United States v. Omnicare, Inc.

UNITED STATES OF AMERICA, and the STATES OF FLORIDA and ILLINOIS ex rel MAUREEN NEHLS, Plaintiffs, v. OMNICARE, INC., MORRIS ESFORMES, AND PHILIP ESFORMES, Defendants.

No. 07 C 05777

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

Entered: July 23, 2013

Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER

Qui tam plaintiff Maureen Nehls (the "relator") brought this action against Morris Esformes and Philip Esformes (the "Esformeses") to recover damages and civil penalties on behalf of the United States and the States of Illinois and Florida. Nehls contends that the Esformeses violated the False Claims Act ("FCA"), 31 U.S.C. §§ 3729, et seq., the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b(b), and parallel state statutes, by accepting remuneration to induce referrals for services reimbursed by Medicare and Medicaid, and thereby causing Total Pharmacy and Omnicare to submit false claims to the Illinois and Florida Medicaid programs. The allegedly false claims consist of certifications by Total Pharmacy and Omnicare (which acquired Total Pharmacy) that they had complied with all applicable laws when, in actuality, the pharmacy services for which the companies sought reimbursement had been secured, allegedly, through violations of the AKS. Related claims against Omnicare have ended in settlement. Now before the Court are the relator's motion to dismiss Philip Esformes' counterclaim, the Esformeses' motions for summary judgment, and the Esformeses' motion tostrike the relator's 56.1 Statement of Additional Facts. For the reasons set forth below, the relator's motion to dismiss is granted, the Esformeses' motions for summary judgment are denied, and the Esformeses' motion to strike is denied.

I. BACKGROUND

A. Procedural

On October 9, 2012, the relator filed her Sixth Amended Complaint pursuant to this Court's order. See Am. Compl., Dkt. 218; Order, Dkt. 216. That complaint alleges that Omnicare, Morris Esformes, and his son, Philip Esformes, violated the FCA, the Illinois Whistleblower Reward and Protection Act, 740 ILCS § 175/3(a)(1)-(3), the Illinois Insurance Claims Fraud Prevention Act, 740 ILCS 92/1 et seq., and the Florida False Claims Act, Section 68.082(2)(a)-(C), Florida Statutes. Omnicare's involvement in this matter has ended in settlement. See Order of Dismissal, Dkt. 307. Morris and Philip¹ answered the amended complaint on October 30, 2012 and January 4, 2013, respectively. See Morris's Answer, Dkt. 220; Philip's Answer, Dkt. 232. In his answer, Philip denied the allegations against him and also asserted a counterclaim alleging that the relator had breached her fiduciary duty by failing to report the alleged FCA and AKS violations to Total Pharmacy and its owners. See Philip's Answer, Dkt. 232 at 41-45.

On January 25, 2013, the relator filed a motion to dismiss Philip's counterclaim. Pl. Mot., Dkt. 233. Soon after, Morris and Philip filed motions for summary judgment with their respective statements of uncontested facts pursuant to Northern District of Illinois Local Rule 56.1. See Morris's Mot. for Summ. J., Dkt. 242; Philip's Mot. for Summ. J., Dkt. 236. For herpart, the relator opted to file a combined responsive brief and statement of additional facts that addressed both motions. See Pl. Resp., Dkt. 253; Pl. 56.1 Statement of Additional Facts, Dkt. 256.

At the outset, the defendants contend that Nehls' statement of additional facts does not comply with Local Rule 56.1(b)(3)(C) and have moved to strike Nehls' statement of additional facts. See Defs. Mot. to Strike, Dkt. 258. In particular, the Esformeses contend that the relator's statement of additional facts "contains significant amounts of argument, characterization, speculation, and inadmissible hearsay." Id. at 2. Further, the defendants argue that Nehls violated the local rules, which limit a nonmoving party's statement of additional facts to 40 paragraphs, by including 77 numbered paragraphs in her brief. Id.

