marquis v. northrop grumman - robbins, · pdf filethe united states district court for the...

THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

--------------------------------------------------------------- ) UNITED STATES OF AMERICA, ex rel. ) ROLAND P. MARQUIS, ) Plaintiffs, ) Case No. 09 C 7704 ) v. ) Judge Samuel Der-Yeghiayan ) NORTHROP GRUMMAN CORPORATION, ) ) Defendant. ) ---------------------------------------------------------------

DEFENDANT NORTHROP GRUMMAN CORPORATION’S MEMORANDUM IN SUPPORT OF ITS MOTION TO

DISMISS RELATOR’S SECOND AMENDED COMPLAINT

Mark L. Rotert Stetler, Duffy & Rotert, Ltd. 10 South LaSalle St., Suite 2800 Chicago, IL 60603 Phone: (312) 338-0214 Fax: (312) 338-0070 Michael L. Waldman Mark A. Hiller Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP 1801 K Street, N.W., Suite 411-L Washington, D.C. 20006 Phone (202) 775-4500 Fax (202) 775-4510 Counsel for Defendant Northrop Grumman Corporation

Dated: December 21, 2012

Case: 1:09-cv-07704 Document #: 36 Filed: 12/21/12 of 19 PageID #:90

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TABLE OF CONTENTS

Page

Introduction and Summary of Argument ........................................................................................ 1

Argument ........................................................................................................................................ 3

I. Count I Should Be Dismissed Under Rule 12(b)(6) Or Rule 9(b), Or Both ....................... 3

A. Marquis Alleges That The Government Knew Of And Approved The Supposed Contract Violations, Thereby Negating Any Falsity ................................... 4

B. Marquis’s Own Allegations And The Contract’s Plain Terms Show That Northrop Grumman Did Not Violate The Contract As A Matter Of Law .................. 6

C. Marquis Alleges, At Most, A Dispute Over Ambiguous Contractual Provisions That Is Not Cognizable Under The FCA ................................................... 9

D. Count I Fails Rule 9(b) Because It Does Not Identify A Single False Claim, Much Less The Required Details Of Any Such Claim .............................................. 10

II. Count II Should Be Dismissed Because Marquis Does Not Allege That Northrop Grumman Had Knowledge Of His Protected Conduct ..................................................... 13

III. The Court Should Not Exercise Supplemental Jurisdiction Over Count III ..................... 15

Conclusion .................................................................................................................................... 15


Defendant Northrop Grumman Corporation (“Northrop Grumman”)1 respectfully submits

this memorandum in support of its Motion To Dismiss the Second Amended Complaint under

Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure.

Introduction and Summary of Argument

Relator Roland Marquis portrays himself as a victim. He claims that Northrop Grumman

breached a contract with the government and that when he told his bosses about the supposed

breach (a breach he now equates with fraud), Northrop Grumman fired him.

Marquis’s tale is pure fiction. There was no breach; there was certainly no fraud; and

there was no retaliation. Rather, Marquis’s story elides perhaps its most material plot twist: as he

is well aware, Northrop Grumman terminated his employment because he violated clear

company policies restricting employees from giving gifts and providing entertainment to

government officials. Between 1999 and 2008, Marquis repeatedly entertained government

customers, including at costly dinners, golf outings, and theatrical and sporting events. In doing

so, Marquis not only broke Northrop Grumman’s rules, but exposed both himself and Northrop

Grumman to possible criminal charges. When Northrop Grumman learned of Marquis’s

misdeeds, it immediately undertook a costly and thorough investigation, terminated Marquis’s

employment, reported his misconduct to the government, and reimbursed the government for

prohibited expenses Marquis had charged to the government customer.

Not surprisingly, the Complaint makes no mention of these actual circumstances of

Marquis’s termination. Instead, Marquis makes the outrageous allegation that he was fired

because of retaliation, and concocts a story of fraud to support that theory. Were this case to

1 The proper defendant here is Northrop Grumman Technical Services, Inc. (“NGTSI”), which is the party with whom the Air Force contracted to perform the QRC contract. For the purpose of this motion, the erroneously-named NGC responds in place of NGTSI.


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proceed, the evidence would show that Marquis’s claims are baseless, as the government

evidently concluded when it declined to intervene after a lengthy investigation. But this case

should not proceed. The Complaint is facially deficient and the Court should dismiss it, with

prejudice, for multiple independent reasons.

Count I, alleging violations of the False Claims Act (“FCA”), fails to state a claim under

Rule 12(b)(6) because it does not allege the sine qua non of any FCA lawsuit: a false claim.

First, Marquis acknowledges in his Complaint that the government customer knew all along of

what he contends were Northrop Grumman’s supposed contract violations, yet the government

continuously paid Northrop Grumman under the contract, including through today. Seventh

Circuit law is clear that such government knowledge and approval negate, as a matter of law, the

necessary FCA element of falsity. Second, even taking Marquis’s assertions as true, the

Complaint fails to plead a false claim because a plain reading of his allegations and of the

contract at issue shows, as a matter of law, that Northrop Grumman did not breach the contract.

Third, even if the contract terms were ambiguous (and they are not), the Complaint would still

fail. The most that Marquis alleges is that Northrop Grumman did not agree with his own

subjective interpretation of ambiguous contract provisions. Such allegations do not amount to

the fraud necessary to sustain an FCA case.

Count I should be dismissed for the separate reason that it does not plead fraud with the

particularity required by Rule 9(b). A relator must plead the “who, what, when, where, and

how” of the false claims allegedly submitted to the government. Yet Marquis identifies no claim

for payment, much less pleads the required specific information about such a claim.

Count II, alleging retaliation in violation of the FCA, fails to state a claim under Rule

12(b)(6). Count II omits the necessary element that Northrop Grumman knew that Marquis was


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engaged in protected conduct when it terminated his employment. Marquis alleges only that he

informed Northrop Grumman of what he thought were contract breaches. His failure to

complain, even once, to Northrop Grumman about fraud, false representations, or even to hint at

an FCA lawsuit defeats his FCA retaliation claim under well-established law.

Count III alleges state law retaliatory discharge. Assuming the Court dismisses Counts I

and II, it should not exercise supplemental jurisdiction over this state law claim. And even if the

Court does not dismiss Count II, dismissal of Count III is still required because Count II provides

Marquis an adequate remedy for the same conduct underlying Count III.

Marquis’s misconduct has already cost Northrop Grumman great time and expense. His

current allegations are not just factually groundless, but fail as a matter of law. The Complaint

should be dismissed with prejudice.

Argument I. Count I Should Be Dismissed Under Rule 12(b)(6) Or Rule 9(b), Or Both Count I alleges a violation of the FCA, 31 U.S.C. § 3729 (2006) et seq., pursuant to its

qui tam provisions. To state an FCA claim, Marquis must allege facts showing that Northrop

Grumman presented a claim or made a statement that “represents an objective falsehood.”

United States ex rel. Yannacopoulos v. Gen. Dynamics, 652 F.3d 818, 822, 836 (7th Cir. 2011).

“In short, the claim must be a lie.” Hindo v. Univ. of Health Sci./The Chi. Med. School, 65 F.3d

608, 613 (7th Cir. 1995).

The only violation of the FCA that Marquis alleges is that, in his view, Northrop

Grumman breached the QRC contract. Compl. ¶ 8; see also id. ¶¶ 53–56 (Count I). The

supposed breach arises from Northrop Grumman’s (i) engaging in marketing and acquisition

activities “in violation of the exclusivity clause of the QRC contract” and (ii) instituting a “new


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[internal] reporting structure [that] violated the terms in the QRC contract.” Id. ¶¶ 35, 43. But

even taking the factual allegations of the Complaint as true, Marquis’s alleged contractual

breaches do not come close to “stat[ing] a claim to relief that is plausible on its face.” Indep.

Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 934 (7th Cir. 2012).

A. Marquis Acknowledges That The Government Knew Of And Approved The Supposed Contract Violations, Thereby Negating Any Falsity

The first and fatal defect of the Complaint is that Marquis repeatedly acknowledges that

the government knew about each of what he contends were Northrop Grumman’s contract

breaches, yet continued to pay Northrop Grumman under the contract. Such government

knowledge and approval, as a matter of law, preclude FCA liability. As the Seventh Circuit

explained, “[i]f the government knows and approves of the particulars of a claim for payment

before that claim is presented, the presenter cannot be said to have knowingly presented a

fraudulent or false claim. In such a case, the government’s knowledge effectively negates the

fraud or falsity required by the FCA.” United States ex rel. Durcholz v. FKW Inc., 189 F.3d 542,

545 (7th Cir. 1999); see also 1 J. Boese, Civil False Claims and Qui Tam Actions § 2.03[F] (4th

ed. 2012) (same).

The Complaint details that the government knew of the alleged contract breaches:

“Beginning in or around January 2007, Mr. Marquis informed USAF personnel apprised [sic] of developments within the QRC, including those activities which violated the QRC contract.” Compl. ¶ 33;

“Mr. Marquis continued to report violations of the QRC contract to . . . the USAF up to the date of termination of his employment.” Id. ¶ 15.

“QRC staff member Burbridge ‘BC’ Smith, at Mr. Marquis’ direction, reported to USAF

personnel that the QRC reporting structure had been changed in violation of the terms of the contract.” Id. ¶ 13;


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“On or about June 6, 2008, acting at Mr. Marquis’ direction, Mr. Burbridge Smith informed personnel of the United States Air Force of the new reporting structure.” Id. ¶ 44;

“In or around July of 2008, Mr. Marquis informed the USAF, by email to Ms. Jenkins, of the reorganization of the QRC, which was in violation of the QRC contract.” Id. ¶ 47;

“Mr. Marquis specifically disclosed information regarding Northrop’s fraudulent and improper activities: (i) to the Government via email correspondence to Rebecca Jenkins, USAF Program Manager, (ii) to the Government by directing staff to inform the United States Air Force through Ms. Jenkins, and Robert Colson, USAF Senior Manager. . . .” Id. ¶ 24.

The Complaint also makes clear that, even though the government knew of Northrop

Grumman’s supposed contract violations, the government consistently paid Northrop Grumman

under the contract. See id. ¶ 56 (“For the years beginning 2006 through 2008, Northrop billed to,

and received payment from, the USAF a total amount in excess of $59 million.”). In fact,

Marquis acknowledges that the government is still paying Northrop Grumman under the

contract, even after the government investigated the very same allegations he is making in this

lawsuit and declined to intervene. See ibid. (“Northrop continues to bill, and receives payment

from, the USAF”).

Courts routinely dismiss FCA complaints that, as here, allege the government knew of

the conduct that was supposedly wrongful and yet continued to make payments under the

contract. See, e.g., United States ex rel. Stierli v. Shasta Servs. Inc., 440 F. Supp. 2d 1108,

1113–14 (E.D. Cal. 2006) (granting motion to dismiss); United States ex rel. Hess v. Sanofi-

Synthelabo Inc., No. 05CV570MLM, 2006 WL 1064127, at *5, *8 (E.D. Mo. Apr. 21, 2006)

(same);2 United States ex rel Boisjoly v. Morton Thiokol, Inc., 706 F. Supp. 795, 809–11 (D.

Utah 1988) (same); cf. United States ex rel. Herbert v. Nat’l Acad. of Sci., Civ. A. No. 90–2568,

1992 WL 247587, at *8 (D.D.C. Sept. 15, 1992). As the Boisjoly Court stated, when “the

2 Copies of unpublished cases are attached to this Memorandum as Exhibit A.


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complaint itself alleges that the government knew of those very facts or characteristics which

allegedly make the claim false, no [FCA] claim has been stated.” 706 F. Supp. at 810.

Marquis pleads that the Air Force was aware of the supposed contract breaches and also

that it continued to pay Northrop Grumman. Accordingly, under Durcholz, “the government’s

knowledge effectively negates the fraud or falsity required by the FCA,” and the Complaint

should be dismissed for failure to state an FCA claim. 189 F.3d at 545.

B. Marquis’s Own Allegations And The Contract’s Plain Terms Show That Northrop Grumman Did Not Violate The Contract As A Matter Of Law

The government’s decision to continue paying Northrop Grumman even after learning of

the supposed wrongful conduct is not surprising. It is clear from the face of the Complaint that

Marquis’s allegations do not show that Northrop Grumman breached the contract, much less

adequately plead an FCA violation.

1. Marquis complains at length about an internal reorganization that Northrop

Grumman undertook in 2008 (which, much to his chagrin, changed to whom Marquis had to

report). Compl. ¶¶ 11–13, 41–47. But his objections are tellingly vague as to what specific

provision of the QRC contract the reorganization supposedly breached. Of course, this is

because there is no such provision. The closest Marquis comes to articulating how the

reorganization contravened the contract is his charge that Northrop Grumman did not “assign

management of the QRC programs to a director who reported to the Vice President Level.” Id.

¶ 8. But the Statement of Work—which Marquis has attached to the Complaint—does not

require a director “who report[s] to the Vice President Level.” Instead, as Marquis himself

alleges elsewhere, the contract requires only that “QRC program managers would be under the

direction of a Director.” Id. ¶ 26; see also id. Exhibit A (Statement of Work) § 4.0.1 (same); id.

§ 4.1.1 (same). And the Complaint makes clear that the QRC was under the direction of a


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Director: Marquis himself was the Director of the QRC at all relevant times. See Compl. ¶ 2

(“Beginning in 1999, [Marquis] assumed the position of Director of the U.S. Air Force Quick

Reaction Capability Center (‘QRC’), a position he held until his employment was terminated on

or around April 10, 2009.”); see also id. ¶ 7 (Marquis was “the Director of the QRC”). In light of

Marquis’s own allegations, we do not understand why Marquis believes the reorganization

violated the contract. The Complaint defeats itself.

2. Marquis’s contention that Northrop Grumman breached the “exclusivity clause”

of the QRC contract is equally mystifying. The contract provides that Northrop Grumman will

run the QRC Center to supply worldwide logistics support for assigned military systems and

projects. In section 3.3, the contract lists the Air Force systems that had been assigned to the

QRC Center. It then goes on to provide in the next paragraph that the QRC Center shall be “for

the exclusive support of the systems assigned to this contract.” Compl. ¶ 31; Exhibit A § 4.0.1.

Pursuant to this provision, the QRC Center could not provide support for non-assigned

electronic systems without Air Force permission. But the Complaint does not allege that the

QRC Center ever provided such support; rather, it pleads only that Northrop Grumman explored

the possibility of moving other systems into the QRC Center. For example, Paragraph 32 does

not allege that Northrop Grumman actually moved the Litening Program into the QRC Center,

but only that “Northrop considered” doing so, and that if Northrop Grumman had done so, then

(and only then) would the contract have been breached. Id. ¶ 32 (emphasis added). See also id.

¶ 49 (“Northrop required that QRC staff perform a Due Diligence Exercise with respect to the

potential acquisition of the ALR-66/67/68 family of Electronic Warfare systems.” (emphasis

added)). The Eleventh Circuit has aptly described (and rejected) this type of argument: “[I]f we

had some ham, we could have ham and eggs, if we had some eggs.” Barnette v. Evans, 673 F.2d


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1250, 1252 (11th Cir. 1982). Northrop Grumman never made “ham and eggs”—it never had the

QRC Center perform work for any electronics system without Air Force permission—and the

Complaint never alleges anything to the contrary.

Rather than allege that the QRC Center actually supported non-assigned systems without

customer permission, Marquis complains that Northrop Grumman personnel engaged in various

research and marketing efforts aimed at potentially adding programs to the QRC Center. See

Compl. ¶¶ 32, 34–36, 38–40, 46, 48–50. Yet, as discussed above, the “exclusivity provision”

does not prohibit such conduct.3 To the contrary, the QRC contract expressly contemplates that

the scope of work would expand to cover additional systems: “Other systems, projects, and tasks

may be incorporated by change order in accordance with the appropriate change clause(s) of the

contract.” Id. Exhibit A § 3.1. As Marquis well knows, the Air Force has approved adding

further programs to the QRC contract over the years. And, of course, such “other systems,

projects, and tasks” could only be added to the contract if Northrop Grumman had done the

requisite marketing, research, and planning activities in advance. Thus, it is not surprising that

the Air Force did not consider these exploratory activities to be a breach of the contract—it

continued to allow these activities and pay Northrop Grumman under the QRC contract (and then

declined to intervene in this lawsuit) even after being apprised by Marquis.4

3 The Complaint also speaks of the “non-marketing provisions of the QRC contract.” Compl. ¶ 9. However, the Complaint provides no indication about what paragraphs in the Statement of Work are being referenced. The Statement of Work lacks any provision with that title and nowhere discusses marketing. 4 As the Air Force has recognized, adding new electronic systems to the QRC contract is often in the government’s interest because it avoids possible excess capacity at the QRC Center and allows the Air Force to spread the QRC Center’s fixed overhead costs over a larger pool of contracts and work.


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C. Marquis Alleges, At Most, A Dispute Over Ambiguous Contractual Provisions That Is Not Cognizable Under The FCA

At the absolute most (and interpreting his allegations far more liberally than is justified),

Marquis has identified ambiguous contract terms. But even assuming arguendo that the

exclusivity provision or other contract provisions could plausibly be read to prohibit internal

market research or reorganizations, the Complaint would still fail to allege objective falsity under

Rule 12(b)(6). “A defendant cannot be held liable under the FCA for conduct based on the

reasonable, but incorrect, interpretation of a contract.” United States ex rel. Tyson v. Amerigroup

Illinois, Inc., 488 F. Supp. 2d 719, 730 (N.D. Ill. 2007). As the Seventh Circuit has held, the

FCA’s standard is not satisfied by “mere differences in interpretation growing out of a disputed

legal question involving the terms of a contract.” Yannacopoulos, 652 F.3d at 836.

But here, at most, Marquis alleges a breach of an ambiguous contract term. The Fourth

Circuit’s decision in United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370

(4th Cir. 2008)—on which Yannacopoulos relied, see 652 F.3d at 836—is on point. There, as

here, relators were former employees of a government contractor. 525 F.3d at 374–75. There, as

here, relators told their superiors that the contractor was in breach of the contract, namely

provisions “that imposed general safety and maintenance requirements on [the contractor].” Id.

at 374. There, as here, the superiors disagreed and relators ultimately brought an FCA suit. Id.

at 375. The district court, having already dismissed relators’ complaint, denied leave to replead.

The Fourth Circuit affirmed because “[relators’] assertion rests not on an objective falsehood, as

required by the FCA, but rather on Relators’ subjective interpretation of [the contractor’s]

contractual duties.” Id. at 377. “An FCA relator cannot base a fraud claim on nothing more than

his own interpretation of an imprecise contractual provision. To hold otherwise would render

meaningless the fundamental distinction between actions for fraud and breach of contract.” Id. at


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378. The court further reasoned that (as is also true here) “the United States government—the

actual party to the contract—has not expressed dissatisfaction with [the contractor’s]

performance in the form of a breach of contract action.” Id. at 377.

In short, the most the Complaint alleges is that Northrop Grumman breached ambiguous

contractual provisions. But there can be no dispute that Northrop Grumman (and, evidently the

other party to the contract, the Air Force) have a reasonable, if contrary, view of this contractual

language. As a matter of law, therefore, the Complaint has failed to allege the “objective

falsehood” the FCA requires. Yannacopoulos, 652 F.3d at 836.

D. Count I Fails Rule 9(b) Because It Does Not Identify A Single False Claim, Much Less The Required Details Of Any Such Claim

Count I should also be dismissed with prejudice because it does not satisfy Rule 9(b),

which applies to FCA suits and requires Marquis to “state with particularity the circumstances

constituting fraud or mistake.” Fed R. Civ. P. 9(b); see United States ex rel. Gross v. AIDS

Research Alliance–Chicago, 415 F.3d 601, 604 (7th Cir. 2005). Marquis must identify “the who,

what, when, where, and how” of the alleged fraud. Id. at 605. This rigorous standard requires

“FCA fraud pleadings [to] allege considerable detail, as Seventh Circuit decisions evidence.”

United States ex rel. Raymer v. Univ. of Chi. Hosps., No. 03 C 806, 2006 WL 516577, at *5

(N.D. Ill. Feb. 28, 2006) (Der-Yeghiayan, J.) (dismissing FCA complaint under Rule 9(b)).

Requiring such detail is necessary not only to “minimiz[e] ‘strike suits’ and ‘fishing

expeditions’” and to “protec[t] a defendant’s reputation from harm,” but to “provid[e] notice of

the claim” to the defendant. Id. at *3.

This last purpose—giving defendants enough information to allow them meaningfully to

defend the allegations—is critical in FCA suits. The reason is that “the Act attaches liability, not

to underlying fraudulent activity, but to the claim for payment.” United States ex rel. Hopper v.


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Anton, 91 F.3d 1261, 1266 (9th Cir. 1996). “The sine qua non of an FCA violation is the

submission of a false or fraudulent claim.” Mason v. Medline Industries, Inc., 731 F. Supp. 2d

730, 736 (N.D. Ill. 2010). Consequently, Rule 9(b) requires “[p]laintiffs proceeding under the

FCA [to] link specific allegations of fraud to claims for government payment.” Id. at 733 (citing

Garst v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003)).

1. Marquis has utterly failed to allege this required link. While the Complaint makes

“allegations of fraud”—i.e., Marquis’s (erroneous and insufficient) allegations that Northrop

Grumman breached the contract—the Complaint does not “link” any of these allegations to even

a single “clai[m] for government payment.” Mason, 731 F. Supp. 2d at 733. Much less does the

Complaint identify the information the Seventh Circuit requires of any such hypothetical claim.

It does not say “who” submitted the false claim or made a false statement to get the false claim

paid. It does not say “when” the false claim was made. And it does not say “what” is false or

fraudulent about the claim. Rather than specify any of this required information (much less all of

it), Count I lumps together all the conduct alleged in the Complaint and then broadly asserts that

Northrop Grumman violated the FCA. Yet Marquis puts no flesh on the bone of these legal

conclusions and fails to tie the wrongful conduct to any actual specific identifiable false claims.

This case vividly illustrates why compliance with Rule 9(b) is necessary. Northrop

Grumman has provided repair, upgrade, maintenance, and support services for numerous

electronics systems over the many years of the QRC contract. Yet, Northrop Grumman has no

idea which of the hundreds, or maybe thousands, of invoices are the allegedly false claims or

why. For example, Marquis asserts that Northrop Grumman “charge[d] the contract for activities

prohibited by the contract.” Compl. ¶ 8. Which Northrop Grumman employees did so? When?

Which invoice? What makes the costs charged prohibited? It is hard to understand—and it is


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certainly never specified in the Complaint— whether and why the alleged violations of the

“exclusivity provision” somehow rendered false the invoice for the repair work on a particular

electronic system in any year (much less on a specific date). The Complaint proclaims broad,

conclusory charges of fraud, but it provides none of the specifics regarding the actual false

claims. This places Northrop Grumman in an impossible situation, left to review every QRC

claim since the mid-2000s and guess what Marquis thinks is false about the claims or supporting

statements. But Rule 9(b) reflects the considered judgment that the onus to provide such

information is on the relator, not the defendant. See Raymer, 2006 WL 516577, at *4 (“The

Seventh Circuit has further indicated that [Rule 9(b) requires relators to allege] the identity of the

person making the misrepresentation, the time, place, and content of the misrepresentation, and

the method by which the misrepresentation was communicated.”).5

2. In addition to the reasons above, the Complaint fails Rule 9(b) for the further

reason that it does not plead scienter with the required detail. “Although ‘[m]alice, intent,

knowledge and other conditions of a person’s mind may be alleged generally,’ Fed. R. Civ. P.

9(b), an FCA plaintiff still must set forth specific facts that support an inference of fraud.”

Wilson, 525 F.3d at 379. The Complaint alleges (at most) that Northrop Grumman breached its

contract with the government. “Yet failing to keep one’s promise is just breach of contract.”

Garst v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003). “To satisfy Rule 9(b),

[relator] had to allege that [the defendant] said something knowing at the time that the

5 See also Garst, 328 F.3d at 376 (the relator must “identify specific false claims for payment or specific false statements made in order to obtain payment”); United States ex rel. Wildhirt v. AARS Forever, Inc., No. 09 C 1215, 2011 WL 1303390, at *3 (N.D. Ill. Apr. 6, 2011) (a plaintiff cannot “merely . . . describe a private scheme in detail but then . . . allege simply and without any stated reason for his belief that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government”).


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representation was false (or not intending to perform).” Ibid.; see also Wilson, 525 F.3d at 380

(“To the degree Relators allege specific facts relating to contractual nonperformance in their

complaint, they are more appropriately viewed as a basis for a breach of contract action, not [an

FCA] claim. Thus, if allowed to go forward, the FCA claim would have to rest primarily on

facts learned through the costly process of discovery. This is precisely what Rule 9(b) seeks to

prevent.”).6

II. Count II Should Be Dismissed Because Marquis Does Not Allege That Northrop Grumman Had Knowledge Of His Protected Conduct

Count II alleges that Northrop Grumman retaliated against Marquis in violation of the

FCA, 31 U.S.C. § 3730(h) (2006), but fails to plead a necessary element of that claim. To state

an FCA retaliation claim, Marquis “would have to show that (1) his actions were taken ‘in

furtherance of’ an FCA enforcement action and were therefore protected by the statute; (2) that

the employer had knowledge that he was engaged in this protected conduct; and (3) that the

discharge was motivated, at least in part, by the protected conduct.” Brandon v. Anesthesia &

Pain Mgmt. Assocs., 277 F.3d 936, 944 (7th Cir. 2002). Assuming for the sake of this motion

that Marquis undertook protected conduct (i.e., the first element), he fails to allege that Northrop

Grumman “had knowledge that he was engaged in” such conduct (i.e., the second element).

Count II therefore fails to state a retaliation claim and should be dismissed.

Marquis alleges that Northrop Grumman retaliated against him when it “effectively

demoted” him in June 2008 (Compl. ¶ 61) and when it terminated his employment in April 2009

(id. ¶ 62). To satisfy the second element of his retaliation claim, Marquis must therefore allege

facts showing that Northrop Grumman knew of his protected conduct prior to taking these two

6 The Court should dismiss the Complaint with prejudice and not allow Marquis to file a fourth complaint. Re-pleading would be futile because there is no reason to think Marquis could allege any, much less all, of the information Rule 9(b) requires.


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actions. But the only notice Northrop Grumman had of Marquis’s (assumedly) protected

conduct is that Marquis told his superiors that, in his view, Northrop Grumman “violated the

QRC contract” by reorganizing the QRC reporting structure and by conducting market research

about expanding the QRC program. Id. ¶ 29; see also, e.g., id. ¶¶ 9–10, 12.

Under settled law, however, merely reporting a perceived contract violation to an

employer does not notify the employer that the employee is engaging in protected conduct;

rather, the employer must have knowledge that the employee’s complaint concerns a possible

fraud or FCA lawsuit. This Court’s decision in Robbins v. Provena Hosps., Inc., No. 03 C 1371,

2003 WL 21468588 (N.D. Ill. June 24, 2003), is representative. There the relator investigated

whether her employer violated Medicare and Medicaid regulations. Id. at *3. The Court held

that this was protected conduct and that the employer knew of relator’s investigation. Ibid. But

the Court nonetheless dismissed the retaliation claim because “[a]n investigation of regulation

violations, without a fraudulent component in the complaints to the employer, does not give the

employer notice that the employee’s activities were done to further a FCA action.” Id. at *4.

Dismissal was required because “[n]othing here indicates that [relator] threatened a qui tam

action, notified the [defendant] that she was investigating fraud, or accused the [defendant] of

making false representations, violating the FCA, or defrauding the federal government.” Ibid.7

7 See also, e.g., Luckey v. Baxter Healthcare Corp., 183 F.3d 730, 733 (7th Cir. 1999) (“Intra-corporate debates about optimal testing protocols cannot be equated to knowledge of litigation”); United States ex rel. Wildhirt v. AARS Forever, Inc., No. 09 C 1215, 2011 WL 1303390, at *1, *6 (N.D. Ill. Apr. 6, 2011) (although “[r]elators repeatedly complained to their supervisors that Defendants were violating [their contract], breaching applicable Medicaid and Medicare regulations, and placing patients at risk,” dismissal was required because, inter alia, relators did not allege they “told [the defendant] that they were planning a lawsuit” or that “[the defendant] suspected by any other means that a lawsuit was in store”); United States ex rel. Kennedy v. Aventis Pharm., Inc., No. 03 C 2750, 2008 WL 4371323, at *1–3 (N.D. Ill. Feb. 11, 2008) (similar); United States ex rel. Batty v. Amerigroup Ill., Inc., 528 F. Supp. 2d 861, 878 (N.D. Ill.


15

Dismissal is similarly required here. All that Marquis alleges is that he told his superiors

he thought Northrop Grumman was not complying with the contract. Marquis does not allege

that he ever mentioned fraud or the FCA (or a lawsuit or investigation of any kind), or that

Marquis gave the Company reason to think he was engaged in protected conduct and was not

simply voicing his own view of the contract’s terms. Count II therefore fails as a matter of law.

III. The Court Should Not Exercise Supplemental Jurisdiction Over Count III

Count III, alleging retaliatory discharge, raises a pure state law claim over which the

Court should not exercise supplemental jurisdiction if the Court dismisses Counts I and II.8

“[T]he Seventh Circuit has stated that where a court dismisses a federal claim and the sole basis

for invoking federal jurisdiction has become nonexistent, that court should not exercise

supplemental jurisdiction over remaining state law claims.” Raymer, 2006 WL 516577, at *11;

see also Timm v. Mead Corp., 32 F.3d 273, 277 n.2 (7th Cir. 1994) (“[D]ismissal [of the federal

claims] at the pleading stage usually counsels strongly in favor of relinquishing jurisdiction

because at that point in a case judicial resources typically are yet to be heavily tapped.”).9

Conclusion For all these reasons, the Court should dismiss the Complaint with prejudice.

2007) (“An employee’s internal complaints directed at bringing the employer into compliance with its legal obligations do not put the employer on notice of potential FCA litigation.”).

