United States District Court, E.D. Texas, Texarkana Division
HEALTH CHOICE ALLIANCE LLC, EX REL ON BEHALF OF UNITED STATES OF AMERICA AND 31 STATES AR; CA; CO;CT; DE; DC; FL; GA; HI; IL; IN; IA; LA; MD; MA; MI; MN; MT; NV; NH; NJ; NM; NY; NC; OK; RI; TN; TX; VT; VA; WA; Plaintiff,
ELI LILLY AND COMPANY, INC., VMS BIOMARKETING, COVANCE, INC., UNITED BIOSOURCE CORPORATION, HEALTHSTAR CLINICAL EDUCATION SOLUTIONS LLC, COVANCE MARKET ACCESS SERVICES, INC., Defendants. HEALTH CHOICE GROUP, LLC, ON BEHALF OF UNITED STATES OF AMERICA AND 31 STATES AR;CA;CO;CT;DE;FL;GA;HI;IL;IN;IA;L A;MD;MA;MI;MN;MT;NV;NH;NJ;NM;N Y;NC;OK;RI;TN;TX;VT;VA;WA; Plaintiff,
BAYER CORPORATION, AMGEN INC., ONYX PHARMACEUTICALS, INC., AMERISOURCEBERGEN CORPORATION, LASH GROUP, Defendants.
W. SCHROEDER III UNITED STATES DISTRICT JUDGE
Choice Alliance LLC, on behalf of the United States of
America and 31 States, filed the above-titled qui
tam actions under 31 U.S.C. §§ 3729 and
3730(b)(1)-the False Claims Act-and various state false claim
statutes. This Court referred the case to the United States
Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1) and
(3) and the Amended Order for the Adoption of Local Rules for
the Assignment of Duties to United States Magistrate Judges.
United States (the “Government”) moved to dismiss
under 31 U.S.C. § 3730(c)(2)(A). Docket No.
In its Amended Report and Recommendation-Docket No. 241-the
Magistrate Judge recommended granting the United
States’ Motion. Health Choice objected. Docket No. 243.
The Court hereby ADOPTS AS MODIFIED the
Magistrate Judge’s Recommendations and
OVERRULES Health Choice’s objections.
Also, the Court hereby DISMISSES WITH
PREJUDICE Health Choice’s claims on behalf of
the United States, DISMISSES WITHOUT
PREJUDICE Health Choice’s claims on behalf of
the 31 States and DISMISSES WITHOUT
PREJUDICE the FCA claims as to the United States.
Choice alleges the Defendants knowingly induced the
submission of false claims for reimbursement to government
healthcare programs using unlawful remuneration. See
False Claims Act, 31 U.S.C. §§ 3729–33
(“FCA”). Specifically, Health Choice claims
Defendants violated the Anti-Kickback Statute
(“AKS”), 42 U.S.C. § 1320a-7b(b), and
various state statutes through three alleged schemes: free
nurse services, white coat marketing and reimbursement
per 31 U.S.C. § 3730(b)(2), Health Choice filed its
complaints under seal. Docket No. 1. But, after the
Government declined to exercise its statutory right to
intervene, § 3730(b)(2), those complaints were unsealed.
Docket No. 9. Before Defendants answered, Health Choice filed
its First Amended Complaints, which were dismissed without
prejudice under Federal Rule of Civil Procedure 12(b)(6).
Docket No. 164. Health Choice again amended its complaints,
adding factual support. Docket No. 172. The Government now
moves to dismiss all FCA claims with prejudice as to Health
Choice and without prejudice as to the United States pursuant
to 31 U.S.C. § 3730(c)(2)(A). Docket No. 192.
Magistrate Judge initially entered her Report and
Recommendation recommending the Court dismiss Health
Choice’s claims under § 3730(c)(2)(A). Docket No.
232. But, Health Choice moved for clarification of the
Magistrate Judge’s recommendation, particularly whether
the Magistrate Judge recommended dismissing Health
Choice’s state-law claims with prejudice. Docket No.
235. Granting that motion, the Magistrate Judge amended its
Report and Recommendation, clarifying that it only
recommended dismissing the state-law claims without
prejudice. Docket No. 241. As amended, the Reports and
Recommendations make three moves: (1) reviewing case law
interpreting § 3730(c)(2)(A), (2) finding the Government
has “unfettered discretion” to dismiss an FCA
claim under § 3730(c)(2)(A), and (3) in the alternative,
finding the Government satisfied the more rigorous
Sequoia Orange review standard.
Magistrate Judge first walked through the fractured landscape
of cases interpreting § 3730(c)(2)(A). Id. at
9–21. Primarily, the Magistrate Judge identified a
circuit split over the § 3730’s dismissal
standard. Id. at 9–16. On one hand, the United
States Court of Appeals for the District of Columbia Circuit
held the Government has “unfettered discretion”
to dismiss FCA claims. Id. at 12–14 (citing
Swift v. United States, 318 F.3d 250, 252 (D.C. Cir.
2003)). To that court, § 3730(c)(2)(A)’s
text-providing the Government “may dismiss” an
FCA qui tam action after a hearing without
additional qualification-and the executive branch’s
well-established prosecutorial discretion preclude judicial
review. Id. And that court held that legislative
history- suggesting a relator can object to the Government
“dropping . . . false claims cases without legitimate
reasons”-was not to the contrary because that
suggestion related to an unenacted version of § 3730.
Id. at 13.
other hand, the United States Courts of Appeal for the Ninth
and Tenth Circuits held that Government must “identify
a valid government purpose and a rational relation between
dismissal and accomplishment of the purpose.”
