Schroeder v. U.S. Dep't of Veterans Affairs

673 F.Supp.3d 1204

Thomas SCHROEDER, Plaintiff,andMedtronic, Inc., Plaintiff/Intervenor, v. The UNITED STATES DEPARTMENT OF VETERANS AFFAIRS, Defendant.

Case No. 22-2209-DDC-KGG

United States District Court, D. Kansas

Signed May 16, 2023

Carrie Mulholland Brous, Cristina Olson, Brous Law LLC, Prairie Village, KS, Daniel W. Craig, Donelon, PC, St. Louis, MO, Brendan J. Donelon, Donelon, PC, Kansas City, MO, for Plaintiff Thomas Schroeder.

Christopher Allman, Jon P. Fleenor, Office of United States Attorney, Kansas City, KS, for Defendant.

Alethea M. Huyser, Pro Hac Vice, Roger Yang, Pro Hac Vice, Fredrikson & Byron, PA, Minneapolis, MN, Rebecca M. Gosch, Pro Hac Vice, Robert J. McCully, Shook, Hardy & Bacon LLP, Kansas City, MO, for Plaintiff/Intervenor Medtronic, Inc.

MEMORANDUM AND ORDER

Daniel D. Crabtree, United States District Judge

Plaintiff Thomas Schroeder filed this lawsuit against the United States Department of Veterans Affairs ("VA") under the Administrative Procedures Act ("APA"), 5 U.S.C. § 706. Doc. 9. He asks the court to issue an order compelling the VA to produce certain documents and information within the VA's sole possession. About five months after plaintiff Thomas Schroeder filed this action, plaintiff-intervenor Medtronic, Inc. filed an Intervenor Complaint (Doc. 19). It also asserts an APA claim and seeks a court order compelling the VA to produce certain documents and information within the VA's sole possession.

For reasons explained below, the court concludes that the VA's refusal to provide the documents and information requested by plaintiff Schroeder was arbitrary, capricious, and an abuse of discretion under the APA. Also, the court concludes, the VA's refusal to provide the documents and information sought by plaintiff-intervenor Medtronic, Inc. was arbitrary, capricious, and an abuse of discretion under the APA. As a consequence, the court remands the matter to the VA for further consideration of plaintiff Schroeder and plaintiff-intervenor Medtronic, Inc.'s requests for documents and information. The court explains how it reaches these conclusions, below.

I. Factual and Procedural Background

The court recites the following factual and procedural background relevant to the APA claims against the VA.

The Qui Tam Action

In a separate lawsuit, plaintiff Thomas Schroeder, as "relator," has brought a qui tam action on behalf of the United States government in the United States District Court for the District of Kansas. Doc. 9 at 2 (First Am. Compl. ¶ 6). The qui tam action is styled United States ex rel. Schroeder v. Medtronic, Inc., No. 17-2060-DCC-KGG (D. Kan.). Id.; see also Fifth Amended Complaint, U.S. ex rel. Schroeder v. Medtronic, Inc., No. 17-2060-DDC-KGG (D. Kan. Oct. 24, 2022), ECF No. 233. That action asserts violations of the False Claim Act, 31 U.S.C. §§ 3729-3733, against various defendants, including Medtronic, Inc. ("Medtronic"). Doc. 9 at 2 (First Am. Compl. ¶ 7); see also Fifth Amended Complaint, U.S. ex rel. Schroeder v. Medtronic, Inc., No. 17-2060-DDC-KGG (D. Kan. Oct. 24, 2022), ECF No. 233. The VA is not a party to the qui tam lawsuit. Id.

The qui tam action asserts that Medtronic paid illegal remuneration to employees at the Dole VA. Doc. 9 at 3 (First Am. Compl. ¶ 8). Relator alleges that the illegal remuneration caused the VA to purchase a grossly excessive number of medical devices, provide unnecessary medical treatment, and promote off-label use of devices on Dole VA's veteran patients. Id. Relator asserts that these actions violated the False Claims Act/Anti-Kickback Statute. Id. (citations omitted).

During fact discovery in the qui tam case, relator has sought nonprivileged and relevant fact discovery from parties and non-parties, including the VA. Id. (First Am. Compl. ¶ 9).

The VA's Touhy Regulations

Section 301 of Title 5 of the United States Code provides that a federal agency "may prescribe regulations for . . . the custody, use, and preservation of its records, papers, and property." 5 U.S.C. § 301. These regulations are known as Touhy regulations. See U.S. ex rel. Touhy v. Ragen, 340 U.S. 462, 467-68, 71 S.Ct. 416, 95 L.Ed. 417 (1951) (holding that DOJ official properly could refuse to comply with a subpoena duces tecum based on a valid regulation issued by the Attorney General under an earlier version of 5 U.S.C. § 301 restricting disclosure of DOJ records); see also Hous. Assistance Corp. of Nassau Cnty. v. Fernandina Beach RRH, Ltd., No. 3:08-cv-782-J-32JRK, 2008 WL 11433239, at *2 (M.D. Fla. Oct. 9, 2008) (explaining that, after Touhy, federal regulations enacted under 5 U.S.C. § 301 "became known as Touhy regulations").

