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

Background

Cardiovascular Systems, Inc. (CSI) alleged that Cardio Flow, Inc. breached a settlement agreement originally made between CSI and Lela Nadirashvili in 2012. According to CSI, the agreement gave CSI an exclusive right to practice rotational atherectomy devices using “solid counterweights,” while Nadirashvili received a portfolio of patents. CSI alleged that Nadirashvili later assigned her contract rights and patent rights to Cardio Flow, and that Cardio Flow was developing a device using solid counterweights.

Cardio Flow disputed that it was bound by the settlement agreement because it was not an original party to the contract. It also disputed CSI’s interpretation of the agreement.

Motion to Amend

CSI sought to add an alternative claim for tortious interference with contract. CSI argued that Cardio Flow knew about the settlement agreement and intentionally induced Nadirashvili to transfer her rights without agreeing to the restrictions that CSI claimed applied to those rights. CSI said it first learned the necessary facts during a deposition of Cardio Flow founder and chairman Gary Petrucci in December 2019.

The motion was filed after the scheduling-order deadline for amending pleadings and after fact discovery had ended. Because the motion was late, the court applied Federal Rule of Civil Procedure 16(b)(4), which requires “good cause” to change a scheduling order. The court explained that the main measure of good cause is the moving party’s diligence.

Court’s Analysis

The court found that CSI had not shown sufficient diligence. It rejected CSI’s argument that Cardio Flow’s allegedly delayed document production prevented earlier discovery of the proposed claim. CSI could have used other discovery methods, including written questions, requests for admissions, or depositions of other witnesses, to investigate Cardio Flow’s knowledge of the settlement agreement.

The court also found that CSI had information before the amendment deadline that should have prompted further investigation. Cardio Flow had stated that it was not bound by the settlement agreement, and it had produced an assignment agreement that expressly referred to the settlement agreement. Other documents showed that Petrucci had been involved with Cardio Flow and Nadirashvili and had been named in the settlement agreement. The court concluded that CSI could have investigated or asserted a tortious-interference theory earlier, sought an extension of the deadline, or pursued additional discovery before the deadline.

The court further stated that the facts revealed in Petrucci’s deposition were less significant than CSI claimed and did not constitute the decisive evidence CSI described.

Disposition

The court held that CSI failed to demonstrate diligence and therefore failed to show good cause for amending its complaint months after the deadline. It ordered that CSI’s Motion to Amend the Pleadings be DENIED.

Cardio Flow also argued that the proposed amendment would be futile because of the statute of limitations. The court did not decide that issue, explaining that it had already denied the motion for lack of diligence and that deciding futility would require weighing factual assertions not appropriate at that stage.