Corporate Counsel Daily, Heart device qui tam action utterly fails for lack of specific pleading, (Apr 9, 2025)

By Justin Marcus Smith, J.D.

The complaint was “devoid” of any information as to any allegedly fraudulent claim submitted to the government.

Despite the inapplicability of most timeliness, res judicata, and public disclosure arguments for dismissal, the Fed. R. Civ. P. 9(b) heightened pleading requirement ultimately proved fatal to a False Claims Act (FCA) qui tam action brought against a hospital, a heart device manufacturer, and associated individuals, held the federal district court in San Juan, Puerto Rico. The relator did not allege any specific dates or even limited time frames for alleged submission of false claims in connection with sales of electrophysiology medical devices (EMDs). Although the relator was correct that the Second Circuit has counseled against applying R. 9(b) so stringently as to render the FCA toothless, the opinion the relator cited still required sufficient precision to serve the R. 9(b) pleading notice requirement. The R. 9(b) dismissal was with prejudice, but the court otherwise mostly rejected timeliness, res judicata, and public disclosure arguments for dismissal (Nieves-Ortiz v. Corporacion del Centro Cardiovascular de Puerto Rico y Del Caribe, No. 21-1010 (JAG) (D.P.R. Mar. 31, 2025)).

Background. A relator filed a qui tam action against defendants Cardiovascular and Critical Services, PSC (CCS); Medtronic Puerto Rico Operations Co. and Medtronic, Inc. (collectively, Medtronic); Emergenciólogos para Puerto Rico (EPR); Corporación del Centro Cardiovascular de Puerto Rico y del Caribe (CCCPR); Heart Rhythm Management, PSC (HRM); a Medtronic sales representative to CCCPR; and, a cardiologist specializing in electrophysiology with CCCPR (collectively, the movants). The relator was a cardiologist, internist, and clinical cardiac electrophysiologist.

The relator’s complaint asserted claims for violation of the False Claims Act (FCA), 31 U.S.C. § 3729: 1) presentation of false claims in violation of § 3729(a)(1)(A); 2) use of false statements in violation of § 3729(a)(1)(B); and, 3) conspiracy to commit those acts in violation of § 3729(a)(1)(C). The allegations generally revolved around electrophysiology medical device (EMD) sales practices and contract awards. Among other things, the relator specifically alleged that the cardiologist arranged for CCCPR to implant mostly Medtronic EMDs, including by means of the Medtronic sales representative’s patient referrals.

Essentially, the relator alleged three fraudulent schemes: 1) a Medtronic kickback scheme; 2) a “transfer program” scheme; and, 3) an emergency room scheme. The alleged Medtronic kickback scheme involved the cardiologist influencing CCCPR contracting to secure Medtronic a large share of EMD purchases used by CCCPR’s electrophysiologists in exchange for unlawful kickbacks and remuneration. The alleged transfer program scheme supposedly involved unlawful influence over the contracting process between CCCPR and CCS in exchange for illegal compensation, including patient referrals. The alleged emergency room scheme involved the cardiologist, as CCCPR’s medical director, supposedly approving EPR’s contract to run CCCPR’s emergency room in exchange for unattached patient referrals that knowingly caused the submission of thousands of false claims for payment by federal healthcare programs.

Timeliness. The court held the action was timely except for claims before January 8, 2011. Medtronic, HRM, and the cardiologist argued the ten-year FCA limitations period had expired, and CCS argued the six-year qui tam FCA limitations period had expired. The court held that all claims before January 8, 2011, ten years before the January 8, 2021 complaint filing date, were time barred. For claims on or after January 8, 2011, the court assumed the relator notified an official of the United States, charged with responsibility to act, in February 2019. Accordingly, the relator had until February 2022, i.e., three years, to file the present action.

Relation back. The court held claims in the amended complaint related back to the original complaint. CCS argued the claims against it, first asserted in the amended complaint filed in July 2024, were time barred under the six-year statute of limitations because they did not relate back to the original 2021 complaint. EPR made a similar no-relation-back argument under the three-year statute of limitations.

The court found the claims against EPR in the amended complaint arose from the same transaction and conduct alleged in the original complaint. Therefore, they related back to the original complaint. Claims against CCS in the 2021 complaint were not as clear, but the court, making all reasonable inferences in favor of the relator, found the claims against CCS arose from and related back to the same transaction and conduct as set forth in the original complaint.

Res judicata. The court held the affirmative defense of res judicata did not apply. The cardiologist, Medtronic sales representative, Medtronic, and HRM all invoked this affirmative defense, but the relator did not object to resolving it on a motion to dismiss. The movants argued res judicata applied because virtually the same parties in this case previously litigated claims in Nieves I arising from the exact same allegations. See Nieves-Ortiz v. Corporacion de Centro Cardiovascular de Puerto Rico y del Caribe et al. (Nieves I), Civ. No. 20-1717 (D.P.R. 2024).

