Amicus Curiae Brief — Medical Device Business Services, Inc., fka DePuy Orthopaedics, Inc., et al., Petitioners v. United States, ex rel. Antoni Nargol and David Langton, et al.

No. 17-1108

IN THE

Supreme Court of the United States

MEDICAL DEVICE BUSINESS SERVICES, INC., F/K/A

DEPUY ORTHOPAEDICS, INC.; DEPUY SYNTHES, INC.,

F/K/A DEPUY, INC.; JOHNSON & JOHNSON SERVICES,

INC.,

Petitioners,

v.

UNITED STATES EX REL. ANTONI NARGOL AND DAVID

LANGTON, ET AL.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

BRIEF FOR AMICI CURIAE PHARMACEUTICAL

RESEARCH AND MANUFACTURERS OF AMERICA,

ADVANCED MEDICAL TECHNOLOGY

ASSOCIATION, AND THE CHAMBER OF

COMMERCE OF THE UNITED STATES OF

AMERICA IN SUPPORT OF PETITIONERS

JAMES C. STANSEL

MELISSA B. KIMMEL

PHARMACEUTICAL RESEARCH

AND MANUFACTURERS OF

AMERICA

950 F Street NW, Suite 300

Washington, DC 20004

Counsel for Amicus Curiae

Pharmaceutical Research and

Manufacturers of America

DAVID W. OGDEN

Counsel of Record

JONATHAN G. CEDARBAUM

BLAKE ROBERTS

JOHN BYRNES

WILMER CUTLER PICKERING

HALE AND DORR LLP

1875 Pennsylvania Ave., NW

Washington, DC 20006

(202) 663-6000

david.ogden@wilmerhale.com

Counsel for Amici Curiae

ADDITIONAL COUNSEL LISTED ON INSIDE COVER

CHRISTOPHER L. WHITE

MATTHEW E. WETZEL

ADVANCED MEDICAL

TECHNOLOGY ASSOCIATION

701 Pennsylvania Ave., NW

Suite 800

Washington, DC 20004

Counsel for Amicus Curiae

Advanced Medical Technology

Association

STEVEN P. LEHOTSKY

WARREN POSTMAN

U.S. CHAMBER

LITIGATION CENTER, INC.

1615 H Street, NW

Washington, DC 20062

Counsel for Amicus Curiae

Chamber of Commerce of the

United States of America

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ........................................... ii

INTEREST OF AMICI CURIAE .................................. 1

SUMMARY OF THE ARGUMENT ................................. 3

ARGUMENT........................................................................ 4

I.

RELAXING THE APPLICATION OF RULE

9(b) ALLOWS OPPORTUNISTIC RELATORS

TO MISUSE THE FCA ................................................... 4

A. The Decision Below Undermines The

Purpose Of The FCA And Invites

Opportunistic Suits ............................................... 5

B. The Decision Below Provides A

Blueprint

For

FCA

Actions

Piggybacking On Products Liability

Claims ..................................................................... 9

II. THE DECISION BELOW UNDERMINES THE

CRITICAL ROLE RULE 9(b) PLAYS IN

PROTECTING DEFENDANTS ....................................... 11

A. Relaxing Rule 9(b) Limits Defendants’

Ability To Respond Meaningfully To

Allegations Of Fraud .......................................... 12

B. Relaxing Rule 9(b) Diminishes Courts’

Ability To Control The Scope Of

Discovery.............................................................. 15

CONCLUSION ................................................................. 18

ii

TABLE OF AUTHORITIES

CASES

Page(s)

Bell Atlantic Corp. v. Twombly, 550 U.S. 544

(2007) ............................................................................ 12

Graham County Soil & Water Conservation

District v. United States ex rel. Wilson,

559 U.S. 280 (2010) ................................................... 3, 6

In re Darvocet, 2015 WL 2451208 (E.D. Ky.

May 21, 2015) ................................................................. 8

In re Natural Gas Royalties, 562 F.3d 1032

(10th Cir. 2009).............................................................. 7

Kellogg Brown & Root Services, Inc. v. United

States ex rel. Carter, 135 S. Ct. 1970 (2015).............. 2

Schindler Elevator Corp. v. United States ex

rel. Kirk, 563 U.S. 401 (2011) .................................. 2, 6

United States ex rel. Booker v. Pfizer, Inc.,

188 F. Supp. 3d 122 (D. Mass. 2016) ......................... 14

United States ex rel. Clausen v. Lab. Corp. of

Am., 198 F.R.D. 560 (N.D. Ga. 2000) ....................... 16

United States ex rel. Gage v. Davis S.R.

