JOHN J. THARP, Jr., District Judge.
Plaintiff August Bogina ("Bogina") brings this fourteen-count action, as relator on behalf of the United States and eleven individual states, against defendant Medline Industries, Inc. ("Medline"), and defendants Tutera Group, Inc., Joseph C. Tutera, Walnut Creek Management Company, L.L.C., Illinois Health Care Management II L.L.C., and Tutera Investments L.L.C. (collectively, "Tutera"), pursuant to the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., and various parallel state statutes. See Third Amended Complaint ("Complaint" or "Compl."), Dkt. 27, ¶ 1.
Medline and Tutera move to dismiss Bogina's Complaint pursuant to Fed. R. Civ. P. 12(b)(1) and/or 12(b)(6), contending that Bogina's claims "are jurisdictionally barred by the FCA's public disclosure bar," 31 U.S.C. § 3730(e)(4), because they "are based on and are substantially similar to allegations that were publicly disclosed" in another qui tam action against Medline previously brought and settled in this district, United States ex rel. Mason v. Medline Indus., Inc., No. 07 C 5615 (filed Oct. 4, 2007; dismissed Mar. 24, 2011), as well as various news stories reporting on that litigation and settlement, and "because Bogina does not fall within the `original source' exception to the public disclosure bar." See Medline Mot., Dkt. 64, ¶¶ 2-3; Tutera Mot., Dkt. 61, ¶ 2. For the following reasons, the Court agrees that Bogina's claims must be dismissed pursuant to the FCA's public disclosure bar.
Before turning to Bogina's claims and the events that preceded them, mention must be made of the standard and burden of proof applicable to the current motions. An amendment to the FCA which took effect on March 23, 2010, modifies its public disclosure bar, 31 U.S.C. § 3730(e)(4), from one depriving a court of jurisdiction (no court "shall have jurisdiction over an action under this section") to one requiring dismissal of a barred action or claim (the court "shall dismiss an action or claim under this section"). See United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 705-06 (7th Cir. 2014) (quoting pre- and post-amendment versions of 31 U.S.C. § 3730(e)(4)). The Seventh Circuit has questioned whether this amended version of § 3730(e)(4) remains "a jurisdictional requirement that must be addressed before a court can reach the merits of the FCA claims," suggesting that the amended public disclosure bar perhaps may be addressed under Rule 12(b)(6) rather than Rule 12(b)(1). See id. ("it is no longer clear" that the Supreme Court's holding that § 3730(e)(4) "is a jurisdictional requirement" is "still good law" after the 2010 amendment) (citing Rockwell Int'l Corp. v. United States, 549 U.S. 457, 467-70 (2007)).
Because this FCA amendment was not retroactive, the earlier version of § 3730(e)(4) applies to conduct before March 23, 2010, and the amended version to conduct thereafter.
Like a motion under Rule 12(b)(6), a motion to dismiss under Rule 12(b)(1) mounting a "facial" challenge to subject matter jurisdiction (i.e., based on the legal sufficiency of the jurisdictional allegations on the face of the complaint, as in this case) requires the complaint's allegations to be "taken as true for purposes of the motion." See Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009); Chicago Transit Auth., 2014 WL 5333399, at *3 (citing Apex); Omnicare, 2014 WL 1458443, at *3 (same). The burden of establishing jurisdiction in a qui tam case, however, remains on the relator plaintiff—here, Bogina—by a preponderance of the evidence. Absher 764 F.3d at 707 ("At each stage of the jurisdictional analysis, the relators bear the burden of proof," and such burden is to prove "on a claim-by-claim basis that subject matter jurisdiction exists by a preponderance of the evidence." (quoting Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009), and Boese, Civil False Claims and Qui Tam Actions § 4.02[A], at 4-56 (4th ed. Supp. 2014)) (brackets and internal quotation marks omitted). The Court applies these standards to the current motions.
According to Bogina's Complaint, "Medline is one of the largest manufacturers and distributors of durable medical equipment" in the United States, Compl., Dkt. 27, ¶ 76; and Medline sells such equipment to various healthcare providers, including nursing facilities, "the vast majority of which participate in federal healthcare programs such as Medicare and Medicaid." Id. at ¶ 77. Bogina alleges that Medline violated the FCA by using "rebates," "bribes," and "kickbacks" to induce nursing facilities to purchase Medline products, thereby causing such facilities in turn to submit false claims when seeking reimbursement for those purchases from government healthcare programs. Id. at ¶¶ 1-7.
