The Eleventh Circuit Court of Appeals has vacated the judgment against Millennium Health (MH) in a lawsuit in which Ameritox accused it of violating the Stark Law and federal Anti-Kickback Statute (AKS) by providing free point-of-care urine drug testing (POCT) cups to physicians.
As the Eleventh Circuit said in its 45 page decision, this case was “extraordinarily complex”, and so I will only provide very broad strokes as to what has transpired over the four years since the case was filed.
Background
In April 2011, Ameritox accused MH (Millennium Laboratories at that time) of violating the Lanham Act (false advertising), the Stark Law and the AKS, and of engaging in unfair competition and tortious interference in multiple states by providing physicians with free POCT cups (urine cups which contain immunoassay strips for qualitative drug testing) in exchange for referral of confirmatory urine drug testing.
A judge ruled in May 2014 that MH violated the Stark Law and AKS when it provided free POCT cups to physicians who then billed for chemical analysis, but allowed a jury to decide whether MH violated the Stark Law and the AKS by providing free POCT cups to physicians who could have billed for POCT but agreed not to do so.
In June 2014, the jury determined MH did indeed violate the Stark Law and AKS, and ordered MH to pay Ameritox $14.8 million. That amount was later reduced to $11.26 million in September 2014.
MH appealed the decision to the Eleventh Circuit and argued, among other things, the District Court “abused its discretion when it decided to retain jurisdiction over the supplemental state-law claims.” Notably, the US government filed an amicus curiae (friend of the court) brief in which it urged the Eleventh Circuit to reject MH’s appeal.
Eleventh Circuit Ruling
The ruling very quickly points out neither the Stark Law nor the AKS have a private right of action, meaning private organizations and individuals have no right to file a lawsuit under them. Neither Ameritox nor MH disputed this fact. Instead, Ameritox sought to use MH’s alleged violations of the Stark Law and AKS as the basis for liability for a whopping fourteen causes of action (the federal Lanham Act, three state statutes, and ten state common law torts). The Eleventh Circuit called this approach “novel and complex”.
Now remember, this case was being pursued in a federal district court, and Ameritox was advancing only one federal cause of action—violation of the Lanham Act. MH “slowly whittled away” at the Lanham Act claim, and the District Court told the parties that if the Lanham Act claim was resolved prior to trial, and if the court lacked diversity jurisdiction, the remaining claims may be dismissed.
The District Court started to investigate whether it had diversity jurisdiction, and Ameritox admitted it did not. Soon after, MH offered to no longer tell health providers that it could legally provide below fair market pricing for chemical analyzers or supplies from third party vendors in exchange for referrals. MH did this because it was trying to render Ameritox’s only federal cause of action moot, thereby forcing the District Court to dismiss the remaining claims for lack of jurisdiction.
But “without any explanation or analysis”, the District Court decided to go ahead and exercise supplemental jurisdiction over the case, which the Eleventh Circuit later called “an abuse of discretion” and a “judgment patently unsupported by actual law.” With the exception of Texas, none of the states in which Ameritox claimed MH engaged in “unfair, deceptive, or unconscionable business practices” had ever even considered whether the Stark Law and the AKS could be used in the way Ameritox was using them.
After further considering judicial economy, convenience, fairness, and comity, the judgment against MH was vacated, and the case was remanded back to the District Court with “instructions to dismiss the state-law claims without prejudice so that the parties can litigate their claims in a proper forum.”
The Eleventh Circuit had some pretty harsh words for both parties about the manner with which the case was handled:
- “In other words, Ameritox’s attorneys wasted both judicial resources and Ameritox’s money.”
- “Ameritox advanced outlandish legal theories and Millennium went along with it.”
- “Millennium has certainly suffered insofar as it massively wasted resources arguing that it did not violate Stark or AKS when it could have moved to dismiss Ameritox’s various theories for failure to state a claim.”
- “At the end of the day, the attorneys here left their clients with gargantuan legal bills and “a tale/ Told by an idiot, full of sound and fury,/ Signifying nothing.”
It is important to note the Eleventh Circuit never considered the underlying allegations in the case; it focused purely on procedural matters:
We also explicitly note that we express no opinion whatsoever as to whether the [free cup agreements] violate Stark, AKS, or some other state law. We also express no view as to whether it would be wise to allow Stark and AKS violations to prove, as a matter of law, elements of state unfair competition law. It certainly does not require any great leap of logic to believe that a company that profits by declining to comply with government regulations enjoys an unfair advantage vis-à-vis its competitors who choose to obey the law. We hold only that exercising supplemental jurisdiction under these (perhaps [unique]) circumstances was an abuse of discretion.
The companies speak out
Not surprisingly, MH is happy with the ruling. From its press release:
We are very pleased with the Appeals Court decision. Millennium defended this case vigorously over the past three years based on our firm belief that the company had taken every measure to ensure that its actions were appropriate and fully consistent with the letter of applicable laws…
Ameritox was kind enough to send me the following statement:
We initially brought this case in hopes of putting a stop to Millennium Health’s anti-competitive
behavior, and in the past year it has become apparent that the Department of Justice is pursuing a $250 million settlement from Millennium Health for similar conduct. At this time, we’re happy to let federal regulators hold Millennium Health accountable.
Many thanks to MH, which gave me the heads up on the court’s decision.