Case: Document: Page : 1 Date Filed: 12/11/2012 Entry ID: No

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1 Case: Document: Page : 1 Date Filed: 12/11/2012 Entry ID: No Wniteh ~tates' IN THE <!Court of ~ppeals' for tbe jfirs't <!Circuit UNITED STATES OF AMERICA, ex rel. HEIDI HEINEMAN-GUT A, Relator, v. Plaintiff-Appellant, GUIDANT CORPORATION and BOSTON SCIENTIFIC CORPORATION, individually and as Successor-in-Interest to Guidant Corporation, Defendants-Appellees. Appeal from the United States District Court for the District of Massachusetts, Civil Action No. 1 :09-cv RGS Judge Richard G. Stearns, Presiding BRIEF FOR APPELLEES J ONATHAN S. FRANKLIN F REDERICK ROBINSON MARK EMERY FULBRIGHT & JAWORSKI L.L.P. 801 Pennsylvania Ave., N.W. Washington, D.C (202) December 10,2012 Counsel for Appellees

2 Case: Document: Page : 2 Date Filed: 12/11/2012 Entry ID: CORPORATE DISCLOSURE STATEMENT Pursuant to Fed. R. App. P. 26.1, Appellees state that Guidant LLC, formerly known as Guidant Corporation, is a wholly-owned indirect subsidiary of Boston Scientific Corporation, and that Boston Scientific Corporation has no parent corporation and no publicly held corporation owns 10% or more of its stock. 1

3 Case: Document: Page : 3 Date Filed: 12/11/2012 Entry ID: TABLE OF CONTENTS Page CORPORATE DISCLOSURE STATEMENT... i TABLE OF AUTHORITIES... iv INTRODUCTION... 1 JURISDICTIONAL STATEMENT... 3 STATEMENT OF TilE ISSUE... 3 STATEMENT OF TilE CASE... 3 STATEMENT OF TilE FACTS... 4 A. The First-Filed FCA Allegations Against BSC The George Complaint The Be1111ett Complaint... 6 B. Heineman-Guta's Allegations Against BSC... 8 C. The District Co'Uft' s Ruling SUMMARY OF ARGUMENT ARGUMENT I. THE DISTRICT COURT CORRECTLY APPLIED THIS COURT'S PRECEDENT IN DISMISSING HEINEMAN GUTA'S CLAIMS AS JURISDICTIONALLY BARRED UNDER 31 U.S.C. 3730(B)(5) A. Heineman-Guta Alleges The Same "Essential Facts" Or Elements Of Fraud As The Bennett Complaint B. Additional Details In Heineman-Guta's Complaint Do Not Eliminate The Jurisdictional Effect Of The First-To- File Bar

4 Case: Document: Page : 4 Date Filed: 12/11/2012 Entry ID: II. THE DISTRICT COURT CORRECTLY REJECTED HEINEMAN-GUT A'S ARGUMENT THAT A FIRST-FILED COMPLAINT MUST SATISFY FED. R. CIV. P. 9(B) A. Section 3730(b)(5)'s Language Neither Requires Nor Permits A Heightened Pleading Requirement B. Section 3730(b) And Rule 9(b) Serve Different, And Sometimes Contrary, Purposes C. Interjecting Rule 9(b)'s Requirements Into The First-To File Determination Creates Undesirable Inter-Judicial Conflicts D. No Rule 9(b) Requirement Is Needed To Give Relators Sufficient Incentive To Adequately Plead Their Cases III. IN THE EVENT OF REVERSAL, THE COURT SHOULD REMAND FOR A DETERMINATION OF WHETHER THE BENNETT COMPLAINT SATISFIES RULE 9(B) CONCLUSION CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE 111

5 Case: Document: Page : 5 Date Filed: 12/11/2012 Entry ID: CASES: TABLE OF AUTHORITIES Page(s) Alderson v. United States, 686 F.3d 791 (9th Cir. 2012) Campbell v. Redding Med. Ctr., 421 F.3d 817 (9th Cir. 2005) Dean v. United States, 556 U.S. 568 (2009) EIMSKIP v. Atlantic Fish Market, Inc., 417 F.3d 72 (1st Cir. 2005) Fidelity Nat'l Title Ins. Co. of NY. v. Intercounty Nat'l Title Ins. Co., 412 F.3d 745 (7th Cir. 2005) Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276 (loth Cir. 2004)... 3, 17, 18 Hillgrove v. Wright Aeronautical Corp., 146 F.2d 621 (6th Cir. 1945) In re Natural Gas Royalties Qui Tam Litig., 566 F.3d 956 (loth Cir. 2009)....40, 41, 43, 47 Keene Corp. v. United States, 508 U.S. 200 (1993) Lamie v. United States Trustee, 540 U.S. 526 (2004) New York v. Amgen Inc., 652 F.3d 103 (1st Cir. 2011) Robinson v. Shell Oil Co., 519 U.S. 337 (1997) Roclnvell Int'l Corp. v. United States, 549 U.S. 457 (2007) Rodi v. So. New England Sch. of Law, 389 F.3d 5 (1st Cir. 2004) Singleton v. Wulff, 428 U.S. 106 (1976) United States ex rel. Bartz v. Ortho-McNeil Pharms., 856 F. Supp. 2d 253 (D. Mass. 2012) IV