8 Dismissal of Count III would be necessary even if the Court does not dismiss Count II. Illinois courts have indicated that the tort of retaliatory discharge will not lie if a plaintiff has an adequate alternative statutory remedy. See Stebbings v. Univ. of Chicago, 726 N.E.2d 1136, 1141 (Ill. App. 2000). Count II would provide such a remedy if it is not dismissed, because it arises from the same conduct as does Count III. See, e.g., Pillay v. Millard Refrigerated Servs., Inc., No. 09-CV-5725, 2012 WL 4498221, at *14–15 (N.D. Ill. Sept. 28, 2012); Hamros v. Bethany Homes & Methodist Hosp. of Chicago, 894 F. Supp. 1176, 1178–79 (N.D. Ill. 1995). 9 Marquis’s employment was governed by a written agreement requiring him to arbitrate disputes arising from his employment, including the retaliation claims he asserts in Counts II and III. In the event that those counts are not dismissed, Northrop Grumman reserves its right under that agreement to seek arbitration of the retaliation claims.


16

Respectfully submitted,

NORTHROP GRUMMAN CORPORATION By: /s/ Mark L. Rotert One of its attorneys Mark L. Rotert Stetler, Duffy & Rotert, Ltd. 10 South LaSalle St., Suite 2800 Chicago, IL 60603 Phone: (312) 338-0214 Fax: (312) 338-0070 Michael L. Waldman Mark A. Hiller Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP 1801 K Street, N.W., Suite 411-L Washington, D.C. 20006 Phone (202) 775-4500 Fax (202) 775-4510 Counsel for Defendant Northrop Grumman Corporation

Dated: December 21, 2012


17

CERTIFICATE OF SERVICE

I, Mark L. Rotert, an attorney, hereby certify that the attached Defendant Northrop

Grumman Corporation’s Memorandum in Support of its Motion to Dismiss Relator’s Second

Amended Complaint was filed and served on all counsel of record via the Court’s CM/ECF

system on this 21st day of December, 2012.

/s/ Mark L. Rotert Mark L. Rotert


Case: 1:09-cv-07704 Document #: 36-1 Filed: 12/21/12 Page 1 of 50 PageID #:109

U.S. ex rei. Hess v. Sanofi-Synthelabo, Inc., Not Reported in F.Supp.2d (2006)

2006 WL 1064127 Only the Westlaw citation is currently available.

NOT FOR PUBLICATION

United States District Court, E.D. Missouri,

Eastern Division.

Plaintiff has pending a second cause of action against

Defendant alleging wrongful discharge and tortious

interference with business relations and business

expectations. Case No. 4:05CV2l95MLM.

UNITED STATES ex rei. Philip HESS, 1

Bringing this action on behalf of the

United States Government, Plaintiff,

v.

SANOFI-SYNTHEIABO INC., Defendant.

No. 4;05CV570MLM. April 21, 2006.

Attorneys and Law Firms

Kathryn S. Render, Chackes and Carlson, St. Louis, MO, for

Plaintiff.

John C. Dodds, Megan L. Travcrsari, Michael L. Banks,

Morgan and Lewis, Phildelphia, PA, Bryan D. Lemoine,

Polsinelli Shalton Welte Suelthaus Pc, St. Louis, MO, for

Defendant.

Suzanne J. Moore, Office of U.S. Attorney, St. Louis, MO,

for Movant.

Opinion

MEMORANDUM OPINION

MARY ANN L. MEDLER, Magistrate Judge.

*1 This matter is before the court pursuant to the Motion

to Dismiss under Federal Rules of Civil Procedure 12(b)

(6) and 9(b) filed by Defendant Sanofi-Synthelabo, Inc.

("Defendant"). Doc. 15. Plaintiff Philip Hess ("Realtor" or

"Plaintiff') has filed a Response. Doc. 19. Defendant has

filed a Reply. Doc. 21. The parties have consented to the

jurisdiction of the undersigned United States Magistrate

Judge pursuant to 28 U.S.C. § 636(c). Doc. 22.

BACKGROUND

Plaintiff filed the qui tam action under consideration on

April II, 1005. Doc. l. The matter remained sealed until

November 9, 2005, at which time the Government elected

not to intervene. Doc. 8. Plaintiffs Complaint alleges that he

was employed as a sales representative by Defendant from

October 2001 to April 28, 2004 2 and that Defendant is a

phannaceutical company. Plaintiffs qui tam action is brought

pursuant to the False Claims Act ("FCA"), 31 U.S.C. §

3 729-33, and addresses Defendant's promotion and marketing

of certain prescription medications.

2 In his Complaint Plaintiff alleges that he worked for

Defendant until February 2004. In the affidavit in support

of his Response to the Motion to Dismiss Plaintiff states

that he worked for Defendant until April 28, 2004.

The Food, Drug and Cosmetics Act ("FDCA") governs

the distribution in interstate commerce of prescription

medications. In Parke-Davis, 147 F.Supp.2d at 44-45, also a

qui tam action, the court set forth the provisions the FDCA

applicable to the matter under consideration as follows:

Under the [FDCA], 21 U.S.C. §§ 301-97, new

phannaceutical drugs cannot be distributed in interstate

commerce unless the sponsor of the drug demonstrates

to the satisfaction of the [FDA] that the drug is safe aod

effective for each of its intended uses. See 21 U.S .C. § 355(a) & (d). Once a drug is approved for a particular

use, however, the FDA does not prevent doctors from

prescribing the drug for uses that are different than those

approved by the FDA. Allowing physicians to prescribe

drugs for such "off-label" usage "is an accepted and

necessary corollary of the FDA's mission to regulate

[phannaceuticals] without directly interfering with the

practice of medicine." Buckman Co. v. Plaintiffs Legal

Comm., 531 U.S. 341, 121 S.Ct. 1012, 1018, 148 L.Ed.2d

854 (2001). Though physicians may prescribe drugs for

off-label usage, the FDA prohibits drug manufacturers

from marketing or promoting a drug for a use that

the FDA has not approved. See 21 U.S.C. § 331 (d)

(prohibiting distribution of drug for non-approved uses);

id. § 331 (a) (prohibiting distribution of a "misbranded"

drug). A manufacturer illegally "misbrands" a drug if the

drug's labeling includes information about its unapproved

uses. See Washington Legal Foundation v. Henney, 202

F.3d 331, 333 (D.C.Cir.2000). If the manufacturer intends

to promote the drug for new uses in addition to those

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already approved, the materials on off-label uses must meet certain stringent requirements and the manufacturer

must resubmit the drug to the FDA testing and approval

process. Id. at 334 (setting forth the requirements in the

Food and Drug Administration Modernization Act of 1997,

21 U.S.C. § 360aaa, et seq.)

*2 Whether a drug is FDA-approved for a particular

use will largely determine whether a prescription for that

use of the drug will be reimbursed under the federal

Medicaid program. Reimbursement under Medicaid is, in

most circumstances, available only for '"covered outpatient

drugs." 42 U.S.C. § 1396b(i)(IO). Covered outpatient

drugs do not include drugs that are "used for a medical

indication which is not a medically accepted indication."

!d. § 1396r-8(k)(3). A medically accepted indication, in

tum, includes a use "which is approved under the Federal

Food Drug and Cosmetic Act" or which is included in specified drug compendia. !d. § 1396r-8(k)(6). See also

id. § 1396r-8(g)(l)(B)(i) (identifying compendia to be

consulted). Thus, unless a particular off-label use for a

drug is included in one of the identified drug compendia, a

prescription for the off-label use of that drug is not eligible

for reimbursement under Medicaid.

(emphasis added).

Plaintiff alleges that Defendant manufactures the pharmaceutical drug Eloxatin which was approved in August

2002, by the FDA for second line treatment of fourth

stage colorectal cancer; that while Plaintiff was employed

by Defendant, Defendant provided Plaintiff and other sales

representatives with training on off-label 3 uses of Eloxatin

and with training on how to get Medicare reimbursement for

off-label uses ofEloxatin; that in November 2002, Wisconsin Physician Services ("WPS"), the Medicare administrator for

the States of Illinois, Wisconsin, Minnesota, and Michigan,

added Eloxatin to its policy with broad coverage for the

treatment of colorectal cancer with Eloxatin, including

treatment in the first line and adjuvant setting even though

these were off-label uses; that in January 2004, the FDA

approved Eloxatin for treatment in the first line setting after

Defendant submitted a Supplemental New Drug Application

for this use; and that in November 2004, the FDA approved

Eloxatin for treatment in the adjuvant setting after Defendant

submitted a Supplemental New Drug Application for this use.

3 As stated above in U11ited States ex rei. Franklin v.

Parke-Davis, Division of Warner-Lambert Co., 147

F.Supp.2d 39, 44 (D.Mass.2001), "off-label" uses of prescription drugs are uses "which are different than those approved by the FDA."

Plaintiff also alleges that in July 2002 the FDA approved

Defendant's drug, Elitek for the treatment and prevention

of tumor lyses syndrome ("TLS") in pediatric patients; that

Defendant's FDA application for adult treatment had been

turned down; and that beginning in February 2004 Defendant

trained Plaintiff and other sales representatives on off-label

uses of Elitek in adult patients and encouraged them to

promote off-label sales ofElitek.

Plaintiff basis his FCA cause of action on the following:

(I) that by promoting the off-label uses of Eloxatin and

Elitek to physicians by using immature, unreliable, and

misleading clinical data, Defendant caused WPS to authorize

Medicare coverage for off-label use; (2) that Defendant

knowingly caused to be presented to an officer or employee

ofthe United States Government (the "Govenunent") false or

fraudulent claims for payment or approval in violation of the

FCA, 31 U.S.C. § 3729(a)(l); (3) that Defendant knowingly

made, used or caused to be made or used, false records or

statements to get false or fraudulent claims paid in violation

of 31 U.S.C. § 3729(a)(2); (4) that Defendant conspired

with private physicians and other health care providers to

defraud the Govenunent by getting false and/or fraudulent

Medicare claims paid in violation of the FCA, 31 U.S.C. §

3729(a)(3); (5) that Defendant encouraged the actions of its

various officers, agents, and employees to take the actions set

forth above and that as a result the Government reimbursed

physicians for treatments that it otherwise would not have

had Defendant not presented false or misleading information

to the physicians in an effort to promote off-label uses; (6)

that the Government has sustained damages as a result of

Defendant's violations of the FCA; and (7) that Defendant

knowingly violated the FCA.

LEGAL STANDARDS

*3 A court may dismiss a cause of action for failure to

state a claim if it appears beyond a doubt that the plaintiff

can prove no set of facts in support of its claim that would

entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78

S.Ct. 99, 2 L.Ed.2d 80 (1957); Alexander v. Pejfer. 993 F.2d

1348, 1349 (8th Cir.!993). "The issue is not whether plaintiff

will ultimately prevail but whether the claimant is entitled

to offer evidence to support [its] claim." Scheuer v. Rhodes,

416 U.S. 232, 236, 94 S.Ct. 1683,40 L.Ed.2d 90 (1974). See

\l'-i~tJ;jwi'Jexr (C) 2012 Thomson Reuters. No claim to original U,S. Government Works, 2



also Bennett v. Berg, 685 F.2d 1053, 1058 (8th Cir.l982)

(a complaint should not be dismissed merely because the

court doubts that a plaintiff will be able to prove all of the

necessary factual allegations). The court must review the complaint most favorably to the plaintiff and take all well

pleaded allegations as true to determine whether the plaintiff

is entitled to relief. Conley, 355 U.S. at 45-46. A dismissal

under Rule 12(b)(6) should be granted only in the unusual

case in which a plaintiff has presented allegations that show

on the face of the complaint that there is some insuperable bar

to relief. Coleman v. Watt. 40 F.3d 255.258 (8th Cir.!994).

Qui tam actions under the FCA "must be pled with

particularity pursuant to Rule 9(b)" of Federal Rules of

Civil Procedure. United States ex ret. Costner, 317 F .3d

883, 888 (8th Cir.2003). See also United States ex rei.

Joshi v. St. Luke's Hospital, Inc., 441 F.3d 552, 2006 WL

522195, at *3 (8th Cir. March 6, 2006); United States ex

rei. Schuhardt v. Washington Univ., 228 F.Supp.2d 10l8,

1034 (E.D.Mo.2002). Rule 9(b) the Federal Rules of Civil

Procedure requires that "[i]n all averments of fraud or

mistake, the circumstances constituting fraud or mistake shall

be stated with particularity." Under Rule 9(b ), the term "circumstances" includes "such matters as the time, place

and contents of false representations, as well as the identity

of the person making the misrepresentation and what was

obtained or given up thereby." Parnes v. Gateway 2000,

Inc., 122 F.3d 539, 549 (8th Cir. 1997) (quoting Commercial

Prop. Invs., Inc. v. Quality Inns lnt'l. Inc., 61 F.3d 639, 644 (8th Cir.l995)). "Particularity" means "the who, what,

when, where and how: the first paragraph of any newspaper

story." DiLeo v. Ernst & Young, 901 F.2d 624, 627-628

(7th Cir. 1990). See also Costlier, 317 FJd at 888. Thus,

the particularity requirement of Rule 9(b) "demands a higher

degree of notice than that required for other claims" and "is

intended to enable the defendant to respond specifically and quickly to the potentially damaging allegations." !d. (citing

Abels v. Farmers Commodities Cmp., 259 F.3d 910, 920-21

(8th Cir.200 I)).

A complaint must be specific " 'enough to give defendants

notice of the particular misconduct which is alleged to

constitute the fraud charged so that they can defend against

the charge and not just deny that they have done anything

wrong.' " Id. at 889 (quoting United States ex rei. Lee

v. SmithK/ine Beecham Inc .. , 245 F.3d 1048, 1051-52 (9th

Cir.200 I)). Rule 9(b) requires more than "conclusory and

generalized allegations." Joshi. 441 F.3d 552, 2006 WL

522195, at *3(citingSchal/er Tel. Co. v. Golden Sk_v Sys., Inc,

298 FJd 736,746 (8th Cir.2002) (" '[C]onclusory allegations

that a defendant's conduct was fraudulent and deceptive are

not sufficient to satisfy [Rule 9(b) ].'")(quoting Commercial Prop. lnv. v. Qualitv Inns, 61 F.3d 639, 644 (8th Cir.l995).

"The requirements of Rule 9(b ), however, must be read in

conjunction with Fed. R.Civ. P. 8(a), which requests 'a short

and plain statement of the claim' for relief. Thus, while

Realtor must allege the circumstances of fraud, he is not

required to plead all of the evidence or facts supporting it." United States ex rei. Franklin v. Parke-Davis, Div. of Warner

Lambert Co .. 147 F.Supp.2d 39,45 (D.Mass.2001).

DISCUSSION

A. Legal Framework of the FCA, 31U.S.C. §§ 3729(a)

(1)-(3):

*4 In its Motion to Dismiss Defendant alleges that Plaintiffs

Complaint fails to plead facts that would establish the necessary elements of a claim under the FCA and fails

to allege fraud with the required particularity. In support

of this position Defendant contends that despite conceding

that the relevant Medicare carrier exercised its authority

to cover Eloxatin beyond the second line setting, Plaintiff

claims that Defendant violated the FDA by promoting

Eloxatin to doctors for use beyond the second line setting. In particular, Defendant contends that Plaintiff does not allege

that Defendant made any misrepresentations to doctors,

to the Government or to anyone regarding Eloxatin; that

Plaintiff does not allege a single doctor prescribed Eloxatin

improperly; that Plaintiff does not allege that any doctors

who may have prescribed Eloxatin and sought reimbursement

from Medicare made any misrepresentations to Medicare; and that Plaintiff concedes that Medicare does not require

physicians to specify the stage for which they are using

a cancer drug. In its Motion to Dismiss Defendant also

contends, in regard to Elitek, that Plaintiff does not allege that

Defendant's training in off-label uses of this medication was

untruthful or deceitfuL

In addition to alleging that Plaintiffs pleadings are factually

insufficient, Defendant contends that Plaintiffs Complaint is

legally insufficient because there is no case law to support its

theory of liability under the FCA.

The FCA, 31 U.S.C. § 3729 provides as follows:

a) Liability for certain acts.-Any person who-

\\lt:stlfWifNexr r;) 2012 Thomson Reuters" No c!airn to ori9inal U.S. Government \.'\forks.



(1) knowingly presents, or causes to be presented, to an

officer or employee of the United States Government or a

member of the Armed Forces of the United States a false

or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a

false record or statement to get a false or fraudulent claim

paid or approved by the Government;

(3) conspires to defraud the Government by getting a false

or fraudulent claim allowed or paid;

is liable to the United States Government for a civil

penalty ....

b) Knowing and knowingly defined.-For purposes of this

section, the terms "knowing" and "knowingly" mean that

a person, with respect to information-

(I) has actual knowledge of the information;

(2) acts in deliberate ignorance of the truth or falsity of

the information; or

(3) acts in reckless disregard ofthe truth or falsity ofthe

information, and no proof of specific intent to defraud

is required.

c) Claim defined.-For purposes of this section, "claim"

includes any request or demand, whether under a contract

or otherwise, for money or property which is made to a

contractor, grantee, or other recipient if the United States

Government provides any portion of the money or property

which is requested or demanded, or if the Government will

reimburse such contractor, grantee, or other recipient for

any portion of the money or property which is requested or

demanded.

*5 The Eighth Circuit has recently held that "[t]he [FCA]

is intended to encourage individuals who are either close

observers or involved in [ ] fraudulent activity to come

forward, and is not intended to create windfalls for people

with secondhand knowledge of the wrongdoing.' "Joshi, 441

F.3d 552, 2006 WL 522195, at *7 (citing Kinney v. Stoltz,

327 F.3d 671, 674 (8th Cir.2003)). In Costner, 317 F.2d

at 886, the court explained that the FCA "imposes liability

on •[a]ny person who knowingly presents, or causes to be

presented, to an officer or employee of the United States

Government ... a false or fraudulent claim for payment or

approval. • "(emphasis added)( quoting 31 U.S.C. § 3729(a)).

The court further noted "that the falsehood in a claim must

be material to the payment decision." !d. (emphasis added).

See also Rabushka ex rel. United States v. Crane Co., 122

F.3d 559, 563 (8th Cir.l997) ("To prove his claims under

the FCA, [a plaintiff] must show that a claim for payment

from the government was made and that the claim was

'false or fraudulent'") (citations omitted); Washington Univ ..

228 F.Supp.2d at 1023 ("To state a claim under the FCA

[§ 3729(a)(l)] a plaintiff is required to establish: (I) that

the defendant submitted a claim for payment to the federal

government; (2) the claim was false or fraudulent; and (3) the

defendant submitted the claim •tmowing' that it was false or

fraudulent.") (citing Rabushka ex rei. United States v. Crane

Co., 122 F.3d 559,563 (8th Cir.l997)).

In regard to the intent requirement of the FCA the Eighth

Circuit held in Costner, 317 F.2d at 887-88:

"[I]fthe government knows and approves of the particulars

of a claim for payment before that claim is presented, the

presenter cannot be said to have knowingly presented a

fraudulent or false claim." United States ex rel. Becker

v. 1Vestinghouse Savannah River Co., 305 F .3d 284, 289

(4th Cir.2002) (quoting United States ex rel. Durcholz v.

FKW. Inc .. 189 F.3d 542,543 (7th Cir.l999)). A contractor

that is open with the government regarding problems and

limitations and engages in a cooperative effort with the

government to find a solution lacks the intent required by

the Act. United States ex rei. Butler v. Hughes Helicopters,

Inc .. 71 F.3d 321,327 (9th Cir.l995) (citing Wang ex rei.

United States v. FMC C01p .. 975 F.2d 1412, 1421 (9th

Cir.l992)).

In court further addressed the materiality requirement of the

FCA in Costner and stated as follows:

The existence of and appropriate standard for a materiality

element is a matter of some disagreement in the courts.

See, e.g., United States, ex rei. Cantekin v. Univ. of

Pittsburgh. 192 F.3d 402, 415-16 (3d Cir.1999) (declining

to decide whether such an element exists because the

claims at issue would easily quality); United States

v. Southland ,~z~mt. C01p., 288 F.3d 665, 674-78 (5th

Cir.) (questioning existence of materiality element, but

fmding that false certification of compliance with condition

required for payment satisfied even strict outcome

materiality standard), reh'g en bane granted, 307 F.3d 352

(5th Cir.2002); Harrison v. Westinghouse Savannah River

Co .. 176 F.3d 776, 785 (4th Cir.l999)(applying materiality

Wes!!av;t<exl'@ 2012 Thomson Reuters. No claim to original U.S. GovernrrH0nt Works. 4



requirement that depends on "whether the false statement

has a natural tendency to influence agency action").

*6 Although we have not heretofore directly considered

whether a materiality element is implicit in the Act, we have stated that the Act provides recovery from one "who

makes a material misrepresentation to avoid paying some

obligation owed to the government." United States v. Q [nt'l Courier. [nc .. 131 F.3d 770, 772 (8th Cir.1997).

Moreover, our decision in Rabushka ex rei. United States v.

Crane Co. suggests that outcome materiality is the proper

standard. 122 F.3d 559, 563 (8th Cir.1997) ("IfRabushka

cannot show that the PBGC would have terminated CF &

I's pension plan [if it had known of the misrepresentations

and nondisclosures], then there is no false claim because ...

liabilities would have occurred regardless of Crane's

actions."). In our prior decision in this case we implied

a materiality standard stricter than mere relevancy: "only

those actions by the claimant which have the purpose and

effect of causing the United States to pay out money it is not

obligated to pay ... are properly considered 'claims' within

the meaning of the FCA." Costner I, 153 F.3d at 677.

Id. at 886-87.

B. Allegations of Plaintiff's Complaint Relevant to

Elitek: 4

4 Defendant's Motion to Dismiss addresses Plaintiff's

Complaint in its entirety although Defendant does not go

into great detail in its Motion to Dismiss regarding Elitek.

Defendant does state that Plaintiff's Complaint does

not allege that Defendant's training for off-label uses

of Elitek contained untruthful or deceitful information.

Doc. 16 at 6. As such, the court will consider Plaintiff's

allegations relevant to Elitek pursuant to its consideration

of Defendant's Motion to Dismiss.

In regard to Elitek, the only factual allegations which

Plaintiff makes in support of his claims pursuant to the

FCA, 31 U.S.C. § § 3729(a)(1), (2), and (3), are that

beginning in February 2004 Defendant trained Plaintiff and

other sales representatives and encouraged them to promote

off-label uses of this medication. Plaintiff further alleges

that Defendant pressured its sales representatives to derive

a substantial amount of sales from the off-label use of

Elitek. Compl., ~ ~ 30-34. The affidavit which Plaintiff

submits in support of his opposition to Defendant's Motion to

Dismiss does not provide greater detail regarding Defendant's

allegedly unlawful conduct involving Elitek. Doc. 19, Ex. A.

Rule 9(b) requires that a complaint allege the who, what,

when, where, and how of fraud. Joshi. 441 F. 3d 552, 2006

WL 522195. at *3; Dileo, 901 F.2d at 627-28. Plaintiff fails

to allege the who, what, when, where, and how regarding

Defendant's sales representatives allegedly promoting the

off-label uses of Elitek to doctors nor does he makes such

allegations regarding Defendant's allegedly training its sales

representatives in off-label uses of Elitek. Significantly,

Plaintiff does not plead the time or place of the allegedly

false representations regarding Elitek. Parnes, 122 F.3d at

549. Moreover, he does not allege the nature or content of

claims made which were allegedly fraudulent. Joshi. 441 F.3d

552, 2006 WL 522195, at *3 (affirming the district court's

finding that pleadings were insufficient where the Complaint

failed to allege, among other things, "what the content was

of the fraudulent claims"). Under such circumstances, the

court finds that Plaintiffs allegations in regard to Elitek fail to

give Defendant sufficient notice of the particular misconduct

which Plaintiff alleges is fraudulent in violation of the FCA.

See Parke-Davis, 147 F.Supp.2d at 50 (finding a complaint

alleging a pharmaceutical company's illegal promotion of a

prescription medication insufficient under Rule 9(b) where

the complaint failed to "identify the liaisons involved in the

fraud, the doctors who were given false infonnation, or any

false claims made"). Also, because Plaintiff fails to allege that

doctors to whom Plaintiff promoted off-label use of Elitek

actually submitted false claims to the Government for off

label uses of this prescription drug, Plaintiff does not allege

facts which would entitle him to relief on his claims pursuant

to 31 U.S.C. § 3729(a)(l)-(3). Rule 12(b)(6). Plaintiffs

allegations in regard to Elitek are vague, conclusory, and

lack the requisite specificity to withstand a motion to dismiss

pursuant either Rule 12(b)(6) or Rule 9(b). The court finds,

therefore, that Defendant's Motion to Dismiss under Federal

Rules of Civil Procedure 12(b)(6) and 9(b) should be granted

in regard to allegations involving Elitek.

C. Allegations of Plaintiff's Complaint regarding

Eloxatin: *7 In regard to the requirements for a violation of the FCA

relating to Defendant's promotion of off-label uses ofEloxatin

to its sales representatives who in turn allegedly promoted

this drug to physicians who in !tun allegedly sought medicare

reimbursement for their prescription ofEloxatin for off-label

uses, the court will assume that Plaintiffs Complaint meets

the requirement that claims were made to the Government;

physicians did file claims for Medicare reimbursement. See United States v. Taber Extrusions. LP, 341 F.3d 843, 845

(quoting United States ex rei. Quirkv. 1\1adonna Tot.vers, Inc.,

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278 F.3d 765, 767 (8th Cir.2002) (holding that § 3729(a)

(I) is "broad enough to 'reach any person who knowingly

assisted the government to pay claims which were grounded

in fraud, without regard to whether that person had direct

contractual relations with the government' "); Parke-Davis,

147 F.Supp.2d at 48.

The court will first address the materiality requirement of the FCA. As stated above, to state a valid claim pursuant to the FCA a defendant must make a material misrepresentation. This false statement must have a natural

tendency to influence agency action. Costner, 317 F.3d at 887-88. Indeed, drug manufacturers are nat prohibited

from promoting off-label uses of medications if they "meet

certain stringent requirements" and if they "resubmit the

drug to the FDA testing and approval process." Parke

Davis, 147 F.Supp.2d at 44. (emphasis added). 5 Plaintiff

contends, however, that his claim arises because, as a result of

Defendant's off-label promotion, doctors submitted Medicare

reimbursement claims for uses which the Government did

not intend to reimburse. As such, to fulfill the materiality

requirement of the FCA Plaintiff must allege with the

required specificity, among other things, that: (l) Defendant

fraudulently promoted certain off-label uses of Eloxatin to

doctors; (2) that these doctors submitted Medicare claims

for off-label uses of Eloxatin and (3) that these claims were

a result of Defendant's promotion of such off-label uses.

Parke-Davis, 147 F.Supp.2d at 52. In other words, Plaintiff

must plead that but far Defendant's allegedly fraudulent

misrepresentations the doctors would not have made claims to

Medicare far off-label uses of Elaxatin and that but for these

allegedly fraudulent misrepresentations Medicare would not

have reimbursed the doctors.

5 FDCA permits doctors to prescribe off-label usage of

prescription medication. Parke-Davis, 147 F.Supp.2d at

44. However, in most circumstances Medicare will not

reimburse them for prescribing such medication. ld.

According to Plaintiffs Complaint, ~ 13, although "the

Medicare claim form has a line for indicating the patient's

diagnosis," it "does not require a doctor to indicate what stage

cancer the patient has." As such, the stage of a patient's cancer

is not material to a doctor's seeking reimbursement for his or

her prescribing Eloxatin for treatment of cancer. The stage

of a patient's cancer, therefore, was not material to WPS in

making a decision to reimburse doctors for their prescription

ofEloxatin. Thus, assuming all of the allegations of Plaintiff's

Complaint as true, under no circumstances can Plaintiff prove

facts to support his claim that Defendant violated the FCA

by promoting off-label uses of Eloxatin to physicians who in

tum sought Medicare reimbursement for these off-label uses.

Rule 12(b)(6). The court fmds, therefore, that Plaintiff has

insufficiently plead the materiality requirement of the FCA

in regard to Defendant's alleged promotion of and causing

doctors to prescribe Eloxatin from October 2001 through

April2004. Fed.R.Civ.P. 9(b).

*8 Also, in regard to the materiality requirement of the FCA,

if the Government knew of problems that Defendant and/or

doctors had with claims for Medicare reimbursement for off

label uses of Eloxatin and if the Government worked with

Defendant and/or the doctors to find a solution, Plaintiff will

be unable to prove all of the necessary factual allegations

to establish a violation of the FCA. Scheuer, 416 U.S. at

236; Castner, 317 F.3d at 887. Plaintiff alleges, in regard to

Eloxatin, that in August 2002 Eloxatin was initially approved

by the FDA for fourth stage colorectal cancer; that in July

2003 Defendant submitted a supplemental application to

the FDA for use of Eloxatin in first-line settings; that in

January 2004 the FDA approved Eloxatin for treatment in

ftrst-line settings; that in January 2004 Defendant submitted

a supplemental application to the FDA far use of Eloxatin

in adjuvant settings; and that in November 2004 the FDA

approved Eloxatin in adjuvant settings. 6 Campi., ~ ~ 15,

26-28. Under such circumstances Defendant was open with

the Government regarding its intentions to market Eloxatin in

first line and adjuvant settings. Castner, 317, F.3d at 887-88.

6 The court notes, as set forth above, when a drug

manufacturer intends to promote a drug for uses other

than approved uses, the manufacturer must resubmit

the drug to the FDA for testing and approval. Parke

Daris, 147 F.Supp.1d at 44. Upon filing supplemental

applications, as alleged by Plaintiff, Defendant was

following proper procedure pursuant to the FDCA.

Parke-Davis, 147 F.Supp.2d at 44.

The court will next consider, arguendo, whether Plaintiff

has sufficiently pled the intent requirement of the FCA. In

support of Plaintiffs allegation that Defendant fraudulently

or falsely promoted Eloxatin to doctors, Plaintiff alleges that

Defendant provided its sales representatives with information

which was neither published nor complete; that it urged

doctors to contact WPS to encourage the broadest Medicare

coverage for Eloxatin; that it provided sales representatives

with training in off-label data for Eloxatin and gave them

computers which included such data; that it told its sales

representatives to show doctors the data in the computers if

the doctors asked about off-label uses for Eloxatin; that it

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provided sales representatives with sales goals which were

impossible to meet without off-label use; that it encouraged

sales representatives to use the Drug Assistance Program

("DAP") to provide Eloxatin in the event a doctor did not

get reimbursement for off-label use; and that it gave sales

representatives monographs which contained information on

the adjuvant and first line trials for Eloxatin. Further in regard to the intent requirement, Plaintiff merely alleges that

data which Defendant provided to doctors was "immature

and unreliable" and "immature, unreliable, and misleading."

