United States of America, ex rel., et al v. Sightpath Medical, Inc., et al

Filing 203

ORDER granting 172 Motion to Compel(Written Opinion) Signed by Magistrate Judge David T. Schultz on 4/2/2019. (AJS)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

United States of America, ex rel., et al.,

Case No. 13-cv-3003 (WMW/DTS)

Plaintiffs,
v.

ORDER

Cameron-Ehlen Group, Inc., et al.,
Defendants.
______________________________________________________________________
INTRODUCTION
In this qui tam action under the False Claims Act, Defendants Cameron-Ehlen
Group (d/b/a Precision Lens) and Paul Ehlen move to compel discovery responsive to
several interrogatories and a document request served on the Government. Specifically,
they seek the basis for allegations in the Complaint that doctors paid below fair market
value for expensive trips arranged by Defendants, as well as the identification of specific
false claims of which the Government is currently aware. Defendants also seek
production of memoranda of interviews the Government conducted during its pre-suit
investigation. Relatedly, Defendants argue that the Government, though asserting
privilege in response to some of the discovery requests, has provided an inadequate
privilege log that must be supplemented. Defendants are entitled to almost all that they
seek.
FACTS
The present action began more than five years ago when, in November 2013,
Relator Kipp Fesenmaier filed a qui tam action under seal and served the United States
Attorney’s Office. Over an approximately four-year period, the Government sought—and
received—eleven extensions of the deadline to intervene in the case. The Government

eventually decided to intervene against select defendants, including Precision Lens and
Paul Ehlen, in late 2017. The Government filed its Complaint, which became the sole
operative complaint, in February 2018. Compl. in Intervention, Docket No. 105; Order,
Feb. 26, 2018, Docket No. 114.
Nearly a year before Fesenmaier filed his qui tam action, the Federal Bureau of
Investigation began investigating Defendants’ business activities. Herrett Decl. ¶¶ 2-3,
Docket No. 182. The FBI interviewed Precision Lens employees in 2013, coordinating at
least minimally with the United States Attorney’s Office. Id. at ¶ 4; Beimers Decl. ¶ 2,
Docket No. 103. By 2014, Assistant United States Attorneys with the Office’s civil
division were coordinating regularly with the FBI on the investigation, including
interviews of Precision Lens employees and customers. Herrett Decl. ¶ 5; Beimers
Decl. ¶ 3.
ANALYSIS
Defendants bring the present motion to compel, seeking more fulsome
responses to three Interrogatories and a Request for Production of Documents. Federal
Rule of Civil Procedure 26(b) provides that “[p]arties may obtain discovery regarding
any nonprivileged matter that is relevant to any party’s claim or defense and
proportional to the needs of the case.” The rule contemplates a liberal scope of
discovery, though this Court “possess[es] considerable discretion in determining the
need for, and form of, discovery.” In re Nat’l Hockey League Players’ Concussion Injury
Litig., 120 F. Supp. 3d 942, 949 (D. Minn. 2015).
I.

Basis for Allegations of Below Fair Market Value Transfers
In its Complaint, the Government alleges specific instances of physicians who