Nearly four years before Bogina filed this case, however, another relator (Sean Mason) filed a strikingly similar action in this district against Medline and an affiliate for violations of the FCA and an Illinois whistleblower statute. See Medline Mem. Ex. A, Dkt. 65-1; Court Docket in Mason v. Medline Indus., Inc., No. 07 C 5615 (N.D. Ill. filed October 4, 2007) [hereinafter Mason].
Following dismissal of Mason's amended complaint for failure to plead fraud adequately and with particularity, Mason Dkt. 82, in December 2009, Mason filed a second amended complaint ("Mason Complaint"), omitting any state claims, but again alleging violations of the FCA through "rebates," "bribes," and "kickbacks" to various "health care providers who purchase medical and surgical supplies paid for by Federal healthcare programs such as Medicare and Medicaid," including among others, "nursing facilities." Medline Mot. Ex. B, Dkt. 65-2, ¶¶ 1-14, 26, 28. The Mason Complaint further identified the specific Medline department responsible for sales to nursing homes—its Healthcare Company sales department—and specific individuals in that department who had "knowledge of one or more fraudulent schemes alleged," including one in Medline's "Top management"—Medline Healthcare Company Senior VP (Timothy Dunden) and VP (Steve Marciano). Id. at ¶¶ 28, 33. In denying Medline's motion to dismiss the Mason Complaint, the Mason court described Mason's allegations of this "scheme" as follows:
Mason v. Medline Indus., Inc., 731 F.Supp.2d 730, 733 (N.D. Ill. 2010).
More than a year after this ruling sustaining the Mason Complaint over Medline's motion to dismiss, the Mason action was dismissed in March 2011 pursuant to a Settlement Agreement between Mason, Medline, and the United States. See Mason Dkt. 238 (Mar. 24, 2011 "Order of Dismissal with Prejudice" noting that "Mason, Medline, and the United States have entered into a Settlement Agreement").
Nearly five months after the Mason action was dismissed, on August 9, 2011, Bogina filed this case. See Dkt. 1. Like the Mason Complaint publicly filed twenty months earlier, Bogina's original complaint here alleged a "scheme" by Medline using "rebates," "bribes," and "kickbacks" to induce healthcare providers—specifically, "nursing homes"—to make purchases from Medline, for which such customers in turn submitted false claims when seeking reimbursement from Medicare and Medicaid. See, e.g., Dkt. 1, ¶¶ 1-12. Bogina's Complaint thus identified the same Medline "Healthcare Company" sales department responsible for sales to nursing homes that was identified in the Mason Complaint. Id. at ¶ 28; Mason Compl., Dkt. 65-2, ¶ 28. Bogina also alleged (in the very words used in the Mason Complaint) that "Medline employed a variety of schemes to induce the purchase of its products in violation of the AKS," Bogina Compl., Dkt. 1, ¶ 7; Mason Compl., Dkt. 65-2, ¶ 8; "[b]y paying kickbacks and bribes in violation of the AKS, Medline caused those Providers' certifications to be false," Dkt. 1, ¶ 11; Dkt. 65-2, ¶ 13; the recipients of such bribes and kickbacks "submitted thousands of cost reports and interim claims to the federal government under federal healthcare programs to cover the cost of the goods, even though their cost reports falsely certified compliance with the AKS as a condition of payment," Dkt. 1, ¶ 5; Dkt. 65-2, ¶ 5; and "[a]s a result, all interim and final claims for payment submitted to federal healthcare programs by those Providers were tainted and rendered false in violation of the False Claims Act." Dkt. 1, ¶ 11; Dkt. 65-2, ¶ 13. A side-by-side comparison of the two complaints reveals even greater similarity:
See Compl., Dkt. 1 (emphasis added); Mason Complaint, Dkt. 65-2 (emphasis added).
