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Hutcheson by jebonee


									48                    694 FEDERAL SUPPLEMENT, 2d SERIES

ing that an ALJ making the determination       (1) transfer of venue was not warranted;
of the vocational impact of mental limita-
                                               (2) first-to-file rule of FCA qui tam provi-
tions ‘‘invaded the province of the voca-
                                                   sions did not bar district court from
tional expert’’). While the ALJ was not
                                                   exercising jurisdiction;
bound by the testimony of the vocational
expert, he certainly needed to provide a       (3) one of two relators was an original
basis for discrediting it. The justification       source; and
the ALJ provided here—that it was be-
                                               (4) allegations were insufficient to state
yond the ken of the vocational expert to
                                                   claims under FCA.
determine the vocational impact of a num-
ber of specific moderate non-exertional        Motions granted in part and denied in
limitations—is unsupported by either fact      part.
or law.
              IV. CONCLUSION
   For the reasons stated, Plaintiff’s mo-     1. Federal Courts O144
tion, insofar as it seeks to reverse the            Burden of proof in a motion to trans-
Commissioner’s decision, is ALLOWED            fer rests with the party seeking transfer.
while the Commissioner’s cross-motion to       28 U.S.C.A. § 1404(a).
affirm is DENIED. The Commissioner
shall forthwith determine and pay the          2. Federal Courts O101, 104
amount of SSI benefits due Plaintiff.
                                                    In evaluating a motion to transfer for
  IT IS SO ORDERED.                            convenience and interests of justice, courts
                                               look to such factors as the relative conven-

             ,                                 ience to each of the parties, the relative
                                               ease of access to sources of proof, the
                                               availability of compulsory process for at-
                                               tendance of unwilling witnesses, and the
 UNITED STATES of America ex rel.              relative availability of documentary and
  Susan HUTCHESON and Philip                   tangible evidence, as well as the public
        Brown, Petitioners,                    interest in the administration of justice,
                     v.                        including trial efficiency. 28 U.S.C.A.
       BLACKSTONE MEDICAL,                     § 1404(a).
          INC., Respondent.
                                               3. Federal Courts O105
     Civil Action No. 06–11771–WGY.
                                                    Ordinarily, on motion to transfer,
       United States District Court,           there is a strong presumption in favor of
            D. Massachusetts.                  the plaintiff’s choice of forum.
              March 12, 2010.
                                               4. Federal Courts O105
Background: Relators filed action against
medical device manufacturer under the qui           The strong presumption afforded
tam provisions of the False Claims Act         plaintiff’s choice of venue on motion to
(FCA). Manufacturer moved to dismiss for       transfer is based principally on the notion
failure to state a claim and for transfer of   of convenience to the plaintiffs; when
venue.                                         plaintiffs choose a forum where they are
Holdings: The District Court, Young, J.,       not residents, this justification is diminish-
held that:                                     ed, and concerns of forum-shopping arise.
           U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                 49
                              Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

5. Federal Courts O106.5                           provide kickbacks to health care providers
    Judicial economy warranted denial of           to induce them to use manufacturer’s de-
defendant’s motion to transfer False               vices in spinal surgeries, despite public
Claims Act action, where original forum            disclosure of such allegations in previously
had a far lighter caseload and there were          filed civil complaint; relator’s complaint
no overriding concerns of convenience to           was not based on public disclosure, but
the parties or witnesses. 28 U.S.C.A.              was based on her observations of manufac-
§ 1404(a).                                         turer’s business practices, meetings, con-
6. United States O122                              versations, and other internal communica-
     Threshold question in a False Claims          tions. 31 U.S.C.A. § 3730(e)(4)(A).
Act action is whether the statute bars ju-                See publication Words and Phras-
                                                        es for other judicial constructions
risdiction. 31 U.S.C.A. § 3730(a, b).
                                                        and definitions.
7. United States O122
                                                   10. United States O122
      First-to-file rule of False Claims Act
(FCA) qui tam provisions did not bar dis-               Relator, a distributor for medical de-
trict court from exercising jurisdiction           vice manufacturer, was not an ‘‘original
over claims in relators’ amended complaint         source’’ within meaning of original-source
alleging medical device manufacturer pro-          exception to public-disclosure bar on feder-
vided illegal kickbacks to physicians and          al-court jurisdiction in qui tam suits under
medical centers, resulting in filing of false      the False Claims Act (FCA), and thus
medical claims; previously filed qui tam           district court lacked jurisdiction over rela-
action made only passing ‘‘information and         tor’s claims that manufacturer violated
belief’’ reference to false claims arising out     FCA by engaging in scheme to provide
of illegal kickbacks beyond Arkansas and           kickbacks to health care providers to in-
alleged a consulting agreement with only           duce them to use manufacturer’s devices in
one doctor, whereas relators alleged essen-        spinal surgeries, where public disclosure of
tial elements of a nationwide fraudulent           such allegations occurred in previously
scheme. 31 U.S.C.A. § 3730(b)(5).                  filed civil complaint, and relator did not
8. United States O122                              contribute significant facts or data to com-
     An action is ‘‘based upon’’ a public          plaint. 31 U.S.C.A. § 3730(e)(4)(A).
disclosure of allegations, within meaning of       11. United States O122
False Claim Act’s public disclosure bar,
                                                        To state a claim under the False
only where the relator has actually derived
                                                   Claims Act, an individual must allege that
from that disclosure the allegations upon
                                                   the accused: (1) knowingly presented or
which his qui tam action is based. 31
                                                   caused to be presented, (2) a false claim,
U.S.C.A. § 3730(e)(4)(A).
                                                   (3) to the United States government, (4)
9. United States O122                              knowing its falsity, (5) which was material,
     Relator, who was a regional manager           (6) seeking payment from the federal trea-
employed by medical device manufacturer            sury. 31 U.S.C.(2006 Ed.) § 3729(a)(1).
was an ‘‘original source’’ within meaning of
original-source exception to public-disclo-        12. United States O120.1
sure bar on federal-court jurisdiction in               A claim is legally false within meaning
qui tam suits under the False Claims Act           of the False Claims Act under an express
(FCA), and thus district court had jurisdic-       certification theory when the party making
tion over relator’s claims that manufactur-        the claim expressly states that it has com-
er violated FCA by engaging in scheme to           plied with the applicable statutes’ regula-
50                    694 FEDERAL SUPPLEMENT, 2d SERIES

tions, where such compliance is a precondi-     sought from government health programs
tion of payment. 31 U.S.C.(2006 Ed.)            for many of the surgeries performed were
§ 3729(a)(1).                                   insufficient to state a claim under the
13. United States O120.1                        False Claims Act based on claims submit-
     Express certification theory of prov-      ted by hospitals for reimbursement for
ing a claim is legally false within meaning     devices used in surgeries, absent allega-
of False Claims Act is satisfied any time a     tions that hospitals certified that entire
claimant expressly states compliance with       transactions complied with the Anti–Kick-
prerequisites of payment; there is no spe-      back statute, that the hospitals themselves
cific form of ‘‘certification’’ required. 31    received kickbacks, or that they knew or
U.S.C.(2006 Ed.) § 3729(a)(1).                  should have known about the kickbacks
                                                received by the doctors. Medicare and
14. United States O120.1
                                                Medicaid Patient and Program Protection
      A claim is legally false within meaning   Act of 1987, §§ 4(a, b, d), 14(b), 42
of False Claims Act under an implied cer-       U.S.C.A. § 1320a–7b(b); 31 U.S.C.(2006
tification theory where a claimant makes
                                                Ed.) § 3729(a)(1).
no express statement about compliance
with a statute or regulation, but by sub-       18. United States O120.1
mitting a claim for payment implies that it          For purposes of determining whether
has complied with any preconditions to          a claim is legally false within meaning of
payment.         31      U.S.C.(2006     Ed.)   the False Claims Act, the implied certifica-
§ 3729(a)(1).                                   tion theory requires that a statute or regu-
15. United States O120.1                        lation expressly state the preconditions to
     Under the False Claims Act, ‘‘know-        payment, such a precondition cannot be
ingly’’ means that the defendant had actual     hidden in an enrollment form.             31
knowledge that the information is false,        U.S.C.(2006 Ed.) § 3729(a)(1).
acted in deliberate ignorance of the truth
                                                19. United States O122
or falsity of the information, or acted in
reckless disregard of the truth or falsity of        Allegations that medical device manu-
the information. 31 U.S.C.(2006 Ed.)            facturer provided doctors a kick-back in
§ 3729(a)(1).                                   violation of the Anti–Kickback Statute in
                                                order to increase the use of its products
16. United States O120.1                        and that manufacturer’s executives were
     Under the natural tendency test for        aware that reimbursement would be
materiality under False Claims Act, the         sought from government health programs
court focuses on the potential effect of a      for many of the surgeries performed were
false statement when it is made rather          insufficient to state a claim under the
than on the false statement’s actual effect     False Claims Act based on claims submit-
after it is discovered. 31 U.S.C.(2006 Ed.)     ted by individual doctors for services ren-
§ 3729(a)(1).                                   dered in surgeries using manufacturer’s
17. United States O122                          devices, where purchase of manufacturer’s
     Allegations that medical device manu-      devices was not an underlying transaction
facturer provided doctors a kick-back in        to the reimbursement request for the doc-
violation of the Anti–Kickback Statute in       tor’s services. Medicare and Medicaid Pa-
order to increase the use of its products       tient and Program Protection Act of 1987,
and that manufacturer’s executives were         §§ 4(a, b, d), 14(b), 42 U.S.C.A. § 1320a–
aware that reimbursement would be               7b(b); 31 U.S.C.(2006 Ed.) § 3729(a)(1).
              U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                       51
                                  Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

