United States ex rel. Hagerty v. Cyberonics, Inc.
146 F. Supp. 3d 337
D. Mass.2015Background
- Relator Andrew Hagerty, a former Cyberonics employee, filed a qui tam False Claims Act (FCA) action alleging improper promotion of unnecessary VNS device replacements; the government declined intervention and the suit was unsealed.
- Hagerty submitted an Employment Application and signed an Offer Letter in April 2010; both contained broad arbitration clauses covering disputes "arising out of or relating to" employment, termination, or the employment relationship.
- Hagerty previously filed a separate wrongful-termination suit in 2012, voluntarily dismissed it, then filed the FCA qui tam suit in Feb. 2013 and amended in May 2014.
- The court dismissed 30 of 33 counts on a motion to dismiss (Mar. 31, 2015), leaving only two retaliation/ wrongful-termination counts: federal FCA retaliation (31 U.S.C. § 3730(h)) and Massachusetts FCA/public-policy termination.
- Hagerty moved for leave to file a second amended complaint (Aug. 14, 2015); Cyberonics moved to compel arbitration as to the remaining counts and to dismiss. The court denied leave to amend (due to undue delay) and granted Cyberonics’ motion to compel arbitration, staying the case pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to file second amended complaint should be allowed | Hagerty: amendments cure pleading defects identified by court; delay reflected careful investigation | Cyberonics: amendment is futile and unduly delayed, prejudicing defendant | Denied — motion to amend denied for undue delay (futility not reached) |
| Whether a valid arbitration agreement exists | Hagerty: disputes about statutory claims should not be compelled absent clear waiver of statutory remedies | Cyberonics: Employment Application and Offer Letter (signed by Hagerty) created a valid arbitration agreement with consideration (employment) | Granted — valid arbitration agreement existed (objective consent, consideration) |
| Whether FCA retaliation and state wrongful-termination claims fall within arbitration scope | Hagerty: statutory anti‑retaliation claims implicate public policy and (per Warfield) require "clear and unmistakable" language to be arbitrable | Cyberonics: clauses broadly cover disputes "arising out of or relating to" employment/termination; federal presumption of arbitrability applies | Granted — claims are within the broad arbitration clauses and are arbitrable; Warfield’s state‑law rule rejected as controlling on scope under federal law |
| Whether Cyberonics waived right to arbitrate by litigating motions to dismiss | Hagerty: Cyberonics litigated extensively and delayed invoking arbitration, thus waived it | Cyberonics: litigation targeted non-arbitrable claims and it timely sought arbitration after dismissal of non-arbitrable claims | Denied — no waiver; delay was not unreasonable and plaintiff showed little prejudice |
Key Cases Cited
- Foman v. Davis, 371 U.S. 178 (1962) (factors for denying leave to amend pleadings)
- In re Lombardo, 755 F.3d 1 (1st Cir. 2014) (undue delay can alone justify denial of amendment)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (apply state contract law to determine existence of arbitration agreement)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (liberal federal policy favoring arbitration; enforce arbitration agreements)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) (presumption of arbitrability; doubts resolved in favor of arbitration)
- United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370 (4th Cir. 2008) (FCA retaliation claims related to employment are arbitrable under broad arbitration clauses)
- Warfield v. Beth Israel Deaconess Medical Ctr., 454 Mass. 390 (2009) (Mass. SJC held statutory discrimination claims not arbitrable absent "clear and unmistakable" waiver — discussed and distinguished by court)