Roche Diagnostics Corp. v. Shaya

679 F.Supp.3d 588

ROCHE DIAGNOSTICS CORP. and Roche Diabetes Care, Inc., Plaintiffs, v. Christopher F. SHAYA, Defendant.

Case No. 19-10264

United States District Court, E.D. Michigan, Southern Division

Signed June 27, 2023

Adam Michael Wenner, Raymond W. Henney, Honigman LLP, Detroit, MI, Aron Fischer, Geoffrey Potter, Patterson Belknap Webb & Tyler LLP, New York, NY, for Plaintiffs.

Edward G. Lennon, Birmingham, MI, for Defendant.

OPINION AND ORDER DENYING WITHOUT PREJUDICE DEFENDANT CHRISTOPHER SHAYA'S MOTIONS IN LIMINE (ECF NOS. 140, 141, 143, 144)

Paul D. Borman, United States District Judge

This case involves an alleged scheme by Defendant Christopher Shaya to use his companies, Olympus Global, LLC (Olympus) and Delta Global, LLC (Delta), to purchase not-for-retail-sale (NFR) diabetes test strips manufactured by Plaintiffs Roche Diagnostics Corp. and Roche Diabetes Care, Inc. (together, Roche) from Northwood, Inc. (Northwood) and then resell them in retail markets at a significant markup. (See generally, ECF No. 1, Complaint.)

Now before the Court are four motions in limine filed by Defendant Shaya, seeking to exclude certain of Plaintiffs' proposed exhibits to be used during the liability phase of the bifurcated trial (ECF Nos. 140, 141, 143, 144.) The motions have been fully briefed. The Court does not believe that oral argument will aid in its disposition of these motions; therefore, it is dispensing with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f)(2).

For the reasons discussed below, the Court denies, without prejudice, Defendant Christopher Shaya's Motions in Limine at ECF Nos. 140, 141, 143, and 144.

I. BACKGROUND

In the parties' Second Revised Joint Proposed Final Pretrial Order, the parties stipulated to the following facts:

1. Binson's Hospital Supplies, Inc. ("Binson's") is — and was at all relevant times — a Michigan-based mail-order provider of medical equipment, including blood glucose test strips, and owner of several brick-and-mortar stores in Michigan and Florida where it is possible to purchase medical equipment in person. Northwood, Inc. ("Northwood") is — and was at all relevant times — a Michigan-based subsidiary of Binson's and a mail-order provider of medical equipment, including blood glucose test strips.

2. On February 10, 2011, Roche Diagnostics Corporation entered into a product and pricing agreement with Binson's (the "Binson's agreement"), which contracted on behalf of itself and its subsidiary, Northwood. The Binson's agreement permitted Binson's and Northwood to sell NFR test strips purchased from Roche only to (i) patients covered by DME insurance or (ii) to DME providers approved by Roche.

3. In November, 2015, Roche Diagnostics Corp. transferred its diabetes care business to Roche Diabetes Care, Inc.

4. The Binson's agreement was amended on several occasions, but the provision requiring that test strips be sold only to DME patients or approved DME providers remained in place at all times.

5. From 2011 to July 2014, Binson's and Northwood purchased approximately 5,000-10,000 boxes per month of test strips from Roche. During this time, Binson's and Northwood submitted reports to Roche showing that their sales were to DME beneficiaries.

6. On May 2, 2014, Northwood entered into a Distributor Agreement with Olympus Global, LLC ("Olympus"). The Distributor Agreement did not require Olympus to sell the NFR test strips to DME patients.

7. Olympus was jointly owned by Mr. Shaya and Jeremiah Mankopf. Delta Global, LLC ("Delta") was wholly-owned by Mr. Shaya.

8. At the request of Northwood, Mr. Shaya sent lists of health insurance plans to Binson's and Northwood.

9. Northwood representatives sent lists of health insurance plans to Roche.

10. Binson's and Northwood represented to Roche that they had located a trove of new DME patients and that the NFR test strips purchased under the Binson's agreement would be sold to these patients.

11. Based on representations that the test strips would be sold to DME patients, Roche amended the Binson's agreement on July 21, 2014 to allow Binson's/Northwood to operate without submitting sales tracings that would confirm that the Roche test strips Binson's/Northwood purchased were being dispensed to DME patients.

12. From July 2014 to September 2015, Northwood sold all of the NFR test strips it purchased from Roche under the Binson's agreement to Olympus and Delta. Neither Olympus nor Delta was an approved DME provider under the Binson's agreement.

13. Under its agreement with Roche, as amended, Binson's and Northwood were not allowed to sell NFR test strips to Olympus or Delta.

14. The NFR test strips that were sold by Northwood to Olympus and Delta were re-sold to Medical Supply Solutions, Inc. ("MSSI") and Republic Pharmaceuticals ("Republic").