   Robert M. Thomas, Jr., Thomas & Asso-               Procedure 12(b)(6) and (2) the alleged
ciates, Sonya A. Rao, United States Attor-             fraud is not pled with sufficient particulari-
ney’s Office, Royston H. Delaney, Boston,              ty under Federal Rule of Civil Procedure
MA, Frederick M. Morgan, Jr., Jennifer                 9(b). Blackstone also moved to dismiss
M. Verkamp, Morgan Verkamp LLC, Cin-                   Relators’ complaint under two jurisdiction-
cinnati, OH, Suzanne E. Durrell, Durrell               al bars contained within the False Claims
Law Office, Milton, MA, for Petitioners.               Act: (1) the Act’s first-to-file rule, 31
  Jonathan L. Diesenhaus, Peter S. Spi-                U.S.C. § 3730(b)(5) and (2) the Act’s public
vack, Stephen M. Kuperberg, Hogan &                    disclosure bar, 31 U.S.C. § 3730(e)(4)(A).
Hartson LLP, Washington, DC, Stephanie                   Blackstone also moved to transfer the
L. Carman, Hogan & Hartson LLP, Mia-                   case to the Eastern District of Arkansas
mi, FL, Benjamin S. Halasz, Brien T.                   where another qui tam action against
O’Connor, Kirsten V. Mayer, Ropes &                    Blackstone and others, alleging violations
Gray, Boston, MA, for Respondent.                      of the False Claims Act, was filed six
                                                       months prior to the filing of Relators’ com-
       MEMORANDUM AND ORDER                            plaint with this Court.
  YOUNG, District Judge.
                                                       II.     FACTUAL BACKGROUND                    AND
I. INTRODUCTION                                                PROCEDURAL HISTORY
   Relators Susan Hutcheson and Philip                    On September 29, 2006, Relators filed,
Brown (‘‘Relators’’) sued Blackstone Medi-             under seal, a qui tam complaint against
cal Inc., (‘‘Blackstone’’) in a qui tam action         Blackstone 1 for violation of the False
under the False Claims Act, 31 U.S.C.                  Claims Act, 31 U.S.C. § 3729. Six months
§ 3729 et seq. (the ‘‘Act’’). The claim                earlier, on April 14, 2006, John Thomas
arises out of Blackstone’s alleged nation-             (‘‘Thomas’’) filed a qui tam action for viola-
wide fraudulent scheme to increase the use             tion of the False Claims Act against Black-
of its medical devices in spinal surgeries             stone and seven other defendants including
by payment of kickbacks to physicians in               an Arkansas surgeon, Dr. Patrick Chan, in
violation of the Medicare and Medicaid                 the Eastern District of Arkansas.2 United
Patient Protection Act, 42 U.S.C. § 1320a–             States, ex rel. Thomas v. Bailey, No. 06–
7b(b) (the ‘‘Anti–Kickback Statute’’). Re-             00465 (E.D. Ark. filed Apr. 14, 2006).
lators allege that this fraudulent behavior            Thomas’s complaint similarly alleged the
caused the submission by hospitals and                 existence of a fraudulent kick-back scheme
doctors of false claims for payment by                 including Blackstone, its agents, and the
Medicare, Medicaid, and other federally-               other defendants. It alleged that as a
funded government healthcare programs                  result of the kickbacks, false claims were
in violation of the False Claims Act.                  submitted to federally funded healthcare
  Blackstone moved to dismiss Relators’                programs by defendant Dr. Chan. Thomas
complaint on the basis that: (1) it fails to           Compl. ¶ 5 [Thomas Doc. No. 1].3 It also
state a claim under Federal Rule of Civil              stated on information and belief, that the

1.     The original complaint was filed against             four corporate entities with which he was
     Blackstone and its parent company, Orthofix            affiliated, and Synthes, Inc. U.S. ex rel. John
     International NV. On June 4, 2009, the day             Thomas v. Bailey, No. 06–00465, 2008 WL
     that Relators filed their first amended com-           4853630, *1 (E.D.Ark. Nov. 6, 2008).
     plaint, this Court terminated Orthofix Inter-
     national as a party.                              3.     Thomas also alleged that Dr. Chan violated
2.    The seven defendants included Blackstone,             the False Claims Act on the basis that he
     Dr. Patrick D.S. Chan, Michael M. Bailey and           performed surgeries that were not medically
52                         694 FEDERAL SUPPLEMENT, 2d SERIES

corporate defendants have and continue to               Blackstone’s first motion to dismiss, Rela-
enter into consulting agreements with oth-              tors amended their complaint on June 4,
er physicians in Arkansas and other states              2009 [Doc. No. 47]. In their amended
in violation of the Anti–Kickback Statute.              complaint, they allege that:
Thomas Compl. ¶ 57.                                     1 Blackstone utilized a business model, at
  Thomas’s original complaint contained                   the direction of senior management,
two counts, alleging violations of 31 U.S.C.              which consisted of paying surgeons
§ 3729(a)(1) and (2) and conspiracy under                 across the United States, in cash and in
31 U.S.C. § 3729(a)(3). Thomas Compl.                     kind, to use its products in their surger-
¶¶ 58–62. On April 18, 2007, Thomas                       ies. Am. Compl. ¶¶ 65, 69–70.
moved for partial voluntary dismissal                   1 Blackstone knew that Medicare, Medic-
against all defendants except Dr. Chan                    aid, and other federal program benefi-
[Thomas Doc. No. 15]; on April 26, 2007,                  ciaries represent a significant percent-
Thomas withdrew this motion [Thomas                       age of spine surgery patients. Id. ¶ 66.
Doc. No. 17].                                           1 The payments to surgeons were in ex-
   On April 23, 2007 the United States filed              cess of fair market value for any ser-
an ex parte motion for a partial lifting of               vices the physicians contributed to
the seal in Relators’ case to enable it to                Blackstone, and were essentially ‘‘kick-
disclose the existence and allegations con-               backs,’’ taking the form of, inter alia,
tained in Relators’ complaint to Thomas.                  consulting agreements, payments for
The government’s stated rationale was the                 travel and accommodations, research
potential overlap between allegations made                grants and royalties. These kick-backs
in both complaints. U.S. Ex Parte App. to                 violated the Anti–Kickback Statute, 42
Part. Lift Seal at 2 [Doc. No. 9]. Judge                  U.S.C. § 320a–7(b), which proscribes
Lasker granted the application.4                          knowingly offering to pay any remuner-
   On June 20, 2007—over two months af-                   ation in cash or in kind in exchange for
ter the partial seal on Relators’ complaint               the referral of any product for which
was lifted—Thomas amended his com-                        payment is sought from any federally-
plaint, stating that Blackstone entered into              funded healthcare program. Id. ¶¶ 25,
improper consulting agreements and other                  33, 67.
kickback arrangements ‘‘throughout the                  1 As a result of Blackstone’s illegal induce-
United States,’’ resulting in violations of               ments, physicians performed surgeries
the False Claims Act. Thomas Am. Compl.                   using its products on Medicare and
¶ 4 [Thomas Doc. No. 73].                                 Medicaid patients admitted to health-
  On November 24, 2008, Relators’ com-                    care facilities around the country. Id.
plaint was unsealed.5 In response to                      ¶ 24.

     necessary and personally submitted claims for           States has not intervened in this action; but
     payment for those surgeries to Medicare and             on September 2, 2009 it filed a statement of
     Medicaid. Thomas Compl. ¶ 4.                            interest regarding the defendant’s motion to
                                                             dismiss [Doc. No. 60].
4.      On November 21, 2008 the United States
     filed notice that it was not intervening at that
     time [Doc. No. 25]. The government in-             5.     The initial complaint here also contained a
     formed the Court that its investigation would           second count, retaliation and wrongful dis-
     continue and requested that under 31 U.S.C.             charge in violation of 31 U.S.C. § 3730(h).
     § 3730(b)(1), should the court dismiss the              Compl. ¶¶ 81–83 [Doc. No. 3]. Relators’
     suit, the Attorney General be allowed to give           amended complaint did not include this sec-
     written consent. Id. To date, the United                ond count. [Doc. No. 47].
           U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                53
                              Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