were remunerated by not paying the full fair market value for trips and other benefits
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provided by Defendants. E.g., Compl. ¶¶ 56, 64-65, 97, 102, 121, 127, 131, 139.
Defendants seek the Government’s estimation of the fair market value regarding these
specific allegations, and the basis of such estimations. Their original Interrogatory was
considerably broader:
INTERROGATORY NO. 2: Identify each alleged kickback, including but
not limited to the alleged provider, the recipient, the date, the nature of the
kickback. For each such instance, identify:
a) The amount and form of payment by the alleged provider.
b) The amount and form of payment by the alleged recipient.
c) The estimated fair value.
d) The basis for the valuation.
Huyser Aff. Ex. 3, at 4, Docket No. 175-1. Although the Government partially answered
the Interrogatory, it objected to providing an estimation for the fair market value
“because it places the burden on the United States when this is in fact Defendants’
burden, and Defendants are in a position at this point in discovery to know more about
various details than the United States.”1 Id. at 4-5.
Because the Government made specific allegations in the Complaint regarding
fair market value, the factual basis for those allegations is presumptively discoverable.
Factual contentions must either “have evidentiary support or, if specifically so identified,
will likely have evidentiary support after reasonable opportunity for further investigation
or discovery.” Fed. R. Civ. P. 11(b); see also Summit Recovery v. Credit Card Reseller,
Civ. No. 08-5273 (DSD/JSM), 2009 WL 10678533, at *3 (D. Minn. Sept. 3, 2009) (noting
that plaintiff must be “aware of the information sought by [the] discovery” because it was
the factual basis for an allegation subject to Rule 11). That the Interrogatory is possibly
a contention interrogatory does not, alone, alter that presumption of discoverability. Fed.
R. Civ. P. 33(b). Although courts often allow parties to wait until the end of discovery to
1

The Government reiterated this position in a letter to Defendants’ counsel. Huyser Aff.
Ex. 2, at 2.
3

answer contention interrogatories, BB&T Corp. v. United States, 233 F.R.D. 447, 450
(M.D.N.C. 2006), the Government mentioned specific instances of below fair market
value payments in its Complaint for which it must have had some basis. Defendants
may discover the basis for these initial allegations at this stage of the litigation, even if it
is not the full universe of facts that ultimately are offered in support of the allegation at
trial.
The Government’s remaining arguments on this issue are unpersuasive. It
argues that Defendants bear the burden of proof on the question of fair market value,
and further stresses that a payment need not be below fair market value to be a
remuneration under the Anti-Kickback Statute. None of this is relevant to the question
currently before the Court. The Government made allegations in its Complaint for which
it must have had some basis. That basis is discoverable at this stage of the litigation.
The Government shall state its estimation for the fair market value of the specific
allegations in the Complaint, as well as its basis for each of those estimations. If it does
not have an estimation, the Government must still state the basis for its allegations.
II.

Identification of False Claims
Defendants next seek a more exacting response to their first Interrogatory, which

sought specification of the alleged false claims at issue in this case, but to which the
Government objected:
INTERROGATORY NO. 1: Identify each false claim alleged to have been
submitted to the United States Government, including but not limited to the
date, amount, identity of the submitting entity, billing codes, facility,
Surgical Supplies, and Complaint Physician associated with each claim.
For each such instance, identify the breakdown of the facility fee and the
physician fee.
ANSWER: . . . The United States further objects to this interrogatory in
that discovery is ongoing and the United States is still learning about the
conduct described therein. Finally, the United States objects to this
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interrogatory as it is overly broad and unduly burdensome in that it seeks
identification of “each false claim.” 2 . . .
Huyser Aff. Ex. 3, at 3-4. After objecting, the Government directed Defendants to its
initial disclosures, which identifies all claims from specific physicians during the relevant
time period.
The parties’ disagreement is fundamentally about the appropriate timeline for this
discovery. The Government insists that Defendants have served a contention
interrogatory and that it will be prejudiced by having to respond this early in the
discovery process. It also suggests that Defendants are well aware of the claims at
issue because they are aware of many of the trips and other remunerations at issue.
Defendants retort that the Government has been investigating the matter for nearly six
years and that the allegedly false claims at issue must be narrowed in time for
Defendants to conduct their own discovery and avoid potentially large costs associated
with investigating every claim for every identified physician.
Defendants’ Interrogatory may well be a contention interrogatory, but the
Government must still respond. And it may do so now without being prejudiced.
Interrogatories—including contention interrogatories—“may relate to any matter that
may be inquired into under Rule 26(b).” Fed. R. Civ. P. 33(b). “Contention
interrogatories that seek damage theory and methodology information almost invariably
will comport with the requirements of Rules 26(b)(1) and 33(c).” Honeywell Int’l Inc. v.
Furuno Elec. Co., Ltd., Civ. No. 09-3601 (MJD/TNL), 2013 WL 2385224, at *4 (D. Minn.
May 30, 2013) (quoting U.S. ex rel Tyson v. Amerigroup Ill., Inc., 230 F.R.D. 538, 544
2