Bogina thus alleged the same "rebate," "bribe," and "kickback" violations of the FCA involving nursing homes that were alleged against Medline in Mason, see Medline Mem. Ex. B, Dkt. 65-2, ¶¶ 26, 28, 33; the only difference being that Bogina specifically named and joined the Tutera defendants, alleging them to be recipients of such unlawful remunerations in an "illegal kickback scheme specifically targeting nursing homes managed by the Tutera Group." Compl., Dkt. 1, ¶ 1. According to this complaint, Bogina learned of these violations "while working with Michael Tutera, a previous member of the ownership group of the Tutera Group and the brother of Defendant Joseph Tutera." Id. at ¶ 6. This complaint further alleged that Bogina "was a business associate of Michael Tutera from 1988 until Michael Tutera's untimely death in 2010," and as such, "Bogina was intimately familiar with the inner workings of the business arrangements of Defendants Walnut Creek, the Tutera Group and Joseph Tutera, and thereby gained personal knowledge of the timing, amount, and value of purchases by and inducements to Providers" described in the complaint. Id. at ¶ 19.
Bogina's original complaint remained sealed while the federal government determined whether to intervene, during which time Bogina twice amended it. See Dkt. 6 (filed Dec. 12, 2011); Dkt. 12 (filed Nov. 27, 2012). His first amendment added claims under similar statutes of six states, Dkt. 6, at 19-34; and the second added claims under similar statutes of five more states. Dkt. 12, at 35-40. The federal government and all eleven states declined intervention in November 2013, Dkts. 14 and 16; the case was unsealed thereafter, Dkt. 18; and Bogina amended yet again, filing his current Complaint on March 4, 2014. Dkt. 27. This iteration retains Bogina's FCA and state law claims, but adds a few bells and whistles, such as references to Medicare Parts A and B and the Defense Department's TRICARE program. Id. at ¶¶ 25-75. In addition, the current Complaint alleges that "Bogina was Michael Tutera's close confidant," that Michael Tutera described to Bogina "the illegal inducement scheme between Medline and the Tutera Defendants and provided [Bogina] with documentation related to the scheme," and that after Michael Tutera's death, Bogina obtained from his widow "certain Electronically Stored Information," which also included documentation pertaining to the alleged scheme, some of which is referenced in, and attached as Exhibits to, the Complaint. Id. at ¶¶ 90-91, 106, 129.
Thus attempting to demonstrate his bases to bring his claims against Medline and Tutera, Bogina's current Complaint states the following: "All allegations herein regarding kickbacks and bribes are based on information learned first-hand by Relator Bogina, and/or communications Relator Bogina engaged in and/or witnessed (including the documentation and ESI provided to Bogina by Michael Tutera and his widow), as supplemented by the results of his attorneys' investigation." Id. at ¶ 91. Medline and Tutera maintain that these assertions fail to substantiate Bogina as an "original source" of the information on which his allegations are based, allegations which they contend were disclosed in Mason. See Dkts. 61, 64. The Court agrees.
The FCA's qui tam provisions allow a relator to sue on behalf of the United States and "collect a bounty" from any recovery or settlement. Goldberg, 680 F.3d at 934. Not surprisingly, the lucrative potential of such awards—potentially between 15 and 25 percent if the government proceeds with the case, and between 25 and 30 percent if the government declines to do so (as here), 31 U.S.C. § 3730(d)—created a "risk that unnecessary `me too' private litigation would divert funds from the Treasury." Goldberg, 680 F.3d at 934. This led Congress to implement the FCA's public disclosure bar. Id. This provision, codified in 31 U.S.C. § 3730(e)(4), "seeks to prevent parasitic lawsuits by `opportunistic plaintiffs who have no significant information to contribute of their own.'" United States ex rel. Heath v. Wisconsin Bell, Inc., 760 F.3d 688, 690 (7th Cir. 2014) (quoting Graham Cnty. Soil and Water Conserv. Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 (2010)). It does so by barring suits brought by relators "if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed," unless "the person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A).
The FCA's public disclosure bar thus strikes a balance "between two competing policy goals: blocking opportunistic lawsuits filed by plaintiffs seeking to capitalize on information already in the public domain and encouraging lawsuits by relators who have firsthand knowledge of fraud against the government." Glaser, 570 F.3d at 910. Determining whether the bar applies requires a court to consider first whether the relator's allegations are "substantially similar to publicly disclosed allegations." Leveski, 719 F.3d at 829. If so, the court must next assess whether the relator has "direct and independent knowledge of the information on which [his] allegations are based." Id. After conducting this inquiry here, the Court concludes that the FCA's public disclosure bar requires dismissal of Bogina's Complaint.