6 Case: Document: Page : 6 Date Filed: 12/11/2012 Entry ID: United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011)... passim United States ex rel. Batiste v. SLM Corp., 740 F. Supp. 2d 98 (D.D.C. 2010)... 12, 31,40 United States ex rel. Bennett v. Boston Scientific Corp., No. H , 2011 WL (S.D. Tex. Mar. 31, 2011)... 5 United States ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371 (5th Cir. 2009)... passim United States ex rel. Chovanec v. Apria Healthcare Grp., Inc., 606 F.3d 361 (7th Cir. 2010)... 17, 41 United States ex rel. Doe v. Boston Scientific Corporation, No. 06- cv-6141 (N'.D. Ill.)... 4 United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13 (1st Cir. 2009)... passim United States ex rel. Gagne v. City of Worcester, 565 F.3d 40 (1st Cir. 2009) United States ex rel. Green v. Northrop Corp., 59 F.3d 953 (9th Cir. 1995) United States ex rel. Hampton v. Columbia/RCA Healthcare Corp., 318 F.3d 214 (D.C. Cir. 2003)... 17, 40 United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377 (1st Cir. 2011) United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227 (3d Cir. 1998)... passim United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181 (9th Cir. 2001)... 17, 34, 36 v

7 Case: Document: Page : 7 Date Filed: 12/11/2012 Entry ID: United States ex rel. Poteet v. Bahler Medical, Inc., 619 F.3d 104 (1st Cir. 2010) United States ex rel. Poteet v. Lenke, 604 F. Supp. 2d 313 (D. Mass. 2009), aff'd 619 F.3d 104 (1st Cir. 2010) United States ex rel. Poteet v. Medtronic, Inc. 552 F.3d 503 (6th Cir. 2009) United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548 (loth Cir.1992)... 16, 33 United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (1st Cir. 2007)... 16, 46 United States ex rel. Springfield Tenninal Ry. Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994)... 35, 36, 37 United States ex rel. Walbunz v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005)... 29, 30, 31, 38,45 United States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251 (D.C. Cir. 2004) STATUTES: 28 u.s.c u.s.c , 6 31 u.s.c. 3730(b)(2)... 34, u.s.c. 3730(b)(3) U.S.C. 3730(b)(4) U.S.C. 3730(b )(5)... pa~...tt;~...tt;im 31 u.s.c. 3730(d) VI

8 Case: Document: Page : 8 Date Filed: 12/11/2012 Entry ID: U.S.C. 3730(e)(4)(A) U.S.C. 3731(c) U.S.C. 3732(a) U.S.C. 3733(b)(1)(B) U.S.C. 3733(c)(2) u.s.c. 3733(h)(1) u.s.c. 3733(j)(6) Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b)... 3, 4 False Claims Amendments Act of 1986, Pub. L. No , 100 Stat (1986) LEGISLATIVE MATERIAL: S. Rep. No. 345, 99th Cong., 2d Sess. (1986)... 35, 40 RULE: Fed. R. Civ. P. 9(b)... passim OTHER AUTHORITY: JeffSovern, Reconsidering Federal Civil Rule 9(b): Do We Need Particularized Pleading Requirements in Fraud Cases?, 104 F.R.D. 143 (1985) Vll

9 Case: Document: Page : 9 Date Filed: 12/11/2012 Entry ID: IN THE Wniteh ~tates' QCourt of ~ppeals' for tbe jfirs't QCircuit No UNITED STATES OF AMERICA, ex rei. HEIDI HEINEMAN-GUTA, Relator, v. Plaintiff-Appellant, GUIDANT CORPORATION and BOSTON SCIENTIFIC CORPORATION, individually and as Successor-in-Interest to Guidant Corporation, Defendants-Appellees. Appeal from the United States District Court for the District of Massachusetts, Civil Action No. 09-ca RGS Judge Richard G. Stearns, Presiding BRIEF FOR APPELLEES INTRODUCTION When a person brings a qui tam action under the False Claims Act ("FCA"), "no other person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. 3730(b)(5). In 2009, relator Heidi Heineman-Guta ("Heineman-Guta") filed suit, alleging that defendants Guidant Corporation and Boston Scientific Corporation l violated the 1 In 2006, Boston Scientific Corporation purchased Guidant Corporation. A

10 Case: Document: Page: 10 Date Filed: 12/11/2012 Entry ID: FCA through a scheme of kickbacks allegedly used to promote their cardiac rhythm management products. However, another complaint (the "Bennett Complaint"), which was pending when Heineman-Guta filed her action, disclosed a scheme "nearly identical" to Heineman-Guta's First Amended Complaint. Op. 7.2 Applying this Court's precedent, the district court correctly held that the Bennett Complaint barred this action under Section 3730(b)(5) because it "exposed all of the essential facts" of the alleged scheme, although Heineman-Guta provided "different and somewhat richer details." Op. 12. Nonetheless, Heineman-Guta believes she is entitled to reliefbecause of her view that a complaint must satisfy the separate pleading standards of Fed. R. Civ. P. 9(b) in order to trigger the bar of Section 3730(b)(5). That rule has been rejected by the D.C. Circuit and the Fifth Circuit for sound reasons that apply here. The language of Section 3730(b)(5) contains no Ru1e 9(b) requirement, nor is any such requirement mandated by its purposes, which differ sharply from Rule 9(b ). Additionally, interposing a Rule 9(b) pleading requirement creates the potential for inter-court conflicts and other practical difficu1ties, while promising no improvements in pleading or outcomes. 2 Citations in this brief to items included in the Appendix to Brief of Appellant are cited by the appendix page, e.g., Al. Citations to items not included in the appendix are cited by their district court docket number, e.g., Doc. 1. The district court's opinion, which is included at Tab A of the Appellant's Brief, will be cited as "Op." 2

11 Case: Document: Page: 11 Date Filed: 12/11/2012 Entry ID: JURISDICTIONAL STATEMENT The district court lacked subject matter jurisdiction over this case pursuant to 31 U.S.C. 3730(b )(5), which has been interpreted as a jurisdictional bar. See, e.g., United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 519 F.3d 13, 33 (1st Cir. 2009); Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1278 (loth Cir. 2004). This Court has jurisdiction under 28 U.S.C to review the district court's final judgment dismissing the case for lack of jurisdiction. STATEMENT OF THE ISSUE Whether Heineman-Guta's claims were properly dismissed under 31 U.S.C. 3730(b)(5}, because an earlier-filed complaint exposed the essential facts or elements of the same scheme alleged by Heineman-Guta's complaint. STATEMENT OF THE CASE Relator Heineman-Guta filed her original complaint against Guidant Corporation and Boston Scientific Corporation (collectively, "BSC") on November 10, 2009, accusing BSC of illegally promoting off-label use of cardiac rhythm management devices and paying kickbacks to physicians to induce them to select and recommend the devices for patients. Doc. 1. The government declined to intervene and the court ordered the complaint unsealed. See Op. 2. On January 30, 2012, Heineman-Guta filed her First Amended Complaint (also referred to as "FAC") against BSC, alleging FCA violations based on violations of the Anti- 3