The Government also objected on the basis of the work product doctrine, but it did not
further that argument in either its briefing or at the motion hearing. Because the party
asserting the privilege bears the burden of establishing its applicability, the Court will not
pursue the issue. See In re Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 925
(8th Cir. 1997).
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(N.D. Ill. 2005)). Here, identification of the specific claims allegedly tainted by kickbacks
is relevant to damages calculations at trial. And, frankly, it is relevant to Defendants’
valuation of the case, a fact which favors providing such information sooner rather than
later. Identification of specific claims allows Defendants to conduct third-party discovery
on only those claims actually at issue without wasting resources on potentially hundreds
or thousands of irrelevant claims that were made by a physician years after an alleged
kickback.
The Government will not be prejudiced by answering the Interrogatory to the
extent of its current knowledge. As to its scope, the request is not as broad as the
Government suggests, as it does not “seek a catalog of all facts or all evidence that
support a party’s contentions.” Linde v. Arab Bank, PLC, 2012 WL 957970, at *1
(E.D.N.Y. March 21, 2012). It merely seeks the identification of the claims that the
Government contends supports its damages calculation, not every fact that undergirds
why the Government thinks that particular claim is tainted by a kickback. Nor will the
Government be “hemmed into fixing its position without adequate information” by
answering the Interrogatory now. See Strauss v. Credit Lyonnais, S.A., 242 F.R.D. 199,
233 (E.D.N.Y. 2007). Although such concerns may be real when the interrogatory seeks
the detailed factual basis of a contention when discovery has just begun, such is not a
concern here. The Interrogatory does not ask for a complete theory of why the claim is a
false claim, but only seek to identify relevant claims. So there is no “hemming into” a
particular theory. And as the court in Strauss noted, “plaintiffs are under an ongoing
obligation to supplement their discovery responses.”” Id. at 235. The Government can
identify additional claims to be added or claims to be removed as discovery continues.
So, there is no prejudice to its damages claim by providing an initial response.
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The Government shall answer Defendants’ Interrogatory No. 1 to the extent of its
current

knowledge

regarding

specific

claims,

without

prejudice

to

further

supplementation as discovery progresses. It shall also identify, without prejudice to
further supplementation, any specific physicians and alleged remunerations it currently
knows about, as well as the duration of any taint to claims it alleges stems from said
remuneration. All supplementation of this information must be completed no later than
45 days before the close of discovery.
III.

Privilege Log
Before turning to the final and thorniest discovery issue, the witness interviews,