Compl., 11 15, 34. Also, in an affidavit, Plaintiff states that

a trial which compared Eloxatin with another medication

for first line treatment of colorectal cancer "was a complex

study [sic] there were serious questions about the study

design." Doc. 19, Ex. A, 133. Plaintiff does make conclusory

allegations that the Medicare claims made by doctors were

false or fraudulent and that Defendant caused these claims

to be made, but these conclusory allegations fail to meet the

pleading requirements of Rule 9(b). Compl, 135,36, 37, 39.

See Parke-Davis. 147 F.Supp.2d at 46 ("To pass Rule 9(b)

muster, the complaint must plead with particularity the ...

contents of the false representations.") (emphasis added).

*9 Plaintiff also alleges that Defendant provided doctors

with information about clinical trials involving off-label uses

and asked doctors to write a letter to WPS urging the broadest

coverage for Eloxatin. In his affidavit Plaintiff states that the

medical director for the WPS "admonished" Defendant for

the letter writing campaign. Doc. 21, Ex. A, 140. As discussed

above, merely providing information does not violate the

FDCA.

Plaintiff neither alleges that Defendant deliberately lied nor

that the data provided by Defendant either to its sales

representatives or to doctors was incorrect or false. See

Costner. 317 F.3d at 887-88. Plaintiff merely alleges that

Defendant provided others with information regarding off

label uses of Eloxatin which information was, at most,

immature, unreliable, and misleading. "The FCA defines ••

'knowingly' to mean actual knowledge that the information

was untrue or deliberate ignorance or reckless disregard of

the truth or falsity of that information.' " United States v.

Taber. 342 F.3d 843, 845 (8th Cir.2003) (quoting United

States ex rel. Quirk v. Nfadonna Towers, lflc., 278 F.3d 765,

767 (8th Cir.2002)). "[I]nnocent mistakes and negligence

are not offenses under the Act.... In short, the claim must

be a lie.' "Id. (quoting Quirk, 278 F.3d at 767) (emphasis

added). See also A1innesota Ass'n of Nw:s·e Anesthetists v.

Allina Health Sys. Cmp .. 276 F.3d 1032. 1053 (8th Cir.2002)

("[l]t is important to remember that the standard for liability

[under the FCA] is knowing, not negligent, presentation of

false claims."). Indeed, the conduct which Plaintiff alleges

on the part of Defendant does not rise to the level of

deliberate ignorance, reckless disregard, or falsity. Moreover,

the doctors who applied for Medicare reimbursement for off

label uses of Eloxatin could not have lied on the Medicare

forms because the Medicare forms did not require that

the stage of a patient's cancer be identified. As such, the

court finds that Plaintiffs Complaint fails to meet the intent

requirement of the FCA.

Further, the court notes that Plaintiff alleges that in

November 2002 the WPS added Eloxatin to its policy

with broad coverage for treatment of colorectal cancer with

Eloxatin, including treatment in the first line and adjuvant

settings. Compl., 1 16. As WPS is the appropriate Medicare

administrator, physicians who sought reimbursement for

prescribing Eloxatin for these uses after November 2002

were not acting inconsistently with Medicare regulations.

As quoted above, the court in Parke-Davis, 147 F.Supp.2d

at 44-45, acknowledged that while in most circumstances

a drug must be approved by the FDA for a particular use

before Medicare reimbursement is available, such approval

is not necessarily a requirement. Plaintiffs Complaint

acknowledges that Medicare chose to apply the exception

to Eloxatin in November 2002. Thus, because in November

2002 the WPS as the Medicare administrator included off

label uses of Eloxatin for reimbursement purposes, Plaintiff

can prove no set of facts to establish that Defendant violated

the FCA after that date.

*10 In support of its claims Plaintiff cites Parke·Davis,

147 F.Supp.2d 30. While in Parke-Davis the court found

liable pursuant to the FCA a defendant which campaigned

with false information to promote the use of Nuerontin for

off-label uses, Plaintiff in the matter under consideration

does not allege that Defendant campaigned with false

information. The court in Parke-Davis stressed that the

defendant had a campaign which included instructing its

"medical liaisons to make exaggerated and false claims

concerning the safety and efficacy of Parke-Davis drugs for

off-label uses." Jd. (emphasis added). In the matter under

consideration, however, none of the actions which Plaintiff

alleges on the part of Defendant, as delineated above, involve

conduct which was designed to present false information;

rather, according to Plaintiffs pleadings Defendant sought to

disseminate data and information from trials and studies. The

court finds, therefore, that Plaintiff has failed to plead that

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Defendant had the requisite intent to violate the FCA and

further finds that Plaintiff has failed to state a claim in this

regard pursuant to Rule 12(b)(6) and Rule 9(b).

Also, upon acknowledging the "who" requirement of the FCA in regard to pleadings, the court in Parke

Davis, 147 F.Supp.2d at 48, considered that the plaintiff

identified physicians who were contacted and given the false

information. In the matter under consideration, while Plaintiff

identifies both in his Complaint and in his Affidavit the names

of persons employed by Defendant who allegedly instructed

sales representatives to provide doctors with information on off-label uses of Eloxatin, Plaintiff does not identify

doctors whom sales representatives allegedly contacted nor

does he identify doctors who allegedly made claims for

Medicare reimbursement for off-label uses of Eloxatin. See

also Joshi, 2006 WL 52219, at *2 (finding that the complaint

alleging a violation of the FCA was insufficient as it failed to

identify "the particular" individuals who allegedly provided

fraudulently claimed patient care and because it failed to

identify the patients who received the services). As such, the

court finds that Plaintiff does not meet the requirement of the

FCA to plead "who" when alleging fraud.

In regard to the "how" requirement of the FCA, the

court in Parke-Davis, 147 F.Supp.2d at 48, found that the

plaintiff sufficiently alleged this requirement as he provided

specific examples of allegedly fraudulent statements which

the defendant's medical liaisons made to physicians in order

to induce the purchase of Neurontin for off-label uses.

In a lengthy affidavit which Plaintiff in the matter under

consideration submits in opposition to Defendant's Motion

to Dismiss, Plaintiff describes meetings which Defendant

had with its sales representatives. Plaintiff, however, does

not provide examples either in his Complaint or in his

affidavit of the allegedly false information which Defendant

allegedly gave its sales representatives. Plaintiff specifically

states that Defendant's marketing department provided

sales representatives with medical monographs containing

information on trials including an adjuvant trial and a first

line trial, which monographs were to be shown to physicians

in the event inquiries were made. Plaintiff further states that

the monographs were ''slick" and had a "'clinical appearance

and professional look" and that they ""were designed to have

the physician focus on a few key elements of the respective

trials." Doc. 19, Ex. A, 1!1! 65, 66. Plaintiff also states

that Defendant instructed its sales representatives to use the

monographs and hand held computers to provide doctors

with off-label uses and that sales representatives used the

monographs to persuade doctors to avoid a competitor's drug

in first line and adjuvant settings. 7 Doc. 19, Ex. A, 1!1!67, 74.

At most, Plaintiff makes conclusory allegations regarding the

fraudulent nature of representations made by Defendant and/

or by the doctors who sought Medicare reimbursement. See Joshi. 441 F.3d 552,2006 WL 522195, at *3. As such, unlike

the complaint in Parke-Davis, the Complaint in the matter

under consideration fails to meet the requirement that Plaintiff

plead the "how" of the alleged fraud. Because Plaintiffs

Complaint insufficiently pleads the "who" and the "how" of a

cause of action under the FCA, the court further finds that the

Complaint is insufficient to satisfy the pleading requirements

of Rule 9(b). See Parke-Davis, 147 F.Supp.2d at 47-48.

7 Plaintiff's affidavit is very lengthy and goes into great

deal on matters not relevant to whether or not he has

sufficiently plead a cause of action pursuant to the FCA.

Additionally, it is replete with legal conclusions.

*11 Under the FCA, § 3729(a)(2), not only must a Plaintiff

satisfy the requirements set forth above for a claim under

§ 3729(a)(l), but a Plaintiff must also establish the making

or using of false records or statements to cause a claim

to be made. The court finds that because Plaintiff has not

sufficiently plead a cause of action pursuant to ~ 3729(a)

(l) he necessarily has not sufficiently plead a cause of

action pursuant to§ 3729(a)(2). Moreover, Plaintiff has not

alleged, other than by his making a conclusory statement,

that Defendant made or used a false record or statement to

cause a claim to be made to the Government. The court finds,

therefore, that Plaintiffs Complaint fails to meet the pleading

requirement of both Rule 12(b)(6) and Rule 9(b) in regard to

his allegation that Defendant violated§ 3729(a)(2). As such,

the court finds that Plaintiffs Complaint should be dismissed

in regard to his allegations that Defendant violated§§ 3729(a)

(1)-(2).

D. Plaintiff's Claim of a Conspiracy under the FCA, § 3729(a)(3):

Plaintiff alleges that Defendant is liable pursuant to§ 3729(a)

(3) of the FCA, which section creates liability for persons

who conspire to defraud the government through fraudulent

claims or payments. To state a claim for conspiracy under

the FCA, 31 U.S.C. § 3729(a)(3 ), a plaintiff must allege:

"(l) that the defendant conspired with one or more persons

to get a false or fraudulent claim allowed or paid by United

States, and (2) that one or more conspirators performed any

act to effect the object of the conspiracy, and (3) that the

United States suffered damages as a result of the false or

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fraudulent claim." Corsello v. Lincare. Inc .. 428 F.3d 1008,

1014 (lith Cir.2005) (citation omitted). " 'Allegations that

amount to nothing more than an agreement to act lawfully,

cannot be actionable claims under the FCA for conspiracy.' "

United States ex re. Riley v. St. Luke 1s Episcopal !Iosp., 200

F.Supp.2d 673.679 (S.D.Tex.2002), rev'd on other grounds.

355 F.3d 370 (5th Cir.2004) (citation omitted).

The court fust notes that Plaintiffs allegation pursuant to §

3721 (a)(3) of a conspiracy between Defendant and physicians

who applied for Medicare reimbursement for off-label uses

of Eloxatin is inconsistent with his claim that Defendant

violated § 3729(a)( I) by providing immature, unreliable, and

misleading clinical data to physicians. Moreover, as found

above, Plaintiff has not plead facts to suggest that physicians

provided fraudulent or false information to the Government

or that Defendant provided such information to physicians.

The court finds, therefore, that Plaintiff has not alleged the

elements of an actionable FCA claim pursuant to a conspiracy

theory. Riley, 200 F.Supp.2d at 679. Moreover, Plaintiff has

failed to allege facts which suggest that Defendant acted in

concert with physicians to make false or fraudulent claims

to the Government; rather, Plaintiff makes a conclusory

statement which gives Defendant no idea of what acts

Plaintiff is accusing it. Under such circumstances a complaint

should be dismissed pursuant to Rule 12(b)(6). See Frey

v. Cicv of Herculaneum, 44 F.3d 667, 672 (8th Cir.1995)

( "At the very least, however, the complaint must contain

facts which state a claim as a matter of law and must

not be conclusory."). Likewise, Plaintiffs mere conclusory

allegation of a conspiracy does not pass muster under Rule

9(b). See Parke-Duvis, 147 F.Supp.2d at 46. The court finds,

therefore, that based on the a11egations of his Complaint

Plaintiff can prove no set of facts to support his allegations of

a conspiracy, that Plaintiffs allegation of a conspiracy does

not meet the particularity requirement of Rule 9(b ), and that,

therefore, his Complaint should be dismissed in this regard

pursuant to both Rule 12(b)(6) and Rule 9(b ). Conley, 35 U.S.

at 45-46. R

8 Defendant argues that the court should consider the Govenunent's declining to "take up" supports

Defendant's Motion to Dismiss. The Government's decision not to participate is not a factor for this court's consideration.

*12 The court notes that its finding that Plaintiffs Complaint

should be dismissed is consistent with the purpose of the FCA

to encourage individuals who are either close observers or

involved in the fraudulent activity to come forward. Indeed,

Plaintiffs Complaint does not demonstrate that he has the

requisite knowledge for a qui tam relator. See Joshi, 441 F.3d

552,2006 WL 522195, at *7.

E. Plaintifrs Request for Leave to Amend the

Complaint:

Plaintiff states that while he did not name doctors and

healthcare providers on whom he called while employed

by Defendant, he could do so by an amended complaint.

Plaintiff also suggests that he can add Defendant's power

point presentation of July 2003 regarding Eloxatin and related

facts to an amended complaint. The court notes, however,

that even if Plaintiff were to plead with greater particularity,

under no set of circumstances could he establish a violation of

the FCA because, as stated above, the information provided

by Defendant to Plaintiff, other sales representatives, and!

or doctors was not false nor were false claims made to the

Government.

Moreover, the most recent pronouncement of the Eighth

Circuit in Joshi. 441 F.3d 552, 2006 WL 522195, at *6,

makes it clear that a qui tam complaint must be sufficient

at the onset. (holding that Rule 9(b )'s pleading requirement

should not be relaxed to allow a qui tam plaintiff to

"plead generally at the onset and to 'fill in the blanks'

following discovery." Additionally, when serving a copy of

the complaint on the Government a qui tam realtor has the

procedural obligation under th FCA to .. disclose all material

evidence and information known to the realtor in order to

allow the government to decide whether or not to intervene."

!d. As such, the court finds that Plaintiff will not be permitted

to amend his Complaint to plead with greater particularity and

that Plaintiffs Complaint should be dismissed with prejudice.

CONCLUSION

For the reasons more fully set forth above, the court finds

that Plaintiff has failed to state a cause of action pursuant

to Fed.R.Civ.P. 12(b)(6) and 9(b) and that, therefore, his

Complaint should be dismissed in its entirety.

Accordingly,

IT IS HEREBY ORDERED that Defendant's Motion to

Dismiss Under Federal Rules of Civil Procedure 12(b)(6) and

9(b) is GRANTED; [Doc. 15]

\VestLFMiNexr@ 2012 Thomson Reuters. No claim to orininal U.S. Government V\/orks. 9


U.S. ex rei. Hess v. Sanofi-Synlhelabo, Inc., Not Reported in F.Supp.2d (2006)

IT IS FURTHER ORDERED that a separate Order of Dismissal shall issue incorporating this Memorandum Opinion.

End of Document © 2012 Thomson Reuters. No claim to original U.S. Government Works.

lf;/{!ls:tlJVJNext' s:) 2012 Thomson Reuters. ~~o dc1im lo original U.S. Government V\torks. 10


U.S. ex rei. Herbert v. National Academy of Sciences, Not Reported in F.Supp. (1992)


United States District Court, District of Columbia.

The UNITED STATES of America

ex rei., Victor HERBERT, Plaintiff,

v.

NATIONAL ACADEMY OF SCIENCES, Defendant.

Civ. A. No. 90-2568. Sept. 15, 1992.

Opinion

MEMORANDUM OPINION AND ORDER

SPORKJN, District Judge.

*1 This case comes before the Court on the Defendant's Motion to Dismiss the Complaint and for Sanctions. The Court has determined that it lacks subject matter jurisdiction

over this action. Therefore, this Court will grant the Defendant's Motion to Dismiss the Complaint. In addition,

because both the jurisdictional and substantive bases of Plaintiffs qui tam action so clearly fail to state a valid federal claim, this Court will grant the Defendant's Motion

for reasonable attorneys fees and expenses under 31 U.S.C. §

3730(d)(4) and Federal Rule of Civil Procedure II.

BACKGROUND

This case is Plaintiffs second lawsuit before this Court relating to the publication of the I Oth edition of the

Recommended Dietary Allowances (lOth RDA's) by the

National Academy of Sciences ("NAS" or "Academy"). The

NAS is a private, non-governmental organization dedicated

to the furtherance of science. Plaintiff was a member of the

Committee on Dietary Allowances ("Committee" or "Kamin

Committee") which was initially empaneled to help prepare

these RDA's.

The United States Government often calls on the NAS to conduct research pursuant to government contracts or congressional mandate. In I 980 the National Institute

of Health ("NIH") contracted with the NAS to begin

development of the I Oth RDA's and the NAS formed the

Committee, of which the Plaintiff was a member.

The Committee failed to timely produce an acceptable final

version of the lOth RDA's. Pursuant to a request of the NIH, the NAS turned over the Committee's drafts to the

government, and the two organizations entered into a second

contract to successfully complete the lOth RDA's. Using

the Committee's previous draft as a starting point, the NAS

completed the lOth RDA's in 1989. Over 25,000 copies were

sold.

At that point Plaintiff brought his ftrst case against the

NAS. See Victor Herbert v. National Academy of Sciences,

Civil Action 90--361 ("Herbert I "). Plaintiff alleged that

the NAS had infringed his claimed copyright interest in the

materials prepared by the Committee by using those materials

in conjunction with its second contract to produce the RDA's.

Even as between the United States and the NAS, the copyright

issue was and remains hotly disputed. In the first case,

Plaintiff engaged in over fifteen months of discovery, motions

practice, and oral argument concerning that issue. Both the

NAS and the United States took the position in that suit that

it, and not Plaintiff, owned the rights to the Committee's first

draft. What was clear from the face of the second contract,

however, was that whoever owned the copyright, the U.S.

specifically intended that the NAS use the preliminary drafts

as a starting point for its second attempt to produce the RDA's.

To further clarify the issue, onAprill2, 1991 the NAS and the

U.S. agreed to a retroactive amendment to the second contract

between the NAS and the NIH which provided:

"(a) The Government authorizes and

consents to the infringement of any

copyright in any work protected

under the laws of the United States

in performing this contract or any

subcontract at any tier."

*2 The facts of that case are more fully set forth in this

Court's opinion of May 21, 1991 dismissing Plaintiffs claims

and the appellate Court's opinion affirming that decision.

Victor Herbert v. National Academy of Sciences, Civil Action

90--36l,ajj'dbyHerbertv. NAS, -F.2d--, App. No. 91-

7099, Slip Op. at 10--16 (D.C.Cir. September 8, 1992) ("Slip

Op.").

Herbert I was dismissed because this Court lacked subject

matter jurisdiction over Plaintiffs case under 28 U .S.C. §

I498(b). The clear record concerning the U.S. government's

authorization and consent for the NAS to use the Committee's

drafts obviated the need for this Court to resolve the copyright

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U. S. ex rei. Herbert v. National Academy of Sciences, Not Reported in F.Supp. {1992)

issue in Herbert I. The Court applied the test enunciated in Auerbach v. Sverdup Corp., 829 F.2d 175 (D.C.Cir.1987),

and found that the United States had not only authorized

but specifically intended that the Conunittee's first draft be

used by the NAS in performing its second contract with the NIH to publish the 1Oth RDA's. That finding was supported

by the clear record developed in Herbert /, including two 1985 letters that the Plaintiff himself had written to the

government informing it of his potential copyright claim, minutes of meetings between the NAS and NIH officials, and the retroactive amendruent by the NAS and the Plaintiff

authorizing infringement of any copyright in using the prior drafts. See Slip Op. at 13. The Court determined, therefore,

that Plaintiff's exclusive remedy, was "an action against the United States in the Claims Court." Slip Op. at 8. In short,

even if the Plaintiff had a copyright interest, he had brought

his suit against the wrong party and in the wrong Court.

Plaintiff did not then bring an action against the United States in the Claims Court. Instead, he appealed Herbert I and

pursued another action against the NAS-which had been filed under seal on October 18, 1990-based on substantially

the same facts. This second case was brought as a qui tam action under Section 3730(b)(l) of the False Claims Act, with

Plaintiff purportedly attempting to vindicate the rights of the

United States. The gist of the complaint was that the NAS

defrauded the U.S. by misinforming it as to the NAS's rights to the Conunittee's drafts.

Pursuant to 31 U .S.C. § 3 729 et seq. the Plaintiff filed his

complaint under seal. As provided by the False Claims Act, the United States was given the opportunity to intervene in the Plaintiffs suit. This Court allowed the United States

over a year to consider and investigate all aspects of Plaintiffs complaint while keeping the matter under seal. During that time, the govermnent, which obviously had

notice of and was investigating Plaintiffs qui tam action, and the NAS amended the second contract, as described above, to give the government's retroactive consent to any copyright infringement in performance of the contract. The U.S. subsequently filed a notice declining to intervene in this suit on November 6, 1991. On November 13, 1991 the

complaint was unsealed and the Plaintiff served it on the Defendant.

*3 On November 26, 1991 this Court conducted a status

conference with the parties. At that status conference the Court specifically questioned counsel for the Plaintiff as to whether the issues in the suit were the same as in Herbert

I, which the Court had already decided and was pending on appeal. The Court specifically warned Plaintiff that Rule 11

sanctions might be imposed if the Court determined that this action was merely an attempt to harass the NAS by forcing it to relitigate the same issues as the Court had addressed in Herbert I and against which the NAS was simultaneously being forced to defend itself in the Court of Appeals. Counsel

for the Plaintiff stated "No, it will be different, Your Honor."

Transcript of Proceedings at 2 ("Tr"). In support of that

position counsel for Plaintiff further stated:

"[T]here is an independent issue of the fraudulent claims against the Government. And in the over a year since we filed that, quite a bit of additional evidence has come to light that we will undoubtedly amend that to

include other false statements made by the defendant in conspiracy to defraud and cover up that fraud."

Plaintiff did not move to amend his Complaint in the eight months following the status conference as counsel had said he would. Counsel for Plaintiff also stated at the status hearing that "this case will have a considerable number of depositions that are not in discovery. I would like to go beyond March 31 at least 60 days." Tr. at 5. Pursuant to that representation, the Court gave the parties an extra month for discovery and set the cutoff at April 30, 1992.

During the eight months following the status hearing, which

saw the passing of both the discovery cutoff date and the

original motions date, Plaintiff made two motions. First, on April28, 1992, two days before the discovery cutoff date set at Plaintiffs request, the Plaintiff moved this Court-"in the best interest of judicial economy"-to extend the discovery

period and to continue the pretrial hearing. 1 Plaintiffs Motion. As grounds for that motion, Plaintiff proffered that Herbert I, which Plaintiff had previously represented in open Court presented different issues from this case, was pending before the Court of Appeals and that, "[d]epending on the

Appellate Court's decision, this qui tam action will either be pursued or will be dismissed." See Plaintiffs Motion for Extension of Discovery at~~ 4-5. That motion was opposed and denied.

Second, Plaintiff moved this Court for a continuance of the motions hearing date scheduled on June 26, 1992 because counsel for Plaintiff had a trial scheduled for that day in

\Vi?stld"~xrcc) 2012 Thomson Reuters< No claim to ori9ina! U,S. Government VVorks. 2



federal court in Iowa. The defendant did not oppose that motion and this Court rescheduled the motions hearing for

August 3, 1992. The Defendant then filed this Motion to

Dismiss or, In the Alternative, for Summary Judgment which

was argued and is now ready for decision.

DISCUSSION

I. JURISDICTION:

*4 The False Claims Act ("FCA") provides, in part:

"No Court shall have jurisdiction over

an action under this section based upon

the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing . .. or from the news media, unless ... the person

bringing the action is an original source of the information."

31 U.S.C. § 3730(4)(A). The statute defines an "original

source" as "an individual who has direct and independent information on which the allegations are based and has voluntarily provided the information to the Government."

Id. at 3730(4)(B). The statute does not allow this Court to

exercise jurisdiction over a case where the Plaintiffs action is

based on publicly disclosed information and Plaintiff was not

the original source of that information.

When a defendant properly places a Court's subject matter

jurisdiction in issue under Rule 12(b)(l), it is the Plaintiff

who has the burden of establishing that jurisdiction. See Moir

v. Greater Cleveland Regional Transit Auth .. 895 f.2d 266,

269 (6th Cir.l990). A Court is under no duty to accept the

factual allegations of a party as true for the purposes of a

motion to dismiss for want of subject matter jurisdiction,

especially when such allegations are sweeping conclusory

statements. See Slip Op. at 11-12; Thigpen v. United States,

800 F.2d 393, 396 (4th Cir.1986). This is true for the reason

that "[i]n contrast to its treatment of disputed issues of fact

when considering a Rule 12(b)(6) motion, a court asked to

dismiss for lack of jurisdiction may resolve factual disputes

to determine the proper disposition of the motion." !d.; see

also Pettis ex rei. United States v. Morrison-Knudson Co.,

577 F.2d 668, 674 (9th Cir.l978) ("conclusory allegations"

not sufficient to meet False Claims Act's jurisdictional

bar). In this case the jurisdictional issues are substantially

unrelated to the underlying merits of Plaintiffs claims under

the FCA. Because the issue is whether and to what extent

material discovered in Herbert 1, a previous action before

this Court, is underlying Plaintiffs qui tam action, the Court

is well situated to make that determination. Thus, unless the

Plaintiff demonstrates that his suit meets the jurisdictional

requirements of the statute, this Court lacks jurisdiction to

hear this case. This Plaintiff has not done.

A. Public Disclosure

First, Plaintiff has not demonstrated that this suit is not

substantially based on information which was publicly

disclosed in the civil or administrative processes. The 1986

amendments to the False Claims Act were intended to

encourage whistle blowers with inside information to aid the

government in detecting fraud. See generally, US. ex rei

Stinson v. Prudentiallnsurance, 944 F.2d 1149, 1152-54 (3rd

Cir.1991). Congress, however, wanted to avoid the situation

of a person merely marshaling public information to bring

a qui tam action. Therefore it added the public disclosure

exemption to ensure that qui tam actions would not be brought

by 'concerned' citizens combining courthouse and agency

records.

*5 Section 3730(4)(A)'s jurisdictional bar has been broadly

construed. Courts have found the terms .. 'in the course

of a civil criminal, or administrative hearing' should be

interpreted broadly to include allegations and information

disclosed in connection with civil, criminal or administrative

litigation." Prudential. 944 F.2d at 1156. Specifically, "civil

hearing'' has been read to "encompass the full range of

proceedings in a civil lawsuit," id, "includ[ing] publicly

available civil discovery." US. ex rei. Springfield Terminal

Railway Company v. Quinn, C.A. 91-2081, Slip Op. at 7

(July 14, 1992 D.D.C.) (Greene J.). Given this standard and

based on the Plaintiffs previous litigation before this Judge in

Herbert/, it is clear that substantial amounts of information

forming the basis of this suit have been publicly disclosed.

Herbert is seeking to use the qui tam provisions to redress

a private grievance between him and the NAS. As such his

action is an abuse of the qui tam process. Plaintiffs private

grievance is nearly identical to the claim in Plaintiffs prior

case dismissed by this Court. Plaintiff has admitted as much

in his motion for a continuance. See Supra. As in Herbert I

Plaintiff claims that the NAS made impermissible use of his

property-the Committee drafts. In this case he merely adds

the allegation that it did so without notifying the U.S. that the

drafts were, in fact his. This is the same issue which Plaintiff

sought to litigate in his previous copyright suit.

V'iest!av;Nexf ({:} 2012 Thomson Reuters. No cl<:1irn to ori9inal U.S. Government Works, 3



.. It is not enough that some of the information that forms

the basis of the suit came from non-public sources." Quinn, Slip Op. at 8. Rather, the plaintiff must show that private

information forms the substantial basis of specific allegations

of fraud. In Herbert I, Plaintiff utilized the processes of the Court to conduct discovery, engage in oral argument, and file memoranda and motions concerning the very issues

which form the basis of his qui tam action. Naturally, the

NAS had to respond. Attached to Plaintiffs complaint in this

action are many of the same government contracts and other

public documents which formed the basis of Plaintiffs case

in Herbert I. It is doubtful that these government contracts

and copyright documents were ever the type of private information which Congress intended could form the basis of

a qui tam action. If they ever were non-public, however, the

civil processes of Herbert I certainly brought them under the

statutory exemption. Thus, not only is Plaintiff's suit based on

publicly disclosed information, but it is the same information

upon which Plaintiff relied in his first unsuccessful suit before

this Court.

Plaintiff states that the information which forms the basis

of his second action was from "personal files, from friends,

and obtained under the Freedom of Information Act." See Declaration of Plaintiff. Given the fact that Plaintiff has

previously litigated the same underlying issue in this Court,

this statement is simply insufficient to satisfy the statute's

jurisdictional terms.

*6 Plaintiff filed his copyright case, waited eight months,

then filed this qui tam action. Having had before it both

litigations, it is obvious to the Court that the two suits are

based on the same set of underlying allegations and that the

discovery and motions practice in the first proceeding dealt

with the same facts at issue in this suit. The same documents

and events which were part of discovery and upon which

the Court relied in dismissing Herbert I are central to the

Plaintiffs second case. Specifically, the two 1985 letters from

the Plaintiff to the government, the two contracts between the

NAS and the NIH, and the U.S.'s subsequent agreement to a

retroactive amendment to the second contract, are substantial

components of the case. See Slip Op. at 13-14. Congress was

correctly concerned about "transform[ing] the courthouse file

rooms into beaches scoured by scavengers combing for riches

with the qui tam equivalent of metal detectors." Quinn, Slip

Op. at 7. This case is even more worrisome. It involves a qui

tam action brought by the same litigant who brought the prior

suit. If Section 3 730(0 )( 4) means anything, it must preclude

the same Plaintiff from utilizing the discovery process and

motions practice in federal court to bootstrap his civil claim

into a qui tam action. The qui tam provisions are not intended

as a consolation prize for "disappointed litigators.'

In his own declaration Plaintiff admits that his complaint

is based on information obtained under the Freedom

of Information Act. Such information was, under the

circumstances of this case, available to the public. 2

The term "public disclosure' in the FCA is "a general

phrase, not specifically limited by the enumerated examples

in the remainder of the statute." U.S. ex rei. Stinson v. Pn1dentia/, 736 F.Supp. 614. 621 (D.N.J.l990). Just as "civil"

discovery is public, it must be the case that information

obtained pursuant to an FOIA request has been made public

through the "'administrative" process and cannot form the

basis of a qui tam action. If that were not the case then, like

court records, public agency records would be flooded with

citizens requesting information in order to bring qui tam suits.

Congress did not intend the qui tam provision to transform

FOIA from sunshine legislation into a search for the pot of

gold at the end of the rainbow.

Plaintiff has used both the civil and administrative process

to gain substantial information upon which he bases his

complaint. Such information is the type of publicly disclosed

information which is covered by the FCA's jurisdictional bar.