12 Case: Document: Page: 12 Date Filed: 12/11/2012 Entry ID: Kickback Statute, 42 U.S.C. 1320a-7b(b), and conspiracy to submit false claims. A BSC moved to dismiss Heineman-Guta's First Amended Complaint on several grounds, including the FCA's first-to-file bar. A The district court held a hearing on the motion to dismiss. A299. On July 5, 2012, the district court issued its opinion and judgment dismissing the action. Appellant's Br., Tabs A and B. Heineman-Guta appealed. A284. STATEMENT OF THE FACTS A. The First-Filed FCA Allegations Against BSC. 1. The George Complaint. Elaine Bennett is a Missouri resident who was employed by BSC' s Cardiac Surgery Division in 2006 as a sales representative. A231 at ~ 14. In November 2006, Bennett (then named Elaine George) filed a complaint in the U.S. District Court for the Northern District of Illinois. United States ex rel. Doe v. Boston Scientific Corporation, No. 06-cv-6141 (N.D. Ill.). In July 2007, the case was transferred to the U.S. District Court for the Southern District of Texas. United States ex rel. George v. Boston Scientific Corp., No. 4:07-cv (S.D. Tex.). On July 10, 2009, after the seal was lifted in the case, Bennett filed a First Amended Complaint. A190 ("George Complaint"). 4

13 Case: Document: Page: 13 Date Filed: 12/11/2012 Entry ID: The George Complaint alleged that BSC violated the FCA through an "offlabel marketing campaign and the use of illegal kickbacks" that caused physicians to perform an increased number of inpatient surgical ablation procedures where less invasive and inexpensive procedures could have been done. A220 at, 131. BSC was alleged to illegally market surgical ablation products to induce hospitals and physicians to purchase the products and use them specifically for off-label treatment of atrial fibrillation. A BSC was alleged to emphasize a high Medicare reimbursement cost ratio for the off-label use of their product. A BSC was also alleged to have provided kickbacks in the form of free marketing and promotional services, as well as free equipment and discounts, to physicians and hospitals to induce them to purchase, perform or use the products for off-label procedures. A The complaint also alleges that BSC coached hospitals to upcode and overcharge Medicare for closed-chest, stand-alone procedures, advising hospitals that they could obtain an over-reimbursement by using certain codes. A The complaint pled causes of action for false claims under 31 U.S.C and for retaliatory discharge under the FCA. A The George Complaint was dismissed without prejudice for failure to satisfy Rule 9(b). United States ex rei. Bennett v. Boston Scientific Corp., No. H , 2011 WL at *28 (S.D. Tex. Mar. 31, 2011). 5

14 Case: Document: Page: 14 Date Filed: 12/11/2012 Entry ID: The Bennett Complaint. While the George case was under seal, Bennett filed a new suit in the U.S. District Court for the District of Maryland. United States ex rel. Bennett v. Boston Scientific Corp., et al., No. 08-cv-2733-CCP (D. Md., filed Oct. 16, 2008).3 The Bennett Complaint alleged that from 2003 until the time of the complaint, BSC "engaged in an illegal kickback scheme within its Cardiac Rhythm Management ('CRM') division" designed to induce physicians and hospitals to use BSC's pacemakers, internal cardiac defibrillators, and cardiac resynchronization therapy ("CRT"). A at~ 3. The complaint alleged that the practice of offering types of remuneration to hospitals and physicians in exchange for using the products is alleged to violate the Anti-Kickback Statute, and therefore that claims to Medicare made by physicians who received kickbacks are false claims under the FCA, 31 U.S.C A ; A Paragraph 4 of the Bennett Complaint summarized the alleged kickback scheme as follows: In furtherance of this fraudulent scheme, BSC, inter alia, (1) provides doctors and hospitals with kickbacks in the form of follow-up medical services in exchange for the providers' use ofbsc's cardiac rhythm devices [see A ]; (2) induces doctors and hospitals to bill for medical services and procedures they do not perform [see A ]; (3) requires BSC sales personnel to provide medical care in the 3 Donald Boone, a Virginia resident who worked for Guidant from , also joined the Bennett Complaint as a relator. A232 at~ 15. 6

15 Case: Document: Page: 15 Date Filed: 12/11/2012 Entry ID: absence of a licensed physician or staff member [A ]; and (4) improperly conducts Medicare billing for physicians and hospitals through non-licensed, non-medical staff [see A ]; (5) provides monetary "grants" to foundations set up by physicians and physician groups in return for favored status by such physicians [see A230; A ]; and (6) sponsors dinner meetings for implanting physicians to invite potential "referring physicians" to, in order for the implanting physician to increase the number of patients he receives for implants from those referring physicians [see A230; A247]. In most cases, the benefitting implanting physician also receives an "honorarium" for speaking about his or her expertise at the program. [see A230; A247] A229 at, 4 (citations in bold to specific allegations in complaint are added). In addition, the Bennett Complaint alleged that BSC provides physicians access to an internet-based monitoring system called "Latitude," which enables doctors to obtain information, lower their costs, and increase billing. A The Bennett Complaint specifically alleges that BSC organizes networking events where surgeons can meet doctors who might provide referrals. A230 at, 8. The "host" surgeon is paid "as if the event were a speaking engagement when in fact it is simply a marketing ploy" to increase the surgeon's and BSC's business.!d. Also, BSC "incentivizes the use of [its] devices by planning and funding dinner programs held by implanting physicians." A247 at, 71. BSC allegedly identifies implanting physicians and "organizes and pays for lavish dinner programs so that the physician in question can network with potential referring physicians." A247 at m In many cases, BSC allegedly "improperly pays the benefitting physician 'honoraria' for 'speaking' at these dinner programs."!d. 7

