United States District Court, D. Minnesota
United States of America, ex rel., and Cavallino Consulting LLC, Relator, Plaintiffs,
Medtronic, Inc., Defendant.
M. Shapiro, Esq. and Cotchett, Pitre & McCarthy, counsel
J. Foster, Esq. and Fredrikson & Byron, counsel for
S. Doty, Judge
matter is before the court upon the motion to dismiss by
defendant Medtronic, Inc. Based on a review of the file,
record, and proceedings herein, and for the following
reasons, the motion is granted.
qui tam action arises from relator Cavallino Consulting,
LLC's claim that since 2012 Medtronic has fraudulently
charged hospitals owned and operated by the federal
government for expedited shipping costs it did not actually
incur. Relator is a consulting firm based in California that
conducts audits, known as Transportation Overcharge Recovery
Audits, of health care systems to “uncover
transportation overcharging.” Compl. ¶ 8.
Medtronic is a medical device manufacturer that sells
products to hospitals throughout the country. Id.
alleges that, through ten years of audits, it discovered that
Medtronic has engaged in a widespread scheme to
“overcharge for expedited shipping across various
health care systems.” Id. ¶ 10. Relator
does not allege that it audited a government hospital or
entity or that it otherwise investigated Medtronic's
sales to the government in reaching that conclusion. Nor does
relator identify representative examples of sales in which
Medtronic overcharged the government for expedited shipping.
See Compl. Ex. 1. Relator nevertheless alleges that
Medtronic receives substantial discounts on expedited
shipping from various carriers that it failed to pass on to
the government despite its contractual obligation to do so.
Compl. ¶ 21. Relator broadly estimates that the
discounts ranged from 35% to 65%, which resulted in millions
of dollars in overpayment by the government. Id.
¶¶ 2, 21.
contract attached to the complaint is an “f.o.b.
destination” contract which, the parties agree, means
that the listed prices include the cost of delivery. Compl.
Ex. 1 ¶ 15. The contract also provides, however, that
for expedited, overnight, and two-day delivery, the
government is “responsible for the additional shipping
charge[s] between the normal surface (ground) rate and
expedited rate.” Id. ¶¶ 11b, 11c.
The parties disagree as to the meaning of this provision.
According to relator, it requires the government to pay the
actual expedited shipping costs paid by Medtronic, whereas
Medtronic interprets it to mean that the government is
required to pay the expedited shipping “rate”
notwithstanding any carrier discounts. According to relator,
the contract language is sufficiently clear to establish that
Medtronic knowingly presented false claims for payment to the
government by submitting invoices that included expedited
shipping costs it did not actually incur due to carrier
discounts. Compl. ¶¶ 23-24.
September 10, 2015, relator commenced this suit against
Medtronic in the Central District of California alleging
violations of the False Claims Act (FCA), 31 U.S.C. §
3729(a)(1)(A), (B), and (G). The government declined to
intervene. ECF No. 19. Medtronic moved to transfer the case
to Minnesota and to dismiss. ECF Nos. 34, 35. The California
court granted the transfer motion finding that convenience
and fairness were best served by transferring the case to
Minnesota. ECF No. 41, at 2-4. The court declined to
entertain the motion to dismiss given the pending
transfer. Id. at 4. Medtronic now moves to
dismiss all claims against it under Federal Rules of Civil
Procedure 9(b) and 12(b)(6). Relator requests the opportunity
to file an amended complaint should the court find that its
pleading is insufficient.
survive a motion to dismiss for failure to state a claim,
“‘a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.'” Braden v. Wal-Mart
Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
“A claim has facial plausibility when the plaintiff
[has pleaded] factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
556 (2007)). Although a complaint need not contain detailed
factual allegations, it must raise a right to relief above
the speculative level. Twombly, 550 U.S. at 555.
“[L]abels and conclusions or a formulaic recitation of
the elements of a cause of action” are not sufficient
to state a claim. Iqbal, 556 U.S. at 678 (citation
and internal quotation marks omitted).
because all of relator's claims are based in fraud, each
must also meet the heightened pleaded requirements of Rule
9(b). See U.S. ex rel. Joshi v. St. Luke's Hosp.,
Inc., 441 F.3d 552, 556 (8th Cir. 2006) (“Because
the FCA is an anti-fraud statute, complaints alleging
violations of the FCA must comply with Rule 9(b).”).
The requirements of Rule 9(b) are read “in harmony with
the principles of notice pleading, ” and the level of
particularity required depends upon the nature of a case.
Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d
736, 746 (8th Cir. 2002) (citation and internal quotation
marks omitted). However, “[c]onclusory allegations that
a defendant's conduct was fraudulent and deceptive are
not sufficient to satisfy the rule.” Id.
(citation and internal quotation marks omitted). To satisfy
the heightened pleading requirement, a plaintiff must set
forth the “who, what, where, when, and how” of an
alleged fraud. Joshi, 441 F.3d at 556 (citation and
internal quotation marks omitted). In other words, a
plaintiff must plead “the time, place and contents of
false representations, as well as the identity of the person
making the misrepresentation and what was obtained or given
up thereby.” BJC Health Sys. v. Columbia Cas.
Co., 478 F.3d 908, 917 (8th Cir. 2007) (citation and
internal quotation marks omitted).