Rheumatology Diagnostics Laboratory, Inc et al v. Blue Shield of California Life & Health Insurance Company

Filing 331

ORDER REGARDING PLAINTIFFS' COMMUNICATIONS WITH FAIR LABORATORY PRACTICES ASSOCIATES by Judge William H. Orrick granting in part and denying in part 308 Administrative Motion to File Under Seal. The documents specified by this order are not privileged and should be produced immediately. (jmdS, COURT STAFF) (Filed on 7/10/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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RHEUMATOLOGY DIAGNOSTICS
LABORATORY, INC, et al.,

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Plaintiffs,
v.

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AETNA, INC., et al.,

ORDER REGARDING PLAINTIFFS’
COMMUNICATIONS WITH FAIR
LABORATORY PRACTICES
ASSOCIATES
Re: Dkt. Nos. 308, 311

Defendants.

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United States District Court
Northern District of California

Case No. 12-cv-05847-WHO

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On June 17, 2015, defendants Quest Diagnostics Incorporated and Quest Diagnostics

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Clinical Laboratories Incorporated (collectively, “Quest”), submitted a short brief regarding their

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concerns over plaintiffs’ communications with the individual relators in U.S. ex rel. Fair Lab.

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Practices Associates v. Quest Diagnostics Inc., No. 05-cv-05393-RPP, 2011 WL 1330542, at *1

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(S.D.N.Y. Apr. 5, 2011) (“FLPA”). See Dkt. No. 308 (“Br.”). I heard argument on a telephonic

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hearing today.

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FLPA was a qui tam action against Quest Diagnostics Incorporated and Unilab

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Corporation dba Quest Diagnostics1 brought by a litigation partnership (i.e., FLPA) formed by

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three former senior Unilab executives for the sole purpose of prosecuting the action. 2011 WL

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1330542, at *1. The three former senior Unilab executives were Andrew Baker (Unilab’s former

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CEO), Richard Michaelson (Unilab’s former CFO), and Mark Bibi (Unilab’s former General

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Counsel). Id. They alleged that from 1996 to 2005 the defendants violated the Federal False

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Claims Act and the Federal Health Care Anti-Kickback Act by offering medical testing services at

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a substantial discount in order to obtain highly lucrative referrals of Medicare and Medicaid

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Unilab became a wholly owned subsidiary of Quest in or around February 2003. FLPA, 2011
WL 1330542, at *2.

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patients. Id.2
Bibi had been Unilab’s sole “in-house” lawyer from 1993 to 2000. Id. He stood to collect

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29 percent of the qui tam recovery. Id. at *4. The Hon. Robert P. Patterson, Jr. found that Bibi

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violated his ethical obligations by improperly disclosing Unilab’s confidential communications in

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the course of litigating the case, and by bringing an action that was materially adverse to Unilab’s

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interests. Id. at *6-11. As a remedy, Judge Patterson dismissed FLPA’s complaint and

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disqualified “FLPA, its general partners, and its counsel . . . from this action and any subsequent

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action arising out of the same facts.” Id. at *11.
The Second Circuit affirmed on appeal, holding that Judge Patterson “did not err by

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dismissing the complaint as to all defendants, and disqualifying [FLPA], its individual relators,

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United States District Court
Northern District of California

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and its outside counsel on the basis that such measures were necessary to avoid prejudicing

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defendants in any subsequent litigation on these facts.” United States v. Quest Diagnostics Inc.,

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734 F.3d 154, 158 (2d Cir. 2013).

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Plaintiffs’ privilege log reflects numerous emails from the summer of 2012 (shortly before

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this action was filed on November 14, 2012) involving both Chris Riedel (the principal of plaintiff

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Hunter Laboratories, LLC) and Bibi, as well as a number of emails involving both Riedel and

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Baker and/or Michaelson. See Sandrock Decl. Ex. 1 (Dkt. No. 308-7). In its brief, Quest

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contended that “the existence of these communications prompts important questions that need to

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be addressed.” Br. at 4. It identified four such questions:
(1) “What was the purpose of the communications? What
information did Bibi, Baker, and Michaelson share with Riedel?”

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(2) “What was [Stephen] Berry’s role in the communications? Who,
if anyone, did he represent?”

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More specifically, FLPA alleged that “from at least January 1, 1996 through present, defendants
violated the [Federal Health Care Anti-Kickback Act] through their operation of an ongoing ‘pull
through’ scheme wherein defendants charged [independent physician associations] and [managed
care organizations] below cost rates for the performance of laboratory tests so as (1) to induce the
physicians in the [independent physician associations] to refer Medicare and Medicaidreimbursable tests to the defendants and (2) to induce the [managed care organizations] to arrange
or recommend that their in-network physicians send Medicare and Medicaid-reimbursable tests to
the defendants.” FLPA, 2011 WL 1330542, at *2.
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(3) “Do Bibi, Baker, and Michaelson have a stake in the outcome of
this case or Eastman?”
(4) “What is Riedel’s role in connection with the Eastman case?
Does he have any stake in that litigation?”