the Court must address the Government’s privilege log. The log, one page long, sorts
responsive documents into nine broad categories and then “checks the box” of one or
more asserted privilege for each category. Huyser Decl. Ex. 5. This is insufficient. As
discussed further below, the party asserting a privilege against discovery bears the
initial burden. Though “[t]here is no ‘privilege log’ rule[,] . . . the privilege log is a
convention of modern legal practice designed to conform with the requirements of
Federal Rule of Civil Procedure 26(b)(5).” Bartholomew v. Avalon Capital Grp., Inc., 278
F.R.D. 441, 447 (D. Minn. 2011). Rule 26 requires a party asserting a privilege to
“describe the nature of the documents, communications, or tangible things not produced
or disclosed—and do so in a manner that, without revealing information itself privileged
or protected, will enable other parties to assess the claim.” Fed. R. Civ. P. 26(b)(5)(ii);
see also In re Wirebound Boxes Antitrust Litig., 129 F.R.D. 534, 537 (D. Minn. 1990).
The Government’s broad categories do not provide sufficient information that
allows Defendants to assess the asserted privileges. This was made apparent in the
recent status conference, when the parties discussed with the Court the disclosure of
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certain surreptitious audio recordings made by the Relator. The Government had initially
withheld these recordings as privileged and categorized them as “Audio recordings of
discussions with witnesses, primarily in connection with the criminal investigation.” This
broad category could also include recorded interviews with witnesses conducted by the
FBI or U.S. Attorney’s Office. Indeed, the average reader of the log would likely not
even consider surreptitious recordings as falling into that category. And that is exactly
why the log as provided does not enable Defendants to assess any privilege claim for
the documents within the categories, as they are entitled to under Rule 26(b).
To the Government’s credit, it has provided a fuller supplemental privilege log for
interview reports and other investigative materials. Samie Decl. Ex. A, Docket No. 1811. Although not always dispositive, such a log at least homes in on the applicable issue
in the asserted privilege. The Government shall provide a more fulsome privilege log,
akin to the limited supplemental log already provided, for all documents it withholds
based upon an asserted privilege. The log should identify each document’s date,
author, all recipients, a brief description of the document’s contents, and the privilege
asserted. The Government shall have two weeks from the date of this Order to provide
Defendants with this supplemental privilege log.
IV.

Investigation Interviews
Defendants served discovery requests regarding interviews conducted by the

Government during the course of its investigation:
INTERROGATORY NO. 3: Identify the persons the Government
interviewed during its Investigation of the allegations in the Complaint.
REQUEST FOR PRODUCTION NO. 5: All reports of interviews and notes
of interviews made by you in the context of Your Investigation of the
allegations in this case.

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Huyser Decl. Ex. 3, at 17; Ex. 4, at 5. The Government declined to answer either
discovery request, citing the work product doctrine, the informant’s privilege, and the
investigatory files privilege. Id. at Ex. 3, at 17; Ex. 4, at 5-6. In its perfunctory privilege
log, the Government also appears to invoke the deliberative process privilege. Id. at
Ex. 5.
Of the various privileges asserted by the Government, only the work product
doctrine warrants extended discussion. Each of the three other privileges alluded to is a
qualified or narrow privilege under the common law, and the onus is on the asserting
party to demonstrate its applicability. See, e.g., Elnashar v. Speedway SuperAmerica,
LLC, 484 F.3d 1046, 1052-53 (8th Cir. 2007) (informant’s privilege); Redland Soccer
Club, Inc. v. Dep’t of Army of U.S., 55 F.3d 827, 854 (3d Cir. 1995) (deliberative process
privilege); Stephens Produce Co., Inc. v. N.L.R.B., 515 F.2d 1373, 1376-77 (8th Cir.
1975) (investigatory files privilege). Beyond mere invocation, the Government has made
no effort to satisfy its burden on any privilege asserted other than the work product
doctrine, so the Court will not attempt to analyze their applicability to the present case.
Even as to the work product doctrine, the Government has not demonstrated its
applicability to Defendants’ Interrogatory that merely asks who it interviewed as part of
the investigation. Anyway, it is unlikely that the doctrine would cover such information,
which is neither a “document” or “tangible thing,” and the information, at least by itself,
does not “inherently reveal the attorney’s mental impressions.” Onwuka v. Federal
Express Corp., 178 F.R.D. 508, 512-13 (D. Minn. 1997) (“[A]ccording to the great weigh
of authority, while Rule 26(b)(3) affords protection for documents and tangible things,
the underlying facts are not protected by the work-product doctrine”); but see United
States v. All Assets Held at Bank Julius Baer & Co., Ltd., 270 F. Supp. 3d 220, 223-25
9

