A relator is dropping his appeal of a district court decision that granted a motion to dismiss FCA claims against CVS. Procedural deficiencies were raised with relator’s appeal, including missing the filing deadline for his appeal in the U.S. Court of Appeals for the Seventh Circuit. The underlying case, which will now stand, could encourage defendants in FCA cases to explore the position of whether advertisements containing the “critical elements” of alleged fraud would make it impossible for a relator to sustain a case relating to that alleged fraud.
In the decision that relator sought to appeal, the U.S. District Court for the Northern District of Illinois granted CVS’s motion to dismiss the allegations as jurisdictionally barred by the FCA’s public-disclosure rule based. Without reaching the substance of the alleged misconduct – the alleged improper provision of coupons and other rewards to federal beneficiaries – the court held that advertising the offer of pharmacy rewards to all customers created a public disclosure that barred the case. That is, the allegations had been publicly disclosed through (1) CVS’s own brochure advertisements stating that CVS customers, including Medicare and Medicaid beneficiaries, could receive cash discounts for purchasing prescriptions and health services and (2) relator’s lack of first-hand knowledge of certifications or safeguards, meaning that he was not an original source of the allegations.
According to the court, disclosure of the “critical elements” of the alleged fraud – that is, that anyone could receive the benefits – through brochures, flyers, and other public documents created a public disclosure that doomed allegations of false claims. The court found the advertisements substantially similar to the allegations of offering coupons to Medicare and Medicaid beneficiaries. In light of this decision, it is possible that defendants in other types of FCA cases could explore the position of whether advertisements with the “critical elements” of the alleged fraud would make it impossible for a relator to sustain a case relating to that alleged fraud.
The district court opinion is Richard J. Carmel v. CVS Caremark Corporation, et. al., Case No. 13 C 5930 (N.D. Illinois, June 26, 2015), and the appeal that relator has moved to dismiss is Richard Carmel v. CVS Caremark Corporation, et al., Case No. 15-02594 (7th Cir., Sept. 16, 2015).