Aviation, L.L.C., 623 F. App’x 622 (5th Cir.

2015) ............................................................................. 13

United States ex rel. Hirt v. Walgreen Co.,

846 F.3d 879 (6th Cir. 2017)....................................... 15

United States ex rel. Karvelas v. MelroseWakefield Hospital, 360 F.3d 220 (1st Cir.

2004) ............................................................................. 16

iii

TABLE OF AUTHORITIES—Continued

Page(s)

United States ex rel. Kinney v. Stoltz, 327 F.3d

671 (8th Cir. 2003)......................................................... 6

United States ex rel. Lee v. Corinthian

Colleges, 2013 WL 12114015 (C.D. Cal.

Mar. 15, 2013) ................................................................ 7

United States ex rel. Lusby v. Rolls-Royce

Corp., 2012 WL 4357438 (S.D. Ind. Sept. 24,

2012) ............................................................................. 11

United States ex rel. Lusby v. Rolls-Royce

Corp., 570 F.3d 849 (7th Cir. 2009)........................... 11

United States ex rel. Mateski v. Raytheon Co.,

816 F.3d 565 (9th Cir. 2016) ...................................... 15

United States ex rel. Nowak v. Medtronic, Inc.,

806 F. Supp. 2d 310 (D. Mass. 2011) ......................... 13

United States ex rel. Nunnally v. W. Calcasieu

Cameron Hospital, 519 F. App’x 890

(5th Cir. 2013).............................................................. 12

United States ex rel. Rigsby v. State Farm Fire

& Casualty Co., 2014 WL 691500 (S.D.

Miss. Feb. 21, 2014) .................................................... 17

United States ex rel. Roop v. Hypoguard USA,

Inc., 559 F.3d 818 (8th Cir. 2009) ............................... 8

United States ex rel. Rost v. Pfizer, Inc.,

253 F.R.D. 11 (D. Mass. 2008) ................................... 16

United States ex rel. Shea v. Cellco

Partnership, 863 F.3d 923 (D.C. Cir. 2017)............... 7

iv

TABLE OF AUTHORITIES—Continued

Page(s)

United States ex rel. Spay v. CVS Caremark

Corp., 2013 WL 4525226 (E.D. Pa. Aug. 27,

2013) ............................................................................. 16

United States ex rel. Springfield Terminal

Railway Co. v. Quinn, 14 F.3d 645 (D.C.

Cir. 1994) .................................................................. 6, 15

United States ex rel. Williams v. Martin-Baker

Aircraft Co., 389 F.3d 1251 (D.C. Cir. 2004)........... 12

United States v. Bornstein, 423 U.S. 303 (1976) ............. 5

Universal Health Services, Inc. v. United

States ex rel. Escobar, 136 S. Ct. 1989

(2016) ............................................................ 2, 3, 5, 7, 14

DOCKETED CASES

In re DePuy Orthopaedics, Inc., Pinnacle Hip

Implant Products Liability Litigation,

No. 3:11-md-02244 (N.D. Tex.) ................................... 8

STATUTES, RULES, AND REGULATIONS

31 U.S.C.

§ 3279 .............................................................................. 6

§ 3730 .......................................................................... 5, 6

42 U.S.C. § 1395y ................................................................. 9

Fed. R. Civ. P.

Rule 8 ........................................................................... 11

Rule 9 .................................................................. passim

42 C.F.R. pt. 411 .................................................................. 9

v

TABLE OF AUTHORITIES—Continued

Page(s)

OTHER AUTHORITIES

Court Statistics Project, Examining the Work

of the State Courts: An Analysis of 2010

State Court Caseloads (Dec. 2012), http://

www.courtstatistics.org/other-pages/~/med

dia/Microsites/Files/CSP/DATA%20PDF/C

SP_DEC.ashx ............................................................. 10

Johnson & Johnson, 2017 Annual Report, SEC

Form 10-K, http://files.shareholder.com/

downloads/JNJ/6088689802x0xS200406-185/200406/filing.pdf....................................................... 10

U.S. Department of Justice, Fraud Statistics Overview: Oct. 1, 1987-Sept. 30, 2017 (2017),

https://www.justice.gov/opa/press-release/

file/1020126/download ...................................... 9, 10, 11

INTEREST OF AMICI CURIAE1

The Pharmaceutical Research and Manufacturers

of America (“PhRMA”) is a voluntary, nonprofit association representing the nation’s leading biopharmaceutical researchers and biotechnology companies.

