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United States ex rel Roop v. Hypoguard USA

March 17, 2009

UNITED STATES EX REL HENRY ROOP, PLAINTIFF - APPELLANT,
v.
HYPOGUARD USA, INC., ET AL., DEFENDANTS - APPELLEES.



Appeal from the United States District Court for the District of Minnesota.

The opinion of the court was delivered by: Loken, Chief Judge.

Submitted: October 14, 2008

Before LOKEN, Chief Judge, JOHN R. GIBSON and MURPHY, Circuit Judges.

Qui tam relator Henry Roop appeals the dismissal of his complaint alleging that his former employer, Hypoguard USA, Inc., violated the False Claims Act ("FCA"), 31 U.S.C. § 3729(a). Conceding that his initial Complaint failed to plead an FCA claim with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure, Roop argues that the district court*fn1 abused its discretion by denying him leave to amend and then denying his motion to alter or amend the judgment to permit him to file a proposed First Amended Complaint. We affirm.

Roop worked as a Medicare sales specialist for Hypoguard, a Minnesota-based manufacturer of blood glucose monitoring systems that are sold to diabetics, many of whom are eligible under Medicare for federal reimbursement of their purchases. Hypoguard sells these medical devices to distributors who submit Medicare reimbursement claims for their sales to nursing homes and individual consumers.

Roop commenced this action in March 2004 by filing a sealed complaint in the Northern District of Mississippi. The complaint alleged, inter alia, that Hypoguard blood glucose monitors and test strips were defective, and that Hypoguard knew they were defective and failed to file reports of defects required by the Food and Drug Administration's Medical Device Reporting ("MDR") regulations,*fn2 which caused Medicare to pay countless fraudulent reimbursement claims submitted by Hypoguard distributors. In May 2006, after a lengthy FDA investigation, the United States filed a Notice of Election to Decline Intervention. See 31 U.S.C. § 3730(b)(4)(B). Roop elected to continue the action. Hypoguard was then served and in October 2006 filed motions to dismiss and to transfer venue to the District of Minnesota.

In support of its motion to dismiss, Hypoguard argued that Roop failed to plead fraud with the specificity required by Rule 9(b) because he failed to allege "a single specific false claim or statement submitted to the government," details concerning the alleged failures to submit proper MDRs, and "what was false in any statement to the Government, why it was false, and when the allegedly fraudulent statements were made." In his Memorandum in Opposition, Roop argued at length that the complaint sufficiently pleaded an FCA claim and then concluded: "Alternatively, if this Court finds that Plaintiff's False Claims Act claims lack specificity as required by Rule 9(b), Plaintiff should be granted leave to file an amended complaint." The Northern District of Mississippi transferred venue to the District of Minnesota in March 2007 without ruling on the motion to dismiss.

The district court held a hearing on Hypoguard's motion to dismiss on September 6, 2007. Roop had not complied with the local rule requiring that a party who moves to amend a pleading "shall attach a copy of the amended pleading to the motion." D. Minn. LR 15.1. Accordingly, at the hearing, the district court asked:

If I were to require there to be a realleging under Rule 9, what further facts do you think could be adduced to shore this up?

Counsel for Roop responded:

Well, number one, I can allege that people were injured by it. I do have evidence of that. My client as a regional sales manager was involved in some telephone conferences with groups of sales reps as well as management of Hypoguard in which people gave instances of where people were injured by the device, so I could allege that. . . .

THE COURT: Injured in the sense of requiring hospitalization--

[COUNSEL]: Yeah, and I think one person died. . . . I guess I could more clearly allege the reimbursement . . . it's not Hypoguard being reimbursed, but that they're causing reimbursements to be made. So I could more specifically allege regarding the MDRs and that they were required to be reported and not reported and provide the basis under the regulations with some evidence as to -- particular evidence as to people that were ...


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