United States of America, ex rel., et al v. Sightpath Medical, Inc., et al
Filing
598
ORDER DENYING DEFENDANTS' MOTION TO DISMISS. (Written Opinion). Signed by Judge Wilhelmina M. Wright on 3/2/2020. (RJE)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
United States of America, ex rel. Kipp
Fesenmaier,
Case No. 13-cv-3003 (WMW/DTS)
Plaintiffs,
ORDER DENYING DEFENDANTS’
MOTION TO DISMISS
v.
The Cameron-Ehlen Group, Inc., and Paul
Ehlen,
Defendants.
This matter is before the Court on Defendants’ motion to dismiss based on alleged
unethical conduct, to disqualify the Plaintiffs’ attorneys who engaged in the allegedly
unethical conduct, and to wall off from Plaintiffs any sources of evidence tainted by such
conduct. (Dkt. 288.) For the reasons addressed below, the motion is denied.
BACKGROUND
Defendant The Cameron-Ehlen Group, Inc., doing business as Precision Lens
(Precision Lens), is a distributor of intraocular lenses and other products related to
ophthalmic surgeries.
Defendant Paul Ehlen is the founder and majority owner of
Precision Lens. Defendants provide supplies and equipment to ophthalmologists and
facilities for use in ophthalmology procedures, including cataract surgery. Relator Kipp
Fesenmaier, who previously worked for a Precision Lens corporate partner, filed a qui
tam complaint in November 2013 against Precision Lens and Ehlen, among others. 1
Plaintiff United States of America investigated Fesenmaier’s complaint for several years
and, in August 2017, filed a notice of its election to intervene in this case.
The United States filed an intervenor complaint against Precision Lens and Ehlen
on February 8, 2018. The intervenor complaint alleges that Precision Lens and Ehlen
offered kickbacks to physicians in violation of the Anti-Kickback Statute, 42 U.S.C.
§ 1320a-7b(b), and that, as a result of those kickbacks, false and fraudulent claims for
payment were made to federal health care programs, including Medicare, in violation of
the False Claims Act (FCA), 31 U.S.C. § 3729(a)(1)(B), (a)(2). 2 During discovery,
Defendants learned the following information about the investigations the United States
conducted before filing the intervenor complaint.
In March 2010, Fesenmaier first notified the FBI of his allegations that Defendants
were providing kickbacks to physicians. The FBI interviewed Fesenmaier in December
2011 and designated Fesenmaier as a “confidential human source” shortly thereafter. At
least as early as June 4, 2012, the FBI communicated with attorneys for the United States
about the investigation, including communications about the FBI’s “confidential human
source.”
1
The Court subsequently dismissed the claims asserted against Defendants
Sightpath Medical, Inc., and TLC Vision Corporation based on the parties’ stipulation
pursuant to a settlement agreement in September 2017.
2
The intervenor complaint also alleges Minnesota common-law claims for unjust
enrichment and payment by mistake. The Court granted Defendants’ motion to dismiss
those common-law claims in an October 22, 2018 order.
2
As part of the investigation, the FBI interviewed employees of Precision Lens on
February 19, 2013. The next day, Precision Lens retained counsel, who notified the
United States that he represented Precision Lens and that any additional communications
with Precision Lens and its employees should be coordinated through counsel. But
Fesenmaier continued to communicate with Precision Lens personnel, including Ehlen.
Fesenmaier also reported to the FBI about these communications and, at the FBI’s
direction, he secretly recorded his conversations with Ehlen and other Precision Lens
personnel. These secret recordings continued until January 2017. These recordings
ceased nearly five years after Precision Lens retained counsel and more than three years
after Fesenmaier commenced this civil lawsuit, but more than a year before the United
States filed its intervenor complaint.
Defendants were unaware of Fesenmaier’s recordings until March 2019, when the
United States produced to Defendants 147 recordings that Fesenmaier made
surreptitiously between February 2013 and January 2017.
The United States
subsequently produced an index of the recordings that identifies the date of, and
participants in, each recording. Of the 147 recordings, 44 involve conversations. The
remaining recordings involve unsuccessful attempts to reach Ehlen and others by
telephone. Most relevant to the pending motion to dismiss, 13 of the recordings involve
conversations with Ehlen or other Precision Lens personnel that Fesenmaier made after
he filed his qui tam complaint.
