Court Rejects Privilege Assertion in False Claims Act Whistleblower Suit

By Michael L. Murphy, Esq., Bailey & Glasser LLP, Washington, DC

When a defendant challenges the plaintiff’s allegations there are countless strategic choices to be made. One such decision is whether to simply argue that plaintiff has failed to carry its burden of proof or to affirmatively assert its conduct was not unlawful. If the defendant chooses the latter, it may be waiving its ability to assert attorney-client privilege as to “communications that relate to the legality of the transactions at issue.” Barker v. Columbus Regional Healthcare System, Inc., No. 4:12-cv-108 2014 WL 4287744, *4 (M.D. Ga. Aug. 29, 2014).

In Barker, a qui tam action, the plaintiff/relator alleged engaged in a number of transactions that violated the Anti-Kickback Statute and the Stark Law. In its defense, the court noted, that defendant “intends to offer evidence at trial that it believed its conduct was lawful.” Barker, at *2. In turn, plaintiff argued that because defendant took the position that “its conduct was lawful,” it “waived the attorney-client privilege as to any communications that relate to the legality of the transactions that Plaintiff alleges violate the False Claims Act, Anti-Kickback Statute, and Stark Law.” Id.

The court began its analysis by noting that, although important, the attorney-client privilege is “not sacrosanct.” Barker, at *1. Instead, the court found that its analysis was controlled by the Eleventh Circuit’s decision in Cox v. Administrator U.S. Steel & Carnegie, 17 F.3d 1386 (11th Cir. 1994). The court explained that “[i]n Cox, the Eleventh Circuit held that when a defendant affirmatively asserts a good faith belief that its conduct was lawful, it injects the issue of its knowledge of the law into the case and thereby waives the attorney-client privilege.” Barker, at *3 (citing Cox, 17 F.3d at 1419). In finding waiver, the court noted defendant “injected its belief as to the lawfulness of its conduct into the case and waived its attorney-client privilege as to communications relating to the legality of the transactions that form the basis of Plaintiff’s claims.” Id. The guts of the Cox opinion, as the court stated, is found in the following statement: defendant’s “defense necessarily implicates all of the information at its disposal when it made the decision to change [the policy] and later rescind that change.” Id.

The court flatly rejected defendant’s arguments that it did not “intend to raise an advice of counsel defense” or to “rely on attorney-client communications.” Barker, at *4. In doing so, the court was moved by the fact that defendant’s arguments went “beyond mere denial.” Id. Accordingly, the court held that defendant waived “the attorney-client privilege as to any communications that relate to the legality of the transactions at issue in this action.” Id.

Thus, when a defendant asserts that its conduct was not unlawful rather than arguing plaintiff has failed to meet its burden plaintiff should consider going on the offensive and arguing that defendant has waived its attorney-client privilege as to the disputed claims.

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