There can be no serious dispute that at least some of Bogina's allegations in this case are "substantially similar" to those in the Mason Complaint publicly filed nearly two years earlier. As shown above, many of the allegations in the Mason Complaint are virtually identical to those in Bogina's first complaint here. Compare Dkt. 1, ¶¶ 1-12, 26-50, with Medline Mem. Ex. B, Dkt. 65-2, ¶¶ 1-14, 26-53. Nor does Bogina dispute that the Mason Complaint was a public disclosure within the meaning of 31 U.S.C. § 3730(e)(4).
Like Bogina's Complaint, the Mason Complaint publicly disclosed allegations of fraud outright, and not just any fraud—fraud by Medline in violation of the FCA through the payment of "bribes," "rebates," "kickbacks," and other "remunerations" to "Providers and their related entities," as well as "purchasing officials and others who influenced Providers' purchasing decisions," to induce purchases from Medline, for which such providers would in turn submit false claims when seeking reimbursement from Medicare and Medicaid. Medline Mem. Ex. B, Dkt. 65-2, ¶¶ 1-14, 26-53. So does Bogina. Compl., Dkt. 27, ¶¶ 2, 6-7, 89. Indeed, zeroing in on the fraud Bogina alleges here, the Mason Complaint alleged specifically that Medline sold its products to "nursing homes" among other providers, Medline Mem. Ex. B, Dkt. 65-2, at ¶¶ 26, 28; the specific Medline department responsible for sales "to nursing homes" (its Healthcare Company sales department), id. at ¶ 28, and that Medline's fraudulent scheme involved that specific department. Id. at ¶ 33. That is precisely what Bogina alleges in this case—he even names the same Medline sales department. Compl., Dkt. 27, ¶¶ 2, 77-78, 89. "If an allegation of fraud has already been made, the analysis is straightforward." Absher, 764 F.3d at 708. And so it is here. Because the fraudulent scheme over which Bogina sues was publicly disclosed in Mason long before Bogina filed this case, the FCA's public disclosure bar is implicated.
Struggling to avoid this result, Bogina argues that the Mason Complaint's allegations "are not the `allegations or transactions' at issue in this case" because "critical, dispositive information concerning details of this fraud scheme and who committed the fraud was never publicly disclosed" in Mason. Bogina Mem., Dkt. 85, at 16-17 (emphasis in original). Right out of the starting blocks, this argument runs head first into the Mason Complaint's implication of both Medline's nursing home customers and the Medline sales group that serviced them. See Medline Mem. Ex. B, Dkt. 65-2, at ¶¶ 26, 28, 33. That covers this case pretty thoroughly. See Compl., Dkt. 27, ¶¶ 2, 77-78, 89. But for other reasons still, the argument fails.
As to Bogina's claim that he adds "details" to flesh out the story, the Seventh Circuit has repeatedly observed that "a private suit is `based upon' a public disclosure," and therefore barred under § 3730(e)(4), "when the allegations are `substantially similar,'
Similarly insufficient are "the documents and information" Bogina obtained from his late business associate's widow, on which Bogina insists his claims are based, rather than the public disclosure in Mason. See Bogina Mem., Dkt. 85, at 19. For one thing, Bogina's contention that his complaints in this case were not based upon the Mason Complaint, id., is more than difficult to credit, given he that quoted so liberally from it—and not merely boilerplate (though that too). Compare, Dkt. 1, ¶¶ 1-12, 26-50, with Medline Mem. Ex. B, Dkt. 65-2, 1-14, 26-53. As in Gear, such a "self-serving" contention "is insufficient to sustain a claim that [Bogina's] allegations are not based on public information," given "the weighty public record, which it is difficult to believe [Bogina] did not notice." See Gear, 436 F.3d at 729 (relator's "self-serving affidavit" claiming that relator "based his complaint on `personal observations and experience'" was "insufficient to sustain a claim that his allegations [were] not based on public information").
In any event, as noted above, section 3730(e)(4)'s "based upon" requirement means only "substantially similar to," see supra note 8, not whether the relator plans to cite different evidence. And as the Seventh Circuit explained in Glaser, "`based upon does not mean `solely based upon.'" Glaser, 570 F.3d at 920-21. Thus, "an FCA qui tam action even partly based upon publicly disclosed allegations or transactions is nonetheless `based upon' such allegations or transactions. Congress chose not to insert the adverb `solely', and we cannot, because to do so would dramatically alter the statute's plain meaning.'" Id. (brackets omitted, quoting United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 552 (10th Cir. 1992)); Zizic, 728 F.3d at 238 ("the public disclosure bar covers actions simply `based upon' public disclosures, including actions `even partly based upon' such allegations or transactions" (quoting Glaser)).