B. Original Source

Having determined that Plaintiff's complaint is based upon

publicly disclosed information, the Court must now assess

whether the Plaintiff has demonstrated that he was the

"original source" of that information. In order to qualify

as an original source, an individual must have "direct and

independent knowledge of the information on which the

allegations are based." 31 U.S.C. § 3730(4)(8). Under that

standard, the Plaintiff does not qualify as an original source.

*7 So odd are Plaintiffs allegations of "false statements"

that it is difficult to ascertain on exactly what "facts" they

are based. This is so because Plaintiffs action is really not

based on facts at all. Rather it is based on his opinion-one

which both the NAS and the U.S. have contested-that he has

a property interest in the Committee's drafts. This Court need

not address the dubious proposition that Plaintiffs personal

opinion can be the basis of a fraud suit--especially when the

purported victim disagrees with that legal opinion.

Vif?sHJwNe.xr@ 2012 Thomson Reuters. No claim to original U.S" Government \AJorks. 4


U. S. ex rei. Herbert v. National Academy of Sciences, Not Reported in F.Supp. (1992)

The only "factual" issue underlying the complaint is whether

or not the U.S. knew that the Plaintiff held this asserted

opinion. Plaintiff is not an original source of that information.

He was not a party or even present at any of the contract

negotiations between the NAS and the U.S .. He can have

neither direct nor independent knowledge of what occurred.

The best that the Plaintiff can do, as a member of the Committee, is to provide information which might put those

negotiations in context. That is not sufficient because in order to be an original source "the relator must possess substantive information about the particular fraud, rather than

merely background information which enables a putative

relator to understand the significance of a publicly disclosed

transaction or allegation." Prudential. 944 F.2d at 1 160.

Because Plaintiffs complaint is based on publicly disclosed

information and the Plaintiff was not the original source

of that information, the Court has no jurisdiction over this

matter.

II. RULE 11 AND SECTION 3730(d)(4):

The False Claims Act provides:

"If the Government does not proceed

with the action and the person bringing

the action conducts the action, the

court may award to the defendant its reasonable attorneys' fees and

expenses if the defendant prevails in

the action and the court finds that

the claim of the person bringing the

action was clearly frivolous, clearly vexatious, or brought primarily for the

purposes of harassment."

See 31 U.S.C. § 3730(d)(4). Federal Rule of Civil Procedure

11 also allows this Court to impose sanctions on a litigant,

including payment of the adversary's fees and costs, when a

suit is "interposed for any improper purpose, such as to harass or to cause unnecessary delay." Fed.R.Civ.P. 11. Because

Plaintiff has abused not only the provisions of the qui tam

statute, but the processes of this Court, this Court will invoke

both of these provisions and require the Plaintiff to pay the

Defendant's reasonable attorney's fees and the expenses of

this litigation.

This Court's clear lack of jurisdiction made it unnecessary

to address the underlying issues in dismissing Plaintiffs

complaint. For Rule 11 purposes, however, this Court will

briefly review Plaintiffs allegations. Upon examination, it is

clear that the underlying bases of the complaint were not only

without merit, but were merely an attempt to relitigate issues

decided by this Court in Herbert I.

*8 The clearest fact negating any claim of fraud is that the

U.S. was aware of the copyright claims that might be asserted

and still required the Committee's drafts be used in the second

contract. See Boisjoly v. lvforton 171iokol, 706 F.Supp. 795,

809 (claim of fraud involving shuttle disaster "negated by

additional allegation that NASA knew of alleged defects")

(D. Utah 1988). The record clearly indicates that the U.S. did

have knowledge of Plaintiffs legal claim and fully consented

--even required-that the NAS use the Committee's drafts

in performing the second contract. That was the basis of the

Court's decision in Herbert I. In this action Plaintiff seeks to

force the Defendant to relitigate the same issues involved in

the prior case. The U.S. and the NAS entered into a specific amendment to the second contract retroactively authorizing

the use of the questioned drafts, even if in so doing it involved

"infringement of any copyright." At the time the U.S. agreed

to this amendment it was on notice not only of the allegations

in Herbert I, but also of the allegations of fraud which

Plaintiff was making in this suit.

The NAS was unaware of Plaintiffs allegations in this action

at the time of the contract amendment. At the time of this

amendment the complaint was placed under seal so that the U.S. could conduct an investigation of the allegations. The

U.S. consented to the use of the Committee's draft at a time

when it actually knew of the Plaintiffs copyright claim, and

was on notice of the Plaintiffs allegations of fraud. Indeed,

the U.S. had more knowledge than the NAS when it agreed to the amendment. That the U.S. continued to authorize the

use of the drafts when it had full knowledge of all these facts

clearly negates the fraud allegations of the complaint.

In the course of this litigation Plaintiff has repeatedly

attempted to delay and harass the defendant, even when

such delay necessitated dubious representations to the Court. This case has been pending before the Court for twenty

two months. During that time, Plaintiff has engaged in a

continual pattern of delay. 3 First, Plaintiff represented in

open Court that this case would not be arelitigation of Herbert

I. Then, contradicting himself, Plaintiff filed a motion asking

the Court to place this case in an indefinite state of limbo

because the Court of Appeals' decision in Herbert I would

have a dispositive effect on this case. 4 In the same motion, two days before the discovery cutoff, Plaintiff asked this

Court to extend the end of the discovery period~a period

\VesUtJWNexf'if) 2012 Thomson Reuters. No dnirn to original U.S. Government \fJorks. 5



that had been already lengthened at Plaintiffs request. The

Defendant has been put to much time and expense by Plaintiff

in defending not one, but two lawsuits concerning the same

series of events. That defense has lasted nearly three years.

A common theme running through Plaintiffs cases has been

a persistent failure to definitively state the legal bases of his claims. Each time the defendant mounts a defense to the

claims against it, the Plaintiff responds by heaping some new

allegation of wrongdoing or some new theory of the case

onto the pile. 5 This must cease. The Federal Rules of Civil

Procedure contemplate considerable flexibility, but that must

end when it comes at the expense of the "just, speedy, and

inexpensive determination of [an] action." F ed.R. Civ. P. 1;

See also Fed.R.Civ.P. 11. Plaintiffs continual abuses in this

case present just such a situation.

*9 This Court is cognizant of the valuable role which

qui tam actions can play in policing government fraud.

Those Plaintiffs who attempt in good faith to vindicate

the government's interests deserve to be rewarded for their

efforts. When a Plaintiff uses the qui tam provisions for

the purposes of harassment, however, all potential qui tam

Plaintiffs suffer. Here, the Plaintiff has done little more than

dress up his personal grievance against the NAS as a qui tam

claim vindicating the interests of the U.S. government. This

Court's fee shifting power both under the statute and Rule II

demands that this type of abuse be prevented. The Plaintiff,

therefore, will be required to pay the Defendant's reasonable

attorneys' fees and costs. The case will be dismissed.

A separate Order accompanies this opinion.

ORDER

Upon consideration of the entire record in the above

captioned matter, the Defendant's Motion to Dismiss and for

Sanctions, and the Plaintiffs Resistance thereto it is this 15

day of September, 1992 hereby

ORDERED that the Defendant's Motion to Dismiss IS

GRANTED and it is

FURTHER ORDERED that the Defendant's Motions for

Sanctions under Federal Rule of Civil Procedure II and 31

U.S.C. § 3730(d)(4) are GRANTED audit is

End of Document

FURTHER ORDERED that this action shall be DISMISSED

WITH PREJUDICE and it is

FURTHER ORDERED that the Defendant shall submit to

this Court for approval within ten (I 0) days of this ORDER

an accounting of its reasonable attorneys' fees and costs in the

present action and that Plaintiff shall submit any opposition

thereto within ten (I 0) days thereafter and it is

FURTHER ORDERED that Plaintiff shall pay to the

Defendant such reasonable attorneys' fees and costs as are

approved by this Court and it is

FURTHER ORDERED footnote 3 of this opinion shall be

kept UNDER SEAL for sixty days after the date of this

ORDER.

2

3

4

5

Despite Plaintiffs representation to the Court, while

setting the discovery cutoff date, that a "considerable

number of depositions" were necessary, the Defendant

has notified this Court that it is not aware of any

deposition conducted by Plaintiff in this case.

The FOIA statute begins with the command that "each

agency shall make available to the public information as

follows ... " See 5 U.S.C. § 552(a).

The Court notes that, in this case, Mr. Herbert has not

presented this Court with any indication that he was

uniquley in the position to request or receive materials

under FOIA.

Editor's Note-Text of footnote 3 eligible.

Even that representation has not been accurate. After

the Court of Appeals affirmed this Court's decision to

dismiss Herbert I, the Plaintiff did not move to dismiss

his qui tam action or notify this Court that he would

seek approval to do so as he represented he would in his

Motion for Continuance.

Plaintiff has not limited his practice of presenting the

defendants with a 'moving target' to the District Court

level. In Herbert I the Plaintiff attempted to raise in his

appellate reply brief an argument which he had never

before raised. The Court of Appeals wisely recognized

Herbert's "late blooming" argument as a tardy one and

refused to entertain it. Slip Op. at 6-9.

(]) 2012 Thomson Reuters. No claim to original U.S. Government Works.

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U.S. ex rei. Raymer v. University of Chicago Hospitals, Not Reported in F.Supp.2d (2006)

Med & Med GO (CCH) P 301,797

2006 WL 516577

United States District Court,

N.D. Illinois, Eastern Division.

UNITED STATES OF AMERICA,

and State of Illinois, ex rei. Donald

Raymer, and Michael Grosche, Plaintiffs,

v.

THE UNIVERSITY OF CHICAGO

HOSPITALS, Defendant.

No. 03C8o6. Feb. 28, 2006.


AUSA, United States Attorney's Office, Abbey Fishman

Romanek , Illinois Attorney General's Office, Steven H.

Cohen, Chicago, IL, for Plaintiffs.

State of Illinois Attorney General, Chicago, IL, prose.

John Nicholas Gallo, Jaime L.M. Jones, James C. Dechene,

Patricia Michelle Petrowski, Sidley Austin LLP, Chicago, IL,

for Defendant.

Opinion

MEMORANDUM OPINION

DERYEGHIAYAN, J.

*1 This matter is before the court on Defendants University

of Chicago Hospitals ("Hospital") motions to dismiss. For the

reasons stated below, we grant in part and deny in part as moot

the Hospital's motion to dismiss brought pursuant to Rule 9(b)

of the Federal Rules of Civil Procedure ("Rule 9(b)"). We

also deny as moot the Hospital's motion to dismiss brought

pursuant to Rule 12(b)(l) and Rule 12(b)(6) of the Federal

Rules of Civil Procedure ("Rule 12(b)(l)" and "Rule 12(b)

(6)").

BACKGROUND

registered nurses in the Hospital's Neonatal Intensive Care

Unit ("NICU") and Neonatal Intermediate Care Nursery

("IMN/IMC"), which are run collectively as one unit in

Chicago, Illinois. All of the babies admitted to the Hospital's

NICU allegedly are premature, and/or have severely low birth

weights, and/or have a host of other serious medical ailments.

(R. A.Compl.Par. 12). Relators assert that the severity of

these babies' conditions necessitates treatment in isolated

NICU bed spaces. Various medical authorities and guidelines

allegedly recommend or require that these spaces each consist

of a minimum of 80-150 square feet and be separated from

adjacent bed spaces by a minimum of four to eight feet.

Relators contend that despite the precarious health of the

infants admitted to the NICU, the Hospital "double bunked"

and occasionally "triple-bunked" babies by "plac[ing] them

back to back in radiant warmers, isolettes, or open cribs in

a bed space designed for only one infant." (R. A.Compl.Par.

16). Relators further assert that "the single bed space [was]

equipped with only one regular monitor and a single space

for bedside supplies," and that "[b]abies [were] forced

to share 'set ups; including medical air, vacuum and

oxygen sources, bedside supplies, and needle and biohazard

receptacles." (R. A.Compl.Par. 16). Relators allege that the

Hospital's incentive was to double-bunk because the Hospital

is allegedly paid or reimbursed on a per capita per diem,

not a per bed per diem, basis. By double-bunking, the

Hospital could therefore allegedly exceed the maximum

number of NICU beds and allegedly earn profits in excess

of its medically advisable and permissible patient capacity.

(R. A.Compl.Par. 31). The Hospital allegedly justified its

double-bunking practices to concerned employees, including

Relators, by citing internal budget-cuts. Relators contend that

the Hospital hid its double·bunking practices from Illinois

state inspectors and other official health inspectors by moving

some babies off the ward and single-bnnking the remaining

infants whenever such officials visited the NICU.

Relators allege that the Hospital's double-bunking practices

and inadequate staffing fostered serious medical errors and

unsanitary conditions. In addition, the Relators claim that

the Hospital NICU staff failed to follow accepted protocols

in isolating infants infected with life-threatening, treatment

resistant infectious diseases. Instead, the Hospital staff

Relators Donald Raymer and Michael Grosche ("Relators") allegedly continued double-bunking practices until "at least

have filed a first amended complaint and the State of four babies were infected" during a disease outbreak between

Illinois ("Illinois"), which intervened as a Plaintiff, has and among infants in the NICU. (R. A.Compl.Par. 29, 30).

filed a separate complaint in this case. Relators represent Relators contend that the combination of double-bunking and

themselves as former Hospital employees who worked as failing to immediately isolate infected NICU infants resulted

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U.S. ex rei. Raymer v. University of Chicago Hospitals, Not Reported in F.Supp.2d {2006)

Med & Med GO {CCH) P 301,797

in an extraordinarily high rate of serious infections, lengthier

and more costly hospitalizations, and at least one baby's death.

*2 Relators claim that the Hospital submitted fraudulent reimbursement bills to both Medicaid, a federal program for indigent medical care administered in Illinois by a state agency, and Tri-Care, a federal program that oversees

medical payments for military personnel and their families in civilian facilities. Illinois asserts that the fraud underlying

the Hospital's reimbursement requests stems from legal requirements that a health care provider attest that its services are "of a quality which meets professionally recognized standards of health care" to qualify for Medicaid

reimbursement. (lll.Compl.Par. 35-43). Illinois asserts that the Hospital's double-bunking, inadequate infection control,

and overcrowding ("overcensus") practices did not qualify for

Medicaid reimbursement. (lll.Compl.Par. 35-43).

The Hospital allegedly billed the state of Illinois and federal agencies more than $1,500 per day, per infant in the NICU or IMN/ICN. While the Hospital was allegedly doublebunking babies since at least either 1997 according to Illinois'

complaint (lll.Compl.Par. 39), or September 1993 according to Relators' first amended complaint (R. A.Compl.Par. 51), Illinois specifically asserts that there were at least 1,275

double-bunked patient days in 2001, of which at least 537 were patient days reimbursed by Medicaid. (lll.Compl.Par. 37). Double-bunking in the Hospital's NICU was allegedly detected in late 2003, by inspectors working for the Illinois Department of Public Health ("IDPH"). (Resp.l2(b)(l) &

12(b)(6) Mot. 3). Despite this alleged detection, additional instances of double-bunking allegedly occurred until June 7, 2005. (lll.Compl.Par. 28).

Relators allege in their first amended complaint that the

Hospital violated the Federal False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., by making Medicaid and TriCare reimbursement claims while willfully and intentionally

double-bunking infants (Count I), by exceeding the Medicaid-permitted number of infants in the Hospital's NICU (Count 2), and by failing to control infant infection in the NICU (Count 3). Relators also contend that the Hospital violated the Illinois Whistleblower Reward and Protection

Act ("IWRPA"), 740 ILCS 175/1 et seq., by these same three alleged sets of actions: double-bunking (Count 4 ), overcensus (Count 5), and tolerating infection (Count 6).

Illinois claims that the Hospital violated the IWRP A, 750 ILCS/3(a) et seq. (Count I) and the Illinois Public

Assistance Fraud Act ("IPAFA"), 305 ILCS § 8A-7(b) et

seq., (Count 2), and committed common law fraud (Count 3) by double-bunking infants in its NICU and IMN/IMC and then submitting claims that indicated otherwise to

Illinois' Medicaid program. In addition, Illinois asserts that by

remunerating the Hospital for double-bunked infants, Illinois

committed payment by mistake of fact (Count 4). Finally, Illinois has requested an injunction against the Hospital to

prevent future unlawful instances of infant double-bunking in

the NICU or IMN/ICN (Count 5).

*3 The Hospital has filed two separate motions to dismiss,

one pursuant to Rule 12(b)(1) and Rule 12(b)(6), and another pursuant to Rule 9(b ), to both Relators' first amended complaint and Illinois' complaint.

LEGAL STANDARD

The Seventh Circuit has indicated that "[i]n response to

an ordinary 12(b)(6) motion, a court simply examines the allegations in the complaint to determine whether they pass

muster." GE Cupita/ Cmp. v. Lease Resolution Corp., 128

F.3d 1074, 1080 (7th Cir.l997). This means that the court must draw all reasonable inferences that favor the plaintiff,

construe the allegations of the complaint in the light most

favorable to the plaintiff, and accept as true all well-pleaded facts and allegations in the complaint. Thompson v. Illinois

Dep't of Prof/ Regulation, 300 F.3d 750, 753 {7th Cir.2002); Perkins v. Silverstein, 939 F.2d 463,466 (7th Cir.l991 ). With the possible exception of a motion to dismiss pursuant to Rule

9(b ), "a plaintiff is not required to plead the facts or elements

of a claim." Dunkin Donuts. inc. v. Tejany & Tejany, Inc.,

2006 WL 163019, at *I (N.D.Ill.2006) (citing Swierkiewic=

v. Sorema. 534 U.S. 506, 511, 122 S.Ct. 992, 152 L.Ed.2d I (2002)); Walker v. Thompson, 288 F.3d 1005, 1007 (7th Cir.2002)).

A complaint need not plead actual facts, but it must allege

the "operative facts" upon which each claim is based. Kyle v.

Morton High School. 144 F.3d 448, 454-55 (7th Cir.l998); Lucien v. Preina. 967 F.2d 1166, 1168 (7th Cir.1992). A

complaint does not necessarily have to allege operative facts

for every element of a claim. See Sanjuan v. American Bd.

of Psychiat1y and Neurology, Inc .. 40 F.3d 247, 251 (7th Cir.l994) (stating that "[a]t this stage the plaintiff receives the benefit of imagination, so long as the hypotheses are

consistent with the complaint" and that "[m]atching facts

against legal elements comes later"). Instead, "[ o ]ne pleads

Wt>stlawNexr@ 2012 Thomson Reuters. No claim to original U.S. Government Works. 2




a 'claim for relief by briefly describing the events." !d. at

251. A plaintiff may even plead conclusions in place of alleging some operative facts. Higgs v. Carver, 286 F.3d 437,

439 (7th Cir.2002); Kyle. 144 F.3d at 455. However, any

conclusions pled "must provide the defendant with at least

minimal notice of the claim," id., and a plaintiff cannot satisfy

federal pleading requirements merely "by attaching bare legal

conclusions to narrated facts which fail to outline the bases of

[his] claims." Perkins. 939 F.2d at 466-67.

DISCUSSION

I. Relators' FCA Claims

The Hospital argues that Relators have failed to plead

their three FCA claims (Relator Counts 1-3) with required specificity. Rule 9(b) states that "[i]n all averments of fraud or

mistake, the circumstances constituting fraud or mistake shall

be stated with particularity." Fcd.R.Civ.P. 9(b). In regard to

fraud claims, the purposes of Rule 9(b) are: "(I) protecting a defendant's reputation from harm; (2) minimizing 'strike

suits' and 'fishing expeditions'; and (3) providing notice of

the claim to the adverse party." Jepson, Inc. v. Afakita Corp.,

34 F.3d 1321, 1327 (7th Cir.I994). There is an exception to

the heightened pleading requirement under Rule 9(b) if the

plaintiff was denied access to information about the fraud at the time the complaint was filed, in which case the .. Rule 9(b)

... requirement must be relaxed." Corley v. Rosewood Care

Ctr., Inc., 142 F.3d I 041, 1051 (7th Cir.l99R).

*4 The particularity requirement in Rule 9(b) does not require a plaintiff to plead with particularity the entire

theory of the case, but rather, only those "circumstances"

intrinsic to any fraud-based claim. See Midwest Commerce

Banking Co. v. Elkhart City Ctr., 4 F.3d 521, 524 (7th Cir.I993); DiLeo v. Ernst & Young, 901 F.2d 624, 627

(7th Cir.l990) (holding that "states of mind may be pleaded

generally, [but] the 'circumstances' must be pleaded in

detail," and that "[t]his means the who, what, when, where,

and how: the first paragraph of any newspaper story"); see

also Garst v. Lockheed-Martin Corp., 328 F.3d 374, 376

(7th Cir.2003). The Seventh Circuit has further indicated that such circwnstances include .. the identity of the person

making the misrepresentation, the time, place, and content

of the misrepresentation, and the method by which the misrepresentation was communicated." Wade v. Hopper, 993

F.2d 1246, 1250 (7th Cir.l993) (quoting Schiffels v. Kemper

Financial Sen•s., 978 F.2d 344,352 (7th Cir.l992)).

The Hospital has filed two motions to dismiss, one pursuant

to Rule 9(b) and another pursuant to Rules 12(b)( I) and

12(b)(6). Relators and Illinois have responded jointly to

both motions. Typically, "the court may consider only

the plaintiffs complaint" in deciding a motion to dismiss.

Rosenblum v. Travelbyus.com Ltd .. 299 F.3d 657, 661 (7th

Cir.2002); see also Berthold Types Ltd. v. Adobe Sys .. 242 F.3d 772, 775 (7th Cir.2001) (holding in a case in which a

contract that was central to the claim was not attached to

the complaint, that "once the district court actually considers

additional docwnents, the motion [to dismiss under Rule

12(b)(6) ] must be treated as one for sununary judgment")

(emphasis in original). The multiple exhibits that Illinois has

attached to its complaint may be considered in determining

the adequacy of Illinois' pleadings. See Fed.R.Civ.P. IO(c) (providing that "[a] copy of any written instrument which is

an exhibit to a pleading is a part thereof for all purposes").

Relators' first amended complaint, however, has no attached

exhibits of its own and fails to refer to Illinois' complaint

or attached exhibits. Therefore, we cannot consider Illinois'

complaint and the attached exhibits in ruling on the adequacy of Relators' pleadings. See Gavin v. AT & T Cinp., 2004

WL 2260632, at* I (N.D.Ill.2004) (stating that" 'documents

attached to a motion to dismiss are considered part of the

pleadings if they are referred to in the plaintiffs complaint

and are central to his claim," ' and concluding that even if .. defendants' submissions appear to be 'central to the

complaint,' but not one is expressly referenced therein,

[ ] they are beyond the scope of the pleadings") (quoting

Levenstein v. Sa/aj,ky·, 164 F.3d 345, 347 (7th Cir.l998))

(emphasis in original); see also Wilkins v. North American

Construction Corp., 101 F.Supp.2d 500 (S.D.Tcx.2000) (considering co-plaintiffs' complaints separately in an FCA

case). Therefore, we hereafter consider the Relators' amended

complaint and Illinois' complaint separately in deciding the

pending motions to dismiss.

*5 The Hospital asserts that Relators have failed to plead with the particularity required by Rule 9(b) their three claims

that are brought under the FCA, 31 U.S.C:. § 3729, et seq. In

regard to FCA claims, the Seventh Circuit has held that "[t]he

FCA is an anti-fraud statute and claims under it are subject

to the heightened pleading requirements of Rule 9(b ). " Gross

v. Aids Research Alliance-Chicago. 415 FJd 601,604 (7th

Cir.2005) (citing Garst, 328 FJd at 376). Accordingly, FCA

fraud pleadings must allege considerable detail, as Seventh

Circuit decisions evidence. See id. at 605 (fmding that "[a]ll

we have are generalized allegations that ... shed no light on the

nature or content of the individual forms or why any particular

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Med & Med GD (CCH) P 301,797

false statement would have caused the government to keep the

fooding spigot open, much less when any payments occurred

or how much money was involved"); Sears v. Likens, 912

F.2d 889, 893 (7th Cir.l990) (finding that plaintiffs failed

"to satisfY [the] 9(b) standard: their complaint is bereft of

any detail concerning who was involved in each allegedly

fraudulent activity, how the alleged fraud was perpetrated, or

when the allegedly fraudulent statements were made," and

criticizing the complaint because it "lumps all the defendants

together and does not specify who was involved in what activity").

Relators allege three federal claims under the FCA. Count

One alleges a violation of the FCA due to alleged double

bunking of babies in the NICU. Count Two alleges a

violation of the FCA stemming from infant overcensus in

the NlCU. Count Three alleges a violation of the FCA

due to inadequate infection controls. In general, the factual

allegations that are material to a fraud claim are case

specific even for the same kind of fraud, such as FCA

based fraud. See Peterson v. Community Gen. Ho.~p., 2003

WL 262515 at *2 (N.D.Ill.2003) (identifYing case-specific

material allegations for fraudulent billing of Medicare under

the FCA). To survive the motion to dismiss pursuant to Rule

9(b ), Relators must properly allege for each FCA claim the

following material elements: A) the predicate acts relating to

double bunking, overcensus, and infection control violations

that the Hospital's NICU staff permitted (Material Element

1), B) that the necessary predicate acts were non-technical

violations of federal and state medical practice regulations

(Material Element 2), C) that the billing of the allegedly

fraudulent claims was authorized by Hospital personnel

(Material Element 3), D) that Hospital personnel made

misrepresentations about the NICU infants1 care (Material

Element 5), and E) that these misrepresentations were made to

Medicaid, Tri-Care, or both with the aim of being reimbursed

for the NlCU infants' care (Material Element 6).

A. Material Element]: The Predicate Acts

Relators must plead with particularity the predicate acts for

Counts 1-3, which relate to double-bunking, overcensus,

and infant infection violations respectively. See .t1idwest

G1inding Co. v. Spit=. 976 F.2d 1016, 1020 (7th Cir.l992)

(holding in a RICO case that "the complaint must, at

minimum, describe the predicate acts with some specificity

and 'state the time, place, and content of the alleged

communications perpetrating the fraud" ') (quoting Graue

Mill Dev. C01p. v. Colonial Bank & Trust Co., 927 F.2d 9RR,

992 (7th Cir.199l)); Obert-Hong v. Advocate Health Care,

2001 WL 303692, *2 (N.D.Il1.2001) (rebuking plaintiffs in an

FCA case for failing to identify doctors who participated in

predicate act of contract signing leading up to alleged fraud).

Thus, just as is true for the individuals who misrepresent

actions to perpetrate the financial stage of a fraud, so too must

a plaintiff plead with specificity "the who, what, when, where,

and how" of the predicate acts of that fraud. DiLeo, 90 I F .2d

at 627.

*6 Generally, Relators appear to recognize that they have

failed to specifically plead the "who" element of all three

predicate acts that allegedly occurred in the NICU, given

their suggestion that any failure on their part to plead

specific details about "who decided to double-bunk babies,

overcrowd the neonatal intensive care ooit ... and willfully

ignore ... infection controls" is because such specific details

are "in the exclusive possession of defendants, and [Relators]

need not allege them under 9(b)." (Resp.9(b) Mot. 5). We

reject this argument, inasmuch as Relators, allegedly nurses

who worked for extended periods in the NICU, should be

capable, at a minimwn, of identifying the titles or positions of

those responsible superiors and perhaps others who allegedly

promoted these NICU medical practices. Allegations about

specific individuals who allegedly committed on one or more

occasions one or more of the three predicate acts against

Medicaid or Tri-Care infants must be pled.

Relators argue in the alternative that their complaint does

specifically identify those individuals responsible for the

three predicate NICU practices. (Resp.9(b) Mot. 5-6).

However, most of Relators1 allegations refer only to "U

of C Hospital" or "U of C Hospital management." (R.

A.Compl.Par. 16, 29, 31-34,41-43, 45,47-49, 51, 53, 54, 56,

57, 61). We note that at least one other court has held that

the "who" element of fraud is not satisfied by making vague

allegations about a corporation whose particular employees

allegedly committed fraud. See Robinson v. Northrop Cmp . . ,

149 F.R.D. 142, 145 (N.D.Ill.1993) (noting that "plaintiffs

argue that where the defendant is a corporation there is no

need to specify in the complaint the role of each individual

defendant," yet finding that "the identity and/or role of

the individual employee involved in the alleged fraud must

be specified in the complaint, since such information is

within the relator's knowledge"). Even for those instances

in which Relators allege or imply that they themselves

were eyewitnesses to improper medical treatment in the

NICU, they fail to allege who directed or engaged in the

mistreatment. (R. A.Compl.Par. 19, 20, 33, 47, 48). In sum,

we fmd that Relators have not pled with particularity as

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to who in the Hospital authorized or mandated any of the alleged practices of double-bunking infants, overcrowding the NICU, and tolerating serious infection outbreaks among

NICU infants. Relators have also not shown that they were

denied access to such information.

Relators have also failed to plead with the necessary specificity other aspects of the predicate acts, including (a)

when these acts occurred, (b) which particular Medicaid or

Tri-Care infants suffered from which of the three allegedly

illegal practices, and (c) how the acts were carried out.

I. Double-Bunking by the Hospital (Count 1)

Relators allege that double-bWlking "is routine" in the Hospital's NICU. (R. A.Compl.Par. 16, 19, 20, 22, 29, 31, 33,

34, 42, 47, 53). As a specific example, Relators allege that the

Hospital's NICU staff sheet of November 15, 2001, reflects

fhat during an Illinois Department of Public Health ("IDPH")

inspection, one baby was simultaneously moved from his double-bunked bed space. (R. A.Compl.Par. 36). Relators

also allege that concealment of double-bunking practices from public health inspectors is a regular occurrence, and indicate that in late 2003, the IDPH detected double-bunking

in the Hospital's NICU. (R. A.Compl.Par. 10, 34, 43).

Relators allege that on multiple undated Hospital Nursing Assignment Sheets and Census sheets, double-bunked babies

are denoted as having "A" or "B" designations for a particular

bed space, or "C" in the case of triple-bunking, and in more

recent reports, by the recording of non-existent "phantom"

bed space numbers in reference to double-bunked infants. (R.

