I am referring.

Blair asserts that Schnupp recruited Derek Quinn, owner of Stratified Solutions, LLC, “to drive

sales to BPI.” Id.; see ECF 156-2 at 19. Moreover, defendants maintain that Schnupp “used his

leverage” as Pharmacist in Charge to manipulate Mr. Blair so as to increase his own compensation.

ECF 156 at 17. Defendants note that, at Schnupp’s deposition, he acknowledged that his

compensation was tied to BPI’s revenue. Id. at 20.

The Relator submitted a combined reply in support of his Motion and in opposition to the

Cross Motion. ECF 165 (“Reply”). It is supported by his Declaration. ECF 165-1. Defendants

filed a reply as to their Cross Motion (ECF 170, “Cross Reply”), along with several additional

exhibits. ECF 170-1 to ECF 170-3.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that

follow, I shall deny the Motion and I shall grant the Cross Motion, in part, and deny it, in part. In

particular, I shall grant the Cross Motion as to Scheme 4 and Scheme 5, but deny the Cross Motion

as to Schemes 1, 2, and 3.

I. Factual and Procedural Background11

Mr. Blair was the founder of Blair Pharmacy as well as a director and a principal of BPI.

ECF 30, ¶ 3. The Pharmacy operated as an independent compounding pharmacy. Id. ¶ 2.

“Compounding” is a practice by which pharmacists combine, mix, or alter ingredients to create a

customized medication for an individual patient in response to a licensed practitioner’s

prescription. Id. ¶ 24.

11 I attempt to recount the pertinent events chronologically. But, this is not always feasible,

because many events overlap in time.

The Court has issued several written opinions in this case. See ECF 55; ECF 80; ECF 100;

ECF 125; ECF 147; ECF 161. To the extent relevant, I incorporate here the factual summaries set

forth in the earlier opinions.

Mr. Blair is not a licensed pharmacist. Under Maryland law, a licensed pharmacist must

be on the premises to provide services when a pharmacy is in operation. See Md. Code (2021

Repl. Vol.), § 12-403(c)(3) of the Health Occupations Article. In August 2014, BPI hired Schnupp

as its Pharmacist in Charge, pursuant to an Employment Agreement. See ECF 30, ¶ 1; ECF 156-

1; ECF 156-2 at 4. Mr. Blair signed the Employment Agreement on behalf of BPI. ECF 156-1 at

7. Schnupp and BPI executed an Addendum to the Employment Agreement on February 25, 2015,

concerning Schnupp’s compensation. ECF 156-5.

Schnupp holds a Doctor of Pharmacy and is a Maryland licensed pharmacist. ECF 156-1.

He was employed by the Pharmacy from August 2014 until January 2017. ECF 156-19. Among

Schnupp’s duties, he was to advise the Pharmacy “with regard to maintaining pharmacy standards

that meet . . . regulatory agency requirements for the operation of [BPI].” ECF 156-1 at 1. He was

also to assist in communications with health care providers and customers. Id. at 2. Given

Schnupp’s employment with BPI, he asserts that the allegations in the Amended Complaint are

based “upon his own direct and independent knowledge, and he is the original source of the

information in this Complaint.” ECF 30, ¶ 1.

The Complaint, filed in August 2017, alleges that Blair perpetrated four fraud schemes

involving Medicare and TRICARE. See ECF 1, ¶¶ 27–34. The Amended Complaint (ECF 30),

filed in May 2022, alleges that Blair engaged in five fraud schemes. Id. ¶¶ 36–43. They are as

follows: (1) substitution of less expensive Lipoderm cream for more expensive SteraBase cream,

while billing for compound drugs that supposedly contained SteraBase cream (id. ¶ 28); (2) billing

for medication that BPI did not provide, i.e., billing for compound drugs that supposedly contained

360 grams of product when only 300 grams were dispensed (id. ¶ 29); (3) overcharging for

Gabapentin by billing for compound drugs containing 10% Gabapentin when only 6% was

provided (id. ¶ 30); (4) using pre-paid gift cards or “burner cards” to pay coinsurance and/or

deductible amounts for beneficiaries to induce them to use the Pharmacy “to fill lucrative

compound medication prescriptions” (id. ¶ 34), in violation of the AKS, 42 U.S.C. § 1320a-7b(b)

(id. ¶¶ 34, 35); and (5) payment of commissions to independent contractors, equal to 50 percent of

reimbursements paid to the Pharmacy by Medicare and TRICARE for compounded prescriptions

that were marketed by the independent contractors to physicians, in violation of the AKS. Id.

¶¶ 36–43.

As to Scheme 5, Schnupp alleges that Blair “recruited” Bahram Alavi, the owner of Atlas,

“to market” BPI’s “compounded drug prescriptions to physicians treating Medicare and TRICARE

beneficiaries.” Id. ¶ 36. Further, the Relator alleges that BPI and Atlas entered into a “Distributor

Agreement” on November 24, 2014. Id. ¶ 37; ECF 156-7. It provided that Atlas would market

the Pharmacy’s scar and pain medications to physicians treating patients who had Medicare or

TRICARE benefits, and then use the Pharmacy to fill the prescriptions. ECF 30, ¶¶ 36, 38; see

ECF 156-7. Moreover, the Amended Complaint asserts that Blair agreed to pay Alavi12 a

commission equal to 50 percent of the gross reimbursement paid to BPI as a result of Atlas’s

marketing efforts. Id. ¶ 37; see also id. ¶¶ 38–41.13 And, the Relator claims that Blair entered into

similar agreements with other marketers. Id. ¶¶ 42, 43.14

12 The Distributor Agreement provides that Blair was to pay Atlas the commission, rather

than Alavi. ECF 156-7, Section VI.

13 Attachment 3 to the Distributor Agreement (ECF 156-7) supposedly specifies the

commission. But, it was not submitted with ECF 156-7.

14 The other independent contractors included Paladin Enterprises, Brevor Medical,

Stratified Solutions, and Absolute Ortho. ECF 30, ¶ 42. Blair allegedly arranged to pay these

independent marketers a percentage of any reimbursement monies received by the Pharmacy from

the TRICARE and Medicare programs. Id.

According to the Relator, from November 2014 until May 2015, TRICARE paid Blair

Pharmacy $6,352,941.66 based upon claims that defendants submitted to TRICARE that “were

tainted by the remuneration payments Defendants paid to [all] their independent sales

contractors. . . .” Id. ¶ 43; see id., ¶ 45; see also ECF 30-1 (“subset of the larger spreadsheet

provided to the government” with the Disclosure Memorandum).

In August 2015, Atlas filed suit in federal court in Maryland against the Pharmacy and Mr.

Blair. See JKB-15-2491 (“Atlas Suit”), ECF 1 (“Atlas Complaint”). Atlas alleged that defendants

wrongfully refused to pay Atlas commissions of 50 percent of gross sales, as provided in the

Distributor Agreement, allegedly in retaliation for issues raised by Atlas concerning health care

fraud laws. Atlas voluntarily dismissed the Atlas Suit in October 2015. Id., ECF 4.

Blair maintains that after the Atlas Suit was filed, “the Government began investigating

BPI and Mr. Blair based on allegations in the Atlas Lawsuit that BPI paid Alavi/Atlas commissions

for referrals of TRICARE business.” ECF 156 at 20–21. Indeed, Blair contends: “By at least July

12, 2017 (i.e., one month before Schnupp filed his Complaint), the FBI had already assembled all

of the facts supporting its allegations that Defendants had purportedly violated the AKS by paying

commissions to 1099 sales representatives.” Id. at 21 (emphasis in original). Defendants add, id.:

“[B]efore Schnupp filed this qui tam action, the Government already knew of and about the

relationship between Schnupp and Alavi, the number of TRICARE prescriptions being referred to

BPI by outside sales representatives, and the details of the 2015 Atlas Lawsuit against

Defendants.” (Emphasis in ECF 156).15

15 Indeed, the United States sought to delay its decision whether to intervene in the FCA

case because the matter was “actively being pursued on a parallel criminal and civil track.” ECF

10-1 at 3.

In January 2017, in connection with the investigation of Mr. Blair, U.S. Magistrate Judge

A. David Copperthite signed a search warrant for a Google email account. ECF 46-1 (search

warrant); see also ECF 156-20, ¶ 28. Then, in July 2017, U.S. Magistrate Judge Beth Gesner

approved a search warrant application for J2 Cloud Services, LLC (“J2”). See ECF 156-20. The

Affidavit in support of the J2 search warrant application, dated July 12, 2017, was submitted by

Special Agent Eugene Choi of the Office of Inspector General, Department of Defense, Defense

Criminal Investigative Services. Id. ¶ 3. He averred, inter alia, that the government learned of

Mr. Blair’s “possible malfeasance” in August 2015, when the Defense Health Agency (“DHA”),

which manages the TRICARE program, provided a report detailing allegations of “fraudulent

billings of compound prescriptions by [Mr.] Blair.” Id. ¶ 10; see also id. ¶¶ 12–14. Of relevance,

Choi also discussed the Atlas Complaint. Id. ¶¶ 19–21.

As indicated, on August 15, 2017, about one month after the search warrant was issued for

J2, the Relator filed his qui tam suit. ECF 1. And, as noted, the Complaint only referenced conduct

consistent with Schemes 1 through 4; it did not reference conduct pertaining to Scheme 5. See

ECF 1, ¶¶ 27–34. However, the Relator also provided the government with the Disclosure

Memorandum, as required by 31 U.S.C. § 3730(b)(2). ECF 1, ¶ 57; ECF 156-21.

Among other things, the Disclosure Memorandum referenced a “dispute” between Mr.

Blair and Atlas, “in which [Mr.] Blair refused to pay Atlas sales commissions under a ‘distributor

agreement’ with Atlas.” ECF 156-21 at 5. Schnupp indicated that Mr. Blair agreed to settle the

case because “Atlas threatened in its lawsuit to reveal [Mr.] Blair’s use of ‘burner cards’ to

unlawfully pay for patients’ co-payments.” Id. The text of the Disclosure Memorandum, which

was prepared by counsel, made no reference to a scheme by which Blair paid commissions to Atlas

equal to 50 percent of monies paid to BPI by Medicare or TRICARE for certain compounded

prescriptions marketed by Atlas to physicians.

Schnupp included thirteen exhibits with the Disclosure Memorandum, as follows: (1) the

Atlas Complaint; (2) BPI purchase orders for Lipoderm Base cream; (3) the BPI Dispense Report

in Excel spreadsheet format; (4), (5) two articles published by the United States Government

Accountability Office on compound pharmaceuticals; (6), (7), (10) three articles published by the

United States Department of Health and Human Services, Office of the Inspector General,

concerning Medicare coverage of prescriptions; (8) a Department of Justice Press Release; (9) a

Kaiser Health News article; (11) an unverified PowerPoint slide deck referred to as a “Drug Pricing

Overview”; (12) publicly available business documents related to the formation of BPI; and (13)

a December 2015 invoice from Medisca, Inc. to BPI for a 150 milliliter pump dispenser. See ECF

156-21.

According to the Relator, after he filed suit, his “first contact with anyone associated with

the government’s criminal investigation of Matthew Blair or Blair Pharmacy came on October 2,

2017, when [he] was interviewed at the U.S. Attorney’s Office by government attorneys and

investigators.” ECF 165-1 at 2. The Relator claims that he provided “truthful information about

the fraudulent activities” of Mr. Blair and the Pharmacy and that he “continued to do so in a series

of interviews with government investigators and/or government attorneys on seventeen (17)

separate occasions between October 2, 2017 and October 8, 2021.” Id. He also maintains that at

no time was he offered, nor did he ever receive, “immunity from prosecution or any other type of

consideration in exchange for [his] cooperation during the criminal investigation of Matthew Blair

and Blair Pharmacy.” Id. at 3.

Daniel Parker, a Special Agent with the FBI, confirmed that Schnupp’s first contact with

FBI investigators involved in the criminal investigation of Mr. Blair occurred on October 2, 2017,

when Mr. Schnupp was interviewed. ECF 75-1 (Parker Declaration). The FBI Interview Report

for Schnupp is docketed at ECF 86-8. It states that in April 2017, Schnupp’s attorney, Ray

Shepard, advised Schnupp to “file a qui tam against Blair and Blair Pharmacy which Schnupp did

in August 2017.” Id. at 26. The Report continues, id.:

[Schnupp] filed the qui tam to “cover his ass.” Based on the way Blair was acting

over the vacation time payment dispute (particularly that he was lying and

fabricating information), Schnupp was worried that if Blair Pharmacy was ever

audited or investigated, Blair would lie and throw Schnupp under the bus by trying

to blame everything on him. Schnupp was further worried because he knew how it

would look since he was the pharmacist in charge at the pharmacy and the one who

submitted the claims for reimbursement. Schnupp did not want to go to jail.

Mr. Blair was indicted on August 27, 2019. See Criminal Case, ELH-19-410. ECF 1.16

The Indictment contains ten counts. Id. In particular, Counts One through Five charge wire fraud,

under 18 U.S.C. § 1343, and Counts Six through Ten charge aggravated identity theft, in violation

of 18 U.S.C. § 1028A(a)(1), (b). Notably, the Indictment does not reference facts that correspond

to Scheme 5.

A Superseding Indictment was filed on March 3, 2020, containing thirty-six counts. Id.,

ECF 20. It added, inter alia, allegations as to Scheme 5. See, e.g., ECF 20, ¶ 21. Specifically, it

alleges, among other things, that Mr. Blair violated the AKS based on BPI’s payments to Atlas in

exchange for Atlas’s referrals of compounded prescriptions to BPI that were paid by TRICARE.

Id., Counts Twenty-Nine to Thirty-Three. Mr. Blair was also charged with money laundering,

under 18 U.S.C. § 1957, as well as additional counts of wire fraud and identity theft.

16 This Court previously took judicial notice of certain pleadings from Mr. Blair’s criminal

case. See ECF 55.

Pursuant to a Plea Agreement (Criminal Case, ECF 181, ECF 181-1), Mr. Blair entered a

plea of guilty on December 3, 2021 (id., ECF 178), to Count Thirty-One of the Superseding

Indictment. That count (id., ECF 20 at 17) charged Mr. Blair with payment of illegal

remunerations to Atlas in April 2015, in violation of the AKS, 42 U.S.C. § 1320a-7b(b)(2)(A), i.e.,

two payments of $500,000 each, in the total sum of $1,000,000. See id., ECF 178.

In support of the guilty plea, the Plea Agreement included a detailed “Stipulation of Facts”

(“Stipulation”). See id., ECF 181-1.17 Under oath at his guilty plea proceeding, Mr. Blair agreed

to the content of the Stipulation. Id., ECF 197 (Transcript of Arraignment Proceedings) at 8–9.

The Stipulation (id., ECF 181-1) provides in part: “Blair entered into 1099 independent

contractor arrangements with several sales marketers . . . and Blair arranged to pay the independent

marketers a percentage of any reimbursement money he received from health care benefit

programs, including TRICARE.” Id. at 2.18 Further, the Stipulation provides that Mr. Blair

recruited “B.A., the owner of Atlas Group, LLC,” i.e., Bahram Alavi, to engage in violations of

the AKS. Id. And, it states that on November 24, 2014, Blair and Atlas entered into a “Distributor

Agreement,” which “Blair entered into . . . with the knowledge that such an arrangement violated

federal law.” Id. at 3. The Stipulation also posits, id.: “With this knowledge of the wrongfulness

of his conduct, Blair intentionally entered into an agreement with B.A. to pay him a value based

50% commission on any successfully reimbursed TRICARE pharmacy benefit claim.”

Moreover, the Stipulation asserts, id.:

The Distributor Agreement required Atlas to use Blair Pharmacy exclusively, and

to refer all business within his established territory to Blair Pharmacy, and Blair

17 With exhibits, the Stipulation exceeds twenty pages. The factual summary consists of

five pages that are typed and single-spaced.

18 In the Stipulation, “Blair” was a reference only to Mr. Blair; BPI was not named as a

defendant.

induced and encouraged these referrals to his pharmacy by offering B.A. a 50%

percentage payment of any money that Blair received from health care benefit

programs. The payment of 50% of the health care benefit program reimbursement

monies was the “sole compensation” under the November 24, 2014 financial

agreement between Blair and B.A. B.A. was not paid any money or compensation,

unless Blair was successful in obtaining reimbursement from a health care benefit

program for a prescription that B.A. referred to Blair, and then, and only then was

B.A. paid a percentage of the successful reimbursement.

This “Distributor Agreement” was thus a financial arrangement based on

the value and volume of prescription referrals that B.A. caused to be directed to

Blair’s pharmacy, including referrals of federal health care program business, such

as TRICARE.

