Words can come back to haunt you: Boilerplate pleading could lead to inadvertent waiver of attorney-client privilege
Attorneys often view drafting answers as a mechanical process in which they may throw any and all possible affirmative defenses. Given some recent case law, parties defending a False Claims Act case should be more cautious with an eye toward potential consequences. In August 2014, defendant Columbus Regional Healthcare System, Inc. (“Columbus Regional”) was likely blindsided when a federal district court ordered the company to produce certain confidential communications with its attorneys. The court justified its decision by finding that Columbus Regional waived its attorney-client privilege when it included in its pleading a statement that it had complied with all laws in good faith in an attempt to defeat the mens rea requirement of the asserted claims. The court’s
decision in this regard exemplifies the potential fragility of the attorney-client privilege and serves as a stark reminder that pleadings can cause unexpected consequences.
In U.S. ex rel. Barker v. Columbus Regional Healthcare System, Inc., a relator alleged that Columbus Regional violated the False Claims Act, the Anti-Kickback Statute, and the Stark Law through various billing and remuneration practices and a transaction in which the defendant bought real estate from a source of patient referrals for more than fair market value. Because the False Claims Act only attaches liability to defendants who knowingly submit false claims with an intent to violate the law, Columbus Regional pleaded as an affirmative defense that it did not knowingly violate the law. In support of this affirmative defense, Columbus Regional planned to offer evidence regarding the extent of its knowledge. The relator responded by moving to compel communications between Columbus Regional and its attorneys to show exactly what the company knew when it entered into the transactions.
Reciting that the attorney-client privilege is a “shield and not a sword,” the court granted the relator’s motion to compel. Although the court acknowledged the privilege’s esteemed place in American law and its purpose of encouraging communication between clients and lawyers, it also stressed that the privilege is waivable. Columbus Regional erred in simultaneously offering to show that it lacked a culpable state of mind while arguing that documents that might show its state of mind were privileged. The defendant, the court said, could not have it both ways: by “injecting its belief as to the lawfulness of its conduct into the case,” Columbus Regional waived the privilege as to communications involving the lawfulness of its conduct.
The court emphasized that the Eleventh Circuit Court of Appeals issued binding precedent in a similar case (Cox v. Adm’r U.S. Steel & Carnegie), and as a result quickly rejected several of Columbus Regional’s defenses to waiver – including a contention that no waiver occurred because Columbus Regional had not advanced an advice of counsel defense. The court did, however, comment on two “arguably unique” defenses. Columbus Regional first argued that it “merely denied” an essential element of the relator’s claim (knowledge) and, as such, no waiver occurred. Although the court agreed that some dicta in appellate case law supported this idea, the court distinguished denying the elements of a claim from affirmatively intending to explain a state of mind. Columbus Regional, the court said, chose the latter approach – an assertion that went “beyond mere denial.” The court also rejected an argument that an exception to the waiver should be recognized in the healthcare industry due to its status as a heavily regulated field and corresponding need for robust attorneyclient communications. The court conceded that this argument had some appeal, but it explained that carving out such an exception was the appellate court’s decision to make.
The lessons from Barker and Cox merit serious reflection when strategizing about pleadings. While industry members should continue to communicate freely with counsel, they should also think strategically when pleading affirmative defenses. In considering whether to plead good faith compliance or another defense that negates a statute’s mens rea requirement, for example, industry members should consider the possibility that a court may order disclosure of certain attorney-client communications if those communications might inform the factfinder about the defendant’s state of mind during the relevant time period. Additionally, although answers that incorporate a boilerplate list of affirmative defenses can be considered a conservative tactic – plead them or lose them,
so the theory goes – such an approach could have negative consequences. Instead, industry members should formulate a defense strategy early in litigation, and recognize that pleading some defenses might close certain doors. The attorney-client privilege is a valuable tool and a safe refuge from invasive discovery practices, but it is not impenetrable. Industry members should be mindful of the privilege’s fragility.