United States ex rel. Hagerty v. Cyberonics, Inc.
95 F. Supp. 3d 240
D. Mass.2015Background
- Relator Andrew Hagerty, a former Cyberonics sales rep, alleges a company-wide scheme to promote medically unnecessary early replacements of Vagus Nerve Stimulator (VNS) devices, many for patients covered by government health programs.
- Cyberonics allegedly shifted incentives in 2007–2011 to reward replacement-device sales, distributed target lists, and encouraged representations about battery life without reliable individualized calculations.
- Hagerty investigated regional sales practices, reported concerns to management, was put on a performance plan, and fired in January 2012; he later filed this qui tam FCA suit (government declined to intervene).
- The amended complaint asserts federal FCA claims (false claims and conspiracy), 28 state FCA claims, FCA retaliation, Massachusetts False Claims Act retaliation, and breach-of-contract/implied covenant claims.
- Cyberonics moved to dismiss for public-disclosure bar, failure to meet FCA pre-suit/sealing rules, failure to plead fraud with Rule 9(b) particularity, and failure to state contract/other claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Public-disclosure bar | Hagerty says prior publicity (his earlier suit and reports) did not disclose fraud on the government; he is original source adding independent information | Cyberonics says Infitialis report and prior suit publicly disclosed substantially the same allegations, barring the FCA claims | Court: public-disclosure bar does not apply — prior disclosures lacked the essential element (fraud on government); alternatively Hagerty qualifies as an original source |
| FCA pre-suit/seal requirements for amended complaint | Hagerty contends the original complaint gave government adequate notice; amended complaint not a new, unrelated FCA claim | Cyberonics contends new FCA allegations required seal/service so gov’t could investigate before disclosure | Court: original and amended complaints were substantially similar; pre-suit/seal requirements satisfied; no dismissal on that basis |
| Rule 9(b) particularity for FCA false-claims allegations | Hagerty relies on scheme allegations plus statistical assertions to infer false claims submitted to government | Cyberonics says complaint lacks specific false claims, dates, claim forms, amounts, and jurisdiction-specific details to meet 9(b) | Court: dismissed federal FCA counts (and state FCA analogues) for failure to plead specific false claims or sufficient factual/statistical support under Rule 9(b) |
| FCA conspiracy claim & corporate conspiracy doctrine | Hagerty alleges conspiracy between Cyberonics and employees to cause false claims | Cyberonics argues a corporation cannot conspire with its own employees; intracorporate-conspiracy doctrine bars claim | Court: conspiracy claim dismissed — corporation cannot conspire with its officers/employees in this context |
| FCA retaliation / Massachusetts FCA retaliation | Hagerty says he investigated fraud, informed management, and was fired shortly after — protected conduct; MFCA mirrors federal protection | Cyberonics asserts termination was for poor sales and lacked notice of FCA-type conduct | Court: FCA retaliation claim (31 U.S.C. § 3730(h)) and MFCA retaliation survive (plausible protected conduct, employer knowledge, temporal proximity) |
| Breach of contract / implied covenant | Hagerty raises breach and implied covenant claims from employment termination | Cyberonics notes at-will employment and no facts showing deprivation of earned compensation | Court: breach and implied covenant claims dismissed (at-will employment; no applicable exception) |
Key Cases Cited
- United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13 (1st Cir. 2009) (discusses Rule 9(b) standards and sufficiency for qui tam inducement cases)
- United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 719 F.3d 31 (1st Cir. 2013) (further False Claims Act qui tam guidance)
- United States ex rel. Cunningham v. Millennium Labs. of Cal., Inc., 713 F.3d 662 (1st Cir. 2013) (public-disclosure bar analysis)
- Ge v. Takeda Pharm. Co. Ltd., 737 F.3d 116 (1st Cir. 2013) (Rule 9(b) particularity in FCA context; must plausibly link misconduct to false government claims)
- Karvelas v. Melrose–Wakefield Hosp., 360 F.3d 220 (1st Cir. 2004) (elements of FCA retaliation claim; conduct must reasonably lead to viable FCA action)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must be plausible on its face)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (Twombly plausibility standard applied to all civil suits)
- Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (U.S. 1984) (intracorporate-conspiracy doctrine — a single corporate entity cannot conspire with its employees)
- Booker v. Pfizer, Inc., 9 F. Supp. 3d 34 (D. Mass. 2014) (examples where additional temporal or scope allegations can materially add to prior public disclosures)