Relevant here, the Stipulation also states: “The amount of $6,352,941.66 (as described in

detail in Attachment B, incorporated herein) was the total reimbursement amount TRICARE paid

to Blair Pharmacy from November 2014 – May 2015, based upon the claims Blair submitted to

TRICARE tainted by remuneration payments Blair Pharmacy paid to independent 1099 sales

contractors.” Id. at 5. Attachment B to the Plea Agreement specifically identified 582 false claims

submitted by Blair to TRICARE, in violation of the AKS, and the amount TRICARE paid for each

tainted claim, the total of which was $6,352,941.66. Id. at 7–21.

In the Plea Agreement, entered pursuant to Fed. R. Crim. P. 11(c)(1)(C), the parties agreed

to recommend to the Court a sentence of twelve months and one day of incarceration for Mr. Blair.

Id., ECF 181, ¶ 9.19 Mr. Blair also agreed to pay restitution to the government in the amount of

$3,176,470.83. Id. On February 10, 2022, the Court sentenced Mr. Blair to the agreed upon term

of imprisonment. Criminal Case, ECF 188, ECF 189, ECF 190. The Court also ordered defendant

to pay restitution to the government in the amount of $3,176,470.83. Id., ECF 189 at 5. As noted,

that sum has been paid. Id., ECF 194.

19 The offense carries a maximum term of imprisonment of five years. Id., ECF 181, ¶ 3.

With respect to the qui tam case, the government apparently conducted a lengthy

investigation to determine whether to intervene. See ELH-17-2335, ECF 4; ECF 6; ECF 8; ECF

10; ECF 13; ECF 16; ECF 18; ECF 20; ECF 22; ECF 24; ECF 26. Ultimately, on or about May

2, 2022, the United States declined to intervene. ECF 28. In the interim, by Order of October 15,

2019, the Court partially lifted the seal to permit the government to disclose the qui tam suit to

defendants. ECF 15.

Mr. Blair and BPI were served with the qui tam suit on June 6, 2022. ECF 32; ECF 33.

Thereafter, they moved to dismiss the case. ECF 38. The Court denied the motion by

Memorandum Opinion and Order of December 9, 2022. ECF 55, ECF 56. Soon after, plaintiff

moved for partial summary judgment (ECF 57), “based upon the defendants’ violations of the

Anti-Kickback statute which have been conclusively established in this action by Matthew Blair’s

criminal conviction.” Id. at 1. The Relator argued that, as a result of Mr. Blair’s criminal

conviction, Blair is “estopped” from disputing a violation of the FCA. Id. at 4. Further, the Relator

asserted: “The United States is entitled to partial summary judgment in the total amount of

$22,259,824.98, minus an offset under 18 U.S.C. § 3664(j)(2)(A) for restitution previously

collected by the United States during Matthew Blair’s criminal case.” Id. at 11. By Memorandum

Opinion and Order docketed on May 24, 2023 (ECF 100, ECF 101), I denied plaintiff’s pre-

discovery summary judgment motion.

Additional facts are included in the Discussion.

II. The False Claims Act and the Anti-Kickback Statute

As noted, the suit is premised on the False Claims Act, 31 U.S.C. §§ 3729(a)(1)(A) and

(a)(1)(B), as well as the Anti-Kickback Statute, 42 U.S.C. § 1320a7b(b).

The FCA “imposes civil liability for presenting false or fraudulent claims for payment to

the federal government. 31 U.S.C. §§ 3729-3733.” United States ex rel. John Doe v. Credit Suisse

AG, 117 F.4th 155, 158 (4th Cir. 2024); see also United States ex rel. Polansky v. Exec. Health

Res., Inc., 599 U.S. 419, 423 (2023). It provides, in part, that “any person who—(A) knowingly

presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] (B)

knowingly makes, uses, or causes to be made or used, a false record or statement material to a false

or fraudulent claim . . . 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 by the Federal Civil Penalties Inflation Adjustment

Act of 1990 . . . plus 3 times the amount of damages which the Government sustains because of

that person.” 31 U.S.C. §§ 3729(a)(1)(A), (a)(1)(B).

By “impos[ing] civil liability on persons who knowingly submit false claims for goods and

services to the United States,” the Act protects the public fisc. United States ex rel. Beauchamp v.

Academi Training Center, 816 F.3d 37, 39 (4th Cir. 2016). And, to prevent fraud that might

otherwise evade detection and to supplement government enforcement, the FCA permits a private

individual, known as a relator, to file a civil lawsuit on behalf of the government against those who

defraud the federal government. United States ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694,

700 (4th Cir. 2014), cert. denied, 574 U.S. 819 (2014); see also 31 U.S.C. § 3730(b)(1); see, e.g.,

United States ex rel. Citynet, LLC v. Gianato, 962 F.3d 154, 157 (4th Cir. 2020) (complaint alleged

that defendant billed the federal government for “material and labor it did not provide, and for

[projects] that were not constructed”); Affinity Living Grp., LLC v. StarStone Specialty Ins. Co.,

959 F.3d 634, 636 (4th Cir. 2020) (complaint alleged that defendant “submitted reimbursement

claims for resident services that were never provided”).

The government, as the “real party in interest,” may elect to intervene in the qui tam suit.

United States ex rel. Eisenstein v. City of New York, 556 U.S. 928, 930 (2009). Even if the

government declines to intervene, however, the relator may opt to pursue the case. See 31 U.S.C.

§ 3730(b)(4), (c)(3). As an incentive to bring such suits, a successful relator is entitled to share in

the government’s recovery from the defendant. See 31 U.S.C. § 3730(b); United States ex rel.

Bunk & Ammons v. Gov’t Logistics N.V., 842 F.3d 261, 265 n.3 (4th Cir. 2016); see also Schindler

Elevator Corp. v. United States ex rel. Kirk, 563 U.S. 401, 404 (2011); ACLU v. Holder, 673 F.3d

245, 246–51 (4th Cir. 2011).

The AKS, 42 U.S.C. § 1320a-7b(b), is “designed to prevent” fraud and abuse in connection

with federal health care programs, including Medicare and Medicaid. United States v. Patel, 778

F.3d 607, 612 (7th Cir. 2015). In particular, it “was enacted to ‘protect the Medicare and Medicaid

programs from increased costs and abusive practices resulting from provider decisions that are

based on self-interest rather than cost, quality of care or necessity of services.’” Id. (citation

omitted). In addition, the AKS seeks “‘to protect patients from doctors whose medical judgments

might be clouded by improper financial considerations.’” Id. (citation omitted).

Section 1320a-7b(b) of 42 U.S.C. was enacted in 1977, when Congress amended the Social

Security Act by adding the Medicare-Medicaid Anti-Fraud and Abuse Amendments. See United

States v. Shoemaker, 746 F.3d 614, 626 (5th Cir. 2014) (citing H.R. Rep. No. 95-393, pt. 2, at 44

(1977)); United States v. Shaw, 106 F. Supp. 2d 103, 110 (D. Mass. 2000). The amendments

sought to address the “disturbing degree [of] fraudulent and abusive practices associated with the

provision of health services financed by the Medicare and Medicaid programs.” Shaw, 106 F.

Supp. 2d at 110 (citing H.R. Rep. No. 95-393, pt. 2, at 44 (1977), reprinted in 1977 U.S.C.C.A.N.

3039, 3047).

Under the AKS, it is illegal for any person to knowingly solicit or receive “remuneration”

in return for referring any “good, facility, service, or item” to someone who will be paid, at least

in part, by a Federal health care program. 42 U.S.C. § 1320a-7b(b)(1)(B). For example, if “a party

offered remuneration to a physician to furnish a federally reimbursable healthcare service with the

requisite mens rea, and the physician refused the remuneration but furnished the service anyway

under her independent professional judgment, the offering party, but not the physician, would have

violated the [AKS].” Pharmaceutical Coalition for Patient Access v. United States, ___ F. 4th

___, 2025 WL 271562, at *4 (4th Cir. Jan. 23, 2025). The AKS also prohibits the knowing and

willful offer or payment of remuneration to “‘induce’ an individual to purchase a federally

reimbursable healthcare product.” Id. (citing 42 U.S.C. § 1320a-7b(b)(2)).

In March 2010, as part of the Patient Protection and Affordable Care Act of 2010, Pub. L.

No. 111–148, 124 Stat. 119 (Mar. 23, 2010) (“Affordable Care Act”), the AKS was amended to

provide expressly that “a claim that includes items or services resulting from a violation of [the

Anti-Kickback Statute] constitutes a false or fraudulent claim for purposes of [the FCA].” 42

U.S.C. § 1320a-7b(g) (as amended by § 6402 of the Affordable Care Act). Therefore, “[a]

violation of the Anti-Kickback Statute . . . automatically constitutes a false claim under the False

Claims Act.” United States ex rel. Lutz v. Mallory, 988 F.3d 730, 741 (4th Cir. 2021) (citing

United States ex rel. Lutz v. United States, 853 F.3d 131, 135 (4th Cir. 2017)) (“An [AKS] violation

that results in a federal health care payment is a per se false claim under the [FCA].”); see United

States ex rel. Nicholson v. MedCom Carolinas, Inc., 42 F.4th 185, 193–94 (4th Cir. 2022).

III. Standard of Review

Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is

appropriate only “if the movant shows that there is no genuine dispute as to any material fact and

the movant is entitled to judgment as a matter of law.” See Celotex Corp. v. Catrett, 477 U.S. 317,

322-24 (1986); see also Cybernet, LLC v. David, 954 F.3d 162, 168 (4th Cir. 2020); Variety Stores,

Inc. v. Wal-Mart Stores, Inc., 888 F.3d 651, 659 (4th Cir. 2018); Iraq Middle Mkt. Dev. Found v.

Harmoosh, 848 F.3d 235, 238 (4th Cir. 2017). To avoid summary judgment, the nonmoving party

must demonstrate that there is a genuine dispute of material fact so as to preclude the award of

summary judgment as a matter of law. Ricci v. DeStefano, 557 U.S. 557, 585–86 (2009);

Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585–86 (1986); Gordon v.

CIGNA Corp., 890 F.3d 463, 470 (4th Cir. 2018).

The Supreme Court has clarified that not every factual dispute will defeat a summary

judgment motion. “By its very terms, this standard provides that the mere existence of some

alleged factual dispute between the parties will not defeat an otherwise properly supported motion

for summary judgment; the requirement is that there be no genuine issue of material fact.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986) (emphasis in original). A fact is

“material” if it “might affect the outcome of the suit under the governing law.” Id. at 248.

There is a genuine dispute as to material fact “if the evidence is such that a reasonable jury

could return a verdict for the nonmoving party.” Id.; see CTB, Inc. v. Hog Slat, Inc., 954 F.3d 647,

658 (4th Cir. 2020); Variety Stores, Inc., 888 F.3d at 659; Sharif v. United Airlines, Inc., 841 F.3d

199, 2014 (4th Cir. 2016); Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013). On

the other hand, summary judgment is appropriate if the evidence “is so one-sided that one party

must prevail as a matter of law.” Anderson, 477 U.S. at 252; see McAirlaids, Inc. v. Kimberly-

Clark Corp., 756 F.3d 307, 310 (4th Cir. 2014). But, “the mere existence of a scintilla of evidence

in support of the plaintiff's position will be insufficient; there must be evidence on which the jury

could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. “When opposing parties tell

two different stories, one of which is blatantly contradicted by the record, so that no reasonable

jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a

motion for summary judgment.” Scott v. Harris, 550 U.S. 372, 380 (2007).

Pursuant to Fed. R. Civ. P. 56(c)(1), where the moving party bears the burden of proof on

the issue at trial, he must support his factual assertions by “citing to particular parts of materials in

the record, including depositions, documents, electronically stored information, affidavits or

declarations, stipulations . . ., admissions, interrogatory answers, or other materials . . . .” But,

where the nonmovant bears the burden of proof at trial, the moving party may show that it is

entitled to summary judgment by citing to evidence in the record, or “by ‘showing’—that is,

pointing out to the district court—that there is an absence of evidence to support the nonmoving

party’s case.” Celotex Corp., 477 U.S. at 325; see also Fed. R. Civ. P. 56(c)(1)(B).

“A party opposing a properly supported motion for summary judgment ‘may not rest upon

the mere allegations or denials of [its] pleadings,’ but rather must ‘set forth specific facts showing

that there is a genuine issue for trial.’” Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514,

522 (4th Cir. 2003) (quoting former Fed. R. Civ. P. 56(e)), cert. denied, 541 U.S. 1042 (2004); see

Celotex, 477 U.S. at 322–24. And, the court must view all of the facts, including reasonable

inferences to be drawn from them, in the light most favorable to the nonmoving party. Ricci, 557

U.S. at 585–86; Matsushita Elec. Indus. Co., 475 U.S. at 587; accord Knibbs v. Momphand, 30

F.4th 200, 206 (4th Cir. 2022); Walker v. Donahoe, 3 F.4th 676, 682 (4th Cir. 2021); Hannah P.

v. Coats, 916 F.3d 327, 336 (4th Cir. 2019); Variety Stores, Inc., 888 F.3d at 659; Gordon, 890

F.3d at 470; Lee v. Town of Seaboard, 863 F.3d 323, 327 (4th Cir. 2017).

But, the nonmovant “must rely on more than conclusory allegations, mere speculation, the

building of one inference upon another, or the mere existence of a scintilla of evidence.”

Humphreys & Partners Architects, L.P. v. Lessard Design, Inc., 790 F.3d 532, 540 (4th Cir. 2015)

(internal quotation marks omitted). Rather, “there must be evidence on which the jury could

reasonably find for the nonmovant.” Thompson v. Virginia, 878 F.3d 89, 97 (4th Cir. 2017)

(alteration and internal quotation marks omitted).

The district court's “function” is not “to weigh the evidence and determine the truth of the

matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249;

accord Guessous v. Fairview Prop. Invs., LLC, 828 F.3d 208, 216 (4th Cir. 2016). Thus, in

considering a summary judgment motion, the court may not weigh the evidence or make credibility

determinations. Brown v. Lott, 2022 WL 2093849, at *1 (4th Cir. June 10, 2022) (per curiam);

Knibbs, 30 F.4th at 207, 213; Betton v. Belue, 942 F.3d 184, 190 (4th Cir. 2019); Wilson v. Prince

George's Cty., Md., 893 F.3d 213, 218-19 (4th Cir. 2018); Jacobs v. N.C. Administrative Office of

the Courts, 780 F.3d 562, 569 (4th Cir. 2015); In re French, 499 F.3d 345, 352 (4th Cir. 2007).

Therefore, in the face of conflicting evidence, such as competing affidavits, summary judgment is

not appropriate, because it is the function of the factfinder to resolve factual disputes, including

matters of witness credibility. See Black & Decker Corp. v. United States, 436 F.3d 431, 442 (4th

Cir. 2006); Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002).

Notably, “a party's ‘self-serving opinion . . . cannot, absent objective corroboration, defeat

summary judgment.’” CTB, Inc., 954 F.3d at 658-59 (quoting Williams v. Giant Food Inc., 370

F.3d 423, 433 (4th Cir. 2004)). But, if testimony of a nonmovant is based on personal knowledge

or firsthand experience, it can be evidence of disputed material facts, even if it is uncorroborated

and self-serving. Lovett v. Cracker Barrel Old Country Store, Inc., 700 F. App’x 209, 212 (4th

Cir. 2017). Indeed, “‘a great deal of perfectly admissible testimony fits’” the “‘description’” of

“‘self-serving.’” Cowgill v. First Data Technologies, Inc., 41 F.4th 370, 383 (4th Cir. 2022) (citing

United States v. Skelena, 692 F.3d 725, 733 (7th Cir. 2012)).

On the other hand, “[u]nsupported speculation is not sufficient to defeat a summary

judgment motion.” Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987); see also

Reddy v. Buttar, 38 F.4th 393, 403-04 (4th Cir. 2022); CTB, Inc., 954 F.3d at 659; Harris v. Home

Sales Co., 499 F. App'x 285, 294 (4th Cir. 2012). “[T]o avoid summary judgment, the non-moving

party's evidence must be of sufficient quantity and quality as to establish a genuine issue of

material fact for trial. Fanciful inferences and bald speculations of the sort no rational trier of fact

would draw or engage in at trial need not be drawn or engaged in at summary judgment.” Local

Union 7107 v. Clinchfield Coal Co., 124 F.3d 639, 640 (4th Cir. 1997).

