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U.S. ex rel. Spay v. CVS Caremark Corporation

United States District Court, Third Circuit

August 27, 2013




Currently pending before the Court is a Motion to Compel by Plaintiff/Relator Anthony R. Spay. For the following reasons, the Motion is granted in part and denied in part.


The present litigation is an action to recover damages and civil penalties on behalf of the United States of America arising from false and/or fraudulent records, statements, and claims made, used, and caused to be made, used, or presented by Defendants CVS Caremark Corporation, Caremark Rx, LLC (f/k/a Caremark Rx, Inc.), Caremark, LLC (f/k/a Caremark, Inc.), and Silverscript, LLC (f/k/a/Silverscript, Inc.) (collectively "Defendants"). (Am. Compl. ¶ 1.) At the core of the Amended Complaint, filed on August 5, 2011, is the allegation that Defendants violated the False Claims Act, 31 U.S.C. § 3729, et seq. ("FCA"), in their role as a Pharmacy Benefit Manager ("PBM"), by engaging in a nationwide practice of fraudulently adjudicating and submitting improper Prescription Drug Event ("PDE") claims to the Center for Medicaid and Medicare Services ("CMS") under the Part D Program. Plaintiff also alleges that Defendants violated the FCA by falsely certifying that the PDE data submitted to CMS was truthful, accurate and complete.

Following the initiation of suit, Defendants moved to dismiss the Amended Complaint on a multitude of grounds. Upon thorough consideration of the parties' extensive briefing, the Court issued an opinion denying the Motion in its entirety and allowing all claims to proceed.[1]

On March 29, 2013, Plaintiff served on Defendants his First Set of Requests for the Production of Documents containing sixty separate Requests. Defendants subsequently responded with a forty-two page series of responses and objections. Upon receipt of Defendants' submission, Plaintiff sent a letter to Defendants, dated May 13, 2013, outlining perceived deficiencies in their production. During a June 4, 2013 teleconference, Defendants declined to withdraw their objections, but agreed to expand the time frame for their production to include documents from January 1, 2006 to January 1, 2008. The parties met again on June 13, 2013, regarding the formatting and schedule of document production, after which Defendants began producing limited documents on a rolling basis.

Plaintiff filed the current Motion to Compel on July 2, 2013. Defendants responded on July 19, 2013, Plaintiff filed a Reply Brief on August 2, 2013, and Defendants filed a Sur-reply on August 9, 2013. The Motion is now ripe for consideration.


Currently at issue between the parties is the permissible scope of discovery on to Plaintiff's FCA claims, which this Court deemed sufficient to survive Rule 12(b)(6) scrutiny. The parties currently maintain a dispute on six issues: (1) the temporal scope of all discovery; (2) the substantive scope of discovery on the "nationwide" FCA claims; (3) the geographic scope of "nationwide" FCA discovery; (4) whether Defendants must respond to certain individual topic areas for which they have declined to produce responsive documents; (5) whether Defendants must withdraw their confidentiality objections; and (6) whether Defendants must withdraw their objections to the definitions of certain industry terms. The Court will address each issue individually.

A. Temporal Scope of All Discovery

The first area of dispute between the parties is whether Plaintiff has sufficiently alleged continuing fraud in order to rationalize its request for discovery from 2006 to the present. While agreeing to produce documents for the entire time period of the contract between Medical Card Systems ("MCS"), a Part D Sponsor, and Defendant SilverScript-from January 1, 2006 to January 1, 2008-Defendants have refused to produce any documents beyond that time frame.

Plaintiff attempts to justify his requests for documents beyond this time period on the ground that the First Amended Complaint alleges that Defendants' fraudulent practices were carried out on an ongoing basis with respect to Defendants' contracts with Part D Sponsors nationwide. He notes that the Court, in denying the Motion to Dismiss, permitted the nationwide claims to proceed. Further, he argues that a defendant who engages in continued fraudulent behavior should not be entitled to escape liability for behavior that exceeds the bounds set forth in the complaint.

Contrary to Plaintiff's position, however, the Court does not find that Plaintiff's allegations justify allowing discovery to span for more than seven years, from 2006 to the present. First, and perhaps most importantly, the Amended Complaint's allegations of continuing misconduct are superficial at best and comprise only three paragraphs of the 382-paragraph Complaint. Paragraphs 2 and 3 assert that Defendants "have intentionally, systematically, recklessly and illegally provided false of fraudulent Medicare Part D claims and prescription drug event ("PDE") data to the Centers for Medicare and Medicaid Services ("CMS") since 2006, " and that "[a]s a direct result of Defendants' fraudulent, improper practices, Federal health insurance programs including, but not limited to, Medicare Part D, have been caused and continue to " pay out on false of fraudulent claims. (Am. Compl. ¶¶ 2-3 (emphasis added).) Moreover, paragraph 323 states that, " Upon information and belief, the CVS Caremark Defendants continue to submit false or fraudulent claims to CMS in the very same manner as described herein. " (Id. ¶ 323 (emphasis added).)[3]