(collecting cases that show courts are split regarding applicability of work product
doctrine to interrogatories that seek the identity of interviewees).
The assertion of the work product privilege to the document request is a trickier
issue. For approximately a year before Fesenmaier filed this qui tam action, there was a
criminal investigation involving the Defendants. The civil investigation ran parallel to,
and likely intertwined with, this criminal inquiry for some while before the present action
became the only case the Government chose to pursue. So, Defendants’ discovery
request encompasses interviews conducted by the FBI independent of the United
States Attorney’s Office, interviews conducted by FBI agents at the behest of, or even
overseen by, the U.S. Attorney’s Office, and interviews conducted by Assistant United
States Attorneys themselves. 3 Where a particular memorandum falls on this list may
determine whether the doctrine applies at all, and, if so, whether its application is
surmountable by a showing of need. But the Court does not have in the record before it
sufficient facts to definitely conclude which documents are protected by the work
product doctrine, the application of which is sensitive to the specific facts of each
document. The most logical path forward is for the Government to produce any
responsive document, subject to the following guidance.
First, some unproduced documents are likely not work product at all. As the
asserting party, the Government “must show the materials were prepared in anticipation
of litigation, i.e., because of the prospect of litigation.” PepsiCo, Inc. v. Baird, Kurtz &
Dobson LLP, 305 F.3d 813, 817 (8th Cir. 2002). The Government is correct that this
does not require a case to be literally filed, id., and that the privilege may extend to
materials created by an attorney’s agent, e.g., In re Green Grand Jury Proceedings, 492
3

The supplemental privilege log suggests that this last category is not really at issue, as
all of the interviews were apparently conducted by FBI agents. Samie Decl. Ex. A.
10

F.2d 976, 981-82 (8th Cir. 2007). What is less certain is whether the materials produced
early in the investigation satisfy this fact-specific test. The Court’s limited understanding
of the investigation is that the civil division of the U.S. Attorney’s Office did not become
meaningfully involved in the investigation until 2014. Herrett Aff. ¶¶ 4-5. Even as to the
criminal investigation, it is unclear how much control the U.S. Attorney had over the
early interviews, as the special agent who oversaw the investigation only attests that
she “discussed” interview subjects with an assistant U.S. Attorney, not that she was
directed to cover specific topics. Id. at ¶ 4. But law enforcement agents are not
necessarily agents of the government attorney. United States ex rel. Landis v. Tailwind
Sports Corp., 303 F.R.D. 419, 424 (D.D.C. 2014). Given the FBI’s “independent mission
to investigate potential criminal offenses, which [it] routinely pursues without supervision
or even involvement by Government attorneys[,]” id., the Court is loath to conclude on
this thin record that the pre-2014 FBI interview materials were created by an attorney’s
agent. Accordingly, the Court finds that the work product doctrine does not apply to
those documents, irrespective of their content.
Those materials created by FBI agents after the U.S. Attorney’s Office became
more intimately involved in 2014 are more properly characterized as the work of an
attorney’s agent. But that does not end the inquiry. Since the Supreme Court decided
Upjohn Co. v. United States, 449 U.S. 383 (1981), courts have distinguished between
opinion work product, “which encompasses counsel’s mental impressions, conclusions,
opinions or legal theories,” and fact work product, which “includes raw factual
information.” In re Green, 492 F.3d at 980-81 (cleaned up). Of these, opinion work
product enjoys a near absolute privilege, but fact work product can be discovered under