1 Blackstone caused hospitals and doctors          839, 91 L.Ed. 1055 (1947)). In terms of
  to submit false claims to federal health-        convenience to the parties and witnesses
  care programs because compliance with            and availability of evidence, neither forum
  the Anti–Kickback Statute is a condition         is favored. The Relators are both resi-
  of payment for federally-funded health-          dents of Florida. Am. Compl. ¶¶ 10, 14.
  care programs. Essentially, the claims           Blackstone, was a Massachusetts-based
  submitted as a result of illegally-induced       company, but now is located in Texas.
  surgeries were false claims. Id. ¶ 64.           Blackstone Mem. in Supp. Mot. Transfer
                                                   at 13–14. More importantly, its relevant
II.    FEDERAL JURISDICTION                        records are maintained electronically and
  Federal jurisdiction is proper because           can be produced in any jurisdiction with
this claim arises under the United States          relative ease. Id. at 13. Finally, the nine-
False Claims Act, 31 U.S.C. § 3729, giving         ty-one doctors alleged to have been in-
the Court jurisdiction under 28 U.S.C.             volved in its alleged kick-back scheme are
§ 1331.                                            scattered across the country. Am. Compl.
                                                   ¶ 84.
                                                      [3] Ordinarily, there is a strong pre-
  A.    The Motion to Transfer                     sumption in favor of the plaintiff’s choice
   [1] Blackstone moves pursuant to this           of forum. Coady, 223 F.3d at 11. There
section to transfer this action to the East-       is sound empirical basis for this presump-
ern District of Arkansas. Under 28 U.S.C.          tion. Studies confirm that when a defen-
§ 1404(a), a district court may transfer           dant can winkle a plaintiff out of her cho-
any civil action to any other district where       sen forum, the defendant’s likelihood of
it may have been brought ‘‘[f]or the con-          success increases markedly. See Kevin M.
venience of parties and witnesses, in the          Clermont & Theodore Eisenberg, Exorcis-
interests of justice.’’ 28 U.S.C. § 1404(a).       ing the Evil of Forum–Shopping, 80 Cor-
The burden of proof in a motion to trans-          nell L. Rev. 1507, 1511–12 (1995) (‘‘[T]he
fer rests with the party seeking transfer.         plaintiff wins in 58% of the nontransferred
Coady v. Ashcraft & Gerel, 223 F.3d 1, 11          cases that go to judgment for one side or
(1st Cir.2000).                                    the other, but wins in only 29% of such
                                                   cases in which a transfer occurred.’’).
   [2] The First Circuit has described 28
U.S.C. Section 1404(a) as a codification of           [4] Although the First Circuit has not
forum non conveniens. Albion v. YMCA               ruled on the application of this presump-
Camp Letts, 171 F.3d 1, 2 (1st Cir.1999).          tion to nonresidents, this Court looks to
Thus, in evaluating a motion to transfer,          Judge Wolf’s decision in U.S. ex rel. Ondis
courts look to such factors as ‘‘the relative      v. City of Woonsocket, R.I., 480 F.Supp.2d
convenience to each of the parties, the            434, 436 (D.Mass.2007), as persuasive. In
‘relative ease of access to sources of proof,’     deciding to transfer the nonresident plain-
the availability of compulsory process for         tiff’s case, Judge Wolf cited 15 Wright,
attendance of unwilling’ witnesses, and the        Miller & Cooper, Federal Practice and
relative availability of documentary and           Procedure: Jurisdiction 3d § 3848 at 134–
tangible evidence, as well as the public           39 (2007) for the legal principle that plain-
interest in the administration of justice,         tiff’s choice of venue carries less weight
including trial efficiency.’’ Veryfine Prod-       when the district court has ‘‘no obvious
ucts, Inc. v. Phlo Corp., 124 F.Supp.2d 16,        connection to the case or the plaintiff is a
24 (D.Mass.2000) (quoting Gulf Oil Corp.           nonresident.’’ The ‘‘strong presumption’’
v. Gilbert, 330 U.S. 501, 508–09, 67 S.Ct.         afforded plaintiff’s choice of venue is based
54                        694 FEDERAL SUPPLEMENT, 2d SERIES

principally on the notion of convenience to              Courts are justly wary of disputed
the plaintiffs. See Nowak v. Tak How                  claims of ‘‘judicial economy.’’ Joint mo-
Investments, Ltd., 94 F.3d 708, 718 (1st              tions, or a claim that seeks judicial action
Cir.1996). When plaintiffs choose a forum             from the judge then charged with respon-
where they are not residents, this justifica-         sibility for the case, are one thing. Other
tion is diminished, and concerns of forum-            such claims usually involve thinly disguised
shopping arise. See Williams v. Bowman,               efforts at forum shopping or seeking delay
157 F.Supp.2d 1103, 1107 (N.D.Cal.2001)               in the hope that some court somewhere
(‘‘The policy behind not deferring to a               will render a decision that would favor the
nonresident plaintiff’s choice of venue ap-           moving party. See, e.g., Sabin Willett,
pears tied into the notion that plaintiffs            Clericalism and the Guantanamo Litiga-
should be discouraged from forum shop-                tion, 1 Northeastern U.L.J. 51, 56 (2009)
ping.’’). Although the Relators’ choice of            (discussing the tactic of delay in the Guan-
venue carries less weight than if they were           tanamo detainee cases). Both maneuvers
residents, Blackstone still carries the bur-
                                                      are properly disfavored.
den of convincing the Court that transfer
is appropriate.                                          Actually, there are neutral principles on
                                                      which a claim of judicial economy may be
   [5] With no overriding concerns of con-            evaluated. As Relators argue, the statis-
venience to the parties or witnesses, the             tics maintained by the Administrative Of-
Court turns to the arguments regarding                fice of the United States favor denying the
the administration of justice. Blackstone             motion to transfer. Relators’ Opp. to Mot.
argues strongly that ‘‘judicial economy’’
                                                      Transfer at 14. The Eastern District of
and comity dictate transferring this case to
                                                      Arkansas has five authorized judgeships
the Eastern District of Arkansas because
                                                      (one of which is vacant) and, on a per
that court already has invested so much
                                                      judge basis, the second highest caseload of
time in the case. Blackstone Mem. in
                                                      all the ninety-four United States District
Supp. Mot. Transfer at 8–9. Not surpris-
                                                      Courts. 2008 Federal Court Management
ingly, the Eastern District of Arkansas has
                                                      Statistics, Administrative Office of the
narrowed the issues in Blackstone’s favor.6
                                                      United States, 111. In light of this heavy
Relators point out that the Eastern Dis-
                                                      caseload, it is no surprise that the Eastern
trict of Arkansas was not extensively
briefed on the nationwide nature of Black-            District of Arkansas has 1,630 civil cases
stone’s activities, and that the Thomas and           over three-years old. Id.
Hutcheson cases overlap only to the extent               The District of Massachusetts, with thir-
of detailing the illegal kickbacks associated         teen authorized judgeships (one of which is
with Drs. Chan and Jordan. Relators’                  vacant) 7, on a per judge basis has a far
Opp. to Mot. Transfer at 16.                          lighter caseload and only 197 civil cases

6.      The Arkansas court held that under either     7.     But see Report of the Proceedings of the
     express or implied theories of certification,         Judicial Conference of the United States,
     the False Claims Act is not triggered when an         March 17, 2009, at 23. As I have written:
     innocent third party submits a claim to the            [F]rom time to time the Judicial Conference
     federal government, even if violations of the          takes upon itself the authority to advise the
     Anti–Kickback Statute have occurred some-              President not to nominate judges to fill va-
     where in the chain of events leading up to the         cancies it deems superfluous. It makes this
     filing of the claim. Thomas, 2008 WL                   decision by fixing an arbitrary cutoff point
     4853630, at *13–14. As will be discussed,              based upon the court’s ‘‘weighted case-
     infra, this Court reaches the same conclusion,         load,’’ derived by a methodology that has
     for the most part.                                     been sharply (and accurately) criticized by
               U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                          55
                                      Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

over three-years old. Id. at 38. Any ra-                   bench conducting evidentiary hearings and
tional calculus of actual judicial economy                 fifteenth in total time out on the bench
thus strongly favors keeping this case in                  actually engaging in the adjudication of
the judicial workload of the District of                   disputes.9 Rankings derived from Table
Massachusetts.                                             C–12, Trials and Trial Days for Each Place
  The most relevant performance criteria                   of Holding Court During the Twelve
confirm this judgment. Among the forty-                    Month Period Ended June 30, 2009, Judi-
three district courts with six or more                     cial Business of the United States Courts.
judges, the District of Massachusetts                      Today the average active district judge
ranks ninth 8 in time actually spent on the                tries only five civil cases per year,10 the