Such cursory allegations, made on information and belief alone, are unquestionably insufficient to open the door to broad and burdensome discovery into Defendant's nationwide practices over the course of more than seven years. The inadequacy of such allegations becomes abundantly obvious when considered in the context of the remainder of the document. The Amended Complaint extensively and repeatedly discusses the time period of January 1, 2006 through January 2008, during which time Defendants provided PBM services to MCS. (Id. ¶¶ 249-253.) It then goes on to state that " [d]uring the time period relevant to this Complaint, the Caremark Defendants regularly and knowingly submitted false or fraudulent PDE data items to CMS"-an implicit but evident suggestion that the "relevant time period" spans only from January 1, 2006 to January 1, 2008.[4] (Id. ¶ 323 (emphasis added).) The Amended Complaint later re-emphasizes that "[t]he Caremark Defendants fraudulently submitted or caused the submission of Part D claims data (PDE data) and other required payment data on behalf of MCS from January l, 2006 and until 2008 to CMS...." (Id. ¶ 337 (emphasis added).) Thereafter, when expressly pleading his nationwide claims, Plaintiff phrases them in past tense, with no contention that the conduct is continuing. (Id. ¶¶ 347-351.) This past tense description holds true throughout the entire portion of the Amended Complaint which sets forth the FCA cause of action against Defendants-at no point does Plaintiff use the language of a continuing violation. (Id. 352-380.) Indeed, in the statement of the claim, Plaintiff contends that "[t]hese false claims were presented by the Caremark Defendants on behalf of thousands of separate entities, across the United States, and over several years "-language which conveys a finite period that does not continue to the present. (Id. ¶ 378 (emphasis added).) Ultimately, this Court recognized as much in the Memorandum Opinion denying Defendants' Motion to Dismiss. In the face of Plaintiff's argument that the FERA amendments to the FCA should apply to this case, the Court noted that, "[t]he language of the retroactivity provision, however, is clear: it applies only to claims pending' on or afer June 7, 2008. The Amended Complaint's cursory reference to continued' activity, made upon information and belief, (Am. Compl. ¶ 323), does not suffice to plead with specificity that Defendants had any false claims pending on or after this date. Accordingly, the Court declines to apply the FERA amendments to this matter." Spay v. CVS Caremark Corp., 913 F.Supp.2d 125, 170 n.30 (E.D. Pa. 2012).

Plaintiff's efforts to avoid the limitations established by his own pleading are unconvincing. First, he argues that his company, Pharm/DUR, performed a subsequent audit in 2009 of another Part D Sponsor for which Defendants served as the PBM. That audit, which reviewed claims submitted in 2007, exposed many of the same problems identified in the MCS audit, thus evidencing the continued nature of Defendants' activity. (Pl.'s Mem. Supp. Mot. Compel 25.) This argument, however, fails on two grounds. First, Plaintiff cannot broaden the scope of his pleading by submission of this evidence. The Amended Complaint is clearly confined to a 2006-2007 time period. Evidence of purportedly continuing violations produced in conjunction with a motion to compel cannot amend Plaintiff's original allegations. Moreover, even if this Court were to consider this evidence, Plaintiff concedes that the audit findings reflect claims made in 2007-a year encompassed by the "relevant time period" defined in the Amended Complaint. As such, the 2009 audit findings will already be included in the discovery period and are not proof of any continuing violation past January 1, 2008.

Finally, Plaintiff appeals to the broad notion of justice as a basis for allowing temporally unlimited discovery. He argues that "if Defendants' position were accurate, a plaintiff would never be entitled to discovery beyond the bounds or time-frame of his own particular knowledge-even if the defendant continued his fraud well beyond the date of the filing of the action, and even if the defendants continued to engage in that very same fraud during the pendency of the litigation." (Pl.'s Mem. Supp. Mot. Compel 28.) Plaintiff, however, misunderstands the purpose of proper pleading. The simple inclusion of a cursory allegation that the Defendants' conduct is ongoing-made on information and belief only and without any of the specificity mandated by Federal Rule of Civil Procedure 9(b)- does not automatically entitle Plaintiff to obtain expansive discovery to the present of all of Defendants' practices in order to uncover new false claims. As aptly noted by a sister court facing a similarly broad FCA claim,

The Plaintiff wants a ticket to the discovery process. If given such a ticket, the next stage of the next stage of this litigation is clear. The Plaintiff will request production of every lab test claim submitted by the Defendant over the last ten years. At that point, the Defendant may decide to settle the case to avoid the enormous cost of such discovery and the possible disruption of its ongoing business. On the other hand, the Defendant may choose to resist the discovery. In that case, the Court will be presented with the dilemma of allowing an unlimited fishing expedition or no discovery at all because of the difficulty in fashioning logical and principled limits on what has to be produced. 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.

U.S. ex. rel. Clausen v. Lab. Corp. of Am., Inc. , 198 F.R.D. 560, 564 (N.D.Ga. 2000), aff'd 290 F.3d 1301 (11th Cir. 2002), cert. denied, 537 U.S. 1105 (2003). Finding such reasoning convincing, this Court declines to allow such a fishing expedition into potential fraudulent claims beyond 2007 absent some particularized pleading that any such claims occurred.[5] Accordingly, the ...

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