US Ex Rel. Frank Solis v. Millennium Pharmaceuticals

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES EX REL. FRANK No. 15-16953

SOLIS,

Plaintiff-Appellant, D.C. No.

2:09-cv-03010-

v. MCE-EFB

MILLENNIUM PHARMACEUTICALS,

INC.; SCHERING-PLOUGH OPINION

CORPORATION; MERCK & CO.,

Defendants-Appellees.

UNITED STATES EX REL. FRANK No. 15-17055

SOLIS,

Plaintiff-Appellee, D.C. No.

2:09-cv-03010-

v. MCE-EFB

MILLENNIUM PHARMACEUTICALS,

INC.,

Defendant-Appellant,

and

SCHERING-PLOUGH CORPORATION;

MERCK & CO.,

Defendants.

2 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

UNITED STATES EX REL. FRANK No. 15-17057

SOLIS,

Plaintiff-Appellee, D.C. No.

2:09-cv-03010-

v. MCE-EFB

SCHERING-PLOUGH CORPORATION;

MERCK & CO.,

Defendants-Appellants,

and

MILLENNIUM PHARMACEUTICALS,

INC.,

Defendant.

Appeal from the United States District Court

for the Eastern District of California

Morrison C. England, Jr., District Judge, Presiding

Argued and Submitted October 17, 2017

San Francisco, California

Filed March 15, 2018

Before: J. Clifford Wallace, Consuelo M. Callahan,

and Jacqueline H. Nguyen, Circuit Judges.

Opinion by Judge Wallace

UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM. 3

SUMMARY*

False Claims Act

The panel affirmed in part, and vacated and remanded in

part, the district court’s Fed. R. Civ. P. 12(b)(1) dismissal of

a False Claims Act (“FCA”) action brought against three

pharmaceutical companies.

Frank Solis alleged that his former employers violated

state law and the federal FCA by promoting dangerous off-

label uses of a cardiovascular drug, Integrilin, and by paying

physicians kickbacks to prescribe Integrilin and an antibiotic

drug, Avelox. The district court found that Solis’s FCA

claims were foreclosed by the public disclosure bar, which

deprives federal courts of subject matter jurisdiction over

FCA suits when the alleged fraud has already been publicly

disclosed, unless the relator is deemed an original source, and

declined to exercise supplemental jurisdiction over the state

law claims.

The panel held that Solis’s Integrilin claims were

substantially similar to those in prior public disclosures, and

were close enough in kind and degree to have put the

government on notice to investigate the alleged fraud before

Solis filed his complaint. The panel vacated the dismissal of

Solis’s Integrilin claims and remanded for the district court to

determine whether Solis qualified for the “original source”

exception under United States ex rel. Hartpence v. Kinetic

Concepts, Inc., 792 F.3d 1121, 1123, 1129–30 (9th Cir. 2015)

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

4 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

(en banc). The panel did not reach the sufficiency of Solis’s

Integrilin claims.

Concerning Solis’s Avelox claims, the panel held that the

district court clearly erred in finding that the Avelox claims

were publicly disclosed based on court complaints that never

mentioned Avelox. The panel affirmed dismissal of Solis’s

Avelox claims on the alternative ground that they failed to

satisfy Fed. R. Civ. P. 9(b). The panel remanded with

instructions to the district court to determine whether to grant

Solis leave to amend his Avelox claims.

COUNSEL

Audra Ibarra (argued), Law Office of Audra Ibarra, Palo Alto,

California; C. Brooks Cutter and John R. Parker Jr., Cutter

Law P.C., Sacramento, California; for Plaintiff-

Appellant/Cross-Appellee.

Kimberly A. Dunne (argued), Sean Commons, and James M.

Perez, Sidley Austin LLP, Los Angeles, California; Douglas

H. Hallward-Driemeier (argued) and Jonathan R. Ference-

Burke, Ropes & Gray LLP, Washington, D.C.; Paul E. Kalb

M.D., Sidley Austin LLP, Washington, D.C.; John P. Bueker,

Ropes & Gray LLP, Boston, Massachusetts; McGregor Scott,

Orrick Herrington & Sutcliffe LLP, Sacramento, California;

Rocky Tsai, Ropes & Gray LLP, San Francisco, California;

for Defendants-Appellees/Cross-Appellants.

Joseph F. Busa (argued), Daniel Tenny, and Michael S. Raab,

Appellate Staff; Phillip A. Talbert, Acting United States

Attorney; Civil Division, United States Department of

Justice, Washington, D.C.; for Amicus Curiae United States.

UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM. 5

Jeffrey L. Handwerker, Sarah M. Harris, and Stephen K.

Wirth, Arnold & Porter LLP, Washington, D.C., for Amicus

Curiae Pharmaceutical Research and Manufacturers of

America.