16 Case: Document: Page: 16 Date Filed: 12/11/2012 Entry ID: at~ 74. Additionally, Bennett alleged that BSC uses "grants" to doctors as a means of providing kickbacks. A On September 28, 2011, the United States gave notice that it declined to intervene in the case. See United States ex rei. Bennett v. Boston Scientific Corp., No. 08-cv-2733-CCP (D. Md.), Doc. 15. On October 2011, the case was voluntarily dismissed by Bennett and the government.!d. at Docs B. Heineman-Guta's Allegations Against BSC. This case was filed in November 2009, while the Bennett case was pending. Heineman-Guta summarizes her original complaint as alleging that BSC "engaged in an illegal kickback scheme in order to influence physicians to implant cardiac devices and refer patients who would be implanted with these devices." Appellant's Br. 3. Heineman-Guta had been hired to promote, and made allegations concerning, the same four devices at issue in the Bennett Complaint: pacemakers, internal cardiac defibrillators, CRT devices, and the Latitude program. A14 at~ 1. Heineman-Guta's core allegations are summarized in Paragraph 2 of the First Amended Complaint: In order to gain market share for these devices, [BSC] implemented nationwide policies and practices, amounting to schemes, by which their account managers and customer relationship managers were trained to proffer kickbacks to physicians in order to encourage them to implant [BSC] devices. These kickbacks were proffered in several ways. First, [BSC] provided honoraria to physicians who actually 8

17 Case: Document: Page: 17 Date Filed: 12/11/2012 Entry ID: implanted their devices and to physicians who referred patients for implantation of [BSC] devices. [BSC] also provided patients to implanting physicians, helping them build their practices as a quid pro quo for implanting [BSC] devices. [BSC] also provided physicians and their family members (both referring physicians and implanting physicians) with lavish meals, expensive trips, golf outings, and tickets to theater and sports events. [BSC] also paid physicians to enroll their patients in sham Phase IV post-marketing clinical trials. The honoraria, gifts, trips, golf outings, tickets and patient referrals that [BSC] paid or provided to physicians were meant only to increase the physicians' use of [BSC] devices; these physicians were not being remunerated at fair market value for any services provided to [BSC]. A14-15 at~ 2. In her brief, Heineman-Guta emphasizes several-but not necessarily all- "essential" aspects of this alleged scheme. First, it is alleged that BSC "instructed its sales representatives to 'provide lavish trips and entertainment to physicians in order to encourage them to refer patients for implantation of Guidant cardiac rhythm management devices."' Appellant's Br. 4-5 (quoting A31). The purpose of providing kickbacks to physicians was to influence them to implant BSC's devices or refer patients for implantation.!d. at 5. BSC allegedly used all-expense paid trips to encourage doctors to use BSC's devices and required sale representative to prepare plans for how to retain customers, grow their business, or win support or market share from them.!d. at 5-6. Second, Heineman-Guta's complaint alleges that BSC paid physicians as speakers to gain their loyalty, paying one high-volume implanting doctor on repeated occasions.!d. at 6 (citing A37, A44-45). 9

18 Case: Document: Page: 18 Date Filed: 12/11/2012 Entry ID: Third, the First Amended Complaint alleges "specific details" about BSC's use of"lavish meals" to encourage physicians to implant BSC's devices or refer patients for implantation.!d. at 6. The meals are alleged to be integral to BSC's marketing practices and ''worked in garnering loyalty."!d. at 7 (citing A38-41). Fourth, BSC is alleged to have used "case reviews" to "funnel money to referring physicians and to provide patient referrals to implanting physicians" in exchange for a commitment to implant BSC's devices.!d. at 8-9 (citing A43-44, A47-48). For example, BSC, at its expense, would allegedly invite a physician to a dinner program with local cardiologists or other referring physicians, and pay a fee to the referring physicians.!d. Fifth, BSC allegedly conducted "sham clinical trials" by paying physicians for each patient they enrolled in a database, targeted at physicians who were loyal to BSC. Id. at 9 (citing A49-50). Sixth, the First Amended Complaint alleges a scheme by which BSC placed residents in established practices in exchange for a commitment that the new physician or his practice implant BSC devices.!d. at 10 (citing A52-53). Seventh, Heineman-Guta also alleges the "effect" of the kickback scheme through allegations that include the initials of the referring and implanting physicians, the initials of patients whose implantations occurred due to the scheme, and dates and places of implantation. Id. at 10. These allegations include such 10

19 Case: Document: Page: 19 Date Filed: 12/11/2012 Entry ID: details as trips, meals, and hotel reimbursements for physicians who implanted BSC devices.!d. at Additionally, the First Amended Complaint alleges that BSC, knowing that Medicaid would pay for the procedures, "promoted the lucrative nature of the implantation of its devices" and used Medicare for "promotional means" by pointing to Medicare reimbursement and potential profit margins for physicians.!d. at 11. Finally, it is alleged that BSC caused physicians and hospitals, who must certify compliance with the Anti-Kickback Statute, to make false certifications that were material to the government's decision to pay for the implantation ofthe companies' cardiac devices.!d. at 11. C. The District Court's Ruling. The district court did not understand this case to present any novel question or setting. As it noted, "[c]ourts have uniformly interpreted 3730(b)(5) to 'bar a later allegation if it states all the essential facts of a previously-filed claim or the same elements of a fraud described in an earlier suit."' Op. 4 (quoting Duxbury, 579 F.3d at 32) (Duxbury's internal citation omitted). Accordingly, the district court reviewed Heineman-Guta' s complaint for whether it alleged the "essential facts" ofthe claims in the George and Bennett complaints. Op. 4-7, 12. The district court agreed with Heineman-Guta that "the George Complaint is not a preclusive first-filed complaint because it does not disclose an alleged kickback scheme to promote the sales of cardiac rhythm management products." 11

