The U.S. Court of Appeals for the Sixth Circuit dismissed a relator-pharmacist’s False Claim Act (FCA) case, holding that the pharmacist claims, largely based on a stolen Medical Expenses Summary, lacked merit. In U.S. ex. rel. Sheoran v. Wal-Mart Stores East, Case No. 20-2128 (6th Cir. June 4, 2021), the court dismissed all claims brought by a pharmacist against his former employer Walmart, including alleged violations of the FCA, the Michigan Medicaid False Claims Act (MMFCA), and the retaliation provisions of the FCA.  The opinion contains several key insights about the pleading standard required for FCA claims.

As background, the relator Ashwani Sheoran, RPh previously worked at Walmart as a “floater pharmacist,” working at various Walmart pharmacies throughout Michigan. Sheoran alleged that during his employment patients were prescribed what he considered to be “high doses” of opiate prescriptions from a single doctor, and, based on his review of a Medical Expenses Summary, with low patient payment numbers, he concluded that excessive claims for medication must have been submitted to Medicare or Medicaid for payment.  Sheoran was later terminated from employment after a supervisor discovered that he stole the Medical Expenses Summary. The stolen Medical Expenses Summary was later included as an Exhibit in a complaint alleging violations of state and federal laws against Walmart, three individual employees of Walmart, and three physicians. After both the U.S. and Michigan declined to intervene, Walmart and one of the physician-defendants moved to dismiss the complaint, and the District Court granted the motions to dismiss in 2019. Sheoran appealed, claiming that the district court failed to “understand the complex issues in [the] case.” The Sixth Circuit disagreed, affirming the dismissal.

For context, to establish a claim under the FCA, the court noted that a plaintiff must allege that:

1. the defendant presented a claim of payment to the government;
2. the claim was false or fraudulent;
3. the defendant knew it was false or fraudulent; and
4. the false claim was material to the government’s payment.

Notably, the Sixth Circuit held that Sheoran failed to establish any of these four elements.  Specifically, the court held that the Medical Expenses Summary was not sufficient to establish that any claims were submitted to a government agency and that Sheoran’s “bare-bones assertion” that claims must have been submitted to the government was mere speculation.  Furthermore, the court held that the Medical Expenses Summary was not sufficient to establish the falsity element of a FCA claim, reasoning that without patient medical history, it is impossible to conclude that prescribed controlled substance doses were too high, as Sheoran alleged.

On the material prong, because the government would have had the same access to the patient information that Walmart had concerning potentially high dosage amounts (assuming paid under a government healthcare program), the court reasoned that the government’s decision to pay the claims despite having the same knowledge that Walmart had in submitting them, was “very strong evidence that those requirements are not material.” Effectively, the court noted the demanding materiality standard for a FCA claim after Escobar, reasoning that having the same information as the government would make a material argument difficult to maintain.   The court also ruled Sheoran failed to establish that Walmart knowingly created false records for false claims too, as there was “nothing in [the] prescriptions [that] would indicate to Walmart” that filling the prescription and submitting claims “were illegal, false, or fraudulent.”

The court also held that Sheoran’s retaliation claim lacked merit because he failed to show that, at the time of his termination, Walmart knew he was pursuing an FCA action, noting that employees must make clear their intentions of bringing or assisting in an FCA action to show retaliation.  Although Sheoran claimed that he told his superiors about the allegedly false prescriptions, the court held consistent with the Sixth Circuit’s past precedent that that is not enough—merely telling an employer about violations does not establish that he was pursuing an FCA action. Such defense-favorable precedent is particularly interesting as the Sixth Circuit ruled earlier this year that a former employee’s retaliation claim could proceed.

The court noted that the FCA was not enacted to punish “garden-variety” violations, concluding that this was a straightforward FCA case that did not necessitate oral argument.  This case demonstrates the pleading standard for FCA cases does not allow for cases built upon mere speculation or bare-bones assertions.  This plaintiff’s burden was not met notwithstanding concerns from the qui tam plaintiff with opiate prescriptions, a significant government focus in addressing the national crisis with substance abuse. This case may be welcome news for companies concerned about fending off non-meritorious FCA or FCA retaliation claims.