Court Opinion

ID: 3006255
Source: CourtListenerOpinion
Date Created: 2015-09-30 21:00:53.858673+00
Date Added: 2024-06-11T11:46:03.763970
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 14-2145

      UNITED STATES OF AMERICA ex rel. JEFFREY D'AGOSTINO,

                      Plaintiff, Appellant,

                  STATE OF CALIFORNIA, ET AL.,

                           Plaintiffs,

                               v.

        EV3, INC., JOHN HARDIN, MICROTHERAPEUTICS, INC.,

                         and BRETT WALL,

                     Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Richard G. Stearns, U.S. District Judge]

                             Before

                      Howard, Chief Judge,
                Selya and Lipez, Circuit Judges.

     Daniel R. Miller, with whom Susan Schneider Thomas, Berger &
Montague, P.C., Lynn Weissberg, Jonathan Shapiro, and Stern,
Shapiro, Weissberg & Garin LLP were on brief, for appellant.
     Joshua S. Levy, with whom Mitchell Stromberg, Bryan
Pennington, and Ropes & Gray LLP were on brief, for appellees ev3,
Inc. and Microtherapeutics, Inc.

 
 

     Stephen G. Huggard, with whom Elizabeth H. Kelly and Locke
Lord LLP were on brief, for appellee John Hardin.
     Martin F. Murphy, Amanda S. Hainsworth, and Foley Hoag LLP on
brief for appellee Brett Wall.

                       September 30, 2015

 
             SELYA,    Circuit         Judge.        Plaintiff-appellant   Jeffrey

D'Agostino (the relator) challenges both the dismissal of his qui

tam action and the antecedent denial of leave to further amend his

complaint.    For obvious reasons, we consider the second challenge

first.   That challenge rests in part on a novel interpretation of

the 2009 amendments to Rule 15 of the Federal Rules of Civil

Procedure.        While    we     reject      that    novel   interpretation,     we

nonetheless    conclude         that    the     district   court   appraised     the

relator's    request      for    leave     to   amend    under   the   wrong   legal

standard.     Consequently, we vacate the judgment below and remand

for further proceedings.

I.   BACKGROUND

             In October of 2010, the relator filed a qui tam action

on behalf of the United States, twenty-five states, and the

District of Columbia.           His complaint named his former employer —

ev3, Inc. — as the sole defendant and asserted a golconda of claims

under the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, and

analogous state statutes.              The gravamen of these claims was the

charge that ev3 had engaged in improper conduct in connection with

the manufacturing and marketing of two medical devices (Onyx and

Axium) and had knowingly caused health-care providers to submit

false claims to various government entities.

                                          - 3 -
           The complaint was filed under seal and service was

initially suspended.   See id. § 3730(b)(2).    In February of 2011,

the relator exercised his unilateral right to file an amended

complaint as a matter of course.       See Fed. R. Civ. P. 15(a)(1).

The relator thereafter filed second and third amended complaints

(in August 2012 and April 2013, respectively), having obtained

leave of court in each instance.        These amendments added five

defendants and reconfigured the relator's legal theories.

           The action remained under seal while the United States

looked into the relator's charges.     In October of 2013, the United

States decided not to intervene.     See 31 U.S.C. § 3730(b)(4)(B).

The court thereafter unsealed the docket and authorized service of

process.   The following May, the parties jointly moved to have the

district court set a deadline of June 30 for the filing of motions

to dismiss and July 25 for the filing of the relator's opposition.

The court obliged and, in the process, made clear that it would

grant no further extensions of these deadlines.

           The defendants timely filed their motions to dismiss.

They argued that the court lacked jurisdiction by reason of the

FCA's public disclosure bar, see id. § 3730(e)(4), and that the

third amended complaint failed either to state a cognizable claim

or to plead fraud with sufficient particularity.        About a week

later, the court entered a scheduling order pursuant to Federal

                               - 4 -
Rule of Civil Procedure 16(b), which set forth a series of temporal

benchmarks that would take effect after it decided the motions to

dismiss.     The order did not set a deadline for amendments to the

pleadings.

