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United States ex rel Kennedy v. Aventis Pharmaceuticals

October 23, 2007

UNITED STATES OF AMERICA EX REL. KATY KENNEDY AND FRANK A. MATOS, STATE OF ILLINOIS EX REL. KATY KENNEDY AND FRANK A. MATOS, AND KATY KENNEDY, PLAINTIFFS,
v.
AVENTIS PHARMACEUTICALS, INC. AND PHARMANETICS, INC., DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Defendants Aventis Pharmaceuticals, Inc. and PharmaNetics, Inc. have moved for reconsideration of the Court's September 13, 2007 ruling denying their motions to dismiss certain claims in the amended complaint of relators Katy Kennedy and Frank Matos and have asked the Court pursuant to 28 U.S.C. § 1292(b) to certify the ruling for interlocutory appeal. Familiarity with the September 13, 2007 ruling is assumed. United States ex rel. Kennedy v. Aventis Pharmaceuticals, Inc., No. 03 C 2750, 2007 WL 2681701 (N.D. Ill. Sept. 13, 2007).

For the reasons stated below, the Court denies defendants' motions.

1. Aventis' Motion for Reconsideration or to Strike

Aventis contends that the Court erred when it held that the False Claims Act's public disclosure bar, 31 U.S.C. § 3730(e)(4), does not bar the qui tam claims of relators Katy Kennedy and Frank Matos. According to Aventis, relators' complaint includes six separate qui tam claims. Aventis argues that because the Court held that some of the allegations underlying relators' claims were publicly disclosed, the Court mistakenly found that it had jurisdiction over "all of Relators' qui tam claims -- including those it had concluded were based on the publicly disclosed allegations . . . ." Aventis Mot. to Reconsider at 4-5. It argues that the Court misinterpreted controlling precedent, specifically, Rockwell Int'l Corp. v. United States, 127 S.Ct. 1397 (2007), which according to Aventis holds that the public disclosure bar "does not permit such claim smuggling." Id. at 1410.

Aventis' motion is based on an erroneous premise. Relators' amended complaint does not, in fact, include six False Claims Act qui tam claims. Rather, the complaint alleges a single qui tam claim, albeit one that has three separate iterations, as the Court explains below. In their complaint, relators allege that defendants caused the presentation of false or fraudulent claims "based on Defendants' knowing dissemination of off-label information relating to the prescription drug Lovenox . . . ." Id. ¶¶ 2-3. Specifically, relators allege that "Defendants' off-label promotion of Lovenox caused physicians to prescribe Lovenox for off-label uses," and that "[t]his in turn caused physicians and hospitals to submit false claims to the [federal and Illinois] Governments" for reimbursement of off-label prescription of the drug. Id. ¶ 5. Though relators' complaint includes three False Claims Act counts, these are simply three separate iterations of the single underlying claim: one count alleging presentation of false claims, one alleging use of false records to seek payment of the same false claims, and one alleging conspiracy to seek payment of the same claims. See id. ¶¶ 64, 67, 70 (first paragraphs of Counts 1, 2, and 3, each incorporating the entirety of relators' factual allegations).

Aventis mistakes the underlying facts alleged by relators -- all of which relate to the single scheme to cause presentation of false claims regarding off-label prescription of Lovenox -- for discrete qui tam claims. They are not.

As the Court held in its September 13, 2007 order, relators' qui tam claim is not barred by the public disclosure bar because the claim does not "depend[ ] essentially upon" publicly disclosed information. Kennedy, 2007 WL 2681701, at *7. Rockwell does not provide any basis for this Court to reconsider this ruling. Rockwell was a False Claims Act qui tam suit concerning a method of disposing of toxic sludge from a nuclear weapons plant that involved mixing it with cement and allowing it to harden into what were referred to as "pondcrete" blocks which would then be disposed of. Stone, the relator, reviewed a proposed manufacturing process for pondcrete and predicted in a memorandum to management that it would not work for various reasons and that this would result in the release of toxic waste. Rockwell nonetheless proceeded with the project. Several years later, after Stone had been laid off, Rockwell discovered "insolid" pondcrete blocks but allegedly did not tell the government for over two years. The alleged false claims involved "award fees" that the government paid Rockwell based on its evaluation of Rockwell's performance in operating the plant, including its performance concerning environmental safety. Stone and the government contended that Rockwell would have been paid less had it disclosed the pondcrete problems. See Rockwell, 127 S.Ct. at 1401-02.

At trial, the jury found against Rockwell only on claims submitted during a particular period, April 1987 through September 1988, rejecting the False Claims Act claims for earlier periods. Because Stone had left the company in March 1986, he had no direct knowledge regarding what had occurred during the 1987-88 period. The Supreme Court considered whether a relator can be an "original source" when the only false claims the jury found involved a theory of fraud as to which he had no direct knowledge and thus could not have been an original source. The Court considered and rejected two theories on which a relator might, under these circumstances, be considered an "original source" for purposes of 31 U.S.C. § 3730(e)(4)(A). The Court first concluded that Stone's earlier prediction that the pondcrete would fail did not qualify as direct and independent knowledge, because it had failed not for the reason he predicted, but for a completely independent reason, specifically, as a result of actions by an employee who started with Rockwell after Stone left. Id. at 1409-10. Second, the Court rejected Stone's contention that his status as the original source of information regarding a completely separate alleged fraud did not qualify him as an "original source" for his claims concerning pondcrete. Id. at 1410. It was in that context that the Court made the comment about "claim smuggling" upon which Aventis relies. Specifically, the Court determined that Stone could not bootstrap his original source status regarding one theory of fraud into original source status for an entirely different theory. In this regard, the Court's conclusion was consistent with its discussion earlier in the decision that a relator may not plead "a trivial theory of fraud for which he had some direct and independent knowledge and later amend the complaint to include theories copied from the public domain," and that "new allegations regarding a fundamentally different fraudulent scheme require reevaluation of the relator's original source status." Id. at 1408 (emphasis added).

The present case presents an entirely different scenario. As described earlier, the matter on which the Court concluded that the relators are original sources involves the exact same allegedly fraudulent scheme as the one and only scheme they allege in their complaint. In short, Rockwell does not stand for the proposition that relators' qui tam claim in this case is barred because some of the facts cited in their complaint were publicly disclosed, nor does it require revisiting the Court's September 13 decision.

For these reasons, the Court denies Aventis' motion for reconsideration. The Court also denies Aventis' motion to strike the allegations that involve public-record or previously-disclosed matters. The extent to which a False Claims Act relator who qualifies as an original source for the information on which his claims are premised can also use other previously disclosed matters to support his claim is a matter more appropriately addressed at a later stage of the case.

2. PharmaNetics' Motion for Reconsideration or to Strike

PharmaNetics has separately moved for reconsideration of the Court's decision on the "original source" question. It argues that because the information for which relators claim to have been an original source does not directly concern PharmaNetics, they cannot maintain a claim against PharmaNetics (as opposed to Aventis). But as the Court discussed at length in its September 13 decision, relators have cleared the original source hurdle with regard to the information that forms the basis of their claim. PharmaNetics has cited no authority for the proposition that the original source question is analyzed on a defendant-by-defendant basis, as opposed to a claim-by-claim basis. In other words, assuming (as the Court has concluded) that relators have adequately alleged that they are an original source for the information that forms the basis of their claim, PharmaNetics has offered no basis for the proposition that relators may not sue other defendants claimed to be joint participants in the same fraudulent scheme simply because relators are not the original source of information that directly implicates those particular ...


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