PhRMA’s member companies are dedicated to discovering medicines that enable patients to lead longer,

healthier, and more productive lives. During 2016

alone, PhRMA members invested approximately $65.5

billion in efforts to discover and develop new medicines.

PhRMA’s mission is to advocate for public policies that

encourage the discovery of life-saving and lifeenhancing medicines. PhRMA closely monitors legal

issues that affect the pharmaceutical industry and frequently participates as amicus in this and other courts.

The Advanced Medical Technology Association

(“AdvaMed”) is the world’s largest medical technology

association, with approximately 300 member companies

that develop medical devices, diagnostic tools, and

health information systems. Its members span every

field of medical science and range from cutting-edge

startups to multinational manufacturers, all dedicated

to advancing clinician and patient access to safe, effective medical technologies in accordance with the highest ethical standards.

1

No counsel for a party authored this brief in whole or in

part, and no entity or person, other than amicus curiae, their

members, and their counsel, made a monetary contribution intended to fund the preparation or submission of this brief. Counsel of record for the parties received notice of amicus’ intent to file

this brief at least 10 days prior to its due date. Letters from the

parties consenting to the filing of this brief are on file with the

Clerk.

2

The Chamber of Commerce of the United States of

America (the “Chamber”) is the world’s largest business federation. It represents 300,000 direct members

and indirectly represents the interests of more than

three million companies and professional organizations

of every size, in every industry, from every region of

the country. An important function of the Chamber is

to represent the interests of its members in matters

before Congress, the Executive Branch, and the courts.

The Chamber regularly files amicus curiae briefs in

cases raising issues of concern to the nation’s business

community.

The key question in this case—whether a False

Claims Act relator can satisfy Rule 9(b) without alleging details about any specific false claim—is of critical

importance to amici’s members. The defense of specious FCA claims imposes costs on businesses across

numerous industries and sectors, giving amici and their

members a substantial interest in the interpretation of

the FCA and application of Rule 9(b) to claims that

seek to repackage public information into speculative

claims of fraud. The proper application of Rule 9(b) in

this context is especially important to amici’s healthcare industry members because the federal government’s extensive role in the healthcare market allows

opportunistic relators to convert claims of consumer

harm into FCA treble damages actions. Amici closely

monitor developments regarding the law and have

routinely participated as amici curiae in FCA cases

before this Court. E.g., Universal Health Servs., Inc. v.

United States ex rel. Escobar, 136 S. Ct. 1989 (2016);

Kellogg Brown & Root Servs., Inc. v. United States ex

rel. Carter, 135 S. Ct. 1970 (2015); Schindler Elevator

Corp. v. United States ex rel. Kirk, 563 U.S. 401 (2011);

3

Graham Cty. Soil & Water Conservation Dist. v. United

States ex rel. Wilson, 559 U.S. 280 (2010).

SUMMARY OF THE ARGUMENT

I. Congress enacted the FCA to combat fraud on

the government fisc, not serve as ‘“an all-purpose antifraud statute.”’ Universal Health Servs., 136 S. Ct. at

2003. The statute carefully balances the interest in encouraging whistleblowers to come forward with information that helps the government uncover fraud

against the risk of opportunistic relators reaping a

windfall. The relaxed Rule 9(b) standard adopted by

the court below, variations of which are used in roughly

half the circuits, undermines these purposes by allowing relators to repackage products-liability cases or

other public allegations as FCA suits without alleging

any specific claims that were submitted to the government. The resulting harm is particularly severe in the

healthcare context, where the size of federal programs

allows relators to almost always allege speculatively

that some claims were surely submitted at some point.

The volume of qui tam suits has soared in the last

ten years. Adoption of this relaxed standard will allow

relators to draw on the wide pool of products liability

cases to bring a new wave of suits. Moreover, because

the government has access to information about specific

claims and payments, this relaxed standard will principally benefit relators in cases where the government

has declined to intervene—cases which tend to be of

little value to the government.

II. The relaxed standard also undermines the core

purposes of Rule 9(b). First, by relieving relators of

the obligation to identify specific false claims, it limits

defendants’ ability to respond meaningfully to allega-

4

tions of fraud. In particular, many FCA defenses depend on a close analysis of the timing and content of the

claims submitted to the government. The relaxed Rule

9(b) standard prevents a defendant from effectively

raising these defenses until summary judgment. Second, by deeming general allegations sufficient, the relaxed standard limits courts’ ability to control the scope

of discovery. When relators make sweeping allegations

of long-running, nationwide fraud—but only have

firsthand knowledge of claims submitted in a specific

location in a defined period—district courts can initially

limit the scope of discovery to those specific claims, allowing assessment of the merits of the case before

opening the door to unrestricted discovery. The relaxed standard’s acceptance of complaints that fail to

allege any particular false claims deprives district

courts of the ability to implement such a prudent,

staged approach.

