20 March 2012

Dismissal and Sanctions Sought for Obtaining Protected Documents from Adversary’s Former Employees

Posted by Jaime L.M. Jones and Brad Robertson

Echoing a fact pattern often found in False Claims Act matters (see related post here), a recent motion filed in an unfair competition suit pending in the Southern District of Florida seeks sanctions for the inappropriate collection and use of confidential information from the opposing party’s former employees. In Millennium Laboratories, Inc. v. Aegis Sciences Corporation, consolidated cases No. 11-cv-20451 and 11-cv-22815, Millennium Laboratories claims that counsel for Aegis Sciences Corporation initiated numerous inappropriate ex parte communications with two of Millennium’s former employees and collected over 5,000 pages of Millennium’s documents—many of which were clearly marked as containing proprietary, confidential and/or attorney-client privileged information—and used the documents as the foundation of a counterclaim against Millennium. The motion further alleges that the former employees’ non-disclosure and confidentiality agreements with Millennium protected these materials and that documents in the production put counsel for Aegis on notice of the agreements. When faced with responding to discovery requests asking for the basis of its counterclaims, the motion asserts that counsel for Aegis allegedly attempted to cover up the circumstances of its receipt of these documents by returning them to the former employees and re-collecting them via a “friendly” third party subpoena before serving its responses.

Millennium seeks dismissal of the defendant’s counterclaims, monetary sanctions, and disqualification of counsel based on Federal Rule of Civil Procedure 37 and violation of the Florida Rules of Professional Conduct. While Aegis will almost certainly oppose the motion, it serves as another reminder that relators (and their counsel) may face significant legal risk when they rely on improperly obtained or retained internal company documents to bring an FCA claim.

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