Fourth Circuit Holds that Facts Learned by Relators' Counsel in Previous Qui Tam Trigger Public Disclosure Bar

In United States ex rel. May v. Purdue Pharma L.P., the Fourth Circuit recently held that the pre-2010 public disclosure bar prohibits a subsequent relator from bringing a False Claims Act qui tam based upon “facts” that their counsel learned in representing a prior relator who brought a qui tam. No. 14-2299, 2016 WL 362250 (4th Cir. Jan. 29 2016). Stated simply, when one relator’s qui tam is dismissed, the public disclosure bar applies to subsequent efforts by relator’s counsel to get around that dismissal by bringing the same qui tam with new relators who are not original sources.  

In 2005, a former district sales manager (“Original Relator”) for Purdue Pharma (“Purdue”), brought a qui tam action in the U.S. District Court for the Southern District of West Virginia against Purdue. In 2010, the Court dismissed the Original Relator’s qui tam because he had signed a release when he accepted a severance package from Purdue.  

Subsequently, the Original Relator’s wife, along with a former Purdue employee that had worked with the Original Relator, filed a nearly identical qui tam against Purdue.  In doing so, they were represented by multiple attorneys, one of whom had represented the Original Relator in his qui tam against Purdue. The District Court dismissed the new qui tam, finding that it was based on claims that were publicly disclosed in the Original Relator’s suit.  In so doing, the Court applied the pre-2010 public disclosure bar. 31 U.S.C. § 3730(e)(4)(A)(2009) (“No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations in a . . . civil . . . hearing unless the . . . person bringing the action is an original source of the information.”)

On appeal to the Fourth Circuit, Relators made three arguments to avoid the public disclosure bar. First, they argued that their allegations were not “derived from” a public disclosure because they had not personally reviewed the Original Relator’s lawsuit prior to instituting their qui tam. Second, though the Relators acknowledged that their attorney had represented the Original Relator and that their attorney’s knowledge was imputed to them, they argued that their attorney’s knowledge was nevertheless derived from nonpublic sources. Finally, Relators argued that the False Claims Act (“FCA”) was intended to encourage relators to bring qui tams even if based upon "second hand" knowledge of a fraud against the government. 

Affirming the District Court, the Fourth Circuit rejected the Relators’ attempt to sidestep the public disclosure bar. The Court noted that (1) the allegations in Relators’ qui tam were publicly disclosed prior to the filing of their complaint, and (2) Relators did not independently discover the facts underpinning their allegations but instead based their claims on what their attorney learned while representing the Original Relator in the prior qui tam. Rejecting the argument that the FCA encouraged relators to bring claims even if based on second hand information, the Court stated that the FCA “is not designed to encourage lawsuits by individuals like the Relators who (1) know of no useful new information about the scheme they allege, and (2) learned of the relevant facts through knowledge their attorney acquired when previously litigating the same fraud claim.” Accordingly, the Court held that Relators’ complaint was subject to the public disclosure bar and must be dismissed due to a lack of subject matter jurisdiction.

Purdue Pharma’s holding reflects the Fourth Circuit’s narrow reading of the pre-2010 public disclosure bar which prohibits jurisdiction over subsequent qui tam suits that are “based upon” prior public disclosures. Unlike other circuits, however, the Fourth Circuit narrowly construes the phrase “based upon” to preclude actions “only where the relator has actually derived from [a public] disclosure the allegations upon which his qui tam action is based.” See United States ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339, 1348 (4th Cir.1994).  

By contrast, had this case been brought in any other circuit, it would have been more easily disposed of:  the majority of circuit courts read the phrase “based upon” to mean “substantially similar to” or “ supported by” publicly disclosed information. United States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 57 (1st Cir.2009) (“majority view [among circuits] holds that as long as the relator's allegations are substantially similar to information disclosed publicly, the relator’s claim is ‘based upon’ the public disclosure even if he actually obtained his information from a different source”). In these circuits, simply comparing the original qui tam with the subsequent qui tam would have sufficed to show that the second was “based upon” the initially filed case.