Defense counsel sent a letter to the United States on May 3, 2019, seeking a
justification for Fesenmaier’s contacts with—and recording of—represented individuals.
3
The United States responded by letter that “such communications were authorized by law
as governmental investigative activities [that occurred] prior to the commencement of
criminal or civil enforcement proceedings” because, when the recordings were made,
“the government had not brought criminal charges and had not intervened and filed its
civil Complaint in this matter.” Thereafter, Defendants filed the pending motion to
dismiss.
ANALYSIS
Defendants contend that counsel for the United States and counsel for Fesenmaier
violated the Minnesota Rules of Professional Conduct (MRPC). As a result of this
violation, Defendants argue, this case should be dismissed, Plaintiffs’ counsel should be
disqualified from participating in any further proceedings pertaining to this matter, and
any tainted evidence or sources of evidence should be walled off from Plaintiffs.
It is undisputed that the MRPC apply both to Fesenmaier’s counsel and counsel
for the United States.3 As relevant here, Rule 4.2 of the MRPC provides:
In representing a client, a lawyer shall not communicate about
the subject of the representation with a person the lawyer
knows to be represented by another lawyer in the matter,
unless the lawyer has the consent of the other lawyer or is
authorized to do so by law or a court order.
3
“An attorney for the Government shall be subject to State laws and rules . . .
governing attorneys in each State where such attorney engages in that attorney’s duties,
to the same extent and in the same manner as other attorneys in that State.” 28 U.S.C.
§ 530B(a). “An attorney who is admitted to the court’s bar or who otherwise practices
before the court must comply with the [MRPC],” and “[a]n attorney commits misconduct
by failing to comply with the [MRPC].” LR 83.6(a); accord MRPC 8.5.
4
MRPC 4.2. The purpose of this rule is to facilitate “the proper functioning of the legal
system by protecting a person who has chosen to be represented by a lawyer in a matter
against possible overreaching by other lawyers who are participating in the matter,”
including interference with the attorney-client relationship and the disclosure of
information pertaining to the representation. Id. cmt. 1. Rule 4.2 applies to represented
individuals as well as organizations such as Precision Lens, including an organization’s
personnel.4 Id. cmt. 7. And Rule 4.2 applies to the conduct of not only attorneys, but
also an attorney’s nonlawyer agents, including investigative agents. MRPC 5.3, cmt. 1;
MRPC 8.4(a); see also Midwest Motor Sports v. Arctic Cat Sales, Inc., 347 F.3d 693, 698
(8th Cir. 2003) (explaining that “an attorney is responsible for the misconduct of [the
attorney’s] nonlawyer employee or associate if the lawyer orders or ratifies the conduct”);
O’Keefe v. McDonnell Douglas Corp., 132 F.3d 1252, 1257 (8th Cir. 1998) (affirming
district court determination that government investigative agents were subject to
Missouri’s equivalent to Minnesota’s Rule 4.2 “no-contact” provision).
It is undisputed that Fesenmaier repeatedly communicated with (and recorded
conversations involving) Ehlen and Precision Lens personnel after Plaintiffs’ counsel
knew that Precision Lens and Ehlen were represented by counsel. The record does not
indicate, however, that Fesenmaier’s counsel—either directly or indirectly—
communicated with represented individuals. Although Fesenmaier’s counsel had some
knowledge that this conduct was occurring, Defendants have identified no legal authority
4
In particular, Rule 4.2 prohibits communications with certain “constituent[s] of the
organization,” which the MRPC define as “officers, directors, employees, . . .
shareholders,” and other equivalent positions. MRPC 4.2 cmt. 7, 1.13 cmt. 1.
5
suggesting that an attorney violates Rule 4.2 based on mere knowledge that the attorney’s
client is communicating with represented persons.
There is no evidence that
Fesenmaier’s counsel directed Fesenmaier to engage in the challenged conduct. Nor is
there evidence that Fesenmaier’s counsel had supervisory authority over Fesenmaier, or
that Fesenmaier was otherwise acting as his counsel’s agent. Although Defendants argue
that Fesenmaier’s counsel violated Rule 4.2 by “ratifying” Fesenmaier’s conduct, the
cases on which Defendants rely involve attorneys’ agents, not their clients. See Midwest
Motor Sports, 347 F.3d at 698 (misconduct by retained private investigator imputed to
supervising attorneys); State v. Miller, 600 N.W.2d 457, 464 (Minn. 1999) (misconduct
by police detective imputed to prosecutor who directed and ratified detective’s conduct).
