Judge Rules Former GC Can't Disclose Privileged Info in Whistleblower FCA Suit

By Nate Raymond

The American Lawyer, Law.com

April 7, 2011

 Since 2005, three former executives of Unilab, a medical testing company now owned by Quest Diagnostics, have quietly been trying to get the U.S. government to intervene in a False Claims Act whistleblower suit alleging violations of anti-kickback laws. The Justice Department may yet intervene--but if it does, the purported whistleblowers and their lawyers at Troutman Sanders won't see any of the DOJ's recovery, according to a 31-page ruling Tuesday by Manhattan federal district court judge Robert Patterson.

Judge Patterson disqualified Fair Laboratory Practices Associates--a company the former execs founded to act as the plaintiff in their FCA suit--from continuing as relator. The judge concluded that one of the men, former Unilab general counsel Mark Bibi, violated the legal code of ethics by disclosing confidential information for the purposes of the suit. To protect Quest from the use of the confidential information, Judge Patterson also disqualified Troutman Sanders and another firm from continuing as FLPA's counsel.

The judge said his ruling is not intended to prevent the Justice Department from intervening and prosecuting an FCA case against Quest. In a November 2009 letter to Judge Patterson, the government said it had not decided whether to intervene and was still investigating the whistleblowers' allegations.
In FLPA's complaint, the onetime Unilab executives (former GC Bibi, CEO Andrew Baker, and CFO Richard Michaelson, all of whom now work for Life Sciences Research Inc.) allege that since 1996, Quest and Unilab have been charging certain providers discounted rates for laboratory tests in an effort to obtain referrals of Medicare and Medicaid patients for whom the companies can bill the government directly. FLPA alleged the "pull through" scheme violates the Federal Health Care Anti-Kickback Act.

Quest and its lawyers at Sidley Austin and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo argued that Bibi, who was Unilab's general counsel from 1996 to 2000, breached attorney-client privilege and disclosed confidential information in order to bring the False Claims Act suit. FLPA did not contest that Bibi disclosed privileged information, but asserted that the disclosure was permissible under the crime-fraud exception.

Judge Patterson disagreed. Citing a 1994 decision, he concluded that "state ethics rules are not trumped by the FCA." Bibi violated his ethical duty to Unilab, the judge found, and made disclosures that were beyond the scope of any exception to privilege.

"The qui tam relator is a representative of the United States and its interests, and accordingly, counsel serving as a qui tam relator may come within the scope of [the code of conduct]," Judge Patterson wrote. "Here, Bibi, as a member of FLPA, is representing another person, the United States, in a matter substantially related and materially adverse to his former representation of Unilab, without his client's consent."

Judge Patterson concluded that FLPA as a whole also had to be disqualified because of Bibi's participation in the suit.

Charles Greenman of Troutman Sanders was lead counsel for FLPA. A spokesman for Troutman Sanders declined comment. Philip Michael of Michael Law Group, the other disqualified firm, did not return our call for comment.

Quest counsel Richard Raskin of Sidley Austin referred a request for comment to a company spokeswoman. She did not respond to an e-mail.