        independent observersTTTT While the                  ranks first in criminal trials with nineteen
        ‘‘weighted caseload’’ ranking may be modi-           such trials per active district judge. The
        fied by various gestalt factors, none of them        Southern District of Iowa ranks first overall
        have anything to do with the actual work             with twenty-three civil and criminal trials per
        being performed by the judges of the affect-         active district judge as compared to thirteen
        ed court, i.e. the on bench and trial time of        for the Eastern District of Arkansas and ten
        those judges.                                        for the District of Massachusetts. The Court
           Even putting aside the larger issues of the       is well aware that the 2008 Federal Court
        separation of powers—the fact that the Ju-           Management Statistics report, under ‘‘Actions
        dicial Conference is, in effect, advising the        per Judgeship—Trials Completed’’ that each
        President not to enforce a law passed by             active judge in the Eastern District of Arkan-
        Congress setting the number of district              sas completed twenty-three ‘‘trials’’, see id. at
        judges within each judicial district and is          111, and each such judge in Massachusetts
        interfering with the Senate’s constitutional         completed twenty ‘‘trials.’’ See Id. at 38.
        prerogative to advise and consent to such            Unfortunately, these figures do not reflect
        nominations—what message does this com-              reality.
        munication send to the people of the affect-
                                                               [As reported in the publicly accessible Fed-
        ed district? Cf. S.Rep. No. 110–427, at 2–5,
        20–21 (revealing the extent of the Judicial            eral Court Management Statistics the Judi-
        Conference’s influence over Congress’s                 cial] Conference has debased the term ‘‘tri-
        power to constitute the lower courts, and              al.’’ The term once denoted a jury or
        including Sen. John Cornyn’s objections on             bench proceeding that led to a verdict; now
        behalf of his district to the Administrative           it encompasses any disputed evidentiary
        Office’s recommendations). Can it be that              hearing. Thus a criminal case with a mo-
        the speed and quality of justice is too high           tion to suppress, a Daubert hearing, a genu-
        in those locations and we need to cut back?            ine trial, and a sentencing hearing counts
        And what of the active judges in such a                as four ‘‘trials,’’ as does a civil patent case
        district, knocking themselves out to try the           with a preliminary injunction hearing, a
        cases before them and help other courts as             Markman hearing, a genuine trial, and a
        well? Each one must know that, should                  separate damages hearing. As a result, the
        she falter or fail, it is the official policy of       Administrative Office inflates the actual
        the Judicial Conference that her seat shall            number of trials by approximately 33%.
        lie vacant and her courtroom go dark.                  However much this may impress Congress,
     William G. Young, A Lament for What Was                   such imprecision renders the term ‘‘trial’’
     Once and Yet Can Be, 32 B.C. Int’l. & Comp.               essentially meaningless, a result not lost on
     L. Rev. 305, 317–318 n. 72 (2009) (‘‘Lament’’)            scholars and the knowledgeable press.
     (internal citations omitted).                           Lament at 317 (footnotes omitted) (citing
                                                             Zach Lowe, Federal Court Statistics, or: How
8.     The Eastern District of California ranks              Numbers Can Drive You Mad,, Sept.
     first.                                                  2, 2008,
9.     Again, the Eastern District of California             ArticleFriendly.js?id=1202424181868          (last
     ranks first.                                            visited Apr. 16, 2008) and Theodore Eisen-
                                                             berg & Margo Schlanger, The reliability of the
10. Yet again, the Eastern District of Califor-              Administrative Office of the U.S. Courts Data-
  nia ranks first. The District of Montana                   base: An Initial Empirical Analysis, 78 Notre
56                    694 FEDERAL SUPPLEMENT, 2d SERIES

average district judge in the Eastern Dis-       States had been over-charged for goods,
trict of Arkansas tries eight such cases,        and billed for goods that were never deliv-
and the average district judge in the Dis-       ered or were worthless. Id. The Supreme
trict of Massachusetts tries seven. Rank-        Court has made it clear that the Act was
ings derived from Table T–1, Civil and           not designed to reach all types of fraud
Criminal Trials by District, during the          performed upon the Government. Id.
Twelve Month Period Ended June 30,
                                                   [6] ‘‘The threshold question in a False
2009, Judicial Business of the United
                                                 Claims Act claim is whether the statute
States Courts.
                                                 bars jurisdiction,’’ Rost, 507 F.3d at 727.
   Considered on the basis of neutral prin-      Under the False Claims Act’s first-to-file
ciples and accurate measures of productivi-
                                                 bar, ‘‘[w]hen a person brings an action
ty, therefore, the disparity in caseload
                                                 under this subsection, no person other
alone as between the Eastern District of
                                                 than the Government may intervene or
Arkansas and the District of Massachu-
                                                 bring a related action based on the facts
setts strongly counsels against transfer.
                                                 underlying the pending action.’’ 31 U.S.C.
  For all of these reasons, the motion to        § 3730(b)(5). ‘‘The first-to-file rule fur-
transfer is denied.                              thers the policy of the [False Claims Act]
                                                 in that ‘[t]he first-filed claim provides the
  B.   False Claims Act’s First to File
                                                 government notice of the essential facts of
                                                 an alleged fraud, while the first-to-file bar
  The False Claims Act prohibits false or        stops repetitive claims.’ ’’ United States
fraudulent claims for payment to the fed-        ex rel. Duxbury v. Ortho Biotech Products,
eral government and permits civil actions        L.P., 551 F.Supp.2d 100, 110 (D.Mass.2008)
based on such claims to be brought by the
                                                 (Zobel, J.) rev’d on other grounds, 579
Attorney General or by private individuals,
                                                 F.3d 13 (1st Cir.2009) (quoting United
called ‘‘relators,’’ acting in the govern-
                                                 States ex rel. Lujan v. Hughes Aircraft
ment’s name. 31 U.S.C. § 3730(a), (b).
                                                 Co., 243 F.3d 1181, 1187 (9th Cir.2001)).
Where the government elects not to inter-
vene, the so-called qui tam plaintiff may           The question for the Court, therefore, is
proceed with the action as the govern-           whether Relators’ case is ‘‘a related action
ment’s assignee. 31 U.S.C. § 3730(c)(3).         based on the facts underlying’’ the Thomas
   Under the Act, liability attaches to a        action, and therefore jurisdictionally
‘‘false or fraudulent claim for payment’’ or     barred under the False Claims Act’s first-
to a ‘‘false record or statement [made] to       to-file rule. In an August 2009 case, the
get a false or fraudulent claim paid’’ by the    First Circuit interpreted Section 3730(b)(5)
government. 31 U.S.C. § 3729(a)(1)-(2);          to ‘‘bar a later allegation [if it] states all
United States ex rel. Rost v. Pfizer, Inc.,      the essential facts of a previously-filed
507 F.3d 720, 727 (1st Cir.2007). The Act        claim or the same elements of a fraud
was adopted following a congressional in-        described in an earlier suit.’’ Duxbury v.
vestigation into the sale of munitions and       Ortho Biotech Products, 579 F.3d 13, 32
provisions to the war department. United         (1st Cir.2009) (quoting United States ex
States v. McNinch, 356 U.S. 595, 599, 78         rel. LaCorte v. SmithKline Beecham Clini-
S.Ct. 950, 2 L.Ed.2d 1001 (1958). The            cal Labs., Inc., 149 F.3d 227, 232–33 (3d
investigation revealed that the United           Cir.1998)) (internal quotes omitted). It

 Dame L.Rev. 1455, 1470–73 (2003) (compar-         inmate cases, and concluding that the Admin-
 ing the Administrative Office’s database rec-     istrative Office method of recording judg-
 ords and case dockets in PACER for tort and       ments created disparities in the data)).
           U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                    57
                                Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

also held that ‘‘[u]nder this ‘essential facts’      Hutcheson Complaint (D.Mass.) (Septem-
standard, § 3730(b)(5) can still bar a later         ber 9, 2006): Relators alleged that Black-
claim ‘even if that claim incorporates               stone engaged in a fraudulent scheme of
somewhat different details.’ ’’ Id. (quoting         kickbacks to physicians throughout the
LaCorte, 149 F.3d at 232–33.)                        United States in the form of sham consult-
                                                     ing agreements, research grants, enter-
   Therefore, under Duxbury, this Court              tainment, travel, and other illegal incen-
must examine whether Relators’ complaint             tives in order to increase its market share,
contains the same ‘‘essential elements’’ and         and in doing so caused violations of the
determine whether this action is barred              False Claims Act. Compl. ¶¶ 1–2.
because the Thomas complaint served its              Thomas           Amended          Complaint
purpose—to put the federal government                (E.D.Ark.)(June 20, 2007): Thomas al-
on notice of the essential facts of a fraudu-        leged that: (1) the contract amount of the
lent scheme. 579 F.3d at 32. In order to             Blackstone consulting agreement present-
ascertain the essential elements of both             ed to Dr. Chan was for $25,000 and fea-
complaints, this Court compares the factu-           tured no performance standards or de-
al allegations made against Blackstone in            scription of the work to be done, Thomas
the Thomas complaints with Relators’                 Am. Compl. ¶ 45; and (2) Blackstone’s
amended complaint currently before this              ‘‘practice of entering into unlawful consult-
Court.11 Thomas Complaint (E.D.Ark.)                 ing agreements and other kickback ar-
(April 14, 2006): Thomas alleged that: (1)           rangements with physicians was a matter
Dr. Chan had a consulting agreement with             of corporate policy that extended to other
Blackstone which required him to use                 physicians in Arkansas and elsewhere in
Blackstone products, Thomas Compl. ¶ 44;             the United States.’’ Id. ¶ 52 (emphasis
(2) a Blackstone employee paid for the               added). In support of this, the complaint
honeymoon of one of Dr. Chan’s nurses                alleged that the Blackstone consulting
and gave the nurse an expensive wedding              agreement presented to Dr. Chan was a
gift, id. ¶ 46; and (3) upon information and         ‘‘corporate form’’ agreement, and listed al-
belief that Blackstone had in the past and           leged kickback arrangements between
was continuing to enter into consulting              Blackstone and several other doctors in
agreements ‘‘with other physicians in Ar-            Arkansas, Missouri, and Mississippi. Id.
kansas and other states that illegally in-           ¶¶ 45, 55–61.
duce those physicians to use their products          Thomas Second Amended Complaint
in spinal surgical procedures, in violation          (E.D.Ark.) (November 20, 2008): Thomas
of the Anti–Kickback Statute.’’ Id. ¶ 57             alleged that: (1) Dr. Chan was a paid
(emphasis added).                                    member of Blackstone’s ‘‘Medical Advisory