             Four days before his opposition to the motions to dismiss

was due, the relator filed a fourth amended complaint.                  This

edition of the complaint dropped claims against two defendants,

abandoned certain legal theories, and added factual allegations

responsive to the motions to dismiss.        Instead of requesting leave

to amend, the relator filed an accompanying motion asserting that

he had an absolute right to amend his complaint under Federal Rule

of Civil Procedure 15(a)(1) and asking the district court to set

a new briefing schedule.

             The   defendants   moved   to   strike    the   fourth   amended

complaint, arguing that the relator had already exhausted his one

amendment as of course. They added that the court should not treat

his motion as a request for leave to amend.           The court agreed that

the relator had used up his one-time right to amend as a matter of

course.    But the court construed the relator's filings liberally

as a request for leave to amend, concluded that Rule 16(b)'s "good

cause" standard governed the request, and held that the relator

had not established good cause for amending his complaint once

again.    Accordingly, it granted the motion to strike.

                                   - 5 -
           The relator subsequently filed his opposition to the

motions to dismiss,1 which included a short section conditionally

requesting leave to amend the complaint further should the court

determine that any claims were subject to dismissal.      Counsel

reiterated that request several times at the ensuing hearing on

the motions to dismiss.   The district court reserved decision and

subsequently dismissed the case with prejudice.    In its written

rescript, the court concluded that the FCA's public disclosure bar

deprived it of jurisdiction over certain allegations.   See United

States ex rel. D'Agostino v. ev3, Inc., No. 10-11822, 2014 WL

4926369, at *5-6 (D. Mass. Sept. 30, 2014).   As to the remaining

allegations, the court ruled that the third amended complaint

failed to identify any false claims with the specificity demanded

by Federal Rule of Civil Procedure 9(b) and also failed to state

a cognizable claim.   See id. at *6-9.   The court's rescript did

not address the relator's conditional request for leave to amend.

II.   ANALYSIS

           On appeal, the relator advances two basic claims of

error.    First, he contends that the district court improperly

thwarted his efforts to amend his complaint. Second, he challenges

      1
       By a separate filing, the relator voluntarily dismissed his
claims against the two defendants whom he had dropped in the
proposed fourth amended complaint.

                               - 6 -
the court's dismissal of his complaint and the subsidiary legal

determinations undergirding that dismissal.   We start — and end —

with the first claim of error.

          We review the grant or denial of leave to amend for abuse

of discretion.    See Nikitine v. Wilmington Trust Co., 715 F.3d

388, 389 (1st Cir. 2013).    In conducting this tamisage, we defer

in substantial measure to the trial court's hands-on judgment and,

thus, we will affirm "so long as the record evinces an arguably

adequate basis for the court's decision."      Hatch v. Dep't for

Children, Youth & Their Families, 274 F.3d 12, 19 (1st Cir. 2001).

This deference, though, is not boundless.   A trial court may abuse

its discretion when, among other things, it adopts and applies the

wrong legal rule.   See Waste Mgmt. Holdings, Inc. v. Mowbray, 208

F.3d 288, 295 (1st Cir. 2000).

          To put the relator's assignment of error in perspective,

we rehearse the applicable procedural framework. Requests to amend

a complaint are typically evaluated under Rule 15, which provides

that

          [a] party may amend its pleading once as a
          matter of course within:

                 (A) 21 days after serving it, or

               (B) if the pleading is one to which a
          responsive pleading is required, 21 days after
          service of a responsive pleading or 21 days
          after service of a motion under Rule 12(b),
          (e), or (f), whichever is earlier.

                                 - 7 -
Fed. R. Civ. P. 15(a)(1).             Once a party has exhausted its one-time

right    to    amend     as    a   matter    of     course,   it   may     make    further

amendments only with the opposing party's consent or with leave of

court.    See id. 15(a)(2).              The rule cautions, however, that the

court should "freely give" leave to amend where the interests of

justice so require.            Id.

               At a certain point, this amendment-friendly regime may

cease to govern.              Rule 16 directs a district court to issue a

scheduling         order      charting      the     anticipated         course    of    the

litigation.        See id. 16(b)(1).          One customary element of such an

order    is    a    deadline       for   amending      the    pleadings.          See   id.

