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US District Court : CIVIL PROCEEDURE - qui tam fraud suit failed R. 9(b) particularity required; dismissed

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
United States of America, ex rel. Henry Roop,
Plaintiff, MEMORANDUM OPINION
AND ORDER
vs. Civil No. 07-1600 ADM/AJB
Hypoguard USA, Inc. and Medisys Group, PLC,
Defendants.
______________________________________________________________________________
Jeffrey J. Lowe, Esq., Jeffrey J. Lowe, PC, St. Louis, MO, and Bernard E. Reynolds, Esq., Vogel
Law Firm, Moorhead, MN, argued on behalf of the Plaintiff.
Brent R. Austin, Esq., Wildman, Harrold, Allen & Dixon LLP, Chicago, IL, and Ryan W. Marth,
Esq., Robins Kaplan Miller & Ciresi LLP, Minneapolis, MN, argued on behalf of the
Defendants.
______________________________________________________________________________
I. INTRODUCTION
On September 6, 2007, the undersigned United States District Judge heard oral argument
on Defendants Hypoguard USA, Inc. and Medisys Group, PLCs (collectively ?Hypoguard)
Motion to Dismiss [Docket No. 43]. In this qui tam suit, Plaintiff Henry Roop (?Roop), suing
as a relator on behalf of the United States of America under the False Claims Act, 31 U.S.C.
3729-3733, seeks to recover payments made by Medicare for allegedly defective medical devices
and related supplies. For the reasons set forth below, this Court grants Hypoguards Motion.
1 In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
2
II. BACKGROUND1
Hypoguard manufactures and sells medical equipment, including the Hypoguard
Advance, Assure I, Assure II, Assure III, and QuickTek blood glucose monitoring systems.
Compl. 7 [Docket No. 1]. Roop worked as an account manager and Medicare sales specialist
for Hypoguard. Id. 6. Roop claims that he learned the factual information underlying the
Complaint through his employment with Hypoguard. Id. 6. Roop asserts that Hypoguards
blood testing meters are defective because they require application of a specific amount of blood
to operate correctly and do not contain working short-fill detection devices (a device that informs
the user when the blood sample is too small to produce an accurate reading). Id. 30-34. Roop
asserts that when a user applies a blood sample that is either too small or too large, the meters
produce false readings thus exposing the user to a potential health risk. Id. Roop avers that the
false high and low readings demonstrate a defect with Hypoguards devices that it failed to
report to the Food and Drug Administration (?FDA). Id. 38. Roop also asserts that
Hypoguard knew its meters were defective but continued to sell its meters knowing they would
be subject to Medicare reimbursement and thus assisted the submission of fraudulent claims to
the government. Id. 51.
Additionally, Roop asserts that Hypoguard markets the Insuflon, a catheter system,
without notifying customers that the device is restricted to sale to adult patients upon order of a
physician who can attest to the medical necessity of the device. Id. 54. Roop asserts that the
Insuflon is sold and reimbursed by Medicare without the requisite proof of medical necessity
3
thus constituting fraud against the government. Id. Further, Roop contends that Hypoguard
defrauded the government by selling the device to children without FDA approval. Id.
Roop asserts the United States suffered damage when Medicare reimbursed Hypoguards
customers for the cost of Hypoguards blood testing meters, when it reimbursed individuals for
the cost of the Insuflon catheter without proof of medical necessity, and when it provided
reimbursement for a childs use of the Insuflon. Id. 57. The United States has declined to
intervene in this suit.
III. Discussion
A. Motion to Dismiss Standard
Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to
dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm, 15 F.3d at 112; Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Any
ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving
party. Ossman, 825 F. Supp. at 880. ?A motion to dismiss should be granted as a practical
matter . . . only in the unusual case in which the plaintiff includes allegations that show on the
face of the complaint that there is some insuperable bar to relief. Frey v. City of Herculaneum,
44 F.3d 667, 671 (8th Cir. 1995).
Under Rule 8(a) of the Federal Rules of Civil Procedure, pleadings shall contain a short
and plain statement of the claim showing that the pleader is entitled to relief. A pleading must
contain enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v.
4
Twombly, 127 S. Ct. 1955, 1974 (2007).
B. False Claims Act
In order to establish a prima facie case under the False Claims Act (?FCA), Roop must
show that (1) Hypoguard presented a claim, or caused a claim to be presented, to the United
States; (2) the claim was false or fraudulent; and (3) Hypoguard knew the claim was false or
fraudulent. 31 U.S.C. 3729(a)(1); see also United States ex rel. Golden v. Ark. Game & Fish
Commn, 333 F.3d 867, 870 (8th Cir. 2003). A complaint alleging violations of the FCA must
be pled with particularity pursuant to Federal Rule of Civil Procedure 9(b). United States ex rel.
Costner v. United States, 317 F.3d 883, 888 (8th Cir. 2003). Under Rule 9(b), ?the complaint
must plead such facts as the time, place, and content of the defendants false representations, as
well as the details of the defendants fraudulent acts, including when the acts occurred, who
engaged in them, and what was obtained as a result. United States ex rel. Joshi v. St. Lukes
Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006). In other words, the complaint must allege the
?who, what, where, when, and how of the fraud. Costner, 317 F.3d at 888.
First, Roop asserts that Hypoguard caused the filing of false claims for Medicare
reimbursement by selling products it knew to be defective and that it knew would be subject to