A.Compl.Par. 17, 35). Relators allege that they personally

witnessed multiple instances on unidentified dates in which

a double-bunked baby had to be physically removed from

its bed space to permit Hospital caregivers adequate access

to the other double-bunked infant in emergency situations. (R. A.Compl.Par. 20). Relators further allege that on multiple

unidentified dates, they personally witnessed hazardous medical conditions in which medical charts, treatments, or medical devices were applied to the incorrect infant in a double-bunked setting. (R. A.Compl.Par. 19). In addition,

Relators specify twenty-four pseudonymous infants whom they allege were double-bunked in the NICU during 200 I. (R. A.Compl.Par. 47, 48). Accordingly, with regard to the

Hospital's alleged practice of double-bunking NICU infants,

we find that while Relators have generally pled that double

bunking occurred, they have failed to plead who in particular engaged in the double-bunking on behalf of the Hospital.

Therefore, we find that Relators have not properly pled the

predicate act relating to double bunking for Count 1.

2. Overcensus by the Hospital (Count 2)

*7 Relators allege in regard to their claim of overcensus in the NICU that the IDPH sets maximum patient numbers

that hospitals, including the Hospital, may admit to their N1CU at any given time. (R. A.Compl.Par. 41, 52). Relators

furthermore allege that at unidentified times, double-bunking was done to permit NICU overcapacity. (R. A.Compl.Par.

53). While Relators may have satisfactorily alleged that

overcrowding was occurring, they have failed to specify when it occurred and who in particular participated in it. Relators also fail to specifically plead which particular infants who

were covered by Medicaid or Tri-Care were admitted to the NICU during a period of alleged overcrowding. Therefore,

we find that Relators have not pled with particularity the predicate act relating to overcensus for Count 2.

3. Inadequate Infection Controls by the Hospital (Count 3)

Relators allege in regard to the Hospital's's inadequate infection controls that because of double-bunking practices, the NICU is an environment that facilitates the spread of serious and potentially fatal, hospital-acquired, treatmentresistant communicable diseases, such as Serratia meningitis and methicillin-resistant Staphylococcus aureus (''MRSA"). (R. A.Comp!.Par. 21, 22, 25, 26, 27). Relators contend that

the Hospital's NICU has infection and colonization rates of MRSA and Serratia meningitis well above national NICU averages. (R. A.Comp!.Par. 28). Relators further contend that

the Hospital intentionally fails to isolate infected babies until at least four babies are infected to avoid incurring additional costs. (R. A.Compl.Par. 29, 42, 45, 46).

As a specific example, Relators allege that the Hospital's NICU staff meeting minutes of September 21, 2001, reflect

that during a particular outbreak among 52 babies in the NICU, seventy-five percent were colonized with Serratia or MRSA pathogens and fifteen percent became infected. (R.

A.Comp!.Par. 22). Relators claim that during this alleged

outbreak, there was blood on the countertops and there were bacterial cultures on the telephone and other NICU equipment. According to Relators, Hospital administrators allegedly advised that these contaminations had to be cleaned up "in anticipation of an upcoming visit" from a public health inspection agency. (R. A.Compl.Par. 23). As

a second specific example, Relators assert that on July 12, 2002, a pseudonymous baby infected with Klebsiella and

Pseudomonas aeruginosa was admitted to the NICU, and within a few days, four other pseudonymous babies within

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proximity of this infected infant themselves had also become

infected with either or both diseases. (R. A.Compl.Par. 30). Relators contend that one of those babies died within a month

of contracting Pseudomonas aernginosa, due predominantly

to that infection. (R. A.Compl.Par. 30). As a third specific example, Relators allege that a pseudonymous premature baby who had been double-bunked in the NICU beginning in January 2001, contracted Serratia meningitis and, despite his

infection, was transferred thirteen times between bed spaces,

four times being double-bunked, during an ensuing ten month

period. Relators allege that this baby suffered "neurological devastation" from his infection and died of cardiopulmonary

failure in October 2001. (R. A.Compl.Par. 48).

*8 Given the three specific examples of inadequate infection

controls alleged by Relators, we find that Relators have adequately pled how the infection occurred, have provided specificity about which individual infants became infected, and have adequately pled when it occurred. However, as discussed above, Relators have not indicated who at the Hospital was involved in tolerating this spread of infection, or who set or maintained the policy that four babies had to become infected before the Hospital acted to prevent the further spread of disease. Therefore, Relators have not sufficiently pled the predicate act relating to inadequate infection controls for Count 3. Accordingly, we find that Relators have not adequately pled Material Element I, the three predicate acts for Counts 1-3, with particularity.

B. Material Element 2: Non-Technical Violations of

Federal and State Regulations by the Hospital

Relators allege that medical and public health inspector laws and guidelines have been violated by the Hospital's three alleged predicate acts relating to double-bunking NICU infants, permitting NICU overcensus, and permitting infectious disease outbreak in the NICU. Despite this oft-repeated allegation, Relators do not indicate which statutes or guidelines the Hospital violated. The deficiency of Relators' general accusation, that "U of C Hospital

expressly certify that they [sic ] comply with all state and federal laws and accreditation guidelines as a condition of reimbursement" (R. A.Compl.Par. 41), becomes all the more apparent by comparison to the Illinois Complaint, which identifies specific laws and regulations that Illinois alleges the Hospital to have violated. (Ill.Compl.Par. 13-21, 23, 29, 40-43). The Seventh Circuit has clearly held at a similar stage of proceedings that "minor technical regulatory violations do not make a claim 'false' for purposes of the

FCA; the existence of mere technical regulatory violations tends to undercut any notion that a prior representation of regulatory compliance was knowingly and falsely made in order to deceive the government." Gross, 415 F.3d at 604 (citing Lamers v. City of Green Bay, 168 F.3d 1013. 1019 (7th Cir.l999)). Despite admittedly graphic allegations that Relators make about NICU treatment of infants (R.A. Compl.Par. 16, 18-24, 28-33, 42, 44, 49, 57), without knowing which regulations are at issue, we cannot determine whether alleged violations of unidentified regulations are merely technical or instead so sufficiently serious that certifications of regulatory compliance made to Medicaid or Tri-Care in conjunction with reimbursements for the allegedly affected NICU infants amounted to fraudulent misrepresentations. The Seventh Circuit has been clear on this issue. See Gross. 415 F.3d at 605 (indicating that "reference to the 'regulatory framework" • was insufficient "to clarifY the causal connection between false certifications and government payouts" and stating that it is "not incumbent upon the district judge to become an expert in all of the regulations ... so that he [can] piece together a theory on why any particular form listed in the ... complaint might have fraudulently caused the government to cut a check"). Thus, with regard to whether the alleged double-bunking, overcensus, or toleration of infection violated state and federal regulations or guidelines, we find that Relators have not met the Rule 9(b) pleading standard.

C. Material Element 3: Billing of Claims by the Hospital

*9 Relators allege that the Hospital submitted fraudulent claims. Relators, however, must also allege that the billing of the allegedly fraudulent claims was actually authorized by the Hospital. Under Rule 9(b), this means Relators must plead with particularity "the identity ofthe person making the misrepresentation" or, in other words, the Hospital personnel who authorized the billing. Wade, 993 F.2d at 1250 (quoting Schiffels. 978 F.2d at 352). As we noted previously, simply alleging that "U of C Hospital" or "management" billed for infants subjected to double-bunking, overcensus, or infection control violations, which is precisely what Relators state in their complaint (R. A.Compl.Par. 37, 45, 46, 51, 56, 59, 61, 66, 68, 76, 79, 87, 89), does not suffice as pleading with particularity. Relators do indirectly identify one individual within the Hospital hierarchy when they state that "[t]he director at the U of C Hospital describes the NICU as the 'money-maker' for the hospital." (R. A.Compl.Par. 31). Yet this allegation sheds virtually no light on the director's involvement in the alleged Medicaid or Tri-Care fraud, given that a legitimate, upstanding hospital practice can

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be just as profitable as a fraudulent one. While Illinois makes specific allegations about the names of individuals

who billed Medicaid for NICU infants in its complaint

and has attached exhibits to bolster these allegations, we

cannot consider these allegations even if they turn out to

be central to Relators' claims, given that Relators do not explicitly refer to these exhibits. Accordingly, Relators have

not sufficiently met the Rule 9(b) pleading standard with

regard to who made misrepresentations to Medicaid or Tri

Care authorities regarding the allegedly illegal or substandard

infant treatments in the NICU during the reimbursement

process.

D. Material Element 4: Misrepresentations by the Hospital

about NICU Care

Relators allege that the Hospital submitted false claims to

Medicaid or Tri-Care. It is not sufficient in pleading an FCA

fraud claim, however, to merely allege that the Hospital

submitted false claims to Medicaid or Tri-Care. Rather, as the

Seventh Circuit has held in the context of an FCA fraud claim,

a complaint should plead with particularity '"the time, place,

and content of the misrepresentation, and the method by

which the misrepresentation was communicated." Wade, 993

F.2d at 1250 (quoting Schij(els. 978 F.2d at 352) (emphasis

added). Furthermore, "[!]alse claim allegations must relate

to actual money that was or might have been doled out by

the government based upon actual and particularly-identified

false representations." Gross, 415 F.3d at 605; but cf Main

v. Oakland City Univ .. 426 F.3d 914, 917 (7th Cir.2005)

(holding that "[t]he [FCA] statute provides for penalties even

if (indeed, especially if) actual loss is hard to quantify")

(emphasis in original). We accordingly examine whether

Relators have met this standard in the instant action.

*10 First, Relators must adequately plead the misleadingly

false content, or misrepresentations, that underlie the

alleged fraud. The Seventh Circuit has been clear that

the test of whether a false communication amounts to a

misrepresentation is whether the defendant has intentionally

fashioned a communication to cause a payer to perceive a

false statement of fact that the payer then "naturally" and

materially has relied upon in making an erroneous payment.

Midwest Commerce Banking Co., 4 F.3d at 524 (holding that

"[ o ]missions are actionable as implied representations when

the circumstances are such that a failure to communicate a fact

induces a belief in its opposite" because "the omitted fact ...

is basic to the transaction, [and] if the nondiscloser treats

the transaction as valid the [defrauded] party will naturally

assume that all its conditions have been fulfilled") (citations

omitted) (emphasis added); see also Gross, 415 F.3d at 604

(holding that "[a]n FCA claim premised upon an alleged

false certification of compliance with statutory or regulatory

requirements also requires that the certification of compliance

be a condition of or prerequisite to government payment"

and that a misrepresentation is made to "coax a payment of

money from the government") (emphasis added); Main, 426

F.Jd at 916-17 (holding that "[t]he [FCA] statute requires

a causal rather than a temporal connection between fraud

and payment" and that "fraud requires more than breach

of promise: fraud entails making a false representation")

(emphasis added).

In the instant action, Relators' amended complaint lacks

any allegations about the nature of the misrepresentation

or misrepresentations underlying the alleged fraud. To

be sure, Relators refer throughout their complaint to the

Hospital's "fraudulent" billing of Medicaid and Tri-Care.

Relators also allege that unnamed Hospital employees falsely

certified the Hospital's compliance with medical regulatory

guidelines to Medicaid and Tri-Care. (R. A.Compl.Par. 40,

41 ). Yet nowhere in the amended complaint do Relators

allege or explain which representations were made and by

what method those representations duped Medicaid or Tri

Care into paying false claims. This oversight is partly, but

only partly, attributable to Relators' failure to plead with

particularity Material Element 2, regarding which regulations

the Hospital's alleged double-bunking, overcensus, and lack

of infection controls allegedly violated.

Relators contend in the alternative that such misleadingly

false content is under the exclusive control of the Hospital,

and that their inability to plead certifications of compliance,

reimbursement invoices, or other specific indicia of the

Hospital's misrepresentations to billing authorities with

particularity is therefore excusable. (R. A.Compl.Par. 69, 80,

91 ). In the past, when FCA plaintiff-relators have argued that

they did not have access to Medicaid billing records, courts

have clearly rejected such claims. See Peterson, 2003 WL

262515 at *2 (citing Russell v. Epic Healthcare A/gmt. Group,

193 F.3d 304, 308 (5th Cir.l999)) (stating that it "is simply

not true [that the claims were inaccessible] as the claims at

issue were submitted to the government," and that "even if it

were true, relator at the very least must plead the particular

circumstances of defendants1 fraud on information and belief,

in which case he also must plead the factual basis for his

suspicions"). Assuming that the Hospital's Medicaid and Tri

Care billing claims are within the public record, we find

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that Relators have not adequately pled with particularity the

content of those claims. In the alternative, if specific claims

are explicitly alleged not to be within the public record, but

rather under the exclusive control of the Hospital, Relators

should plead the particular circumstances of those claims on

information and belief, consistent with our precedent.

*11 Next, we note that other courts have acted in accord with

the Seventh Circuit's guidance and have held that examples

of when allegedly fraudulent bills were submitted are usually

necessary to a Rule 9(b) pleading. See Obert-Hong, 200 I

WL 303692 at *2 (finding problematic that "[t]he complaint

[ ] fails to list specific dates when defendants made these supposedly fraudulent claims''); Garst v. Lockheed Integrated

Solutions Co .. 158 F.Supp.2d 816, 821 (N.D.lll.2001)

(quoting Clausen v. Lab. Or Am .. Inc .. 198 F.R.D. 560,

564 (N.D.Ga.2000)) (observing that it "is hard to imagine

how Defendant can respond to an allegation that fraud was

committed over a ten year period without knowing the time

that some of the false claims were submitted, much less what

the false claims actually were"). As we noted immediately

above, we fmd that Relators have failed to adequately allege

misrepresentations connected with the alleged fraud. We

also find that Relators have failed to adequately plead with

particularity the specific dates on which, or narrow time

periods in which, alleged misrepresentations in connection

with the alleged fraud were submitted by the Hospital, or the

places from which or to which such misrepresentations were

submitted or made.

E. Material Element 5: Misrepresentations by the Hospital

to Medicaid, Tri-Care, or Both

We note that while Relators devote much discussion to the

alleged defrauding of Medicaid, they make no individual

or general allegations about Tri-Care fraud stemming from

treatment of Hospital NICU infants, other than to simply

assert that it occurred. (R. A.Compl.Par. I, 2, 44, 60, 61,

62, 67, 76, 87). Similar to their pleadings for the allegedly

fraudulent Medicaid claims that they have referenced,

Relators contend that their lack of particularity in pleading

about misrepresentations to Tri-Care is excusable because

"knowledge about which babies were covered by Tri-Care

and the exact dates of these submissions are particularly

within the knowledge of [the] Hospital." (R. A.Compl.Par.

61). However, similar to what we found above in regard

to their failure to plead Medicaid misrepresentations with

particularity, Relators should be able to plead Tri-Care claims

with particularity, as those claims were submitted to a

government agency and therefore should be in the public

record. If the claims are not public, then that fact must be so

pleaded. Accordingly, we find that Relators have not met the

Rule 9(b) pleading standard with specific regard to Tri-Care

billing fraud.

Based upon the above analysis of the five Material Elements

of the Relators' three FCA claims, we grant the Hospital's

motion to dismiss pursuant to Rule 9(b ), to the extent that it

relates to FCA claims in Counts I, 2, and 3 of Relators' first

amended complaint.

II. Remaining Claims

In regard to the remaining state claims, the Seventh Circuit

has stated that where a court dismisses a federal claim and

the sole basis for invoking federal jurisdiction has become

nonexistent, that court should not exercise supplemental

jurisdiction over remaining state law claims. See Williams

v. Aztar Indiana Gaming Cmp., 351 F.3d 294, 300 (7th

Cir.2003) (stating that if there is a dismissal of the original

jurisdiction claim and only a supplemental jurisdiction claim

remains, "the sole basis for invoking federal jurisdiction

is nonexistent and the federal courts should not exercise

supplemental jurisdiction over his remaining state law

claims"); Wright v. Associated Ins. Cos. Inc., 29 F.3d 1244,

1251 (7th Cir.l994) (stating that "the general rule is that,

when all federal-law claims are dismissed before trial," the

pendent claims should be left to the state courts). In addition,

under 28 U.S.C. § 1367(c)(3), a federal district court may

dismiss a plaintiffs supplemental state law claims if it "has

dismissed all claims over which it has original jurisdiction."

28 U.S.C. § 1367(c)(3). The decision to dismiss supplemental

claims is discretionary. Larsen v. City of Beloit, 130 F .3d

1278, 1286 (7th Cir.l997). In exercising that discretion,

the court should consider a number of factors, including

"the nature of the state law claims at issue, their ease of

resolution, and the actual, and avoidable, expenditure of

judicial resources .... " Timm v. Mead C01p., 32 F.3d 273, 276

(7th Cir.l994). In the instant action, we have granted the

Hospitars Rule 9(b) motion to dismiss Relators' FCA claims,

and the remaining claims are state law claims. Relators and

Illinois do not indicate in their respective complaints that this

court has diversity subject matter jurisdiction over the state

law claims. (Resp.l2(b)(l) & 12(b)(6) Mot. 14).1n addition,

we have considered the relevant factors indicated above and

have determined that it is appropriate at this point to decline to

exercise jurisdiction over the state law claims, which include

Relators' Counts 4-6 and Illinois' Counts 1-5.

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*12 As a final matter, we note that we are merely ruling on

the adequacy of the Relators' pleadings at this juncture and

are not making any findings regarding the merits of either Relators' or Illinois' claims. In the event that the statute of limitations would bar the proper refiling of a complaint, an

appropriate motion for reconsideration within ten business

days of this decision may be filed.

CONCLUSION

Based on the foregoing analysis, we grant the Hospital's Rule

9(b) motion to dismiss Relators' FCA claims (Count 1-3).

We deny the Hospital's Rule 9{b) motion to dismiss Relators'

state law claims (Counts 4-6) and the Illinois complaint

(Counts 1-5) as moot. We decline to exercise supplemental

jurisdiction over both Relators' and Illinois' state law claims,

and deny as moot the Hospital's motion to dismiss brought

pursuant to Rule 12(b)(l) and Rule 12(b)(6).

Para11el Citations


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Robbins v. Provena Hospitals, Inc., Not Reported in F.Supp.2d (2003)

2oo3 WL 21468588 Only the Westlaw citation is currently available.

United States District Court, N.D. Illinois, Eastern Division.

Pamela ROBBINS, Plaintiff,

v. PROVENA HOSPITALS, INC., Defendants.

No. 03 C 1371. June 24, 2003.

Opinion


ZAGEL, J.

*1 Plaintiff Pamela Robbins brings this action against Defendant Provena Saint Joseph Hospital ("Medical Center")

for terminating her in violation of the anti-retaliation provision of the False Claims Act (Count I) and for damages

arising out of her retaliatory discharge in violation of Illinois

law and public policy, specifically the "duty to report" (Count

II) and "right to testify for the benefit of the members of the

Illinois General Assembly" (Count Ill). The Medical Center

has moved to dismiss Count I pursuant to Federal Rule of

Civil Procedure 12(b)(6) or, alternatively, to dismiss Counts

II and III on the grooods that under Illinois law, a separate

cause of action for retaliatory discharge will not stand where

an adequate alternative remedy is available.

Factual Background

Robbins is a registered nurse and was employed by the Medical Center from January 8, 1979 until she was terminated

on June 7, 2002. Robbins was the co-chair and later chair

of the Illinois Nurses Association ("INA"), the exclusive

bargaining unit for the registered nurses at the Medical

Center. In this capacity, she complained about the adequacy

of nurse staffing. In February 200 I, Robbins met with the

Directorofthe Illinois Department ofPublic Health ("IDPH")

and other officials to raise her concerns about inadequate

staffmg at the Medical Center. The IDPH inquired if the

staffing concerns were affecting patient care and advised the

nurses to record any delays in patient treatment. Robbins

alleges that she learned that delays in patient care could

affect the Medical Center's right to participate in and receive

reimbursement for Medicare or Medicaid related services.

After the meeting, Robbins and other nurses changed the

"assignment despite objection" ("ADO") forms to expressly

notify the Medical Center about delays in patient treatment

as a result of inadequate staffing. Robbins also advised the

nurses to file the forms with Medical Center supervisors

to comply with Illinois regulatory law, which requires

nurses to '"[r]eport unsafe, unethical, or illegal care practice

or conditions to the appropriate authorities." Ill. Admin.

Code tit. 68, § 1300.42. The nurses at the Medical Center

subsequently filed hundreds of ADOs from 2001 to the

beginning of2002, which alleged delays in patient treatment

and unsafe staffing levels.

In early 2002, Robbins and other nurses helped organize

public legislative hearings on Illinois House Bill 959, the

Patient Safety Act, which proposed to give nurses a role

in determining staffmg levels and to impose penalties on

facilities that refused to do so. Robbins and other nurses

attended these televised hearings in March 2002. Before

these hearings, Robbins alleges that she was detained and

questioned by Medical Center security guards regarding the

hearings.

In May 2002, Robbins circulated petitions addressed to the

IDPH demanding investigation into whether the Medical

Center was providing safe nursing standards. The petition

stated that the "INA believes the current staffing situation and

any future efforts to 'downsize' not only violates the various

acts, codes and laws governing safe patient care delivery, [w ]e

believe it greatly endangers the lives of our patients." Over

160 nurses signed the petition. On May 30, 2002, a Medical

Center manager confiscated the petition from a nurse.

*2 On May 22, 2002, the Medical Center notified several

nurses that their jobs had been eliminated. One of the affected

nurses asked Robbins to represent her in a meeting with

Human Resources. Several of the other affected nurses joined

Robbins to attend the meeting. A Human Resource manager

told the nurses that they could not all be present, so Robbins

told the other nurses to wait in a cafeteria. Two weeks

later, the Medical Center notified Robbins that it needed

to interview her regarding the events of May 22, 2002 and

that she would need to retain a grievance representative.

After meeting with the Medical Center officials, Robbins was

placed on indefinite suspension on June 6 and terminated on

June 7, 2002 for allegedly violating an agreement prohibiting

nurses from engaging in strikes and work stoppages.

Legal Standard

VVif!St!av.;~f@ 2012 Thomson Reuters" No claim to original U,S. Government Works_



The purpose of a motion to dismiss under Rule 12(b)(6) is

to "test the sufficiency of the complaint, not to decide the merits" of the case. Triad Associates, Inc. v. Chicago Housing

Authority. 892 F.2d 583, 586 (7th Cir.1989). In reviewing

a motion to dismiss, the court must construe all allegations

in the complaint in the light most favorable to the plaintiff

and accept all well-pleaded facts and allegations as true. Bontkowski v. First National Bank of Cicero, 998 F.2d 459,

461 (7th Cir.l993). A complaint should only be dismissed

when "it appears beyond a doubt that the plaintiff can prove

no set of facts in support of his claim which would entitle

him to relief." Conley v. Gibson. 355 U.S. 41, 45-46 ( 1957).

However, the complaint must allege facts sufficiently setting

forth the essential elements of the cause of action. Lucien v.

Preiner. 967 F.2d 1166, 1168 (7th Cir.l992).

Count I: False Claims Act

The False Claims Act (FCA) allows the federal government to

impose civil sanctions against parties defrauding the federal

government. 31 U.S.C. § 3729. It also permits a private

individual to bring a qui tam action for fraud and provides

an anti-retaliation provision for employees who investigate

this possible fraud. 31 U.S.C. § 3730(h). To establish a

retaliation claim against the Medical Center under§ 3730(h),

Robbins must show that: (I) her actions were protected by the

statute (i.e., taken "in furtherance of' an FCA enforcement

action); (2) the Medical Center knew she was engaged in this

protected conduct; and (3) the Medical Center's motivation to

discharge her, at least in part, was motivated by her protected conduct. Brw1don v. Anesthesia & Pain Afgmt. Assoc., Ltd.,

277 F.3d 936, 944 (7th Cir.2002). The Medical Center claims

that Robbins failed to establish that she was engaged in protected conduct or that the Medical Center knew that she

was engaged in protected conduct.

The statute's protections "are aimed at employees 'exposing

fraud' or attempting to 'expose fraud,' not employees with

concerns wholly detached from the purportedly fraudulent

activity .... [T]he purpose of the employee's investigatory

activity must contain at least some ingredient of uncovering

fraudulent activity." Luckey v. Bax;ter Heathcare Corp., 2

F.Supp.2d 1034,1051 (N.D.Ill.l998),aff'd.l83 F.3d 730(7th

Cir.l999). Attempting to correct regulatory noncompliance,

absent fraud, is not actionable under the FCA. United States

ex rei. Hopper v. Anton. 91 F.3d 1261, 1269 (9th Cir.l996).

The action protected under the statute is defined to "include

situations in which a qui tam action is a 'distinct possibility,'

or 'litigation could be filed legitimately-that is, consistently

with Fcd.R.Civ.P. II." ' Brandon. 277 F.3d at 944 (quoting

Neal v. Honeywell. 33 F.3d 860, 864 (7th Cir.l994)).

*3 The Medical Center claims that Robbins was not

engaged in protected conduct, but rather was attempting to

force the hospital to hire more registered nurses. Robbins

complained about staffing levels and accused the Medical

Center of not being compliant with state regulations. The

most Robbins alleged, the Medical Center claims, is that

she was investigating understaffing of nurses that could

ultimately disqualify the Medical Center from participating

in Medicare or Medicaid reimbursement programs. However,

there is a critical difference between failing to qualify

for Medicare/Medicaid reimbursement and submitting false

information to collect such reimbursement. If Robbins was

only investigating staffing levels to determine the Medical

Center's future Medicare/Medicaid participation, her activity

is not protected as it is not investigating fraud. However, if

Robbins was investigating staffing levels to show that the

Medical Center was not compliant with regulations which

are conditions for payment, and thus falsely representing its

compliance with the regulations, then Robbins' actions were

protected.

It is clear that Robbins was attempting to increase the

number of registered nurses on staff. Robbins alleges that

the Medical Center was inadequately staffed and that this

was causing delays in patient treatment. Robbins further

alleges in her complaint that she learned that "delays in

patient treatment could affect the defendant Hospital's right

to participate in and receive reimbursement for Medicare and

Medicaid related services" and that with significant delays,

the "Hospital would not be providing the care which certain

health regulations require in connection with Medicare and

Medicaid services." Although, merely attempting to get an

employer to comply with regulations is not actionable without

fraud, see Hopper. 91 F.3d at 1269, Robbins claims that

the Medical Center was potentially "falsely representing its

compliance with certain health regulations when submitting

claims for reimbursement for certain Medicare and Medicaid

services." Documenting staffing levels and delays in patient

treatment would be one way to investigate the Medical

Center's compliance with regulations, which could later be

used to show false representations. Robbins also requested,

via the petitions, that the IDPH investigate the Medical

Center's staffing levels and unsafe conditions. While not

explicitly stated in the complaint, the IDPH investigates fraud

on behalf of the Centers for Medicare and Medicaid services.

At this stage, it is possible that Robbins knew this. The right

1;VestL.~xr (C) 2012 Thomson Reuters. No claim to orinina! US. Government VVorks. 2



of the Medical Center to "receive reimbursement" can be

interpreted as either the Medical Center's right to receive

reimbursement in the future or the Medical Center's right to have received reimbursement in the past for Medicare

and Medicaid services. Thus, it is possible that Robbins

was investigating potentially false representations made by the Medical Center to the federal government. She has

thus sufficiently pleaded that she was engaged in protected

conduct.

*4 The Medical Center further claims Robbins did not

adequately plead that the Medical Center knew that she

was engaged in protected conduct at the time it terminated

her employment. The Medical Center claims that she never raised any fraud issues against the Medical Center before filing her complaint. Robbins claims the Medical

Center knew that the ADO forms and her complaints to

state legislators, along with the petitions addressed to the

IDPH, had become the basis for a formal complaint to

governmental authorities, and that the Medical Center could

reasonably expect those authorities to investigate potential

false representations of compliance with regulations when

the Medical Center submitted reimbursements for Medicare

and Medicaid services. The ADO forms, which noted the

inadequate staffing levels resulting in delays in patient

treatment, alone could not reasonably give the Medical Center

notice of an investigation into Medicare or Medicaid fraud.

There is nothing in the complaint to indicate that the ADO

forms were submitted to anyone but the Medical Center.

Although attempting to convince an employer to comply with

regulations "usually does not put an employer on notice of

potential FCA litigation," Brandon, 277 F.3d at 945. the

plaintiff in Brandon never threatened to report the illegal

conduct to the government before he was discharged. In this

case, however, Robbins did report violations of regulations

to government authorities during the hearings and was in

the process of reporting violations to the IDPH through

the petitions. Robbins was allegedly detained by Medical

Center security guards and questioned about the hearing, and

a Medical Center manager allegedly confiscated a petition

addressed to the IDPH. Thus, the complaint sufficiently

alleges that the Medical Center knew before Robbins was

terminated that she was investigating the Medical Center

End of Document

and had contacted government authorities regarding that

investigation.

Nonetheless, employers must "be on notice, not only of the

voiced concerns and investigations of the employee, but that

the employee's actions are related to the employer's alleged

false claims to the government." Luckey, 2 F.Supp.2d at

1055. It is clear that the Medical Center knew that Robbins

was concerned about nurse staffing, but the question is

whether Robbins "couch[ ed] her concerns or investigation in

terms of funds her employer fraudulently obtained from the

government." /d. In Hopper v. Anton, the plaintiff complained

(by numerous written complaints, 70 letters, and over 50

phone calls) to state officials and to her employer that it

was violating state and federal regulations, but she "never

gave any indication she was investigating the School District

for defrauding the federal government." 91 F.3d at 1269-

270. An investigation of regulation violations, without a

fraudulent component in the complaints to the employer, does

not give the employer "notice that [the] employee's activities

were done to further a FCA action." Luckey. 2 F.Supp.2d

at I 055. Nothing here indicates that Robbins threatened a

qui tam action, notified the Medical Center that she was

investigating fraud, or accused the Medical Center of making

false representations, violating the FCA, or defrauding the

federal government. Thus, Robbins failed to adequately plead

that the Medical Center had the requisite notice that she was

investigating fraud and has thus failed to sufficiently allege

a retaliation claim under the FCA. Accordingly, I dismiss

Count I.

*5 In light of the dismissal of Count I, the Medical Center's

alternative argument for dismissing Counts II and III-that

a separate cause of action for retaliatory discharge will not

stand where an adequate alternative remedy is available-is

now moot in light of the fact that the FCA claim in Count I

no longer exists as an adequate alternative remedy.

For the reasons above, the Medical Center's Motion to

Dismiss is GRANTED as to Count I, but is DENIED as to

Counts II and III.

!9 2012 Thomson Reuters. No c!airn to original U.S. Government Works.

