Jan 302012

Relator’s Counsel Sanctioned For Mishandling Privileged Documents and Barred from Acting as Counsel Against Company In Future

Amy Markopoulos and Kristin Graham Koehler
,

Posted by Amy Markopoulos and Kristin Koehler

A recent ruling in the District of Arizona serves as a reminder to defense counsel that they should be sensitive to the possibility that relators are relying on stolen privileged documents to support their claims. Should a company suspect that a relator’s case is founded on privileged documents, the company should act quickly to move for return of the privileged documents. The consequences for relator or his counsel for failing to appropriately handle privileged documents can be serious.

In Frazier v. IASIS Healthcare Corporation, No. 2:05-cv-00766 (D. Ariz. 2012), IASIS Healthcare and Relator’s counsel had engaged in a 4-year battle regarding the return of certain privileged documents that Relator had stolen when he left IASIS in 2004. The relator, Jerre Frazier, had sent these privileged documents to his lawyers, who kept most of the documents in a sealed box. Despite bearing the title “Legal Memo,” relator’s counsel did not seek the court’s opinion as to whether these documents were privileged, and “appeared to play dumb” and feigned ignorance about the documents’ location when IASIS asked for their return. As a result, IASIS moved for the return of the documents and for sanctions against Relator’s counsel.

Relator’s counsel will pay IASIS $1.4 million, representing the amount of legal fees incurred by litigating this specific issue. Counsel is also barred from representing the Relator or any other plaintiff adverse to IASIS.

Serious issues can arise for counsel when relators steal documents – defense counsel needs to be prepared to file a motion should this occur, and relator’s counsel must be careful to appropriately handle privileged documents if relator turns them over.

IASIS and Frazier settled the case in November, six years after Frazier had initially brought his complaint. The government had declined to intervene in this matter.

Amy Markopoulos

AmyMarkopoulos@sidley.com

Kristin Graham Koehler

Washington, D.C.

kkoehler@sidley.com

You might also like
Conflicting Interpretations of Falsity Preclude Knowledge Under FCA, Tenth Circuit Holds

In a victory for government contractors, the U.S. Court of Appeals for the Tenth Circuit held that vendors and their suppliers cannot knowingly submit false claims under the False Claims Act where the knowing falsity is premised on lack of compliance with government regulations that are subject to differing, good-faith interpretations. The case, U.S. ex rel. Smith v. Boeing, No. 14-3247, 2016 WL3244862 (10th Cir. 2016), involved an appeal by relators, three former Boeing employees, of summary judgment for Boeing and Ducommun, Inc.

Fifth Circuit Affirms Dismissal of False Certification Claim For Failure to Plead A Specific Contract Provision or Regulation Violated

In a recent unpublished decision, the Fifth Circuit affirmed without oral argument the dismissal of an FCA implied certification claim for failure to comply with Rule 9(b).  The relators alleged that a defense contractor submitted certifications to the government falsely certifying that they “calibrated the government’s electromagnetic-energy-measuring instruments in accordance with applicable industry standards and specifications.”  The Fifth Circuit emphasized, however, that a false certification theory can succeed only “only when certification is a prerequisite to obtaining payment from the government.”  Because the relators’ complaint failed to identify any specific statute, regulation, or contract provision providing that compliance with the applicable standards, “let alone certification of compliance,” was a prerequisite to the government’s payments, the Fifth Circuit affirmed dismissal of the complaint.  A copy of the Fifth Circuit’s unpublished decision can be found here.

Fifth Circuit Passes On Opportunity To Join Seventh Circuit in Rejecting Implied False Certification Theory

Last month, the Seventh Circuit bucked the trend of several other circuits in expressly rejecting the theory of implied false certification under the FCA.  See  United States v. Sanford-Brown, Limited, No. 14-2506 (7th Cir. June 8, 2015) (opinion here).  The Fifth Circuit recently had an opportunity to decide whether to follow the Seventh Circuit’s lead.  But acknowledging that, “[f]or over a decade, this court has avoided deciding whether to recognize the implied certification theory,” the Fifth Circuit declined – again – to decide the issue.  After concluding that the relator’s allegations would fail to satisfy Rule 9(b) even if the theory was valid, the court once again declined to decide whether the theory should be recognized.  Thus, the opinion provides helpful guidance on the pleading standards applicable to implied certification claims in the Fifth Circuit – assuming the theory is viable in the first instance.