Author: Nathan Huff 
Editor: A. Brian Albritton
February 8, 2016

Court Affirms Dismissal of Qui Tam and Disqualification of Relators' Counsel Due to Relator's Violation of Attorney Ethics Rule

The Second Circuit Court of Appeals has upheld a dismissal of a qui tam suit against Quest Diagnostics that was filed by three relators, one of which was the defendant's former general counsel. Fair Lab. Practices Assocs. v. Quest Diagnostics Inc., 2d Cir., No. 11-1565-cv, 10/25/13. Joan Rodgers of the ABA/BNA Lawyer's Manual on Professional Conduct recently wrote an article about the Court's opinion: Company’s Former General Counsel Ruined Qui Tam Action by Telling Ex-Client’s Secrets. I commend it to you.

Essentially, the Court affirmed the District Court's dismissal of the qui tam based on a court's "inherent power" to manage its own affairs. Specifically, the Court ruled that the False Claims Act does not preempt state ethical rules governing the practice of law. In that instance, the Court found that the relator and defendant's former counsel had violated New York Rule 1.9(c) which prohibits a lawyer from revealing the confidences of a client or using the confidences or secrets of a client to the disadvantage of a client -- a rule similar to that found in most state bar rules. The Court found that the relator had used and revealed confidential information which he had obtained in his capacity as counsel for the defendant. As a result, the Court affirmed the District Court's remedy of not only dismissing the qui tam suit, but also disqualifying the other relators and their counsel who together with Quest's former counsel had brought the qui tam.

What is in unusual about this case is that a court, based on its "inherent powers," dismissed a case based on a relator's violation of law, i.e., a rule governing the practice of law, as opposed to a violation of the False Claims Act's procedures. The Court presents its decision as just a balancing test of "varying federal interests" in deciding on whether to apply the state bar rule and affirm the matter's dismissal. That too is unusual because defendants in qui tam cases frequently allege that the relator has violated the law in bringing a qui tam claim. Indeed, relators are commonly accused of stealing records, of participating in the fraud on which they base their qui tam, and in some instances, of even perpetrating or being the mastermind of the fraud in which they accuse a corporate defendant of engaging. Such misconduct by the relator, however, normally only serves as a basis to reduce a qui tam award. See 31 USC 3730(d)(3)("if the court finds that the action was brought by a person who planned and initiated the violation . . . upon which the action was brought, then the court may . . . reduce the share of the proceeds of the action which the person would otherwise receive"). Indeed, the False Claims Act only bars a relator from bringing a qui tam or receiving a recovery if the relator is convicted of the criminal conduct relating to the claim brought in the relator's complaint. See 31 USC 3730(d)(3); see also Order Dismissing Relator in USA ex rel Schroeder v. CH2M Hill et al, E.D. WA., No. CV-09-5038-LRS. In short, the Second Circuit does not really explain why this violation of law concerning a lawyer's duty not to disclose client confidences warrants dismissal of a qui tam when compared with other violations of law by relators.

A. Brian Albritton
November 17, 2013

Whistleblower Counsel Going International: Focus on FCPA and Pharmaceutical Cases

Corporate Crime Reporter recently published an interview with Neil Getnick, a well known and successful plaintiff's attorney whose firm, Getnick and Getnick LLP, specializes in, among other things, federal and state whistleblower (qui tam) cases on behalf of relators and whistleblowers. The interview notes that Mr. Getnick seeks to catch the "next wave" of whistleblower cases: cases arising internationally. Getnick and Getnick is launching a "global anti-fraud and corruption unit focusing on international whistleblower cases."