Id. at 9–12, 12–15 (citing Ridenour
v. Kaiser-Hill Co., Ltd. Liab. Co., 397 F.3d 925, 935
(10th Cir. 2005); United States ex rel. Sequoia Orange
Co. v. Baird-Neece Packing Co., 151 F.3d 1139 (9th Cir.
1998)). Then, the burden shifts to the relator to show the
Government’s dismissal is “arbitrary, capricious,
or illegal.” Id. The Ninth Circuit found
support in § 3730’s legislative history and
dismissed separation of powers concerns based on “the
district court . . . respect[ing] the executive
branch’s prosecutorial authority by requiring no
greater justification of the dismissal motion than is
mandated by the Constitution itself.” Id. at
11. The Tenth Circuit similarly found Sequoia
Orange’s standard “comports with legislative
history and protects the right of relator to judicial review
of a government motion to dismiss.” Ridenour,
397 F.3d at 936. No. other circuit-the United States Court of
Appeals for the Fifth Circuit included-has directly addressed
out the fractured legal landscape, the Magistrate Judge
reviewed similarly divided district court opinions. Docket
No. 241 at 16–21. Some courts-like this Court in
United States ex rel. Wright v. AGIP Petroleum
Co., No. 5:03-CV-264-DF, 2005 WL 8167952, at *2 (E.D.
Tex. Feb. 3, 2005)-have declined to address the issue,
finding the Government met the more arduous Sequoia
Orange burden. Id. at 16–17. Some have
followed Swift, see United States ex rel. Sibley
v. Delta Reg'l Med. Ctr., No. 4:17-CV-53, 2019 WL
1305069, at *4 (N.D. Miss. Mar. 21, 2019), applying the
unfettered discretion standard. And others have followed
Sequoia Orange, see United States v. EMD Serono,
Inc., 370 F.Supp.3d 483, 488 (E.D. Pa. 2019)
(substantially the same allegations as here), applying the
rational relationship standard. Id. at 17–19.
this background established, the Magistrate Judge next
addressed the proper standard for dismissal under §
3730(c)(2)(A). Id. at 21–27. Ultimately, she
concluded that the Fifth Circuit would likely follow the D.C.
Circuit and hold that the Government has “unfettered
discretion” to dismiss FCA claims. Id. at 24.
For support, the Magistrate Judge looked to the text and
structure of § 3730, related Fifth Circuit precedent and
general separation-of-powers principles. Id. at
Magistrate Judge found that the text of § 3730(c)(2)(A)
supports the Government’s unfettered discretion.
Id. at 21–22. Section 3730(c)(2)(A),
in relevant part, provides the Government authority to
dismiss a FCA qui tam action “notwithstanding
the objections of the person initiating the action if the
person has been notified by the Government of the filing of
the motion and the court has provided the person with an
opportunity for a hearing on the motion.” To the
Magistrate Judge, the statute’s failure to set a
standard for dismissal-other than requiring “an
opportunity for a hearing”-suggests that the Government
has unfettered discretion to dismiss an action under §
3730(c)(2)(A). Id. at 21–22. The Magistrate
Judge also noted that hearing would not be rendered
superfluous under an unfettered discretion framework.
Id. at 19 n.9. The absence of a standard in
subsection (c)(2)(A) is further highlighted by the presence
of standards in other subsections of § 3730.
Id. at 23–24. For example, 31 U.S.C. §
3730(c)(2)(B) provides “[t]he Government may settle the
action . . . notwithstanding the objections of the person
initiating the action if the court determines, after a
hearing, that the proposed settlement is fair, adequate, and
reasonable under all the circumstances.”
the Magistrate Judge relied on related Fifth Circuit
precedent. Id. at 24–27. Twice, the Fifth
Circuit has mentioned the Government’s
“unilateral” power to dismiss an FCA qui
tam action. Searcy v. Philips Electronics N. Am.
Corp., 117 F.3d 154, 160 (5th Cir. 1997); Riley v.
St. Luke’s Episcopal Hosp., 262 F.3d 749, 754 (5th
Cir. 2001). In Searcy, the Fifth Circuit used §
3730(c)(2)(A)’s language to support a less
“radical” exercise of governmental control over a
qui tam action: the Government’s veto power
over settlements, without intervention. Searcy, 117
F.3d at 160. And, in Riley, the Fifth Circuit used
the Government’s dismissal power-also calling that
power “unilateral”-to establish the
Government’s control over qui tam action,
obviating separation of powers concerns. Riley, 262
F.3d at 754. The Magistrate concluded this precedent suggests
the Fifth Circuit would hold § 3730(c)(2)(A) provides
the Government with a standard-less right to dismiss. Docket
No. 241 at 24–26.
the Magistrate Judge found the “unfettered
discretion” standard to be consistent with the
Government’s prosecutorial and executive discretion.
Id. at 26–27. Traditionally, prosecutorial
decisions are unsuitable for judicial review. Id.
And the Government’s decision to dismiss a qui
tam action-given that the Government does not initially
file that action-is analogous to a decision not to bring the
action at all-that is, prosecutorial discretion. Id.
So, the Government’s decision to dismiss under §
3730(c)(2)(A) should similarly be unsuitable for judicial
review, giving the Government “unfettered
Swift’s unfettered discretion analysis, the
Magistrate Judge recommended dismissal. Health Choice was
provided notice and an opportunity to be heard. Docket No.
227 (minute entry for April 24, 2019 hearing). And that
satisfies the statutory test. Docket No. 241 at 27 n.15.