16(b)(3)(A).        Such a deadline, like other deadlines contained in

a scheduling order, may be modified only upon a showing of "good

cause."       Id. 16(b)(4).        Thus, when a litigant seeks leave to amend

after the expiration of a deadline set in a scheduling order, Rule

16(b)'s more stringent good cause standard supplants Rule 15(a)'s

leave freely given standard.                 See, e.g., Cruz v. Bristol-Myers

Squibb Co., P.R., Inc., 699 F.3d 563, 569 (1st Cir. 2012); Trans-

Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 327 (1st

Cir. 2008).

               Against     this      backdrop,       we   turn     to    the     relator's

assignment of error.            To begin, he hypothesizes that Rule 15(a)(1)

granted him an absolute right to file the fourth amended complaint

                                            - 8 -
without first obtaining leave of court. This hypothesis is nothing

more than wishful thinking.

             Rule 15(a)(1) explicitly states that a party is entitled

to amend "once as a matter of course."               Fed. R. Civ. P. 15(a)(1)

(emphasis supplied); see United States ex rel. Poteet v. Bahler

Med., Inc., 619 F.3d 104, 116 (1st Cir. 2010).                The relator took

advantage of this one-time opportunity in February of 2011 when he

filed his first amended complaint.             Absent the defendants' consent

— never obtained here — the relator was therefore obligated to

secure     leave   of   court   before      any   further   amendments    to    his

complaint could be effected.

             The relator demurs.         He reasons that, pursuant to the

2009 revisions to Rule 15, amendment as a matter of course may be

made "within . . . 21 days after service of" a defendant's answer

or   responsive     motion,     Fed.   R.    Civ.   P.   15(a)(1)(B),    so    such

amendments may be made whenever such an action has occurred. Under

this construction, his right to amend as a matter of course renewed

each time the defendants filed a responsive pleading (either an

answer or a responsive motion) to a particular version of the

complaint.2

       2
       At oral argument, the relator's counsel disclaimed any
reliance on a theory that service of the complaint is required to

                                       - 9 -
           This tortured interpretation of Rule 15 not only defies

common sense but also runs contrary to the historic structure of

Rule 15 and to the stated purpose of the 2009 amendments to the

Rule.   Prior to those amendments, Rule 15(a)(1) stated:

           A party may amend its pleading once as a matter
           of course:

           (A) before being served with a responsive
           pleading; or

           (B) within 20 days after serving the pleading
           if a responsive pleading is not allowed and
           the action is not yet on the trial calendar.

Fed. R. Civ. P. 15(a)(1) (2009).    This language made plain that a

plaintiff is allowed to amend as a matter of course at any time

between filing his complaint and receiving the defendant's answer.

But the 2009 revisions did not purpose to alter the time at which

a plaintiff can first amend as a matter of course.   The absence of

such a change is understandable: those revisions were intended

primarily to remedy inefficiencies created by granting plaintiffs

the unconditional right to amend as a matter of course at any time

before an answer was filed (regardless of how much litigation and

discovery activity had occurred in the interim).      See 6 Charles

Alan Wright et al., Federal Practice and Procedure, § 1483 (3d ed.

trigger the right to amend as of course under Rule 15(a)(1)(A).
Accordingly, we take no view on that theory.

                               - 10 -
2010).   To that end, the drafters made "three changes in the time

allowed to make one amendment as a matter of course."      Fed. R.

Civ. P. 15 advisory committee's note to 2009 amendment.

             Two of these changes are arguably relevant here.3   The

Rule was revised so that "the right to amend once as a matter of

course [now] terminates 21 days after service of a motion under

Rule 12(b)" and "is no longer terminated by service of a responsive

pleading."     Id.   The advisory committee's focus on the time at

which the right to amend terminates and its concomitant silence

concerning changes to when such an amendment may first be made

makes abundantly clear that, in this context, the word "within"

merely specifies the point at which the right expires.

