Cardiovascular Systems, Inc. v. Cardio Flow, Inc.

Background

Cardiovascular Systems, Inc. (CSI) sued Cardio Flow, Inc. in Minnesota state court for breach of a 2012 Settlement Agreement. The agreement followed earlier litigation concerning ownership of certain inventions. Under the agreement, CSI received rights relating to devices or methods using solid counterweights, while the other side received analogous rights relating to fluid inflatable counterweights. The agreement also stated that an assignee would be bound as though it were an original party.

The earlier federal court dismissal order expressly stated that the United States District Court for the District of Minnesota would retain jurisdiction over the Settlement Agreement. After the agreement was made, the rights, duties, obligations, and responsibilities relating to it were assigned to Cardio Flow. CSI later alleged that Cardio Flow was developing an atherectomy device called FreedomFlow that used solid counterweights in violation of the agreement. CSI sought a permanent injunction and sued in state court. Cardio Flow removed the case to federal court.

Arguments about Remand

CSI moved to remand, meaning to send the case back to state court. CSI argued that its complaint was a straightforward contract claim and did not arise under federal patent law. CSI also argued that the federal court could not exercise ancillary jurisdiction over Cardio Flow because Cardio Flow had not been a party to the earlier lawsuit.

Cardio Flow argued that the case was effectively a patent-infringement dispute and that the court had jurisdiction under federal-question and patent jurisdiction statutes. It also argued that the court had ancillary jurisdiction because the current dispute arose from the Settlement Agreement and the earlier dismissal order expressly retained jurisdiction over that agreement.

Court’s Analysis

The court held that ancillary jurisdiction existed. Ancillary jurisdiction is a federal court’s authority to decide a matter connected to another matter properly before it. Under the authorities discussed by the court, a federal court may exercise this jurisdiction over an alleged breach of a settlement agreement when the obligation to comply with the agreement is made part of the dismissal order, including through an express provision retaining jurisdiction.

The court found that those requirements were met. The dismissal order expressly retained jurisdiction over the Settlement Agreement, and Cardio Flow became bound by the agreement through an assignment from an original party. The court concluded that Cardio Flow was not a new defendant outside the settlement arrangement; as an assignee, it had the same relevant legal rights as the assignor. The court therefore held that Cardio Flow could ask the federal court to resolve disputes arising from the agreement.

Because ancillary jurisdiction was sufficient, the court did not decide whether the complaint independently presented a federal patent-law question under 28 U.S.C. § 1331.

Disposition

Judge Susan Richard Nelson ordered that CSI’s Motion to Remand was DENIED. The ruling kept the action in federal court but did not decide whether Cardio Flow breached the Settlement Agreement or whether the dispute constituted patent infringement.