UPDATED: When Does The Government Have To Preserve Documents In An FCA Case?

Anyone who has defended a False Claims Act case knows the importance of taking appropriate steps to ensure that relevant documents are preserved when litigation becomes reasonably foreseeable. A recent federal court decision emphasized that the United States has real preservation obligations of its own, rejecting the government’s position that litigation of a False Claims Act case is not reasonably foreseeable even after the filing of a qui tam complaint.

The relator had filed his complaint in 2005. In early 2006, the United States issued a subpoena to the defendants in which it instructed them to preserve documents. The investigation continued over several years, and the parties engaged in settlement discussions through September 2008. In February 2009, the United States filed a Notice of Intervention. The United States did not issue any litigation hold to any relevant federal agencies until after it intervened.

The opinion is worth reading in its entirety, but we note here that one of the more unusual arguments the United States made is that it does not have a duty to take steps to preserve documents relevant to any of the thousands of cases filed in the name, and on behalf, of the United States, unless and until the United States intervenes in the case. DOJ argued that the filing of a qui tam does not make litigation “reasonably foreseeable” – the typically standard for determining when preservation efforts must begin – because “the filing of a qui tam matter does not necessarily result in litigation against the named defendants. In fact, only a small percentage of the filed qui tam matters result in litigation.” This argument is odd, to say the least. The filing of a False Claims Act complaint does not just make litigation “reasonably foreseeable” – it signals actual litigation, at least as to the United States and the relator. (The same cannot be said of the defendant, given that the complaint is filed under seal). Moreover, the government cites no support for the claim that “only a small percentage of the filed qui tam matters result in litigation,” even accepting the implicit and highly questionable claim that the filing of a complaint against a defendant does not by itself qualify as “litigation.”

The court rejected the government’s argument that the United States had no duty to preserve documents prior to the date of intervention. It dismissed out of hand the Government’s claim “that it did not and could not have reasonably anticipated litigation and therefore had no duty to issue a litigation hold until the very day it received permission from the DOJ to proceed with intervention and filed its Notice of Intervention on February 20, 2009.” At a bare minimum, the court noted that the latest that litigation was reasonably foreseeable was when authority to intervene was requested. But on the facts before it, the court held that litigation was reasonably foreseeable no later than when the Defendants rejected the Government’s settlement offer in September 2008. It so holding, the court rejected the Government’s argument “that because there was continuing dialogue with the Defendants [regarding settlement] there was no duty to preserve documents or issue a litigation hold until the Notice of Intervention was actually filed,” stating that the Government’s position “is contrary to law and would in effect do away with the duty to preserve documents and issue a litigation hold pre-litigation, let alone when litigation can be ‘reasonably anticipated’ or is ‘imminent.'” Concluding that the government’s litigation hold notices were untimely, the government failed to take reasonable steps to ensure that even the untimely notices were complied with, and relevant documents likely had been destroyed, the magistrate judge found a waiver of privilege with respect to various categories of documents and awarded the defendants their attorneys’ fees.

The opinion does not directly address the issue of the government’s preservation obligations in that vast majority of qui tam cases in which it does not intervene. But the logical extension of the government’s argument that it has no obligation to preserve documents in cases in which it is a party until it decides to intervene is that the government has no obligation to preserve documents at all in the vast majority of cases in which the government does not intervene. But clearly that cannot be the case; such a position would give the government free rein to intentionally destroy evidence detrimental to relators’ claims and/or helpful to defendants, which would raise obvious due process concerns. For now, this recent decision stands as a reminder that if the government decides not to take reasonable measures to preserve documents while it decides whether to intervene, it will not be relieved of the consequences of its decision based on the argument that it had no preservation obligations prior to intervention.

UPDATE: On October 3, the district judge overruled all of the Government’s objections to the magistrate judge’s rulings and affirmed the magistrate judge’s finding of spoliation and the sanctions that the magistrate judge imposed. A copy of the district court’s order can be found here.