15. Between July 21, 2014 and September 24, 2015 (when Roche ceased selling test strips to Binson's and Northwood), Northwood sold approximately 1,526,688 50-strip boxes of NFR test strips to Olympus and Delta, which re-sold those test strips to MSSI and Republic.

16. Roche had no direct communications with Mr. Shaya regarding test strips sold to Binson's and Northwood, and Roche did not pay any money directly to Mr. Shaya, Olympus or Delta.

17. Roche never sold any test strips directly to Christopher Shaya, Olympus or Delta.

18. Roche brought claims against Binson's, Northwood, Christopher Shaya and Northwood/Binson's representatives, in Indiana federal court in 2017 (Roche Diagnostics Corp., et al. v. Binson's Hospital Supplies, Inc., et al., Civil Action No. 1:17-cv-0949-TWP-DML (S.D. Ind.)). That case settled in March 2019, with the defendants other than Christopher Shaya agreeing to pay Roche $13 million over a four-year period.

Roche subsequently filed this lawsuit against Mr. Shaya and the individual Binson's and Northwood executives, but voluntarily dismissed claims against all individual defendants other than Mr. Shaya, after the Binson's and Northwood executives agreed to participate in the Indiana settlement and pay Roche $13 million.

(Parties' Second Revised Joint Proposed Final Pretrial Order (2nd Revised JFPTO), at pp. 7-10.)

Roche alleges that Shaya, through several shell companies, engaged in a scheme to fraudulently divert 1.5 million boxes of NFR blood glucose test strips to retail pharmacies. Roche asserts claims against Shaya in this case for fraud and fraud in the inducement, including aiding and abetting fraud and conspiracy (Counts I and II), unjust enrichment (Count IV), and tortious interference with contract (Count V). (ECF No. 1, Compl.)¹ Roche claims to have lost $84 million in profits and millions more in unwarranted rebates on NFR test strips sold in retail markets as a result of Shaya's alleged scheme. (Id. ¶¶ 127-28.) Roche also alleges that Shaya made $8 million in personal profits. (Id. ¶ 90.) Roche claims it suffered damages because each sale of test strips to Northwood and then Olympus/Delta "replaced a sale of retail strips that would have been made but for Defendants' fraud" and because Roche "paid millions of dollars of warranted rebates to insurance companies and [pharmacy benefit managers] in connection with these [insurance] claims" (Id. ¶¶ 124-25.)

On July 28, 2021, this Court entered an Opinion and Order denying Defendant Shaya's motion for summary judgment (ECF No. 96), and the Court also denied Defendant Shaya's motion for reconsideration of that Opinion and Order. (ECF No. 99.) The Court concluded that Plaintiff Roche Diabetes Care, Inc., as the successor-in-interest to Roche Diagnostics Corporation, is a proper plaintiff in this case, and that genuine issues of material fact remain as to Roche's claims for fraud (including fraud, aiding and abetting fraud, and conspiracy to commit fraud), unjust enrichment, and tortious interference with contract. (ECF No. 96.)

On March 1, 2022, this Court entered an Order bifurcating the liability and damages phases of the trial, with the issue of liability on Roche's claims tried first, potentially followed by a second phase to determine damages, if necessary. (ECF No. 119.) On April 1, 2022, this Court entered an Order directing the parties to submit a revised proposed Joint Final Pretrial Order, and to identify in that order which exhibits will be used in the liability phase of the trial and which exhibits will be used in the damages phase. (ECF No. 120.)

In accordance with those Orders, the parties submitted their Second Revised Joint Proposed Final Pretrial Order on September 28, 2022, and designated whether their proposed exhibits would be used in the liability phase or damages phase of the trial (or in some cases, in both phases).

Defendant Shaya now objects to 13 of Roche's proposed trial exhibits. Four of those proposed exhibits are designated to be used during the liability phase, or the liability and damages phases, of the trial, and nine of those exhibits are designated to be used during the damages phase of the trial only.

The Court now addresses the four motions in limine to exclude proposed exhibits to be used in the liability phase of the bifurcated trial and defers ruling on the nine motions in limine to exclude exhibits to be used during the damages phase of the trial only.

II. LEGAL STANDARD

District courts have broad discretion over matters involving the admissibility of evidence at trial. United States v. Seago, 930 F.2d 482, 494 (6th Cir. 1991). "Although the Federal Rules of Evidence do not explicitly authorize in limine rulings, the practice has developed pursuant to the district court's inherent authority to manage the course of trials." Luce v. United States, 469 U.S. 38, 41 n. 4, 105 S.Ct. 460, 83 L.Ed.2d 443, (1984); United States v. Brawner, 173 F.3d 966, 970 (6th Cir. 1999) ("The Federal Rules of Evidence, the Federal Rules of Criminal and Civil Procedure and interpretive rulings of the Supreme Court and this court all encourage, and in some cases require, parties and the court to...