The court described how the relator brought causes of action in Nieves I for 1) retaliation under the FCA; 2) violations of the Sherman Act’s antitrust provisions; 3) violations of Due Process; and, 4) violations under Puerto Rico’s tort law. The Nieves I court dismissed the claims against the movants without prejudice because the relator could not demonstrate the requisite employer-employee or contractual-agency relationship between the cardiologist and HRM.

Although the Nieves I dismissal was a final judgment on the merits, the instant court reasoned it did not preclude the instant FCA claims because the prior retaliation claims were not substantially similar. The court noted there was no need to prove an underlying fraud to succeed on a FCA retaliation claim. The retaliation claim was a separate and far more limited cause of action.

The parties in interest were also not identical. In the instant matter, the government, not the relator, was the true party in interest. For these reasons, res judicata on the FCA retaliation claim did not bar the present FCA fraud claims. The Nieves I court also reasoned the relator could not succeed on the Sherman Act claims because he was unable to connect them to interstate commerce. Despite final judgment on the merits, the instant court held there was not a sufficient identity between the causes of action for res judicata to apply.

Public disclosure. The court also held the claims were not barred under the doctrine of public disclosure. The cardiologist, Medtronic sales representative, Medtronic, and HRM all argued the doctrine of public disclosure barred the claims against them. The court explained that the FCA public disclosure bar provides that courts shall not entertain qui tam actions based on public prior disclosure of the allegations or transactions found in a variety of statutorily specified sources. Carve-out exceptions may apply if the relator is the original source, based on direct and independent knowledge, of the information in question. Examples of such information include allegations or transactions in a government report, hearing, or investigation, including federal agency written responses to Freedom of Information Act requests. The court found the relator qualified as an original source based on 1) direct and independent knowledge of the alleged kickback scheme to defraud the government; and, 2) the relator having provided that information to the government before filing. The doctrine of public disclosure did not bar the claims.

Fraud pleading. The court found the relator failed to assert sufficient facts about the alleged fraud schemes in a way that was fatal to the relator’s claims. The court explained that the heightened pleading standard of Fed. R. Civ. P. 9(b) applied to the FCA fraud claims: 1) presentation of false claims; 2) use of false statements; and, 3) conspiracy to violate the FCA. The Anti-Kickback Statute (AKS), after amendment in 2010, now provides that a claim is false within the meaning of the FCA if there is sufficient causality with an AKS violation. The court agreed with the movants that the amended complaint did not comply with the heightened pleading standard of R. 9(b) because it was “devoid” of any information as to any allegedly fraudulent claim submitted to the government. The relator failed to specifically identify a single claim fraudulently submitted, nor did the relator provide any factual allegation as to any claim the movants submitted.

The relator, citing to Chorches, insisted that R. 9(b) did not require the pleading of specific false claims. See United States ex rel. Chorches v. Am. Med. Response, Inc., 865 F.3d 71 (2d Cir. 2017). Although the Second Circuit counseled against applying R. 9(b) so stringently as to render the FCA toothless, Chorches still required sufficient precision to serve the R. 9(b) pleading notice requirement. The instant court noted how the allegations in Chorches included the time period of the alleged fraudulent scheme concurrent with the relator’s employment, some precise or otherwise approximate dates on which the relator was asked to falsify patient care reports, patient names, actual reasons for transport, and information entered into patient care reports. Those were ample details, but such were absent here. The instant complaint did not provide any specific dates or even limited time frames. The amended complaint seemed to allege the submission or induced submission of fraudulent claims “unceasingly” since at least July 2011. In the absence of specific identifying details, the court found the relator failed to plead the FCA claims with requisite specificity under R. 9(b).

The case is Civil No. 21-1010 (JAG).

Judge: Garcia-Gregory, J.

Attorneys: Adrian Sanchez-Pagan (Sánchez-Betances, Sifre & Muñoz-Noya, P.S.C.) for U.S. and Dr. Omar Nieves-Ortiz. David Schillinger (Schillinger Law, P.A.) and Edgar Hernandez-Sanchez (Cancio, Nadal & Rivera, LLC) for Corporacion del Centro Cardiovascular de Puerto Rico y del Caribe. Jennifer Lyn Weaver (Holland & Knight LLP) for Dr. Juan Carlos Sotomonte-Ariza.

Companies: Corporacion del Centro Cardiovascular de Puerto Rico y del Caribe

Cases: CaseDecisions AntikickbackNews FCANews FraudNews GCNNews MDeviceNews QuiTamNews PuertoRicoNews