When, as here, the parties have filed cross motions for summary judgment, the court must

“‘consider each motion separately on its own merits to determine whether either of the parties

deserves judgment as a matter of law.’” Def. of Wildlife v. N.C. Dep't of Transp., 762 F.3d 374,

392 (4th Cir. 2014) (citation omitted); see Belmora LLC v. Bayer Consumer Care AG, 987 F.3d

284, 291 (4th Cir. 2021). Simply because opposing parties have moved for summary judgment

does not mean that summary judgment to one side or the other is necessarily appropriate. Indeed,

“[b]oth motions must be denied if the court finds that there is a genuine dispute of material

fact.” 10A C. WRIGHT, A. MILLER, & M. KANE, FEDERAL PRACTICE & PROCEDURE § 2720 (4th

ed. Suppl. 2022) (“Wright & Miller”). And, as noted, the court “‘resolve[s] all factual disputes

and any competing, rational inferences in the light most favorable to the party opposing that

motion.’” Defs. of Wildlife, 762 F.3d at 393 (quoting Rossignol v. Voorhaar, 316 F.3d 516, 523

(4th Cir. 2003), cert. denied, 540 U.S. 822 (2003)); see Mellen v. Bunting, 327 F.3d 355, 363 (4th

Cir. 2003).

IV. Discussion

In support of the Motion, Schnupp largely relies on the facts to which Mr. Blair stipulated

in the Criminal Case. See ECF 149 at 15–20; ECF 65-3; Criminal Case, ECF 181-1 at 1–6. He

argues: “Nothing revealed in discovery . . . may change the facts established by Mr. Blair’s

criminal conviction and nothing revealed in discovery supports Mr. Blair’s assertion that Mr.

Schnupp is not an ‘original source’ of the allegations underlying Mr. Blair’s criminal conviction.”

ECF 149 at 11. Therefore, he contends that “summary judgment in favor of the United States is

now appropriate.” Id.

Schnupp’s argument can be summarized as follows: (1) Mr. Blair was criminally convicted

of a violation of the AKS; (2) a violation of the AKS automatically constitutes a false claim under

the FCA; (3) Blair is estopped from denying the facts set forth in the Stipulation in Mr. Blair’s

Plea Agreement; (4) in the Stipulation, signed by Mr. Blair, he admitted that TRICARE paid

$6,352,941.66 to the Pharmacy from November 2014 through May 2015 based upon claims

submitted to TRICARE that were “tainted by remuneration payments” paid to independent sales

contractors; and (5) the attachment to the Plea Agreement (Criminal Case, ECF 181-1 at 7–21)

identifies 582 false claims submitted by defendants to TRICARE, in violation of the AKS. ECF

149 at 12–22. Accordingly, Schnupp contends that “there is no dispute in this case that the

defendants submitted 582 false claims to TRICARE for which the United States suffered damages

totaling $6,352,941.66.” Id. at 22. Schnupp also contends that he is an original source as to

Scheme 5. ECF 165 at 37.

Schnupp has calculated the treble damages to which he contends the United States is

entitled, pursuant to 31 U.S.C. § 3729(a)(1). Specifically, he asserts that the government is entitled

to treble damages of $19,058,824.98, i.e., 3 x $6,352,941.66. ECF 149 at 23. Schnupp has also

calculated the adjustment to the applicable penalties due to inflation. Id. at 25. According to

Schnupp, because defendants submitted 582 separate claims to TRICARE, as identified in Mr.

Blair’s Plea Agreement, a penalty ranging from $5,500 to $11,000 for each false claim is required

under 31 U.S.C. § 3729(a)(1). Id. at 25–26. This totals between $3,201,000 and $6,402,000. Id.

at 26. Further, Schnupp contends that, after deducting the amount of restitution that Mr. Blair has

already paid, i.e., $3,176,470.83, id., the government is entitled to a sum ranging from

$19,083,354.15 to $21,324,354.15.

In the Cross Motion, defendants argue that “Schnupp has failed to produce in discovery

the required facts in support of his claims and has not provided the type of assistance to the

Government as a relator that the FCA is intended to award. . . .” ECF 156 at 13. Therefore,

defendants claim that they are entitled to summary judgment as to all claims. Id.

As to Schemes 1, 2, 3, and 4, set forth in Schnupp’s original Complaint, Blair argues that

Schnupp has not presented any evidence to corroborate his allegations, whereas defendants “have

produced uncontroverted evidence disproving Schnupp’s claims.” Id.20 As to Scheme 5, Blair

advances multiple challenges.

20 In defendants’ Cross Reply (ECF 170), they raise, for the first time, the contention that

Schnupp’s suit is unconstitutional. Id. at 7. Citing U.S. ex rel. Zafirov v. Florida Medical

Associates, LLC, 2024 WL 4349242, at *1 (M.D. Fla. Sept. 30, 2024), Blair argues that Schnupp

was not properly appointed under Article II of the U.S. Constitution, and therefore, his suit as an

unappointed government officer, is unconstitutional. ECF 170 at 7.

The opinion from the federal court in Florida was not issued until after defendants filed the

Cross Motion. Nevertheless, the foundation of the claim was certainly as available to Blair as it

With respect to Scheme 5, Blair argues that Schnupp “has not made any effort to establish

a link” between Mr. Blair’s guilty plea and Blair’s alleged liability under the FCA. Id. at 13.

Defendants contend that they are entitled to summary judgment, “or at least, Schnupp’s [Motion]

should be denied,” because he cannot establish causation, “an essential element of his FCA claim.”

Id. at 14. Blair also relies on the FCA’s public disclosure bar. Id. at 13–14; see 31 U.S.C.

§ 3730(e)(4). According to Blair, Schnupp cannot prevail because the factual allegations

underlying the qui tam suit were publicly disclosed when the qui tam suit was initially filed in

August 2017. Id. at 35. Moreover, defendants contend that Schnupp cannot establish that he is an

original source under the FCA. In this regard, Blair posits that the Relator’s “disclosures were not

voluntary,” nor did he “provide the Government with any information related to the AKS

violations to which Mr. Blair pled guilty that either materially added to or was independent from

information the Government already had in its possession.” Id. at 14.

Defendants also argue that the Court should deny Schnupp’s Motion “because his damages

demand and calculations are unsupported by the record.” Id. Further, Blair maintains that

“Schnupp’s request for $22 million dollars and summary judgment becomes markedly more

was to the defendant in Zafirov. Blair’s attorneys obviously knew of the existence of Article II of

the Constitution.

In any event, the Court need not consider arguments made for the first time in a party’s

reply. See, e.g., United States v. Al–Hamdi, 356 F.3d 564, 571 n. 8 (4th Cir. 2004) (declining to

consider argument first raised in reply brief); see also United States v. Williams, 445 F.3d 724, 736

n. 6 (4th Cir. 2006) (declining to consider an argument raised for the first time in the reply brief);

Hanlin–Cooney v. Frederick Cnty., Md., 2014 WL 576373, at *11 n. 32 (D. Md. Feb. 11, 2014)

(declining to consider an argument first raised in reply brief); Price v. Grasonville Volunteer Fire

Dep't, ELH-14-1989, 2014 WL 7409891, at *8 (D. Md. Dec. 30, 2014). The rationale behind this

general principle is that that the opposing party would be prejudiced by a consideration of the

argument, absent an opportunity to respond. See Clawson v. FedEx Ground Package Sys., Inc.,

451 F.Supp.2d 731, 735 (D. Md. 2006) (citing United States v. Head, 340 F.3d 628, 630 n. 4 (8th

Cir. 2003)). Therefore, I decline to consider the belated contention.

extreme and unjustified considering that, since this Court initially denied his first request for

summary judgment, Schnupp has taken only one deposition and conducted very little written

discovery.” Id. at 12. Blair asserts, id. “Simply put, Schnupp’s case is no different today than it

was when this Court denied his first Motion for Partial Summary Judgment on May 24, 2023.”

I turn to address the contentions.

A. The Public Disclosure Bar

As discussed, in order to prevent fraud that might otherwise evade detection and to

supplement government enforcement, the FCA permits a private individual, known as a relator, to

file a civil lawsuit on behalf of the federal government against those who have defrauded the

government. 31 U.S.C. § 3730(b)(1). To encourage such suits, the statute allows the relator to

collect a portion of any recovery as a reward. See 31 U.S.C. § 3730(b); § 3730(d)(2).

However, a qui tam suit is of no help to the government if the alleged fraud has already

been uncovered by the time the relator’s suit is filed. Graham Cty. Soil & Water Conservation

Dist. v. United States ex rel. Wilson, 559 U.S. 280, 294–95 (2010). Indeed, since enacting the

FCA in 1863, Congress has repeatedly amended the FCA in an effort “‘to strike a balance between

encouraging private persons to root out fraud and stifling parasitic lawsuits’ in which a relator,

instead of plowing new ground, attempts to free-ride by merely reiterating previously disclosed

fraudulent acts.” Beauchamp, 816 F.3d at 39 (quoting Graham Cty. Soil & Water, 559 U.S. at

295).

One such mechanism is the FCA’s public disclosure bar. See 31 U.S.C. § 3730(e)(4)(A)

(1986), as amended by the Affordable Care Act; see also State Farm Fire & Cas. Co. v. United

States ex rel. Rigsby, 580 U.S. 39, 44 (2016) (describing the public disclosure bar as a threshold

that a relator must clear in order to proceed on a qui tam suit). Effective March 23, 2010, the

public disclosure provision states, 31 U.S.C. § 3730(e)(4)(A):

The court shall dismiss an action or claim under this section, unless opposed by the

Government, if substantially the same allegations or transactions as alleged in the

action or claim were publicly disclosed—

(i) in a Federal criminal, civil, or administrative hearing in which the Government

or its agent is a party;

(ii) in a congressional, Government Accountability Office, or other Federal report,

hearing, audit, or investigation; or

(iii) from the news media,

unless the action is brought by the Attorney General or the person bringing the

action is an original source of the information.

Thus, the public disclosure bar “disqualifies private suits based on fraud already disclosed

in particular settings—such as hearings, government reports, or news reports—unless the relator

meets the definition of an ‘original source’ under the FCA.” Beauchamp, 816 F.3d at 39 (quoting

31 U.S.C. § 3730(e)(4)); see United States ex rel. Siller v. Becton Dickenson & Co., 21 F.3d 1339,

1347 (4th Cir. 1994). Put another way, if the relator qualifies as an “original source,” the public

disclosure bar does not apply.

The FCA permits a defendant to raise the public disclosure bar as an affirmative defense.

Beauchamp, 816 F.3d at 40. The public disclosure bar requires the Court to consider three

questions: (1) is there a qualifying public disclosure? (2) if yes, is the disclosed information the

basis of the relator’s suit? (3) and, if so, is the relator the original source of that information?

United States ex rel. Wilson v. Graham Cty. Soil & Water Conservation Dist., 528 F.3d 292, 308

(4th Cir. 2008), rev’d on other grounds, 559 U.S. 280 (2010); see United States ex rel. Maharaj v.

Est. of Zimmerman, 427 F. Supp. 3d 625, 646 (D. Md. 2019); United States ex rel. Moore v.

Cardinal Fin. Co., L.P., CCB-12-1824, 2017 WL 1165952, at *10 (D. Md. Mar. 28, 2017); United

States ex rel. Davis v. Prince, 753 F. Supp. 2d 569, 579 (E.D. Va. 2011).

As a threshold matter, the public disclosure bar does not apply unless the fraud alleged by

the relator was previously disclosed to the public in a manner specifically enumerated in the statute.

See United States v. Meridian Senior Living, LLC, 5:16-CV-410-BO, 2018 WL 1463347, at *8

(E.D.N.C. Mar. 23, 2018); Davis, 753 F. Supp. 2d at 579. And, the disclosure “must be a disclosure

of fraudulent ‘allegations or transactions’ and not merely a disclosure of information.” See A1

Procurement, LLC v. Thermcor, Inc., 2:15-00015, 2017 WL 9478501, at *8 (E.D. Va. Apr. 4,

2017) (citing United States ex rel. Saunders v. Unisys Corp., 1:12-00379, 2014 WL 1165869, at

*1, *6 (E.D. Va. Mar. 21, 2014)). As explained by the D.C. Circuit: “[I]f X + Y = Z, Z represents

the allegation of fraud and X and Y represent its essential elements. In order to disclose the

fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers

or listeners may infer Z, i.e., the conclusion that fraud has been committed.” United States ex rel.

Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994).

The Fourth Circuit has said that “a ‘public disclosure’ requires that there be some act of

disclosure outside of the government.” United States ex rel. Wilson v. Graham Cty. Soil & Water

Conservation Dist., 777 F.3d 691, 697 (4th Cir. 2015) (emphasis in original) (cleaned up) (quoting

United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 730 (1st Cir. 2007), overruled on other

grounds by Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008)). It reasoned

that by “specifying that a ‘disclosure’ must be ‘public,’ Congress indicated that only disclosures

made to the public at large or to the public domain had jurisdictional significance.” Wilson, 777

F.3d at 696. “The government,” said the Court, “is not the equivalent of the public domain.” Id.

at 697.

However, as stated, the public disclosure bar does not apply if the relator qualifies as an

original source. The Supreme Court has made clear that the relator must be an original source as

to “the allegations in the original complaint as amended.” Rockwell Int'l Corp., 549 U.S. at 473

(emphasis in Rockwell Int’l Corp.). It reasoned that, otherwise, the relator could “plead a trivial

theory of fraud for which he had some direct and independent knowledge and later amend the

complaint to include theories copied from the public domain or from materials in the Government's

possession.” Id.

A timeline summary of some critical events follows.

1. Atlas filed suit against Blair in federal court in August 2015. See JKB-15-2491

(D. Md.). The Atlas Suit referred to the Distributor Agreement and included

allegations consistent with Scheme 5.

2. In July 2017, in connection with the government’s investigation of Mr. Blair,

the government obtained a search warrant for J2. See ECF 156-20. The search

warrant application reflects that the government knew of the Atlas Suit.

3. Schnupp filed his qui tam suit in August 2017. It includes allegations as to

Schemes 1 through 4, but not Scheme 5. See ECF 1.

4. Also in August 2017, Schnupp submitted the Disclosure Memorandum to the

government, with attachments.

5. Beginning in October 2017, Schnupp had multiple meetings and interviews

with the government.

6. Mr. Blair was indicted in the Criminal Case on August 27, 2019. He was

charged in ten counts with conduct unrelated to Scheme 5. See Criminal Case,

ECF 1.21

7. The Superseding Indictment, filed on March 3, 2020, included facts pertinent

to Scheme 5 and asserted, inter alia, violations of the AKS. See id., ECF 20.22

21 As noted, the Indictment charged Mr. Blair with five counts of wire fraud and five counts

of aggravated identity theft. Id.

22 The Superseding Indictment added additional charges of wire fraud and aggravated

identity theft, as well as money laundering and violations of the AKS.

8. On December 3, 2021, Mr. Blair pleaded guilty to Count Thirty-One in the

Superseding Indictment, which is based on conduct pertaining to Scheme 5.

9. Schnupp amended his qui tam suit six months later, in May 2022, adding facts

pertaining to Scheme 5. ECF 30.

The parties agree that, as to Scheme 5, the Superseding Indictment contains allegations that

are also set forth in the Amended Complaint, filed in May 2022. ECF 165 at 35; ECF 156 at 37.

In addition, the parties agree that a qualifying public disclosure as to Scheme 5 occurred on March

3, 2020, when the Superseding Indictment was filed. Id. 23 On these and other facts, recounted

earlier, the question is whether the public disclosure bar applies to Scheme 5.24

The Sixth Circuit’s decision in United States v. Chattanooga-Hamilton Cty. Hosp. Auth.,

782 F.3d 260, 267 (6th Cir. 2015), is informative. There, the defendant argued that “there was a

prior public disclosure of fraud in the administrative audit and investigation to others outside the

government who were ‘strangers to the fraud.’” Id. at 269. In particular, the defendant pointed to

“disclosures between OIG and AdvanceMed [, a private corporation,] and between [the defendant]

and the Deloitte auditors,” employees of a private company engaged prior to the qui tam lawsuit

to conduct an internal audit of fraud allegations. Id. The Sixth Circuit found that neither disclosure

“constituted a public disclosure of fraud that would trigger the public-disclosure bar.” Id. No

qualifying public disclosure resulted because AdvanceMed received the information “for the

purpose of acting on behalf of the government as part of the administrative audit and

23 Defendants assert: “This Court has previously found that Schnupp’s claims related to

the AKS were publicly disclosed before this action was filed via the Government’s criminal case

against Mr. Blair.” ECF 156 at 14. In a Memorandum Opinion filed in December 2022 (ECF 55),

I made reference to the Relator’s concession that “‘qualifying public disclosures of Fraudulent

Scheme #5 occurred in connection with Blair’s criminal proceedings before the Amended

Complaint was filed.’” Id. at 32 (quoting ECF 47 at 39).