The motion to strike is unnecessary. First, both of the defendants filed responses to Nehls' statements and so had a full opportunity to spell out their problems with her fact contentions. See Morris's 56.1 Resp., Dkt. 265; Philip's 56.1 Resp., Dkt. 261. And further, while the defendants are correct that it is improper to include "irrelevant information, legal arguments, and conjecture" in a Local Rule 56.1 statement, see, e.g., Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir. 2006), a review of Nehls' statement of additional facts demonstrates that striking all, or even some, of her brief is unwarranted. For example, the defendants claim that paragraph seven of Nehls' statement of additional facts contains "unjustifiable mischaracterizations of facts and testimony" and the "[r]elator's personal beliefs as to the mental states and reasoning as to the speaker or actor." Defs. Mot. to Strike, Dkt. 258 at 3. A review of paragraph seven, however, reveals no such mischaracterization of facts and testimony alleged by the defendants. See Pl. 56.1 Statement of Additional Facts, Dkt. 256 at ¶ 7. Paragraph seven merely sets forth, in a straight forward manner, the content of a portion of a legal opinion pertaining to the structure ofthe pharmacy services company that became Total Pharmacy. Similarly, the defendants contend that paragraph 12 contains "blatant argument," paragraph 15 is a "complete fabrication[]," and that paragraphs 12 and 15 both contain "unjustifiable mischaracterizations of facts and testimony." Defs. Mot. to Strike, Dkt. 258 at 3. However, a review of those statements of facts belies the defendants' contentions. Paragraph 12 is based on and supported by Philip's statement of facts, see Philip's 56.1 Statement of Facts, Dkt. 249 at ¶¶ 17-18, and paragraph 15 is based on and supported by Morris's deposition testimony. See Morris Dep., Dkt. 256, Ex. F at 24:19-26:2, 42:14-44:20.

That said, the Court agrees that in some statements the relator may have "favorably characterized, rather than plainly stated, several facts." See In re NeoPharm, Inc. Sec. Litig., 705 F. Supp. 2d 946, 963 (N.D. Ill. 2010). For example, in paragraph 38, the relator states that a letter written from Tracy Finn, an Omnicare Vice President, to Tim Dacy, "makes it sound not only as if no deal on Missouri [nursing homes] had been reached, but as if no negotiations had ever taken place." Pl. 56.1 Statement of Additional Facts, Dkt. 256 at ¶ 38. That statement is argument, not "fact." Similarly, in paragraph 17, the relator states that "Morris insisted that separate contracts between the Esformes Homes and Total Pharmacy be signed by each nursing home's administrator because he did not want his name appearing on the contracts with Total Pharmacy." Id. at ¶ 17. The initial portion of this statement is supported by the deposition testimony of Bruce Paler, to the extent that Paler testified that Morris instructed him to send the contracts to each home and have the administrator sign them. However, whether Morris instructed Paler to act in this manner "because he did not want his name appearing on the contracts" is not a fact, but an inference and characterization of the evidence that is unsupportedby record evidence.² It may be a permissible inference to argue at trial, but it is plainly not an undisputed fact. To the extent that the relator characterized the evidence presented in her statement, she failed to comply with the Local Rule. These occasional misstatements, however, do not warrant striking the relator's submission, particularly since the defendants have had the opportunity to file responses pointing out where they believe that the relator has taken liberties.

As for the number of the relator's statements, while true that the relator never moved for leave to file more than 40 statements of fact, she responded to two motions for summary judgment in a combined brief. The defendants maintain that the relator must still comply with Local Rule 56.1(b)(3)(C). To that end, the Court agrees and finds that the relator has complied with the Local Rules. The relator had the option of filing separate responses, or even separate statements of additional facts, to each motion for summary judgment, but, to conserve resources and promote efficiency, opted for combined briefs. Counsel for the relator indicated that they would do as much before the Court and the parties, see Hr'g, Pl. Resp., Dkt. 253, Ex. 2 at 17, and the combined response and statement of additional facts have in no way prejudiced the defendants. In fact, the relator has used less numbered paragraphs than she is otherwise entitled.

As the defendants correctly note, this Court has the "discretion to require strict compliance with its local rules governing summary judgment." Koszola v. Bd. of Educ. of City of Chi., 385 F.3d 1104, 1109 (7th Cir. 2004). Here, however, the Court finds after a careful review that the relator's statement of additional facts is sufficiently within the "spirit, if not the letter ofthe Local Rule." See Karlin v. Mauritzon, Inc., No. 10 C 07077, 2012 WL 5830592, at *3 n. 5 (N.D. Ill. Nov. 16, 2012) (citing Portis v. City of Chi., 510 F. Supp. 2d 461, 463 (N.D. Ill. 2007)). And to the limited extent any portion of the relator's filing does not meet the requirements of Local Rule 56.1(b)(3)(C), or is based on inadmissible evidence, the Court will disregard those portions of the statement of additional facts. Accordingly, the defendants' motion to strike is denied.

B. Facts

To avoid unnecessary repetition, an overview of the events and basis for the relator's complaint are presented here, drawing on the parties' Local Rule 56.1 statements of facts. More detailed facts are presented and analyzed below, in the Court's review of the relator's evidence. Moreover, as required on a motion for summary judgment, the record is viewed in the light most favorable to the nonmoving party, Nehls, and all reasonable inferences are construed in her...