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United States ex rel. Steury v. Cardinal Health, Inc.

United States Court of Appeals, Fifth Circuit

August 20, 2013

UNITED STATES OF AMERICA, ex rel., LESLIE STEURY, Plaintiff - Appellant
v.
CARDINAL HEALTH, INCORPORATED, formerly known as Alaris Medical Systems, Incorporated; CARDINAL HEALTH 303, INCORPORATED, formerly known as Alaris Medical Systems, Incorporated; CARDINAL HEALTH SOLUTIONS, INCORPORATED, Defendants-Appellees

Appeal from the United States District Court for the Southern District of Texas

Before JONES, DENNIS, and HIGGINSON, Circuit Judges.

PER CURIAM:

Two questions are posed in this appeal. The first is whether relator Steury's third amended complaint states a claim under the False Claims Act ("FCA") based solely on an implied false certification of "merchantability" by defendants, Cardinal Health, Inc.; Cardinal Health 303, Inc.; and Cardinal Health Solutions, Inc., successors in interest to Alaris Medical Systems, Inc. (collectively, "Cardinal") to the United States Department of Veterans Affairs ("VA") in connection with the sales of Cardinal's Signature Edition Infusion Device ("Signature pump"). Related to this issue is the sufficiency of Steury's pleading to allege this theory of liability. The second issue is the viability of a worthless goods claim. Because Steury's third amended complaint still fails to plead her claims with sufficient particularity, we AFFIRM the district court.

This is the second time this matter has been before this court. See U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262 (5th Cir. 2010) ("Steury I").

I. Background

Steury marketed Cardinal's Signature pump to various hospitals, including VA hospitals, from 1996 until she was terminated in 2001. The Signature pump regulates the rate at which intravenous fluids flow into patients. Steury alleges that a design flaw in the Signature pumps allowed air bubbles to accumulate and be released into a patient's intravenous line, potentially causing death on entering the patient's bloodstream. Steury alleges that Cardinal sold Signature pumps to the VA from 1997 until it suspended production and sales for a separate problem in 2006.

Steury became aware of the defect in late 2000 and discussed it with an area manager in early 2001. In mid-2001, Cardinal suspended shipment of Signature pumps for three months while it reviewed the defect. Steury continued to market the Signature pumps during this period. Cardinal fired Steury at the end of the three-month review period. According to Steury, she was scheduled to fill a major order of Signature pumps with a VA hospital in Ohio only five days later and by that time a number of Cardinal employees were aware of the defect.

Steury sued Cardinal in 2007 for alleged violations of the FCA and several state statutes. The government declined to intervene.[1] Cardinal moved to dismiss after Steury filed an amended complaint. The district court adopted the magistrate judge's report and recommendation and dismissed Steury's complaint for failure to satisfy the heightened pleading standards of Rule 9(b).

We largely affirmed the district court on appeal but remanded to allow Steury an opportunity to amend her complaint. Steury I, 625 F.3d 262. On remand, Steury filed a second amended complaint, which the district court again dismissed. Steury filed a third amended complaint, and Cardinal moved to dismiss under Rules 12(b)(6) and 9(b) for failure to state a claim and for failure to plead a claim alleging fraud with sufficient particularity. The magistrate judge recommended dismissal, and the district court adopted that recommendation in full. Steury timely appealed.

II. Standard of Review

"[C]laims brought under the FCA must comply with the particularity requirements of Rule 9(b)" for claims of fraud. Steury I, 625 F.3d at 266 (citation omitted). Rule 9(b) provides: "In alleging fraud . . . a party must state with particularity the circumstances constituting fraud." Fed.R.Civ.P. 9(b). Thus, "Rule 9(b) requires, at a minimum, that a plaintiff set forth the who, what, when, where, and how of the alleged fraud." Steury I, 625 F.3d at 266 (citations and internal quotation marks omitted). "A dismissal for failure to plead fraud with particularity under Rule 9(b) is treated as a dismissal for failure to state a claim under Rule 12(b)(6)." United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 n.8 (5th Cir. 2009) (citation and internal quotation marks omitted).

We review "de novo a district court's ruling on a Rule 12(b)(6) motion[, ] . . . interpret[ing] the complaint in the light most favorable to the plaintiff." Steury I, 625 F.3d at 266 (citing U.S. ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 379 (5th Cir. 2003)). "The plaintiff's factual allegations must support a claim to relief that is plausible on its face and rises above mere speculation." Id. (citation omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). We view all well pleaded facts in the light most ...


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