In part, Mr. Getnick was referring to "Foreign Corrupt Practices Act (FCPA) whistleblower cases." The Foreign Corrupt Practices Act, 15 U.S.C. sec. 78dd-1 et seq, makes it unlawful to bribe or pay foreign officials to obtain or retain business, and according to the U.S. Department of Justice, requires that public companies "(a) make and keep books and records that accurately and fairly reflect the transactions of the corporation, and (b) devise and maintain an adequate system of internal accounting controls." The Securities and Exchange Commission's whistleblower program instituted in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) rewards individuals who assist the SEC in uncovering securities violations including violations of the FCPA. 

Mr. Getnick's anticipated focus on FCPA whistleblower cases should not come as a surprise. For example, in an article discussing the ramifications of the Dodd-Frank Act, the Arent Fox firm predicted that the passage of the Dodd-Frank whistleblower provisions will "likely result in the development of a 'cottage industry' with law firms and consultants stepping up to solicit potential FCPA whistleblowers." "To put this in context," the firm explained, "the fees collected worldwide in the recent Siemens FCPA investigation amounted to approximately $1.6 billion. Accordingly, a qualified whistleblower could have potentially received up to $480 million under this new program. The substantial financial incentives to potential whistleblowers will likely result in a significant increase in FCPA investigations initiated by the government as employees or informants perceive a big pay-off for information."

Along with the FCPA, Mr. Getnick predicted more "international cases targeting pharmaceutical manufacturing practices" such as the 2010 case against GlaxoSmithKline (GSK). In that case, the Getnick firm "successfully targeted [GSK's] largest pharmaceutical plant in the world for violating FDA current good manufacturing practices and selling adulterated drugs." "Pharmaceutical manufacturing companies are moving their plants overseas," Mr. Getnick observed, and if those pharmaceuticals are manufactured in a manner that violates FDA regulations and subsequently sold to the Medicare or Medicaid programs in the U.S., then "there is a sufficient nexus to assert jurisdiction in the United States" pursuant to the False Claims Act.

A. Brian Albritton
November 11, 2012

What Was the Relator Thinking? Court Sanctions Relator and Counsel for Frivolous Qui Tam Claim

Under the "what were they thinking" column, a recent U.S. District Court case from the Eastern District of Wisconsin shows that relators and their counsel who bring frivolous or unfounded qui tam claims will be subject to sanctions. USA ex rel Watson v. King-Vassel, et al., 2012 WL 5272486 (E.D. Wis. Oct. 23, 2012).

In the King-Vassel case, the relator, a physician, brought a qui tam against another physician and two companies with whom she was affiliated that provided mental health services alleging that the physician violated the False Claims Act and the Wisconsin False Claims Act when she allegedly "prescrib[ed] medications to a minor patient receiving Medicaid assistance for reasons that are not medically accepted." The state and federal governments decline to intervene, and the relator proceeded with the case, though he was grossly unprepared to do so.

First, the Court observed that the relator got the idea of bringing a qui tam suit as a result of meeting an attorney at a conference and researching how to bring a qui tam claim through a website, "psychrights.org".

Second, the relator found his alleged false claim by placing an ad in the the newspaper seeking minor Medicaid patients who had received certain medications and got his "lead" when a patient responded. The doctor obtained that patient's records using a "borderline-fraudulent release" that failed to mention that the records would be used to bring suit.

Based on these patient records, the relator filed suit against the physician alleging that she had improperly prescribed psychotropic drugs to the minor patient for four years since the drugs at issue were not approved by the FDA for such indications. By doing do, the relator alleged that the physician caused false claims for reimbursement to be submitted to Medicaid. The relator further sued the two companies that the physician was affiliated with on the grounds that they employed the physician. After several months of discovery, the defendants moved for summary judgment.