20 Case: Document: Page: 20 Date Filed: 12/11/2012 Entry ID: Op. 6. Instead, the court concluded, the George complaint alleged that BSC promoted the "Flex View" microwave surgical ablation system for an off-label use and that these promotional activities caused physicians and hospitals to submit false claims for reimbursement from Medicare or Medicaid.!d. But the district court found the Bennett Complaint preclusive. Quoting from paragraphs 3 and 4 of the Bennett Complaint, the district court stated that "Heineman-Guta does not deny that Bennett Complaint disclosed a scheme nearly identical to the one alleged in the [First Amended Complaint]." Op. 7.4 Instead, Heineman-Guta contended, relying on Sixth Circuit precedent, that the Bennett Complaint was "'legally incapable of serving as a complaint,"' because it lacked the particularity required by Rule 9(b). Op. 8 (quoting United States ex rel. Poteet v. Medtronic, Inc. 552 F.3d 503, (6th Cir. 2009)). The district court rejected Heineman-Guta's argument, stating that it "agree[d] with the reasoning" ofthe D.C. Circuit in United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011), and the district court decision affirmed in that case, United States ex rel. Batiste v. SLM Corp., 740 F. Supp. 2d 98 (D.D.C. 2010), that "[t]he purpose of a qui tam action is to provide the government with sufficient notice that it is the potential victim of a fraud worthy of 4 Nowhere in Heineman-Guta' s opening brief does she refute the district court's conclusion that it is undisputed that the schemes disclosed in the Bennett Complaint and the First Amended Complaint are "nearly identical." Op

21 Case: Document: Page: 21 Date Filed: 12/11/2012 Entry ID: investigation." Op The holding of those courts, that a first-filed complaint need not satisfy Rule 9(b)' s particularity requirements in order to bar a later action "is faithful to the purpose of the qui tam statute." Op. 11 n.11. The district court explained that it wanted to avoid the "strange judicial dynamic," Batiste, 659 F.3d at 1210, that would have followed from Heineman- Guta's position, which asked the court "to evaluate the legal sufficiency of a complaint [the Bennett Complaint] filed in another jurisdiction [Maryland], and to make a judgment on an issue that neither the Maryland District Court nor the parties to that case had the opportunity to address." Op The district court held that it was not necessary to determine whether the Bennett Complaint satisfied Rule 9(b), only whether the complaint stated the "essential facts" of the scheme alleged in this case: For present purposes it is sufficient that this court hold that the Bennett Complaint is pled in sufficient detail to act as a first-filed complaint barring the FAC. Like the FAC, the Bennett Complaint disclosed a kickback scheme to promote defendants' cardiac rhythm management products. The Bennett Complaint described, inter alia, the same types of kickbacks-grants, honoraria, and lavish meals-as disclosed in the F AC. Although the F AC provides different and somewhat richer details, the Bennett Complaint exposed all of the essential facts of that scheme, and thus acts as a bar precluding the FAC. Op. 12 (citing Duxbury, 579 F.3d at 32 ("Under this 'essential facts' standard, 3730(b)(5) can still bar a later claim 'even if that claim incorporates somewhat different details."')) (citation omitted). 13

22 Case: Document: Page: 22 Date Filed: 12/11/2012 Entry ID: Thus, the district court ultimately reached its determination that the frrst-tofile bar required dismissal ofheineman-guta's claims by applying this Court's precedent (Duxbury), and did not adopt Rule 9(b )' s separate requirements. The court dismissed the case for lack of subject matter jurisdiction. Op SUMMARY OF ARGUMENT The FCA's frrst-to-file bar precludes a private relator from filing a subsequent, related qui tam action. 31 U.S.C. 3730(b)(5). Under this Court's precedent, a complaint bars a later filed action if it discloses the "essential facts" of the same fraudulent scheme. Heineman-Guta does not dispute the district court's conclusion that the Bennett Complaint alleged a "nearly identical" scheme to the First Amended Complaint, Op. 7, or that "[a]lthough the FAC provides different and somewhat richer details, the Bennett Complaint exposed all of the essential facts of the scheme." Op. 12. Indeed, the Bennett Complaint alleges ample facts disclosing the same scheme, providing the government notice to launch an investigation. The added factual details in the First Amended Complaint-e.g., that physicians dined at Buddha Bar rather than some other restaurant, or were given tickets to The Producers and not some other show--do not provide any 5 The district court did not reach any of the alternative grounds for dismissal raised in BSC's motion to dismiss. Op. 12 n

23 Case: Document: Page: 23 Date Filed: 12/11/2012 Entry ID: additional "essential facts" that disclose a different scheme, or give the government notice of alleged fraud that it otherwise lacked. The Court should reject Heineman-Guta's attempt to graft a Rule 9(b) standard on to the first-to-file rule. Nothing in the language of Section 3730(b)(5) indicates Congress's intent to require that first-filed complaints satisfy Rule 9(b). To the contrary, the fact that Congress repeatedly invoked the Federal Rules of Civil Procedure in other FCA provisions indicates that it did not intend, sub silentio, to incorporate Rule 9(b) within Section 3730(b)(5). In fact, Congress's purposes in enacting Section 3730(b)(5}, which were to balance the goals of inviting relator suits with avoiding parasitic, opportunistic or duplicative litigation, differ from Rule 9(b)'s purpose of protecting defendants from the public shame of fraud allegations and nuisance suits, and providing them notice to enable the preparation of a defense. And the imposition of a Rule 9(b) standard is likely to undermine Congress's goals by encouraging more litigation. Additionally, imposing a Rule 9(b) requirement would create intra-judicial conflicts and practical difficulties. And despite the creation of such difficulties and the disruption Congress's statutory scheme, a Rule 9(b) requirement would serve no valid or sanctioned purpose (such as improved pleading) because Rule 9(b) must be satisfied if a relator's complaint is to succeed. 15