As to Bogina's second point—that Mason never disclosed "the particular providers identified by Relator Bogina," Bogina Mem., Dkt. 85, at 19—that, too, was rejected by the Seventh Circuit in Gear: "Gear contends . . . that these public disclosures do not expose any transactions from which the government (or anyone else) could infer that the particular entities he has named were fraudulently billing Medicare. We are unpersuaded by an argument that for there to be public disclosure, the specific defendants named in the lawsuit must have been identified in the public records." Gear, 436 F.3d at 729. Several courts have followed Gear in reaching the same conclusion. See, e.g., Zizic, 728 F.3d at 238 (citing Gear in concluding that relator's claims were publicly disclosed in earlier litigation, even though the particular defendants relator sued "were not actually identified" in that earlier case); Schultz, 2009 WL 562286, at *3 ("The specific defendants named in the lawsuit do not need to be identified in public disclosures." (citing Gear)), cited with approval in Leveski, 719 F.3d at 834; In re Nat. Gas royalties Qui Tam Litigation, 467 F.Supp.2d 1117, 1138 (D. Wyo. 2006) ("the issue is not whether a public disclosure names names" (citing Gear)).
Central to these holdings was the prior public disclosure's fulfillment of the FCA's primary purpose—to place the government "in a position to vindicate society's interests." Gear, 436 F.3d at 729 (quoting Feingold, 324 F.3d at 495); Zizic, 728 F.3d at 238 (although defendants "were not actually identified in the [earlier] litigation, they were directly identifiable from that public disclosure"); Schultz, 2009 WL 562286, at *3 ("The critical elements exposing DeVry's alleged fraud were publicly disclosed in parallel litigation and news reports."); In re Natural Gas, 467 F. Supp. 2d at 1138 ("the issue is whether, once alerted by the public disclosure to the nature of the wrongdoing, the federal government can identify the wrongdoers through whatever means are at its disposal" (citing Gear)). "The public disclosure bar is designed to prevent lawsuits by private citizens in such situations because `where a public disclosure has occurred, that authority is already in a position to vindicate society's interests, and a qui tam action would serve no purpose.'" Glaser, 570 F.3d at 913 (quoting Feingold, 324 F.3d at 395). That is certainly true here, where the federal government was fully apprised in Mason long before Bogina filed this case both of Medline's fraud and that Medline perpetrated such fraud with its health care provider customers,
That nursing homes (and thus the Tutera defendants) were included within the fraud alleged in Mason is no leap, since the Mason Complaint alleged nursing facilities among Medline's primary customers, id. at ¶ 26, that Medline's fraudulent scheme "occurs in connection with Medline's sales," id. at ¶ 28, and that the scheme was so pervasive within the company that "Medline internally accounted for the bribes and kickbacks as a cost of getting and doing business." Id. at ¶ 43. Even the media took notice of the Mason Complaint's allegations of Medline's fraud with its nursing home customers. See Medline Mot. Ex. F, Dkt. 65-6 (Kantzavelos supra (Chicago Daily Law Bulletin article) reporting on the Mason Complaint's allegations of "an illegal kickback scheme targeting health-care providers that purchase products paid for by federal programs," and "rebates paid to hospitals, skilled nursing facilities, hospices and other health-care providers"). But the Mason Complaint's allegations involving nursing homes were even more specific. The government was also apprised (1) that this fraud involved the Medline department that handled Medline's nursing home customers, and (2) of the management personnel in that department who knew about it, including its VP and Senior VP. Id. at ¶¶ 26, 28, 33. And there can be no doubt that these allegations positioned the government "to vindicate society's interests" regarding this scheme, Glaser, 570 F.3d at 913, because Medline's alleged scheme pertaining to nursing homes was referenced explicitly in the Mason Settlement Agreement, to which the United States was a party. Medline Mem. Ex. D, Dkt. 65-4.