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Rule 26 “upon a showing of substantial need and an inability to secure the substantial
equivalent of the materials by alternate means without undue hardship.” Id. at 980.
The Eighth Circuit has opined that notes and memoranda of a witness interview
are opinion work product because “when taking notes, an attorney often focuses on
those facts that she deems legally significant.” Id. at 981-82 (quoting Baker v. General
Motors Corp., 209 F.3d 1051, 1054 (8th Cir. 2000)). The Government thus urges the
position that any FBI notes or memoranda that is work product is opinion work product
for which the Defendants have not demonstrated the incredibly high burden to get. That
is not so obvious. The rationale of the Eighth Circuit’s holding emphasizes the analysis
an attorney (or agent) conducts when choosing to memorialize certain facts while
disregarding others. This is consistent with the D.C. Circuit’s position, re-articulated by
the United States District Court for the District of Columbia in Landis, that the fact work
product standard applies to notes or memoranda “that the lawyer has not sharply
focused or weeded.” In re Sealed Case, 124 F.3d 230, 236 (D.C. Cir. 1997) (reversed
on other grounds). Although some, or even many, of the FBI reports may be opinion
work product, the Court cannot say with confidence without reviewing the individual
documents. If a memorandum is a “nearly verbatim transcript[]” of the interview, then
the Court is inclined to find it to be fact work product. In re HealthSouth Corp. Sec. Litig.,
250 F.R.D. 8 (D.D.C. 2008).
For those documents properly viewed as fact work product, the Court is satisfied
that Defendants have demonstrated both substantial need and the inability to otherwise
obtain the information without undue hardship. Fed. R. Civ. P. 26(b)(3)(A)(ii). The
Landis opinion is persuasive on this matter. As the court in that case noted, the civil
lawyers in this matter have had the benefit of the prior criminal investigation, which
12

produced “critical sources of evidence for both sides.” Landis, 303 F.R.D. at 425. This is
truer here, where the Government conducted a parallel investigation and shaped the
later parts of the criminal investigation. Although many of the witnesses were Precision
Lens employees, the contemporaneous notes and memoranda are unique because
they “provide the witnesses’ initial, unadorned testimony . . . and reveal how the
witnesses’ testimony and recollections may have changed over time.” Id. at 426. The
investigation in this case began in late 2012; it is now 2019. The passage of time alone
prejudices Defendants’ ability to obtain the same information by interviewing the
witnesses today. By extending the start of this case for almost four years through eleven
requests to extend the deadline to intervene, the Government contributed to the
Defendants’ need for, and inability to otherwise obtain, the same information which now
exists solely in the Government’s possession.
The Government shall provide Defendants with all responsive documents,
subject to the opportunity to submit any document for in camera review for privilege.
Documents submitted for review may be submitted as either being privileged in their
entirety, or submitted for approval of reasonable redactions. An example of such a
reasonable redaction would be the redaction of minor commentary or analysis within a
document that is otherwise a near verbatim recreation of an interview.

ORDER
IT IS HEREBY ORDERED that:
1.

Defendants’ Motion to Compel Discovery [Docket No. 172] is GRANTED.

2.

The

Government

shall

supplement

its

response

to

Defendants’

Interrogatory No. 2 by providing its estimation of the fair market value of the specific
13

allegations it made in the Complaint that physicians paid below fair market value for trip
or benefit, as well as its basis for each of each estimation.
3.

The Government shall answer Defendants’ Interrogatory No. 1 to the

extent of its current knowledge regarding specific claims, without prejudice to further
supplementation as discovery progresses. It shall also identify, without prejudice to
further supplementation, any specific physicians and alleged remunerations it currently
knows about, as well as the duration of any taint to claims it alleges stems from said
remuneration. All supplementation of this information shall be completed no later than
45 days before the close of discovery.
4.

Consistent with the discussion of the work product doctrine in this Order,

the Government shall answer Defendants’ Interrogatory No. 3. It shall also produce all
documents responsive to Defendants’ Document Request No. 5, but may submit any
documents or proposed redactions to the Court for in camera review. No further briefing
will be permitted.
5.

The Government shall produce a supplemental privilege log that identifies

each individual document it continues to claim is privileged. The log should include the
date of the document, author, all recipients (including “cc” and “bcc” recipients), a brief
description of the document’s contents (e.g., “legal advice regarding operation of AntiKickback Statute”), and the privilege asserted.

Dated: April 2, 2019

s/David T. Schultz
DAVID T. SCHULTZ
United States Magistrate Judge

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