US Ex Rel. Frank Solis v. Millennium Pharmaceuticals ( 2018 )

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 at998–99.
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.