The Mason Settlement Agreement required Medline to pay $85 million to settle claims for the "Covered Conduct" defined in the Settlement Agreement, which expressly included claims involving "Skilled Nursing" Facilities and their submission of "annual cost report(s), such as Forms . . . 2540," just like those referenced repeatedly throughout Bogina's Complaint. See Medline Mem. Ex. D, Dkt. 65-4, at 3; Compl., Dkt. 27, ¶¶ 6, 32, 38, 40, 49 (referring to "annual costs reports, Form CMS 2540-96," and "similar forms"). Although this definition of "Covered Conduct" is not part of Mason's public court docket (the Mason court's Order of Dismissal referred to the Settlement Agreement, but did not attach it, see Medline Mem. Ex. C, Dkt. 65-3), the Settlement Agreement's specific reference to this conduct demonstrates nonetheless that Mason's public disclosure positioned the government "to vindicate society's interests" regarding the very claims Bogina makes here. See Gear, 436 F.3d at 729.
Attempting to fend off this conclusion, Bogina invokes the Seventh Circuit's holding in United States ex rel. Baltazar v. Warden, 635 F.3d 866, 868 (7th Cir. 2011), that "reports documenting a significant rate of false claims by an industry as a whole—without attributing fraud to particular firms—do not prevent a qui tam suit against any particular member of that industry." See Bogina Mem., Dkt. 85, at 18. But key to the Seventh Circuit's holding in Baltazar was the failure of the published reports at issue to identify
Here, by contrast, the prior public disclosure was not merely a governmental report "that false or mistaken claims are common," id. at 869; it was a complaint in a lawsuit expressly alleging fraud by Medline in its dealings with customers, including nursing homes, and that such fraud was standard operating procedure for the company. See, e.g., Mason Compl., Dkt. 65-2, ¶ 1 (Medline engaged in a "widespread illegal kickback scheme"); ¶¶ 5, 52 (bribes and kickbacks paid "to hundreds of Providers and their purchasing officials"); ¶ 6 (Medline "broadly [and] systematically" violated the AKS and FCA; its "primary sales strategy was to `buy business' by offering various inducements to Providers"). Unlike the prior disclosures in Baltazar, which provided no reason to believe that any particular entity was engaging in any fraudulent conduct, the public disclosure here—the Mason Complaint—alleged that the fraudulent practices it described were a normal, if not universal, feature of Medline's relationships with its customers.
Indeed, the Baltazar court distinguished the generalized and inconclusive prior disclosures in that case from the prior disclosures it had confronted in Gear on precisely that basis. See Baltazar, 635 F.3d at 869 (prior disclosure in Gear indicated that "the practice it described was normal, if not universal, among teaching hospitals"). As in Gear, the prior disclosure here, the Mason Complaint, revealed a uniform practice by Medline with its customers, including nursing homes, and thus implicated Medline's nursing home clients across the board. See Medline Mem. Ex. B, Dkt. 65-2, e.g., ¶¶ 1-14, 26, 28, 33, 43, 52-53. Moreover, unlike the disclosure at issue in Baltazar, the Mason Complaint, which was sustained on a motion to dismiss under Fed. R. Civ. P. 9(b), Mason, 731 F. Supp. 2d at 733, alleged a particular fraud, identified the same Medline department that Bogina identifies here (Medline's Healthcare Company sales department), and described the same means of perpetrating that fraud as Bogina alleges—"rebates," "bribes," and "kickbacks" given to customers, including nursing homes, their "related entities," and others who influenced [their] purchasing decisions." See Medline Mem. Ex. B, Dkt. 65-2, e.g., ¶¶ 1-14, 26, 28, 33, 43, 52-53; Dkt. 1 ¶¶ 1-12, 26-50; Compl., Dkt. 27, ¶¶ 77-78, 89. Identifying one such group of nursing facilities and their related entities, Dkt. 27, ¶ 89, told the government nothing it did not already know or could not readily discover. The Baltazar court made clear that its holding would not apply to such a qui tam complaint that was "substantially similar" to earlier published information, Baltazar, 635 F.3d at 869; and Mason was "substantially similar" to this case, at the very least. This Court therefore concludes, as did the court in Zizic, that this case "is closer to Gear than to Baltazar." Zizic, 728 F.3d at 238.
Finally, Bogina points to other Seventh Circuit decisions warning district courts against "viewing FCA claims `at the highest level of generality . . . in order to wipe out qui tam suits that rest on genuinely new and material information.'" Bogina Mem., Dkt. 85, at 17 (quoting Leveski, 719 F.3d at 831 (quoting Goldberg, 680 F.3d at 936)). This Court is mindful that the Seventh Circuit has cautioned that such "boosting" of "the level of generality" of an FCA claim in order to find a prior public disclosure of that claim "is not sound," e.g., Goldberg, 680 F.3d at 935, and the Court has considered that concern carefully. In this case, however, the admonishment is more aptly applied to Bogina's arguments rather than to those of the defendants. For it is Bogina who is "boosting the level of generality" of Mason's disclosure "in order to wipe out" its effect under the FCA public disclosure bar. Upon full and fair review of Mason's disclosure, the Court concludes that the Mason Complaint publicly disclosed the allegations and transactions that Bogina alleges in this case. It is therefore necessary to assess whether Bogina is an "original source" of the information on which his allegations are based. Leveski, 719 F.3d at 829.
