United States ex rel. Estate of Gadbois v. Pharmerica Corp.

          MEMORANDUM AND ORDER

          JOHN J. MCCONNELL, JR., United States District Judge.

         This qui tam suit centers around allegations that defendant PharMerica Corporation has violated provisions of the Federal False Claims Act and various state analogues. The original complaint brought by relator Robert Gadbois, since deceased, was dismissed by this Court in 2014. Mem. & Order, United States ex rel. Gadbois v. PharMerica Corp. (Gadbois I), No. 10-471 (D.R.I. Oct. 3, 2014) (Lisi, J.), ECF No. 53. The United States Court of Appeals for the First Circuit vacated the decision and remanded for further proceedings. United States ex rel. Gadbois v. PharMerica Corp. (Gadbois II), 809 F.3d 1 (1st Cir. 2015).

         The case is now before the Court on two motions: the Estate of Robert Gadbois' motion for leave to file its Third Amended Complaint (ECF No. 64), and the Estate's motion to strike PharMerica's response in opposition to the Estate's motion for leave (ECF No. 72). For the reasons set forth herein, the Court DENIES the Estate leave to file its Third Amended Complaint, as supplementation would be futile. The Court also DENIES as moot the Estate's motion to strike.

         I. BACKGROUND

         The facts and posture of this matter have been extensively laid out in this Court's prior decision, see Gadbois I, slip op. at 2-13, in the First Circuit's opinion in this case, see Gadbois II, 809 F.3d at 3-4, and in the briefing by the parties on these motions. The Court assumes the reader's familiarity with those details and recites only what is relevant to the issues currently before it.

         In July of 2009, Jennifer Denk, a pharmacist previously employed by PharMerica in Pewaukee, Wisconsin, filed a qui tarn action against PharMerica in the United States District Court for the Eastern District of Wisconsin (the "Wisconsin action"). She subsequently filed a first amended complaint in January of 2010. Ms. Denk alleged that PharMerica violated the False Claims Act by submitting fraudulent claims for monetary payment through Medicare and Medicaid, including for Schedule II through V controlled substances. Pursuant to the governing statute, the Wisconsin action was filed under seal. See 31 U.S.C. § 3730(b)(2).

         During this time, the original relator in this action, Robert Gadbois, worked as a pharmacist employed by PharMerica in its Warwick, Rhode Island, pharmacy. In November of 2010, he filed this qui tarn suit alleging that PharMerica was engaged in schemes related to overbilling Medicaid and Medicare Part D for controlled and non-controlled medications. Mr. Gadbois alleged that these false claims brought undue profit to PharMerica, and that these schemes were prevalent beyond just PharMerica's Warwick pharmacy. Mr. Gadbois' allegations reached Schedule II through V drugs.

         In May of 2013, the United States intervened in the Wisconsin action, and the next month, the complaint was unsealed. A few months later in November, the United States declined to intervene in Mr. Gadbois' action. The complaint in this action was unsealed and ordered served on PharMerica. Shortly thereafter, the State of Rhode Island, on behalf of itself and other named states, similarly declined to intervene in this action. Mr. Gadbois filed his second amended complaint in February of 2014.

         On October 3, 2014, this Court dismissed Mr. Gadbois' second amended complaint under the first-to-file bar of the False Claims Act, 31 U.S.C. § 3730(b)(5).^[1]Gadbois I, slip op. at 22-23. This Court held that Mr. Gadbois' complaint alleged the same scheme as contained in Ms. Denk's complaint, and that Mr. Gadbois' allegations related to non-controlled medications were insufficient to distinguish the claims. See Id. at 21-22. Specifically, this Court found that, "[b]y the time Gadbois filed his initial complaint in this Court, the United States Government had already been alerted to Pharmerica's alleged fraudulent scheme on three occasions: Denk's meeting with government officials and Denk's filing of her original and first amended complaints." Id. "Whether the medications in question were controlled or non-controlled, the prescription information required prior to their dispensing was the same, and dispensing either category of medication without a proper prescription disqualified it from reimbursement by Medicare and/or Medicaid." Id. at 22.