24 Case: Document: Page: 24 Date Filed: 12/11/2012 Entry ID: ARGUMENT I. THE DISTRICT COURT CORRECTLY APPLIED THIS COURT'S PRECEDENT IN DISMISSING HEINEMAN-GUT A'S CLAIMS AS JURISDICTIONALLY BARRED UNDER 31 U.S.C. 3730(B)(5). A. Heineman-Guta Alleges The Same "Essential Facts" Or Elements Of Fraud As The Bennett Complaint. The ''threshold question" in an FCA case "is whether the statute bars jurisdiction." Duxbury, 579 F.3d at 20 (quoting United States ex rei. Rost v. Pfizer, Inc., 507 F.3d 720, 727 (1st Cir. 2007)). Whether a relator is qualified to bring a qui tam action under the FCA is a question of subject matter jurisdiction. Roclnvell Int'l Corp. v. United States, 549 U.S. 457, 468 (2007). The relators, "as the proponent[ s] of federal jurisdiction, bear[ ] the burden of proving its existence by a preponderance of the evidence." United States ex rei. Poteet v. Bahler Medical, Inc., 619 F.3d 104, 109 (1st Cir. 2010). Statutes such as the FCA that confer jurisdiction on federal courts "are to be strictly construed, and doubts resolved against federal jurisdiction." United States ex rei. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 552 (loth Cir.1992). The Court reviews a district court's order of dismissal for lack of subject matter jurisdiction de novo, but "may affirm an order of dismissal on any ground made apparent by the record (whether or not relied upon by the lower court)." Duxbury, 579 F.3d at 20. Heineman-Guta has failed to demonstrate that Section 3 730(b )( 5) allows jurisdiction in this case. 16

25 Case: Document: Page: 25 Date Filed: 12/11/2012 Entry ID: Section 3730(b )(5) precludes any person other than the government from bringing "a related action based on the facts underlying the pending action." 31 U.S.C. 3730(b)(5).6 Like all other circuits to have considered the issue, this Court holds that Section 3730(b)(5) "bar[s] a later allegation [if it] states all the essential facts of a previously-filed claim" or "the same elements of a fraud described in an earlier suit." Duxbury, 579 F.3d at 32 (emphasis in original) (quoting United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, (3d Cir. 1998)). Under the "essential facts" standard, Section 3730(b)(5) can still bar a later claim "even if that claim incorporates somewhat different details," if it states "the same elements of a fraud described in [the] earlier suit."!d) 6 Heineman-Guta's opening brief does not dispute that the Bennett Complaint was "pending" under Section 3730(b)(5), and any challenge to that issue is now waived. In any event, the Bennett Complaint was pending when this action was filed, which makes it "pending" for purposes of the frrst-to-file bar. See United States ex rel. Bartz v. Ortho-McNeil Pharms., 856 F. Supp. 2d 253,255, (D. Mass. 2012) (evaluating frrst-to-file bar against date of relator's filing of original complaint in 2005, despite "succession of Amended Complaints" by relator over next several years); United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1188 (9th Cir. 2001) (a later-dismissed action was ''pending" for purposes of 3 730(b )( 5) because first action was pending when the relator brought her claim); United States ex rel. Chovanec v. Apria Healthcare Grp., Inc., 606 F.3d 361, 365 (7th Cir. 2010) (same). 7 See also United States ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371, 378 (5th Cir. 2009); Lujan, 243 F.3d at 1187; Grynberg, 390 F.3d at 1279; United States ex rel. Hampton v. Columbia/RCA Healthcare Corp., 318 F.3d 214, (D.C. Cir. 2003); Chovanec, 606 F.3d at

26 Case: Document: Page: 26 Date Filed: 12/11/2012 Entry ID: Thus, the first-to-file bar is not confined to "identical" actions-section 3730(b)(5)'s plain language refers to "related" not "identical" actions. See Duxbury, 579 F.3d at 32. The frrst-to-file bar applies "[s]o long as a subsequent complaint raises the same or a related claim based in significant measure on the core fact or general conduct relied upon in the frrst qui tam action." United States ex rel. Poteet v. Lenke, 604 F. Supp. 2d 313,322 n.20 (D. Mass. 2009), aff'd 619 F.3d 104 (1st Cir. 2010) (quoting Grynberg, 390 F.3d at 1279). Nowhere in her opening brief does Heineman-Guta expressly challenge the district court's determination that she "does not deny that the Bennett Complaint disclosed a scheme nearly identical to the one alleged in the FAC..." Op. at 7 (emphasis added). See also A300 (district court's comment at hearing that FAC is "almost a carbon copy of what was said in Bennett"). See EIMSKIP v. Atlantic Fish Market, Inc., 417 F.3d 72, 77 (1st Cir. 2005) (noting that due to appellant's failure to challenge on appeal the district court's determination that it was "primarily liable" for freight charges, "we are spared any need for further discussion of the issue"). Instead, Heineman-Guta attacks the legal standard employed by the district court. See, e.g., Appellant's Br. at 19. For reasons discussed below in Section II, that argument is unpersuasive. In any event, the district court correctly determined that the Bennett Complaint "exposed all of the essential facts" of the fraudulent scheme alleged by 18

