In United States ex rel. Lutz v. Berkeley Heartlab, Inc., et al., 2017 WL 51691 (D.S.C. Apr. 5, 2017), the United States District Court for the District of South Carolina confirmed that the advice-of-counsel defense cannot be used as a sword and shield. In this action arising under the False Claims Act, the United States alleges that laboratories (HDL and Singulex) and their marketing agents (BlueWave and its principles) violated and conspired to violate the FCA in multiple ways, including (1) offering physicians kickbacks in the form of sham processing and handling fees to order expensive tests for federal healthcare beneficiaries from the labs, and (2) waiving co-pays for federal healthcare beneficiaries.
In their amended answer to the government’s complaint, the BlueWave defendants asserted as an affirmative defense their good-faith reliance on the advice of counsel. The government sought discovery related to the legal advice and opinions rendered by the attorneys in question. The BlueWave defendants declined to produce the requested documents, citing attorney-client privilege and work product protection, and the government moved to compel.
Earlier this month, the Court ruled in the government’s favor. It held that the BlueWave defendants had waived the attorney-client privilege as to the entire subject matter of the advice of counsel received by asserting it as an affirmative defense in its answer.
For the same reason, it held that the BlueWave defendants had held the work product protection. Moreover, the Court extended the waiver to attorney work product that was never communicated to the BlueWave defendants. In applying the waiver broadly to “uncommunicated work product,” as well as work product disclosed to the BlueWave defendants, the Court cited the government’s need to obtain discovery into the research conducted and considered by counsel, as well as whether any aspects of the advice was selectively ignored.
As such, the BlueWave defendants will have to produce all documents in their possession, custody, and control – including all relevant documents in the possession of their former attorneys – regarding their advice-of-counsel defense.