A Primer on the Attorney-Client Privilege in Health Care Fraud and Abuse Litigation
Robert W. Biddle
Nathans & Biddle LLP
Attorney-client privilege fosters free and open communication between providers and suppliers and their counsel in disputed reimbursement matters, including fraud and abuse litigation. Providers and suppliers rely on the privilege to protect their confidential communications involving legal advice from unwanted disclosure to others. The promise of confidentiality fosters the open dialogue between attorneys and clients essential to good legal advice and interpretation of and compliance with complex government regulations. However, the Government has increasingly sought to pierce the privilege in its health care fraud investigations. In a recent indictment, the Government charged a former in-house lawyer and outside counsel as conspirators in an anti-kickback prosecution in Kansas City, Kansas.
In this environment, knowledge of an attorney's and a client's confidentiality rights and responsibilities is essential to informed decision-making. Careful adherence to certain procedures will allow institutions when appropriate to make voluntary disclosures or otherwise waive applicable privileges. If proper procedures are not followed, institutions may have no choice but to disclose communications because the communications may not be privileged.
Attorneys Must Comply with the Professional Ethics Rules
Attorneys are obligated under the American Bar Association Model Rules of Professional Conduct, which apply in various forms in most states, to refrain from revealing information relating to representation of a client unless the client consents after consultation, or in instances where disclosures are impliedly authorized in order to carry out the representation. This confidentiality rule applies not only to matters communicated in confidence by a client, but also to all information which attorneys receive relating to their representation of a client, whatever its source. Thus, attorneys may not disclose such information except as authorized by the client or required by the applicable Rules of Professional Conduct. If a court requires an attorney to provide information, the Rules of Professional Conduct permit the attorney to disclose the requested information.
The Attorney-Client Privilege
In addition to the Model Rules of Professional Conduct, communications between attorneys and their clients are governed by the attorney-client privilege. Under the law of evidence, a privilege is a right which the holder of the privilege possesses to decline to disclose information which other persons or entities not holding the privilege would be required to answer. The attorney-client privilege allows a client or the client's attorney acting on the client's behalf to resist disclosure of confidential communications between the attorney and the client which were made for the purpose of obtaining or providing legal advice. The attorney-client privilege covers verbal statements, documents, or anything else communicated in confidence between an attorney and client. Communications from a lawyer to a client as well as communications from any of a client's officers, agents, directors, employees, or representatives to a client's lawyer bearing on the subject matter of the lawyer's representation and for the purpose of securing legal advice are equally protected by the privilege so long as all requirements of the privilege are met. Confidential communications to or from a corporate employee, officer, director, agent or consultant for the purpose of obtaining legal advice for the corporation are covered by the corporate attorney-client privilege. The privilege applies equally to in-house and outside counsel. Providers and suppliers should keep in mind that the attorney-client privilege protects disclosure of communications between lawyers and clients, not the facts underlying such communications. Thus, even if an institution provides certain information to its lawyer to obtain legal advice, that information may be discovered by an adversary in litigation, although the adversary may not be entitled to learn that it was previously conveyed to counsel. For instance, in a reimbursement dispute, a provider may be required to disclose what it knows about the items or services provided and for which reimbursement was sought, even if the lawyer alone "discovered" the information in interviews with the institution's employees prior to disclosure to corporate management, although the institution might not be required to disclose what it told its lawyer in specific meetings about such items or services.
