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United States v. Supervalu Inc.

United States District Court, C.D. Illinois, Springfield Division

July 12, 2018

UNITED STATES OF AMERICA, and THE STATES OF CALIFORNIA, DELAWARE, ILLINOIS, INDIANA, MASSACHUSETTS, MINNESOTA, MONTANA, NEVADA, NEW JERSEY, NORTH CAROLINA, RHODE ISLAND, VIRGINIA, ex rel . TRACY SCHUTTE and MICHAEL YARBERRY, Plaintiffs and Relators,
v.
SUPERVALU, INC., SUPERVALU HOLDINGS, INC., FF ACQUISITIONS, LLC, FOODARAMA, LLC, SHOPPERS FOOD WAREHOUSE CORP., SUPERVALU PHARMACIES, INC., ALBERTSON'S LLC, JEWEL OSCO SOUTHWEST LLC, NEW ALBERTSON'S INC., AMERICAN DRUG STORES, LLC, ACME MARKETS, INC., SHAW'S SUPERMARKET, INC., STAR MARKET COMPANY. INC., JEWEL FOOD STORES, INC., and AB ACQUISITION LLC, Defendants.

          OPINION

          RICHARD MILLS, U.S. DISTRICT JUDGE

         This is a False Claims Act case pursuant to 31 U.S.C. § 3729.

         Pending before the Court is the Defendants' motion for limited sanctions for spoliation of evidence.

         The Relators filed this qui tam action alleging that Defendant Supervalu and related entities (collectively, SuperValu or Defendants) defrauded government healthcare programs by fraudulently reporting inflated Usual and Customary (U&C) pharmacy prices for prescriptions filled for government healthcare program beneficiaries. According to the complaint, Relator Tracey Schutte worked as a pharmacist at SuperValu for a short period of time in April of 2011. Relator Michael Yarberry has worked as a pharmacist in the retail pharmacy industry since 1992.

         The Relators allege that Defendants would report their regular cash prices for prescriptions as their U&C prices. The Relators claim this was a misrepresentation in order to obtain funds from the Government in violation of the False Claims Act.

         I. BACKGROUND

         In their first amended complaint, the Relators claim they each spoke individually with employees of certain of Defendants' pharmacies. SuperValu alleges the Relators rely heavily on these alleged conversations to support their fraud allegations. Specifically, the complaint discusses alleged conversations between Relators and Defendants' (now former) employees Bob Atchison, Lindsay Reel and Mark Cross. The amended complaint also includes an allegation that “Relators conducted numerous phone calls with pharmacy staff at Defendants' branded pharmacies verifying Defendants' price matching and fraudulent billing scheme occurred nationwide.”

         In this motion, SuperValu alleges that the Relators shredded contemporaneous notes of “supposed conversations” with Defendants' employees. Moreover, it is charged that the Relators intentionally deleted computer files concerning these conversations and also threw away the computer on which the files were stored, thereby precluding examination of the relevant metadata. SuperValu contends the Relators took these actions after filing suit, despite having testified they lack any recollection of the alleged conversations.

         The motion provides that on December 20, 2016, the Defendants served interrogatories seeking details of the alleged conversations. The Relators identified 19 alleged conversations between Relators and SuperValu employees. Relator Yarberry identified nine phone conversations occurring in August, November and December of 2009. Relator Schutte identified ten phone or in-person conversations occurring in April, May or July of 2011.

         The Defendants also propounded requests for production which sought, among other things, documents relating to certain phone calls. The Relators produced no documents in response to the requests. At his deposition, Yarberry testified he prepared for his testimony by reviewing notes made by him or Schutte for some of the calls.

         Subsequently, the Relators' counsel produced five documents which Yarberry confirmed were the notes that he reviewed. During his deposition, Yarberry identified one document as notes he made on his home computer concerning phone calls he allegedly made to various Defendant pharmacies. Yarberry testified he had no independent recollection of the substance of these calls. The computer on which he prepared the notes “quit working” and he threw it away after the filing of this lawsuit. Yarberry “deleted everything [all documents he prepared on the computer related to this lawsuit] after [he] sent them to counsel.”

         A number of other notes were also prepared on the computer that Yarberry discarded. Some of the handwritten notes or reports that were the basis for this information were shredded or destroyed.

         The Defendants also note that Schutte identified a May 2011 telephone call he claims to have had with Lindsay Reel, regarding “[s]ubmitting price match to insurance.” Schutte testified, “I'm sure I took notes of the phone call;” “I assume they're gone” and “I don't think I gave any of my handwritten notes to anybody.” The Defendants claim this vague testimony is inconsistent with the Relators' complaint, which features a detailed version of this alleged conversation about which there is apparently no substantiating evidence, and about which the Relators have no present recollection.

         The Relators claim SuperValu made no effort to investigate the matters it addresses in its motion and did not speak to counsel for the Relators before filing the motion. They dispute that the notes on the various phone calls were created “after litigation began.” Additionally, the Relators allege they have the original electronic version of the notes from Schutte's ...


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