24 Neither party addresses whether the DHA Report, cited by Agent Choi in his Affidavit

(ECF 156-20), qualifies as a public disclosure under the FCA.

investigation,” and the disclosures to AdvanceMed “were confidential and remained so until after

[the qui tam] action was filed.” Id. Similarly, the court rejected the argument that disclosure of

information to various Deloitte auditors constituted a public disclosure, because of their

“obligation to keep the information confidential.” Id. at 270.

The Second Circuit employed similar reasoning to conclude that “disclosures made

pursuant to a confidential government investigation or audit do not constitute ‘public’ disclosures.”

United States ex rel. Foreman v. AECOM, 19 F.4th 85, 126 (2d. Cir. 2021). The court noted that

the information disclosed outside the government during its investigation was “designated

‘CONFIDENTIAL’ or ‘HIGHLY CONFIDENTIAL,’ suggesting that any disclosures to [the

defendant company’s] employees in connection with the government’s audits and investigations

were made under an obligation to keep such information secret.” Id. at 125. In its view, such

disclosures did not qualify as public disclosures under 31 U.S.C. § 3730(e)(4)(A). Id. at 126.

The same rationale applies here. By the time Schnupp filed his qui tam suit in August

2017, the government had possession of substantial information about Mr. Blair’s conduct, as

evidenced by information in the J2 search warrant application and the agent’s Affidavit. See ECF

156-20. But, that information was not public. Moreover, both Google and J2 were under an

obligation to keep the information confidential. Under such circumstances, the disclosures were

more “private” than “public.” See Chattanooga-Hamilton Cty. Hosp. Auth., 782 F.3d at 270; see

also United States ex rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1518 (9th Cir. 1995)

(stating that “information that was ‘disclosed in private’ has not been publicly disclosed”). Put

simply, the search warrant applications as to Google and J2 do not constitute public disclosures.

Nor does the Atlas Complaint constitute a public disclosure under 31 U.S.C.

§ 3730(e)(4)(A). Although the Atlas Suit was publicly filed in federal court, the government was

not a party to it. And, the FCA “makes clear that a federal civil or criminal hearing qualifies for

public disclosure status only if it is one ‘in which the government or its agent is a party[.]’” United

States ex rel. Beauchamp v. Academi Training Ctr., 933 F. Supp. 2d 825, 844 n.36 (E.D. Va. 2013)

(quoting 31 U.S.C. § 3730(e)(4)(A)(i)), rev’d on other grounds, 816 F.3d 37 (4th Cir. 2016).

Because the Atlas Suit involved private parties, it cannot qualify as a public disclosure under 31

U.S.C. § 3730(e)(4)(A)(i). See United States ex rel. Daugherty v. Tiversa Holding Corp., 342 F.

Supp. 3d 418, 425 (S.D.N.Y. 2018) (stating that “actions between private parties . . . cannot

generate public disclosures within the meaning of the current public disclosure bar.”); United

States ex rel. Paulos v. Stryker Corp., 11-0041-CV-W-ODS, 2013 WL 2666346 (D. Mo. June 12,

2013) (stating that “the only lawsuits that can constitute public disclosure under the statute are

suits ‘in which the Government or its agent is a party.’”).

The qui tam suit was filed in 2017, well before Mr. Blair was indicted in 2019. And,

because neither the search warrant records nor the Atlas Suit qualifies as a public disclosure under

the FCA, Schnupp would not be foreclosed from qualifying as a whistleblower as of that date with

respect to Schemes 1 through 4, even though, as the search warrant reflects, the government was

already well aware of significant facts as to Blair’s conduct. Therefore, as to Schemes 1 through

4, I need not determine whether the Relator is an original source of the information contained in

the Complaint. See Beauchamp, 816 F.3d at 47 (“[W]here, as here, there was no public disclosure,

the . . . inquiry under § 3730(e)(4) ceases, regardless of whether the relator qualifies as an original

source.”) (quoting United States ex rel. Holmes v. Consumer Ins. Grp., 318 F.3d 1199, 1208 (10th

Cir. 2003) (en banc)).

Conversely, the Relator previously conceded that “qualifying public disclosures of

Fraudulent Scheme #5 occurred in connection with Blair’s criminal proceedings before the

Amended Complaint was filed.” ECF 47 at 39; see Moore, 2017 WL 1165952, at *12 (federal

criminal documents filed in criminal proceedings are qualifying public disclosures). Moreover,

Schnupp does not dispute that the allegations in the Amended Complaint are “substantially the

same” as the allegations contained in Mr. Blair’s criminal pleadings, because “the government had

already investigated, indicted, and convicted Blair for his conduct of Fraudulent Scheme #5 when

the Amended Complaint was filed.” ECF 47 at 39; see Maharaj, 427 F. Supp. 3d at 649.

Therefore, Schnupp agrees that the public disclosure bar would apply to Scheme 5, unless

Schnupp is an “original source” of the information. ECF 165 at 38 (citing 31 U.S.C.

§ 3730(e)(4)(A)). A discussion of that issue follows.

B. Original Source

As noted, the public disclosure bar does not apply to a relator who is an original source.

Schnupp maintains that he qualifies as an original source as to Scheme 5. ECF 149 at 30.

Under 31 U.S.C. § 3730(e)(4)(B), an “original source” is defined as an individual who

either:

(i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed

to the Government the information on which allegations or transactions in a claim

are based, or (2) who has knowledge that is independent of and materially adds to

the publicly disclosed allegations or transactions, and who has voluntarily provided

the information to the Government before filing an action under this section.

Schnupp maintains that he did not learn of Scheme 5 from the government. ECF 165 at 39.

He asserts that, “at various times,” he disclosed “‘information’ relating to Blair’s AKS scheme

involving independent sales representatives to the government . . . before the Superseding

Indictment was filed on March 3, 2020.” Id. Specifically, he contends that he provided relevant

information to the government voluntarily, first in the form of the Disclosure Memorandum and

its exhibits, produced in August 2017, and then during numerous interviews with the government,

beginning in October 2017. See ECF 149 at 34; ECF 165 at 39–40.

Defendants insist that, as to Scheme 5, Schnupp does not meet the statutory definition of

an original source. They contend that his Disclosure Memorandum “was not voluntarily filed,”

because it was a required filing. ECF 156 at 37. Moreover, they maintain that the Disclosure

Memorandum does not include any factual allegations pertinent to the Fifth Scheme. Id.

Defendants also observe that Schnupp did not provide information to the government “related to

Scheme 5 until after he was contacted by law enforcement,” rendering involuntary any disclosures

during his interviews with the government. Id. at 37–38.

Historically, qui tam actions were sometimes “brought by individuals with no independent

knowledge of the fraud, some of whom learned of the fraud through the inspection of government

criminal indictments.” U.S. ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins.

Co., 944 F.2d 1149, 1153 (3d Cir. 1991) (citing S. Rep. No. 345, 99th Cong., 2d Sess. 10, U.S.

Code Cong. & Admin. News at 5275); see United States ex rel. Marcus v. Hess, 317 U.S. 537, 546

(1943) (upholding a relator’s ability to bring a qui tam action based solely on information derived

from a criminal indictment). Congress amended the FCA in 1943 to preclude qui tam actions that

were “based on evidence or information the government had when the action was brought.” 31

U.S.C. § 3730(b)(4) (1982) (superseded). However, the FCA’s original source provision preserves

the objective of “inspir[ing] whistleblowers to come forward promptly with information

concerning fraud so that the government can stop it and recover ill-gotten gains.” U.S. ex rel.

Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 685 (D.C. Cir. 1997).

A “‘relator’s knowledge . . . is independent if the knowledge is not dependent on public

disclosure.’” United States ex rel. Ahumada v. NISH, 756 F.3d 268, 276 (4th Cir. 2014) (quoting

Grayson v. Adv. Mgmt. Tech., Inc., 221 F.3d 580, 583 (4th Cir. 2000)). Further, “[a] relator

‘materially adds’ to the public disclosures ‘when it contributes information . . . that adds in a

significant way to the essential factual background: the who, what, when, where and how of the

events at issue.’” United States ex rel. Fadlalla v. DynCorp Int’l LLC, 402 F. Supp. 3d 162, 184-

85 (D. Md. 2019) (quoting United States ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries,

LLC, 812 F.3d 294, 307 (3d Cir. 2016)).

According to Schnupp, “‘information’” refers to “‘any essential element of the fraud

transaction.’” ECF 165 at 39 (quoting Findley, 105 F.3d at 690) (internal citation omitted)

(emphasis in original). The Findley Court was quoting Springfield Terminal Ry. Co., 14 F.3d at

656–57. In Springfield Terminal Ry. Co., the court clarified that the FCA requires an original

source to have “direct and independent knowledge” of “information” underlying an allegation of

fraud, which is something less than “direct and independent knowledge of all of the vital

ingredients to a fraudulent transaction.” Id. (emphasis in Springfield). But, both cases were

decided prior to the 2010 amendments to the FCA.

The “original source” definition “no longer contains a ‘direct’ knowledge requirement,

instead requiring that an original source have ‘knowledge that is independent of and materially

adds to the publicly disclosed allegations or transactions.’” Silbersher v. Allergan Inc., 506 F.

Supp. 3d 772, 789 (N.D. Cal. 2020), rev'd and remanded sub nom. on other grounds, United States

v. Allergan, Inc., 46 F.4th 991 (9th Cir. 2022). But, there is no indication that Congress intended

to alter the meaning of the words “information” that is “voluntarily provided . . . .”

Moreover, there is no dispute that Schnupp provided “information.” Rather, the issues here

concern the timing of his disclosures; whether they were voluntary; whether the information was

the basis for allegations or transactions in a claim; or whether the information “materially adds to

the publicly disclosed allegations . . . .” 31 U.S.C. § 3730(e)(4)(B).

The conduct pertaining to Scheme 5 in the Amended Complaint corresponds to the

allegations contained in a prior qualifying public disclosure, i.e., the Superseding Indictment in

the Criminal Case, ECF 20. The question is whether the Relator “is an original source of the

information.” 31 U.S.C. § 3730(e)(4)(A). As indicated, a relator qualifies as an original source if

he “voluntarily disclosed to the Government the information” underlying the fraud claims or if he

had “knowledge that is independent of and materially adds to the publicly disclosed allegations,”

which was voluntarily provided to the government before the qui tam suit was filed. 31 U.S.C.

§ 3730(e)(4)(B) (2010); see also Maharaj, 427 F. Supp. 3d at 649-50.

As indicated, the definition of “original source” in 31 U.S.C. § 3730(e)(4)(B) consists of

two alternatives. Both require disclosures that are made “voluntarily.” As noted, Schnupp claims

that he voluntarily provided information to the government in two ways: the Disclosure

Memorandum of August 15, 2017, and in extensive interviews conducted by the government after

the qui tam suit was filed.

1. “Voluntarily”

The Court must determine whether Schnupp acted “voluntarily” when he submitted the

Disclosure Memorandum or when he submitted to interviews with the government. The FCA does

not define the term “voluntarily.” This implicates principles of statutory construction.

Generally, “[w]hen faced with a statutory provision, ‘the starting point for any issue

of statutory interpretation . . . is the language of the statute itself.’” Redeemed Christian Church

of God (Victory Temple) Bowie, Md. v. Prince George's Cty., Md., 17 F.4th 497, 508 (4th Cir.

2021) (quoting D.B. v. Cardall, 826 F.3d 721, 734 (4th Cir. 2016)) (alteration in

original); see Groff v. Dejoy, 600 U.S. 447, 468 (2023) (stating that “statutory interpretation must

‘begi[n] with,’ and ultimately heed, what a statute actually says”) (citation omitted) (alteration in

Groff); Murphy v. Smith, 583 U.S. 220, 223 (2018) (“As always, we start with the specific statutory

language in dispute.”); Pharmaceutical Coalition for Patient Access, 2025 WL 271562, at *3

(“Statutory interpretation begins with the text of the statute.”); Williams v. Carvajal, 63 F.4th 279,

285 (4th Cir. 2023) (“As always, an issue of statutory interpretation begins with the text.”)

(citing McAdams v. Robinson, 26 F.4th 149, 156 (4th Cir. 2022)); Navy Fed. Credit Union v. LTD

Fin. Servs., LP, 972 F.3d 344, 356 (4th Cir. 2020) (“‘As in all statutory construction cases,’ we

start with the plain text of the provision.”) (quoting Marx v. General Revenue Corp., 568 U.S. 371,

376 (2013)); see also United States v. Bryant, 949 F.3d 168, 174–75 (4th Cir. 2020); Othi v.

Holder, 734 F.3d 259, 265 (4th Cir. 2013); Ignacio v. United States, 674 F.3d 252, 254 (4th Cir.

2012).

A statute “means what it says.” Simmons v. Himmelreich, 578 U.S. 621 (2016); see United

States v. Cohen, 63 F.4th 250, 253 (4th Cir. 2023). “‘[A]bsent ambiguity or a clearly expressed

legislative intent to the contrary,’” courts apply the “plain meaning” of the statute. United States

v. Abdelshafi, 592 F.3d 602, 607 (4th Cir. 2010) (quoting United States v. Bell, 5 F.3d 64, 68 (4th

Cir. 1993)); see United States v. George, 946 F.3d 643, 645 (4th Cir. 2020) (“When interpreting a

statute, courts must ‘first and foremost strive to implement congressional intent by examining the

plain language of the statute.’”) (quoting Abdelshafi, 592 F.3d at 607). A court determines a

statute’s plain meaning by referencing the “ordinary meaning [of the words] at the time of the

statute's enactment.” United States v. Simmons, 247 F.3d 118, 122 (4th Cir. 2001); see also

HollyFrontier Cheyenne Refining, LLC v. Renewable Fuels Ass’n, 594 U.S. 382, 388 (2021).

Courts may “not resort to legislative history to cloud a statutory text that is clear.” Ratzlaf v.

United States, 510 U.S. 135, 147–48 (1994); see Raplee v. United States, 842 F.3d 328, 332 (4th

Cir. 2016) (“If the meaning of the text is plain . . . that meaning controls.”).

Terms in a statute that are not defined, such as the word “voluntarily,” are “‘interpreted”

in accordance with “their ordinary, contemporary, common meaning.’” Sandifer v. U.S. Steel

Corp., 571 U.S. 220, 227 (2014) (citation omitted); see Holly Frontier Cheyenne Refining, LLC,

594 U.S. at 388; George, 946 F.3d at 645. Moreover, “‘the words of a statute must be read in their

context and with a view to their place in the overall statutory scheme.’” West Virginia v. EPA,

597 U.S. 697, 721 (2022); see also Gundy v. United States, 588 U.S. 128, 141 (2019) (quoting Nat'l

Ass'n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666 (2007)); see also United States v.

Hansen, 599 U.S. 762, 775 (2023) (“When words have several plausible definitions, context

differentiates among them.”); King v. Burwell, 576 U.S. 473, 486 (2015); Pharmaceutical

Coalition for Patient Access, 2025 WL 271562, at *3. Courts may also consider a statute's history

and purpose to give effect to its language. See Gundy, 588 U.S. at 141.

After surveying judicial opinions on the subject, the court in United States ex rel. Griffith

v. Conn., 11-157-ART, 2015 WL 779047 (E.D. Ky. Feb. 24, 2015), concluded that the “most apt

definition” of the word “voluntarily,” as used in the FCA, is “an act done ‘without a present legal

obligation’ or ‘without valuable consideration.’” Id. at *9 (collecting cases); see United States ex

rel. Fine v. Chevron, U.S.A., Inc., 72 F.3d 740, 744 (9th Cir. 1995) (en banc) (defining “voluntary”

as “done, of one’s own free will without valuable consideration” and “done without any present

legal obligation to do the thing done.”); United States ex rel. Ackley v. Int’l Bus. Machines Corp.,

76 F. Supp. 2d 654, 666 (D. Md. 1999) (“‘Voluntarily’ means not in response to a

subpoena, . . . and, insofar as a government employee is concerned, not in exchange for a salary.”).

In analyzing the parties’ contentions, the ordinary meaning of the word “voluntarily,” set

forth above, shall frame the analysis.

