State ex rel. Schnupp v. Blair Pharm.

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UNITED STATES ex rel. TIMOTHY SCHNUPP, Relator, v. BLAIR PHARMACY, et al., Defendants.

CIVIL No. ELH-17-2335

United States District Court, D. Maryland

June 6, 2024

MEMORANDUM OPINION

Ellen L. Hollander United States District Judge

In this qui tam action, Timothy Schnupp, the Relator, has sued his former employer, Blair Pharmacy, Inc. (“BPI,” “Blair Pharmacy,” or “Pharmacy”), and its director and principal Matthew Blair (“Mr. Blair”) (collectively “Blair”), pursuant to the False Claims Act (“FCA” or “Act”), 31 U.S.C §§ 3728 et seq. See ECF 1 (“False Claims Act Complaint”). In May 2022, following a lengthy investigation, the United States declined to intervene in this case. ECF 28. The Complaint was then unsealed (ECF 29) and, on May 11, 2022, plaintiff filed his “First Amended False Claims Act Complaint.” ECF 30 (the “Amended Complaint”).

The Amended Complaint contains two counts. Count I asserts false claims under 31 U.S.C. § 3729(a)(1)(A) and Count II asserts false claims under 31 U.S.C. § 3729(a)(1)(B). Some sixteen months later, on September 13, 2023, Schnupp filed a “Motion for Leave to Supplement the First Amended Complaint.” ECF 113 (the “Motion”). He seeks to add a third claim, alleging unlawful retaliation under 31 U.S.C. § 3730(h).

In support of the Motion, plaintiff filed three exhibits. ECF 113-1 to ECF 113-3. These include a copy of a complaint filed in August 2022 by Mr. Blair and Blair Pharmacy in the Circuit Court for Baltimore County, naming as defendants Schnupp and Pharma Resolutions, LLC (“Pharma”), Schnupp's wholly owned single-member limited liability company (ECF 113-1). In addition, plaintiff filed the proposed Supplemental First Amended False Claims Act Complaint (ECF 113-2) and a redline version of the Supplemental First Amended False Claims Act Complaint (ECF 113-3).

Defendants oppose the Motion. ECF 116 (the “Opposition”). And, defendants submitted three exhibits. ECF 116-1 to ECF 116-3. These include the motion to dismiss the State case, dated October 13, 2022 (ECF 116-1); a copy of Blair's opposition to that motion, dated November 4, 2022 (ECF 116-2); and a copy of the transcript of the hearing held on January 31, 2023, before Judge Michael S. Barranco of the Circuit Court for Baltimore County (ECF 116-3).

No reply was filed, and the time to do so has expired. See Docket.

No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall deny the Motion.

I. Factual and Procedural Background

Plaintiff filed the qui tam suit in 2017. ECF 1. As noted, the government investigated the case and, in May 2022, the government declined to intervene. ECF 28. The Complaint was then unsealed. ECF 29. And, the suit was amended. ECF 30.

Schnupp alleges, inter alia, that defendants knowingly submitted false claims to the Medicare Program, 42 U.S.C. § 1395 et seq. (“Medicare”), a federally funded health insurance program for people ages 65 and older and for certain people with disabilities (id. ¶¶ 11 et seq.), and to the Department of Defense TRICARE health insurance program. Id. ¶¶ 20 et seq.^[1]According to the Relator, defendants knowingly submitted false claims to Medicare and TRICARE for certain compound drugs, by substituting a less expensive drug for a more expensive drug; by billing for medication that was not provided; by overcharging for certain medications; and by committing violations of the Anti-Kickback Statute (“AKS”), 42 U.S.C. § 13209-7b(b). See id. ¶¶ 28-43.

The claims lodged by the Relator were the subject of a federal criminal prosecution of Mr. Blair. See United States v. Matthew Blair, ELH-19-410 (D. Md.). Pursuant to a Plea Agreement (id., ECF 181, ECF 181-1), Mr. Blair entered a plea of guilty on December 3, 2021 (id., ECF 178), to Count 31 of the Superseding Indictment (id., ECF 20). That count charged Mr. Blair with Payment of Illegal Remunerations, in violation of 42 U.S.C. § 1320a-7b(b)(2)(A). The Plea Agreement included a lengthy “Stipulation of Facts.” See id., ECF 181-1. And, on February 10, 2022 (id., ECF 188), pursuant to Fed. R. Crim. P. 11(c)(1)(C), Mr. Blair was sentenced to twelve months and one day of imprisonment. See id., ECF 189 (Judgment).

In the FCA case, Blair moved to dismiss on June 18, 2022. ECF 38. After briefing (ECF 47, ECF 50), which included several extensions requested by the parties (ECF 42, ECF 43, ECF 48, ECF 49), the Court denied the motion by Memorandum Opinion and Order of December 9, 2022. ECF 55, ECF 56.