ARGUMENT

I.

RELAXING THE APPLICATION OF RULE 9(b) ALLOWS

OPPORTUNISTIC RELATORS TO MISUSE THE FCA

The relators in this case are two British doctors

who based their complaint on information from two

pending products-liability MDLs in which they serve as

expert witnesses, and layered on statistical allegations

hypothesizing that some unknown number of allegedly

defective devices were paid for by the government.

App. 60. The First Circuit sanctioned this approach,

finding it sufficient that the complaint alleged facts

showing that it is “statistically certain” that “many”

false claims were submitted. App. 23.

This decision illustrates the hazards of “relaxing”

Rule 9(b) to allow relators to avoid their burden to al-

5

lege particularized details about specific false claims

submitted to the government. The circuits that follow

this approach encourage claims that depart from the

purpose of the FCA. Congress did not want opportunistic relators to wield the severe penalties authorized

by the FCA outside of their intended context, leveraging them to extract settlements for claims that do little

to advance the government’s goals of deterring and detecting fraud.

A. The Decision Below Undermines The Purpose

Of The FCA And Invites Opportunistic Suits

Enacted in 1863, the FCA “was originally aimed

principally at stopping the massive frauds perpetrated

by large contractors during the Civil War.” United

States v. Bornstein, 423 U.S. 303, 309 (1976). Although

Congress has since extended the FCA’s scope beyond

the defense industry, “its focus remains on those who

present or directly induce the submission of false or

fraudulent claims.” Universal Health Servs., Inc. v.

United States ex rel. Escobar, 136 S. Ct. 1989, 1996

(2016).

In furtherance of its goal of preventing fraud on the

government fisc, the FCA includes generous qui tam

provisions that are intended to encourage private whistleblowers to expose wrongdoing by allowing relators

to receive 15 to 30 percent of the government’s award,

including treble damages and civil penalties. 31 U.S.C.

§ 3730(d)(1)-(2). These very same provisions, however,

provide a powerful incentive for parasitic relators to

bring suits that simply repackage available information.

As a result, Congress has structured the FCA with

the goal of “‘[s]eeking the golden mean between ade-

6

quate incentives for whistle-blowing insiders with genuinely valuable information and discouragement of opportunistic plaintiffs who have no significant information to contribute of their own.’” Graham Cty. Soil

& Water Conservation Dist. v. United States ex rel.

Wilson, 559 U.S. 280, 294 (2010) (quoting United States

ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d

645, 649 (D.C. Cir. 1994)). Likewise, courts have sought

to interpret the FCA to encourage suits by knowledgeable insiders and discourage “‘opportunistic’ litigation.”

Schindler Elevator Corp. v. United States ex rel. Kirk,

563 U.S. 401, 413 (2011) (“[A]nyone could identify a few

regulatory filing and certification requirements, submit

FOIA requests until he discovers a federal contractor

who is out of compliance, and potentially reap a windfall

in a qui tam action under the FCA”); see also United

States ex rel. Kinney v. Stoltz, 327 F.3d 671, 674 (8th

Cir. 2003) (“The False Claims Act is intended to encourage individuals who are either close observers or

involved in the fraudulent activity to come forward, and

is not intended to create windfalls for people with

secondhand knowledge of the wrongdoing.”).

In order to reach this “golden mean,” the statute

includes a series of jurisdictional bars to weed out individuals without information to contribute, see 31 U.S.C.

§ 3730(e), and requires that the plaintiff allege that the

defendant either presented, caused to be presented, or

made a statement material to “a false or fraudulent

claim for payment or approval,” id. § 3729(a)(1)(A)-(B).

In other words, it is not enough to allege a fraudulent

scheme related to a government program. The scheme

must be connected to the actual submission of a false or

fraudulent claim. This claim-submission element requires that would-be relators have direct knowledge

about the nature of the fraud on the government, and

7

ensures that the FCA is not used as ‘“an all-purpose

antifraud statute.”’ Universal Health Servs., 136 S. Ct.

at 2003.