Third, though it had been apparent from early in the case that the defendant companies did not employ the physician and were not responsible for her alleged conduct on the grounds of respondeat superior, the relator did not move to dismiss them until after the summary judgment was filed. At that point, however, one of the corporate defendants had moved for sanctions on the grounds that it should not have been sued since it was not the employer of the physician defendant. The Court granted sanctions against the relator and his attorney pursuant to 28 U.S.C. 1927 and its inherent powers, finding that the attorney waited far too long after she should have known better to withdraw the claim against the corporate defendant. As a result of relator counsel's failure to conduct an "appropriate investigation" after becoming aware of the "serious flaw" in his claim against the corporate defendant, the defendant "was forced to proceed through the entire discovery process and file an extensive summary judgment brief, all to combat a claim that could have been readily dismissed after a minor inquiry."

Fourth, the Court granted summary judgment against the relator who failed to provide any expert testimony or competent evidence to show that the defendant physician's prescribing of certain drugs in fact caused the submission of a false claim to Medicaid or even to show that the prescribed drugs were improper for that patient.

Overall, the Court observed that the relator's "attack here on a single doctor's prescriptions to a single patient does not provide the government with substantial valuable information, as intended by the qui tam statutes. Instead of providing the government with valuable information, [the relator] seemingly sought only to cash in on a fellow doctor's attempts to best address a patient's needs. In return, [the physician] was treated to a lawsuit, the proceeds of which would be split three ways between [the relator, his counsel, and the patient's parent]."

One question that remains is why the government did not dismiss this case or at least dismiss the corporate defendants pursuant to 31 U.S.C. 3730(2)(c)(2). This case was frivolous, and this should have been apparent as to the corporate defendants even at the sealed stage: the corporate defendants were not subject to respondeat superior liability because the physician was an independent contractor and not an employee of defendants. 

A. Brian Albritton
October 31, 2012

Is there Hope for the IRS Whistleblower Program?

The IRS Whistleblower Program has been the subject of repeated criticism from several corners.  For example, in a Forbes article last March, "IRS Whistleblowers See Little Reward," Erika Kelton of the Phillips & Cohen firm, one of the leading relator firms, accused the IRS of "sitting on a mountain of whistleblower claims" and  asserted that the "real problem" in processing these claims is "the IRS itself and institutional resistance to whistleblowers within the IRS that is hobbling the whistelblwoer program and draining its enormous promise." In fact, Kelton quoted the former IRS Chief Counsel as saying, "The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules; they were forced on it by the Congress."

Criticism of the IRS Whistleblower Program has not been limited to relators' counsel. As detailed in Whistleblower Protection Blog, Richard Renner discusses two recent reports prepared by the Treasury Inspector General for Tax Administration and the General Accounting Office that were critical of the IRS Whistleblower Program. See IG Report says IRS Whistleblower Office falls short and resists audit.

According to a recent article in Accounting Today, "IRS Plans to Fix Whistleblower Program," the IRS is responding to this criticism.  In a June 20th memo, the IRS Deputy Commissioner for Services and Enforcement pledged to work with "the Whistleblower Office and with internal and external stakeholders on a comprehensive review of operating guidelines and procedures . . . . . to improve the timeliness and quality of decisions as the Service evaluates and acts on whistleblower information."  Outlining proposed internal deadlines for reviewing whistleblower claims, the Commissioner stated: claims received by the Whistleblower Office "should be initially evaluated by the office within 90 days" and review by subject matter experts from the Operating divisions and Criminal Investigation "should be completed within 90 days of receipt."

The Accounting Today article, which I commend to readers, further discusses efforts by U.S. Senator Charles Grassley to pressure the IRS to improve the Whistleblower Program and highlights a recent Bloomberg article that was critical of the IRS Program as well, as it relates that "in the past five years, over 1,300 claims have been filed against nearly 10,000 companies and individuals, alleging tax underpayments of at least $2 million, but only three whistleblower awards have been paid so far under the new program." 