OPINION

WALLACE, Circuit Judge:

Frank Solis appeals from the dismissal of his False

Claims Act action against three pharmaceutical companies.

We have jurisdiction under 28 U.S.C. § 1291, and we affirm

in part and vacate and remand in part.

I.

Millennium Pharmaceuticals, Inc. hired Solis to promote

sales of a cardiovascular drug, Integrilin. He moved to

Schering-Plough Corp. after Schering acquired the right to

market Integrilin. There, he also promoted an antibiotic drug,

Avelox. Schering later merged with Merck & Co., and Merck

fired Solis a year later.

Solis filed this action in 2009. He alleged that his former

employers violated state laws and the False Claims Act

(FCA) by promoting dangerous off-label uses of Integrilin

and by paying physicians kickbacks to prescribe Integrilin

and, in the case of Schering and Merck (collectively,

Schering), Avelox. Following a three-year investigation, the

United States and all twenty-four states named in Solis’s

initial complaint chose not to intervene.

6 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

The district court dismissed Solis’s FCA claims under

Federal Rule of Civil Procedure 12(b)(1), finding them

foreclosed by the FCA’s so-called public disclosure bar. After

dismissing Solis’s federal claims, the district court declined

to exercise supplemental jurisdiction over his state law

claims. Solis appealed.

II.

We review de novo the district court’s dismissal for lack

of subject matter jurisdiction. United States ex rel. Hartpence

v. Kinetic Concepts, Inc., 792 F.3d 1121, 1126 (9th Cir. 2015)

(en banc). Plaintiff bears the burden to establish subject

matter jurisdiction by a preponderance of the evidence.

United States ex rel. Mateski v. Raytheon Co., 816 F.3d 565,

569 (9th Cir. 2016). We review for clear error the findings of

fact underlying the subject matter jurisdiction determination.

Hartpence, 792 F.3d at 1126–27.

III.

The FCA allows whistleblowers, known as relators, to

bring an action on the government’s behalf against companies

that “knowingly present[], or cause[] to be presented . . . a

false or fraudulent claim for payment or approval” to the

federal government. 31 U.S.C. § 3729(a)(1) (2006)1; see

Mateski, 816 F.3d at 569. The statute, however, deprives

federal courts of subject matter jurisdiction over FCA suits

when the alleged fraud has already been publicly disclosed,

unless the relator is deemed an original source. See 31 U.S.C.

1

The district court determined that the version of the FCA in effect

when Solis filed his initial complaint governs this action. Solis does not

challenge this determination on appeal.

UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM. 7

§ 3730(e)(4) (2006) (amended 2010). This public disclosure

bar is triggered if three conditions are met: “(1) the disclosure

at issue occurred through one of the channels specified in the

statute; (2) the disclosure was ‘public’; and (3) the relator’s

action is ‘based upon’ the allegations or transactions publicly

disclosed.” Mateski, 816 F.3d at 570, quoting Malhotra v.

Steinberg, 770 F.3d 853, 858 (9th Cir. 2014). Solis challenges

only the third condition, as he contends his allegations are not

based upon a prior public disclosure.

“Under our case law, for a relator’s allegations to be

based upon a prior public disclosure, the publicly disclosed

facts need not be identical with, but only substantially similar

to, the relator’s allegations.” Id. at 573 (internal quotation

marks and citation omitted). A prior disclosure and an

allegation may be substantially similar when the prior public

disclosure put the government “on notice to investigate the

fraud before the relator filed his complaint.” Id. at 574.

IV.

We first consider Solis’s Integrilin claims. These claims,

brought in 2009, fall into three categories: combination use

claims, other off-label claims, and kickback claims. The

district court held the combination use claims were

substantially similar to those in a complaint filed in state

court by an unrelated plaintiff in 2006. It further held the

other off-label use and kickback claims were substantially

similar to those in five complaints filed in federal court by

unrelated plaintiffs in 2007.

We compare Solis’s combination use claims to those in

the 2006 complaint to determine whether they are

substantially similar. Solis alleged that Millennium and

8 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

Schering fraudulently promoted the use of Integrilin in

combination with the drugs tenecteplase and heparin, which

was “extremely dangerous” and “increased bleeding risk.” He

also alleged that publicly available studies identified this

increased bleeding risk and that Schering managers gave

those studies to its sales representatives. By comparison, the

2006 complaint alleged that Schering and Millennium were

negligent in (1) failing to warn adequately physicians who

would prescribe Integrilin about the “danger of causing

intracranial bleeds,” (2) failing to warn physicians about the

“dangers of using [Integrilin] in combination with

tenecteplase and heparin,” and (3) “marketing [Integrilin] for

use in combination with tenecteplase and heparin.”