The decision below, like others that relax the application of Rule 9(b), renders meaningless the need to

plead the submission of a false claim. This approach encourages plaintiffs with nothing to offer the government—like Relators in this case—to file opportunistic

suits in hopes of reaping a windfall. Opportunistic suits

threaten businesses in a range of industries. See, e.g.,

United States ex rel. Shea v. Cellco P’ship, 863 F.3d

923, 934 (D.C. Cir. 2017) (FCA suit against telecommunications provider, where relator’s complaint was based

on information gathered from “public databases” of

government contracts); United States ex rel. Lee v. Corinthian Colls., 2013 WL 12114015, at *4 (C.D. Cal.

Mar. 15, 2013) (FCA suit against for-profit college and

its auditor, noting that relators’ counsel had filed five

other qui tam suits with substantially identical allegations against other colleges and auditors), aff’d, 652 F.

App’x 503 (9th Cir. 2016); In re Natural Gas Royalties,

562 F.3d 1032, 1037 (10th Cir. 2009) (FCA suit against

dozens of natural gas pipelines, brought after relator

learned of Senate report on industry-wide fraud).

The risk is particularly acute in the healthcare context. Because government programs like Medicare and

Medicaid are responsible for a major share of overall

healthcare expenditures, a would-be relator can almost

always use general statistics to allege that some claims

must have been submitted. Under the relaxed standard, relators lacking personal or even secondhand

knowledge of claims that were submitted to the government will bring FCA cases against healthcare industry defendants premised on little more than allegations that their products are medically ineffective, have

8

manufacturing defects, or have undisclosed or unanticipated risks or side effects—and probably were paid for

by the government at some point. Instead of being the

core component that makes an alleged fraudulent

scheme an actionable FCA case, the claim-submission

element is reduced to an afterthought.

The possibility of parasitic suits is not a hypothetical concern. Other courts have previously rejected,

under Rule 9(b), FCA claims grounded in products liability theories that failed to allege specific false claims.

See, e.g., United States ex rel. Roop v. Hypoguard

USA, Inc., 559 F.3d 818, 822-823 (8th Cir. 2009) (in

FCA case involving defective blood glucose monitoring

systems, allegations of consumer injury and noncompliance with regulations insufficient under Rule 9(b) in the

absence of allegations of representative claims); In re

Darvocet, 2015 WL 2451208, at *8 (E.D. Ky. May 21,

2015) (in FCA and products liability case alleging defendants failed to disclose that their drugs were causing heart problems, summary judgment granted due to

failure to identify specific false claims).

This very case provides a clear example of the potential for abuse: Relators’ complaint was not filed until May 18, 2012, nearly a year after the Judicial Panel

on Multidistrict Litigation consolidated 57 products liability actions alleging defects in the same Pinnacle hip

replacement devices at issue in relators’ complaint. See

MDL Transfer Order, In re DePuy Orthopaedics, Inc.,

Pinnacle Hip Implant Prods. Liab. Litig., No. 3:11-md02244, Dkt. 1 (N.D. Tex. May 24, 2011); App. 31. In

such a case, the government is perfectly capable of initiating its own FCA investigation. Allegations of pervasive defects in a widely used or high-profile medical

device or drug inevitably attract public attention, and

are even advertised by attorneys seeking potential

9

plaintiffs. In addition, the government has a legal right

to notice of such claims by Medicare beneficiaries and

their insurers, who must report payouts received as result of settlements, judgments, or awards, so that the

government has the opportunity to seek reimbursement. See 42 U.S.C. § 1395y(b)(2), (8); 42 C.F.R. pt. 411.

In short, the government does not need relators to

alert it to the possibility that the FCA may bear on allegedly defective medical devices or drugs. However,

under the decision below, opportunistic relators would

be free to file similar FCA suits based on any of the

dozens of other pending pharmaceutical and medical

device MDLs, or any other products liability action involving an industry where the government is a significant customer. This is not what Congress intended in

passing the FCA, and such a rule only serves to reduce

the government’s share of any recovery and bar other

relators with bona fide inside information.