11. Thomas filed four complaints in total. The         Court of Arkansas referred to the ‘‘nationwide
  first was filed on 4/14/2006. An amended             scheme’’ allegations as though they were
  complaint was filed on 6/20/2007 [Thomas             made in the second amended complaint, and
  Doc. No. 73]; a second amended complaint             made a ruling dismissing Thomas’s claims
  was filed on 11/20/2008 [Thomas Doc. No.             pertaining to a nationwide fraudulent scheme
  228]; and a third amended complaint was              for failing to plead with particularity as re-
  filed on 12/29/2008 [Thomas Doc. No. 240].           quired by Federal Rule of Civil Procedure
  Importantly, the allegations of a ‘‘nationwide       9(b). See Thomas, 2008 WL 4853630, at *8.
  policy’’ against Blackstone appeared in the          In the interest of thoroughness, this Court
  amended complaint, but did not appear in the         compares the factual allegations made in all
  second or third amended complaints. De-              four Thomas complaints with those made in
  spite this pleading irregularity, The District       Relators’ complaint and amended complaint.
58                    694 FEDERAL SUPPLEMENT, 2d SERIES

Board,’’ Thomas 2d Am. Compl. ¶ 39; and         sort of kickback from Blackstone.          Id.
(2) an agent of Blackstone provided child-      ¶ 84.
care and homecare services and performed           In Duxbury, upon an almost identical
personal tasks and errands for Dr. Chan.        set of events, the First Circuit reversed
Id. ¶ 49. This version of the complaint         the district court’s dismissal of a second
contained no allegations of a ‘‘nationwide      complaint under the first-to-file bar.
scheme.’’                                       Three paragraphs in a first-filed complaint
Thomas Third Amended Complaint                  alleged that pharmaceutical company Or-
(E.D.Ark.) (December 29, 2008): This com-       thofix N.V. caused inflated claims for its
plaint reiterated the factual allegations       product, Procrit, to be submitted to Medi-
made in the second amended complaint            care by, inter alia, using cash payments to
pertaining to Blackstone’s alleged kick-        encourage physicians, clinics and hospitals
backs to Drs. Chan and Jordan, and again        to undertake ‘‘off label’’ uses of Procrit.
contained no allegations of a ‘‘nationwide      Duxbury, 551 F.Supp.2d at 111–12. A
scheme.’’                                       complaint from a second relator, filed one
Hutcheson Amended Complaint (D.Mass.)           month later, alleged a promotional scheme
(June 4, 2009): Relators allege that Black-     of ‘‘off label’’ use, including:
stone: (1) entered into ‘‘sham’’ consulting        (1) direct off-label marketing to medical
agreements with consultants across the             professionals;
United States in order to increase the             (2) influencing the results of purported-
number of surgeries performed using BMI            ly independent clinical studies; (3) ille-
products, Am. Compl. ¶¶ 2, 73, 86; and (2)         gal payments to medical professionals in
this consulting scheme included kickbacks          the form of ‘educational grants’ and
such as (a) an ‘‘education grant’’ to a sur-       ‘clerkships;’ (4) payments to medical
geon for ‘‘sponsorship’’ of his website, id.       professionals for giving presentations on
¶ 120; (b) paying surgeons to engage in            increased dosage of Procrit; (5) attend-
sham research studies long after BMI               ing consulting conferences sponsored by
products had been researched, developed,           OBP which pushed increased dosage of
and launched, id. ¶¶ 134, 147, 86; (c) offer-      Procrit; and (6) rebate programs of-
ing per diem ‘‘studies’’ on a per-patient          fered to induce increased prescriptions
basis to incentivize surgeons to use its           of Procrit.
products, id. ¶ 207; (d) paying royalties to    Duxbury, 551 F.Supp.2d at 113.
surgeons for the development of certain
                                                   On appeal, the First Circuit held that
products, id. ¶ 205; (e) paying surgeons to
                                                the first complaint could not trump the
perform cadaver labs demonstrating
                                                second because it failed ‘‘to encompass the
Blackstone products to sales representa-
                                                other allegations contained in the [second
tives, id. ¶ 208; (f) paying surgeons in
                                                complaint] concerning [Ortho Biotech]’s
stock rather than cash, id. ¶¶ 209–10; (g)
                                                ‘off-label’ promotion,’’ and therefore it
lavishing entertainment and VIP travel on
                                                failed to ‘‘allege the ‘essential facts’ of the
consultants and their families, id. ¶¶ 213–
                                                ‘off-label’ promotion scheme contained in
17; and (h) providing cash incentives to
                                                the [second complaint].’’ Duxbury, 579
consultant-surgeon’s staff. Id. ¶ 223. In
                                                F.3d at 33.
support of their claim that Blackstone had
a nationwide kickback program, Relators           [7] Here, the first Thomas complaint
allege that at least ninety-one doctors from    made only passing ‘‘information and belief’’
across the United States received some          reference to false claims arising out of
           U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                59
                              Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

illegal kickbacks beyond Arkansas. More-              in the affirmative, whether the relator
over, it alleged a consulting agreement               falls within the ‘original source’ excep-
with only one doctor. The allegations con-            tion as defined in § 3730(e)(4)(B).
tained in the Hutcheson complaint, includ-         Id. (citing Rost, 507 F.3d at 728).
ing research engagements, VIP travel,
                                                      Blackstone contends that this suit is
stock payments and royalties involving at
                                                   based upon public information and relators
least ninety-one doctors across the United
                                                   are not the original source of that informa-
States are more than simply ‘‘details,’’ but
                                                   tion. Def.’s Mem. in Supp. Mot. to Dis-
essential elements of a nationwide fraudu-
                                                   miss at 6. Specifically, Blackstone asserts
lent scheme. The Hutcheson complaint is
                                                   that Relators’ allegations of its ‘‘campaign
not barred, therefore, because it does not
                                                   to induce physicians to perform surgeries
allege ‘‘the same elements of a fraud de-
                                                   utilizing its medical products by paying
scribed in an earlier suit.’’ For these rea-
                                                   illegal kickbacks’’ were first publicly dis-
sons, the Court denies Blackstone’s motion
                                                   closed in an earlier complaint. Id. at 6–7.
to dismiss based upon the first to file bar.
                                                      In support of this proposition, Black-
  C.   False Claim Act’s Public Disclo-            stone cites Berrios v. Blackstone Medical,
       sure Rule                                   Inc., No. 05–17339 (Brevard Co., Fla., filed
   The False Claim Act’s public disclosure         May 16, 2005), a negligence and strict lia-
bar provides that a district court does not        bility action brought by a patient who had
have subject matter jurisdiction over any          faulty Blackstone devices implanted during
qui tam action that is ‘‘based upon the            spinal surgery. Blackstone points out that
public disclosure of allegations or transac-       in her complaint, Berrios contended that
tions’’ concerning the alleged fraud, unless,      Blackstone ‘‘routinely provides incentives
among other things, ‘‘the person bringing          to orthopedic surgeons to use their devices
the action is an original source of the            over those of their competitors, including,
information.’’ 31 U.S.C. § 3730(e)(4)(A).          upon information and belief, offering prac-
A relator qualifies as an ‘‘original source’’      titioners paid travel and entertainment la-
if she has ‘‘direct and independent knowl-         beled as ‘continuing medical education’ and
edge’’ of the information supporting her           paying financial incentives to high-volume
claims and she ‘‘provided the information          users under the guise of ‘consulting’ agree-
to the Government before filing an action.’’       ments.’’ Def.’s Mem. in Supp. of Mot. to
31 U.S.C. § 3730(e)(4)(B).                         Dismiss at 7 quoting Berrios Compl. ¶ 10.
  In Duxbury, the First Circuit discussed          Blackstone further contends that Hutche-
the inquiries necessary to determine               son and Brown, the Relators here, have
whether a claim is barred by an earlier            simply ‘‘declared’’ themselves relators and
public disclosure. Duxbury, 579 F.3d at            that such conclusory assertions do not
21. They are:                                      meet Relators’ burden of pleading facts
  (1) whether there has been public dis-           that establish this Court’s jurisdiction. Id.
  closure of the allegations or transactions       at 8.
  in the relator’s complaint;                         Relators assert that: (1) the Berrios
  (2) if so, whether the public disclosure         complaint was not a public disclosure of
  occurred in the manner specified in the          the ‘‘massive kickback fraud alleged by
  statute; (3) if so, whether the relator’s        relators in this case’’; (2) Berrios’ allega-
  suit is ‘based upon’ those publicly dis-         tion regarding the Blackstone kick-back
  closed allegations or transactions; and          scheme was based on ‘‘information and
  (4) if the answers to these questions are        belief’’ and therefore not ‘‘statutorily sig-
60                     694 FEDERAL SUPPLEMENT, 2d SERIES