Providers and Suppliers Should Maintain the Confidentiality of Records to Preserve the Privilege
In order to maintain the attorney-client privilege, institutions should maintain the confidentiality of records relating to their representation by counsel. Thus, copies of materials which are provided to in-house or outside counsel, including all letters, notes of conference calls, letters counsel sends internally, and the like, should be kept together in a secure marked file cabinet and should be marked as private or confidential attorney-client communication on the client's word processing system. Each document which is sent by an employee to in-house counsel should be recorded as a confidential attorney-client communication if it relates to legal advice. Unless there are compelling reasons to the contrary, access within a client corporation to such communications should be allowed on a need-to-know basis. If communications with counsel are not labeled as confidential, or if any corporate employee is allowed access to them, a court could find that adequate steps were not taken to preserve the confidentiality of communications to and from counsel, or an accidental disclosure of confidential information could occur. Thus, it is particularly important that institutions carefully monitor the circulation within their offices of written communications to or from their attorneys, whether in-house or outside counsel. At an appropriate time, institutions may decide to disclose communications despite its initial designation as confidential and privileged. However, appropriate procedures may make the decision a real choice rather than a fait accomplishment.
Control of the Attorney-Client Privilege
Typically, in-house counsel solely represents the corporate entity in a matter, and does not personally represent any of the institution's officers, directors, employees, shareholders, or agents in the matter. Thus, in these situations, whoever controls the institution will control the institution's attorney-client privilege. For example, if an institution is sold, the new owner of the institution will control the institution's attorney-client privilege. Generally, the board of directors of an institution controls the institution's attorney-client privilege. Although communications on legal matters between an institution's counsel and any particular employee can ordinarily be withheld by the institution, if the institution, through its Board, so chooses, that privilege can be waived and the substance of the communication can be disclosed to the Government or others.
The Sometimes Porous Wall: Exceptions to the Attorney-Client Privilege
The attorney-client privilege is not ironclad. Not all confidential communications in connection with legal advice between an institution and its in-house or outside lawyer are protected by the privilege. There are a number of situations where communications between attorneys and their clients may be obtained by third parties. First, courts have refused to recognize an attorney-client privilege when the client intends that the attorney disclose the information the client provides to the attorney to third parties. In some instances, courts will require disclosure of not only the specific information which the client intended to disclose to third parties, but also the details exchanged between attorney and client underlying what was intended to be disclosed to third parties. For example, if a client is in a reimbursement dispute with an intermediary or a carrier, a court may find that if the client requests the attorney to prepare a letter to the intermediary or the carrier, possibly in connection with a voluntary disclosure, then some or all of the communications between the lawyer and the client relating to preparation of the letter to the intermediary or carrier may be discoverable in later litigation over the disputed reimbursement. Second, a court may find after-the-fact that communications between a lawyer and client were not made for the purpose of seeking legal advice, but were made for business or other purposes, and thus may be discovered by third parties such as the Government in litigation. Given the many roles thrust upon in-house counsel by institutions, this scenario is probably common. For example, an attorney's role in preparing a Certificate of Need application, helping to obtain a provider number from HCFA, obtaining various licenses from state governments, and the like, may not principally involve legal advice, but may be found by a court later to have been business advice or business services provided to a client. In addition, if a client hires an attorney to conduct an internal review of certain corporate activities for public relations purposes, audit, or business purposes, rather than primarily to obtain legal advice or for the defense of possible litigation, the attorney-client privilege and other protections such as work product (discussed below) may not apply. In any of these instances and others, there is a possibility that, well after the transaction has been completed, a court would find that the communications between the lawyer and client did not relate to legal advice and thus were unprivileged. However, if the lawyer and client structure and document the engagement from the outset to maximize the legal advice element of the work to be performed by the lawyer, a court may be hard pressed to pierce the privilege on this basis. Third, courts have required disclosure of otherwise privileged and confidential communications when a client waives or surrenders the privilege. For example, if a client contemplating an acquisition obtains an analysis of fraud and abuse issues relating to the to-be-acquired entity and discloses the opinion letter prepared by the attorney to a third party, such as to a lender to obtain financing, other third parties such as the Government may obtain the opinion letter, since by disclosing the letter to one third party, the client can be deemed to have disclosed it to all third parties such as government agents. Furthermore, once an opinion letter is disclosed to a third party, a client may be required to disclose to another third party, such as the Government, the underlying legal advice and all communications which related to preparation of the letter. Thus, as one court has aptly put it, "[any voluntary disclosure by the client to a third party waives the privilege not only as to the specific communication disclosed, but often as to all other communications relating to the same subject matter." United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982). Fourth, if a court later concludes that an institution sought to obtain legal advice to commit an illegal act, the court will find that the attorney-client privilege does not apply. For example, if an institution consults with its attorney for the covert purpose of learning how to violate the law without getting caught, a court could find that the institution's communications with the attorney were not made for the purpose of rendering legal advice, but for the improper purpose of violating the law. Of course, if a court finds that an institution consulted with an attorney regarding previously completed misconduct or to bring its conduct in the future into compliance with the law, the court may hold that the attorney-client privilege protects such communications. Thus, senior managers should carefully document in their own files the reason they seek legal advice and the use to which they intend to put the advice. In-house counsel should urge senior managers to do so. Misuse of communications between a client and its lawyer could have significant consequences for the client in later litigation, as a court could find that the privilege does not apply.
