19-0093
Vierczhalek v. MedImmune

                                   UNITED STATES COURT OF APPEALS
                                      FOR THE SECOND CIRCUIT

                                          SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 18th day of March, two thousand twenty.

PRESENT:
                   JOHN M. WALKER, JR.,
                   BARRINGTON D. PARKER,
                   SUSAN L. CARNEY,
                               Circuit Judges.
_________________________________________

SUSAN VIERCZHALEK, M.D.,

                   Plaintiff-Appellant,

                           v.                                                    No. 19-0093

MEDIMMUNE INC.,

           Intervenor-Defendant-Appellee.*
_________________________________________

FOR PLAINTIFF-APPELLANT:                                     BARBARA J. HART, (David C. Harrison,
                                                             Scott V. Papp, on the brief), Lowey
                                                             Dannenberg P.C., White Plains, NY;
                                                             Kenneth A. Wexler, Wexler Wallace LLP,
                                                             Chicago IL.

FOR DEFENDANT-APPELLEE:                                      JOHN C. DODDS, (James D. Nelson,
                                                             David B. Salmons, Matthew J.D. Hogan
                                                             Sr., Natalie M. Georges), on the brief,
*
    The Clerk of Court is directed to amend the caption as set forth above.
                                                    Morgan Lewis, & Bockius LLP,
                                                    Washington, DC; Philadelphia, PA.

       Appeal from a judgment and orders of the United States District Court for the
Southern District of New York.

       UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment entered on March 11, 2019, the
decision and order dated September 28, 2018, and the order orally issued on December 6,
2018, are AFFIRMED.

       Plaintiff-Appellant Susan Vierczhalek (“Vierczhalek”) appeals from an order of the
United States District Court for the Southern District of New York (Sullivan, J.) granting
Defendant-Appellee MedImmune, Inc.’s (“MedImmune”) motion to dismiss Vierczhalek’s
claims brought under the False Claims Act (“FCA”), 31 U.S.C. § 3729. Vierczhlaek also
appeals from the District Court’s (Batts, J.) subsequent denial of her motion to amend her
complaint. We assume the parties’ familiarity with the underlying facts, the procedural
history of the case, and the issues on appeal, to which we refer only as necessary to explain
our decision to affirm the District Court’s judgment and orders.

       The following statement of facts is taken from the undisputed portions of the parties’
filings. In 2009, Vierczhalek, a medical doctor acting as a relator, brought a qui tam action
(the “Original Complaint”) in the District Court against MedImmune, the manufacturer of a
drug called Synagis, which is prescribed to prevent lung infections in premature infants. The
action also named as defendants two health care service providers, Trinity Homecare LLC
(“Trinity”) and OptionCare. Vierczhalek alleged that these entities violated the FCA by
promoting the “off-label” use of Synagis—that is a, use for which the drug had not been
specifically approved by the Food and Drug Administration.

       Vierczhalek’s suit was stayed for several years as the United States and various States
weighed whether to intervene. In 2013, the United States notified the District Court that it
declined to intervene in the suit. In 2015, the State of New York (the “State”) intervened as
to claims stated against Trinity and OptionCare. The State ultimately settled the claims made

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against those entities for $22.4 million dollars, and all claims stated in the suit against Trinity
and OptionCare were thereafter dismissed. Vierczhalek received $4,040,808.84 as part of the
settlement.

       The State also continued its investigation of MedImmune, however, and in March
2017, it filed a complaint-in-intervention against the company. Instead of focusing on the
off-label promotion of Synagis as had the Original Complaint, however, the State now
alleged that MedImmune had engaged in an unlawful scheme with Trinity. It charged that
MedImmune had made a practice of gaining access to protected health information (“PHI”)
of hospitalized infants who might be candidates for a Synagis prescription and passed this
information along to Trinity. Trinity used the PHI to identify possible patients for its
services in administering the drug, with the goal of increasing sales of Synagis-related
services.

       In November 2017, Vierczhalek filed an Amended Complaint in the action,
designating herself a relator on behalf of the United States and the States other than New
York. She now also alleged that MedImmune engaged in an unlawful kickback scheme with
Trinity and thereby violated the FCA and the States’ FCA analogs. Her Amended Complaint
did not reprise her off-label claims.

       The District Court dismissed Vierczhalek’s Amended Complaint, finding that (1) the
Amended Complaint was substantially similar to New York State’s complaint-in
intervention, and (2) she was not an “original source” of the allegations in the Amended
Complaint, and thus was precluded by the FCA’s public disclosure bar from acting as a
relator. The District Court subsequently denied Vierczhalek’s motion for leave to amend her
Amended Complaint on the ground that amendment would be futile. Vierczhalek now
appeals both orders, which were encompassed by a March 2019 judgment.

       I.      Motion to Dismiss

       We review de novo a district court’s grant of a motion to dismiss a qui tam action.
United States v. Quest Diagnostics Inc., 734 F.3d 154, 163 (2d Cir. 2013). We affirm the judgment
of the District Court dismissing the Amended Complaint for substantially the same reasons

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as are stated in its comprehensive opinion. The parties do not dispute that the New York
Attorney General’s (“NYAG”) Complaint is a “public disclosure” for purposes of 31 U.S.C.
§ 3730(e)(4)(B). Vierczhalek therefore cannot maintain this qui tam action unless she is an
“original source” of the allegations made in the NYAG complaint. Vierczhalek’s Amended
Complaint failed to allege that she was the original source of those allegations. In particular,
the NYAG’s allegations explain that it discovered MedImmune’s conduct only after it
expanded its original investigation.