nificant’’; 12 (3) Relators’ allegations were      ployed by Blackstone between January
not ‘‘based upon’’ the Berrios complaint           2004 and January 2006. She states that
because they were not aware of the allega-         she observed Blackstone’s business prac-
tions contained within it; and (4) Relators        tices while in their employ, and was privy
are ‘‘original sources’’ on the basis that         to meetings, conversations, and other in-
while employed by Blackstone they gained           ternal communications. In the regular
significant insider knowledge which                course of her job duties, she also had
formed the basis of their allegations. Pls.’       access to email and internal documents
Opp’n to Mot. to Dismiss at 5–9 [Doc. No.          and data which reflected the conduct dis-
58]. Relators further specify that they            cussed in the complaint, including commu-
disclosed the allegations of the complaint,        nications and documents circulated among
prior to filing, to the United States Attor-       upper management. Am. Compl. ¶¶ 11–12.
ney’s Office for the Middle District of
Florida in the summer of 2006 and dis-                [10] Relator Brown’s contribution to
closed the allegations of the complaint to         the complaint is comparatively weaker
the United States Attorney’s Office for the        than Hutcheson’s. Brown states that he
District of Massachusetts in October 2006.         was a distributor for Blackstone in 2004
Am. Compl. ¶ 8.                                    and that part of his role was to develop a
   Although it was entirely unrelated either       Blackstone consulting relationship with
to the False Claims Act or Anti–Kickback           physicians in his territory. Am Compl.
Statute, the Berrios complaint publicly dis-       ¶ 15. Brown does not appear to have con-
closed Blackstone’s kickback scheme in the         tributed significant facts or data, and ac-
manner specified in the statute. The First         knowledges that his interactions with
Circuit has recognized that ‘‘a filing to a        Blackstone representatives and physicians
government body such as a court (not un-           merely support and confirm many of the
der seal) where all records are public could       allegations contained in the complaint. Id.
be public disclosure.’’ Rost, 507 F.3d at          On this basis, the Court agrees with Black-
728, n. 5.                                         stone’s contention that Brown’s claim to be
   [8] Here, however, Relators’ complaint          an ‘‘original source’’ is conclusory, and in-
is not ‘‘based upon’’ the Berrios complaint.       sufficient to meet his burden of pleading
Under United States ex rel. Rost v. Pfizer         facts establishing the Court’s jurisdiction.
Inc., an ‘‘action is ‘based upon’ a public           The motion to dismiss based on the
disclosure of allegations only where the           False Claims Act’s public disclosure bar as
relator has actually derived from that dis-        to relator Hutcheson is denied on the basis
closure the allegations upon which his qui         that she is an ‘‘original source’’ under the
tam action is based.’’ 446 F.Supp.2d 6, 19         Act. The motion to dismiss based on the
(D.Mass.2006) (quoting United States ex            False Claim Act’s public disclosure bar as
rel. Siller v. Becton Dickinson & Co., 21          to relator Brown is allowed.
F.3d 1339, 1348 (4th Cir.1994)).
  [9] This Court holds that the ‘‘original           D.   Motion to Dismiss for Failure to
source’’ exception to the public disclosure               State a Claim
bar applies to relator Hutcheson. Relator           A motion to dismiss pursuant to Federal
Hutcheson was a regional manager, em-              Rule of Civil Procedure 12(b)(6) challenges

12. Relators rely on a Texas district court,        the scheme alleged by Relator.’’ United
  which held that it is difficult to claim that     States ex rel. Smart v. CHRISTUS Health, 626
  ‘‘one paragraph in a purely private litigation    F.Supp.2d 647, 655 (S.D.Tex.2009).
  TTT actually put the government on notice of
           U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                  61
                                Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

a complaint on the basis that it fails to            of the FCA is shown when an individual).
state a claim upon which relief can be               The First Circuit explained that:
granted. To survive a motion to dismiss                [T]he [False Claims Act] imposes liabili-
under the Rule, a complaint must contain               ty upon persons who 1) present or cause
sufficient factual matter, accepted as true,           to be presented to the United States
to ‘‘state a claim to relief that is plausible         government, a claim for approval or pay-
on its face.’’ Bell Atlantic Corp. v. Twom-            ment, where 2) that claim is false or
bly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167            fraudulent, and 3) the action was under-
L.Ed.2d 929 (2007). A pleading that mere-              taken ‘knowingly,’ in other words, with
ly offers ‘‘labels and conclusions’’ or a ‘‘for-       actual knowledge of the falsity of the
mulaic recitation of the elements of a cause           information contained in the claim, or in
of action’’ is insufficient. Id. at 555, 127           deliberate ignorance or reckless disre-
S.Ct. 1955.                                            gard of the truth or falsity of that infor-
1. False Claims Act Standard of Review                 mation.
   [11] An individual violates the False             United States ex rel. Karvelas v. Melrose–
Claims Act when he ‘‘knowingly presents,             Wakefield Hosp., 360 F.3d 220, 225 (1st
or causes to be presented, to an officer or          Cir.2004). In addition, the First Circuit
employee of the United States Govern-                held that the false claim must be material
ment or a member of the Armed Forces of              in United States v. Data Translation, Inc.,
the United States a false or fraudulent              984 F.2d 1256, 1267 (1st Cir.1992). In an
claim for payment or approval.’’ 31 U.S.C.           attempt to provide greater clarity on the
§ 3729(a)(1). To clarify the elements nec-           necessary elements for a claim under the
essary to state a claim under the False              False Claims Act, this Court will break
Claims Act, numerous circuits have creat-            down the First Circuit requirements to
ed specific tests. The Fourth, Fifth and             separate specific elements. Thus, to state
Ninth Circuits inquire: ‘‘(1) whether ‘there         a claim under the False Claims Act, an
was a false statement or fraudulent course           individual must allege that the accused:
of conduct; (2) made or carried out with             (1) knowingly presented or caused to be
the requisite scienter; (3) that was materi-         presented, (2) a false claim, (3) to the
al; and (4) that caused the government to            United States government, (4) knowing its
pay out money or to forfeit moneys due               falsity, (5) which was material, (6) seeking
(i.e., that involved a claim).’ ’’ United            payment from the federal treasury.
States ex rel. Longhi v. United States, 575
F.3d 458, 467 (5th Cir.2009) (quoting Unit-              a.   Knowingly Presented or Caused
ed States ex rel. Wilson v. Kellogg Brown                          to Be Presented
& Root, Inc., 525 F.3d 370, 376 (4th Cir.               There are two roads to submitting a
2008)); see also United States ex rel. Hen-          false claim to the government. An entity or
dow v. University of Phoenix, 461 F.3d               person can actually submit the claim itself
1166, 1177–78 (9th Cir.2006). The Second             or cause another entity or person to sub-
Circuit uses a five-part test requiring the          mit the claim. The second road, the
individual to show (1) a claim, (2) to the           ‘‘causes to be presented’’ prong of the
United States government, (3) that is false          False Claims Act, results when the sub-
or fraudulent, (4) knowing its falsity, and          mission was the reasonably foreseeable re-
(5) seeking payment from the federal trea-           sult of a defendant’s actions. Rost, 507
sury. United States ex. rel. Mikes v.                F.3d at 733 n. 9 (‘‘under the [False Claims
Straus, 274 F.3d 687, 695 (2d Cir.2001)              Act] TTT [t]hat there were allegedly inter-
(utilizing a five-part test where a violation        vening persons who actually submitted the
62                     694 FEDERAL SUPPLEMENT, 2d SERIES

claims does not itself necessarily break the      rel. Quinn v. Omnicare, Inc., 382 F.3d 432,
causal connection when the claims are             440–41 (3d Cir.2004); Mikes, 274 F.3d at
foreseeable’’).                                   697; United States ex rel. Siewick v. Ja-
               b. False Claim                     mieson Science & Engineering, Inc., 214
   The next inquiry is whether the plaintiff      F.3d 1372, 1375–76 (D.C.Cir.2000); Harri-
sufficiently alleged the existence of a ‘‘false   son v. Westinghouse Savannah River Co.,
or fraudulent claim.’’ There are three the-       176 F.3d 776, 785–87 (4th Cir.1999); Unit-
ories under which a claim may be ‘‘false or       ed States ex rel. Thompson v. Colum-
fraudulent’’ under the False Claims Act.          bia/HCA Healthcare Corp., 125 F.3d 899,
They are: (1) factual falsity; (2) legal falsi-   902 (5th Cir.1997); United States ex rel.
ty under an express certification theory;         Hopper v. Anton, 91 F.3d 1261, 1265–66
and (3) legal falsity under an implied certi-     (9th Cir.1996). The First Circuit has not
fication theory.                                  defined legal falsity in the context of the
             i. Factual Falsity                   False Claims Act, although it has recog-
   A ‘‘factually false’’ claim is defined as a    nized that other courts have found liability
claim in which the goods or services pro-         for legally false claims. See Karvelas, 360
vided are either incorrectly described, or        F.3d at 232 n. 15.
make claim for a good or service never               [12, 13] A claim is legally false under
provided. Mikes v. Straus, 274 F.3d 687,          an express certification theory when the
697 (2d Cir.2001) (citing Robert Fabrikant
                                                  party making the claim expressly states
& Glenn E. Solomon, Application of the
                                                  that it has complied with the applicable
Federal False Claims Act to Regulatory
                                                  statutes’ regulations, where such compli-
Compliance Issues in the Health Care In-
                                                  ance is a precondition of payment. Con-
dustry, 51 Ala. L.Rev. 105, 111–12 (1999)).
                                                  ner, 543 F.3d at 1217. This theory is
     ii. Legal Falsity Under Express
                                                  satisfied any time a claimant expressly
                                                  states compliance with prerequisites of
  In amending the False Claims Act in             payment—there is no specific form of ‘‘cer-
1986, Congress emphasized that the scope          tification’’ required. See Hendow, 461
of false or fraudulent claims should be           F.3d at 1172 (‘‘So long as the statement in
broadly construed such that ‘‘each and ev-        question is knowingly false when made, it
ery claim submitted under a contract, loan        matters not whether it is a certification,
guarantee, or other agreement which was
                                                  assertion, statement, or secret handshake;
originally obtained by means of false state-
                                                  False Claims liability can attach.’’).
ments or other corrupt or fraudulent con-
duct, or in violation of any statute or appli-            iii. Legal Falsity Under
cable regulation, constitutes a false claim.’’
                                                              Implied Certification
S.Rep. No. 99–345, at *9 (1986), reprinted
in 1986 U.S.C.C.A.N. 5266, 5274. Thus,               [14] There appear to be three defini-
the coverage of the False Claims Act has          tions of the implied certification theory of
been extended to cover claims that are            legal falsity. Some courts hold that a
legally false, that is where a party certifies    claim is legally false under an implied cer-
compliance with a statute or regulation as        tification theory where a claimant makes
a condition to government payment, but            no express statement about compliance
did not actually comply with the statute or       with a statute or regulation, but by sub-
regulation. See U.S. ex rel. Conner v.            mitting a claim for payment implies that it
Salina Regional Health Center, Inc., 543          has complied with any preconditions to
F.3d 1211, 1217 (10th Cir.2008); U.S. ex          payment. Conner, 543 F.3d at 1218;
           U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                63
                              Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

