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United States ex rel. Cunningham v. Millennium Laboratories, Inc.

United States District Court, D. Massachusetts

August 19, 2016

UNITED STATES OF AMERICA, et al., ex rel. ROBERT CUNNINGHAM, Plaintiffs,
v.
MILLENNIUM LABORATORIES, INC. et al., Defendants. UNITED STATES OF AMERICA, et al., ex rel. MARK MAGUIRE, Plaintiffs,
v.
MILLENNIUM LABORATORIES, INC. et al., Defendant. UNITED STATES OF AMERICA, et al., ex rel. RYAN UEHLING, Plaintiffs,
v.
MILLENNIUM LABORATORIES, INC. et al., Defendants. UNITED STATES OF AMERICA, et al., ex rel. OMNI HEALTHCARE, INC. and JOHN DOE, Plaintiffs,
v.
MILLENNIUM LABORATORIES, INC. et al., Defendants.

          MEMORANDUM & ORDER

          NATHANIEL M. GORTON UNITED STATES DISTRICT JUDGE

         Consolidated before this Court are the qui tam actions of six sets of relators against defendant Millennium Laboratories, Inc. (now known as Millennium Health, LLC) (“Millennium”). After the government intervened in several of the cases and reached a settlement with Millennium, relator Mark McGuire (“McGuire”) filed a cross-claim against the other relators seeking a declaratory judgment that he is entitled to the relators’ share of the settlement money. Pending before the Court are motions filed by four of the relators to dismiss that cross-claim, a motion to seal certain related documents and a motion to strike certain documents and statements.

         I. Background

         In December, 2009, Robert Cunningham (“Cunningham”), an attorney who had worked as a compliance officer at a laboratory testing company that competed with Millennium, filed a lawsuit against Millennium pursuant to the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. The FCA allows whistleblowers to file lawsuits on behalf of the federal government, known as qui tam actions, exposing fraudulent claims charged. The whistleblower, known as a “relator”, may recover damages on behalf of the government and receive a portion of those damages himself. FCA lawsuits are required to remain sealed for 60 days, unless the Court permits an extension of that time, in order to allow the government to investigate the claims before deciding whether to intervene.

         Cunningham’s claim alleged that Millennium had defrauded the government by submitting claims for testing that was excessive and medically unnecessary, despite its certifications to the contrary. Cunningham also alleged that Millennium caused numerous physicians to submit fraudulent claims to the government. At the time he filed his complaint and served it on the government, Cunningham also provided the government with a disclosure statement containing additional information and voluminous source materials to substantiate his allegations and to assist the government in investigating the alleged fraud.

         Cunningham continued to cooperate with the government and to provide additional materials until his death in December, 2010. His estate then continued his FCA action by filing an amended complaint in February, 2011. The estate and its attorneys (hereinafter also referred to as “Cunningham”) also continued to respond to requests from the government pursuant to its ongoing investigation and to provide the government with additional materials.

         A few days after Cunningham filed its amended complaint, the time during which the government was permitted to intervene and keep the case sealed expired. The government entered a notice that it would not intervene in the case for the time being and later elected not to intervene at all. The case was unsealed and subsequently dismissed by the district court. After an appeal, a partial remand and a second dismissal, Cunningham’s case is currently on appeal to the First Circuit for a second time, although that appeal has been stayed pending the outcome of these proceedings.

         In January, 2012 Mark McGuire, a former laboratory director of operations at a medical center, filed another FCA action against Millennium. McGuire’s action also alleged that Millennium submitted claims for medically unnecessary testing and caused physicians to submit fraudulent claims. The government elected to intervene in McGuire’s case. All told, eight FCA cases have been filed against Millennium by different relators and the government has chosen to intervene in three.

         In October, 2015 the federal government and several intervening states reached a settlement agreement with Millennium (“the Settlement Agreement”) through which Millennium agreed to pay $227, 000, 000, plus interest, in exchange for the government’s forbearance with respect to certain claims. Those claims (“the Covered Conduct”) were expressly limited to the period between January 1, 2008 and May 20, 2015, and were described as:

(1) excessive and unnecessary [urine drug testing (“UDT”)] ordered by physicians without an individualized assessment of patient need . . . and
(2) UDT referred by physicians who received free point-of-care drug testing supplies in violation of the Stark Law, 42 U.S.C. § 1395nn, and the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b).

         Seven of the eight relators joined in the agreement, which requires them to dismiss their pending actions with prejudice after post-settlement proceedings have been concluded. The agreement provides that 15% of the settlement be set aside for the relators (“the Relator’s Share”), but does not prescribe how the money is to be apportioned among the relators. Instead, the agreement demurs on that subject and leaves it to the Court to apportion the 15% if the relators are unable to reach an agreement among themselves.

         In October, 2015, after the filing of the settlement, relator McGuire filed a cross-claim against the other relators seeking a declaratory judgment that he is entitled to the Relator’s Share. Four of the other relators subsequently filed motions to dismiss his cross-claim, which motions are the subject of this memorandum and order.

         II. Cunningham’s Motion to Dismiss

         Cunningham moves the Court to dismiss McGuire’s cross-claim both for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) and for failure to state a claim under Fed.R.Civ.P. 12(b)(6).

         A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         1. Legal Standard

         In opposing a motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), the plaintiff bears the burden of establishing that the Court has jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). If the defendant mounts a “sufficiency challenge”, the court will assess the sufficiency of the plaintiff’s jurisdictional allegations by construing the complaint liberally, treating all well-pled facts as true and drawing all reasonable inferences in the plaintiff’s favor. Valentin v. Hospital Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001).

         If, however, the defendant advances a “factual challenge” by controverting the accuracy, rather than the sufficiency, of the alleged jurisdictional facts, “the plaintiff’s jurisdictional averments are entitled to no presumptive weight” and the court will consider the allegations by both parties and resolve the factual disputes. Id. The court has “broad authority” in conducting the inquiry and can, in its discretion, consider extrinsic evidence in determining its own jurisdiction. Id. at 363-64.

         2. Analysis

         a. Appropriateness of a Jurisdictional Inquiry

         Cunningham asserts that McGuire’s declaratory judgment cross-claim is jurisdictionally barred because McGuire was not the “first to file” relator in this set of FCA cases. ...


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