The Downside of the Advice-of-Counsel Defense

Intent is a necessary element of a False Claims Act (FCA) violation.  If a defendant reasonably relied on advice of counsel in performing the actions at issue, the intent element is absent.  That’s the upside of the advice-of-counsel defense.  But there’s a downside, and a recent federal decision in a major FCA case demonstrates that the downside may be deeper and steeper than one might think.

The government accused the defendants of three Medicare kickback schemes costing the government some $330 million.  The defendants asserted an advice-of-counsel defense based on advice “including, but not limited to,” opinions or advice by (1) one named attorney on two specific dates, (2) another named attorney on one specific date, and (3) a third named attorney regarding certain contracts.

In discovery, the government sought all information relating to advice and counsel solicited or received regarding the schemes at issue (but not information from defendants’ current trial counsel).  That would cover advice and counsel from 2007 through January 2015, including an OIG investigation that began in 2012.  It would also cover all such information in the custody of four different law firms.  Defendants insisted that they had not given a waiver (1) for anything after 2012, when they began the conduct in question, or (2) litigation-related documents and communications with the counsel who advised them during the OIG investigation.

On April 5 the court issued its opinion, siding squarely with the government.  The court ruled that defendants had waived both the attorney-client privilege and work product protection for all information from 2008 through July 2014 concerning one scheme and from 2008 through January 2015 concerning a second, including the OIG investigation.  What’s more, the waiver extended to “uncommunicated work product”—information in the hands of counsel.

 

The case is United States ex rel. Lutz v. Berkeley HeartLab, No. 9:14-cv-00230-RMGNo. 9:11-cv-1593-RMGNo. 9:15-cv-2458-RMG (D.S.C., Apr. 5, 2017).

 

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