United States ex rel. Augustine v. Century                              c.   Knowingly
Health Services, Inc., 289 F.3d 409, 415              [15] The Act was amended in 1986 to
(6th Cir.2002); Mikes, 274 F.3d at 699.            clarify that specific intent is not required
Other courts have held that the implied            in order to find a violation of the Act. 31
certification theory is essentially a materi-      U.S.C. 3729(b).       Instead, ‘‘knowingly’’
ality analysis where the government would
                                                   means that the defendant had actual
not have paid funds had it known of a
                                                   knowledge that the information is false,
violation of a law or regulation. See Unit-
                                                   acted in deliberate ignorance of the truth
ed States ex rel. Pogue v. Diabetes Treat-
                                                   or falsity of the information, or acted in
ment Centers of America, Inc., 238
                                                   reckless disregard of the truth or falsity of
F.Supp.2d 258, 264 (D.D.C.2002); see also
                                                   the information. Id.
In re Pharma. Indus. Average Wholesale
Price Litig., 491 F.Supp.2d 12, 18 (D.Mass.
                                                                    d.       Materiality
2007) (Saris, J.) (holding that hospitals
submitted legally false claims under an               Numerous circuits have explicitly re-
implied certification theory for Medicaid          quired a ‘‘materiality’’ element regarding
reimbursement when they failed to comply           the government’s decision to pay a claim in
with the Anti–Kickback Statute because             False Claims Act cases. See Longhi, 575
Medicare requires compliance with the              F.3d at 470; United States v. Bourseau,
Anti–Kickback Statute). Finally, there is          531 F.3d 1159, 1170–71 (9th Cir.2008);
a definition that implied certification exists     United States ex rel. Av Homecare, Inc.
where a statute requires express certifica-        v. Medshares Mgmt. Group, Inc., 400 F.3d
tion, but the claimant did not expressly           428, 445 (6th Cir.2005); United States ex
certify. Siewick, 214 F.3d at 1376 (holding        rel. Costner v. U.S., 317 F.3d 883, 889 (8th
that courts will ‘‘infer certification from        Cir.2003); Harrison, 176 F.3d at 785;
silence, but only where certification was a        Luckey v. Baxter Healthcare Corp., 183
prerequisite to the government action              F.3d 730, 732–33 (7th Cir.1999); Data
sought’’); Harrison, 176 F.3d at 787 n. 8,         Translation, 984 F.2d at 1267 (holding that
793.                                               any jury instruction error was harmless
   This Court rules that the first definition      because Government failed to show that
is the proper definition for the implied           alleged nondisclosure was material).
certification theory. As to the second defi-       While the Second Circuit has not adopted
nition, because this Court holds that mate-        a materiality element in the claim require-
riality is a separate element of a claim           ments, it has stated that the False Claims
under the False Claims Act, analysis of            Act ‘‘does not encompass those instances
whether the claim is false vel non ought           of regulatory noncompliance that are irrel-
not be based on the materiality of the false       evant to the government’s disbursement
statement. The third definition fits within        decisions.’’ Mikes, 274 F.3d at 697.
either the express certification theory or
the implied certification theory, but is not          [16] Nonetheless, there is not a consis-
broad enough fully to define either theory         tent definition of materiality and the First
completely. In adopting the first defini-          Circuit did not provide one in Data Trans-
tion, this Court agrees with the logic of          lation. The Fourth, Sixth, Ninth Circuit
Mikes as to the implied theory of liability,       and Fifth Circuits adopted a ‘‘ ‘natural ten-
restricting such liability to compliance with      dency test’ for materiality, which focuses
expressly stated preconditions of payment          on the potential effect of the false state-
found in the relevant statute or regula-           ment when it is made rather than on the
tions. 274 F.3d at 700.                            false statement’s actual effect after it is
64                    694 FEDERAL SUPPLEMENT, 2d SERIES

discovered.’’ Longhi, 575 F.3d at 470                         2.   Application
(quoting Bourseau, 531 F.3d at 1171). In           With the elements thus defined, the
contrast, the Eighth Circuit relies upon an      Court turns to whether the Amended
‘‘outcome materiality test,’’ which requires     Complaint states a claim under the False
a showing that the defendant’s actions (1)       Claims Act. The Amended Complaint al-
had ‘‘the purpose and effect of causing the      leges that Blackstone paid doctors a fee to
United States to pay out money it [was]          act as consultants. Am. Compl. ¶ 72. The
not obligated to pay,’’ or (2) ‘‘intentionally   doctors did no actual consulting for Black-
deprive[d] the United States of money it is      stone, however, rather the payment was an
lawfully due.’’ Bourseau, 531 F.3d at 1171       inducement to the doctors to use Black-
(quoting Costner v. URS Consultants, Inc.,       stone products in their spinal surgeries.
153 F.3d 667, 677 (8th Cir.1998)). In justi-     Id. ¶ 73. The Amended Complaint alleges
fying its decision to adopt the ‘‘natural        that this arrangement provided doctors a
tendency test,’’ the Fifth Circuit explained     kick-back in violation of the Anti–Kickback
that in passing the Fraud Enforcement            Statute, 42 U.S.C. § 1320a–7b(b). The
and Recovery Act of 2009 (FERA), Pub. L.         Amended Complaint alleges that Black-
No. 111–21, § 4, 123 Stat. 1617 (2009) (co-      stone created and used this program as a
dified at 31 U.S.C. § 3729), Congress clari-     means to increase the use of its products.
fied its intent for the False Claims Act by      Id. ¶ 68. It also alleges that Blackstone
adding the following language to                 executives were aware that reimbursement
§ 3729(b): ‘‘(4) the term ‘material’ means       would be sought from government health
having a natural tendency to influence, or       programs for many of the surgeries per-
be capable of influencing, the payment or        formed. Id. ¶ 66.
receipt of money or property.’’ Longhi,             Both the doctors and hospitals submit-
575 F.3d at 470 (quoting 31 U.S.C.               ted claims for reimbursements of many of
§ 3729(b)). This Court follows the reason-       these surgeries to Medicare, Medicaid, and
ing of the Fifth Circuit and adopts the          other government health programs. Id.
‘‘natural tendency test’’ such that it consid-   ¶ 243. The doctors submitted claims re-
ers whether the government likely would          questing reimbursement for their services,
have declined to pay had they known of           such as performance of the surgery, and
the fraud.                                       the hospitals submitted claims for use of
                                                 the hospital and reimbursement for the
        e.    Seeking Payment from               products, including Blackstone’s products,
             the Federal Treasury                used in the surgeries. Id. ¶¶ 51, 53.
  Finally, the last element of a claim un-         Before seeking any reimbursement from
der the False Claims Act was defined in          Medicare, hospitals and physicians enter
United States v. Rivera, where the First         into a Provider Agreement to establish
Circuit held that liability under the Act        their eligibility to seek such reimburse-
may occur even where a contractor ‘‘did          ment. Id. ¶ 57. The Provider Agreement
not actually induce the government to pay        states, in part:
out funds or to suffer any loss,’’ but re-          I agree to abide by the Medicare laws,
quired a court to inquire whether ‘‘within          regulations and program instructions
the payment scheme, the [claim] has the             that apply to [me]. The Medicare laws,
practical purpose and effect, and poses the         regulations, and program instructions
attendant risk, of inducing wrongful pay-           are available through the [Medicare]
ment.’’ 55 F.3d 703, 709–10 (1st Cir.1995).         contractor. I understand that payment
            U.S. EX REL. HUTCHESON v. BLACKSTONE MEDICAL, INC.                                      65
                                 Cite as 694 F.Supp.2d 48 (D.Mass. 2010)