The publicly disclosed allegations from the 2006

complaint are substantially similar to Solis’s 2009

combination use claims. Both sets of allegations point to the

same actors (Schering and Millennium), the same conduct

(marketing Integrilin for use in combination with tenecteplase

and heparin), and the same risk (increased bleeding). While

there may be some differences in the focus and framing of the

2006 complaint compared with Solis’s 2009 combination use

claims, the degree of overlap is sufficient to show substantial

similarity.

Solis argues that his combination use claims are not

substantially similar to those in the 2006 complaint because

he provided “139 more pages of detail.” But much of his

complaint amounts to legal boilerplate, reciting the elements

of dozens of federal and state law counts. As to the few

unique details about the studies, he fails to explain how they

would be material to a government investigation. See

Mateski, 816 F.3d at 579 (explaining that a relator must

provide “genuinely new and material information”). Solis’s

UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM. 9

reliance on Mateski is also unpersuasive. There, we held that

the public disclosure bar did not apply because the relator’s

complaint “allege[d] fraud that is different in kind and in

degree” from the prior public disclosure, a point we

emphasized twice in our decision. Id. at 567, 578. But here,

Solis’s complaint and the 2006 complaint are similar in kind,

even if slightly less so in degree. The prior disclosure “need

not be identical with” Solis’s allegations to bar his claims. Id.

at 573.

Solis also contends that his combination use claims are

not substantially similar because he alleged fraud, while the

2006 complaint alleged only negligence. We disagree. The

absence of any explicit allegation of wrongdoing in the prior

public disclosure “is simply of no moment” so long as “the

material transactions giving rise to the [defendant’s] allegedly

unlawful . . . schemes were publicly disclosed.” A-1

Ambulance Serv., Inc. v. California, 202 F.3d 1238, 1245 (9th

Cir. 2000); see also United States v. Alcan Elec. & Eng’g,

Inc., 197 F.3d 1014, 1019–20 (9th Cir. 1999). Here, the 2006

complaint revealed the material transactions or allegations

giving rise to Solis’s later claims: that Schering and

Millennium “market[ed] the drug [Integrilin] for use in

combination with tenecteplase and heparin” and that this

combination increased the risk of bleeding.

Solis does not argue that his other off-label use and

kickback claims allege more detail than those in the 2007

federal court complaints, and for good reason. These claims

closely mirror those in the 2007 complaints. Rather, Solis

argues that the 2007 complaints are not substantially similar

because they “discuss[] many ‘subject drugs’ as a group, of

which Integrilin was only one.” We reject this argument.

Solis cites no legal authority suggesting the public disclosure

10 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

bar is inapplicable where a prior public disclosure uses a

defined term. As the district court observed, the use of a

defined term “to avoid repeating the names of seven

drugs–one of which was Integrilin–hundreds of times” does

not make the similarity any less substantial. United States ex

rel. Solis v. Millennium Pharm., Inc., 95 F. Supp. 3d 1208,

1218 (E.D. Cal. 2015).

Finally, we disagree with Solis that his claims contain

“more current allegations, including facts which transpired

after the 2007 cases.” Each 2007 complaint alleged that the

“acts and omissions as alleged herein . . . continue[] to be

undertaken.”

We are satisfied that Solis’s Integrilin claims are

substantially similar to those in the prior public disclosures.

They are close enough in kind and degree to have put the

government on notice to investigate the alleged fraud before

Solis filed his complaint. See Mateski, 816 F.3d at 574.

V.

Solis can still establish subject matter jurisdiction,

however, if he can show that he qualifies as an “original

source.” 31 U.S.C. § 3730(e)(4). Under our precedent in

effect at the time the district court considered Solis’s

allegations, we applied a three-part test to determine whether

a relator qualifies as an original source: (1) he must have

“direct and independent knowledge” of the information on

which his allegations are based; (2) he must have “voluntarily

provided the information to the Government before filing” his

FCA action; and (3) he “must have had a hand in the public

disclosure of allegations that are a part of [his] suit.” Wang ex

rel. United States v. FMC Corp., 975 F.2d 1412, 1417–18

UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM. 11

(9th Cir. 1992), overruled by Hartpence, 792 F.3d at 1123.

The first two parts of the test derive directly from the text of

the FCA; the third part—the hand-in-the-public-disclosure

requirement—we had inferred from the statute’s legislative

history. Id. Invoking this test, the district court concluded that

Solis did not qualify as an original source because he did not

satisfy the hand-in-the-public-disclosure requirement. Solis,

95 F. Supp. 3d at 1220.

Intervening circuit law, however, has undercut the basis

for the district court’s conclusion. In our recent en banc

decision in Hartpence, we repudiated the third part of our

original source test, holding that it had no basis in the

statutory text. 792 F.3d at 1128. After Hartpence, only the

first two parts—those explicitly provided in the statute—are

relevant to the original source inquiry. Id.