             Nothing else in either the text of Rule 15 or in the

advisory committee's notes evinces an intent to confine amendments

as a matter of course under Rule 15(a)(1)(B) to a narrow window

following service of an answer or responsive motion.   Nor do these

materials evince any intent to rescind the historic limitation of

amendment as a matter of course to one such amendment per plaintiff

per case.     The Rule's traditional restriction of amendments as a

     3 The third change addressed the amendment of pleadings to
which no responsive pleading is required. That provision is not
implicated here.

                                - 11 -
matter of course to one per plaintiff per case was not modified.

Had the drafters intended so dramatic a change in long-settled

procedure, they surely would have chosen language indicating as

much and explained this change in the commentary.    Here, however,

the advisory committee's notes imply the contrary; they discuss

changes only to the time at which the right to amend as a matter

of course terminates.

          To say more on this point would be supererogatory.     We

hold, without serious question, that a plaintiff may amend a

complaint only once as a matter of course under Rule 15(a)(1).   It

follows that the district court did not err in concluding that the

relator exhausted his one-time right to amend as a matter of course

when he filed his first amended complaint in February of 2011.

          This brings us to the relator's claim that even if he

did not have an unfettered right to amend his complaint in July of

2014, the district court abused its discretion by appraising the

proposed amendment under the wrong legal standard.       While the

district court might have struck the fourth amended complaint on

the ground that the relator filed it without requesting leave to

amend, that is not what happened.      Instead, the court construed

the relator's filing as an implicit request for leave to amend.

We defer to this reasonable construction of the relator's filing.

Cf. Invest Almaz v. Temple-Inland Forest Prods. Corp., 243 F.3d

                              - 12 -
57,   71   (1st   Cir.   2001)   (construing   new   argument   raised   in

opposition to motion for judgment as a matter of law as a request

for leave to amend).

            Having decided that the question of leave to amend was

properly before it, the court proceeded to answer that question by

applying Rule 16(b)'s good cause standard.           In the circumstances

of this case, that was error.       Cf. Somascan, Inc. v. Philips Med.

Sys. Nederland, B.V., 714 F.3d 62, 64 (1st Cir. 2013) (per curiam)

(holding that the good cause standard, rather than the leave freely

given standard, applies when a scheduling order sets a deadline

for amending the pleadings).

            As we previously explained, requests for leave to amend

are normally evaluated under Rule 15(a)'s leave freely given

standard.    When made in derogation of a scheduling order, however,

Rule 16(b)'s more stringent good cause standard takes precedence.

See id.     But in this case the district court's scheduling order

did not specify any deadline for amending the pleadings and, thus,

the gears of Rule 16(b) were not engaged.

            Notwithstanding this omission in the scheduling order,

the court applied Rule 16(b).        It reasoned that use of the good

cause standard was an appropriate way to sanction the relator for

requesting leave to amend within a matter of days before his

                                   - 13 -
opposition to the dismissal motions was due.            This reasoning is

unpersuasive.

             When a litigant seeks leave to amend in defiance of a

deadline delineated in a scheduling order, the rationale for

applying an elevated good cause standard is both obvious and

pragmatic.      Were a district court powerless to enforce such

deadlines,     scheduling      orders   would   be    little   more   than

aspirational statements, to be disregarded by the parties whenever

compliance proves inconvenient.         See O'Connell v. Hyatt Hotels of

P.R., 357 F.3d 152, 155 (1st Cir. 2004).         Properly deployed, the

elevated good cause standard puts teeth into Rule 16(b) scheduling

orders and "preserves the integrity and effectiveness of [such]

scheduling orders."      Id.     In other words, the specter of Rule

16(b)'s less amendment-friendly standard acts as one of the sticks

through which compliance with a scheduling order is enforced.

             Deployment of the good cause standard was not warranted

here. Since the scheduling order in this case did not even mention

amendments to the pleadings, let alone impose any deadlines for

the filing of amended pleadings, moving to amend did not show any

disrespect for court orders.        Moreover, the relator had neither

notice that an elevated standard would be applied to his motion

nor any reason to expect that it would.              Basic notions of due

process counsel that litigants are entitled to rely on established

                                   - 14 -
procedural rules — and those rules cannot be altered at a court's

whim.    Cf. Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994)

("Elementary considerations of fairness dictate that individuals

should have an opportunity to know what the law is and to conform

their conduct accordingly; settled expectations should not be

lightly disrupted.").