2. Section 3730(e)(4)(B)(i)

Under 31 U.S.C. § 3730(e)(4)(B)(i), a relator qualifies as an original source if, “prior to a

public disclosure under subsection (e)(4)(a), [the relator] has voluntarily disclosed to the

Government the information on which allegations or transactions in a claim are based.”

a. Disclosure Memorandum

Schnupp claims that in August 2017, he voluntarily provided the government with his

Disclosure Memorandum, dated August 14, 2017, and it included a copy of the Atlas Complaint,

filed in case JKB-15-2491. ECF 165 at 39. In his view, this conduct meets the definition of

original source in § 3730(e)(4)(B)(i).

The Disclosure Memorandum, prepared by counsel for Schnupp, states, in part, ECF 156-

21 at 5–6:

In addition to his own observations at Blair Pharmacy, Relator learned of a

dispute between Defendant Blair and a sales company called Atlas Group, in which

Blair refused to pay Atlas sales commissions under a “distributor agreement” with

Atlas. Relator believes Defendant Blair settled the case and paid Atlas because

Atlas threatened in its lawsuit to reveal Defendant Blair’s use of “burner cards” to

unlawfully pay for patients’ co-payments. Among the records enclosed is a copy

of a lawsuit filed by Atlas against Defendant Blair and the Blair Pharmacy for

breach of contract and unlawful retaliation. Without providing any specifics, Atlas

alleged in the case: “Upon information and belief, during the course of

performance under this Agreement, Atlas learned from Blair’s statements that Blair

was using ‘burner’ cards (pre-paid credit cards that have a monetary value) to pay

co-pays on behalf of patients, while posing as the at-issue patients over the phone

to third party payors Medicare, TRICARE and Medicaid.

According to Atlas, Matthew Blair was withholding commissions from

Atlas because he feared the Pharmacy’s failure to collect co-payments would cause

payors to recoup funds from the pharmacy if an audit were to occur. Atlas alleges

that Blair solicited Atlas to help impersonate patients and pay co-pays in violation

of federal fraud and abuse laws.

The Disclosure Memorandum does not mention key elements of the arrangement between

Blair and Atlas that violated the AKS. For example, unlike the Stipulation to which Mr. Blair

agreed in the Criminal Case (ECF 181-1), the Disclosure Memorandum does not mention that the

“Distributor Agreement required Atlas to use Blair Pharmacy exclusively, and to refer all business

within his established territory to Blair Pharmacy,” nor does it mention that “Blair induced and

encouraged these referrals to his pharmacy by offering B.A. a 50% percentage payment of any

money that Blair received from health care benefit programs.” Id. at 3. Nor does the Disclosure

Memorandum mention that this 50 percent payment “of the health care benefit program

reimbursement monies was the ‘sole compensation,’” and Alavi was “not paid any money or

compensation, unless Blair was successful in obtaining reimbursement from a health care benefit

program for a prescription that B.A. referred to Blair, and then, and only then was B.A. paid a

percentage of the successful reimbursement.” Id.

However, the Atlas Complaint, appended to the Disclosure Memorandum, contains certain

allegations concerning Scheme 5. But, as discussed, it appears to have been provided by Schnupp

to support Scheme 4, involving burner cards, which is specifically addressed by Schnupp in the

text of the Disclosure Memorandum.

The parties do not address whether Schnupp’s intent, reason, or purpose for providing the

Atlas Complaint is relevant. Even if Schnupp produced the Atlas Complaint to support his

contentions as to Scheme 4, and did not appreciate or realize that facts pertaining to Scheme 5 are

also included in the Atlas Complaint, this would not alter the fact that Schnupp provided the Atlas

Complaint to the government, with all that it alleged. In my view, regardless of Schnupp’s reason

for producing the Atlas Complaint, it speaks for itself; the content constitutes “information.” See

31 U.S.C. § 3730(e)(4)(B).

However, the Disclosure Memorandum, to which the Atlas Complaint was appended, was

provided pursuant to 31 U.S.C. § 3730(b)(2). This provision states: “A copy of the [qui tam]

complaint and written disclosure of substantially all material evidence and information the person

possesses shall be served on the Government [by the relator].” 31 U.S.C. § 3730(b)(2) (emphasis

added). The Fourth Circuit has made clear that “the word ‘shall,’ when used in a statutory context,

is generally construed to be mandatory.” Holland v. Pardee Coal Co., 269 F.3d 424, 431 (4th Cir.

2001); see also Navy Fed. Credit Union, 972 F.3d at 356 (construing the word “shall” in a statute

to be mandatory in nature).

The question, then, is whether a required disclosure, such as the Disclosure Memorandum,

which included the Atlas Complaint, is one that is made “voluntarily,” within the meaning of 31

U.S.C. § 3730(e)(4)(B). Schnupp acknowledges that there is a circuit split as to whether the

Disclosure Memorandum required by 31 U.S.C. § 3730(b)(2) can be deemed to have been

“voluntarily” provided. ECF 165 at 58.

To my knowledge, the Fourth Circuit has not addressed whether the fact that the Disclosure

Memorandum is required by statute vitiates voluntariness. But, the Second, Seventh, and Tenth

Circuits have determined that a Disclosure Memorandum cannot be considered to have been

voluntarily provided. See, e.g., United States ex rel. Omni Healthcare, et al., v. U.S. Oncology,

Inc., No. 23-1334-cv, 2024 WL 4751635, at * (2d Cir. Nov. 12, 2024); U.S. ex rel. King v. Hillcrest

Health Ctr., Inc., 264 F.3d 1271, 1280 (10th Cir. 2001); U.S. v. Bank of Farmington, 166 F.3d

853, 866 (7th Cir. 1999), overruled on other grounds by Glaser v. Wound Care Consultants, Inc.,

570 F.3d 907 (7th Cir. 2009); see also United States v. U.S. Oncology, Inc., No. 19-CV-5125 (NG)

(LB), 2023 WL 5831140, at *5 (E.D.N.Y. Sept. 8, 2023) (concluding that the relator’s disclosure

statement, made as required under 31 U.S.C. § 3730(b)(2), was not voluntary because it was “made

pursuant to a legal obligation and in return for valuable consideration in the form of a possible qui

tam award”), aff'd sub nom. Omni Healthcare, 2024 WL 4751635. At least one trial court in this

circuit has agreed with the Second, Seventh, and Tenth Circuits. See, e.g., Beauchamp, 933

F.Supp.2d 825, rev’d on other grounds, 816 F.3d 37. But, the D.C. Circuit and the Fifth Circuit

have taken the opposite view. See, e.g., U.S. ex rel. Babalola v. Sharma, 746 F.3d 157 (5th Cir.

2014); Findley, 105 F.3d at 690-91.

Schnupp contends that the position taken by the Second, Seventh, and Tenth Circuits would

potentially require two disclosures of information to the government to be qualified as “voluntary.”

ECF 165 at 60. This, he argues, is because 31 U.S.C. § 3730(b)(2) requires a relator to serve a

copy of the complaint and written disclosure of “substantially all material evidence and

information the person possesses” upon the government. Id. at 59. If this one disclosure does not

qualify as voluntary, Schnupp argues, then a relator would need to make a second disclosure to the

government prior to this statutorily required disclosure. Id. at 60. According to Schnupp, such an

interpretation “raises irrational and arbitrary obstacles to protection of the public fisc.” Id.

I agree with the Second, Seventh, and Tenth Circuits that the Disclosure Memorandum

required by 31 U.S.C. § 3730(b)(2) cannot be deemed to have been “voluntarily” provided under

31 U.S.C. § 3730(e)(4)(B)(ii). If a relator’s submission of a required disclosure statement to the

government under 31 U.S.C. § 3730(b)(2) is deemed a “voluntary” disclosure under the original

source exception to the public disclosure bar, this would “read[] the voluntary requirement” out of

the original source exception, 31 U.S.C. § 3730(e)(4)(A). Omni Healthcare Inc., 2024 WL

4751635, at *3 (citation omitted); see Beauchamp, 933 F.Supp.2d at 846 (“Courts that have

addressed whether these mandatory disclosures under § 3730(b)(2) also qualify as voluntary

disclosures under § 3730(e)(4) have held that they do not, as these are mandatory disclosures rather

than voluntary disclosures.”).

To conclude that a required disclosure may simultaneously qualify as voluntarily provided

would eviscerate the statutory language that requires an original source to have provided the

information “voluntarily.” And, “[i]t is ‘a cardinal principle of statutory construction’ that ‘a

statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence,

or word shall be superfluous, void, or insignificant.’” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)

(quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)); see Ysleta Del Sur Pueblo v. Texas, 596

U.S. 685, 698–99 (2022); Corley v. United States, 556 U.S. 303, 314 (2009); Pharmaceutical

Coalition for Patient Access, 2025 WL 271562, at *4; Doe v. Cooper, 842 F.3d 833, 844 (4th Cir.

2016); Barnes v. Holder, 625 F.3d 801, 806 (4th Cir. 2010); United States v. Fisher, 58 F.3d 96,

99 (4th Cir. 1995).

b. Interviews Conducted by the Government

Schnupp contends that during sixteen interviews with the government that began in

October 2017, he voluntarily disclosed information on which “allegations or transactions in a claim

are based.” ECF 165 at 40–43. He explains that his filing of the qui tam suit in August 2017

“prompted the government to request an interview” of him, at which he voluntarily disclosed

information, including as to the Fifth Scheme. Id. at 46. The first meeting occurred at the U.S.

Attorney’s Office in Maryland on October 2, 2017, and fifteen meetings followed. Id. at 40, 47.

The Relator asserts: “Excluding . . . [a] relator like Mr. Schnupp from being an original source

simply because the government ask[ed] for an interview after receiving the qui tam complaint

would greatly undermine Congress’ goal of encouraging more enforcement actions by private

insiders.” Id. at 46. And, the Relator previously claimed that it was only after “many meetings

and discussions with the Relator [that] the government filed a 36-count Superseding Indictment

against Mr. Blair on March 3, 2020.” ECF 47 (reply in opposition to motion to dismiss), at 12.

The parties describe the question as whether the disclosures provided by Schnupp during

meetings initiated by the government after the filing of the qui tam Complaint qualify as having

been provided by him voluntarily, within the meaning of the FCA. See ECF 156 at 41; ECF 165

at 43.

In particular, Schnupp asserts that he disclosed the following to the government: “‘In total

Blair hired approximately six sales reps that marketed to doctors to send prescriptions to Blair

Pharmacy. . . . Blair paid his sales reps between 30 and 50 [percent] of the total amount Blair

Pharmacy was reimbursed for each prescription the sales rep referred to Blair Pharmacy.’” ECF

165 at 40–41 (quoting ECF 67-2 at 9). Schnupp also revealed that the “‘Pharmacy’s prescriptions

came into the pharmacy via electronic fax’” and that each sales representative had a “‘separate

eFax number’” by which Mr. Blair tracked who had made the referral. ECF 165 at 41 (quoting

ECF 67-2 at 8). In addition, Schnupp informed the government that Mr. Blair “‘transferred money

from the pharmacy’s bank account to another account he controlled in the name of Blair Medical

LLC and paid the sales reps from that account.’” ECF 165 at 42 (quoting ECF 67-2 at 23). And,

Schnupp claims that he provided specific information about the prescriptions prescribed by Dr.

Rehrig, an Army doctor, and the doctor’s connection with Alavi. See ECF 156-9 at 19. According

to the FBI notes of Schnupp’s interview, Schnupp disclosed that one of Alavi’s doctors was Dr.

Rehrig, an Army doctor, who “was the only physician who wrote the same prescriptions for his

patients over and over.” Id. Schnupp maintains that he also told the FBI that the majority of Dr.

Rehrig’s patients were insured by TRICARE because he was an Army doctor who worked on a

military base. Id.

In support of Schnupp’s contention that these disclosures were made voluntarily, he points

to court decisions in the context of “non-custodial interviews conducted by law enforcement

officers.” ECF 165 at 44. Schnupp maintains that during the sixteen meetings he had with

government attorneys and investigators, none of his “disclosures were compelled by the

government, and none were made pursuant to any promise from the government.” Id. at 47. He

adds that there is no evidence that his “free will had been overborne, or that his capacity for self-

determination had been critically impaired when he provided information to the government.” Id.

(citing In re Mut. Funds Inv. Litig., 529 F.3d 207, 232 (4th Cir. 2008)).

Defendants insist, however, that “Schnupp’s failure to plead anything about Scheme 5 in

his initial qui tam Complaint is fatal to his claim that he is an original source (or at the very least

raises a question for the jury that cannot be resolved at this juncture).” ECF 170 at 21. Blair also

argues: “Because it was the Government who first made contact regarding any information that

Schnupp arguably provided about Scheme 5, Schnupp did not provide information about Scheme

5 voluntarily through any cooperation with law enforcement.” Id. at 23.

I am unaware of any Fourth Circuit case that has addressed the issue of voluntariness in

the context of the circumstances attendant here. But, cases from other circuits are informative.

In United States ex rel. Paranich v. Sorgnard, 396 F.3d 326, 341 (3d Cir. 2005), the Third

Circuit determined that disclosures made in response to a subpoena are not voluntary. But here,

Schnupp was not under subpoena.

In City of Chicago ex rel. Rosenberg v. Redflex Traffic Systems, Inc., 884 F.3d 798, 805–

06 (7th Cir. 2018), the Seventh Circuit concluded that disclosures made in exchange for an

immunity agreement were not voluntary. But here, Schnupp did not have an immunity agreement.

Of relevance, however, the Seventh Circuit also determined that the disclosures were not voluntary

because the relator “did not voluntarily initiate contact with the OIG and only provided information

once he was contacted as part of the City's investigation.” Id. at 806.

Similarly, in United States ex rel. Barth v. Ridgedale Electric, Inc., 44 F.3d 699 (8th Cir.

1995), the Eighth Circuit found that Barth’s cooperation was not voluntary because it came only

after Barth was contacted by a government investigator. Id. at 704 (“Barth's only contact with a

government official prior to filing this action was his discussion with Richard Nark, the HUD

investigator, which occurred almost two years after Ridgedale's alleged fraudulent activities. More

importantly, however, this discussion was initiated by Nark rather than Barth.”).

Both Rosenberg and Barth support the proposition that, in considering whether a relator’s

disclosures to the government are voluntary, it is significant to determine whether the first contact

was initiated by the relator or the government. On the other hand, courts have found that

disclosures were voluntary where the relator wrote a letter to the Department of Justice requesting

an investigation, Cause of Action v. Chi. Transit Auth., 815 F.3d 267 (7th Cir. 2016), and where

the relator met with Department of Defense personnel to discuss her allegations before filing her

suit. U.S. ex rel. Lujan v. Hughes Aircraft Co., 162 F.3d 1027 (9th Cir. 1998).

In Fine, 72 F.3d 740, the court determined that a salaried government employee who was

compelled to disclose the fraud as part of his job responsibilities “was no volunteer.” Id. at 743.

In the same way, Blair argues that any information Schnupp may have provided to the government

cannot be considered voluntary because “[i]t is undisputed that Schnupp was the Pharmacist-in-

Charge and the only full-time pharmacist employed at BPI. As a result, Schnupp’s job (and his

pharmacy license) imposed a stringent obligation to come forward and report any activities he was

engaged in that related to fraud.” ECF 156 at 42.25 Moreover, Schnupp’s Employment Agreement

(ECF 156-1) stated that he was to advise the Pharmacy “with regard to maintaining pharmacy

standards that meet . . . regulatory agency requirements for the operation of [BPI].” Id. at 1.

As mentioned, there is no claim that Schnupp was under subpoena when he spoke with the

government. Nor is there evidence that Schnupp spoke with the government in exchange for an

immunity agreement. It is also undisputed that, after Schnupp filed his Complaint, the government

reached out to Schnupp to initiate the interviews at which Schnupp claims to have provided

information about Scheme 5; Schnupp did not initiate the contact. See ECF 67-2. Ultimately,

Schnupp participated in sixteen interviews, without a subpoena or the promise of immunity.

That the government initiated the meetings seems to me a slender reed on which to

conclude that the interviews were not voluntary. To the contrary, I conclude that Schnupp

participated voluntarily. But, this is not the end of the inquiry. The original source definition also

requires voluntary disclosure to the government of “information on which allegations or

transactions in a claim are based.” 31 U.S.C. § 3730(e)(4)(B)(i).

It is undisputed that, by the time of the government’s interviews of Schnupp, he had already

filed his original qui tam Complaint and it did not include any reference to the facts concerning

Scheme 5. The government disclosed Scheme 5 in the Superseding Indictment filed on March 3,

2020, and the Relator subsequently added Scheme 5 to the Amended Complaint in May 2022.

