In a decision that could dramatically change the course of how defendants conduct discussions with the government, a district court judge in the District of Minnesota required a defendant in a False Claims Act (FCA) case to turn over to a qui tam relator the presentations the company had made to the government prior to the government’s decision to decline the matter. U.S. ex rel. Higgins v. Boston Scientific Corp., 11-cv-02453, Dkt. No. 279 (D. Minn. Aug. 28, 2019). As set forth in the Justice Manual, a defendant is eligible for cooperation credit if it discloses the relevant facts related to any alleged misconduct. Justice Manual § 9-28.720. Thus it is not uncommon for a corporate defendant to conduct an internal investigation of the alleged misconduct, and to share its findings with the government in the form of PowerPoint presentations or White Papers with an expectation that the government will consider those findings in determining whether prosecution of the company is warranted. Companies seek to ensure confidential treatment of these documents, invoking Federal Rules of Evidence (FRE) 408 and 410, requesting Freedom of Information Act confidentiality, and not providing “leave behind” copies for the government attorneys. If the logic in the Higgins decision is adopted by other courts, a defendant may need to refine how it presents its findings to convince the government to decline the case, but also to protect its position if the relator continues to pursue those declined claims.
The underlying case involved allegations from Relator Steven Higgins that Boston Scientific Corporation (BSC) caused physicians to submit false claims for reimbursement for medically unnecessary and unreasonable devices and surgeries. In discussions with the government, BSC made several presentations to respond to the allegations. The government ultimately declined to intervene, and as permitted under the FCA, the Relator proceeded with the lawsuit on the declined claims. As part of Relator’s discovery requests, he asked BSC to produce the presentations that BSC had earlier made to the government. BSC objected and the Relator filed a motion to compel.
The magistrate judge granted Relator’s motion from the bench, holding that neither the FCA nor the FRE restricted discovery of these materials. The judge also held that BSC waived any claims to work-product or attorney-client privilege by intentionally disclosing the materials to an adversary, that the work-product doctrine does not protect materials used in litigation, and that the materials were relevant. BSC objected to this ruling, triggering a review by the district court, which can only reverse a magistrate judge’s order on non-dispositive pretrial matters if it is clearly erroneous or contrary to law. Fed. R. Civ. P. 72(a). It is an “extremely deferential” standard. See Reko v. Creative Promotions, Inc., 70 F. Supp. 2d 1005, 1007 (D. Minn. 1999).
BSC put forth four arguments to protect the materials from disclosure, each of which District Court Judge Joan N. Ericksen rejected. First, BSC argued that settlement negotiations are subject to a heightened relevance standard in discovery under FRE 408. In rejecting this argument, Judge Ericksen noted that Rule 408 prohibits evidence contained in settlement negotiations from being admitted to prove a claim or impeach another party during trial. Judge Ericksen stated however, that the FRE do not apply to discovery.
Second, BSC argued that public policy requires the court to protect communications between defendants and the government in qui tam cases and that allowing disclosure of these communications would hinder the government’s ability to settle FCA cases. Judge Ericksen side-stepped BSC’s policy argument, turning instead to the language in the FCA governing Civil Investigative Demands (CIDs) (31 U.S.C. § 3733). Judge Ericksen determined that the FCA CID provisions prohibit the government from disclosing materials while in the possession of the government but do not prohibit the defendant from disclosing those materials in discovery. In making this determination, Judge Ericksen focused on 31 U.S.C. § 3733(i).
Third, BSC argued that the Eighth Circuit created an expectation of confidentiality for material provided to the government during an investigation. Specifically, BSC cited Diversified Industries, Inc., v. Meredith, 572 F.2d 596 (8th Cir. 1977) (en banc), which held that the voluntary surrender of material protected by the attorney client privilege to a government agency was a limited waiver and did not waive the privilege in future disputes. Judge Ericksen concluded that Diversified Industries did not apply because BSC asserted that the presentations were protected by the work-product doctrine, not the attorney client privilege.
Lastly, BSC argued that the presentations are protected by the work-product doctrine. Judge Ericksen agreed that the work product doctrine protects materials prepared in anticipation of litigation, but that the privilege could be waived by disclosure to an adversary such as the government. Judge Ericksen reasoned that by voluntarily disclosing the presentations to the government, BSC waived this privilege.
Although this decision is not binding on any other court, it will no doubt be used by relators in future proceedings to obtain defendants’ presentations. Judge Ericksen’s seemingly sweeping dismissal of the public policy considerations shows that companies facing an FCA investigation need to carefully draft the contents of submissions to the government understanding the risk of possible disclosure of the submission to an adversary. Should this approach gain favor in other courts, it could change the nature of FCA negotiations with the government. Certainly defendants may be less likely to provide any written materials, such as presentations, during discussions with the government. But there also may be less candor about admissions or attorney work product, for fear that these statements could be used in subsequent litigation by a relator.
We note that 31 U.S.C. § 3733(a)(1) permits the government to share certain information with a qui tam relator if the government determines it is necessary as part of an FCA investigation: “Any information obtained by the Attorney General or a designee of the Attorney General under this [CID] section may be shared with any qui tam relator if the Attorney General or designee determine it is necessary as part of any false claims act investigation.” Arguably, under this provision, the government can share with the relator any and all materials a defendant presents to the government during its investigation. We understand this is a practice that already exists among some Assistant U.S. Attorneys, particularly in those cases in which a relator is providing substantive assistance on technical issues. But a defendant could argue that the presentations made during settlement discussions are not made in response to a CID, and thus that the government cannot share this information with the relator. Or a defendant could argue that the presentations do fall within its CID response, and that while the government can share that information with the relator as part of its investigation, it is otherwise protected from disclosure. While the court addressed CIDs in the context of public policy supporting its decision, it did not address this specific provision in the CID statute.