Higgins v. Boston Scientific Corporation

Background

Steven Higgins brought this action for the United States and California under the federal False Claims Act and the California False Claims Act. He alleged that Boston Scientific obtained regulatory approval for, and sold, defective Cognis and Teligen cardiac defibrillator devices. The federal government and California declined to intervene, and Higgins was permitted to continue the action on their behalf.

The court had previously allowed Higgins to proceed after he corrected pleading deficiencies. His Second Amended Complaint alleged that Boston Scientific misled the Food and Drug Administration during the approval process and that the resulting claims submitted to Medicare and Medicaid were false. The scheduling order set July 31, 2018, as the deadline for motions to amend. On that date, Higgins moved for permission to file a Third Amended Complaint adding a claim under California’s Insurance Frauds Prevention Act, or CIFPA. The proposed claim concerned allegedly false claims submitted to private insurance companies in California.

Boston Scientific opposed the motion. It argued that the proposed claim was futile because Higgins had not filed it under seal as CIFPA requires, the claim was barred by time limits, it did not relate back to the earlier complaints, and it did not satisfy Rule 9(b)’s requirement that fraud be pleaded with particularity. Boston Scientific also argued that the amendment would cause undue prejudice. At the hearing, Boston Scientific additionally argued that the court lacked jurisdiction over the proposed CIFPA claim.

Legal standard

Federal Rule of Civil Procedure 15(a) generally directs courts to freely allow amendments before trial when justice requires. Courts may deny leave because of undue delay, bad faith, repeated failure to correct deficiencies, undue prejudice, or futility. An amendment is futile if the proposed complaint could not survive a motion to dismiss for failure to state a claim.

CIFPA filing requirement

CIFPA requires a private complaint to be filed privately with the court, kept under seal for at least 60 days, and not served on the defendant until the court orders service. The court held that this requirement did not make Higgins’s proposed amendment futile because he had not yet filed the Third Amended Complaint. He was seeking permission to file it, and under the local rules he would file and serve it only if the motion were granted.

The court also compared CIFPA’s filing procedure with the similar procedure under the California False Claims Act. It noted that California had not strictly followed its own notice requirement when it declined to intervene in the existing case. The court therefore declined to enforce strict compliance against Higgins on Boston Scientific’s behalf and concluded that the public filing of the motion and attached proposed complaint did not make the amendment futile.

Time limits and relation back

CIFPA includes a three-year period running from discovery of the facts supporting the action and an eight-year outer limit running from the violation. The court did not decide Boston Scientific’s time-limit arguments because it concluded that the proposed CIFPA claim related back to Higgins’s earlier complaints under Rule 15(c).

A claim relates back when it arises from the conduct, transaction, or occurrence described in the original pleading. The court found a common core of operative facts: Higgins’s existing and proposed claims all centered on the allegation that Boston Scientific misled the Food and Drug Administration in bringing defective defibrillators to market. The difference between public and private insurance payments concerned the final payment step, not the alleged underlying scheme. The court therefore concluded that the CIFPA claim related back to the earlier timely pleadings.

Fraud pleading requirements

Rule 9(b) requires a party alleging fraud to identify the circumstances of the alleged fraud with particularity, including generally the who, what, where, when, and how. The court had already determined that Higgins’s Second Amended Complaint adequately pleaded the alleged fraud concerning the Food and Drug Administration. Because the proposed CIFPA claim relied on the same underlying allegations and did not change the facts concerning the approval process, the court concluded that the proposed claim also met Rule 9(b)’s particularity requirement.

Supplemental jurisdiction

The court recognized that Higgins’s proposed CIFPA claim sought money paid by private insurance companies, not by a state or local government. The federal False Claims Act’s specific jurisdictional provisions therefore did not cover that claim. The court considered supplemental jurisdiction, which allows a federal court to hear a related state-law claim that shares a common factual basis with a claim properly in federal court.

The court concluded that the CIFPA claim shared the same core facts as the federal and California false-claims claims. It rejected the argument that the possibility of declining supplemental jurisdiction alone made the proposed amendment futile. The court stated, however, that the factors governing whether to decline supplemental jurisdiction were relevant to the prejudice analysis.

Prejudice and ruling

The court found undue delay. Higgins offered no explanation for waiting until the final day of the amendment deadline or for failing to include the CIFPA claim in his first three complaints. The court found that the delay would burden Boston Scientific by requiring California to receive a new opportunity to consider intervention and by expanding discovery after the parties had negotiated a schedule focused on the existing claims.

The court also found that CIFPA required proof that Boston Scientific intended to defraud, an element the court said was not required for Higgins’s federal False Claims Act claim. In the court’s view, that additional issue would make the CIFPA claim dominate the litigation, transforming the case from a false-claims action concerning public health programs into a private-insurance fraud action. The court concluded that this shift, combined with the late amendment and anticipated discovery, would unduly prejudice Boston Scientific.

The court held that the proposed CIFPA claim was not futile, but that justice did not require allowing the amendment. It denied Higgins’s Motion for Leave to File Third Amended Complaint. The order did not state that the motion was denied with or without prejudice.