The Relator acknowledges that the allegations in the Amended Complaint pertaining to

Scheme 5 correspond to Count Thirty-One of the Superseding Indictment. ECF 149 at 26

(“. . . [T]he Anti-Kickback violations involved in Mr. Blair’s criminal action are identical to those

25 Defendants do not provide any legal authority for the proposition that Schnupp’s license

required the disclosures at issue here.

at issue in this Motion.”); see also ECF 156 at 24 (“The only new fraud scheme added to the

Amended Complaint (Scheme 5) related to Defendants’ violations of the AKS via commission

payments to 1099 sales representatives.”). The issue, then, is whether Schnupp disclosed

information to the government on which the allegations in Count Thirty-One are based.

Blair argues that the government’s investigation of Scheme 5 began with the Atlas Suit

filed against Blair in federal court in 2015. See ECF 156 at 20–21. Further, Blair contends that

by July 12, 2017—one month before Schnupp filed his qui tam suit—“the FBI had already

assembled all of the facts supporting its allegations that Defendants had purportedly violated the

AKS by paying commissions to 1099 sales representatives.” Id. at 21. Schnupp provided the Atlas

Complaint to the government in August 2017, with his Disclosure Memorandum.

Blair’s contention is amply supported by the record. In particular, Special Agent Choi filed

an Affidavit dated July 12, 2017 (ECF 156-20), in support of the government’s request for a search

warrant for J2. Agent Choi averred that the government’s investigation began when the Defense

Health Agency, the federal government entity that manages the activities of TRICARE, “provided

a report which detailed allegations of potential excessive, fraudulent billings of compound

prescriptions by Blair.” Id. at 7. According to Agent Choi, the report made reference to Dr. Rehrig,

who prescribed compound drugs for TRICARE patients that were filled by the Pharmacy. See id.

Notably, the Affidavit also references the Atlas Complaint. Id. at 11–12. Moreover, the Affidavit

references the Google search warrant signed by Judge Copperthite on January 20, 2017,

authorizing the search of email accounts “related to those involved in this fraudulent scheme under

investigation.” Id. at 16. The J2 warrant was approved on July 12, 2017. Id. at 24.

The events described by Agent Choi in the Affidavit took place well before Schnupp met

with government investigators, and before Schnupp filed his qui tam Complaint on August 15,

2017. ECF 1. Schnupp has not presented anything beyond bald assertions to support his claim

that in his interviews with the FBI, he revealed information as to Scheme 5 that was not already

known to the government.

Congress has sought to preclude relators from bringing claims based on information

gleaned from government criminal indictments. Although Schnupp argues that it was he “who

first contacted the government through the filing of his qui tam lawsuit,” ECF 165 at 45, this is not

true as to Scheme 5, the only scheme for which Schnupp seeks summary judgment. Indeed,

Schnupp filed the qui tam suit in August 2017, including allegations only as to Schemes 1 through

4. Two and a half years later, on March 3, 2020, the government filed the Superseding Indictment,

disclosing Scheme 5. Nearly two years after that, on December 3, 2021, Mr. Blair pleaded guilty

to a count in the Superseding Indictment that was based on conduct pertaining to Scheme 5. It

was six months after Mr. Blair’s guilty plea, and nearly five years after Schnupp originally filed

his qui tam suit, that Schnupp amended his qui tam suit to add Scheme 5. Armed with Mr. Blair’s

guilty plea, accompanied by its lengthy Stipulation, Schnupp now seeks monetary recovery.

As to Schemes 1 through 4, Schnupp could argue soundly that the public disclosure bar

does not apply, because his qui tam suit was filed before the government’s Indictment charged Mr.

Blair. Indeed, if Schnupp had sought summary judgment as to Schemes 1 through 4, there would

be little question that he would qualify as a whistleblower as to those claims. But, these are not

the claims for which Schnupp seeks summary judgment. Rather, Schnupp seeks summary

judgment only as to the conduct laid out in Count Thirty-One of the Superseding Indictment and

Mr. Blair’s Plea Agreement, for which he relies on the government’s proof.

Indeed, Schnupp does not dispute Blair’s contention that “Schnupp has taken only one

deposition and conducted very little written discovery” since he filed his pre-discovery motion for

summary judgment. ECF 156 at 12. Rather, Schnupp has done what the Supreme Court warned

against in Rockwell Int’l Corp., by pleading a theory of fraud for which he had some independent

knowledge of, i.e., Schemes 1 through 4, and “later amend[ing] the complaint to include theories

copied from the public domain or from materials in the Government's possession,” i.e., Scheme 5.

Rockwell Int’l Corp., 549 U.S. at 473. Schnupp seems to be the type of free-riding relator seeking

recovery on a parasitic allegation that Congress has tried to stifle by repeatedly amending the FCA.

See Beauchamp, 816 F.3d at 39 (quoting Graham Cty. Soil & Water, 559 U.S. at 295).

To allow Schnupp to recover as to Scheme 5 merely by piggybacking on the government’s

investigation of Mr. Blair, the Superseding Indictment, and the Plea Agreement would, in my view,

undermine the objective of the FCA. See Findley, 105 F.3d at 685. Based on the information

presented, I conclude that, as to Scheme 5, Schnupp does not qualify as an original source under

the definition’s first prong.

3. Section 3730(e)(4)(B)(ii)

To satisfy the second definition of original source, the relator must have “knowledge” that

is “independent of and materially adds to the publicly disclosed allegations or transactions.” 31

U.S.C. § 3730(e)(4)(B)(ii). And, again, the relator must have “voluntarily” provided “the

information” to the government prior to filing the qui tam action. Id.

The Disclosure Memorandum is rooted in 31 U.S.C. § 3730(b)(2). It states: “A copy of

the complaint and written disclosure of substantially all material evidence and information the

person possesses shall be served on the Government.” (Emphasis added.) I have already

determined that because the statute requires the relator to submit a Disclosure Memorandum, it

cannot be regarded as having been produced voluntarily.

As to the “independent” question, Schnupp argues that his disclosures to the government

through the Disclosure Memorandum in August 2017 are “independent” of the Superseding

Indictment. ECF 165 at 56. He also argues that his inclusion of the Dispense Report with his

Disclosure Memorandum of August 2017 “materially added” to the information contained in the

Superseding Indictment, “because it included every conceivable detail about each false claim

submitted by the [P]harmacy, including the claims underlying the commission payments that were

the focus of Count 31 to which Mr. Blair pled guilty.” Id. at 57.

In his Reply, Schnupp states that whether he qualifies as an original source under the

second prong “comes down to whether the Disclosure Report [he] provided to the government

prior to filing his lawsuit may be considered to have been ‘voluntarily’ provided.” Id. at 58.

Under 31 U.S.C. § 3730(b)(2), a relator must serve upon the government “written

disclosure of substantially all material evidence and information the person possesses” (emphasis

added). Schnupp does not suggest that he was not obligated to provide the Atlas Complaint and

the Dispense Report with the Disclosure Memorandum. Because Schnupp was required to include

such documents, disclosure of those documents cannot be regarded as made “voluntarily” under

31 U.S.C. § 3730(e)(4)(B)(ii). The statute’s language requiring disclosure of substantially all

material evidence possessed by the relator speaks for itself.

Having concluded that Schnupp is not an original source as to Scheme 5 under either prong

of 31 U.S.C. § 3730(e)(4)(B), I shall deny Schnupp’s Motion as to Scheme 5 and grant the Cross

Motion as to Scheme 5. See Beauchamp, 816 F.3d at 39 (quoting 31 U.S.C. § 3730(e)(4)).

In an abundance of caution, I address the parties’ alternative arguments as to Scheme 5.

C. Estoppel

Schnupp argues that Blair is collaterally estopped from denying liability as to any of the

allegations in this case. See ECF 165 at 13–25. In the Cross Reply, Blair counters that the elements

of Mr. Blair’s plea “do not permit statutory or common law collateral estoppel” as to all elements

of an FCA claim. ECF 170 at 6. Rather, Blair argues that Schnupp must still establish causation

and damages, which he has failed to do. Id.

Blair concedes that courts have interpreted a violation of the AKS as a per se false claim

for the purpose of the FCA. Id. at 15. But, Blair posits that the FCA requires additional elements

to establish liability against a defendant, including knowledge, materiality, and causation. Id. at

13. Moreover, Blair contends that “Schnupp does not cite one FCA case supporting this estoppel

argument or the notion that the Government is a ‘victim’ under the FCA. . . .” ECF 170 at 15.

Blair adds, id. “This is especially true in cases (like this one) that are brought by a private citizen

where the United States declines to intervene.”

In support of Blair’s position, Blair points to the case of United States v. Novak, No. 17 C

4887, 2018 WL 4205540, at *1 (N.D. Ill. Sept. 4, 2018), an FCA case in which the defendant had

previously been convicted of paying illegal remunerations under the AKS. The court said, id. at

*2: “The basic problem with the government’s argument is that the charges on which Novak was

convicted did not ‘charg[e] fraud or false statements.’ Rather, they charged violations of the Anti-

Kickback Statute. The elements that the jury had to find did not include false statements or fraud.”

United States ex rel. Doe v. Heart Solution, PC, 923 F.3d 308, 317–18 (3d Cir. 2019), is

also instructive. There, the Third Circuit concluded that although a defendant’s plea collaterally

estopped her from denying some elements of the FCA claims against her, the government, which

had intervened in the case, was still required to produce additional evidence to establish the

“materiality” and “causation” elements.

The doctrine of nonmutual offensive collateral estoppel applies when a non-party to a

previous action can “prevent a defendant in the current action from relitigating issues already

decided against him in that previous action.” S.E.C. v. Resnick, 604 F.Supp.2d 773, 778 (D. Md.

2009) (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5 (1979)); cf. Washington v.

Pellegrini, et al., __ F.4th __, 2025 WL 29228, at *9 (4th Cir. Jan. 6, 2025) (explaining the related

doctrine of nonmutual, defensive collateral estoppel). Here, Schnupp was not a party to the

Criminal Case. He is the party asserting nonmutual offensive collateral estoppel. A party asserting

nonmutual offensive collateral estoppel must establish that: (1) the issue sought to be precluded is

identical to the one previously litigated; (2) the issue was actually determined in the prior

proceeding; (3) that determination was a critical and necessary part of the decision in the prior

proceeding; (4) the prior judgment must be final and valid; and (5) the party to be estopped must

have had a full and fair opportunity to litigate the issue in the prior proceeding. Resnick, 604

F.Supp.2d at 778 (citing Sedlack v. Braswell Servs. Grp., Inc., 134 F.3d 219, 224 (4th Cir.1998)).

For claims arising under the FCA, the principle of collateral estoppel is codified at 31

U.S.C. § 3731(e):

[A] final judgment rendered in favor of the United States in any criminal proceeding

charging fraud or false statements, whether upon a verdict after trial or upon a

plea of guilty or nolo contendere, shall estop the defendant from denying the

essential elements of the offense in any action which involves the same transaction

as in the criminal proceeding and which is brought under subsection (a) or (b) of

section 3730.

In the Amended Complaint, Schnupp alleges false claims under 31 U.S.C. § 3729(a)(1)(A)

(Count I) and 31 U.S.C. § 3729(a)(1)(B) (Count II). ECF 30 at 19–20. Central to the

collateral estoppel analysis here is an examination of the facts contained in Mr. Blair’s plea in the

criminal case and a determination of what a factfinder must find in this civil action to establish

liability. The Fourth Circuit has stated: “Both a presentment claim and a false-record-or-statement

claim under the False Claims Act require four elements: (1) ‘a false statement or fraudulent course

of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that

caused the government to pay out money or to forfeit moneys due.’” Nicholson, 42 F.4th at 193

(quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 788 (4th Cir. 1999)).

A violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, “automatically constitutes

a false claim under the False Claims Act.” Mallory, 988 F.3d at 741 (citing Lutz, 853 F.3d at

135); accord 42 U.S.C. § 1320a-7b(g) (“[A] violation of this section constitutes a false or

fraudulent claim for purposes of subchapter III of chapter 37 of title 31.”). But, establishing a

violation of the AKS does not automatically establish all of the elements for a violation of the

False Claims Act.

For purposes of collateral estoppel, a defendant is bound by the statement of facts included

in his plea agreement. United States v. Wight, 839 F.2d 193, 196 (4th Cir. 1987) (“[A] defendant

is precluded from retrying issues necessary to his plea agreement in a later civil suit.); see Nat'l

Mortg. Warehouse, LLC v. Bankers First Mortg. Co., 208 F. Supp. 2d 565, 567 (D. Md. 2002)

(“As part of his guilty plea, [defendant] agreed to a Statement of Facts which leaves the material

allegations in the . . . complaints undisputed. . . . Consequently, he is collaterally estopped from

denying his liability.”); see also United States ex rel. Kline v. Docs at the Door, P.C., No. 13 C

7837, 2023 WL 2631647, at *5 (N.D. Ill. Mar. 24, 2023) (“[T]his court concludes that Ayeni is

legally bound by his admissions to the conduct underlying all of the false claims to which he

admitted in his plea agreement, not merely the one at issue on the single-count misdemeanor to

which he pleaded guilty.”), appeal dismissed sub nom. United States v. Ayeni, No. 23-1794, 2023

WL 7179960 (7th Cir. July 13, 2023); United States v. Harris, No. 06 C 2996, 2008 WL 4324032,

at *1 (N.D. Ill. Jan. 31, 2008) (holding defendant was collaterally estopped from challenging

additional admissions in his plea agreement in the civil proceeding against him), aff'd, 303 F. App'x

348 (7th Cir. 2008).

In the context of an FCA retaliation claim, the First Circuit has construed the 2010

amendment of the AKS, § 1320a-7b(g), to mean that “if there is a sufficient causal connection

between an AKS violation and a claim submitted to the federal government, that claim is false

within the meaning of the FCA.” Guilfoile v. Shields, 913 F.3d 178, 190 (1st Cir. 2019). It “further

read the AKS amendment as obviating the need for a plaintiff to plead materiality.” Id.

In this case, (1) Mr. Blair may not relitigate specific facts that he has admitted would have

been proven beyond a reasonable doubt if his Criminal Case had gone to trial; (2) these facts were

critical and necessary to the criminal plea and Mr. Blair’s acceptance of guilt; (3) the plea

agreement led to a final and valid judgment; and (4) Mr. Blair had a full and fair opportunity to

litigate the allegations against him in the Criminal Case. See ECF 156-22.26

Mr. Blair pled guilty to a violation of the AKS, not to a violation of the FCA. As noted, a

violation of the AKS constitutes a false claim under the FCA. Mallory, 988 F.3d at 741; Lutz, 853

F.3d at 135. But, to establish a violation of the FCA, the Fourth Circuit requires a relator to prove

more than a violation of the AKS. Therefore, I shall next address the parties’ causation arguments.

D. Causation

In their Cross Motion, defendants urge the Court to deny Schnupp’s Motion, claiming that

“his sole reliance on the Plea Agreement . . . does not establish the causation required by § 1320a-

26 Neither side has addressed the question of whether the Pharmacy is bound by the facts

to which Mr. Blair pled guilty in the Criminal Case. But, it is unnecessary to do so here because I

have determined that Schnupp is not the original source as to Scheme 5.

7b(g).” ECF 156 at 48. According to Blair, § 1320a-7b(g) includes a causation element that

requires a relator to establish that the government’s “FCA damages ‘result[ed] from ‘an AKS

violation.” Id. at 47 (citing United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 834 (8th

Cir. 2022)). Blair maintains that Schnupp must establish “a causal connection between the

purported false statements” of defendants and the damages incurred by the government. ECF 156

at 45. Further, Blair argues that “‘something more than a showing that a claim was merely

“tainted” by an AKS violation’” is necessary; and Schnupp must show that “‘the relevant provider

in an AKS-based FCA case was aware of the alleged kickback.’” Id. at 49 (quoting U.S. ex rel.

Fitzer v. Allergan, Inc., 2022 WL 1567645, at *6 (D. Md. May 18, 2022)). According to Blair,

the relevant provider here would be the doctor who prescribed the medications filled by BPI. ECF

156 at 43.

Defendants urge the Court to adopt a “but for” causation standard. See id. at 51.

Addressing the “but for” causation standard, defendants contend that “Schnupp has not identified

one claim for reimbursement with or without particularity that would not have occurred anyway.”

Id. at 52. According to defendants, this is because “no doctor or patient was ever directly (or

indirectly) exposed to any sort of payment or incentive” by the defendants. Id. at 52–53. But, they

contend that under either “but for” causation or the “causal link” test used in U.S. ex rel. Greenfield

v. Medco Health Solutions, Inc., 880 F. 3d 89 (3d Cir. 2018), discussed infra, Schnupp has failed

to meet his burden. ECF 156 at 51.