A. Brian Albritton
July 4, 2012

Ninth National Institute on the Civil False Claims Act and Qui Tam Enforcement

Last week, I attended the ABA's National Institute on Civil False Claims Act and Qui Tam Enforcement in Washington, D.C..  It was well attended and a worthwhile event overall.  A few observations:

• The conference was attended by a great mix of people:  lots of plaintiff's counsel (a/k/a relators' counsel), defense counsel, a number of attorneys from state attorneys' general or state Medicaid Fraud Control Units, and a number of federal investigators and counsel from federal agencies.  Unlike conferences such as the ABA's White Collar Crime which are huge with nearly a 1,000 attendees, this conference is still quite small (I would estimate around 200+) and there was a very collegial atmosphere.

•  As with the attendees, so too with the panels as they were always had a mix of defense counsel, relators' counsel, and various government representatives usually from the a U.S. Attorney's Office or Department of Justice.  Most panels provided a very broad perspective.

• Joyce Branda, now Acting Deputy Attorney General for the Civil Division and chair of the first panel, noted that 600 False Claims Act/Qui Tam cases were being filed each year, 2/3 of them health care related, though she said that "other areas were developing."  Branda further observed that the government intervenes in 22% of qui tam cases and that percentage has "held steady over the years."

•  Dan Anderson, co-chair of the Institute and Deputy Director of the Commercial Litigation  Branch of DOJ's Civil Division, told the conference "we are doing much more with much less.  We are doing the best we can  and are stretched very thin."

• More than one speaker discussed the increased use  of Civil Investigative Demands ("CIDs"):  a very effective investigative tool that allows the government prior to intervening in a qui tam case to conduct depositions and obtain interrogatories and the production of documents.  Prior to the recent amendments of the False Claims Act, the Attorney General had to personally approve the issuance of a CID, but their use has now been liberalized and they are now being issued by DOJ-Civil as well as U.S. Attorneys.

•  29 states have passed False Claims Act statutes.  The panel on State Qui Tam Enforcement was one of the best.

•  John Boese, conference co-chair and author of a leading treatise on the False Claims Act, observed rather critically that the False Claims Act has become not just a statute to sanction those making false claims, but with the False Claims Act "jurisprudence being dominated by false certification claims," it is increasingly used as an "enforcement mechanism" for compelling compliance with governmental regulations.  He gave the example of a bid protest.  In the past, he explained, a losing bidder might challenge the legitimacy of a competitor's bid; now, they file an FCA/qui tam claim.

• Panelist Peter Hutt II of Akin Gump noted that  non-intervened qui tam cases impose very real and substantial costs on the businesses as a result of the discovery that stems from such suits.  Invited to say what he would change about the False Claims Act, he argued that there was too many meritless qui tam suits and that such suits resulted from the "over-incentive" of damages presently allowed under the FCA.  To discourage meritless suits, Hutt argued that real fee shifting should be introduced and that it should apply not just to the relator but to a relator's counsel as well.  He also argued for a cap on relators' recoveries. Hutt's comments about meritless suits brought an interesting reaction from other panelists. The relators' counsel on the panel did not believe meritless qui cases were a problem, but they also discussed that they carefully review potential qui tam cases and only file a handful of the cases they review.  Speaking for herself, an Assistant U.S. Attorney from the Northern District of California who handles FCA/qui tam cases argued that if qui tam cases had been investigated and found to be without merit, then they should be dismissed by the government as permitted by the statute --though she did not cite any instances of that occurring.  Boese argued that since dismissals of qui tam required hearings and that such hearings had often been hotly contested by relators, DOJ rarely exercised its authority to dismiss.

A. Brian Albritton
June 10, 2012

Wellcare Health Plans Agrees to Pay $137.5 Million to Resolve False Claims Act Case

The U.S. Attorney for the Middle District of Florida and the Civil Division of the U.S. Department of Justice announced yesterday that WellCare Health Plans had agreed to pay $137.5 million to settle a qui tam/ False Claims Act case pending against it, primarily in the Middle District of Florida, that has been pending for years.  You can see the links above for a fuller description of the case and settlement.