B. The Decision Below Provides A Blueprint For

FCA Actions Piggybacking On Products Liability Claims

The decision below applies the “relaxed” approach

to Rule 9(b) in a manner that invites derivative FCA

cases based on alleged product defects, including with

respect to pharmaceuticals and medical devices. For

amici’s members, such claims will further increase the

costs of developing and delivering innovation and lifesaving drugs and devices. The health care industry has

already proven to be a popular target for relators, with

health care cases now comprising over 70% of new FCA

qui tam cases, with 492 filed in FY 2017. See Fraud

Statistics - Overview: Oct. 1, 1986-Sept. 30, 2017, at 2, 4

10

(2018).2 And the universe of new products liability

suits to mine for allegations is substantial: In the federal district courts alone, 21,517 new health care or

pharmaceutical products-liability cases were filed in

2016, making up over 7% of the civil cases filed.3 There

are even more cases in the state courts, which are

where most products liability suits are filed, and which

handle far more cases than the federal courts.4 For example, one of the defendants in this case, Johnson &

Johnson, alone faces more than 100,000 pending products-liability cases related to its products. See Johnson

& Johnson, 2017 Annual Report, SEC Form 10-K, at 75.

Even before this case, the number of qui tam suits

has nearly doubled in the past ten years. See Fraud

Statistics 2. Opening the door to copycat productsliability suits could result in an exponential increase in

the volume of cases.

This new wave of FCA claims will be of little value

to the government. Healthcare payors already have

access to detailed claims information about specific devices and drugs. Where concerns about a defective

product support a bona fide FCA action, the government will either initiate its own investigation or intervene, and bring to bear that trove of payment data. As

a result, relaxing the application of Rule 9(b) in this

context only benefits relators where the government

2

https://www.justice.gov/civil/page/file/1025711/download

3

http://www.uscourts.gov/sites/default/files/data_tables/jb_c2

a_0930.2016.pdf

4

Court Statistics Project, Examining the Work of the State

Courts: An Analysis of 2010 State Court Caseloads 3 (Dec. 2012)

(incoming civil caseload in state courts totals 19 million per year),

http://www.courtstatistics.org/other-pages/~/media/Microsites/

Files/CSP/DATA%20PDF/CSP_DEC.ashx

11

declines to intervene—cases which tend to be groundless strike suits or fishing expeditions that do not advance the purposes of the FCA and that Rule 9(b) is

generally meant to prevent. See Fraud Statistics 2 (in

the past 10 years, qui tam cases in which the United

States declined resulted in less than 7% of qui tam settlements and judgments).

Allowing such claims to proceed under a “relaxed”

Rule 9(b) will compel government suppliers to expend

significant resources to defend or settle speculative

claims that often lack merit. For example, in 2009, the

Seventh Circuit applied its relaxed standard to allow a

relator to proceed with a claim based on allegedly defective engine parts, even though the government declined to intervene and the relator failed to plead a

“specific request for payment.” United States ex rel.

Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir.

2009). More than three years later and after “extensive

discovery,” the district granted summary judgment to

the defendant because the relator had “no individualized knowledge that a particular part that failed to

meet contract specifications was ever sold to the government.” United States ex rel. Lusby v. Rolls-Royce

Corp., 2012 WL 4357438, at *11 (S.D. Ind. Sept. 24,

2012).

II. THE DECISION BELOW UNDERMINES THE CRITICAL

ROLE RULE 9(b) PLAYS IN PROTECTING DEFENDANTS

Since their adoption in 1937, the Federal Rules of

Civil Procedure have required a party alleging fraud to

“state with particularity the circumstances constituting

fraud.” Fed. R. Civ. P. 9(b). This heightened pleading

standard—which applies to FCA cases—demands that

plaintiffs provide more than the “short and plain statement of the claim” that suffices in other cases. Fed. R.

12

Civ. P. 8(a)(2). As this Court has noted, this requirement is meant to protect defendants from the “high risk

of abusive litigation” resulting from fraud claims. Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 569 n.14 (2007).

Relaxing the pleading standard with respect to the

submission of particular false claims undermines this

protection in at least two critical ways: first, it limits

defendants’ ability to prepare a meaningful defense,

and second, it limits courts’ ability to control discovery

and weed out deficient cases. If some circuits continue

to relax Rule 9(b) in this context, relators without information about any specific false claims may survive

motions to dismiss, and the threat of treble damages

and “discovery expense will push cost-conscious defendants to settle even anemic cases before reaching

[summary judgment or trial].” Twombly, 550 U.S. at

559. The Court should grant certiorari to reiterate and

restore the proper protections of Rule 9(b).

A. Relaxing Rule 9(b) Limits Defendants’ Ability

To Respond Meaningfully To Allegations Of

Fraud

A core purpose of Rule 9(b) is to “‘guarantee all defendants sufficient information to allow for preparation

of a response.’” United States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir.