Defendants have submitted the declarations of a licensed pharmacist, Alyson Wooten (ECF

156-31), and a practicing physician, Norman Chideckel, M.D. (ECF 156-32), to support the

defense contention that “the compound medications at issue would have been prescribed and filled

regardless of BPI’s renumeration payments to the 1099 sales representatives.” ECF 156 at 54.

They add that the 1099 sales representatives who were paid by BPI “did not exhibit any sort of

demonstrated influence over the prescribing physicians and/or their patients to the point that the

sales representatives impact whether and what compounded medications were prescribed.” Id.

In the Cross Reply, Blair posits that “Schnupp must establish that the remunerations paid

to BPI’s independent sales representatives affected the clinical decision making of the doctors who

prescribed the medications that were ultimately filled by BPI and reimbursed by TRICARE.” ECF

170 at 17. Defendants state, id.: “The fundamental flaw in Schnupp’s FCA causation argument

is that he focuses on two isolated facts with no nexus: that Defendants paid remunerations and that

TRICARE reimbursements separately occurred.” In Blair’s view, “[t]he correct focus for

establishing FCA causation (under either the ‘but for’ or ‘causal link’ standard) is that the

TRICARE reimbursements (and underlying medical care) occurred because of Defendants’

payment of remunerations.” Id.

As stated, the Fourth Circuit has made clear that a violation of the AKS “that results in a

federal health care payment is a per se false claim under the FCA.” Lutz, 853 F.3d at 135; see

Mallory, 988 F.3d at 741; ECF 165 at 20. Schnupp argues that as part of Mr. Blair’s plea

agreement, he “‘stipulate[d] and agree[d] that the financial loss he caused to TRICARE resulted

from the claims for reimbursement that Defendant submitted and caused to be submitted to

TRICARE.’” ECF 165 at 17–18 (quoting ECF 65-3, ¶ 19) (emphasis in ECF 165).27 Moreover,

Schnupp points to Mr. Blair’s certification in his plea agreement that he had reviewed the

attachments, “agree[d] with the statement of facts in each attachment,” and understood that the

27 Presumably, by “Defendant” Schnupp is referring to Mr. Blair. But, he has sued both

Mr. Blair and BPI.

attachments were “‘included as part of [his] plea agreement with the government in this case.’”

ECF 165 at 30 (quoting ECF 65-3 at 6).

In addition, Schnupp argues that Blair’s arguments regarding “but for” causation are

inconsistent with Mallory, 988 F.3d 730. ECF 165 at 24. According to Schnupp, the Fourth

Circuit in Mallory “rejected Blair’s argument . . ., explaining that the AKS ‘statute expressly

prohibits individuals from receiving remuneration in exchange for arranging for or recommending

purchasing healthcare services [which] includes sales representatives who are compensated for

recommending a healthcare service . . . to physicians.’” ECF 165 at 25 n.6 (quoting Mallory, 988

F.3d at 738) (citation omitted) (cleaned up).

Blair regards Schnupp’s interpretation of Mallory as “disingenuous.” ECF 170 at 20. First,

Blair contends that, unlike this case, the defendants’ FCA violations in Mallory involved direct

payments to physicians. Id. Additionally, defendants posit that Mallory does not establish that

“an AKS § 1320a-7b(b)(2)(a) violation for paying indirect remunerations to salespeople, standing

on its own, is sufficient to establish FCA causation.” Id.

Defendant Mallory was the owner of a blood testing laboratory that he founded. Mallory,

988 F.3d at 734. Defendants Dent and Johnson led its sales operations. Id. They also formed

Defendant BlueWave Healthcare Consultants, Inc. (“BlueWave”). Id. at 735. Of relevance,

BlueWave entered into an “exclusive contract” with the lab “to market and sell the lab’s tests in

exchange for a percentage of the lab’s revenue based on the number of tests that physicians

ordered. Id. It reached a similar agreement with another lab. Id.

At trial, the government argued that the AKS prohibited the laboratories from paying

BlueWave to induce others to arrange the tests, and also barred BlueWave from paying its sales

force to recommend purchasing the tests. Id. at 735–36. The labs also paid doctors a “process and

handling fee.” Id. at 735. Between 2010 and mid 2014, Medicare and TRICARE paid Mallory’s

lab almost $540 million, and the lab, in turn, paid BlueWave about $220 million. Id. The

government contended that the “volume-based commissions” paid by the lab constituted a

violation of the AKS because the commissions constituted “remuneration” intended to induce sales

representatives “to sell as many tests as possible.” Id.

The defendants were found liable for violations of the FCA. Id. at 730, 734. The

government established that the defendants violated the FCA by, inter alia, paying physicians “for

drawing patients’ blood and processing the blood samples in violation of the [AKS].” Id at 735.

On appeal to the Fourth Circuit, the Court said: “The Anti-Kickback Statute expressly

states that ‘a claim that includes items or services resulting from a violation of this section

constitutes a false or fraudulent claim for purposes of’ the False Claims Act.” Id. at 741. The

Fourth Circuit also concluded that the jury instruction requiring the government to “prove ‘that at

least one purpose of the remuneration’ was to induce the referral of services” was proper. Id. This

suggests that, to prove a violation of the FCA, it is not enough merely to establish a violation of

the AKS.

The Sixth Circuit has also provided a useful interpretation of the “but for” causation

standard. It has said: “So long as proof exists that the referrals would not have been made without

the remuneration, and that claims would not have been submitted to the government without those

referrals, causation for False Claims lawsuits would be satisfied too.” United States ex rel. Martin

v. Hathaway, 63 F.4th 1043, 1055 (6th Cir.), cert. denied, ___ U.S. ___, 144 S. Ct. 224 (2023).

The alternative standard cited by both parties is the “causal link” standard used in

Greenfield, 880 F.3d 89. See ECF 156 at 49–51; ECF 165 at 21–23. In Greenfield, the plaintiff,

Greenfield, filed a qui tam suit against Accredo Health Group, Inc. (“Accredo”), a specialty

pharmacy that provided home care for hemophilia patients. 880 F.3d at 91. Accredo made

donations to charities, and two of these charities allegedly recommended Accredo as an approved

provider for hemophilia patients. Id. This raised the question of “whether the donations came

with something expected in return for the recommendations, which might trigger violations of the

Anti–Kickback Statute, 42 U.S.C. § 1320a-7b(b), and, if so, whether Accredo's healthcare

reimbursement claims for persons who may have received the charities’ recommendations ran

afoul of the False Claims Act, 31 U.S.C. § 3729(a)(1)(A)-(B).” Id. After the district court granted

summary judgment to Accredo, Greenfield appealed. Id.

The Third Circuit analyzed the connection between a violation of the AKS and a violation

of the FCA by looking to the intention of Congress. Id. at 96. With regard to the AKS, the court

concluded that because Congress intended “‘to strengthen the capability of the Government to

detect, prosecute, and punish fraudulent activities under the [M]edicare and [M]edicaid

programs,’” id. (quoting H.R. Rep. No. 95-393, at 1 (1977)), “[t]his counsel[ed] requiring

something less than proof that the underlying medical care would not have been provided but for

a kickback.” Greenfield, 880 F.3d at 96 (first two alterations in Greenfield). Further, the court

noted: “Although the legislative history of the provision does not explain the term ‘resulting from,’

the Congressional Record indicates it was enacted to avert ‘legal challenges that sometimes defeat

legitimate enforcement efforts.’” Id. (quoting 155 Cong. Rec. at S10853).

With regard to the FCA, the court pointed out that the “‘Act is intended to reach all

fraudulent attempts to cause the Government to pay ou[t] sums of money or to deliver property or

services,’ and ‘[a] false claim for reimbursement under Medicare, Medicaid, or similar program

. . . may be false even though the services are provided as claimed.’” Greenfield, 880 F.3d at 96

(quoting S. Rep. No. 99-345, at 9 (1986)) (emphasis added in Greenfield). Thus, the Third Circuit

concluded that a requirement that plaintiff must prove that “a kickback actually influenced a

patient's or medical professional's judgment . . . would hamper False Claims Act cases under that

provision even though Congress enacted it to ‘strengthen[ ] whistleblower actions based on

medical care kickbacks.’” Greenfield, 880 F.3d at 97 (quoting 155 Cong. Rec. at S10853).

In applying this standard, the Greenfield Court stated: “Greenfield d[id] not need to prove

[the charities’] referrals actually caused their members to use a particular healthcare provider.”

Greenfield, 880 F.3d at 98. The court concluded: “For a False Claims Act violation, Greenfield

must prove that at least one of Accredo's claims sought reimbursement for medical care that was

provided in violation of the Anti-Kickback Statute (as a kickback renders a subsequent claim

ineligible for payment).” Id.

As applied to the facts in Greenfield, the court also stated, id. at 99:

It follows that Greenfield may not prevail on summary judgment simply by

demonstrating that Accredo submitted federal claims while allegedly paying

kickbacks. Nor may he prevail by hypothesizing that at least some of [the charities’]

recommendations must have been directed to federal beneficiaries because Accredo

submitted claims for 24 federally insured patients during the relevant time period.

Instead, he must point to at least one claim that covered a patient who was

recommended or referred to Accredo by [the charities].

As noted, Mr. Blair pleaded guilty to Count Thirty-One of the Superseding Indictment,

which charged him with payment of illegal remunerations, in violation of 42 U.S.C. § 1320a-

7b(b)(2)(A). Criminal Case, ECF 181. The elements of the offense include the following:

(a) defendant paid, or offered to pay, any remuneration; (b) that one purpose of the payment was

to induce the recipient of the payment to refer an individual for the furnishing of any item or for

which payment may be made in whole or in part by a federal health care program, such as the

TRICARE program, and (c) defendant acted knowingly and willfully. Id. at 2–3.

The Plea Agreement included the Stipulation (id., ECF 181-1), which said, in part, id. at 3,

4 (first bracket added):

Blair presented B.A. with a signed “Distributor Agreement” between Blair

Pharmacy and Atlas, in which Blair agreed to pay B.A. [i.e., Mr. Alavi] as

follows[:] “commission will be 50% of gross reimbursement to [Blair Pharmacy]

paid bi-weekly.” The Distributor Agreement required Atlas to use Blair Pharmacy

exclusively, and to refer all business within his established territory to Blair

Pharmacy, and Blair induced and encouraged these referrals to his pharmacy by

offering B.A. a 50% percentage payment of any money that Blair received from

health care benefit programs. The payment of 50% of the health care benefit

program reimbursement monies was the “sole compensation” under the November

24, 2014 financial agreement between Blair and B.A. B.A. was not paid any money

or compensation, unless Blair was successful in obtaining reimbursement from a

health care benefit program for a prescription that B.A. referred to Blair, and then,

and only then was B.A. paid a percentage of the successful reimbursement.

This “Distributor Agreement” was thus a financial arrangement based on

the value and volume of prescription referrals that B.A. caused to be directed to

Blair’s pharmacy, including referrals of federal health care program business, such

as TRICARE.

* * *

B.A. influenced the decision regarding which pharmacy the prescriptions were sent

to, in that B.A. directed and sent and referred all of the pain and scar cream

prescriptions S.R. [a doctor] authorized directly to Blair’s pharmacy. Neither S.R.,

nor the TRICARE beneficiaries for whom the creams were authorized, had a chance

or opportunity to choose which pharmacy they wanted to fill the prescription

because B.A. submitted the prescriptions directly to Blair.

In view of the content of the Stipulation, the Court need not decide which causation

standard is appropriate. This is because both standards are readily satisfied with the admissions in

the Stipulation.

For example, the link to which the Greenfield Court refers is satisfied with the following

undisputed facts set forth in the Stipulation incorporated in the Plea Agreement, id. at 5:

After receiving payment from TRICARE for the prescriptions B.A. directed to Blair

Pharmacy, Blair paid 50% of the reimbursement amount to B.A.

* * *

Blair admits that he made payments of illegal remunerations in violation of

42 U.S.C. § 1320a-7b(b), in that he knowingly and willfully paid, and offered to

pay, remuneration; and that one purpose of the payment was to induce the recipient

of the payment to refer an individual for the furnishing of any item or service, for

which payment was made, in whole or in part, by TRICARE, a federal health care

benefit program. Blair further agrees that TRICARE would not have approved of

or reimbursed any claim for compounded ingredients made by Blair Pharmacy, had

TRICARE known that Blair had agreed to pay a 1099 independent contractor based

on the volume and value-based commission of prescription referrals of TRICARE

business to Blair Pharmacy.

The “but for” standard is satisfied by other admissions of Mr. Blair contained in the

Stipulation, id. at 4:

As to S.R.’s patients, there were times when some of his TRICARE patients

received cream bottles in the mail from Blair Pharmacy, the receipt of a box on

their doorstep was the first time they learned that a prescription for a cream or

vitamin had been written for them. In some instances, the beneficiaries did not

need, did not want, and did not use the creams or vitamins that they received on

their doorstep.

* * *

Some of the TRICARE beneficiaries had no idea of the cost to TRICARE of these

creams and vitamins that they received in the mail. Other TRICARE beneficiaries

learned about the high cost of the creams and vitamins after they reviewed their

TRICARE Explanation of Benefits letter a month or two after they received the

creams on their doorstep. Some of these TRICARE beneficiaries lodged official

complaints, and made fraud referrals to TRICARE and ESI. When physician S.R.,

referenced above, learned of the cost of the creams he had authorized prescriptions

for, he was outraged at the high costs, and he immediately stopped authorizing any

additional cream prescriptions and he provided notice of the problem to his

management. S.R. advised TRICARE patients who made complaints about the

creams, to send the creams back to the pharmacy.

Therefore, contrary to Blair’s assertions, Schnupp’s reliance on the Plea Agreement

would establish causation, as required by 42 U.S.C. § 1320a-7b(g).

E. Schemes 1 Through 4

As noted, Schnupp seeks summary judgment only as to Scheme 5, and has indicated his

“intention . . . to seek permission to voluntarily dismiss the remaining allegations in the Amended

Complaint” if summary judgment is granted. ECF 165 at 66. In the Cross Motion, however, Blair

seeks summary judgment as to all claims. Therefore, I shall address Schemes 1 through 4.

Blair argues: “The record is completely devoid of any evidence that supports Schnupp

[sic] allegations with respect to Defendants [sic] (Scheme 1) billing 360 milligrams of product but

only dispensing 300 grams, (Scheme 2) billing for Sterabase but dispensing medication containing

Lipoderm, (Scheme 3) billing for compounds containing 10% Gabapentin while dispensing

medication containing only 6% Gabapentin, and (Scheme 4) utilizing prepaid ‘burner’ credit cards

to pay patient copays.” ECF 156 at 28. Blair concludes, id. “Schnupp has not and cannot meet

his burden of proof and therefore Defendants are entitled to summary judgment on Schemes 1

through 4 of the Amended Complaint.”

Schnupp contends that Count Thirty-One of the Superseding Indictment, to which Mr.

Blair pled guilty, begins by incorporating Paragraphs 1 through 35 of the General Allegations of

the Superseding Indictment, which provides details of Schemes 1 through 4. ECF 165 at 64–65.

Therefore, Schnupp urges the Court to deny the Cross Motion. Id.

The schemes described in Paragraphs 1 through 35 of the Superseding Indictment were

specifically the subject of counts to which Mr. Blair did not plead guilty. See ECF 65-2 at 10–16.

And, Schnupp cites no case law that would permit the Court to consider these paragraphs as

admissions by Mr. Blair. To defeat summary judgment, the evidence must be “such that a

reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.

I will address each scheme, in turn.

1. Scheme 1

In Schnupp’s Disclosure Memorandum provided to the government, Scheme 1 is described

as follows: “Defendant Matthew Blair directed Relator to routinely bill the government for 360

grams of compounded drug when only 300 grams were actually dispensed to the Medicare or

TRICARE beneficiary.” ECF 156-2 at 4.

As Blair observes, the basis for Schnupp’s allegations for Scheme 1 is that the “‘pumps’

that BPI used to ship compounded medications to customers only ‘held a maximum of 150 grams

each,’ and, since only two (2) containers were used for each prescription, ‘only 300 grams of

compounded medication were provided’ whenever BPI billed for 360 grams.” ECF 156 at 28

(citing ECF 156-23 at 7–8).

Included with Blair’s Cross Motion is a document titled: “Relator/Plaintiff’s Answers To

Defendant Matthew E. Blair Pharmacy Inc.’s First Set Of Interrogatories.” ECF 156-23. In this

document, Schnupp was asked to “[g]ive a full and complete account of the basis for [his]

contention that BPI and/or Blair billed for a greater amount of a given ‘compounded drug’ than

was dispensed as specifically set forth in Paragraphs 51–58 of the Amended Complaint.” Id. at 7.

