United States District Court, E.D. Pennsylvania
UNITED STATES OF AMERICA, CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE, DISTRICT OF COLUMBIA, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, IOWA, LOUISIANA, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MONTANA, NEVADA, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, OKLAHOMA, NORTH CAROLINA, RHODE ISLAND, TENNESSEE, TEXAS, VIRGINIA, and WISCONSIN, ex rel. CATHLEEN FORNEY, Plaintiffs/Relator,
MEDTRONIC, INC., Defendant.
G. SMITH, J.
case, the relator contends that the defendant, a medical
device company, paid kickbacks to health care providers in
violation of the False Claims Act. The False Claims Act,
however, includes a public disclosure bar that prohibits
lawsuits brought by relators where the relator's
allegations of fraud have already been disclosed to the
government. The company contends that the claims of fraud
raised in the relator's complaint were publicly disclosed
prior to the time the relator filed the complaint.
Consequently, the company asks the court to enter summary
judgment in its favor and dismiss the action under the public
company's motion, however, presents numerous technical
legal issues, several of which have yet to be resolved in
this circuit. A number of these issues arise from the fact
that in 2010, as part of the Patient Protection and
Affordable Care Act, Congress amended the public disclosure
bar to restrict the material that counts as a public
disclosure and broadened the exception to the public
disclosure bar. The exception now provides, in broad terms,
that a relator may avoid dismissal under the bar if she is an
original source. While the Third Circuit has had occasion to
address the post amendment disclosure bar, the parties,
through the outstanding work of counsel, have raised a number
of creative arguments that the Third Circuit has yet to
addition to those unresolved legal questions, the motion also
presents difficult factual issues. The public disclosure bar
analysis involves an intricate comparison of the fraud
allegations in this case to the fraud allegations in the
prior public disclosures. After performing this comparison,
the court must also address the original source exception. In
an effort to solidify her status as an original source, the
relator has submitted over two thousand pages of documents to
reviewing the amended public disclosure bar and the
applicable case law, the court concludes that the vast
majority of the relator's allegations of fraud were
contained in valid prior public disclosures. The court also
finds, however-after a rigorous examination of the documents
the relator provided to the government-that under the Third
Circuit's interpretation of the original source
exception, the relator qualifies as an original source. Thus,
despite the presence of prior public disclosures that
advanced substantially the same allegations of fraud as the
relator does here, the court denies the motion for summary
November 20, 2015, the relator, Cathleen Forney
(“Relator Forney”), filed a sealed complaint
alleging that the defendant, Medtronic, Inc.
(“Medtronic”), violated the federal False Claims
Act (“FCA”). Doc. No. 1. Relator Forney named the
United States and 29 state governments as plaintiffs in the
action. See Compl. at 1, Doc. No. 1. The United
States then filed two motions seeking to extend the seal
while it determined whether to intervene in the case. Doc.
Nos. 2, 6. The court granted both motions and extended the
seal. Doc. Nos. 3, 7. Then, on December 12, 2016, the United
States and the 29 plaintiff states filed notices that they
declined intervene. Doc. Nos. 8, 9. Accordingly, on December
14, 2016, the court lifted the seal and ordered Relator
Forney to serve the complaint on Medtronic. See Dec.
14, 2016 Order, Doc. No. 11.
months later, Relator Forney filed an amended complaint. Doc.
No. 17. The court ordered Medtronic to respond to the amended
complaint by April 24, 2017. See April 13, 2017
Order, Doc. No. 29. On April 24, 2017, Medtronic filed a
motion to dismiss the amended complaint in which it asserted,
inter alia, that Relator Forney had failed to plead
fraud with sufficient particularity. See Def.
Medtronic, Inc.'s Mem. of Law in Supp. of Its Mot. to
Dismiss, Doc. No. 30-1; see Fed. R. Civ. P. Rule
9(b) (requiring fraud to be pled with particularity). The
court found serious problems with the allegations in the
amended complaint and, accordingly, granted the motion and
dismissed the amended complaint without prejudice.
See June 19, 2017 Mem. Op., Doc. No. 37; June 19,
2017 Order, Doc. No. 38.
Forney then filed a second amended complaint on July 6, 2017.