2004); accord United States ex rel. Nunnally v. West

Calcasieu Cameron Hosp., 519 F. App’x 890, 892 n.2

(5th Cir. 2013) (“The heightened pleading standard for

fraud claims supplies defendants with the information

they need to prepare responses.”). An FCA complaint

is subject to a range of potential defenses at the motion

to dismiss stage, including absence of a false statement,

lack of scienter, non-materiality, and the public disclosure bar. These defenses, however, often turn on the

13

specifics of the claims submitted to the government,

and, in a products-liability case like this one, the specifics of a given patient’s medical condition. Allowing relators to plead FCA cases with only general statistics

about submitted claims hamstrings a defendant’s ability to assert these defenses effectively, opening the

door to discovery to the very plaintiffs least likely to

have meritorious cases.

One of the most basic defenses in an FCA action is

that the defendant made no false statements to the

government. This may be because the device or drug

at issue worked as expected, or because the risk of side

effects or failure was appropriate in light of the patient’s circumstances. See United States ex rel. Nowak

v. Medtronic, Inc., 806 F. Supp. 2d 310, 354-355 (D.

Mass. 2011) (FCA complaint alleging misrepresentation

of safety and efficacy of medical device “would require

an individual claim-by-claim review of medical necessity”). Or a defendant may argue that an allegedly defective product was compliant with applicable government

regulations when the claim was submitted. See United

States ex rel. Gage v. Davis S.R. Aviation, L.L.C., 623

F. App’x 622, 627 (5th Cir. 2015) (dismissing FCA complaint alleging that contractor’s parts caused aircraft

crash, on grounds that “post hoc product failure is not

enough, standing alone, to create an inference that the

product was non-compliant at the time of sale.”). Without particularized allegations about specific claims, defendants have no way to argue, on a claim-by-claim basis, that the claims were not false.

Particularized allegations are also critical if a defendant is to meaningfully respond to a FCA case based

on a theory of implied certification—i.e., a case premised on the theory that the defendant impliedly certified compliance with some material contractual or regu-

14

latory provision in submitting claims for payment. In

Universal Health Services, the Court approved of this

theory, but only when two conditions are met: “first,

the claim does not merely request payment, but also

makes specific representations about the goods or services provided; and second, the defendant’s failure to

disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” 136 S. Ct. at 2001.

When the submission of claims is pleaded generally, defendants have no way to argue that the claims did not

make specific representations. Nor are defendants able

to explain how any specific representations were not

misleading half-truths. Without the protections of Rule

9(b), a defendant’s implied certification defense is all

but foreclosed at the pleading stage.

Scienter and materiality defenses are also compromised without particularized allegations. A common

defense to FCA liability is that any defects were disclosed to the government, showing that the defendant

was not intending to perpetrate a fraud and that the

defects were not material to the government. For example, in United States ex rel. Booker v. Pfizer, Inc.,

188 F. Supp. 3d 122, 132 (D. Mass. 2016), aff’d, 847 F.3d

52 (1st Cir. 2017), which addressed allegations of fraudulent off-label marketing of pharmaceuticals, the court

found that the scienter element was negated because

state Medicaid programs knowingly chose to reimburse

for the off-label use. This type of defense may be difficult to assert without particularized details about the

circumstances of specific claims, especially where there

are factual disputes about what exactly the government

knew and when it acquired that knowledge. Moreover,

in the pharmaceutical and medical device context, the

knowledge and independent medical judgment of pre-

15

scribing or treating doctors must also be considered. If

a medical provider determines that the device or drug

remains medically reasonable or necessary despite latent defects, the materiality standard is not satisfied.

Without representative sample claims for payment or

particularized details about specific categories of

claims, a defendant cannot present concrete arguments

that go to these elements.

Finally, a relaxed pleading standard undermines

the jurisdictional bars of the FCA. In assessing whether a claim is barred by prior public disclosure, courts

often use the formulation “X + Y = Z” to assess whether either the allegation of fraud itself (Z) or its component parts (X + Y) were publicly disclosed. See, e.g.,

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

565, 573 (9th Cir. 2016); Springfield Terminal, 14 F.3d

at 654. Those component parts are a “misrepresented

state of facts and a true state of facts.” Springfield

Terminal, 14 F.3d at 655. When a complaint fails to allege specific false claims—the who, what, when, where,

and how of the alleged fraud—a court may be unable to

identify the specific false misrepresentations presented

to the government and determine whether they had

been publicly disclosed prior to the complaint. See

United States ex rel. Hirt v. Walgreen Co., 846 F.3d

879, 881 (6th Cir. 2017) (“Adherence to this requirement [for pleading of specific false claims] not only respects Civil Rule 9(b), but it also helps in determining

whether the public-disclosure bar applies.”)