In the interim, on August 17, 2022, Mr. Blair and BPI filed a civil lawsuit against Schnupp and Pharma in the Circuit Court for Baltimore County. See Blair, et al. v. Schnupp, et al., Case No. C-03-CV-22-003286 (“State Case”); see also ECF 113 at 1, ¶ 3; ECF 116 at 2 n.1.^[2] In the State Case, Blair asserted five claims against Schnupp: Breach of Contract (Count I); Intentional Misrepresentation/Fraud (Count II); Fraudulent Concealment (Count III); Negligent Misrepresentation (Count IV); and Breach of Fiduciary Duties (Count V). ECF 113-1, ¶¶ 78-113. And, Blair asserted two claims against both Schnupp and Pharma: Unfair Competition/Trade Secret Misappropriation (Count VI) and Tortious Interference with Economic Relations and/or Business Relationships (Count VII). Id. ¶¶ 114-27.

On October 13, 2022, Schnupp and Pharma moved to dismiss the State Case. ECF 116-1. Relevant here, they argued, in part, id. at 9: “Plaintiffs attempt to bring this lawsuit in retaliation for the federal qui tam action filed by Mr. Schnupp against the Plaintiffs on August 15, 2017, and for the resulting federal criminal prosecution and conviction of plaintiff Matthew Blair.” And, they asserted that the False Claims Act “prohibits retaliation for acts done in furtherance of an FCA lawsuit. See 31 U.S.C. § 3730(h).” Id. at 23 n.4.

Blair opposed that motion. ECF 116-2. And, on November 13, 2022, Schnupp and Pharma replied. See Docket in Blair, et al. v. Schnupp, et al., Case No. C-03-CV-22-003286.^[3]

On January 31, 2023, the State court held a hearing on the motion to dismiss (Barranco, J.). ECF 116-3. At the hearing, counsel for Schnupp and Pharma argued that “[u]nder the False Claims Act under federal law no retaliation is allowed ....” Id. at 27; see also id. at 45. Judge Barranco denied the motion to dismiss. Id. at 107. And, the case is still pending. See Docket, Blair, et al. v. Schnupp, et al., Case No. C-03-CV-22-003286.

As to the FCA case, on December 19, 2022, plaintiff filed a motion for partial summary judgment. ECF 57. The motion was briefed (ECF 65, ECF 75) and, by Memorandum Opinion and Order of May 23, 2023 (ECF 100, ECF 101), I denied that motion.

In the interim, on January 25, 2023, defendants answered the suit. ECF 60. Thereafter, on March 6, 2023, I issued a Scheduling Order. ECF 73. Among other things, the Scheduling Order set a deadline of April 6, 2023, for amendment of pleadings. Id. By consent, the Scheduling Order was extended several times. See ECF 106, ECF 118, ECF 122, ECF 136, ECF 142. Critically, however, the deadline to amend pleadings was never extended. See id. Pursuant to the Court's Order of April 5, 2024 (ECF 142), discovery closed on or about May 8, 2024.^[4]

As indicated, in the State Case, in October 2022, Schnupp argued that the State Case was retaliatory, in violation of federal law. ECF 116-1. Yet, the Motion, seeking leave to add a retaliation claim in the FCA case (ECF 113), was not filed until September 13, 2023-almost a year after Schnupp asserted retaliation in the State Case. See ECF 113.

In particular, in the Motion, plaintiff seeks to “supplement” the First Amended Complaint with an FCA retaliation claim. ECF 113. He maintains that on August 17, 2022, Mr. Blair and BPI filed “a retaliatory lawsuit” in the Circuit Court for Baltimore County against Schnupp and Pharma. Therefore, he seeks to “file a Supplemented First Amended False Claims Act Complaint in this case to add a third count alleging unlawful retaliation under 31 U.S.C. § 3730(h).” Id. at 2. As discussed, infra, by seeking to add a new claim, plaintiff actually seeks to amend his suit.

II. Legal Standards

Schnupp has moved to “supplement” his First Amended Complaint by adding a new claim. ECF 113. The title of the Motion does not alter its character. “A rose by any other name would smell as sweet.”^[5] In actuality, the Motion seeks leave to amend the suit. Therefore, the Motion implicates Fed.R.Civ.P. 15(a).

Pursuant to Rule 15(a)(1), “[a] party may amend its pleading once as a matter of course within: A) 21 days after serving it, or B) if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” “In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). However, Rule 15(a)(2) provides: “The court should freely give leave [to amend] when justice so requires.” See Sohrabi v. Mirghahari, GJH-20-2001, 2023 WL 1416020, at *2 (D. Md. Jan. 31, 2023) (citing Fed.R.Civ.P. 15(a)(2)).

Fed. R Civ. P. 15 is a “liberal rule” that “gives effect to the federal policy in favor of resolving cases on their merits instead of disposing of them on technicalities.” Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006); see United States ex rel. Nicholson v. MedCom Carolinas, Inc., 42 F.4th 185, 197 (4th Cir. 2022); Galustian v. Peter, 591 F.3d 724, 729 (4th Cir. 2010) (citing Coral v. Gonse, 330 F.2d 997, 998 (4th Cir. 1964)). The Fourth Circuit has interpreted Rule 15(a) to provide that “leave to amend a pleading should be denied only when the amendment would be prejudicial to the...