Doc. No. 42. On July 27, 2017, Medtronic moved to dismiss the
second amended complaint. Doc. No. 48. On August 14, 2017,
notwithstanding the court's lingering concern that the
“relator's theory of support services amounting to
illegal remuneration will not ultimately prove to be viable,
” the court denied the second motion to dismiss
“without prejudice to the defendant raising its
arguments in a motion for summary judgment.” Aug. 14,
2017 Order, Doc. No. 52. Accordingly, the court set
scheduling deadlines and ordered the parties to complete fact
discovery by December 22, 2017. Aug. 14, 2017 Scheduling
Order, Doc. No. 51.
to the conclusion of fact discovery, Medtronic filed an early
motion for summary judgment. See Def. Medtronic
Inc.'s Mot. for Summ. J. Due to Public Disclosure Bar
(“Def.'s Mot.”), Doc. No. 64. In the motion,
Medtronic contends that it is entitled to summary judgment in
its favor because of the FCA's public disclosure bar.
See Id. Accordingly, the court placed all scheduling
deadlines in suspense pending resolution of the motion for
summary judgment. See Nov. 29, 2017 Order, Doc. No.
67. Relator Forney filed a response to the motion on December
8, 2017, and Medtronic filed a reply in further support of
the motion on December 20, 2017. Doc. Nos. 69, 70. On
December 20, 2017, the court heard oral argument on the
motion for summary judgment.
court ordered supplemental briefing on April 3, 2018.
See Apr. 3, 2018 Order, Doc. No. 74. Relator Forney
filed a supplemental memorandum on April 17, 2018. Doc. No.
75. Medtronic filed a response to the supplemental memorandum
on May 1, 2018. Doc. No. 76. The motion for summary judgment
is now ripe for adjudication.
second amended complaint sets forth the following
allegations: Medtronic is a massive international medical
device manufacturer that, in the United States alone,
“generate[s] between 8.8 and 9.2 billion dollars per
year.” Second Am. Compl. at 4, Doc. No. 42. Relator
Forney worked at Medtronic for 16 years-from 1996 until 2012
when Medtronic terminated her employment. See Id. at
2. At the time of her termination, Relator Forney was working
as a District Service Manager for the Cardio and Vascular
Group, where she reported to the District Manager for the
Eastern Pennsylvania District. See Id. at 2, 4.
Forney contends that during her time at Medtronic she
observed Medtronic engage in an extensive illegal fraud
scheme. See Id. at 1-2, 4. In broad terms, she
contends that Medtronic provided free services to people
“who made purchasing decisions about Medtronic
devices” and that these free services were
“intended to persuade health care providers to purchase
Medtronic devices.” Id. at 4. Relator Forney
contends that these services constitute illegal remuneration
under the FCA. See Id. at 15.
Forney references a number of instances where Medtronic
allegedly provided services as an incentive to convince
health care providers to purchase devices from it. These
instances can be grouped into three categories: (1) device
checks and device interrogations; (2) implant services; and
(3) practice management consulting. See Second Am.
Compl. at 4-19; see also Relator Forney's Opp.
to Medtronic's Mot. for Summ. J. Based on Public
Disclosure Bar at 19 (“Forney's Br.”)
(characterizing the second amended complaint as alleging
these three theories of fraud), Doc. No. 69-1. Relator Forney
is apparently no longer pursuing her implant services theory.
See Forney's Br. at 19 n.3 (“Relator
intends to seek only damages for kickbacks paid in the form
of device checks and consulting services. Relator has
conferred with the United States, which does not object to
Relator ceasing to prosecute the free labor at implant
surgeries.”). Accordingly, the court will address the
remaining two theories in turn.
with Relator Forney's device check theory, she contends
that after a physician implanted a Medtronic medical device,
Medtronic provided “checks” or
“interrogations” of the device. See
Second Am. Compl. at 9-10. Relator Forney offers her own
experience and training as an example of these device checks:
Ms. Forney was credentialed to perform the following services
at one hospital: (1) performing system assessments on
Pacemakers through the use of packing system analyzers and
programmers, (2) evaluation and reprogramming of Pacemaker
devices at bedside, evaluation and reprogramming of devices
at bedside, (3) performing system assessments on ICD Systems
through the use of system analyzers and programmers, (4)
evaluation and reprogramming of ICD devices at bedsides, and
(5) evaluation and reprogramming of IC [sic] devices at
procedural and surgical suites off-site from hospitals.