           The fact that the relator sought to amend only a few

days before his opposition to the dismissal motions was due does

not justify a different result.         At any rate, Rule 15(a)'s leave

freely given standard typically applies even where a party requests

leave to amend after a motion to dismiss has been fully briefed.

See, e.g., Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir.

2006).   If the court concluded that the relator was attempting to

torpedo its briefing schedule, that conclusion could be a proper

factor in its Rule 15(a)(2) calculus, see Quaker State Oil Ref.

Corp. v. Garrity Oil Co., 884 F.2d 1510, 1517-18 (1st Cir. 1989),

but it could not be a permissible ground for employing a more

stringent standard.

           The   defendants   contend    that   the   court's   failure   to

specify a deadline for amending the pleadings is irrelevant because

the court must have thought — based on the travel of the case —

that there would be no further amendments to the complaint when it

issued its scheduling order.     But nothing of this sort is apparent

                                 - 15 -
from the record, and the relator could not be expected to divine

from the district court's silence that future amendments were

either off limits or would be subjected to a more stringent

standard of review.   See Weisburgh v. Fidelity Magellan Fund (In

re Fidelity/Micron Sec. Litig.), 167 F.3d 735, 737 n.1 (1st Cir.

1999).    We hold, therefore, that the district court erred in

applying Rule 16(b)'s good cause standard to the relator's proposed

fourth amended complaint.

           The matter of remedy remains.   Ordinarily, a district

court's application of an erroneous legal standard is a per se

abuse of discretion, which necessitates remand.    See In re Grand

Jury Subpoena, 138 F.3d 442, 444, 445-46 (1st Cir. 1998).    There

is, however, a narrow exception for instances in which application

of the correct legal standard can lead to only one result.     See

id. at 446.   Where uncertainty lurks, remand is the appropriate

course.   See United States ex rel. Rost v. Pfizer, Inc., 507 F.3d

720, 733-34 (1st Cir. 2007).

           We cannot say with certainty that the district court

would not have allowed the fourth amended complaint if it had

applied the appropriate legal standard.     Rules 15(a) and 16(b)

engender different inquiries.    See O'Connell, 357 F.3d at 155.

Here, the district court made no findings sufficient to permit us

                               - 16 -
to predict confidently how it would have ruled under the Rule 15(a)

standard.4

             Let us be perfectly clear.   We do not suggest that the

district court will be compelled to grant the motion to amend on

remand.   After all, there are myriad reasons that might justify

the denial of a motion for leave to amend, including undue delay,

repeated failure to cure deficiencies, or futility.     See Foman v.

Davis, 371 U.S. 178, 182 (1962).    "The number and nature of prior

amendments to a complaint" are also relevant considerations.     ACA

Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 56 (1st Cir. 2008).

The rub, however, is that the district court did not address these

factors in any meaningful way, and none of them appears to mandate

the denial of leave to amend.    In the last analysis, the matter is

one committed to the sound discretion of the district court, and

the relator is entitled to have the district court exercise that

discretion under the proper legal standard.

     4 To be sure, the district court's order denying leave to
amend alludes conclusorily to prejudice to the defendants.
However, that order provides no detail; and the possibility that
the defendants will be seriously prejudiced by allowing amendment
at this relatively early stage of the litigation seems sufficiently
remote to warrant remanding the matter to the district court for
further consideration.

                                - 17 -
III.       CONCLUSION

               We need go no further. 5   For the reasons elucidated

above, the judgment below is vacated and the case is remanded for

further proceedings consistent with this opinion.        All parties

shall bear their own costs.

Vacated and remanded.

       5
       Because we are uncertain of what result the district court
will reach when it applies the correct legal standard to the
relator's request to file the fourth amended complaint, we take no
view of the substantive issues briefed by the parties. There is
simply too great a risk that any decision concerning those issues
will turn out to be purely advisory. See United States v. Tyerman,
641 F.3d 936, 936 n.2 (8th Cir. 2011) (declining to address
additional issues raised on appeal where it was "unknown if and
how th[e] case w[ould] proceed on remand").

                                 - 18 -