Schnupp answered as follows: “The pumps the prescriptions were dispensed in held a maximum

of 150 grams each. Two pumps were used per prescription. Thus only 300 grams of compounded

medication were provided, but BPI billed for 360 grams.” Id. at 7–8.

Defendants retained David Joseph, a licensed pharmacist, to “investigate[] and test[]

Schnupp’s Scheme 1 allegations in a laboratory setting.” ECF 156 at 29. According to Blair,

Joseph’s tests demonstrate “that two 150 milliliters pumps can hold 360 grams of compound

medication,” which they claim “empirically disproves Schnupp’s allegations in Scheme 1.” Id. at

30. Mr. Joseph was never deposed by Schnupp. Nor has Schnupp presented evidence to contradict

Mr. Joseph, apart from his own assertions.

In the Criminal Case, I conducted Daubert hearings on July 12, 2021, and September 28,

2021. See Criminal Case, ECF 133; id., ECF 159; see also Daubert v. Merrell Dow Pharms., Inc.,

509 U.S. 579 (1993). In my Memorandum Opinion of October 29, 2021 (ECF 169), I considered

the testimony of David Joseph, R.Ph., FIACP, in which he claimed that he conducted experiments

that demonstrated that a 150 ml container can hold 180 grams or more of a compounded formula.

Id. at 52, 54, 55. At the Daubert hearing, the government endeavored to undermine the reliability

of those experiments. See id. at 52, 55–58. In my Memorandum Opinion, I stated, id. at 56: “The

process Mr. Joseph outlined was not complicated science. There were certainly errors in [his]

early experiments, but they were corrected. Mr. Joseph will be permitted to testify about the

experiments he conducted to establish that, on the occasions of his tests, a 150 millileter container

held 180 grams of product.” But, I also stated, id.: “[T]here is absolutely no basis for Mr. Joseph

to opine . . . that the outcome of his experiments would be the same, regardless of the ingredients

he might use.”

Schnupp provides no rebuttal except to cite to records of his interview with the FBI (ECF

67-2) and his deposition transcript (ECF 149-2), where he discussed his use of the pumps as the

Pharmacist in Charge. He also baldly asserts that he “has personal knowledge” of Schemes 1

through 4 “based upon his own observations at Blair Pharmacy.” ECF 165 at 63.

Nevertheless, the jury does not have to credit Mr. Joseph’s experiments. And, even

assuming that Joseph’s tests are accurate, just because Blair Pharmacy could have filled 360 grams

of compound medication does not prove that this is what actually happened. Moreover, Relator

has stated in the Complaint, the Amended Complaint, his FBI interview, and in his sworn

deposition testimony that he has personal knowledge of this scheme. It is for the jury to assess the

credibility of Schnupp’s testimony.

As such, there is a dispute of material fact. The evidence is not “so one-sided that [Blair]

must prevail as a matter of law.” Anderson, 477 U.S. at 252.

2. Scheme 2

In Schnupp’s Disclosure Memorandum, Scheme 2 is described as follows: “Defendant

Matthew Blair . . . instructed Relator to use Lipoderm cream, but bill the government as if the more

expensive SteraBase cream had been used when compounding the drugs dispensed.” ECF 156-21

at 4. Relevant here, Schnupp also stated: “The Pharmacy will be unable to produce purchase

records to document acquisition of SteraBase cream in the amounts billed to the government.” Id.

In regard to Scheme 2, Blair contends that Schnupp has no support for these allegations,

other than his own testimony. ECF 156 at 30. At his deposition, Schnupp testified that he was

told by Mr. Blair “that Sterabase only reimbursed for a greater amount, but Lipoderm actually

created a better product, and patients were complaining about the compound being running [sic]

and sticky. . . .” ECF 156-2 at 31. Schnupp also said, id.: “[Mr. Blair] told me that the independent

contractors were used to getting paid out on the reimbursements that were associated with

Sterabase. So he said continue billing for Sterabase, but use Lipoderm to result in a better product.”

Schnupp was then asked, id.: “So your testimony is Mr. Blair told you to do it, and then, you did

it, and you also lied on these pharmacist worksheets, and you fabricated them; is that what you’re

saying?” Schnupp responded: “Yes.” Id.

According to defendants, Schnupp’s claim relies on defendants’ purported inability to

produce evidence showing the acquisition of Sterabase cream. ECF 156 at 31. But, Blair contends

that defendants have produced documentation that the Pharmacy acquired shipments of Sterabase

that it used to fill the compound prescriptions. Id. Defendants include with their Cross Motion an

email dated December 30, 2014, to Mr. Blair from Harry Avetisyan, an Account Executive at

Pharmaceutica North American, Inc., confirming that Avetisyan sent the Pharmacy 12,500 grams

of Sterabase. See ECF 156-26 at 2.

Blair also argues that Schnupp does not recall “when and if [the Pharmacy] stopped

receiving Sterabase samples.” ECF 156 at 31. Indeed, at his deposition, Schnupp stated that he

did not remember when BPI last received a sample of Sterabase. ECF 156-2 at 44. But, he

estimated that BPI received samples “once a month at the most” for a year. Id.

In his Affidavit, Schnupp responds that he “reviewed Blair’s argument . . . that Blair

Pharmacy received 12,500 grams of Sterabase samples,” and he believes it to be “an accurate

amount.” ECF 165-1 at 4. However, he also states that he reviewed the Dispense Report, “which

records the amounts of each ingredient billed for,” and it shows that the Pharmacy “billed for

prescriptions containing 66,172.32 grams of Sterabase.” Id. Schnupp argues that this corroborates

his testimony regarding drug substitution. Id.

As discussed, supra, in the face of conflicting evidence, summary judgment is not

appropriate. It is the function of the factfinder to resolve factual disputes, including matters of

witness credibility. See Black & Decker Corp., 436 F.3d at 442.

3. Scheme 3

In Schnupp’s Disclosure Memorandum, Scheme 3 is described as follows: “For a period

of time, certain prescriptions were made with 10% Gabapentin. Compounds containing 10%

Gapapentin, however, hardened prematurely making the drug difficult to spread over the skin.

Blair Pharmacy addressed this problem by reducing the amount of Gabapentin to 6% instead of

10%. This change solved the premature hardening problem, however, Defendant Blair instructed

Relator to continue billing for 10% Gabapentin as a way to increase profits.” ECF 156-21 at 4.

Thus, Schnupp contends that “Mr. Blair instructed that we continue to bill at the 10% level because

salespersons were used to obtaining the higher commissions associated with the use of Gabapentin

at 10%.” ECF 156-23 at 8.

Blair counters that Schnupp has not: “(1) identified any witnesses in support of his

allegations; (2) produced any documents that support his allegations; or (3) provided any

medications compounded by BPI that he contends contains the Gabapentin reduction he alleges.”

ECF 156 at 32. Moreover, defendants contend that the Dispense Report “establishes that BPI

began dispensing compounds containing both 10% and 6% Gabapentin in September 2014, when

BPI began operating,” which Blair contends contradicts Schnupp’s allegations. Id. at 33.

Schnupp provides no rebuttal. But, at Schnupp’s deposition, he testified that he recalled a

communication between himself and one of the ingredient manufacturers because BPI was “trying

to figure out why all of a sudden patients’ creams were solidifying,” and after “speaking to some

of the consultants” at the manufacturer, they determined that the issue was “an interaction when

[Mr. Blair] increased the percentage of Gabapentin from 6 to 10 percent, that it react[ed] with . . .

Flurbiprofen, and then, creates [sic] the cream to solidify.” ECF 149-2 at 69. Moreover, Schnupp

testified that the situation with the Gabapentin cream “ultimately resulted in patients not refilling

their prescriptions, which affected the revenue,” so Mr. Blair told

him to substitute for a higher percentage “to increase refill for patients.” Id. at 72.

As discussed, testimony from a nonmovant that is based on personal knowledge can

constitute evidence of material facts, even if it is uncorroborated and self-serving. Lovett, 700 F.

App’x at 212. The testimony of the Relator is sufficient to create a dispute of material fact.

4. Scheme 4

Schnupp’s Disclosure Memorandum describes Scheme 4 as follows: “A single compound

drug prescription can be worth thousands of dollars to the pharmacy that fills the prescription and

dispenses the drug. Through his interaction with Defendant Blair, Relator learned that Blair

routinely paid patients’ copayments with prepaid credit card or ‘burner cards’ to avoid losing

lucrative sales and to incentivize patients to use Blair Pharmacy.” ECF 156-21 at 4–5.

In regard to Scheme 4, Blair maintains that Schnupp has admitted “that he has no evidence

to support his allegations related to ‘burner cards.’” ECF 156 at 33 (citing ECF 156-2 at 26–27).

As is also the case with the third scheme, Schnupp’s deposition testimony is based on his personal

knowledge. For example, Schnupp was asked: “[T]here’s no document that would demonstrate

that he did not purchase the burner cards?” ECF 156-2 at 27. Schnupp agreed. Id. Schnupp was

then asked, id.: “There would only be documents that demonstrate he did purchase the burner

cards. So I’m asking you, who has the burden of proof in this case, to put forward whatever

evidence you have that he did it?” Schnupp responded: “I have firsthand knowledge. I witnessed

him do it.” Id.

Notably, a civil suit under the FCA sounds in fraud, and thus is “subject to” Rule 9(b),

which requires that claimants plead fraud with particularity.” Harrison, 176 F.3d at 783–84. Fed.

R. Civ. P. 9(b) states: “In alleging fraud or mistake, a party must state with particularity the

circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a

person's mind may be alleged generally.”

To be sure, Rule 9(b) is particularly useful in addressing a motion to dismiss, and the

motions here seek summary judgment. But, even at the outset of a fraud case, the heightened

pleading standard of Rule 9(b) requires a plaintiff alleging claims that sound in fraud to “at a

minimum, describe the time, place, and contents of the false representations, as well as the identity

of the person making the misrepresentation and what he obtained thereby.’” United States ex rel.

Nathan v. Takeda Pharms. N. Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013) (citation

omitted); see United States ex rel. Owens v. First Kuwaiti Gen. Trading & Contracting Co., 612

F.3d 724, 731 (4th Cir. 2010); see also Harrison, 176 F.3d at 784.

“A ‘complaint fails to meet the particularity requirements of Rule 9(b) when a plaintiff

asserts merely conclusory allegations of fraud . . . without identifying each individual defendant's

participation in the alleged fraud.’” Kimberlin v. Hunton & Williams LLP, GJH-15-723, 2016 WL

1270982, at *7 (D. Md. Mar. 29, 2016) (citing Adams v. NVR Homes, Inc., 193 F.R.D. 243, 250

(D. Md. 2000)). In other words, “‘Rule 9(b) requires plaintiffs to plead the who, what, when,

where, and how: the first paragraph of any newspaper story.’” Crest Constr. II, Inc. v. Doe, 660

F.3d 346, 353 (8th Cir. 2011) (citation omitted); see United States ex rel. Wilson v. Kellogg Brown

& Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008). By this stage in the case, a plaintiff certainly

should satisfy these criteria.

The “‘clear intent of Rule 9(b) is to eliminate fraud actions in which all the facts are learned

through discovery after the complaint is filed.’” Harrison, 176 F.3d at 789 (citation

omitted); see Wilson, 525 F.3d at 380 (“[I]f allowed to go forward, Relators’ FCA claim would

have to rest primarily on facts learned through the costly process of discovery. This is precisely

what Rule 9(b) seeks to prevent.”). Indeed, Rule 9(b) serves several purposes. In Harrison, 176

F.3d 776, the Court said, id. at 784 (citation omitted):

First, the rule ensures that the defendant has sufficient information to formulate a

defense by putting it on notice of the conduct complained

of . . . . Second, Rule 9(b) exists to protect defendants from frivolous suits. A third

reason for the rule is to eliminate fraud actions in which all the facts are learned

after discovery. Finally, Rule 9(b) protects defendants from harm to their goodwill

and reputation.”

Several cases have clarified Rule 9(b)’s “who,” “what,” and “when” requirements in the

context of the Act. As to “who,” in FCA cases where the defendant is a corporate

entity, Rule 9(b) requires the plaintiff to name the individuals involved in the allegedly fraudulent

conduct. See, e.g., United States ex rel. Robinson v. Northrop Corp., 149 F.R.D. 142, 145 (N.D.

Ill. 1993) (stating that Rule 9(b) requires a plaintiff asserting a FCA claim against a corporate

defendant to specify the “identity and/or role of the individual employee involved in the alleged

fraud.”). With respect to “what,” a plaintiff must show a link between allegedly wrongful conduct

and a claim for payment actually submitted to the government. See, e.g., United States ex rel.

Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 2002) (noting

that Rule 9(b) “does not permit a False Claims Act plaintiff merely to describe a private scheme

in detail but then to allege simply and without any stated reason for his belief that claims requesting

illegal payments must have been submitted, were likely submitted[,] or should have been submitted

to the Government.”), cert. denied, 537 U.S. 1105 (2003). Finally, as to

“when,” Rule 9(b) requires a plaintiff to allege with particularity the dates of the supposed

fraudulent conduct. See, e.g., United States ex rel. Cericola v. Fed. Nat. Mortg. Assoc., 529 F.

Supp. 2d 1139, 1146 (C.D. Cal. 2007) (stating that Rule 9(b)’s requirements were not fulfilled

when, among other deficiencies, a plaintiff's complaint alleged that FCA violations occurred

between 1995 and 1998 but did not allege any specific dates).

This case is well past the motion to dismiss stage.28 At this juncture, the Relator should be

able to point to evidence that supports bald allegations expected in the suit. Yet, the Relator’s

evidence is thin and self-serving. Schnupp has not pointed to any evidence of the burner card

scheme, apart from his own testimony that he purportedly witnessed Mr. Blair “do it.” See ECF

156-2 at 27. He has not provided any receipts of Mr. Blair’s alleged purchase of the burner cards,

nor has he provided any pharmacy payment records showing alleged use of the burner cards. He

28 Defendants previously moved to dismiss under Rule 9(b). ECF 38 at 2. I denied the

motion by Memorandum Opinion (ECF 55) and Order (ECF 56) of December 9, 2022.

has not pointed to specific prescriptions that were allegedly paid by way of burner cards, nor has

he identified patients whose prescriptions were allegedly paid with burner cards. He has not

identified how many prescriptions were allegedly paid with burner cards, nor the time period

during which Mr. Blair allegedly did so.

Schnupp’s bare-bones assertion is not sufficient to create a dispute of material fact as to

Scheme 4. Therefore, I shall grant summary judgment in favor of defendants as to Scheme 4.

F. Damages

Schnupp calculated the treble damages he claims Blair owes, pursuant to 31 U.S.C.

§ 3729(a)(1). See ECF 149 at 23. This sum is based on the Stipulation, in which Mr. Blair admitted

the factual basis for his illegal kickback scheme. See Criminal Case, ECF 181-1.

The Stipulation begins: “The undersigned parties stipulate and agree that if this case had

proceeded to trial, [the government] would have proven the following facts beyond a reasonable

doubt.” Id. at 15 (emphasis in original). It continues: “The amount of $6,352,941.66 (as described

in detail in Attachment B, incorporated herein) was the total reimbursement amount TRICARE

paid to Blair Pharmacy from November 2014–May 2015, based upon the claims Blair submitted

to TRICARE tainted by remuneration payments Blair Pharmacy paid to independent 1099 sales

contractors.” Id. at 19. And, as stated in the Stipulation, Attachment B to the Plea Agreement

identifies 582 specific false claims submitted by defendants to TRICARE, in violation of the Anti-

Kickback Statute. Id. at 21–35. Accordingly, there is no dispute that Blair submitted 582 false

claims to TRICARE, totaling $6,352,941.66. Blair Pharmacy retained half of that sum, and the

other half was paid by BPI to independent contractors, such as Atlas. Criminal Case, ECF 181-1

at 5.

However, defendants contend there is still a factual dispute as to the “true measure of the

Government’s FCA damages in this case.” ECF 156 at 64. They argue that “[t]he baseline figure

for Schnupp’s damages calculation—$6,352,941.66—represents the global amount of TRICARE

reimbursements from all of BPI’S 1099 sales representatives,” Id. at 66 (emphasis in original), but

that the Plea Agreement and Count Thirty-One of the Superseding Indictment refer to payments

defendants made to Atlas and Alavi, “and not to any of the other 1099 sales representatives.

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