Id. at 10. Relator Forney also contends that, in
order to facilitate these free device checks, Medtronic paid
“the necessary costs involved in credentialing”
its Clinical Specialists. Id. at 11. These costs
included background checks. See Id. Costs of the
background checks range from $60 to $250 each. See
Id. Relator Forney contends that this is a cost that the
health care provider would have had to bear if Medtronic had
not covered it. See Id. Moreover, the Clinical
Specialists themselves obviate the need for health care
providers to require one additional staff member. See
Id. As stated by Relator Forney: “This free staff
person eliminated the need of the hospital to pay to
credential a staff member, as well as eliminating the need to
hire the necessary staff.” Id.
to Relator Forney's practice management theory, Relator
Forney alleges that
Medtronic created an entire structure of ‘lean
sigma' training that taught Ms. Forney and others how to
provide free consulting services as a means to integrate
their services into the health care provider's practice
management tasks. Medtronic offered free assistance on
reimbursement, and free consulting on all sorts of practice
Id. at 13; see also Relator Forney's
Opp. to Medtronic's Mot. for Summ. J. Based on Public
Disclosure Bar, Ex. 1 at ECF pp. 23-29 (describing the lean
sigma training / approach), Doc. No. 69-3. Under the umbrella
of the practice management theory, Relator Forney raised two
distinct allegations of fraud. First, Medtronic trained Clinical
Specialists to handle administrative tasks that the health
care provider would normally handle. See Second Am.
Compl. at 11-12. For example, Relator Forney drafted a
worksheet to track remote monitoring. See Id. She
also alleges she assisted health care providers with data
entry: “Medtronic Clinical Specialists [entered] data
 into  hospital databases maintained by St. Luke's
Hospital and Lehigh Valley Hospital Muhlenberg.”
Id. (alterations to original). Relator Forney
contends that “Medtronic  directed its employees to
engage in these clerical data-entry tasks as a means of
providing value to the hospitals.” Id. at 12
(alteration to original).
Relator Forney contends that Medtronic provided free
reimbursement guidance to health care providers. See
Id. at 12. Specifically, she alleges that
“Medtronic taught health care providers how to increase
profits by maximizing their revenue from government-funded
health care programs.” Id. In other words,
Medtronic taught health care providers how to accurately code
their reimbursement requests so that the health care
providers were able to recover maximum reimbursement from
government-sponsored health care programs. See id.
Relator Forney has alleged that Medtronic engaged in a
nationwide scheme to provide free services to health care
providers. Relator Forney contends that these free services
are illegal kickbacks under the FCA. These free services
included device checks and device interrogations provided by
Medtronic Representatives. To facilitate these free checks,
Medtronic paid to have its representatives credentialed-a
cost that the health care provider would typically have paid.
And finally, Medtronic also provided free administrative
assistance and reimbursement guidance to health care
Standard of Review - Motions for Summary
district court “shall grant summary judgment if the
movant shows that there is no genuine issue as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a). Additionally,
“[s]ummary judgment is appropriate when ‘the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a
matter of law.'” Wright v. Corning, 679
F.3d 101, 103 (3d Cir. 2012) (quoting Orsatti v. New
Jersey State Police, 71 F.3d 480, 482 (3d Cir. 1995)).
An issue of fact is “genuine” if “the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc. 477 U.S. 242, 248 (1986). A fact is
“material” if it “might affect the outcome
of the suit under the governing law.” Id.
party moving for summary judgment has the initial burden
“of informing the district court of the basis for its
motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, which it believes
demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986) (internal quotation marks omitted). Once the
moving party has met this burden, the non-moving party must
counter with “‘specific facts showing that there
is a genuine issue for trial.'” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986) (citation omitted); see Fed. R. Civ. P.