As noted above, an original source "has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions," 31 U.S.C. § 3730(e)(4)(B), or under the pre-amendment version of the statute (effective before March 23, 2010), "has direct and independent knowledge of the information on which the allegations are based." See Leveski, 719 F.3d at 826 (quoting pre-amendment version of § 3730(e)(4)(B)); Baltazar, 635 F.3d at 869 ("The question is whether the relator is an original source of the allegations in the complaint and not, as the district court supposed, whether the relator is the source of the information in the published reports."). Bogina contends that he is such an "original source" because he "learned of the fraudulent conduct that he alleged through his own experience and investigation, completely independent of any public disclosures." Bogina Mem., Dkt. 85, at 21. Again, the argument rings hollow, where Bogina's opening salvo in the case was largely a carbon of the Mason Complaint. But even apart from the substantial degree to which Bogina has copied the allegations of the Mason Complaint, Bogina's claim that he "learned of the fraudulent conduct that he alleged through his own experience and investigation" does not bear scrutiny.
According to his Complaint, Bogina's "experience" was as a former "business associate" of one of the defendant's deceased family members and an alleged party to the fraud, Michael Tutera, Compl., Dkt. 27, ¶¶ 14, 89; and Bogina's "investigation" was the procurement of "documentation pertaining to Defendants' illegal kickback inducement scheme" from Michael Tutera and his widow. Id. at ¶ 90. Moreover, although Bogina claims to have known Michael Tutera from as early as 1998 and to have been his "close confident," id. at ¶¶ 14, 90, and alleges that the Medline-Tutera fraud ran from at least 2003, id. at ¶ 89, Bogina nevertheless admits that he "learned" of the fraud much later—"from his conversations with Michael Tutera in 2008 and 2009"—eight years after Michael Tutera himself "agreed to sell his interest in the Tutera Group," in exchange for a "consultant" agreement whereby he "facilitated business deals involving the Tutera Group" "from time to time." Id. at ¶¶ 88, 95, 101, 103, 116, 126. And the documents and "Electronically Stored Information" Bogina procured from Michael Tutera's widow do not up the ante, since those came even later—after Michael Tutera's death in 2010— and with nothing other than the undefined "investigation" of Bogina's attorney to "supplement" them. Id. at ¶¶ 90-91. In this Court's view, these allegations demonstrate that Bogina's knowledge of the fraudulent scheme he alleges is not "direct" as required by required by the pre-amendment version of 31 U.S.C. § 3730(e)(4)(B), for his knowledge is, at best, secondhand. See Glaser, 570 F.3d at 921 (questioning whether relator could show direct knowledge of the information supporting her allegations where information "came from" her attorney).
While the Seventh Circuit declined to define the term "direct" explicitly in Glaser, the Court of Appeals nonetheless indicated that the term connotes "first-hand" knowledge, id. at 910 (the public disclosure bar encourages "lawsuits by relators who have firsthand knowledge of fraud against the government"); and being "personally aware of at least one instance of fraud," id. at 921, citing the Third Circuit's decision in Paranich, where the relator had "direct knowledge" of the fraudulent scheme he alleged "because he was
Bogina's conversations with Michael Tutera and procurement of documents from Tutera and his widow fall far short of such personal and firsthand involvement. Nor do they meet any of the other definitions of "direct" noted with approval (though not formally adopted by the Court of Appeals) in Glaser: "marked by
Unlike Bogina, the Leveski relator was a former employee of the defendant she sued, ITT, and a "decade-long" employee to boot. Leveski, 719 F.3d at 829-30. She alleged that "ITT knowingly submitted false claims to the Department of Education in order to receive funding from the federal student financial assistance programs." Id. at 819. Because other relators had already alleged certain false claims by ITT in earlier litigation in another district, the Leveski court examined the key differences between the Leveski relator (and her claims and evidence) and the earlier relators (and their claims and evidence): (1) "because Leveski worked at ITT for so much longer than the [earlier] relators, she [had] greater potential than the [earlier] relators to possess relevant evidence about ITT's compensation scheme"; (2) "the long span of Leveski's employment allow[ed] her to make allegations against ITT that cover a different time period than the [earlier] relators"; (3) "because the [earlier] relators were employed by ITT for a relatively short period of time, they were only able to make allegations about the one department to which they were briefly exposed," whereas Leveski was "able to present evidence about ITT practices in a second department . . . since her long employment afforded her the opportunity to hold two different positions"; (4) Leveski alleged a different means of violating Department of Education requirements that was "much more sophisticated—and more difficult to detect"; and (5) "virtually all of Leveski's evidence in support of her allegations [came] from conversations to which she was a party." Leveski, 719 F.3d at 829-31, 837.