27 Case: Document: Page: 27 Date Filed: 12/11/2012 Entry ID: Heineman-Guta. Op. 12. Touting the "great detail" of her First Amended Complaint, Appellant's Br. 4, 10, 12, Heinemann-Guta dismissively labels the Bennett complaint as "speculative," "cursory" and "incredibly barebones," id. at However, a fair comparison of the complaints shows that the Bennett Complaint alleges the essential facts and same elements alleged in the First Amended Complaint, justifying the district court's decision to dismiss this action. Both complaints name the same defendants, Guidant and BSC. Compare A15-16 with A232. Both complaints allege kickbacks in connection the same devices: pacemakers, defibrillators, CRT devices and the "Latitude" patient management system. Compare A228 at~ 3 and A250 at mf with A14 mf 1-2 and A23. Both complaints allege violations of the Anti-Kickback Statute. Compare A with A Furthermore, the core of the allegations in both complaints is that BSC used kickbacks to induce third parties (physicians and hospitals) to submit false or fraudulent claims to the government, specifically Medicare, as part ofbsc's scheme to increase its own market share. Compare A14 at~ 2 ("In order to gain market share for these devices, [BSC] implemented nationwide policies and practices, amounting to schemes," by which employees ''were trained to proffer kickbacks to physicians to encourage them to implant [BSC] devices") with A228 at ~ 3 (alleging "kickback scheme... designed to induce physicians and hospitals" 19

28 Case: Document: Page: 28 Date Filed: 12/11/2012 Entry ID: to use BSC devices, "thereby increasing the Company's market share of these devices"). Both the Bennett and Heineman-Guta complaints allege similar means of providing kickbacks, such as organizing and funding lavish dinner programs and entertainment designed to bring in referrals, compare A247 with A29, A31 and A37-43; payment ofhonoraria to physicians, compare A247 with A31 and A37; funneling money to doctors and hospitals through the payment of "grants" to educational foundations, compare A with A29 and A37; and advising or "coaching" doctors on the profits to be made from charging Medicare for procedures and upgrades, compare A249 with A44. Moreover, the self-selected factual allegations that Heineman-Guta highlights in her brief, see Appellant's Br. 4-11, while not all "essential" to the alleged fraudulent scheme described in both complaints, are each related to factual allegations found in the Bennett Complaint: 1. Lavish gifts and entertainment. The Bennett Complaint alleged that "Defendant organizes and pays for lavish dinner programs so that the physician in question can network with potential referring physicians." A247 at, 73; see also A229 at, 4; A230 at, 8; A247 at,, So does Heineman-Guta's complaint--even repeatedly using the exact same adjective, "lavish"-albeit with 20

29 Case: Document: Page: 29 Date Filed: 12/11/2012 Entry ID: pages of non-essential detail about the names of restaurants and the prices of meals, or the names of particular shows, events or hotels. See, e.g., A14; A Speakers' fees. The Bennett Complaint alleges that BSC organizes networking events where surgeons can meet doctors who might provide referrals. A230 at, 8. The "host" surgeon is paid "as if the event were a speaking engagement when in fact it is simply a marketing ploy" to increase the surgeon's and BSC's business.!d. The complaint also alleges that physicians were invited to speak at dinner meetings for referring physicians and received an "honorarium" for speaking about their expertise at the program. A229 at, 4; A247 at, 74. Heineman-Guta's complaint has the same essential allegations. See A14 (alleging BSC "provided honoraria to physicians who actually implanted their devices and to physicians who referred patients for implantation of [BSC] devices"); A3 7 at, 80 (alleging physician was invited to speak at dinners and hospital events 15 times, and ''paid an honorarium" each time); A45 at, Expensive meals. As already noted, the Bennett Complaint alleges "lavish dinner programs" used to court physicians into its programs. A24 7 at, 73. So does Heineman-Guta's complaint, A14; 31-42, albeit with lengthy, nonessential details about the meals, such as the cost of appetizers at the Patina restaurant, A38, or the price of a bottle oflevendi wine at the Geisha House, A40. 21

30 Case: Document: Page: 30 Date Filed: 12/11/2012 Entry ID: Case reviews. The Bennett Complaint alleged that BSC "sponsored dinner meetings for implanting physicians to invite potential 'referring physicians' in order for the implanting physician to increase the number of patients he receives for implants from those referring physicians." A229 at, 4. BSC allegedly asked doctors to compile a list of potential referring physicians who might be a source of business for the physicians, and to organize dinner programs so the physician can "network with potential referring physicians." A 247 at~ So does Heineman-Guta's complaint, which calls these meetings "case reviews." A See also Appellant's Br. 8 ("Under the 'case review' program, Guidant/BSC would invite [an electrophysiologist or "EP"] to a dinner program with several cardiologists or other referring physicians in his geographic area to allow the EP to 'review' cases to be referred to him."). 5. "Sham Clinical Trials." The Bennett Complaint does not reference the ADV AN CENT program by name, (f. A48-50, but makes numerous allegations that essentially expose the same underlying kickback scheme-that BSC gains influence with physicians through an advisory relationship aimed at the submission of fraudulent claims to Medicare. See A249 at ~ 80 (alleging that BSC sales and marketing departments are trained to market BSC' s cardiac rhythm procedures by advising doctors and hospitals that they can obtain extra reimbursements if they allow representatives to perform extra checkups and follow-up visits with 22

31 Case: Document: Page: 31 Date Filed: 12/11/2012 Entry ID: patients); A250 at~ 83 (BSC's sales and marketing departments train representatives "to advise hospitals and doctors to perform extra and often necessary procedures to increase their Medicare billing"). In any event, the name of the ADV AN CENT program is not an "essential fact" that exposes any fraud separate and apart from the larger scheme to provide services and build loyalty to induce implantation of BSC devices. 6. Placement of residents in practices. The underlying allegation here is that BSC is providing something to resident physicians in exchange for a commitment to use BSC devices. See A Although the Bennett Complaint does not specifically mention placement of residents, the essence of such conduct is comprised within the allegation that BSC has engaged in "an illegal kickback scheme" in its cardiac rhythm division "designed to induce physicians and hospitals to use" BSC cardiac products. A228 at~ 3. See also A252 at~ 92 (alleging that BSC has "through the use of illegal kickbacks, fraudulently induced physicians and hospitals to use BSC's devices..."). In any event, the placement of residents (as opposed to other physicians) is also not an "essential fact," but rather a non-essential detail about the alleged fraudulent scheme to provide service and build loyalty to induce implantation ofbsc devices among physicians, resulting in fraudulent representations to the government. 23