Without the benefit of Hartpence, the district court

determined Solis could not qualify as an original source on

the sole ground that he failed to show he had a hand in the

prior public disclosure. Solis, 95 F. Supp. 3d at 1220. Because

that requirement is inapplicable after Hartpence, we remand

so that the district court can determine, in the first instance,

whether Solis meets the other two parts of the original source

test. Hartpence, 792 F.3d at 1129–30.

Solis argues the district court “already found” he met the

remaining two parts of the original source test. This is

incorrect. The district court simply observed in dicta that

Solis “may well have direct and independent knowledge of

the subject matter of the allegedly fraudulent claims” and that

Solis “claims he did provide the information to the

government before filing his suit.” Solis, 95 F. Supp. 3d at

1220; United States ex rel. Solis v. Millennium Pharm., Inc.,

12 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

No. 2:09-CV-03010-MCE-EFB, 2014 WL 1270581, at *9

(E.D. Cal. Mar. 26, 2014). These observations are neither

legal conclusions nor findings of fact. At most, they are

assumptions made by the district court for the sake of

argument en route to finding that Solis did not satisfy the

hand-in-the-public-disclosure requirement. A straightforward

reading of the district court’s orders demonstrates the district

court did not consider whether Solis satisfied the other two

requirements of the original source test.

VI.

We now turn to Solis’s Avelox claims, which relate only

to the payment of kickbacks. Defendants do not argue that the

public disclosure bar applies to Solis’s Avelox claims. This

is because none of the disclosures deemed to bar the Integrilin

claims even mentions Avelox. The district court clearly erred

in finding that the Avelox claims were publicly disclosed

based on court complaints that never mention Avelox.

We may affirm, however, on any ground supported by the

record. See United States ex rel. Kelly v. Serco, Inc., 846 F.3d

325, 330 (9th Cir. 2017). FCA claims are subject to Federal

Rule of Civil Procedure 9(b). United States v. United

Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016).

This means a relator must state with particularity “the who,

what, when, where, and how of the misconduct charged.” Id.,

quoting Ebeid ex rel. United States v. Lungwitz, 616 F.3d

993, 998 (9th Cir. 2010). We have held that Rule 9(b) does

not require a relator to allege the details of every false claim

submitted to the federal government for reimbursement, so

long as he alleges “particular details of a scheme to submit

false claims paired with reliable indicia that lead to a strong

inference that claims were actually submitted.” United

UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM. 13

Healthcare Ins., 848 F.3d at 1180, quoting Ebeid, 616 F.3d at

998–99.

Solis’s only particularized allegations show efforts by

Schering to get Avelox placed “on formulary” at two

hospitals. Even assuming these efforts established a scheme

to submit false claims, Solis has failed to identify a single

claim submitted pursuant to the scheme. Nor has he provided

reliable indicia supporting a strong inference that such claims

were submitted. For example, Solis does not allege that being

“on formulary” meant such claims would be submitted, or

even that being on formulary meant Avelox would be

prescribed. Being “on formulary” merely means the drug is

available to be used or prescribed. See Consolidated Second

Cross-Appeal Brief of Defendants-Appellees/Cross-

Appellants at 75; accord J.B.D.L. Corp. v. Wyeth-Ayerst

Labs., Inc., 485 F.3d 880, 884 (6th Cir. 2007) (“Formularies

are, generally, a listing of medications for which [a managed

care organization] provides coverage”). Solis’s complaint

provides no other details linking the alleged scheme to any

claim submitted to a federal healthcare program. It was

Solis’s burden to supply these missing links and he has failed

to do so. Solis has not pleaded with the particularity required

by Rule 9(b).

Solis argues that we should direct the district court to

grant him leave to amend his complaint for the third time if

deemed deficient. The district court had no occasion to

consider this question, having denied Schering’s Rule

12(b)(6) and 9(b) motion before granting its Rule 12(b)(1)

motion. United States ex rel. Solis v. Millennium Pharm.,

Inc., No. 2:09-CV-03010-MCE-EFB, 2015 WL 1469166, at

*7 (E.D. Cal. Mar. 30, 2015). On remand, we instruct the

district court to decide this question in the first instance.

14 UNITED STATES EX REL. SOLIS V. MILLENNIUM PHARM.

VII.

In conclusion, we vacate the dismissal of Solis’s Integrilin

claims and remand for the district court to determine whether

Solis qualifies for the original source exception under

Hartpence. We do not reach the sufficiency of Solis’s

Integrilin claims. We affirm dismissal of Solis’s Avelox

claims on the alternative ground that they fail to satisfy Rule

9(b). Finally, we remand with instructions to the district court

to determine whether to grant Solis leave to amend his

Avelox claims.

Each party shall bear its own costs.

AFFIRMED in part; VACATED in part; REMANDED.