The second was the drama of the NBA Finals. Watching old guys like Tim Duncan and Ray Allen make key plays was inspiring. We remember watching Duncan play as underage freshman back at Wake, so it also made us feel old. We felt for Duncan when he missed shots late in game 7, even though we have no allegiance to the Spurs or the Heat. In fact, we do not have much interest in the NBA most of the time. Sure, there are great athletes making amazing plays, but most of the long season lacks the intensity and angst that makes regular season college games between conference foes more entertaining to us. The drama of the last few games of the NBA Finals, however, was enough to draw our attention, which is about when it usually perks up. We know others find the NBA’s entire regular season and the first three rounds of the playoffs worth watching. That is fine. People find different things interesting.
The decision in U.S. ex rel Paulos v. Stryker, No. 11-0041-CV-W-ODS, 2013 U.S. Dist. LEXIS 82294 (W.D. Mo. June 12, 2013), is somewhat like that. We have posted on False Claims Act cases from time to time, but we have generally focused on the aspects relevant to drug and device product liability cases. We know that FCA cases matter to our clients. We know they probably care about the FCA’s Public Disclosure Bar, discussion of which took up the majority of the Paulos decision. We, on the other hand, did not see how the issue relates to our cases, so we will focus on the analysis of failure to state a claim. The court applied familiar Twiqbal standards to two different versions of the FCA, the original one that required proof of specific intent to defraud the US government into paying false claims and the one from a 2009 statutory amendment that imposed liability based on knowingly causing “a false record or statement material to a false or fraudulent claim.”
As often seems to be the case when drug or device is sued under the FCA, the alleged conduct at issue (in the part we care about) involves alleged violations of FDA regulations. The three defendant manufacturers of pain pumps allegedly failed to submit reports (we assume MDRs) to FDA over the course of several years, straddling the 2009 amendment. Under either scheme, there was the fundamental question of whether a non-statement—a report that was not made—can be a false statement. Plaintiff tried to expand on an old case about an omission from a statement that was made created an implicit representation that was false. The Paulos court saw the distinction between that situation and the one alleged in the complaint—no statement at all. In product liability cases, we often see allegations that a manufacturer’s silence renders its conduct with regard to FDA or doctors fraudulent. Those allegations are more difficult when paired with a regulatory or common law obligation to provide updated information. Here, there apparently was an the allegation that one of the defendants had submitted thirteen MDRs, which the court read as undercutting the allegation of false statements by not sending in reports: “Plaintiff’s claim is based on the absence of reports, so this allegation seems to eviscerate the claim . . . .” Id. at *47 n. 11. We wonder whether there could have been a false statement if the allegation was that the submission of MDRs to FDA always comes with a representation that the reports being submitted are the only reportable events within the reporting period. Plaintiff apparently did not plead that, though.
The more fundamental problem with plaintiff’s allegations was the lack of articulated connection between FDA reporting and claims for payment being submitted to other parts of the government. Under both statutory schemes, there was insufficient connection alleged between FDA reporting and the claims for payment that doctors and hospital made on the defendants’ pain pumps. Id. at **45-46. With a nod toward reality, plaintiff did not even allege that the MDRs that were not submitted would have ended up in the hands of some potential claims submitter. With language close to what we have been touting recently in other contexts, the court succinctly rejected pinning FCA liability on FDA reporting:
… Plaintiff’s theory strays too far from the FCA’s purpose. Crediting Plaintiff’s theory would impose FCA liability anytime a drug/device manufacturer fails to comply with an FDA requirement. For that matter, Plaintiff’s theory would impose liability under the FCA every time a drug or device manufacturer is alleged to have negligently tested a drug or device because in such instance the manufacturer can be alleged to have failed to reveal the absence of health benefits. There are remedies for such failures under FDA’s regulatory scheme or tort law, but the FCA is not one of those remedies.Id. at **46-47. Except for maybe the part about tort law covering all of these alleged failures, the court nailed it. Bada bing.
There is one last part of the opinion that bears mention. Because companies tend to buy other companies over time, we often see a company named as a defendant in product liability cases only because it bought the company that actually made the product the plaintiff used. The allegation that a defendant is the successor in interest to the company whose actions and product are at issue seems to suffice in those cases. Not here. One defendant was also dismissed because it was alleged to have purchased a company that allegedly committed bad acts, with the court holding “Plaintiff must allege facts that make [successor] liable for [predecessor’s] wrongdoing.” Id. at *48. The court paired that with a rebuff of the request that it get discovery to see if could allege something bad by the successor. “Plaintiff has placed the cart before the horse. Before discovery is justified, Plaintiff must first allege—consistent with the dictates of Iqbal and Twombly—that [successor] is liable.” Id. at * 49. We certainly care about that.