August 23, 2022. The United States Court of Appeals for the Ninth Circuit ruled in favor of a relator, reviving its False Claims Act lawsuit and overturning the United States District Court for the Eastern District of Washington’s decision to dismiss the whistleblower’s case against healthcare company Cardinal Health and various “small business front companies.” The case now goes back to the trial court for further proceedings.
The relator, UPPI LLC, is an association of highly specialized small business nuclear pharmacies. The relator alleges that several Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) were front companies for the large, Fortune 15 business Cardinal Health in a “rent-a-vet” scheme. In this scheme, a large company exploits the statutory and regulatory preferences given to SDVOSBs in government contracting. The defendants—large enterprise Cardinal Health and SDVOSBs Caring Hands and Logmet—allegedly misled the government into awarding contracts to the SDVOSBs for the supply and distribution of radiopharmaceutical products to Veterans Affairs (VA) hospitals. The complaint alleges that in reality, Cardinal Health performed the vast majority of the work and kept the majority of the revenue, while the SDVOSBs took only a small cut for doing some nominal invoicing.
The District Court’s original decision dismissed the case for failure to plead falsity and materiality. The Ninth Circuit found that the relator’s First Amended Complaint (FAC) “viably” presented “two theories under which the defendants might be liable for false statements.” One of the theories is “promissory fraud,” wherein a defendant promised to perform work as an SDVOSB subcontractor but had no intention of complying with the contract.
The case will be remanded back to the trial court for further litigation on the plaintiff’s claims.
Representing relator on appeal was Glenn Chappell of Tycko & Zavareei LLP in Washington, D.C. and Tejinder Singh of Sparacino PLLC. Also representing the relator in the trial court are Renée Brooker ([email protected]) and Eva Gunasekera, whistleblower attorneys at Tycko & Zavareei LLP. Government counsel are United States Attorney Vanessa R. Waldref, Assistant United States Attorneys Daniel Fruchter and Tyler Tornabene, and U.S. Department of Justice Civil Frauds Deputy Director Colin Huntley.
The case is UPPI LLC, qui tam as Relator, and United States of America v. Cardinal Health, Inc.; Cardinal Health 414 LLC, DBA Cardinal Health Nuclear Pharmacy Services; Cardinal Health 200 LLC; D’s Ventures LLC DBA Logmet Solutions LLC; Caring Hands Health Equipment & Supplies LLC; Obie B. Bacon; Demaurice Scott; Other Unnamed Small Business Front Companies; Unnamed Individuals (No.: 21-35905, D.C. No. 2:17-cv-00378-RMP).