Remarkably, WellCare announced the settlement of the qui tam almost two years ago on June 26, 2010 when I was serving as U.S. Attorney for the Middle District of Florida.  See St. Petersburg Times, June 26, 2010, "WellCare Health Plans Strikes $137.5 million settlement, challenged by new whistle-blower disclosures."  

Just as remarkably, in the two years prior to the government's announcement of the settlement, the relator's counsel, a prominent criminal defense attorney who stood to reap millions in fees, had already begun criticizing the not-yet-announced settlement as "grossly inadequate" and claiming that "tax payers" were "unfairly disadvantaged" by the settlement.  Though he acknowledged the "financial benefits" of any settlement to the relator, relator's counsel argued to the St. Petersburg Times that a larger settlement was more important  in order "to deter any effort by companies such as WellCare to take advantage of the health care system or the people who should be served by this system."

The chief relator in the WellCare case, Sean Hellein, is slated to receive $21 million in the settlement.

A. Brian Albritton
April 4, 2012

Opportunistic Relator or Enterprising Whistleblower?

I try to spare readers from too many "can you believe this happened in a case?" entries, but on occasion, I do find just such a story worth highlighting.  The firm of Horwood Marcus & Berk ("HMB") recently highlighted an "opportunistic" (others might say, enterprising) relator and law firm in Illinois who, HMB reports, have brought over 200 cases under the Illinois False Claims Act against retailers operating nationwide who "allegedly have fraudulently failed to collect tax on the shipping portion of sales to Illinois customers." See "Opportunistic 'Whistleblower' Exploits Illinois False Claims Act."  Though it does not list the cases, HMB claims that the relator's claims are based on tax advice provided by the Illinois Department of Revenue to retailers.  Relator's "lawsuits accuse retailers of committing fraud by not collecting tax on shipping charges to Illinois customers, a position that the Department of Revenue has endorsed explicitly in the case of several tax payers, and more generally in over 30 information letters."  Moreover, HMB essentially accuses the relator and the plaintiff's firm that has brought all 200 cases of being "opportunists," as the relator reportedly has no insider knowledge and bears little resemblance to the classic whistleblower.  HMB complains further that taxpayers "attempting to understand Illinois law on the proper taxation of shipping charges will likely finish the exercise with more questions than answers" and that the Illinois Department of Revenue is partly responsible for creating this "muddled and confusing  . . . legal landscape."

HMB predicts that another frontier for opportunistic qui tam suits will be claims over the payment of unclaimed property obligations, another area where HMB believes there is real confusion about what property is subject to unclaimed property laws and must be reported to the state.

by A. Brian Albritton
     March 27, 2012

Insights from a Qui Tam Plaintiff's Lawyer

In a recent interview with Corporate Crime Reporter, qui tam attorney Joseph E.B. "Jeb" White of the firm Nolan & Auerbach, P.A. described what kind of plaintiff/relator cases his firm is interested in and, more importantly, the kinds of cases in which the government will intervene.

White says that the government does not want "low hanging fruit.  They want boxed fruit."  He notes that the government intervenes in "only about 25 percent" of False Claims Act (FCA) cases, and due to "tightening budgets," the government's approach to taking FCA cases is changing.  Increasingly, the government delays its decision to intervene because "sometimes the case simply isn't ready.  The relator hasn't fully flushed out the allegations sufficiently for the government to intervene."  Moreover, courts frequently "pressure the government to make up its mind before the government is ready to make up its mind."  These pressures, he says, lead the government to often say in qui tam cases that they are "not intervening at this time" but nevertheless "signaling to the relator's lawyer" to keep the case alive because they government is "going to come back later."  While it may not be able to investigate or intervene in a case due to a lack of resources, says White, the government encourages relators to "move forward" with meritorious cases, letting the relator use what may be his or her superior resources to develop the case further.  In short, the government, White explains, often declines, but in doing so it frequently indicates to the relator to "pick up the ball and move it forward for us."