WestlavvN<!Xr@ 2012 Thomson Reuters. No clairn to ori[Jinal U.S. Government Works


U.S. ex rei. Wildhirt v. AARS Forever, Inc., Not Reported in F.Supp.2d (2011)


2011 WL 1303390

Only the Westlaw citation is currently available. United States District Court,

N.D. Illinois, Eastern Division.

UNITED STATES of America ex rei. Catlly

WILDHIRT and Nancy McArdle, State of Illinois ex

rei. Cathy Wildhirt and Nancy McArdle, and Cathy

Wildhirt and Nancy McArdle, individually, Plaintiffs,

v.

AARS FOREVER, INC., an Illinois corporation,

and THH Acquisition LLC I, a Delaware

limited liability company, Defendants.

No. 09 C 1215. April 6, 2011.


Gregory Thomas Patrick Condon, Wang, Leonard & Condon, William W. Thomas, Behn & Wyetzner, Chtd., Dana Marie Pesha, Stewart M. Weltman, Futterman Howard Ashley Watkins & Weltman, P.C., Kathryn Ann Kelly, United States Attorney'S Office, Chicago, !L, for Plaintiffs.

Joseph R. Marconi, Justin H. Volmett, Johnson & Bell, Ltd., Stephen David Libowsky, Ramji B. Kaul, SNR Denton US LLP, Chicago, IL, for Defendants.

Opinion


GARY FEIN ERMAN, District Judge.

*1 In this qui tam action brought on behalf of the United States and the State of Illinois, Plaintiffs~Relators Cathy Wildhirt and Nancy McArdle allege that their former employers, Defendants AARS Forever, Inc. ("AARS"), and THH Acquisition LLC l ("Acquisition") violated the False Claims Act, 3! U.S.C. § 3729 et seq. ("FCA"), and the Illinois Whistleblower Reward and Protection Act, 740 ILCS 17511 et seq. ("IWRP A"), by submitting false and fraudulent claims

to the federal and state governments. Relators also bring individual claims alleging that Acquisition violated the FCA's

and IWRP A's anti-retaliation provisions by terminating their

employment in retaliation for calling attention to the false

or fraudulent claims. After the United States and the State

of Illinois declined to intervene, the complaint was unsealed

and served on Defendants, who have moved to dismiss under

Federal Rule of Civil Procedure 12(b)(6). The motion is granted, but Relators are given leave to file an amended

complaint that attempts to satisfY the applicable pleading standards.

Background

The facts alleged in the complaint are assumed true on a

Rule l2(b)(6) motion. See Reger Dev., LLC v. Nat'/ City

Bank, 592 FJd 759, 763 (7th Cir.20l 0); United States ex

rei. Main v. Oakland City Univ .. 426 F.3d 914, 916 (7th Cir.2005). In May 2007, Defendant AARS entered into a contract with the Veterans Administration ("VA") to provide

home healthcare services and durable medical equipment

to respiratory patients in portions of Illinois, Wisconsin,

and Michigan. AARS also provided medical services to

respiratory patients through the Medicaid and Medicare

programs. Defendant Acquisition took over AARS's business

under the VA, Medicaid, and Medicare programs in early

2008. Both AARS and Acquisition operated under the name "Total Home Health."

From 2007 until September 2008, Plaintiffs~Relators

Wildhirt and McArdle worked as a respiratory therapists for AARS and then for Acquisition. During their employment, Relators came to realize that Defendants were breaching

numerous performance requirements under the VA contract

(Doc. l, ~~ 86, 104-137) and violating numerous Medicare and Medicaid standards and regulatory provisions (id. ~~ 139~!63). Those breaches and violations, Relators allege, caused all or nearly all of the claims sent by Defendants to the federal and state governments to be "false claims." !d. ~1! 138,157, !64, 175~177, 188~!89.

Relators repeatedly complained to their supervisors that

Defendants were violating the VA contract, breaching

applicable Medicaid and Medicare regulations, and placing

patients at risk. ld. ~~ 165~169. McArdle's complaints culminated in a "run-in" with Richard Manning, a senior

official at Acquisition, the Friday before Labor Day in 2008. /d. ~ 169. McArdle left a message with Scott Hughes, her direct supervisor, stating that she would not return to work

on Tuesday because she was distraught over her conversation

with Manning and uncertain whether she could continue to

work under existing conditions. /d. ~ 170. A human resources

manager then contacted McArdle and told her that if she did not return to work on Tuesday, she would be terminated for

Wes!lawNext t) 2012 Thomson Reuters. No claim to ori~inal U.S. Government Works.




job abandonment. Ibid. McArdle did not return on Tuesday,

and was terminated later that week. Ibid.

*2 Wildhirt was ill over that same Labor Day weekend

and informed her direct supervisor, McArdle, who in tum

informed Hughes. !d. ~ 171. Although Acquisition knew

that Wildhirt was ill and had a doctor's note restricting her

from working, Wildhirt was terminated the same day as

McArdle for job abandonment. Ibid. Relators contend that

their terminations "were directly related to the fact that they

were regularly trying to provide an adequate level of patient

care on behalf of a company who seemed not to care at all

about providing such care to veterans." /d.~ 173. The Illinois

Department of Employment Security, in a decision entitled

to judicial notice on a Rule 12(b)(6) motion, see 4901 C01p.

v. Town of Cicero. 220 F.3d 522, 527 n. 4 (7th Cir.2000),

ruled that Wildhirt was not "discharged"; rather, she "knew

that she could have preserved her job by returning" a call from Acquisition's Human Relations Department two days

after Labor Day, "but she decided not to do that." Doc. 29-1.

Discussion

The complaint contains four counts. Count I is a qui tam

claim against both Defendants under the FCA, alleging that

they knowingly submitted false or fraudulent claims to the

United States. Count III is a materially identical qui tam

claim against both Defendants under the IWRP A, alleging

that Defendants knowingly submitted false or fraudulent

claims to the State of Illinois. Counts II and IV allege

that Acquisition unlawfully terminated Relators in violation

of the anti-retaliation provisions of the FCA and IWRP A,

respectively.

A. Counts I and III: FCA and IWRP A Qui Tam Claims

Qui tam claims brought under the FCA are subject to the heightened pleading standards of Federal Rule of

Civil Prot:etlure 9(b). See United States ex rei. Gross v.

AIDS Research Alliance-Chicago, 415 F.3d 60 I, 604 (7th

Cir.2005). The same pleading standards apply to qui tam

claims brought under the IWRP A. See Afason v. 1Vedline

Indus., Inc., 2009 WL 1438096, at *2 (N.D.Tll. May22, 2009)

(citing Ackerman v. Nw. Mut. Life Ins. Co., 172 F.3d467, 470

(7th Cir.1999)). To support their qui tam claims, the Relators

must allege "the who, what, when, where and how" of the

alleged fraud. Gross, 415 F.3d at 605.

Relators' FCA claim alleges that Defendants "knowingly

submitted, and/or continue to submit ... false or fraudulent

claims for payment" to the federal government, "knowingly

made, used, or caused to be made or used ... false records

and statements to obtain payment" from the government, and "knowingly submitted, and possibly continue[ ] to

submit ... false or fraudulent claims for payment or approval

by improperly retaining funds that should have been credited

to" the government. Doc. I,~~ 175-177. These allegations

mirror the bad acts set forth in 31 U.S.C. §§ 3729(a)(l), (2),

and (7). Relators' IWRP A claim makes parallel allegations

under parallel provisions of the IWRPA. See Doc. I,~ 188-

189; 740 ILCS l75/3(a)(l), (2).'

* The FCA was amended and re-codified effective May

20,2009. See Pub.L. 111-21, 123 Stat. 1621. Because only the amendment to 31 U.S.C. § 3729(a)(2) (now§ 3729(a)(l)(B)) is retroactive, because the parties do not

contend that the amendment has any substantive impact

on this case, and because Defendants' alleged misconduct

preceded the amendments, the pre-amendment version

of the statute will be cited. See U11ited States ex

ref. Lusby v. Rolls-Ruyce Corp .. 570 F.3U 849. 855

n. * (7th Cir.2009); United States ex rei. Wainer v.

Northshore Univ. llealthsystem, 660 F .Supp.2d 891, 895

n. 3 (N.D.IIL2009). The IWRPA was amended andre

codified effective July 27, 2010, and now is known as

the Illinois False Claims Act. See IlL Pub. Act 96-1304,

§ 10. Again, because the parties do not suggest that the

amendment has any substantive impact on the case, the

pre-amendment version of the statute will be cited.

*3 A qui tam plaintiff must allege that the defendant actually

submitted a claim for payment to the government, and that the

claim was knowingly false. See United States ex rei. Fowler

v. Caremark RX; L.L.C., 496 F.3d 730, 741--42 (7th Cir.2007)

(affirming dismissal of FCA claim because "Relators do

not present any evidence at an individualized transaction

level to demonstrate that Caremark" engaged in the alleged

fraud), overruled in part on other grounds by Glaser v.

Wound Care Consultants, Inc., 570 F.3d 907, 909-10 (7th

Cir.2009); United States ex rei. Garst v. Lockheed-Martin

Corp., 328 F.3d 374, 377 (7th Cir.2003) (affirming dismissal

ofFCA claim because "the pleadings [do not allege] a single

instance of a false statement made to obtain payment");

United States ex rei. Clausen v. Lab. Cmp. ofAm., 290 F.3d

1301, 1312 (lith Cir.2002). That is, "[i]n order to plead

cause of action for the submission of a false claim under the

FCA and IWRPA, [a relator] must plead with particularly the

details of actual claims submitted to the government." United

States ex rei. Grant v. Thorek Hosp., 2008 WL 1883454,

V\fi?-stlawNexf@ 2012 Thomson Reuters, No dairn to original U.S. Government V'Jorks, 2




*2 (N.D.lll. Apr.25, 2008). Complaints that merely allege

breaches of contract, cost overruns, or regulatory violations

do not suffice. See Fowler, 496 F.3d at 743; Garst. 328 F.3d

at 378; Clausen, 290 F.3d at 1311. As the Seventh Circuit

has instructed, "failing to keep one's promise is just breach

of contract, and cost overruns in government procurement

projects may occur without fraud. To satisfy Rule 9(b), [the

plaintiff must] allege that [the defendant] said something

knowing at the time that the representation was false (or not

intending to perform); failures to satisfy the customer ex post

are not fraud .... " Garst, 328 F.3d at 378.

Relators have failed to satisfy these pleading standards. The complaint's principal thrust is that because Defendants

violated the VA contract and breached Medicare and

Medicaid regulations in so many ways, their performance fell

so short that every or nearly every claim they submitted to the

federal and state governments was false and fraudulent. Doc.

1, ~~ 138, 157, 164, 175-177, 188-189. The Seventh Circuit

has rejected this "gestalt" method of alleging a qui tam claim,

explaining that however rotten a government contractor1s

performance or motives, the relator must .. identify specific

false claims for payment or specific false statements made in

order to obtain payment." Garst, 328 F.3d at 376. Consistent

with this principle, the Seventh Circuit held that a qui tam

claim could not rest on allegations that "[a]ll Lockheed

invoices and payments within the statute of limitations'' were

fraudulent due to its prior violation of ethical rules, or that

"[t]he total claims" for a specific component of contract were

.. fraudulent or false" because Lockheed submitted a false

cost estimate to obtain the contract. Garst, 328 F.3d at 377-

78; see also United States ex rei. Crews v. NCS Hea!thcare

of Ill., Inc., 460 F.3d 853, 857·-58 (7th Cir.2006). Relators'

attempt to paint with an equally broad brush fails for the same

reason. See Clausen, 290 F.3d at 1131 (a plaintiff cannot

.. merely .. . describe a private scheme in detail but then ...

allege simply and without any stated reason for his belief that

claims requesting illegal payments must have been submitted,

were likely submitted or should have been submitted to the

Government").

*4 The complaint does get more focused at points, but

not focused enough to state a qui tam claim. For example,

Relators allege that Defendants impermissibly billed the VA

for follow-up visits, knowingly failed to return overpayments

to the VA, and intentionally overbilled for equipment. Doc.

1, ~~ 115, 129, 14().-141, 163-164. But these allegations

fail to identify specific improper billings, knowing failures

to return overpayments, or intentional overbillings, and thus

cannot support a qui tam claim. See Fowler. 496 FJd

at 741-42; Garst, 328 F.3d at 376. At other points, the

complaint alleges that McArdle noticed that may Medicaid

and Medicare invoices "seemed extremely exaggerated

vastly overpriced"; that McArdle alerted a fellow employee

.. about the seeming(v outrageous prices charged on [certain]

delivery invoices"; and that Defendants maintained .. what

appear to be inflated billing records" and engaged in "likely

massive overbilling." Doc. I, mf 140, 144, 154, 161 (emphasis

added). These allegations are all hedged-Relators for some

reason are unable or unwilling to straightforwardly allege

that Defendants actually overbilled Medicare and Medicaid

and thus are insufficient to allege a false or fraudulent claim.

See Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th

Cir.2003) (allegation that "certain alloys of[Brush] may have

been mismarked" insufficient to plead FCA claim); Afason,

2009 WL 1438096, at *4 (allegations that "one employee was

hired 'perhaps [ ] as a favor' to a provider, and a second was

given substantial severance pay 'apparently [ ] to mollify'

another provider" are "too feeble to satisfy the requirements

of Rule 9(b )" and "fail to plead fraud with particularity")

(emphasis added).

In an effort to plead at the requisite level of specificity,

Relators reference and attach two sets of exhibits to the

complaint. The first set is a collection of credit card invoices

reflecting VA payments to Defendants. Doc. 1-2 at 8().-

86 (referenced by Doc. I,~ 137). The invoices, however,

are not linked to any specific claim made by Defendants,

let alone a specific claim alleged to be knowingly false .

See Garst, 328 F.3d at 377; Mason, 2009 WL 1438096, at

*4 ("But these entries standing alone demonstrate nothing.

Mason has the burden to link specific acts of deceit to false

claims."); id. at *7 (while relator "identifies a number of

delivery orders made under the procurement contracts in

2008 and the dollar amounts of those orders," he "does not

tie the fraud he witnessed during his employment to" those

claims). The second set consists of "delivery tickets" that

reflect deliveries of equipment to three particular Medicare

or Medicaid patients, Doc. 1-2 at 87-101 (referenced by

Doc. I,~ 163). Like the invoices reflecting VA payments

to Defendants, however, these tickets are neither claims

submitted to the government for payment nor linked to any

specific claim, and thus cannot support a qui tam claim.

*5 In another attempt at specificity, Relators point to

the "harrowing example" of "an infant patient covered by

Medicaid or a private insurer [who] was placed in extreme

jeopardy" when one of the Defendants (the complaint does

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not say which one) initially failed to properly set up a

ventilator. Doc. I,~ 162 (emphasis added). This allegation is

insufficient because the complaint allows for the possibility

that the infant was covered by a private insurer, not the

government. See Crews, 460 F.3d at 857 (rejecting FCA claim

where complaint did not foreclose possibility that private

insurance company was billed). And even if the patient were

covered by Medicaid, the complaint does not allege that the

claim submitted to the government was false or improper

in any way; indeed, the complaint acknowledges that the

Defendant ultimately succeeded in "properly" setting up the

ventilator. Doc. I,~ 162.

The complaint also alleges that whenever a Defendant

submits a bill to the government, "it certifies its compliance

with all applicable regulations." Doc. I,~ 146. The Seventh

Circuit has instructed that "where an FCA claim is based

upon an alleged false certification of regulatory compliance,

the certification must be a condition of the government

payment in order to be actionable." Gross, 415 F.3d at

605; see also Crews, 460 F.3d at 85S; lv!ikes v. Straus,

274 F.3d 687, 697 (2d Cir.2001) ("a claim under the Act

is legally false only where a party certifies compliance

with a statute or regulation as a condition to governmental

payment") (citing cases). Although the complaint alleges that

Defendants were required to certify that they would comply

with applicable regulations as a condition of enrolling in the Medicare and Medicaid programs, the complaint does

not allege that Defendants were required to accompany each

claim for payment with a certification that they had complied

with applicable regnlations. Doc. 1, ~~ 146-147, 151-152.

Absent such an allegation, Relators cannot premise their

qui tam claims on Defendants' submission with each bill of

allegedly false certifications of compliance. See Gross, 415

F.3d at 605 (affirming dismissal ofFCA claim where relator

"failed to allege that any particular certification of regnlatory

compliance was a condition of payment of government

money"); United States ex rd Henclow v. Univ. of Phoenix,

461 F.3d 1166, 1173 (9th Cir.2006)("for a false statement or

course of action to be actionable under the false certification

theory of false claims liability, it is necessary that it involve

an actual claim, which is to say, a call on the government

fisc"); United States ex rei. Kennedy v. Avemis Pharms.,

Inc., 610 F.Supp.2d 938,947 (N.D.ll1.2009) (Gross"suggests

that making a false certification involving a matter that is a

condition of program eligibility, not a condition of payment of

a claim, does not give rise to FCA liability"). This conclusion

directly follows from the bedrock principle that a relator must

allege that the defendant made a false or fraudulent claim "at

an individualized transaction level." Fowler, 496 F.3dat 742.

*6 Finally. Relators allege in a most conclusory fashion that

Defendants "conspired to defraud" the United States and State

of Illinois "by getting a false or fraudulent claim allowed or

paid." Doc. I, ~ 178, 190. The FCA and IWRPA prohibit

conspiracies to submit false or fraudulent claims. See 31

U.S.C. § 3729(a) (3); 740 lLCS 175/3(a)(3). But to state a

conspiracy claim, a relator must allege that the defendants

had an agreement or formed a combination to defraud the

government and that the defendants did so for the purpose

of obtaining payment from the government. See Corsello v.

Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir.2005); Wainer,

660 F.Supp.2d at 895-96. The complaint does not allege that

AARS and Acquisition agreed to defraud the state or federal

governments. And in response to Defendants' submission

that this allegation was not made (Doc. 29 at 12), Relators

said nothing (Doc. 34), thus forfeiting the point. See Lac

Du Flambeau Band (?l Lake Superior Chippewa Indians v.

Norton, 422 F.3d 490, 502 (7th Cir.2005).

B. Counts II and IV: FCA and IWRPA Retaliation

Claims

Relators also bring claims against Acquisition under the

FCA's and IWRP A's antiretaliation provisions, see 31 U.S.C.

§ 3730(h); 740 ILCS 175/4(g), alleging that they were

terminated for engaging in protected conduct under the

statutes. Doc. I, ~~ 182-186, 193-197. To state a claim

for retaliatory discharge, Relators must show: (l) their

actions "were taken in furtherance of an FCA [or lWRPA]

enforcement action"; (2) Acquisition "knew" that Relators

"were engaged in this protected conduct"; and (3) "the

discharge was motivated, at least in part. by the protected

conduct." United States ex ref. Batty\.-'. AmeriGroup Ill., Inc ..

528 F.Supp.2d 861,877 (N.D.Ill.2007); see also Brandon v.

Anesthesia & Pain Mgmt. Assoc., Ltd., 277 F.3d 936,944 (7th

Cir.2002); McDonough v. Citv of Chicago, 743 F.Supp.2d

961, 987-88 (N.D.lll.2010) (IWRPA claim). Although a

retaliation claim may proceed where the enforcement action

post-dates an employee's termination, the filing of an action

must be a "distinct possibility" prior to termination; simply

informing an employer that certain actions were "illegal,"

"improper," or "fraudulent," without any explicit mention of

the possibility that the employee would sue, does not suffice.

Brandon, 277 F.3d at 944; see also Batty, 528 F.Supp.2d at

877; United States ex rei. Kennedy v. Aventis ?harms., inc.,

512 F.Supp.2d 1158, 1168-69 (N.D.lll.2007).

\i!J~Urll.vNexf '¢'J 2012 Thomson Reuters. No c!.airn to original U.S. Government Works. 4




Even putting aside the fact that the Illinois unemployment

compensation authorities found that Wildhirt was not discharged at all, the complaint does not make the requisite

allegations. Relators merely allege that they repeatedly

complained to their superiors about the deficient services

provided by Defendants. The complaint does not allege that

Relators, prior to the termination of their employment, were

investigating facts as a prelude to this lawsuit; nor does it

allege that Relators told Acquisition that they were planning

a lawsuit, that Acquisition suspected by any other means that

a lawsuit was in store, or that Acquisition terminated Relators

because they were investigating or planning a lawsuit. To

the contrary, the complaint alleges that Relators1 terminations

.. were directly related to the fact that they were regularly

trying to provide an adequate level of patient care on behalf

of a company [that] seemed not to care at all about providing

such care to veterans." Doc. l, ~ 173. This allegation, if

true, shows that Relators are admirable people who were

treated poorly by their employer, but it fails to show that

they were retaliated against in violation of the FCA or

End of Document

IWRPA. The retaliation claims accordingly are dismissed.

See Batty, 528 F.Supp.2d at 878 ("An employee's internal

complaints directed at bringing the employer into compliance

with its legal obligations do not put the employer on notice of

potential FCA litigation.").

Conclusion

*7 For the foregoing reasons, Defendants' motions to

dismiss are granted. Because it is not inconceivable that the

pleading defects in both the qui tam and retaliation claims

may be remedied, the dismissal is without prejudice, and

Relators are allowed leave to file an amended complaint, as

they requested in opposing dismissal. Doc. 34 at 4 n. 1.

Parallel Citations


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\VestJ;wvNexfrtJ 2012 Thomson Reuters. No claim to original U.S. Governrn(:)nt VVorks.


U.S. ex rei. Kennedy v. Aventis Pharmaceuticals, Inc., Not Reported in F.Supp.2d (2008)


United States District Court,

N.D. lllinois,

Eastern Division.

UNITED STATES of America ex rei. Katy

KENNEDY and Frank Matos, the State of Illinois

ex rei. Katy Kennedy and Frank A. Matos,

and Katy Kennedy, individually, Plaintift:S,

v.

AVENTIS PHARMACEUTICALS, INC.

and Pharmanetics, Inc., Defendants.

No. 03 C 2750. Feb. 11, 2008.

Attorneys and La'" Firms

AUSA, United States Attorney's Office, Clinton A. Klislov,

Kenneth Todd Goldstein, Krislov & Associates, Ltd., Office

of the Attorney General, General Law Bureau, Michael Charles Rosen blat, Chicago, IL, for Plaintiffs.

Scott R. Lassar, Jaime L.M. Jones, Sidley, Austin, LLP,

Michael Irving Leonard, Meckler, Bulger, Tilson, Marick

& Pearson, LLP, Chicago, IL, Robert J. Conlan, Stephen

C. Payne, Sidley, Austin, LLP, Washington, DC, Benjamin

N. Thompson, Charles George, Jennifer M. :tvtiller, Mary McCrory Williams, Wyrick, Robbins, Yates & Ponton, LLP,

Raleigh, NC, for Defendants.

Opinion


MATTHEW F. KENNELLY, District Judge.

*1 Katy Kennedy and Frank Matos have brought this suit

againstAventis Pharmaceuticals, Inc. and PharmaNetics, Inc.

Kennedy and Matos have sued as relators on behalf of the

United States and the State of Illinois under the federal False

Claims Act (FCA) and the Illinois Whistleblower Reward and

Protection Act (lWRPA). Kennedy has also brought claims

on her own behalf against A ventis for retaliation under the

FCA, the IWRPA, and the Illinois Whistleblower Act (IW A).

The Court previously dismissed Kennedy's FCA and IWRP A

retaliation claims in her first amended complaint for failure

to state a claim, with leave to amend. Kennedy then filed

a second amended complaint, asserting her previously

made FCA and IWRPA retaliation claims with additional

allegations, as well as a new claim under the IW A. A ventis

has moved to dismiss these claims, which are Counts 7, 8, and

9 of the second amended complaint. For the reasons stated

below, the Court dismisses Counts 7 and 8 but declines to

dismiss Count 9.

Background

The case involves Aventis and PharmaNetics' alleged

promotion of "off-label" prescription and use of a

pharmaceutical product called Lovenox-in other words,

promotion of the product for a use other than its FDA

approved use-and allegedly resulting false claims by hospitals

and other providers to the federal and Illinois governments

for reimbursement via the Medicare and Medicaid programs.

The defendants' actions, Kennedy and Matos allege, included

marketing of the drug by Aventis sales personnel with off

label clinical studies and materials describing methods for

off-label use, training of providers in off-label use, and

payment of grants to health care organizations and allegedly

excessive fees to speakers to promote off-label use.

With regard to her retaliation claim, Kennedy, who was an

Aventis salesperson, alleges that in May 2002, her supervisor,

a district sales manager, directed her and other sales personnel

to spend all their remaining expense account funds by

July 2002 on events that would occur after that date and

submit false invoices to the company for reimbursement.2d

Am. Compl. 1111 54-55. Kennedy says she questioned the

manager on whether this practice was fraudulent and violated

A ventis procedures. I d. 1[56. In August 2002, Kennedy says,

she reported to internal compliance and human resources

personnel her concerns about "inappropriate use of company

funds." Id.111!57-58.

Kennedy also alleges that in September-October 2002, she

spoke to senior Aventis human resources personnel "about

the off-label promotion and marketing of Lovenox" and the

inappropriate use of Aventis funds. She says she advised these

senior personnel that her district manager was encouraging

her and other sales personnel to promote Lovenox for off

label uses and that an area sales trainer had instructed her and

other representatives in off-label promotion. Kennedy alleges

that she turned over to senior human resources personnel

some of the materials she had been given by her supervisors.

!d. ~ 59. Kennedy says that in her discussions with senior

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personnel, she told them "that it was wrong to promote off-label and that sales representatives can only use FDA approved studies to sell on-label for the drug's FDA approved

indications." Id. ~ 60.

*2 Kennedy further alleges that it was well known by supervisory sales personnel at A ventis "that Lovenox

was widely prescribed to Medicare patients" and "that government sponsored health care programs would reimburse

providers for Lovenox." She says that she "reasonably believed in good faith that Aventis was committing fraud

against the government by its off-label promotion and sale of

Lovenox." Id. ~ 61.

Kennedy says that because of these communications and her

refusal to participate in illegal activities, she was "threatened,

harassed, retaliated and discriminated against" by senior

A ventis personnel. !d. ~~ 63-66. She says that due to the

retaliatory actions and harassment by senior personnel, she

"was forced to resign her position with A ventis in February

2004." Id. ~ 62.

Discussion

1. FCA and IWRP A claims (Counts 7 and 8)

In Counts 7 and 8, Kennedy claims unlawful retaliation in

violation of the FCA and the IWRP A. The FCA provides

that"[ a ]ny employee who is discharged, demoted, suspended,

threatened, harassed, or in any other manner discriminated

against in the terms and conditions of employment by his or

her employer because oflawful acts done by the employee on

behalf of the employee or others in furtherance of an action

under this section, including investigation for, initiation of,

testimony for, or assistance in an action filed or to be filed

under this section, shall be entitled to all relief necessary to

make the employee whole." 31 U.S.C. § 3730(h). The parallel

provision of the lWRPA is worded identically. 740 lLCS

175/4(g).

In its earlier decision, the Court ruled that to state a claim

under these provisions, Kennedy must allege (among other

things) that her statements to her superiors put Aventis

on notice that she suspected A ventis was defrauding the

government or that she was investigating or assisting in

making a claim under the FCA I lWRP A. US. ex rei.

Kennedv v. Aventis Pharms .. Inc .. 512 F.Supp.2d 1158, 1168

(N.D.Ill.2007). Aventis has adopted this formulation in the

briefs it has filed in support of its current motion. See Aventis

Mem. at 5; A ventis Reply at 4.

Aventis argnes that Kennedy has failed to allege that Aventis

was on notice that she believed A ventis was defrauding the

government or that she otherwise was pursuing a qui tam

action at the time of the alleged retaliation. A ventis Mem.

at 6. It contends that although Kennedy has alleged that she

advised her employer of her views regarding the propriety of

the promotional activities at issue, she does not allege that

she advised A ventis that she suspected it was committing

fraud on the government or that she was pursuing a qui tam

action. This, A ventis argues, is insufficient to allow Kennedy

to pursue a retaliation claim under the FCA or the IWRP A.

Kennedy's allegations are insufficient under governing law in

this Circuit to state a claim for retaliation under the FCA. To

prevail on a claim under section 3730(h), an employee must

show that she was retaliated against because she was engaging

in FCA-protected activity. Kennedy has alleged that she told

Aventis that she thought it was acting inappropriately under

internal policies and FDA regulations, but that is insufficient.

The Seventh Circuit has made it clear that an employee's

complaints about internal improprieties or violation of federal

regulations do not amount to FCA-protected activity. See

Brandon v. Anesthesia & Pain Mgmt. Assocs., Ltd., 277 F .3d

936, 944-45 (7th Cir.2002); Luckey v. Baxter Hea/thcare

C01p., 183 F.3d 730, 733 (7th Cir.l999). Accord, Shekoyan

v. Sibley Int'/, 409 F.3d 414, 423 (D.C.Cir.2005).

*3 Rather, the Seventh Circuit has ruled, an employee must

show that she acted in furtherance of an FCA enforcement

action (at least one that might be contemplated in the

future), that her employer knew she was engaged in protected

conduct, and that it discharged her, at least in part, due to her

protected conduct. Brandon. 277 F.3d at 944. With regard to

the second element, Brandon indicates that the employer must

have realized that it faced the possibility of a qui tam action.

!d. Internal complaints, the court stated, "usually do[] not put

an employer on notice of potential FCA litigation," id. at 945,

at least not without more.

Section 3730(h) does, to be sure, protect employees from

retaliation for activities preparatory to suit. See Luckey,

183 F.3d at 733; Neal v. HrmeJ1Veli, Inc., 33 F.3d 860,

863-64 (7th Cir.1994). But Kennedy does not allege, nor

can a reasonable inference be drawn from her allegations,

that Aventis was aware she was investigating possible false

claims. Specifically, there is nothing in Kennedy's complaint

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suggesting that she communicated to A ventis any awareness

or contention that false Medicare or Medicaid claims were

being made. In this regard, the Court does not believe it is

sufficient that Kennedy has alleged that she was aware, and

that A ventis separately was aware, that false claims were

being submitted by providers. Without more, the company's

alleged independent awareness of the submission of false

claims is insufficient to suggest that it believed Kennedy was

engaging in FCA-protected activity.