When Three Isn't a Crowd: The Common Interest/Joint Defense Privilege
There are instances where communications between a client and counsel involving third parties do not necessarily waive the attorney-client privilege. An ancillary or adjunct privilege called the common interest/joint defense privilege may apply in such circumstances. This privilege has several elements: (1) a confidential communication occurred; (2) between multiple clients with separate counsel either at the direction of or with the assent of counsel; (3) in the presence of or at the direction of counsel; (4) concerning matters of common legal interest. Although some courts have extended this privilege to information shared outside of actual litigation, courts frequently limit this privilege to situations where the multiple parties sharing the information have a common legal interest in pending litigation. This privilege, where applicable, would allow multiple parties to share information without waiving the applicable attorney-client privilege.
Work Product Protection
In addition to the attorney-client privilege, the work product protection doctrine applies to the discoverability of statements and any other type of information possessed by the attorney, whether written or unwritten, gathered in anticipation of litigation. Information which an attorney gathers in anticipation of litigation is entitled to work product protection. For example, if an attorney conducts interviews of witnesses who are not clients, the notes of those interviews are not necessarily attorney-client communications, but are deemed to be work product entitled to special protection from discovery by third parties.
Generally, litigation must be pending or immediately imminent for work product protection to apply. Some courts have held that the work product doctrine does not protect documents or information developed during the course of normal business activity. Thus, if an attorney's notes are prepared in the ordinary and regular course of business such as a corporate restructuring or an acquisition, a court may find that they were not prepared in anticipation of litigation.
To be sure, the line drawn between documents created in response to an event that might eventually lead to litigation versus documents prepared in aid of litigation is difficult to draw. Some aspect of a corporate acquisition may possibly result in litigation, yet it may not be possible to protect materials relating to the issue under work product protection because the possibility of litigation would be too remote. Courts often find that a remote prospect of litigation is insufficient to trigger work product protection. Unlike the attorney-client privilege, which provides absolute protection to communications, if all the elements of the privilege apply, work product protection may be overcome by a showing of need by a third party such as the Government. The law provides that "fact work product," such as verbatim transcripts of witness interviews, may be discoverable by a third party if a sufficient showing of need is made. On the other hand, what is known as "opinion work product," which consists of the attorney's mental impressions, conclusions, opinions, or legal theories, is not generally discoverable if work product protection applies to the communication. There are crucial differences distinguishing fact or ordinary work product and opinion work product, and the burdens associated with an attempt to avoid the protections vary accordingly.
The exceptions to the attorney-client privilege generally also apply to work product protection. For example, if a client seeks and obtains legal advice with the intent to commit a crime, the work product protection doctrine as well as the attorney-client privilege will not protect those communications and the work of an attorney for the client from discovery by third parties.
Free and open communications between lawyers and their clients are essential in order for lawyers to do their job. An understanding of the confidentiality rules within which attorneys operate is essential. Because an attorney's advice can only be as good as the information the attorney receives from the client and other sources, understanding the privilege and its limitations is important to engaging and properly using the services of counsel.