  of a claim by Medicare is conditioned                 were provided in compliance with such
  upon the claim and the underlying trans-              laws and regulations.
  action complying with such laws, regula-            Id. ¶ 62. In reimbursing hospitals for op-
  tions, and program instructions (includ-            erating costs, Medicare pays according to
  ing, but not limited to, the Federal                a per-patient standardized rate, called the
  Anti–Kickback Statute and the Stark                 Diagnostic Related Group (‘‘DRG’’) rate.
  law), and on the [provider’s] compliance            Id.      ¶ 40    (citing      42      U.S.C.
  with all applicable conditions of partic-           § 1395ww(d)(3)(A), (D)). The hospital
  ipation in Medicare.                                submits a claim for a surgery by identify-
Id. (quoting Form CMS–855A; Form                      ing the DRG associated with the surgery.
CMS–855I) (emphasis added). In addi-                  The DRG reimbursement rate is ‘‘intended
tion, Hospitals must submit annual Hospi-             to fairly compensate the hospital for all
tal Cost Reports. Id. ¶ 44 (citing 42                 costs associated with the surgery, includ-
U.S.C. § 1395g(a); 42 C.F.R. § 413.20).               ing the medical device costs.’’ Id. ¶ 52.
The Hospital Cost Report includes the fol-            The Amended Complaint contains no alle-
lowing statement:                                     gations regarding certifications or require-
                                                      ments in other government health pro-
   Misrepresentation or falsification of any
                                                      grams such as Medicaid or TRICARE.
   information contained in this cost report
   may be punishable by criminal, civil and              [17, 18] Based on those facts, this
   administrative action, fine and/or impris-         Court holds that the Amended Complaint
   onment under federal law. Further-                 fails to state a claim for which relief can be
   more, if services identified in this report        granted. Recognizing that it is not easy to
   provided or procured through the pay-              break out each element when looking at a
                                                      factual situation, the Court will attempt to
   ment directly or indirectly of a kickback
                                                      be as clear as possible in explaining how
   or where otherwise illegal, criminal, civil
                                                      the complaint fails. Numerous courts
   and administrative action, fines and/or
                                                      have held that reimbursement for Medi-
   imprisonment may result.
                                                      care requires compliance with the Anti–
Id. ¶ 61 (quoting CMS Form 2552). The                 Kickback Statute. See Conner, 543 F.3d
person certifying the report is required to           at 1223 n. 8 (citing cases). The Court
sign a statement which reads:                         agrees with those decisions to the extent
   To the best of my knowledge and belief,            that they hold that the Provider Agree-
   it [the Hospital Cost Report] is a true,           ment creates an express certification of
   correct and complete statement pre-                compliance with the Anti–Kickback Stat-
   pared from the books and records of the            ute.13 The Court further holds that as
   provider in accordance with applicable             written, this certification is specific to the
   instructions, except as noted. I further           party seeking reimbursement. The certifi-
   certify that I am familiar with the laws           cation states, ‘‘I agree to abide by the
   and regulations regarding the provisions           Medicare laws, regulations and program
   of health care services, and that the              instructions that apply to [me].’’ While
   services identified in this cost report            the paragraph does state that the signato-

13. The Court does not hold that the Hospital           specific enough to create False Claims Act
  Cost Report creates such an express certifica-        liability for failure to comply with the Anti–
  tion because it simply acknowledges the civil         Kickback Statute, as it refers broadly to ‘‘such
  and criminal liability of failing to comply with      laws and regulations.’’ Contra Mason v. Med-
  the Anti–Kickback Statute. The actual certifi-        line Indus. Inc., No. 07–5615, 2010 WL
  cation in the Hospital Cost Report is not             653542, at *5–6 (N.D.Ill. Feb. 18, 2010).
66                     694 FEDERAL SUPPLEMENT, 2d SERIES

ry ‘‘understand[s] that payment of a claim         that they submitted any claims for surger-
by Medicare is conditioned upon the claim          ies performed using Blackstone products
and the underlying transaction complying           while they received consulting fees, they
with such laws, regulations, and program           did not comply with the Anti–Kickback
instructions (including, but not limited to,       Statute, and thus submitted a false claim.
the Federal Anti–Kickback Statute and the          The Amended Complaint sufficiently alleg-
Stark law) TTT,’’ that statement is not in         es that through the consulting agreements,
itself a certification that the entire transac-    Blackstone knowingly caused the submis-
tion complied with the Anti–Kickback Stat-         sion of these false claims. Whether or not
ute. The statement creates no obligation           any such Medicare claims from these doc-
on the part of the signatory to determine          tors were paid, the doctors sought pay-
whether the entire transaction complied            ment from the federal treasury. This
with the Anti–Kickback statute.14 More-            Court holds, however, that the Amended
over, the statement does not create a pre-         Complaint does not sufficiently allege that
condition to payment for purposes of the           the false statements were material. Con-
implied certification theory. This Court           tra Thomas, 2008 WL 4853630, at *14.
holds that the implied certification theory           As explained above, the Court must de-
requires that a statute or regulation ex-          termine whether the false claim had ‘‘a
pressly state the preconditions to payment,        natural tendency to influence, or be capa-
such a precondition cannot be hidden in an         ble of influencing, the payment or receipt
enrollment form. The Medicare statutes             of money.’’ The Court assumes that had
and regulations do not expressly contain a         the hospital received a kick-back or known
precondition of compliance with the Anti–          of the kick-back, such that its certification
Kickback Statute. The Amended Com-                 was false, the false certification by the
plaint contains no allegations that the hos-
                                                   hospital would have been material, despite
pitals themselves received kickbacks, or
                                                   the use of DRG pricing. Although the
that they knew or should have known
                                                   government did not lose any excess money
about the kickbacks received by the doc-
                                                   by the use of Blackstone products, it likely
tors. As a result, the certifications sub-
                                                   would not have paid for the cost associated
mitted by the hospitals were not false.
                                                   with the surgery, including the use of the
  [19] The issue as to whether the nine-           Blackstone product, had it known of the
ty-one doctors identified in the Amended           kickback for such use. The request for
Complaint submitted false claims is a clos-        reimbursement from the doctor is a little
er issue. As with the hospitals, the doc-          different. The doctor is not seeking reim-
tors expressly certified compliance with           bursement for the use of the Blackstone
the Anti–Kickback Statute. To the extent           device at all, the doctor is purely seeking

14. The Court can imagine a certification that      demnify the hospital should they violate any
  does create such an obligation. If the form       such laws or regulations. Interpreting the
  read, ‘‘I declare that the underlying transac-    current language of Form CMS–855A and
  tion for which I seek reimbursement com-          Form CMS–855I as certifying compliance at
  plied with such laws, regulations and pro-        every step of a transaction not only goes be-
  gram instructions (including the Federal          yond the plain language of the document, but
  Anti–Kickback Statute and Stark Law) at ev-       it is a policy decision (holding hospitals re-
  ery step of the transaction,’’ or some such       sponsible for such knowledge) that properly
  statement, this Court would hold differently.     ought come from Congress or the Department
  With such a certification, the Court imagines
                                                    of Health and Human Services, not the
  that hospitals would require all employees
  and independent contractors to agree to in-
                          KENNEY v. STATE STREET CORP.                                     67
                              Cite as 694 F.Supp.2d 67 (D.Mass. 2010)

reimbursement for his services. The pur-             Judgment shall enter for the defendant
chase of Blackstone devices are thus not           Blackstone.
an underlying transaction to the reim-                SO ORDERED.
bursement request for the doctor. Had
the Amended Complaint alleged that
Blackstone induced doctors to perform
medically unnecessary surgeries for which
they sought reimbursement from Medi-
care, this Court would reach a different
conclusion. In that situation, the underly-
ing transaction—the sale of surgical ser-             Thomas U. KENNEY, on Behalf of
vices to a patient—would have been taint-              Himself and a Class of Persons
ed by a kickback, and the false statement                Similarly Situated, Plaintiff,
would have had a natural tendency to in-
fluence the decision to pay.                                              v.
                                                   STATE      STREET     CORPORATION;
III.   CONCLUSION                                    North America Regional Benefits
  For the reasons stated above:                      Committee of State Street Corpora-
   1. The Court denies Blackstone’s Mo-              tion; Alison Quirk; Pamela Gormley;
tion to Transfer (Document No. 50).                  Ross McLellan; David O’leary; Skip
                                                     Curtrell; Jayne Donahue; David Gut-
   2. The Court denies Blackstone’s mo-
                                                     schenritter; James Malerba State
tion to dismiss based on the False Claims
                                                     Street Corporation Investment Com-
Act’s first-to-file rule because the Relators’
                                                     mittee; and John Does 1–10, Defen-
case is not ‘‘a related action based on the
facts underlying’’ the Thomas action, and
therefore not jurisdictionally barred under           Civil Action No. 09–CV–10750–PBS.
the False Claims Act’s first-to-file rule.
                                                           United States District Court,
   3. The Court denies Blackstone’s mo-                         D. Massachusetts.
tion to dismiss based on the False Claims
Act’s public disclosure bar as to relator                           March 15, 2010.
Hutcheson, but allows it as to relator             Background: Participant in employee
Brown, on the basis that he is not an              stock ownership plan (ESOP) brought
‘‘original source’’ under the public disclo-       action on behalf of himself and similarly
sure bar of the False Claims Act.                  situated participants against former em-
   4. The Court grants the motion to dis-          ployer, the benefits and investment com-
miss based on (Document No. 52) the fail-          mittees of its board of directors, and in-
ure to state a claim under the False               dividual board members for breach of
Claims Act, under Federal Rule of Civil            fiduciary duty under the Employee Re-
Procedure 12(b)(6) because the express             tirement Income Security Act (ERISA),
certification by the hospitals in seeking          alleging that defendants negligently mis-
payment for the use of Blackstone’s de-            represented and failed to disclose criti-
vices was personal to the hospital and with        cal aspects of the employer’s financial
no allegations that the hospital knew of the       condition and imprudently continued to
kick-backs, those claims were not false,           invest plan funds in employer stock
and the false express certification by the         knowing that they had exposed the
doctors were not material.                         company to potentially billions in invest-

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