White's firm, Nolan & Auerbach, only does FCA cases on behalf of relators.  He says the firm takes roughly one in ten FCA cases, and that they can only bring a "handful of cases in any given year."  White states that when his firm brings a case to the government, they want the government to have "some level of confidence" that the case has been "fully vetted."  In considering whether to take a case, White explains that the firm is looking for several things: (1) "evidence of systematic fraud" as opposed to just some "rogue employee," hopefully involving a "scheme from the top of the company;" (2) a "credible witness" who can withstand scrutiny at trial; and (3) whether there are "common road blocks," such as the public disclosure bar.

White estimates that there are 100 FCA cases every year, of which "five of them are blockbusters."  He estimates that the remaining "95 settle for about $10 million each," and that the average whistleblower award is around 16.2 percent.

The entire interview is at 26 Corporate Crime Reporter 8, February 20, 2012 print edition.

A. Brian Albritton
3/13/12

Court Sanctions Attorneys for Relator in Frazier v. IASIS Healthcare For Failing to Promptly Seek Ruling on Privileged Documents Obtained from Relator

The U.S. District Court in Arizona recently sanctioned the attorneys for the relator in the qui tam case of United States ex rel Jerre Frazier v. IASIS Healthcare Corporation, Case 2:05-cv-766-RCJ as a result of their failure to promptly seek a ruling from the Court concerning privileged documents of the defendant that they had received from the relator.  In an Order entered on January 10, 2012, the Court found that the relator, Frazier, had “copied and removed approximately 1,300 pages of documents, emails and other . . . proprietary materials” from the the defendant, IASIS Healthcare. After years of litigation and the dismissal of the third amended qui tam complaint in June 2011, the Court handed down its ruling in response to the Defendant's Renewed Motion for Sanctions against the relator and his counsel.

The Court denied as moot the Motion for Sanctions against the relator as the parties had settled their claims.

As to the relator's "Qui Tam Counsel," however, the Court found they "were aware that they had potentially privileged documents in the Fall of 2004," before they filed suit, but once Qui Tam Counsel filed suit, they "delayed and did not seek a ruling from the Court on what to do with IASIS’s privileged documents" until it had served the unsealed qui tam complaint. The Court further falted Qui Tam Counsel for appearing to "play dumb as to what privileged documents IASIS was talking about" once IASIS requested its docuuments  The Court explained that "[a]lthough Qui Tam Counsel were obligated to acquire Frazier’s consent before returning the documents back to IASIS, Qui Tam Counsel should have told IASIS that or should have waited for Frazier’s consent. Instead, Qui Tam Counsel feigned ignorance with respect to the Sealed Box of privileged documents in their offices." The Court found that Qui Tam Counsel breached an ethical duty to seek a ruling from the Court about the privileged documents and breached their duty to contact IASIS about the documents after the complaint was unsealed."

Though finding that sanctions were appropriate, the Court explained that the "circumstances in this case do not warrant dismissal" nor did the facts establish that Qui Tam Counsel acted in "bad faith"  In light of these considerations, the Court imposed the sanction of requiring Qui Tam Counsel to repay the "attorneys’ fees and costs expended by IASIS in its attempt to get its privileged documents back from Qui Tam Counsel."  Additionally, the Court disqualified the relator's counsel from further assisting or representing the relator "or any other party adverse to IASIS."

The Court denied Defendant's request that Qui Tam Counsel be sanctioned even more broadly for fees and costs pursuant to 28 U.S.C. § 1927.   28 U.S.C. § 1927 provides that the Court may award attorneys' fees and costs against an attorney who "unreasonably and vexatiously" . . . . . "multiplies the proceedings in any case."  The Court rejected  Defendant's request on the grounds that Qui Tam Counsel had not acted in bad faith "nor is there any evidence to establish that they knowingly raised a frivolous argument."