       In response, Vierczhalek argues that the information she disclosed to the NYAG
with respect to off-label use of Synagis should be considered “core information” under this
Court’s decision in United States ex rel. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d
1148, 1159 (2d Cir. 1993), and is therefore sufficient to make her an original source of the
MedImmune-kickback allegations as well, Appellant’s Br. at 39-40. A relator cannot qualify
as an original source, however, merely by providing some core information. Rather, she must
provide information regarding “the essential elements of the alleged fraud.” See United States
ex rel. Kirk v. Schindler Elevator Corp., 437 F. App’x 13, 17 (2d Cir. 2011). Vierczhalek has not
so alleged here.

       Vierczhalek also counters that the public disclosure rule should not bar her Amended
Complaint’s allegations about MedImmune’s unlawful scheme outside of New York, citing 31
U.S.C. § 3730(e)(4)(A). She urges that these latter claims are not “allegations or transactions”
that are substantially similar to the NYAG’s allegations. Id. But, as the District Court
correctly observed, descriptions of the scheme that the NYAG first alleged pervade the
Amended Complaint, and indeed Vierczhalek’s Amended Complaint intermittently uses the
NYAG Complaint’s phrasing. See Joint App’x at 188. The additional details that Vierczhalek
uncovered about similar unlawful activity in states other than New York do no more than
support closely related claims about the unlawful scheme. They therefore do not free her of
the public disclosure rule.

       Finally, Vierczhalek contends that her allegations in the Amended Complaint
regarding similar activities pursued by MedImmune in states other than New York are
“independent of and materially add[]” to the State’s complaint, thus qualifying her as an
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“original source” under the FCA. See 31 U.S.C. § 3730(e)(4)(B) (internal quotation marks
omitted). For the following reasons, we are not persuaded.

       First, Vierczhalek’s allegations of similar conduct in other states and with one other
pharmacy are not “independent of” the activities charged in the NYAG Complaint. She
admits that she “investigated further [in other States] after New York elected to pursue only a
local Trinity-centric kickback theory.” Appellant’s Br. at 55 (emphasis added). Vierczhalek’s
own recitation leaves no doubt that her investigation into kickback activity outside of New
York arose from the NYAG’s kickback allegations, not vice-versa. See U.S. ex rel. Schumann v.
AstraZeneca Pharm. L.P., 769 F.3d 837, 845 (3d Cir. 2014) (“The independent knowledge
requirement means that ‘knowledge of the fraud cannot be merely dependent on a public
disclosure.’”). A relator who simply “conducted some collateral research and investigations”
in response to public allegations, and paired the results of that research with her background
information, does not qualify as an original source. See Kreindler, 985 F.2d at 1159.

       Second, for new allegations to “materially add” to public disclosures, they must
“substantially” or “considerably” add to information that is already public. U.S. ex rel. Paulos
v. Stryker Corp., 762 F.3d 688, 694-95 (8th Cir. 2014). We discern no error in the District
Court’s conclusion that Vierczhalek at most augmented the “where” of the kickback
allegations against MedImmune, and did not contribute “an iota to the ‘who,’ the ‘what,’ or
the ‘how’ of the scheme.” United States ex rel. Vierczhalek v. MedImmune, Inc., 345 F. Supp. 3d
456, 465 (S.D.N.Y. 2018).

       Thus, Vierczhalek’s Amended Complaint does not adequately allege that she is an
original source for purposes of avoiding the FCA’s public disclosure bar. The District Court
properly dismissed the Amended Complaint.

       II.     Motion to Amend

       We generally review a district court’s denial of leave to amend a complaint for abuse
of discretion, see Grabcheski v. Am. Int’l Grp., Inc., 687 F. App’x 84, 88 (2d Cir. 2017), but if
the denial is based on “futility,” we review it de novo, Panther Partners Inc. v. Ikanos Cmmc’ns,
Inc., 681 F.3d 114, 119 (2d Cir. 2012). We are unpersuaded that the District Court erred in

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denying Vierczhalek’s motion for leave to amend her Amended Complaint with respect to
her original source allegations.

       A proposed amendment is futile, and need not be allowed, when it would fail to cure
the deficiencies identified in the prior complaint. The proposed Second Amended Complaint
did not cure the deficiencies in Vierczhalek’s Amended Complaint that we have just
described, namely, that she failed to plausibly allege that she was an “original source” of the
unlawful scheme against MedImmune. Vierczhalek urges that the allegations made in her
Second Amended Complaint “support[] an inference that Trinity and MedImmune shared the
NICU lists to market Synagis,” and that this is new. Appellant’s Br. at 22 (emphasis added).
But the District Court already correctly rejected the notion that this inference made
Vierczhalek an original source of the operative allegations. For this reason, we conclude that
the District Court did not err in denying Vierczhalek’s motion to amend.

                                             * * *

       We have considered Vierczhalek’s remaining arguments and conclude that they are
without merit. Accordingly, the judgment and orders of the District Court are AFFIRMED.


                                                     FOR THE COURT:
                                                     Catherine O’Hagan Wolfe, Clerk of Court




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