The VA has codified its Touhy policies and procedures for "production or disclosure of official information or records of the Department of Veterans Affairs (VA)" in the Code of Federal Regulations. 38 C.F.R. § 14.800 (citing 38 C.F.R. §§ 14.800-14.810). The VA's Touhy regulations provide that VA personnel may not provide testimony or produce VA records in legal proceedings "without the prior written approval of the responsible VA official designated in § 14.807(b)." 38 C.F.R. § 14.806. Section 14.807(b) designates the responsible VA official as "the General Counsel, the Regional Counsel, an attorney in the Office of General Counsel designated by the General Counsel, or an attorney in the Regional Counsel office designated by the Regional Counsel." 38 C.F.R. § 14.807(b).

A party who seeks documents or testimony from the VA must make a proper request under the VA's Touhy regulations by submitting:

a written statement by the party seeking the testimony or records or by the party's attorney, [along with] a summary of the nature and relevance of the testimony or records sought in the legal proceedings containing sufficient information for the responsible VA official to determine whether VA personnel should be allowed to testify or records should be produced.

38 C.F.R. § 14.805. The VA Touhy regulations provide 15 factors for the responsible VA official to consider when deciding whether to produce the requested information. 38 C.F.R. § 14.804. They include:

(a) The need to avoid spending the time and money of the United States for private purposes and to conserve the time of VA personnel for conducting their official duties concerning servicing the Nation's veteran population;

(b) How the testimony or production of records would assist VA in performing its statutory duties; (c) Whether the disclosure of the records or presentation of testimony is necessary to prevent the perpetration of fraud or other injustice in the matter in question;

(d) Whether the demand or request is unduly burdensome or otherwise inappropriate under the applicable court or administrative rules;

(e) Whether the testimony or production of records, including release in camera, is appropriate or necessary under the rules of procedure governing the case or matter in which the demand or request arose, or under the relevant substantive law concerning privilege;

(f) Whether the testimony or production of records would violate a statute, executive order, regulation or directive. (Where the production of a record or testimony as to the content of a record or about information contained in a record would violate a confidentiality statute's prohibition against disclosure, disclosure will not be made. Examples of such statutes are the Privacy Act, 5 U.S.C. 552a, and sections 5701, 5705 and 7332 of title 38, United States Code.);

(g) Whether the testimony or production of records, except when in camera and necessary to assert a claim of privilege, would reveal information properly classified pursuant to applicable statutes or Executive Orders;

(h) Whether the testimony would interfere with ongoing law enforcement proceedings, compromise constitutional rights, compromise national security interests, hamper VA or private health care research activities, reveal sensitive patient or beneficiary information, interfere with patient care, disclose trade secrets or similarly confidential commercial or financial information or otherwise be inappropriate under the circumstances[;]

(i) Whether such release or testimony reasonably could be expected to result in the appearance of VA or the Federal government favoring one litigant over another;

(j) Whether such release or testimony reasonably could be expected to result in the appearance of VA or the Federal government endorsing or supporting a position advocated by a party to the proceeding;

(k) The need to prevent the public's possible misconstruction of variances between personal opinions of VA personnel and VA or Federal policy[;]

(l) The need to minimize VA's possible involvement in issues unrelated to its mission;

(m) Whether the demand or request is within the authority of the party making it;

(n) Whether the demand or request is sufficiently specific to be answered;

(o) Other matters or concerns presented for consideration in making the decision.

Id.

The VA Touhy regulations provide that "the VA official"—after considering the request—"shall determine in writing whether the individual is required to comply with the demand or request and shall notify the requester or the court or other authority of the determination reached where the determination is that VA will not comply fully with the request or demand." 38 C.F.R. § 14.807(c).

Plaintiff Schroeder's Touhy Requests to and Responses from the VA

Beginning in January 2022, consistent with the VA's Touhy regulations, plaintiff Schroeder sent written requests for testimony and documents to the VA. Doc. 14-2 at 132-47, 148-53, 170-72 (AR 499-514, 515-19, 537-39); Doc. 14-3 at 28-30, 112-13 (AR 575-77, 659-60); Doc. 14-4 at 1-4 (AR 661-64). Specifically, plaintiff Schroeder sought from the VA various documents, data, and depositions of current and former VA personnel relevant to his underlying False Claims Act lawsuit. Id.

On June 15, 2022, the VA sent plaintiff Schroeder a written response to his To...