Court Dismisses Lawsuit Against Millennium Laboratories; Compliance Officers Take Heed

A Massachusetts district court filed an order on Jan. 28 dismissing, for the final time, a 5-year-old whistleblower lawsuit against Millennium Laboratories (ML) in which an employee of a competitor, Robert Cunningham, alleged false claims and conspiracy to commit fraud against both state and federal health care programs. The dismissal came as a result of motions filed by ML for the second time seeking the dismissal of the original complaint filed in 2009, which it won, but Cunningham appealed. A thorough review of the documents from this case teaches three very important aspects of a compliance officer’s day-to-day practices: (1) Never jump to conclusions when presented with a compliance problem, (2) there are many ways to defend against a whistleblower lawsuit, and (3) seek the advice of legal counsel experienced in defending against such suits. In this case, the outcome has very little to do with the facts and circumstances of the alleged fraudulent activities but was won based on understanding the technicalities of how the False Claims Act (FCA) works and because the plaintiff did not, in the eyes of the courts, provide any actual evidence to support the allegations. The Case The suit was originally filed by Cunningham (now deceased) in December 2009, five days after ML filed a suit against Cunningham’s employer, Calloway Laboratories, in California state court. Cunningham was a compliance officer at Calloway, a competitor of ML. Since Cunningham’s death, the suit has been carried forward by his estate. It is the disclosures in the California state court that ultimately resulted in the dismissal of Cunningham’s suit. Cunningham’s estate filed an amended complaint on Feb. 25, 2011. ML filed a motion to dismiss the amended complaint because, it argued, there was a jurisdictional bar in the FCA that deprived the court of jurisdiction over the subject matter because there was already a public disclosure resulting from the California state lawsuit. Additionally, the motion argued that Cunningham had not stated a claim upon which relief could be granted and that he failed to plead fraud with the requisite, particularly under the Federal Rules of Civil Procedures, rule 9(b), a rule that has been cited by defendants in several recent whistleblower cases. The court dismissed the case in its entirety and Cunningham appealed. The original complaint alleged a conspiracy to defraud the United States and 15 individual states by getting false or fraudulent claims allowed or paid. The alleged scheme included ML and John Doe 1-10,000 defendants, who were physicians allegedly involved because they referred to ML. Court documents related to the amended complaint in 2011 and the subsequent motion for dismissal filed by ML indicate the court divided the complaint into three aspects. Aspect 1 alleged multiple billings for the same test kit and aspect 3 concerned confirmation screening. The dismissal of these two aspects was upheld by the court, and they were barred from being filed again. Aspect 2, which survived the first ML motion to dismiss, alleged the promotion of excessive unnecessary testing and billing and was remanded to the Massachusetts district court. Since the remand, both the defendant and the plaintiff have filed additional documents to support their arguments. ML filed additional documents to support its motion for dismissal and Cunningham responded and moved to file a second amended complaint (SAC). The Final Order As part of the appeal of the dismissal of the first complaint, Cunningham asserted that rule 9(b) didn’t apply to conspiracy cases as are alleged in the first complaint, but the court disagreed. Citing a precedent, United States ex rel. Gagne v. City of Worcester, the court said that is not the law in its circuit. In its circuit, rule 9(b) applies to a conspiracy under the FCA, so it is not sufficient to allege, in general, some of the mechanisms of the fraud. Instead, the plaintiff must plead with particularity. Regarding aspect 2 of the complaint, excessive billing, the plaintiff provided details of a program, the physician billing model (PBM), allegedly used by ML representatives, which showed a physician how much money the physician could earn by using the PBM. Cunningham alleges that the PBM is designed to cause false claims to be submitted by encouraging physicians to perform excessive unnecessary tests but provided no details of the use of the PBM by any physician. Further, no physicians were specifically identified and the allegations are based entirely on “information and belief,” a standard phrase used in legal pleadings that means the statements made are based on secondhand knowledge but the person presenting the information believes them to be true. Concerning the conspiracy allegation, Cunningham provided no specific evidence showing a conspiracy, and in its proposed SAC, the court ruled that it did not meet the promised information detailing the fraud and conspiracy alleged by the plaintiff. It also introduced new allegations that should have been filed under seal. As a result, the defendant’s motion to dismiss the first amended complaint was allowed and the plaintiff’s motion for leave to file an SAC was denied. This essentially concludes this case as the whistleblower suit is dismissed. Lessons Learned The documents and exhibits associated with this case could represent the kind of information and documents provided to a compliance officer by an employee seeking some kind of action against a competitor. A compliance officer might be tempted to take some kind of action based on these documents but he or she should carefully consider the facts before acting. As far as the compliance officer is concerned, these are allegations and even if the employee believes the documents prove some kind of violation of law or regulation, they may not. Compliance officers must always rely on fact and data. In the laboratory field, compliance officers are not usually lawyers and generally do not have a background in legal training. The nuances of laws and regulations are complex and best left to experts. Compliance officers should not jump to any conclusions and should avoid leading employees down a path of having any expectation that an action might be taken in light of their belief that a competitor is violating any laws or regulations. Takeaway: Compliance officers must be the voice of reason when faced with accusations of violations of laws and regulations by competitors or persons within the laboratory and take a conservative approach of seeking facts before considering taking any kind of action, legal or otherwise, against a competitor or an employee.