         Mr. Gadbois appealed the Court's ruling to the United States Court of Appeals for the First Circuit. While that appeal was pending, two crucial developments unfolded. First, the Supreme Court decided Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, which interpreted the first-to-file bar as a temporal bar that dissolves when the precluding suit is no longer "pending." 135 S.Ct. 1970, 1979 (2015). Second, the Wisconsin action was settled and dismissed.

         In light of these events, the First Circuit held that the jurisdictional bar underpinning this Court's order of dismissal had "dissolved." Gadbois II, 809 F.3d at 6. Faced with a complaint originally dismissed for want of jurisdiction, the Court of Appeals had a choice: allow the original dismissal to stand and require Mr. Gadbois to file a new action, or allow Mr. Gadbois to pursue supplementation under Federal Rule of Civil Procedure 15(d) to cure the jurisdictional defect. The First Circuit chose the latter course, reasoning that to require dismissal and refiling would be a "pointless formality." Id. The Court of Appeals thus vacated the dismissal and remanded the case for further proceedings.

         Some six months later, on June 1, 2016, Mr. Gadbois died. His Estate was substituted as relator, through Mr. Gadbois' successor and the Estate's representative, Kristine Cole-Gadbois.

         Acting on the First Circuit's decision, the Estate sought leave to file an amended and supplemental complaint in December of 2016.^[2] ECF No. 64. Briefing related to this motion ensued over nearly the next year, including a motion by the Estate to strike PharMerica's response in opposition to the Estate's motion for leave to supplement. ECF No. 72. In June of this year, the original judge assigned to this case retired, and the matter was reassigned to this Court.

         II. STANDARD OF REVIEW

         Courts should "freely give leave" to amend a complaint "when justice so requires." Fed.R.Civ.P. 15(a)(2). In addition to amending a complaint, a plaintiff may supplement her complaint "setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Fed.R.Civ.P. 15(d). Courts should allow supplementation "on just terms, " and treat requests to supplement liberally. Gadbois II, 809 F.3d at 7 (comparing the Rule 15(d) standard to that of Rule 15(a)).

         However, the right to amend or supplement is not absolute, and such motions should not be granted automatically. See Id. Leave should be denied where the proposed revisions would be futile. See id., Maldonado v. Dominguez, 137 F.3d 1, 11 (1st Cir. 1998). "Futility" means that the complaint, as amended, fails to state a claim or leaves the Court without subject-matter jurisdiction. See D'Agostino v. ev3, Inc., 845 F.3d 1, 6 & n.3 (1st Cir. 2016). Where a proposed pleading would leave the Court without subject-matter jurisdiction, the appropriate standard of review is that of a motion to dismiss under Rule 12(b)(1). See Schock v. United States, 21 F.Supp.2d 115, 124 (D.E.I. 1998); cf. Hatch v. Dep't for Children, Youth, & Their Families, 274 F.3d 12, 19 (1st Cir. 2001) (endorsing Rule 12(b)(6) standard where amendment would be futile for failure to state a claim).

         III. DISCUSSION

         PharMerica raises three primary arguments as to why supplementation would be of no avail. Its opening argument is that the proposed supplemental complaint does not relate back to the date of the original complaint. If this is so, PharMerica can take advantage of two defenses which have arisen since the original complaint was filed. First, that this action is barred because it is based upon allegations already subject to a suit in which the Government is a party. Second, that the suit is barred because substantially similar allegations have been publicly disclosed, and because the Estate cannot prove Mr. Gadbois was an original source of the information.

         A. Relation Back

         The supplemental allegation central to the Estate's proposed complaint is that the Wisconsin action has been settled. This development, in conjunction with the Supreme Court's decision in Kellogg, 135 S.Ct. 1970, has "dissolved the jurisdictional bar" that caused this Court to previously dismiss this action. Gadbois II, 809 F.3d at 6.

         Although the jurisdictional bar no longer exists going forward, a critical question is whether the supplemental complaint relates back under Federal Rule of Civil Procedure 15(c).^[3] If the supplemental complaint does not take the date of the original complaint, then PharMerica may have several defenses that would render supplementation futile. See Id. at 8 n.4 (citing U ...