Kennedy's claim, interpreted liberally, could be read to suggest that even though she never suggested to A ventis her

awareness of any false claims, the company forced her out

because of concern that her complaints might result in the

uncovering of such claims. Were the Court writing on a clean

slate, it might conclude that such allegations are sufficient to

state an FCA retaliation claim. The Seventh Circuit, however,

has declined to read section 3730(h) this broadly.

In support of her claim, Kennedy relies on comments by

the D.C. Circuit in U.S. ex rei. Yesudian v. Howard Univ.,

153 F.3d 731, 741, 742 (D.C.Cir.l99R). A full reading of

that case, however, undermines Kennedy's reliance on it.

The court said in Yesudian that a plaintiff is not required

to show that she knew her investigation could lead to a suit

under the FCA and thus need not show that she told or

suggested to the employer that she was contemplating such

a suit. "What defendant must know," the court said, "is that

plaintiff is engaged in protected activity ... that is, activity that

reasonably could lead to a False Claims Act claim." !d. at 742.

This, Kennedy suggests, is essentially what she has alleged.

Yet the court in Yesudian went on to state that the employee

must show the employer was aware of her FCA-protected

activity and that "[m]erely grumbling to the employer about

job dissatisfaction or regulatory violations does not satisfy the

requirement-just as it does not constitute protected activity in

the first place." !d. at 743. And earlier in its decision, the court

unambiguously stated that to be covered by the FCA, "the

plaintiffs investigation must concern 'false or fraudulent'

claims." Id. at 740. Because Kennedy's allegations cannot be

read to suggest that her complaints to superiors had anything

to do with false claims to the government, her FCA claim is

legally deficient under governing Seventh Circuit law.

*4 Aventis argues, and Kennedy does not dispute, that the

identically-worded anti-retaliation provision of the IWRP A

should be interpreted the same way as the FCA in this regard.

For this reason, the Court's conclusion that Kennedy has

failed to state a retaliation claim under the FCA applies

equally to her claim under the IWRP A.

2. IW A claim (Count 9)

Kennedy's IW A claim is, as noted earlier, newly made in

her second amended complaint. Under the IW A, which took

effect on January I, 2004, "[a]n employer may not retaliate

against an employee for refusing to participate in an activity

that would result in a violation of a State or federal law, rule,

or regulation." 740 ILCS 174/20. Under a separate provision

of the statute, "[i]f an employer takes any action against an

employee in violation of Section 15 or 20, the employee

may bring a civil action against the employer for all relief

necessary to make the employee whole, including but not

limited to" reinstatement, back pay, and compensation for any

damages sustained, including litigation costs and attorney's

fees. 740 ILCS 174/30.

The IW A does not contain a definition of the word "retaliate."

In its motion to dismiss, A ventis argues that the IW A was

intended to codify the Illinois common law tort of retaliatory

discharge and that consistent with Illinois decisions regarding

the contours of that tort, the statute proscribes only discharge

of an employee, not other types of retaliation, and thus does

not apply to claims of constructive discharge like the one

Kennedy has made. See Hartlein v. Illinois Power Co., 151

Ill.2d 142, 163, 176 Ili.Dec. 22, 601 N.E.2d 720, 730 (1992)

(holding that claim for common law retaliatory discharge

does not encompass claims of constructive discharge).

Aventis cites a single Illinois case for the proposition that the

IWA was intended to codify the Illinois retaliatory discharge

tort, Sutherland v. Norfolk Southern Rv. Co., 356 Ili.App.3d

620, 292 III.Dec. 585, 826 N.E.2d 1021 (2005). Aventis

reads far too much into Sutherland. The case concerned a

common law claim involving conduct prior to the adoption

of the IWA, and lhus lhe court's discussion of the applicable

law involved the common law tort, not a statutory claim.

The court noted in passing-indeed, in a footnote-that "[t]he

'whistleblower' cause of action has since been codified in the

Whistleblower Act." !d. at 624 n. 4, 292 Ill. Dec. 585, 826

N.E.2d at 1026 n. 4. This can hardly be called a conclusion

that the statutory claim is coextensive with the common law

tort, particularly when the case did not even involve a claim

under the IW A. Indeed, in a later decision, a different district

of the Illinois Appellate Court stated lhat the IW A does not

preempt the common law tort, in part because the statute

does not cover as broad a range of employee conduct as the

common law tort, and in part because it provides greater

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protections. Callahan v. Edgewater Care & Rehabilitation

Center, Inc., 374 III.App.3d 630, 634-35, 313 Ill.Dec. 568,

872 N.E.ld 551,571 (2007).

*5 The bigger problem with Aventis' argument is that it is contrary to principles of statutory construction that

Illinois courts follow. The statute proscribes "retaliat[ion],"

not "retaliatory discharge." Illinois courts (like other courts) regard statutory language as "the best indication of

[legislative] intent." Met=ger v. DaRosa, 209 Ill.2d 30,34-35,

282 lll.Dec. 148, 805 N.E.2d 1165, 1167 (2004). Statutory

language "must be afforded its plain, ordinary, popularly understood meaning." People ex rei. Shennan v. Ci)'flS, 203

Tll.2d 264. 279, 271 lll.Dec. 881, 786 N.E.2d 139, 151

(2003). When the language of a statute is unambiguous, it

must be applied as written, without resort to other tools of

construction. Lawrence v. Regent Realty Group, Inc., 197 lll.2d l, 10, 257lli.Dec. 676,754 N.E.2d 334,339 (2001).

A corollary of these principles is that a court may not depart

from the plain language of a statute "by reading into it

exceptions, limitations, or conditions not expressed by the

legislature." /d. The common meaning of"retaliate" includes

all sorts of adverse action other than termination. Reading

the statute to apply only to a particular form of retaliationdischarge-would violate these basic principles of Illinois

statutory construction.

The Court also notes that although the provision of the

IWA describing the relief a prevailing plaintiff may obtain

identifies reinstatement and back pay, it specifically says that relief is not "limited to" such remedies. Rather, the statute

entitles a prevailing employee "to all relief necessary to make

the employee whole." 740 ILCS 174/30. A commonsense

End of Document

reading of this section of the IW A supports the Court's conclusion that the statute's anti-retaliation provision is not

limited to cases involving actual discharge.

A ventis also argues that Kennedy has not sufficiently alleged

that she actually refused to participate in allegedly illegal activity. But in her complaint, Kennedy alleges exactly

that: "Defendant Aventis retaliated against Ms. Kennedy for

refusing to participate in activities that would result in a

violation of State or Federal laws, rules, or regulations." 2d

Am. Compl. ~ 80. Nothing in federal pleading standards requires her to allege anything more than this to state a claim;

in particular, there is no requirement that a plaintiff in an

IW A retaliation case plead with particularity exactly what

illegal conduct she refused to participate in. A ventis also

argues that Kennedy has failed to identify anyone similarly

situated who was treated differently. This argument borders

on the frivolous as part of a Rule 12(b)(6) motion; Aventis

cites no authority, and the Court is aware of none, imposing

this as a pleading requirement in any sort of employment

discrimination I retaliation case.

Conclusion

For the reasons stated above, the Court grants A ventis' motion

to dismiss in part and denies it in part [docket no. 104]. The Court dismisses Counts 7 and 8 of the second amended

complaint for failure to state a claim but denies Aventis'

motion as to Count 9. The Court directs A ventis to answer

Count 9 by no later than February 21,2008. The case remains

set for a status hearing on March 7, 2008 at 9:30a.m.

© 2012 Thomson Reuters. No claim to original U<S. Government Works.

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Pillay v. Millard Refrigerated Services, Inc., Slip Copy (2012)


United States District Court, N.D. Illinois,

Eastern Division.

A. Samson PILLAY and A.othony Ramirez. Plaintiffs,

v.

MILLARD REFRIGERATED

SERVICES, INC., Defendant.

No. 09-cv-5725. Sept. 28, 2012.


John Craig Ireland, The Law Firm of John C. Ireland, Aurora,

IL, for Plaintiffs.

Joanne Marie Rogers, ~tare F. Katalinic, Kevin M. Phillips, Nielson, Zehe & Antas, P.C., Chicago, IL, for Defendaot.

Opinion


JOAN HUMPHREY LEFKOW, District Judge.

*I A. Samson Pillay ("Pillay") and Anthony Ramirez

("Ramirez") filed this law suit against Millard Refrigerated

Services, Inc. ("Millard") alleging claims under the

Americans With Disabilities Act ("ADA"), 42 U.S.C. * * 12102 et seq. 1 and several Illinois law claims. Ramirez alleges employment discrimination in violation of the ADA

(count I) and retaliatory discharge under Illinois law (count

Ill). Pillay alleges retaliation in violation of the ADA (count

II) and state law claims of retaliatory discharge (count IV), libeVslander (count V), tortious interference with a prospective contract (count VI), and negligent spoliation

(count VII). 2 Millard has moved under Federal Rule of Civil

Procedure 56 for partial summary judgment as to counts I, H, IV, V, aod VI. [Dkt. 82.] For the reasons explained below, the

motion is denied with respect to counts I and II and granted

with respect to counts IV, V, and VI. 3

Effective January 1, 2009, the ADA was significantly

amended. See ADA Amendments of 2008, Pub.L. No.

110-325, 122 Stat. 3553 (2008). Because Congress

"did not express its intent for these changes to apply

2

3

4

retroactively," the court will apply the version of the

ADA in place when the events that gave rise to the claims

at issue took place. See Fredricksen v. (Jnited Parcel

Sen•., Co., 581 F.3d 516, 521 n. 1 (7th Cir.2009).

This court has jurisdiction over these claims pursuant

to 28 U.S.C. § 133\ and 28 U.S.C. § 1367. Venue is proper under 28 U.S.C. § 1391 (b) as the parties reside in

this district and the events that gave rise to Ramirez and

Pillay's claims occurred in this district.

In order to maintain a claim under the ADA, a plaintiff

must file charges with the EEOC within 300 days

of the alleged unlawful employment practice. Stepney

v. Naperville Sch. Dist. 103, 392 F.Jd 236, 239 (7th

Cir.2004 ). Ramirez and Pillay both brought charges with

the EEOC based on the conduct giving rise to their ADA

claims within this time period.

FACTUALBACKGROUND 4

The facts are stated in the light most favorable to Ramirez

and Pillay, and are taken from the parties' statement of

facts and supporting documents pursuant to Local Rule

56.1. Millard's statements of facts are abbreviated as

Def. L.R. 56.1, and its response to Ramirez and Pillay's

statements of facts are abbreviated as Def. Resp. to Pl.

L.R. 56.1. Ramirez and Millard's statements of facts are

abbreviated as Pl. LR. 56.1.

Millard is a third party logistics company that warehouses

its customers' perishable products ln a refrigerated or frozen

environment. (Def. L.R. 56.1 ~ 3.) Millard does not own any

of the products; rather, it receives and stores those products

for a fee and then ships them elsewhere as directed by

its customers. (!d. ~ 4.) In 2000, Pillay began working at

Millard's facility in Geneva, Illinois as a Human Resources

Coordinator. (ld. ~ 30.) Ramirez began working at Millard's

Geneva facility beginning in 2008 as a temporary employee

aod later as a "regular" (as opposed to temporary) employee.

(!d.~ 9.)

Anthony Ramirez

Before working at Millard, Ramirez worked at Home Depot

as part of a freight team, stocking shelves after business hours.

(Def. L.R. 56.1 ~ 6.) In October2007, while working at Home

Depot, Ramirez suffered an on-the-job injury to his knee,

which required surgery. (/d.) Ramirez was off work for a

period of three months. (I d. ~ 7.) By the time he returned to

work at Home Depot, Ramirez had made a complete recovery.

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(Id.) He could do everything he had been able to do before

the injury. (/d.)

In connection with the injury, Ramirez filed a Worker Compensation ("WC") claim and received a settlement in the amount of $12,000. (Def. L.R. 56.1 116.) After submitting

his WC claim, the Illinois Industrial Commission ("IIC")

informed Ramirez that he had a 17.5 percent disability (or

17.5 impairment rating). (Id . 11 17.) In February 2008,

approximately a month and a half after returning to work, Home Depot terminated Ramirez due to his failure to report an accident involving damage to merchandise. (Id. ,-r 8.)

During June, 2008, Ramirez was hired for a position at

Millard through a temporary employment agency. (Def. L.R.

56.1 119; Pl. L .R. 56.11116.) As a temporary employee,

Ramirez worked as a "picker," a position which entailed using an electric pallet jack or forklift to fulfill orders of refrigerated

or frozen products to be shipped. (Def. L.R. 56.1 11 9.) On his June 2008 employment application, Ramirez indicated

that be would be "able to consistently and reliably perform

the essential functions of the job with or without reasonable accommodation." (Id.11ll.) The application did not ask about any prior work-related injury. (!d.)

*2 Temporary employees who performed satisfactorily were eligible for regular employment with Millard. (Def. L.R.

56.11110.) Applicants were required to fill out a Personal and Confidential Conditional Job Offer & Medical Review Form

("Conditional Job Offer Form"). (!d.) Ramirez had received

good reviews as a temporary employee (Pl. L.R. 56.1111117-

18), so he applied for a regular position.

In his Conditional Job Offer Form, Ramirez disclosed that

while working for Home Depot he had suffered an on-thejob injury to his knee which required three months off work and that he had filed a we claim in connection with that injury. (Def. L.R. 56.1 11 14, Exhibit ("Ex.") F.) Ramirez

further provided on his application that he had no (0 percent) permanent disability resulting from the October 2007 injury.

(Id.) On July 28, 2008, Millard hired Ramirez as a regular

employee. (!d. 1112.) Ramirez was then reassigued to a new

position operating a forklift. (Pl. L.R. 56.11121.)

Ramirez, like other new hires, was subject to a 90 day probationary period. (Def. L.R. 56.11112.) The purpose of the

probationary period was to allow the employee time to adjust to his or her new position while providing the supervisor an opportunity to assess the employee's suitability to the position

and to verify information provided on the Conditional Job Offer Form. (Id. 1111 14, 28.) Moreover, Millard employed

a labor management system ("LMS") to track its warehouse employees' productivity and performance, which it would then measure against its own performance standards. (/d. ~

26.) Millard advised Ramirez that it expected his productivity to be between 95 and 98 percent. (!d. 1127.) Millard expected

a performance level of 100 percent for its employees. (!d.)

Probationary employees at Millard were held to a higher standard of conduct. (Id. 11 28.) Ramirez was told that his

performance and LMS numbers were great. (Pl. L.R. 56.111

21.)

Ramirez's Conditional Job Offer Form was sent to Millard's headquarters in Omaha, Nebraska. (Pl. L.R. 56.1 11 22.)

Rachel O'Dell, a Claims Risk Management Specialist for

Millard at headquarters, reviewed Ramirez's Conditional Job Offer Form. (Def. L.R. 56.1111fl8-19.) O'Dell recoguized that

missing three months of work as the result of a knee injury indicated that the injured worker had undergone surgery and that, in Illinois, an injury requiring surgery would not yield a zero percent impairment rating as Ramirez had indicated on his Conditional Job Offer Form. (ld.1120.)

O'Dell advised either Mark Domroes, General Manager of the Millard Plant in Geneva, or Pillay that Ramirez had an impairment rating assigned by the ICC which he did not

indicate in his Conditional Job Offer Form. (Def. L.R. 56.1

11 22.) On August 20, 2008, Domroes emailed Nick Dayan,

Mi1lard's Senior Vice President of Human Resources:

Don't forget about Anthony Ramirez. We discussed he was an injury risk, had a 13 wk settlement from a

previous job and was rated 17.5% perm disability. Is he someone we want to probation out now? (hired 7/28)

*3 (Pl. L.R. 56.111116-7.) Dayan responded to Domroes the

same day, "We have this all documented right? ... Let's get him out asap." (Id. 117 .) Dayan testified that his response to

Domroes' email was in reference to a separate conversation regarding Ramirez's performance. (Def. Resp. to Pl. L.R. 56.1 11 8.) During his deposition, Domroes explained his

understanding of the 17.5 percent disability rating referenced in his email to Dayan:

This information was supplied to me by Sam, Sam Pillay. So he had brought

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it to my attention that he had found out

that this person was-like I said, was previously injured, had a permanent

disability, he was a recent new hire. And my understanding was that it was

not put on his application. I don't know

-I can't speak for Sam. I don't know

that we would have hired someone if

that was known up front just because

of the physical requirements for the job and having to lift and twist and,

you know, that would have probably

had to potentially gone through our corporate office. So that was brought

to my attention, so I wanted to run it up the ladder. I was not going to make

a decision to keep him or not keep him. So my question basically to Nick

was giving him the facts, just saying

that, hey, this gentleman has come here with some physical limitations, he's a

new hire, he's still on probation, you

know, he's a probationary employee.

So my understanding under Illinois

law, that, you know. you can be let

go for any reason whatsoever. And the

second email was from Nick telling me

to-instructing me to let him go.

(Def. L.R. 56.1, Ex. B, Domroes Dep. at 25-26.) Domroes

testified about physical abilities that he believed Ramirez was

lacking:

To be honest with you, in looking at the e-mail, and again

I told you I did not recall whether this was legs or arms,

but, you know, the-there's lifting involved with the jobs,

especially new hires traditionally have put-are put into

a picking role. That is the probably-[ don't necessarily

want to say an entry level, because we fill employees where

they're needed. But case pickers are in the freezer for the

longest period of time, so it's the roughest, so you kind of

graduate out onto the docks of loading and unloading as

you get with experience, and you're operating a piece of

equipment which takes more skill.

So, you know, to operate a piece of equipment, you need

a skill set with, you know, a fully functioning-! mean, if

you're limited in any capacity, and I'm not a doctor, I don't

know what 17-and-a-half percent means. But if there's a

potential there that he can't steer the forklift properly or

brake properly, that he can't manage that, that is a potential

risk to other employees. Lifting requirements, I believe it

was at least 25 pounds, if not up to 50 pounds, that they're

required to lift, so that could be a potential if he's-he

could injure himself. If he was favoring one arm or one

leg, he might put undue duress on another part of the body

and then potentially risk injuring himself. So I believe that

the thought process behind that was to avoid a potential

workers' comp claim and injury to himself and/or others.

*4 (Def. L.R. 56.1, Ex. B, Domroes Dep. at 27-28; Pl.

L.R. 56.1 ~ 4 .) With regard to the decision to terminate

Ramirez, Domroes explained that '"we've had terminations

for performance and-but in this case, this wasn't really

performance related directly, it was about his-his ability to

do the job and his injury, previous injwy ." (Def. l..R. 56.1,

Ex. B., Domroes Dep. at 41.)

On August 21, 2008, after approximately four weeks on the

job, Ramirez had a performance level of 59 percent, which

was lower than Millard's claimed performance expectation

level of 100 percent. (Def. l..R. 56.1 ~ 29, Ex. J.) Millard

terminated Ramirez on August 21, 2008. (Def. l..R. 56.1 ~

28.) Millard provided Ramirez with a "Termination Report"

which checked a box titled "PROBATIONARY PERIOD;

NO MISCONDUCT" denoting the reason for his termination.

(Pl. L.R. 56.1 ~ 26, Ex. 16.) The Termination Report did

not reference Ramirez's LMS-determined performance level

as the reason for his termination. (/d.) In August 2009,

the raw data used to create Ramireis LMS numbers were

automatically deleted. (Pl.l..R. 56.1 ~ 32.)

A. Samson Pillay

Millard hiredPillay on April!?, 2000 as a Human Resources

Coordinator. (Def. L.R. 56.1 ~ 30.) Part of Pillay's duties

included being involved in hiring and firing. (!d.) He

"administered" terminations based on the recommendations

of supervisors, the operations manager, or the General

Manager. (Id. ~ 31.) From 2000 to 2008, Pillay received

good/great performance reviews in addition to pay raises and

bonuses. (Pl. L.R. 56.1 ~ 11.) Pillaydidnot work with or know

Ramirez when Ramirez worked at Home Depot. (Def. L.R.

56.1 ~ 65.)

Dayan began working at Millard in its corporate headquarters

on March 17, 2008. (Def. L.R. 56.1 ~~ 32, 34.) Shortly

thereafter, Dayan reviewed a complaint dated March 7, 2008

about Pillay. (Id. ~ 35.) On March 26, 2008, Dayan received

another complaint that referred to Pillay. (!d. ~ 37.) In

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March and April 2008, Dayan visited the Geneva facility, at

which time he received numerous verbal complaints about Pillay. (ld. '!I 40.) The complaints were directed to Pillay's

(I) lack of confidentiality in his HR role; (2) discouraging/

warning employees about attempting to contact corporate headquarters; (3) withholding freezer gear from employees;

(4) mean, disrespectful and abusive treatment of employees; and ( 5) general unapproachability. (Jd.) Dayan discussed

these complaints with Pillay and decided in collaboration with Domroes that Pillay would be placed on a perfonnance improvement plan ("PIP"), the goal of which was to make

Pillay a better employee by addressing deficiencies identified in his performance. (/d. '!1'!1 4546.) The PIP identified a

number of areas of needed improvement, including (1) confidentiality; (2) favoritism; (3) hiring; (4) communication;

and (5) employee development. (!d. '!I 45.) The PIP also

required Pillay to complete the program and to maintain sustained results after the program's completion. (!d. '!I 46.)

Pillay did not believe that the PIP was merited (Pl. L.R.

56.1 '!I 13) and disagreed with the terms contained therein.

(Pl.L.R.56.1, Ex. 12.) Millard had received complaints

about other Millard employees during 2007, but only

Pillay received disciplinary repercussions. (Pl. L.R. 56.1 '!I 36.) Specifically, Dayan reviewed prior complaints about Operations Manager Mike Polerecky and Domroes. (Def. L.R. 56.1 '![42; Pl. L.R. 56.1 '![36.)

*5 The PIP went into effect on May 5, 2008 (Def. L.R. 56.1 '!I 49) for a ninety-day period, setting a schedule ofthree follow

up meetings every thirty days. (Pl. L.R. 56.1 '![14.) On June

2, 2008, Domroes and Pillay had a PIP follow-up meeting,

at which time Domroes concluded that "[Pillay) has achieved

the required improvements." (!d.) On August I, 2008, the

PIP expired (id. '![15); however, the PIP required "sustained

results" for continued employment. (Def. L.R. 56.1 '![46.)

During August 2008, Dayan received additional complaints from other Millard employees about Pillay. (Def. L.R. 56.1

'!I 60(a)-(h) .) 5 At about this same time, Pillay requested

documentation regarding Ramirez's termination, and on August 21, 2008, Domroes forwarded Pillay the August 20,

2008 email between himself and Dayan concerning Ramirez. (Pl. L.R. 56.1 '![24.) Pillay met with Dayan and alleges that

they had a heated argument during which Pillay protested

Ramirez's termination. (!d. '!1'!1 25-26.) Pillay testified that

he told Dayan that terminating Ramirez because he had a disability and had filed a WC claim was illegal. (!d. '![25.)

Despite his protest, Pillay alleges that Dayan ordered him to

terminate Ramirez. (ld. '![26.)

5 Although made in August, some of the complaints were not documented until after Pillay was fired on August 26,

2008. (Pl. L.R. 56.1 ~ 29.)

Millard, on the other hand, disputes that Pillay ever objected

to Ramirez's termination. (Def. L.R. 56.1 ~ 56.) Domroes

testified during his deposition:

I do not recall what stance Sam took. I know-so I-I remember we had some conversations about whether to keep him or not, and then it was something that wasneither one of us were willing to make that call, you know, 'What should we do in this case? It's come to our attention that he has some permanent disability that may affect his ability to perform. He could be a safety risk to himself

and others. And what should we do?' And !-if-and from

seeing this email, I know Sam wasn't going to do anything without getting something in writing from Nick, and that's why I forwarded that.

(Def. L.R. 56.1, Ex. B, Domroes Dep. at 4344.) Dayan

disputed that a heated argument took place with Pillay

(Plf. L.R. 56.1 '!I 27) and denied that Pillay objected to

Ramirez's being tenninated. (Def. L.R. 56.1 ~ 57.) Dayan

claimed that Pillay actually recommended that Ramirez be terminated along with other employees who needed to be disciplined or terminated. (!d. '!I 57.) In explaining its

rationale for firing Pillay, Dayan stated that because the PIP required "sustained results" for continued employment and in light of the additional complaints concerning Pillay,

Dayan recommended that the Millard Executive Committee terminate Pillay's employment. (/d. '!1'!1 61, 66-<i7.) The

Executive Committee concurred with Dayan, and on August 26,2008, Millard terminated Pillay. (!d. '![61.) Pillay was not

given the reason for his termination at this time. (Pl. L.R. 56.1 '![28.)

Union Petition Rumored for several months beforehand, on August 1, 2008, a union petition was circulated at Millard's Geneva facility. (Def. L.R. 56 .I '!1'!1 39, 41, 50.) In response to

the union petition, Dayan traveled to the Geneva facility to meet with management staff to prepare for the union campaign and upcoming election. (/d.) Pillay's termination occurred in the midst of this union election. (Pl. L.R. 56.1

'!I 34.) All managers in place at the time of the union

campaign were subsequently terminated. (Def. Resp. to Pl. L.R. 56.1 '![36.) Prior to the union campaign, on July 4, 2008,

Millard terminated Assistant GM Carlos Mamarian, and in

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December 2008, Millard fired Office Manager Peter Trinidad.

(Jd. ~ 38.) Domroes testified duriog his deposition that he

believed that he and Pillay were made "scapegoats" for the

union campaign. (Def. L.R. 56.1 ~ 53.) Although Millard

terminated Domroes and Polerecky several months after firing Pillay, Domroes explained that Pillay's termination

was accelerated because his name came up negatively and

repeatedly, and he was "associated in a bad light with a lot of

the employees." (I d.)

Post Termination

*6 On September 15, 2008, Pillay sent Millard a demand

letter requesting compensation for his termination which,

Pillay wrote, was premised on his protests against Ramirez's

termination. (Pl. L.R. 56.1 ~ 30.) On September 26, 2008,

Millard responded to Pillay's letter, writing that Pillay's

termination was for "good, valid, and lawful reasons" and

that "[a]t no time during Mr. Pillay's employment did Millard

ever instruct Mr. Pillay to violate, disregard or contravene any

federal or state labor laws or any other laws, nor did Millard

terminate Mr. Pillay's employment because he refused to

violate any such laws." (Pl.L.R.56.1, Ex. 7.)

In December 2008, Ramirez and Pillay filed claims with the

Equal Employment Opportunity Commission ("EEOC"). (Pl.

L.R. 56.1 ~ 31, Ex. 8; Def. L.R. 56.1, Ex. U.) On January 16,

2009, Millard responded to the charges that Ramirez lodged

with the EEOC, denying that it "conducted or committed

unlawful discrimination on the basis of disability or in

retaliation." (Pl.L.R.56.1, Ex. 8.) Millard further contended

that Ramirez's termination resulted from his unacceptable

LMS performance rating (i.e., 59 percent) during his tenure as

a probationary employee. (Pl.L.R.56.1, Ex. 8.) On January 21,

2009 Millard responded to Pi!lay's EEOC charge, stating that

Pillay's poor performance as HR manager, taken together with

his failure to improve that poor performance and continued

improper and unacceptable treatment of employees, resulted

in his termination. (Pl. L.R. 56.1 ~ 31, Def. L.R. 56.1, Ex. U.)

Following his termination from Millard, Pillay interviewed

for positions with the Bartlett Park District and Grohe

America but was not offered employment at either. (Def. L.R.

56.1 n 6!1--70.) Sometime after he was denied a position

with the Bartlett Park District or Grobe America, Pillay

sent Millard a "request for employment verification" from

Reliance Data Corp. (a fictitious company). (I d.~ 71.) Millard

replied and provided incorrect dates of employment for

Pillay, stating that Pillay's employment dates spanned from

December I, 2000 to August 25, 2008 (when Pillay had in

fact been hired on Aprill7, 2000). (Jd. ~ 71, Ex. 19.) Pillay

never contacted the Bartlett Park District or Grobe America

to determine whether Millard provided accurate dates of his

employment. (Jd. ~~ 71, 73.) Pillay is currently employed by

Sears where he works in the HR department. (Jd. 1[75.)

SUMMARY JUDGMENT STANDARD

Summary judgment obviates the need for a trial where there

is no genuine issue as to any material fact and the moving

party is entitled to judgment as a matter oflaw. Fed.R.Civ.P.

56( a}. To determine whether any genuine fact exists, the court

must pierce the pleadings and assess the proof as presented

in depositions, answers to interrogatories, admissions, and

affidavits that are part of the record. Fed.R.Civ.P. 56( c) &

advisory committee notes ( 1963 amend.) While the court

must construe all facts in a light most favorable to the non

moving party and draw all reasonable inferences in that

party's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

255, 106 S.Ct. 2505.91 L.Ed.2d 202 (1986), where a claim

or defense is factually unsupported, it should be disposed of

on summary judgment. Celotex Corp. v. Catrett, 477 U.S.

317. 323~24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The

party seeking sunnnary judgment bears the initial burden of

proving there is no genuine issue of material fact. !d. at 323. In

response, the non-moving party cannot rest on bare pleadings

alone but must use evidentiary tools listed above to designate

specific material facts showing that there is a genuine issue

for trial. Jd.; lnsolia v. Phillip Morris Inc., 216 F .3d 596, 598

(7th Cir.2000). "Summary judgment is not appropriate 'ifthe

evidence is such that a reasonable jury could return a verdict

for the nonmoviog party.' "Payne v. Paule)'. 337 F.3d 767,

770 (7th Cir.2003) (quoting Anderson. 477 U.S. at 248)).

DISCUSSION

I. Ramirez and Pillay's Motion to Strike *7 Before delving into the merits of the parties' motions,

the court must address numerous objections raised in Ramirez

and Pillay's motions to strike portions of Millard's statement

of material facts submitted pursuant to Northern District of

Illinois Local Rule 56.1. [Dkts. 90; 91; 92.]

Ramirez and Pillay first move to strike eight exhibits (Exs.