reimbursement. Compl. 51. Roops Complaint fails to meet the particularity requirements of
Rule 9(b). Central to Roops argument that Hypoguard caused a false or fraudulent claim to be
submitted to the government is Roops assertion that Hypoguards blood glucose monitors are
defective. However, Roop does not allege that Hypoguards monitors failed to comply with any
statute or FDA regulation. Indeed, Roop is unable to identify any authority that blood glucose
meters requiring a specific blood sample size and that do not contain a short-fill detection device
5
are defective. Accordingly, this claim fails to allege facts demonstrating any fraudulent act.
Next, Roop asserts that Hypoguard caused the submissions of false claims by selling
products the FDA would not have approved but for Hypoguards fraudulent submission in the
pre-market approval process. Id. 38, 55. Specifically, he asserts that the FDA would not have
continued to authorize Hypgoguards blood glucose meters if Hypoguard had notified the FDA
that its monitors sometimes produced false readings. Id. In support of this argument, Roop
contends that Hypoguard was required to file medical device reports (?MDR) with the FDA but
that Hypoguard failed to file some MDRs and the MDRs it did file contained ?false, incomplete
and/or misleading information. Id. 38. This claim also fails to meet the particularity
requirements of Rule 9(b). Although Roop contends that Hypoguard provided the FDA with
false information during the pre-market approval process, Roop does not allege who within
Hypoguard provided the FDA with false information, what the allegedly false information was,
or when that information was provided to the FDA (including the date, time, and place).
Similarly, Roops Complaint fails to identify the who, what, where, and when regarding the
MDRs Hypoguard submitted to the FDA. Roop does not set forth any specific instances in
which Hypoguard was required to submit an MDR but failed to, nor does Roop set forth any
specific instances in which Hypoguard either submitted false information in an MDR or
neglected to provide required information.
Finally, Roop asserts that Hypoguard caused submission of fraudulent claims to the
government because it failed to inform customers that the Insuflon catheter is a device restricted
to sale only upon order by a physician and only to adults. Compl. 54. Again, Roop has not
met the requirements of Rule 9(b). Roop does not set forth any facts identifying an instance in
6
which the Insuflon catheter was actually sold to someone without the requisite physicians
determination of medical necessity. Nor does he set forth an example of the Insuflon being sold
for a childs use. Roop also fails to set forth any facts demonstrating that a fraudulent sale of the
Insuflon has ever occurred, nor the specific conduct Hypoguard engaged in to bring about the
fraud.
All of Roops claims that Hypoguard caused the submission of false claims to the
government fail Rule 9(b)s particularity requirement. Accordingly, this Court must grant
Hypoguards Motion to Dismiss.
C. Leave to Amend
In the memorandum in opposition to Hypoguards Motion to Dismiss, Roop asks this
Court to grant him leave to file an amended complaint if this Court finds that his Complaint fails
the requirements of Rule 9(b). Pl.s Mem. in Oppn to Defs. Mot. to Dismiss at 12. Roop has
not specified in his memorandum what additional facts he would plead to satisfy Rule 9(b), nor
did he submit a proposed amended Complaint. At oral argument, this Court asked Roops
counsel what further facts could be adduced to conform Roops Complaint to the requirements of
Rule 9(b). Roops counsel responded that he could allege that people were injured by
Hypoguards devices, and continued by stating:
I guess I could more clearly allege the reimbursement that -- its not
Hypoguard being reimbursed, but that theyre causing reimbursements to be
made. So I could more specifically allege regarding the MDRs and that they were
required to be reported and not reported and provide the basis under the
regulations with some evidence as to -- particular evidence as to people that were
injured or at least discussion where Hypoguard employees acknowledged that
people were injured by the device.
Roops counsel further requested an additional ninety days to conduct discovery before filing an
2 Since the filing of Defendants Motion to Dismiss, Roop has not sought leave to amend
his complaint by submitting to the Court a proposed Amended Complaint as provided by
Minnesota Local Rule 15.1.
7
amended complaint. The purpose of discovery is not to cure deficiencies in a facially inadequate
Complaint.
Rule 15(a) of the Federal Rules of Civil Procedure states that leave [to amend a
complaint] shall be freely given when justice so requires. A court may deny leave to amend
when amendment would be futile. Roberson v. Hayti Police Dept, 241 F.3d 992, 995 (8th Cir.
2001). In this case, the potential amendments Roops counsel cited would not cure the
deficiencies in Roops Complaint and thus would be futile. The potential amendments do not
allege facts demonstrating that Hypoguards products failed to conform with a statute or FDA
requirement, they would not allege any specific instances in which Hypoguard provided the FDA
with false information or failed to submit an MDR when it was required to, and they would not
demonstrate a specific instance in which a fraudulent claim was filed for the Insuflon catheter
because of Hypoguards conduct. Accordingly, this Court finds that it would be futile to allow
Roop to amend his Complaint. Roops request for leave to amend is denied.2
8
IV. CONCLUSION
Based upon the foregoing, and all of the files, records and proceedings herein, IT IS
HEREBY ORDERED that:
1. Defendants Motion to Dismiss [Docket No. 43] is GRANTED; and
2. Plaintiff's Complaint is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: September 24, 2007.
 

 
 
 

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