56(c) (stating that “[a] party asserting that a fact .
. . is genuinely disputed must support the assertion by . . .
citing to particular parts of materials in the record . . .;
or . . . [by] showing that the materials cited do not
establish the absence . . . of a genuine dispute”
(alterations to original)). The non-movant must show more
than the “mere existence of a scintilla of
evidence” for elements on which the non-movant bears
the burden of production. Anderson, 477 U.S. at 252
(1986). Bare assertions, conclusory allegations, or
suspicions are insufficient to defeat summary judgment.
See Fireman's Ins. Co. v. DuFresne, 676 F.2d
965, 969 (3d Cir. 1982) (indicating that a party opposing a
motion for summary judgment may not “rely merely upon
bare assertions, conclusory allegations or
suspicions”); Ridgewood Bd. of Educ. v. N.E. for
M.E., 172 F.3d 238, 252 (3d Cir. 1999) (explaining that
“speculation and conclusory allegations” do not
satisfy non-moving party's duty to “set forth
specific facts showing that a genuine issue of material fact
exists and that a reasonable factfinder could rule in its
favor”). Additionally, the non-moving party
“cannot rely on unsupported allegations, but must go
beyond pleadings and provide some evidence that would show
that there exists a genuine issue for trial.” Jones
v. United Parcel Serv., 214 F.3d 402, 407 (3d Cir.
2000). Moreover, arguments made in briefs “are not
evidence and cannot by themselves create a factual dispute
sufficient to defeat a summary judgment motion.”
Jersey Cent. Power & Light Co. v. Township of
Lacey, 772 F.2d 1103, 1109-10 (3d Cir. 1985).
court “may not weigh the evidence or make credibility
determinations.” Boyle v. County of Allegheny,
139 F.3d 386, 393 (3d Cir. 1998) (citing Petruzzi's
IGA Supermarkets., Inc. v. Darling-Del. Co. Inc., 998
F.2d 1224, 1230 (3d Cir. 1993)). Instead, “[w]hen
considering whether there exist genuine issues of material
fact, the court is required to examine the evidence of record
in the light most favorable to the party opposing summary
judgment, and resolve all reasonable inferences in that
party's favor.” Wishkin v. Potter, 476
F.3d 180, 184 (3d Cir. 2007). The court must decide
“not whether . . . the evidence unmistakably favors one
side or the other but whether a fair-minded jury could return
a verdict for the plaintiff on the evidence presented.”
Anderson, 477 U.S. at 252. “Where the record
taken as a whole could not lead a rational trier of fact to
find for the non-moving party, there is no ‘genuine
issue for trial'” and the court should grant
summary judgment in favor of the moving party. Matsushita
Elec. Indus. Co., 475 U.S. at 587 (citation omitted).
motion for summary judgment, Medtronic generally contends
that the court should grant summary judgment under the
FCA's public disclosure bar. The relevant portion of the
(4)(A) The court shall dismiss an action or
claim under this section, unless opposed by the Government,
if substantially the same allegations or transactions as
alleged in the action or claim were publicly disclosed--
(i) in a Federal criminal, civil, or
administrative hearing in which the Government or its agent
is a party;
(ii) in a congressional, Government
Accountability Office, or other Federal report, hearing,
audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the
person bringing the action is an original source of the
(B) For purposes of this paragraph,
“original source” means an individual who either
(i) prior to a public disclosure under subsection (e)(4)(a),
has voluntarily disclosed to the Government the information
on which allegations or transactions in a claim are based, or
(2) who has knowledge that is independent of and materially
adds to the publicly disclosed allegations or transactions,
and who has voluntarily provided the information to the
Government before filing an action under this section.
31 U.S.C. § 3730(e)(4)(A), (B) (footnote
removed). Per this portion of the FCA, a defendant
seeking to have the court dismiss an action under the public
disclosure bar must prove three elements: (1) a valid public
disclosure exists; (2) the prior public disclosure revealed
“substantially the same allegations or
transactions” of fraud alleged in the present action;
and (3) the relator is not an original source. See ...