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Id. at 4. Quest requested an order requiring plaintiffs to produce the communications with the

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FLPA relators and allowing it take limited discovery from them and Riedel. Id. at 1. In the

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alternative, Quest asked that I review the communications in camera “to determine whether there

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is a valid privilege that would justify withholding production.” Id. at 5.
Plaintiffs responded that Bibi left Unilab in 2000, that by the summer of 2012 he was the

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General Counsel of Manhattan Physicians Laboratories, Inc. (“Manhattan Labs”), and that in this

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capacity he communicated with Riedel and Berry “about potential antitrust litigation that could be

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United States District Court
Northern District of California

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brought against [Quest] for practices that were harming [Hunter], Manhattan Labs, and other

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regional laboratories.” Dkt. No. 310 at 1. Plaintiffs stated that at the time, Berry “was involved

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with Riedel, Bibi, and others . . . in researching the feasibility of such litigation,” but that Riedel

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ultimately decided to pursue litigation with plaintiffs’ current counsel, not Berry. Id. Plaintiffs

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also stated that the communications at issue do not contain any confidential information from

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Unilab or Quest. Id. Nevertheless, they offered to submit the disputed communications for in

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camera review. Id. at 2. On June 26, 2015, I ordered them to do so. Dkt. No. 313.

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Having reviewed the documents, the parties’ other submissions, and other relevant

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materials, I find that further discovery or motion practice regarding the communications between

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Riedel and the FLPA relators is not appropriate in this case. The documents I reviewed do not

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indicate that Bibi disclosed any confidential information or otherwise violated the terms of Judge

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Patterson’s dismissal order, at least not in any way that is relevant to this case. Nor do the

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communications indicate that Bibi, Baker, or Michaelson disclosed any confidential information

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from Unilab or Quest, thereby tainting this action with Bibi’s previous ethical violations.

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During the telephonic hearing, Quest argued that Bibi may have violated the “side-

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switching” rule discussed in Judge Patterson’s order (the Second Circuit did not reach that issue).

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In FLPA, Bibi sued Unilab for conduct that allegedly occurred during the same timeframe that he

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served as its General Counsel. While representing Unilab, he obtained confidential information
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directly relevant to the allegations in the complaint and disclosed it to Unilab’s adversaries. Here,

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on the other hand, Bibi works for Manhattan Labs, which is not a party. The lawsuit does not

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involve a timeframe during Bibi’s tenure at Unilab. Concerns about “side-switching” are far more

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attenuated here than in FLPA. I am focused on whether Bibi disclosed confidential information.

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Unlike in FLPA, there is no evidence of such disclosure here. Because twelve years elapsed

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between Bibi’s work at Unilab and his involvement in the instant lawsuit, and without more

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information, “side-switching” does not appear to be an issue here.

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I am satisfied that plaintiffs have properly withheld the bulk of the disputed
communications for the reasons stated in their privilege log. See, e.g., Barton v. U.S. Dist. Court
for Cent. Dist. of Cal., 410 F.3d 1104, 1111 (9th Cir. 2005) (“Prospective clients’ communications

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United States District Court
Northern District of California

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with a view to obtaining legal services are plainly covered by the attorney-client privilege under

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California law, regardless of whether they have retained the lawyer, and regardless of whether

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they ever retain the lawyer.”); OXY Res. California LLC v. Superior Court, 115 Cal. App. 4th 874,

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891(2004) (“[F]or the common interest doctrine to attach, most courts seem to insist that the two

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parties have in common an interest in securing legal advice related to the same matter – and that

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the communications be made to advance their shared interest in securing legal advice on that

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common matter.”) (internal quotation marks omitted). That said, certain of the documents that I

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reviewed are not privileged and should be produced immediately:

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• CTRL00132336-37

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• CTRL00128093-96

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• CTRL00128089-92

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• CTRL00128085-88

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• CTRL00128081-84

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• CTRL00128076-80

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Quest’s concerns about the participation of Bibi in this litigation are understandable, and

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the involvement of attorney Berry in the development of this action and as counsel for the

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plaintiffs in Eastman is unusual, raising issues regarding the nature of Reidel’s involvement in that

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action. But in addition to the lack of evidence of impropriety in this case, Quest’s brief on this
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dispute came only two months before trial, even though it had known of Bibi’s involvement from

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the date the privilege logs were produced. The reasons for the antagonism between Quest, on the

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one hand, and Reidel and Bibi, on the other, is apparent from this and prior lawsuits. But nothing

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more needs to be developed prior to the commencement of the trial here.

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IT IS SO ORDERED.
Dated: July 10, 2015
______________________________________
WILLIAM H. ORRICK
United States District Judge

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United States District Court
Northern District of California

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