L, M, N, 0, P, T, V, and W) [Dkt. 90] attached to

Millard's statement of facts, arguing that these documents

are inadmissible hearsay for which the proper foundation has

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Pillay v. Millard Refrigerated Services, Inc., Slip Copy {2012)

not been laid. These documents consist of complaints lodged

by Millard employees against Pillay. "Sworn testimony is

not the only basis on which summary judgment may be

granted; rather, the court may consider any material that would be admissible or usable at trial, including properly authenticated and admissible documents or exhibits." Woods

v. City ~f Chicago, 234 F.3d 979, 988 (7th Cir.2000)

(citations and quotations omitted). Although Dayan refers to

the substance that gave rise to these complaints in his affidavit

submitted to the EEOC in 2009 (Def.L.R.56.1, Ex. K), he

did not specifically authenticate these exhibits in his EEOC

affidavit. Millard also failed to submit an affidavit or any

evidence authenticating Exhibits L, M, N, 0, and P (all of

which concern anonymous complaints regarding Pillay) and,

accordingly, they will be stricken. 6 See Fed.R.Civ.P. 56( c)

(4); Fed.R.Evid. 901.

6 That Millard failed to authenticate these documents for

purposes of summary judgment does not mean that they

will not be admitted as evidence at trial.

Exhibits T, V, and W are acknowledged complaints either

sent to or requested by Dayan concerning Pillay. Specifically,

Exhibits T and Ware signed handwritten complaints; Exhibit

V is an email sent to Dayan. Although Millard failed to raise

this argument, after reviewing Dayan's deposition transcript,

this court finds that his testimony authenticates these exhibits.

(See Def. L.R. 56.1, Ex. 1.) Ramirez and Pillay further argue

that these exhibits and Dayan's 2009 EEOC affidavit [see

Dkt. 91] that references these exhibits should be struck as

they constitute inadmissible hearsay. Millard, however, offers

the statements for the non-hearsay purpose of proving that

complaints were made, corroborating Millard's position that

it terminated Pillay as a result of receiving complaints. See

Pannizi v. City ol Chicago Bd. oj'Educ .. No. 07 C 846, 2007

WL 4233755, at *5 (N.D.IIl. Nov.l9, 2007) (statements and

letters were admissible at summary judgment for non-hearsay

purpose of showing that complaints about the plaintiff were

made to school officials). Accordingly, Exhibits T, V, W, aod

Dayao's 2009 EEOC affidavit will not be struck.

Ramirez and Pillay next move to strike the affidavit of

Rachelle O'Dell. [Dkt. 91]. They claim that Millard failed to

identifY O'Dell in its initial Federal Rule of Civil Procedure 26

disclosures, and that her affidavit contains hearsay. Rule 26(a)

provides that "a party must ... provide to the other parties ...

the name ... of each individual likely to have discoverable

information-along with the subjects of that information[.]"

Fed.R.Civ.P. 26(a)(I)(A)(I). Rule 26(e) further imposes a

duty to supplement Rule 26(a) disclosures "in a timely

manner if the party learns that in some material respect

the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise

been made known to the other parties during the discovery

process or in writing." Fed.R.Civ.P. 26(e)(li(A) (emphasis

added). Rule 3 7 sets forth sanctions for failing to comply

with the rule, stating "[i]f a party fails to provide information

or identifY a witness as required by Rule 26(a) or (e), the

party is not allowed to use that information or witness to

supply evidence on a motion." Fed.R.Civ.P. 37{c){l). As

Millard notes, O'Dell had been repeatedly identified by both

sides throughout discovery, in deposition testimony, and

in Pillay's answers to interrogatories. As both parties had

identified O'Dell as a potential witness during discovery,

the court declines to strike her affidavit for non-compliance

with Rule 26. See Fed.R.Civ.P. 26(e)(I)(A). Ramirez aod

Pillay also move to strike the following portion of paragraph

six of O'Dell's affidavit based on hearsay: "Millard's [WC]

counsel was able to conftrm Mr. Ramirez did, in fact,

have an impairment rating assigned by the Illinois Industrial

Commission." Millard did not respond to this argument, and

this portion of O'Dell's affidavit will be struck as hearsay.

*8 Ramirez and Pillay last request that the court strike that

part of Millard's statement of facts that does not consist of

short numbered paragraphs, and contains legal arguments in

violation of Local Rule 56.1. [Dkt. 92.] Having considered the

specific paragraphs that Ramirez and Pillay argue violate this

rule, the court denies their motion to strike on this basis. To

the extent that Millard's statement of facts contains improper

legal conclusions, the court will disregard them.

II. Ramirez's ADA Discrimination Claim

Ramirez claims that Millard violated the ADA by terminating

his employment based on a perceived disability. '"The ADA

prohibits an employer from discriminating against a qualified

individual with a disability." Kersting v. Wal-Mart Stores,

Inc .. 250 F.3d II 09, 1115 (7th Cir.200 I )(quotations omitted).

"Congress enacted the ADA 'against a backdrop of pervasive

unequal treatment ... including systematic deprivations of

fundamental rights' that people with disabilities were forced

to endure." Dickerson v. Bd. ofTrs. ofComm. Col/. Dist. No.

522, 657 F.3d 595, 600 (7th Cir.2011) (quoting Tennessee

v. Lane, 54! U.S. 509. 524, 124 S.Ct. 1978, !58 L.Ed.2d

820 (2004)). To establish disability discrimination in order

to defeat a motion for summary judgment, a defendant must

prove that there is no genuine issue of material fact and

the plaintiff must prove that "(I) [he] is disabled within

the meaoing of the ADA, (2)[he] is qualified to perform

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the essential functions of the job, either with or without a reasonable accommodation, and (3)[he] suffered from an

adverse employment action because of his disability." Hoppe

v. Lewis Univ., No. 11-3358, 2012 WL 3764717, at *4

(7th Cir. Aug.31, 2012). A plaintiff can establish disability

discrimination through the direct method or indirect method

of proof. Dickerson. 657 F.3d at 60 I.

Direct Method of Proof Under the direct method, a plaintiff can rely on direct or circumstantial evidence to meet his burden. Dickerson,

657 F.3d at 601. "Direct evidence requires an admission by the decision maker that his or her actions were based upon the prohibited animus." /d. "A decisionmaker is the person responsible for the contested decision." Rogers v. City

of Chicago. 320 F.3d 748, 754 (7th Cir.2003) (quotations omitted). "The most common example of direct evidence is a

statement by the decision-maker that betrays a discriminatory

intent." Walker v. Bd. of Regents ~f Univ. of Wis. Sys .. 410

F.3d 387, 394 n. 7 (7th Cir.2005 ). A plaintiff can also rely

on circumstantial evidence to survive summary judgment,

namely, "(1) suspicious timing~ (2) ambiguous statements or behavior towards other employees in the protected group;

(3) evidence, statistical or otherwise, that similarly situated

employees outside of the protected group systematically

receive better treatment; and (4) evidence that the employer offered a pretextual reason for an adverse employment

action." Dickerson, 657 F.3d at 601. Using circumstantial

evidence, a plaintiff can present "a convincing mosaic ...

that would allow a jury to infer intentional discrimination by

the decisionmaker." Silverman v. Bd. of Educ. of the City

of Chicago. 637 F.3d 729, 734 (7th Cir.2011) (quotations omitted).

*9 Ramirez proceeds under the direct method of proof

relying on the August 20, 2008 email exchange between

Domroes and Dayan sent the day before Millard terminated Ramirez, in which Domroes stated that Ramirez ··was rated

17.5% perm disability" to which Dayan responded, "We

have all of this documented right? ... Let's get him out

asap." (Pl. L.R. 56.1 ~ 7.) Dayan, as head of human resources

for Millard, was the ultimate decision maker with regard

to terminating Millard employees with less than two years

of service (i.e .. Ramirez). (Def. L.R. 56.1 ~ 58.) Dayan's

response to Domroes' email is direct evidence that Millard

terminated Ramirez because of a perceived notion that he had

a disability, conduct which the ADA specifically proscribes. Domroes also corroborated this notion:

So my question basically to Nick

[Dayan] was giving him the facts,

just saying that, hey, this gentleman

has come here with some physical

limitations, he's a new hire, he's

still on probation, you know, he's

a probationary employee. So my understanding under Illinois law, that,

you know, you can be let go for any reason whatsoever. And the second

email was from Nick telling me to-

instructing me to let him go.

(Def. L.R. 56.1, Ex. B, Domroes Dep. at 27-28.)

Domroes' testimony, at a mm1mum, evidences a

discriminatory intent. Namely, Dayan and Domroes' email conversation occurred one day before Millard terminated

Ramirez. In addition to this suspicious timing, Domroes

further expounded on his belief that Ramirez's prior

injury may have precluded him from working at Millard's

warehouse, and ultimately precipitated his termination.

Specifically, Domroes testified:

So, you know, to operate a piece of equipment, you need a skill set

with, you know, a fully functioning-!

mean, if you're limited in any capacity, and I'm not a doctor, I don't know

what 17-and-a-half percent means.

But if there's a potential there that he

can't steer the forklift properly or brake

properly, that he can't manage that, that

is a potential risk to other employees.

Lifting requirements, I believe it was at least 25 pounds, if not up to 50

pounds, that they're required to lift,

so that could be a potential if he's

-he could injure himself. If he was

favoring one arm or one leg, he might

put undue duress on another part of the

body and then potentially risk injuring

himself. So I believe that the thought

process behind that was to avoid a

potential workers' comp claim and

injury to himself and/or others.

(Def. L.R. 56.1, Ex. B, Domroes Dep. at 27-28.) With regard

to the decision to terminate Ramirez, Domroes explained that

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"we've had terminations for performance and-but in this

case, this wasn't really performance related directly, it was

about his-his ability to do the job and his injury, previous

injwy." (/d. at 41.) Thus, the documentary and testimonial

evidence raises sufficient factual questions from which a

reasonable jury could find that Millard had a discriminatory motive in terminating Ramirez. Millard's motion for partial

summary judgment with respect to count I is thus denied. 7

7 Unlike the indirect burden shifting approach, once a

plaintiff makes a showing of discrimination using the

direct method in response to a summary judgment

motion, the employer is not given the opportunity to

rebut the discriminatory reason. See Silverman, 637 F.3d

at 734 n. 3 ("Once a plaintiff produces such evidence

[under the direct method], the defendant's summary

judgment motion necessarily must fail, in contrast to

the burden-shifting approach of the indirect, McDonnell

Douglas method.").

III. Pillay's ADA Retaliation Claim *10 Pillay claims that Millard violated the ADA by

terminating Pillay's employment after he protested Ramirez's

termination. The ADA states that "[n]o person shall

discriminate against any individual because such individual

has opposed any act or practice made unlawful by this chapter

or because such individual made a charge, testified, assisted, or participated in any manner in an investigation, proceeding,

or hearing under this chapter." 42 U.S.C. § 12203(a). Similar

to establishing an ADA discrimination claim, a plaintiff bringing an ADA retaliation claim may rely on the direct or

indirect method of proof. Dickerson, 657 F.3d at 601.

A. Direct Method of Proof

To establish unlawful retaliation under the direct method,

a plaintiff must present evidence showing "(1) a statutorily

protected activity; (2) an adverse action; and (3) a causal connection between the two." Squibb v. Afem .. Med. Ctr.,

497 F.3d 775. 786 (7th Cir.2007) (quotations omitted). Pillay

argues that he has provided direct evidence of retaliation.

i) Whether Pillay Engaged in A Statutorily Protected

Activity

Pillay argues that he engaged in statutorily protected activity

by protesting against Ramirez's termination. "[A ]n informal

complaint may constitute protected activity for purposes of

retaliation claims." Casna v. City of Loves Park, 574 F.3d

420, 427 (7th Cir.2009). The parties disagree about whether

Pillay protested Ramirez's termination. Pillay argues that after

hearing about Millard's decision to terminate Ramirez he

requested documentation at which time Domroes fotwarded

Pillay his August 20, 2008 email correspondence with Dayan

on this subject. (Pl. L.R. 56.1 ~ 24.) Pillay testified that he

then confronted Dayan protesting Ramirez's termination was

premised on an illegal motive. (/d. 11'1!25-26.) Millard denies

that Pillay argued against Ramirez's termination and further

argues that Pillay advocated for Ramirez's termination. (Def.

L.R. 56.1 ~ 56.) Although the parties dispute that this conversation took place, sufficient questions for the trier

of fact exist as to whether Pillay engaged in a statutorily

protected activity by protesting Ramirez's termination. See,

e.g .• Payne. 337 F.3d at 773 ("Where the material facts

specifically averred by one party contradict the facts averred

by a party moving for summary judgment, the motion must be denied."); see also Paz v. Wauconda Healthcare & Rehab.

Ctr .. LLC, 464 F.3d 659. 664-65 (7th Cir.2006) ("We have

long held that a plaintiff may defeat summary judgment with

his or her own deposition.").

ii) Whether A Causal Connection Exists Between Pillay's

Termination and Protest The parties do not dispute that Pillay satisfied the second

prong under the direct method (i.e., he suffered an adverse

action) after Millard terminated his employment. Pillay

and Millard, however, dispute the last prong, that Pillay's

protesting Ramirez's firing triggered his termination. Pillay must demonstrate that his complaint was a "substantial or

motivating factor" in Millard's decision to fire him. Leitgen

v. Franciscan Skemp Healthcare, [nc . .. 630 F.3d 668, 675

(7th Cir.20l!) (quotations omitted). Although Pillay claims

that the timing of his termination (which occurred less than one week after he protested Ramirez's firing) is indicative

of retaliation, "suspicious timing alone is almost always

insufficient to survive summary judgment." !d. at 675.

*11 In addition to the suspicious timing of his termination,

Pillay points to Domroes's forwarding Pillay the August 20, 2008 email correspondence between Dayan and Domroes.

Pillay contends that this email precipitated his argument with

Dayan about Ramirez's termination. Domroes testified that

he forwarded the email he received from Dayan approving

Ramirez's termination to Pillay because "Sam [Pillay] wasn't

going to do anything without getting something in writing

from Nick [Dayan]." (Def. L.R. 56.1, Ex. B, Domroes Dep.

at 43-44.) Domroes, however, does not corroborate Pillay's

story that he protested against Ramirez's termination and

could not recall whether Pillay opposed firing Ramirez. Pillay

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focuses on the lack of written documentation evidencing

Millard's reasons for firing him; however, he does not offer

any additional evidence linking his termination with his

protest. Accordingly, Pillay fails to show by direct evidence

that his protest played a "substantial or motivating factor" in

Millard's ultimate decision to end his employment.

B. Indirect Method of Proof A plaintiff may also prove his case using the indirect method

by employing the burdenshifting test set out in JtvfcDonnell

Douglas Corporation v. Green, 411 U.S. 792, 804 93 S.Ct.

1817, 36 L.Ed.2d 668 (1973). Tyler v. !spat Jnl"nd Inc.,

245 F.3d 969, 972 (7th Cir.2001). The Seventh Circuit has

elucidated on this burden-shifting test, explaining:

Under the McDonnell Douglas method

of proof, the plaintiff bears the initial burden of establishing a prima

facie case of discrimination. The

burden of production then shifts

to the employer to articulate a

legitimate, nondiscriminatory reason for the employment action. Finally, the

burden shifts back to the plaintiff to

prove that the employer's articulated

reason for the employment action was

a pretext for discrimination and that the decision was in fact motivated by

an unlawful factor.

/d. (citation omitted). In initially making his retaliation

case under the indirect method of proof, a plaintiff must

demonstrate "(I) that [he] engaged in protected activity; (2) that [he] was subject to an adverse employment action; (3)

that [he] was performing her job satisfactorily; and (4) that no

similarly situated employee who did not engage in protected

activity suffered an adverse employment action." Squibb, 497

F.3d at 788 (quotations omitted).

i) Whether Pillay Was Meeting Millard's Legitimate

Employment Expectations

As noted above, Pillay has presented sufficient facts at

this point to allow a reasonable trier of fact to find that

he satisfied the first two elements of the indirect method

(i.e., Millard ended Pillay's employment as a result of his

protesting Ramirez's termination). Pillay must also establish

that he was performing his job satisfactorily and that no

other similarly situated employees were terminated at the

time. Pillay worked at Millard for more than eight years

before he was fired in August 2008. During that time, Pillay

received good performance reviews in addition to pay raises

and bonuses. (Pl. L.R. 56.1 ~ II.) Still, "when a district

court evaluates the question of whether an employee was

meeting an employer's legitimate employment expectations,

the issue is not the employee's past performance, but whether

the employee was performing well at the time of [his]

termination." Peele v. Counft}' Atut.lns. Co., 288 F.3d 319,

329 (7th Cir.2002) (emphasis added) (quotations omitted). In May 2008, Millard placed Pillay on a PIP to remedy

areas of deficiencies identified by complaints received from

other Millard employees. (Def. L.R. 56.1 ~~ 45-46.) On June

20, 2008, Domroes concluded that Pillay had "achieved the

required improvements." (Pl. L.R. 56.1 ~ 14.) In August 2008,

Pillay's PIP expired. (Id. ~ 15.) Millard contends that the PIP

contemplated "sustained results" with which Pillay failed to comply. Still, Pillay received positive feedback during the PIP

and, as a result, the plan expired on schedule. Pillay has thus

presented sufficient facts showing that he was satisfactorily

performing his job in August 2008.

ii) Whether Other Similarly Situated Employees Were

Treated More Favorably *12 To make a prima facie case using the indirect

method, Pillay must last show that similarly situated

Millard employees received more favorable treatment. "[T]he

similarly situated inquiry is a flexible one that considers all relevant factors, the number of which depends on the context

of the case." Humphries v. CBOCS West, Inc., 474 F.3d

387, 405 (7th Cir.2007) (quotations omitted). An employee

must show a "substantial similarity" in comparing himself to

the better treated employee. /d. "When the same supervisor treats an othetwise equivalent employee better, one can

often reasonably infer that an unlawful animus was at play."

Coleman v. Donohoe, 667 F.3d 835,847 (7th Cir.2012).

Dayan, as Senior Vice President of Human Resources, had

the power to discipline Millard employees who served in a managerial role and to recommend terminations to Millard's

Executive Committee (of which he was also a member). (Def.

LR. 56.1 ~ 58.) Other Millard employees who served in a managerial role, including Domroes and Mike Polerecky

received employee complaints, but Dayan did not place them

on a PIP at the same time as Pillay. (Def. L.R. 56.1 ~

42; Pl. L.R. 56.1 ~ 36.) Although Millard argues that it

subsequently terminated all the managers in place at the

time of the union campaign, Pillay was the only manager

fired in August 2008. Millard terminated Polerecky in March

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2009, and fired Domroes in May 2009. (Def. Resp. to Pl.

L.R. 56.1 11 38; Def. L.R. 56.1, Ex. B, Domroes Dep. at

12.) Domroes and Polerecky were similarly situated to Pillay

in that they were Millard managerial employees. Although

Pillay reported to Domroes, Dayan was the ultimate decision

maker in that he recommended terminations to the Executive

Committee. Pillay has thus offered sufficient facts showing

that similarly situated employees who had been the subject of prior complaints and served in a managerial role were treated

more favorably in that Pillay was the first of these employees

to be fired. See Coleman. 667 F.3d at 846-47 ("Whether a

comparator is similarly sihlated is usually a question for the

fact-finder, and summary judgment is appropriate only when

no reasonable fact-finder could find that plaintiffs have met

their burden on the issue.") (quotations omitted).

iii) Whether Millard Had Legitimate Non

Discriminatory Reasons for Terminating Pillay

Millard points to numerous facts which tend to show that

Pillay's termination was the result of continued poor work performance, not because he protested Ramirez's termination.

Having received complaints about Pillay from Millard

employees, in May 2008, Dayan placed Pillay on a three

month PIP. (Def. L.R. 56.1 1111 37, 40, 45-46.) Although

Pillay completed the PIP by August 2008, his continued

employment was dependent on maintaining "sustained results." (ld. 1146.) Subsequently, Dayan received numerous

complaints about Pillay. (ld. 11 60.) These complaints,

according to Millard, in connection with the union campaign

at Millard's Geneva facility resulted in Pillay's termination.

(!d. 1111 53, 61, 66-67.) Millard also argues that other high level employees, including Domroes, ultimately were let go

as the result of the union campaign over the course of the next

nine months. (Def. Resp. to Pl. L.R. 56.1111136, 38; Def. L.R. 56.1, Ex. B, Domroes Dep. at 12.) Domroes further testified

that he believed Pillay's termination was also the result of the

union campaign, and that they were both "scapegoats." (De f.

L.R. 56.1 11 53.) These facts evidence a legitimate non

discriminatory reason for Millard to terminate Pillay.

iv) Whether Pillay's Termination Was Pretextual *13 To survive summary judgment, Pillay must demonstrate

that Millard's decision to terminate him was pretextual.

"Pretext involves more than just faulty reasoning or mistaken

judgment on the part ofthe employer; it is [a]lie, specifically a phony reason for some actions." Argyropoulos v. City

of Alton. 539 F.3d 724, 736 (7th Cir.2008) (quotations omitted). Pillay disputes the accuracy of the complaints

received in August 2008, and argues that they were an

after-the-fact Millard concoction so as to provide cover for

themselves. Pillay substantiates this argument by highlighting

the fact that some of these complaints were not documented

until after Millard terminated him. Pillay also points to the

lack of documentation created contemporaneously with his

termination. Pillay argues that the union campaign did not

trigger his termination, noting that other employees such

as Domroes did not lose their jobs until several months

after Pillay. (Def. L.R. 56.1 11 53.) That Pillay was the only Millard manager working at the Geneva facility terminated

in August 2008 bolsters his argument that his termination

resulted not from employee complaints or the pending

union campaign but, rather, was the result of his protesting

Ramirez's termination. In addition, the short time period

between which Pillay received Dayan and Domroes' August 20, 2008 email correspondence and when he was fired (i.e.,

five days) raises questions about why Millard ultimately

decided to terminate Pillay. Namely, a question of fact exists

about whether Millard terminated Pillay because he protested

Ramirez's termination or whether that decision was the result

ofPillay's poor work performance. See, e.g., Payne, 337 F.3d

at 770 ("We must look therefore at the evidence as a jury might, construing the record in the light most favorable to

the nonmovant and avoiding the temptation to decide which

party's version of the facts is more likely true.") A reasonable

trier of fact could conclude that the union campaign in

connection with Pillay's prior poor work performance was the perfect storm of events which triggered his termination.

Still, the trier of fact could reasonably conclude that Millard's

proffered reasons were pretextual and that the real reason for

Pillay's termination was the result of his disputing Ramirez's

termination. Millard's motion for summary judgment with

respect to count II is thus denied.

IV. Pillay's Retaliatory Discharge Claim

Pillay next claims that Millard is liable for retaliatory

discharge under Illinois law. "The tort of retaliatory discharge comprises three distinct features: first, an employee must

establish that [he] has been discharged; second, [he] must

demonstrate that [his] discharge was in retaliation for [his]

activities; and finally, [he] must show that the discharge

violates a clear mandate of public policy." Belline v. K

Mart Corp., 940 F.2d 184, 186 (7th Cir.l991). "Retaliatory

discharge cases are generally allowed when an employee

is discharged for: ( 1) filing a worker's compensation claim;

or (2) reporting illegal or improper conduct." Mackie v.

Vaughan Chapter·-Para(vzed Veterans of Am., inc., 820

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N.E.2d 1042, 1044-45, 354lli.App.3d 731, 289lll.Dec. 967 (lll.App.Ct.2004).

A) Exercising Workers' Compensation Rights *14 "The lllinois Supreme Court has recognized a common

law cause of action for retaliatory discharge where an

employee is terminated because of his actual or anticipated 8

exercise of workers' compensation rights." Beatty v. Olin

C01p .. No. 11-2853, 2012 WL 3854855, at *3 (7th Cir. Sept.6, 2012). In addition, in Pietruszynski v. lW.cC!ier

Corporation, Architects & Engineers, Inc., 788 N.E.2d 82, 338 lll.App.3d 58, 272 lli.Dcc. 778 (Ill.App.Ct.2003), the Illinois Appellate Court held that the plaintiffs could recover for retaliatory discharge where they had been terminated as

a result of testifying in a coworker's WC hearing noting that such participation served public policy and promoted the interests of the Workers' Compensation Act. !d. at 87.

8 Anticipated claims presuppose that an injury giving rise

to a workers' compensation has already occurred. See

lfilliams v. Shell Oil Co., 18 F.3d 396, 401 (7th Cir.1994)

("The [Worker's Compensation] Act does not apply to

future injuries or even anticipated injuries."); Wiesman v. Kienstra, Inc., 604 N.E.2d 1126, 1129, 237lii.App.3d

721. 178 lll.Dec. 603 (III.App.Ct.l992) (holding that the plaintiff did not have a retaliatory discharge claim,

as "[t]he [Workers' Compensation] Act does not apply

to anticipated future injuries, and an employee's rights

under the Act accrue only at such time when a work

related injury occurs.").

Pillay cannot support his retaliatory discharge claim because he cannot demonstrate any activity in connection with Ramirez's actual or anticipated exercise of his WC rights. Unlike in Pietruszynski, where the plaintiffs testified on the claimant's behalf, here Pillay did nothing in connection with an actual or potential WC claim that Ramirez could have pursued. Ramirez's Home Depot claim had concluded by the time he started working at Millard. Millard had nothing to do with that claim. Ramirez had suffered no injury at Millard

that would have created a potential WC claim. There is no authority in Illinois extending the tort of retaliatory discharge to protect an employee who tells his employer that it should not fire someone who had filed a WC claim in the past but who had no connection to that earlier proceeding. See, e.g.,

Pietruszynski. 272 lll.Dec. 778, 788 N.E.2d at 86 (stating that .. [The Illinois Supreme Court] has continued to stress the narrow scope of the tort of retaliatory discharge"). Millard is entitled to judgment on this claim.

B) Other Illegal and Improper Conduct Pillay also argues that he has a retaliatory discharge claim premised on illegal and improper conduct, namely that

Pillay protested Ramirez's termination because of a perceived disability. Protesting against Ramirez's termination, however, is the same conduct which Pillay uses to substantiate his ADA retaliation claim. In Stehbings v. University ofChicago.

726 N.E.2d 1136, 1141, 312 III.App.3d 360, 244 Ill. Dec. 825 (III.App.Ct.2000), the Illinois Appellate Court identified the situation where a plaintiff brings a retaliatory discharge claim yet has an adequate alternative remedy, holding:

It is not necessary or a plaintiff attempting to state a claim for retaliatory discharge to cite to a statute making his or her firing illegal. If that were the case, the tort of retaliatory discharge would be superfluous, for the plaintiff would be able to proceed under the statute. In fact, a court might be obligated to dismiss the claim in such a situation, for one of the factors that a court considers in deciding whether to allow a retaliatory discharge claim is the existence of an adequate alternative remedy.

*15 !d. at 1141. Indeed, Pillay's ADA retaliation claim reaffirms that he has an adequate alternative remedy as the ADA provides him with a private cause of action. Cf

Hamros v. Bethany Homes & Methodist Hosp. of Chicago.

894 f.Supp. 1176, 1179 (N.D.lll.l995) (concluding that the "Illinois Supreme Court would not expand the common Jaw tort of retaliatory discharge to include claims based on the exercise of rights under the [Family and Medical Leave Act"] ). Pillay cannot use the conduct which substantiates his ADA retaliation claim, reporting disability discrimination, to bring a claim for retaliatory discharge. Millard is entitled to summary judgment on this count.

V. Pillay's Libel/Slander Claim Pillay next claims that Millard is liable for defamation under Illinois law because it provided false employment dates for Pillay. Under Jllinois law, "[t]o prove a claim of defamation, a plaintiff must show that the defendant made a false statement concerning plaintiff, that there was an unprivileged publication of the defamatory statement to a

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third party by defendant, and that plaintiff was damaged."

Gibson v. Phillip Morris. Inc., 685 N.E.2d 638, 643, 292

lli.App.3d 267, 226 lll.Dcc. 383 (lll.App.Ct.l997). The

question how the incorrect (or false) dates of employment

might have damaged Pillay aside, Pillay fails to demonstrate

that Millard communicated false employment to dates to

anyone but himself. Pillay surmises that Millard must have

communicated incorrect dates of employment to prospective

employers, relying on the incorrect information that Millard

sent to the fictitious company Pillay created requesting

such information. Still, "[t]o show a publication, it must

be established that the allegedly slanderous remarks were

communicated to someone other than the plaintiff." Gibson,

226 Jll.Dec. 383, 685 N.E.2d at 643. Pillay offered no

evidence showing that Millard made such a communication

with a third party, and thus cannot survive summary

judgment.

VI. Pil1ay's Tortious Interference with Contract Claim

Pillay last claims that Millard is liable for tortious interference

with contract based on supplying incorrect employment

dates to prospective employers. Because Pillay contends

that he was a job applicant seeking employment, his claim

actually lies in tortious interference with a prospective

economic advantage. Fellhauer v. City o.FGeneva. 568 N.E.2d

870, 877, 142 lll.2d 495, !54 Ill.Doc. 649 (1991). Under

Illinois law, "[a] plaintiff claiming intentional interference

with a prospective economic advantage must establish

(I) a reasonable expectation of entering into a valid

business relationship, (2) the defendant's knowledge of the

expectation, (3) purposeful interference by the defendant that

prevents the plaintiffs legitimate expectancy from ripening

into a valid business relationship, and ( 4) damage to the

plaintiff resulting from the defendant's interference." Atanus

v. Am. Airlines, Inc., 932 N.E.2d 1044, 1048,403 lll.App.3d

549, 342 Ill.Dec. 583 (Ill.App.Ct.2010). Again to survive

summary judgment, Pillay must offer some proof that Millard

actually communicated incorrect information to prospective

employers. Because Pillay has failed to do so and merely

relies on irumendo, he has failed to meet his burden.

Accordingly, summary judgment is granted as to count VI.

CONCLUSION

*16 Millard's motion for partial summary judgment [Dkt.

82] is granted in part and denied in part. The motion is denied

with respect to counts I and II and granted with respect to

counts IV, V, and VI. Ramirez and Pillay's motion to strike

hearsay documents [Dkt. 90] is granted in part and denied

in part. Ramirez and Pillay's motion to strike the affidavits

of O'Dell and Dayan [Dkt. 91] is granted in part and denied

in part. Ramirez and Pillay's motion to strike portions of

Millard's statement of facts [Dkt. 92] is denied.

This case will be called for a status hearing on October 16,

2012 at 8:30 a.m. The parties are directed to engage in a

sincere effort to settle this case and to report the potential

for settlement at the next status hearing and whether referral

to the magistrate judge for a settlement conference would be

helpful.

End of Document © 2012 Thomson Reuters. No claim to original U.S. Government Works.

V'ifestLtt\NNexr r~) 2012 Thomson Reuters. No claim to original U.S. Government Works. 12


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