B. Relaxing Rule 9(b) Diminishes Courts’ Ability To Control The Scope Of Discovery

Rule 9(b) also serves as a tool for courts to weed

out meritless or speculative cases at the pleading stage,

and to narrow overbroad cases before proceeding to

16

summary judgment and trial. The need to prevent fishing expeditions is especially important in the FCA context, given “that a qui tam plaintiff, who has suffered

no injury in fact, may be particularly likely to file suit

as ‘a pretext to uncover unknown wrongs.’” United

States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360

F.3d 220, 231 (1st Cir. 2004). Defendants should not be

forced to bear the enormous costs of discovery in cases

where relators cannot allege that any actual false

claims were submitted.

Even in cases where a relator is able to plead certain claims with particularity, Rule 9(b) can be used effectively to control the scope of discovery and limit litigation costs for defendants and courts. United States

ex rel. Clausen v. Laboratory Corp. of Am., 198 F.R.D.

560, 564 (N.D. Ga. 2000), aff’d, 290 F.3d 1301 (11th Cir.

2002) (“The particularity requirement of Rule 9(b), if

enforced, will not only protect defendants against

strike suits, but will result in claims with discernable

boundaries and manageable discovery limits.”). For

example, in United States ex rel. Spay v. CVS Caremark Corp., 2013 WL 4525226, at *1 (E.D. Pa. Aug. 27,

2013), the relator sought discovery, on a nationwide basis over the course of seven years, of an alleged practice

by a pharmacy benefit manager of fraudulently adjudicating and submitting prescription drug event claims to

Medicare and Medicaid. The court rejected this effort,

ordering that discovery be limited to the time periods,

types of activity, and locations alleged in the complaint.

Id. at *2, *4, *6, *7; see also, e.g., United States ex rel.

Rost v. Pfizer, Inc., 253 F.R.D. 11, 15, 17 (D. Mass.

2008) (where relator supported complaint alleging nationwide off-label marketing scheme with details about

more than 200 false claims submitted in Indiana, court

limited discovery to conduct in Indiana).

17

As illustrated by the decision below, however, the

relaxed pleading standard forecloses the possibility of

any such case management effort. In their complaint,

Relators allege a five-year course of nationwide misconduct without identifying a single false claim with

particularity. See App. 23. Lacking any details about

the nature of the individual false claims, and how they

may have varied over time, by region, or in substance, a

district court on remand would simply not have enough

factual material to meaningfully limit discovery in any

way. See, e.g., United States ex rel. Rigsby v. State

Farm Fire & Cas. Co., 2014 WL 691500, at *5 (S.D.

Miss. Feb. 21, 2014) (“Were the Court to grant Relators’ request, discovery would necessarily be overly

broad because the Amended Complaint lacks enough

detail to permit the Court to craft reasonable discovery

parameters.”). Instead of a reasonably staged approach, the doors of discovery are opened in full, allowing the kind of speculative, burdensome fishing expedition that Rule 9(b) has traditionally guarded against.

18

CONCLUSION

For the foregoing reasons, this Court should grant

the petition.

Respectfully submitted.

JAMES C. STANSEL

MELISSA B. KIMMEL

PHARMACEUTICAL RESEARCH

AND MANUFACTURERS OF

AMERICA

950 F Street NW, Suite 300

Washington, DC 20004

Counsel for Amicus Curiae

Pharmaceutical Research and

Manufacturers of America

CHRISTOPHER L. WHITE

MATTHEW E. WETZEL

ADVANCED MEDICAL

TECHNOLOGY ASSOCIATION

701 Pennsylvania Ave., NW

Suite 800

Washington, DC 20004

Counsel for Amicus Curiae

Advanced Medical Technology

Association

MARCH 2018

DAVID W. OGDEN

Counsel of Record

JONATHAN G. CEDARBAUM

BLAKE ROBERTS

JOHN BYRNES

WILMER CUTLER PICKERING

HALE AND DORR LLP

1875 Pennsylvania Ave., NW

Washington, DC 20006

(202) 663-6000

david.ogden@wilmerhale.com

Counsel for Amici Curiae

STEVEN P. LEHOTSKY

WARREN POSTMAN

U.S. CHAMBER

LITIGATION CENTER, INC.

1615 H Street, NW

Washington, DC 20062

Counsel for Amicus Curiae

Chamber of Commerce of the

United States of America