District Court Refuses to Certify “Fraud on the FDA” Claims for Interlocutory Appeal

A judge in the Western District of Texas recently departed from a magistrate judge’s recommendation, ruling that the novelty of the relator’s FCA claims – which are based on allegations that the defendant medical device manufacturer committed “fraud on the FDA” by seeking clearance for its stent devices based on substantial equivalence with a predicate device, when the defendant allegedly had no intention of marketing its device for the predicate device’s use – could not overcome the failure to otherwise meet all of the requisite criteria for interlocutory appeal.  See United States ex rel. Sullivan v. Atrium Med. Corp., No. SA-13-CA-244-OLG (W.D. Tex. Oct. 1, 2015).  This suit involves a continued, but as yet unsuccessful, effort to expand the potential basis for FCA liability to fraudulent conduct directed to one government agency separate from the payor agency.

In July, the district court granted defendant Atrium’s motion for judgment on the pleadings as to the relator’s “fraud on the FDA” theory of liability, while leaving allegations of various state law and AKS violations in play.  Although the relator alleged a scheme by Atrium fraudulently to induce FDA to clear its stent device, her complaint made no allegations of any fraudulent conduct or statements directed at a payor agency.  The district court thus held that the relator had failed to state a claim because she did not plead “any direct or immediate link between Atrium’s alleged false statement or fraudulent conduct and any resulting claim for payment.”

In response, the relator filed a motion for certification of an interlocutory appeal on the question whether her fraud on the FDA claims were viable.  In a Report and Recommendation released on September 16, the magistrate judge decided  that although the relator only met one of the three statutory criteria necessary for interlocutory appeal, “the novelty of the question of law at issue,” still warranted immediate appellate review.  In particular, although the first criterion—whether the claims present “a controlling question of law”—was met, there was no “substantial ground for difference of opinion” on this question, nor would interlocutory appeal materially advance the ultimate termination of the litigation.  As to the question of differences of opinion, the relator urged the magistrate judge to find tension between United States ex rel. Campie v. Gilead Sciences, Inc. and United States ex rel. Krahling v. Merck & Co.  This summer, the Sullivan magistrate and district court judges both agreed with the holding in Campie (as reported here and here), that allegations of fraud toward a licensing or regulatory agency, if disconnected from requests to the payor agency, lack the type of causal nexus demanded by the FCA.  The magistrate judge disagreed that Krahling, which involved allegedly false statements made directly to a government payor entity, could be considered in tension with Campie.  Nonetheless, the magistrate judge recommended the motion for certification of interlocutory appeal be granted based on the uniqueness of the question presented by both of the relators in Sullivan and Campie.

As Atrium argued in its Objections to the Report and Recommendation, the magistrate judge’s rationale for when interlocutory appeal is appropriate would collapse to any situation where an issue was novel to the applicable circuit court of appeals and had received sparse treatment in other district courts.  The district court agreed with Atrium that “the novelty of a question of law is not an overriding consideration for the failure to meet the statutory burden for certification,” and accordingly, denied the motion for certification of interlocutory appeal.

A copy of the magistrate judge’s Report and Recommendation can be found here, and a copy of the district court’s order can be found here.