32 Case: Document: Page: 32 Date Filed: 12/11/2012 Entry ID: Effects of kickbacks. The Bennett Complaint alleged that "[a]s a result ofbsc's illegal kickback scheme, taxpayers have been forced to bear the costs of excessive unnecessary and unqualified medical care," that "Medicare patients have been denied proper medical care" and that "Medicare programs have incurred substantially increased costs." A231 at, 12. The Bennett Complaint also alleges that BSC "made, used, and caused to be made and used false records and statements in order to obtain reimbursement from the United States for BSC devices," A252 at, 99, and "caused to be presented, false or fraudulent claims, to the United States Government, in order to obtain government reimbursement for health care services provided under Medicare, A252 at, 101. So does Heineman Guta's complaint. See Appellant's Br (arguing that FAC alleges representative samples of "influence the scheme had on physicians to implant or recommend Guidant/BSC devices" and that BSC "caused the[] physicians and hospitals to make false certifications that were material to the government's decision to pay for the implantation of the companies' cardiac devices"). However, Heineman-Guta's allegations regarding claims made to the government are sometimes less specific, based on mere "information and belief." See A54-55 at~

33 Case: Document: Page: 33 Date Filed: 12/11/2012 Entry ID: B. Additional Details In Heineman-Guta's Complaint Do Not Eliminate The Jurisdictional Effect Of The First-To-File Bar. Under the "essential facts" standard, Section 3730(b)(5) bars a later claim "even if that claim incorporates somewhat different details." Duxbury, 579 F.3d at 32. "[A] relator cannot avoid 3730(b)(5)'s frrst-to-file bar by simply adding factual details or geographic locations to the essential or material elements of a fraud claim against the same defendant described in a prior complaint." Branch Consultants, 560 F.3d at 378. A relator who merely adds details to a previously exposed fraud does not help "reduce fraud or return funds to the federal fisc," because "'once the government knows the essential facts of a fraudulent scheme, it has enough information to discover related frauds."'!d. at 378 (quoting LaCorte, 149 F.3d at 234). The statute requires only that the cases be "related," 31 U.S.C. 3730(b)(5), not that they be the same. Duxbury, 579 F.3d at 32. Here, the district court recognized that the First Amended Complaint "provides different and somewhat richer details" than the Bennett Complaint. Op. 12. Heineman-Guta's brief repeatedly touts the FAC's "great detail." See, e.g., Appellant's Br. 4, 10, 12. But those details did not give the district court jurisdiction, because the Bennett Complaint "exposed all of the essential facts of the scheme, and thus acts as a bar precluding the filing of the FAC." Op. at 12. For example, Heineman-Guta alleges "lavish meals, expensive trips, entertainment and grants" to physicians. A29 at~ 52. Her complaint includes 25

34 Case: Document: Page: 34 Date Filed: 12/11/2012 Entry ID: details of such meals and entertainment. Appellant's Br. 5-7; A31-42 at~ The Bennett complaint likewise alleges, even using the same adjective, that BSC "organizes and pays for lavish dinner programs so that the physician in question can network with potential referring physicians." A229 at~ 4; A230 at~ 7. The absence of the names of restaurants and other unnecessary details does not deprive the government of notice of the "essential fact" that gifts were allegedly used to induce physicians to act. For example, the government is not deprived of notice of fraud because it is not alleged that physicians were taken to dinner at Buddha Bar in New York City, rather than some other restaurant, given tickets to The Producers rather than some other play, or treated to wine tasting tours in Napa Valley rather than Tuscany. See Appellant's Br Heineman-Guta argues that the Bennett Complaint does not give notice to the government and is not a bar because it "does not provide notice of even one particular incident in which Guidant or Boston Scientific provided a kickback to a physician." Appellant's Br. 20. But the Bennett Complaint clearly alleges, for example, that BSC "incentivizes the use of [BSC's] devices by planning and funding dinner programs held by implanting physicians." A247 at~ 71. It alleges that BSC provides monetary "grants" to physicians in return for favored status in implanting cardiac devices. A229 at~ 4. And the Bennett Complaint alleges that networking events are organized where surgeons can meet physicians with 26

35 Case: Document: Page: 35 Date Filed: 12/11/2012 Entry ID: referrals, and the surgeon is paid as if it were a speaking engagement, or given honoraria. A230 at, 8; A247 at, 74. Those allegations contain "essential facts" about the use of gifts as kickbacks that give the government sufficient notice to investigate alleged fraud. Additional details about particular instances of specific kickbacks are not needed to give the government notice. By comparison, in Duxbury, the Court held that the first complaint did not bar a later filed complaint because the frrst complaint entirely failed to include allegations related to claims for payment for an "off-label" promotion scheme. See Duxbury, 579 F.3d at 33. It cannot be disputed that the Bennett Complaint, like the First Amended Complaint, provides allegations regarding kickbacks in exchange for implantation ofbsc's cardiac devices, by nearly identical means (e.g., "lavish" dinners and entertainment, honoraria, "grants"), resulting in false or fraudulent claims to the government. Heineman-Guta identifies no such separate scheme that, like the "off-label" promotion scheme in Duxbury, is not essentially described in the Bennett Complaint. Heineman-Guta argues that the Bennett Complaint is not preclusive because there is "not one date, not one place, not one time, not one physician mentioned." Appellant's Br. at 20. But after having been put on notice of the alleged fraudulent scheme, the government can learn those specific details through further investigation. For example, in Batiste, the D.C. Circuit concluded that the fact that 27