Bogina brings none of these benefits to this case—unlike both Leveski and the prior relator concerning the very same scheme alleged here, Mason. Bogina was never employed by any of the defendants in this case, unlike Mason who alleged he was employed by Medline for nearly seven years and held two different positions during that time. Medline Mem. Ex. B, Dkt. 65-2, ¶ 21. The scheme Bogina alleges falls within the timeframe Mason alleged (2003-2009, see id. at ¶¶ 216, 220-498);
Rather, Bogina alleges that he "learned," "engaged in and/or witnessed" communications and information regarding the fraud he alleges through conversations with a now-deceased witness (Michael Tutera) and documents provided by him and his widow, "as supplemented by" the "investigation," otherwise undescribed, of Bogina's attorney. Compl., Dkt. 27, ¶¶ 14, 91. This is not "direct" knowledge as required by 31 U.S.C. § 3730(e)(4)(B), because Bogina was not "involved" in the conduct, Paranich, 396 F.3d at 336, did not witness it "firsthand," Lamers, 168 F.3d at 1017, and is not "personally aware" of it. Glaser, 570 F.3d at 921. And since the burden on the issue is Bogina's to carry, Absher, 764 F.3d at 707; Glaser, 570 F.3d at 922 (relator "has the burden of proving the jurisdictional facts"), the Court cannot reasonably infer such direct knowledge on his behalf.
Because Bogina is not an "original source" of the information on which his allegations are based, the public disclosure bar of 31 U.S.C. § 3730(e)(4) requires dismissal of Bogina's FCA claims (Counts I-III). Medline and Tutera ask that dismissal be "with prejudice." See Tutera Reply, Dkt. 88, at 8 ("The Court lacks subject matter jurisdiction over this case, and Relator's Complaint must be dismissed with prejudice."); Medline Reply, Dkt. 87, at 14-15 ("Bogina's federal claims should be dismissed for lack of jurisdiction and . . . . with prejudice."). But this dismissal is required by the pre-amendment version of § 3730(e)(4)'s public disclosure bar (effective before March 23, 2010), which governs all of Bogina's FCA claims except for two paragraphs in his Complaint alleging on "information and belief" that the scheme described in other paragraphs "continues to the present day." See Complaint, Dkt. 27, ¶¶ 89, 135. The Seventh Circuit has stated that this pre-amendment version of the FCA's public disclosure bar is "a jurisdictional requirement that must be addressed before a court can reach the merits of the FCA claims." Absher, 764 F.3d at 705-06 and n.8 (citing Rockwell, 549 U.S. at 467-70: "Rockwell made clear that § 3730(e)(4) must be addressed before a court can reach the merits of the underlying FCA claims."). Any dismissal for lack of federal jurisdiction based on that version of the public disclosure bar (effective before March 23, 2010) therefore must be without prejudice.
This is not to suggest, however, that this dismissal "invites amendment," as it is nevertheless "a conclusive jurisdictional ruling." See Bovee, 732 F.3d at 743-44. Bogina may not amend and refile his claim in federal court. Id. And to the extent the amended version of § 3730(e)(4) is not "jurisdictional,"
Medline and Tutera also urge the Court to "decline to exercise supplemental jurisdiction" over Bogina's state law claims and to dismiss those claims with prejudice. See Medline Reply, Dkt. 87, at 14-15; Tutera Mem., Dkt. 62, at 28, 30.
For all of these reasons, the Court grants Medline's and Tutera's motions to dismiss, Dkts. 61 and 64, and Bogina's Third Amended Complaint is dismissed in its entirety.