Because Defendants have not established that Fesenmaier’s counsel violated Rule 4.2, the
Court’s analysis is limited to whether counsel for the United States violated Rule 4.2.
It is undisputed, and the record reflects, that Fesenmaier communicated with Ehlen
and other Precision Lens personnel at the direction of counsel for the United States and
their nonlawyer agents.
And counsel for the United States undisputedly knew that
Defendants were represented when these communications occurred. Assuming that these
communications involved the subject matter of this litigation,5 counsel for the United
States violated Rule 4.2 unless, as addressed below, Fesenmaier’s contacts with
represented persons were “authorized . . . by law.” See MRPC 4.2.
5
At least some of the communications appear to have involved the subject matter of
this litigation. But the contents of most of the recordings are not part of the record, and
the United States disputes whether the recorded conversations involve privileged subject
matter that is material to this litigation.
6
According to the United States, Fesenmaier’s contacts with Ehlen and Precision
Lens personnel were authorized by law—and, therefore, not a violation of Rule 4.2—
because those contacts were part of a legitimate investigative process that occurred before
the commencement of criminal or civil enforcement proceedings. Defendants counter
that the authorized-by-law exception does not apply to the conduct of the United States in
this case.
An attorney does not violate Rule 4.2 by communicating with a represented person
if the attorney “is authorized to do so by law.” MRPC 4.2. The commentary that follows
Rule 4.2 provides, as relevant here, the following guidance about the authorized-by-law
exception:
Communications authorized by law may . . . include
investigative activities of lawyers representing governmental
entities, directly or through investigative agents, prior to the
commencement of criminal or civil enforcement proceedings.
MRPC 4.2 cmt. 5. Consistent with this guidance, both the United States Court of
Appeals for the Eighth Circuit and the Minnesota Supreme Court have recognized that
government attorneys and investigators are not prohibited from having ex parte contact
with an investigatory target who has retained counsel but has not been charged with a
crime.
See, e.g., United States v. Plumley, 207 F.3d 1086, 1095 (8th Cir. 2000)
(collecting cases); State v. Miller, 600 N.W.2d 457, 467 (Minn. 1999) (recognizing that
“the ‘authorized by law’ exception to MRPC 4.2 . . . mean[s] that legitimate investigative
processes may go forward without violating MRPC 4.2 even when the target of the
7
investigation is represented by counsel”).6 Here, it is undisputed that the United States
has not commenced criminal proceedings against Defendants. Based on the foregoing
authority, if this case were limited to a pre-indictment criminal investigation, the conduct
of the United States would unquestionably be authorized by law and, therefore, not a
violation of Rule 4.2. But the facts at issue in this case are not limited to a pre-indictment
criminal investigation because this case involves a parallel civil investigation and civil
proceedings. As a result, additional analysis is necessary.
The authorized-by-law exception to Rule 4.2 is not limited to criminal
investigations. The exception also applies to the government’s “investigative activities”
conducted “prior to the commencement of . . . civil enforcement proceedings.” MRPC
4.2 cmt. 5.
The parties disagree about when the civil enforcement proceedings
commenced in this case. The United States argues that, because it did not commence
civil enforcement proceedings until it intervened in this case on February 8, 2018, its
investigative activities were authorized by law until that date. It is undisputed that all of
Fesenmaier’s contacts with (and recording of) represented persons occurred before the
6
To be sure, in Miller the Minnesota Supreme Court held that “when the process
goes beyond fair and legitimate investigation and is so egregious that it impairs the fair
administration of justice, it is not ‘authorized by law.’ ” Miller, 600 N.W.2d at 467. But
this aspect of the Miller decision has minimal relevance here for at least three reasons.
First, Miller is not binding precedent for this Court. See Plumley, 207 F.3d at 1095
(observing that the interpretation of state disciplinary rules as they apply in federal court
“is a matter of federal law” (internal quotation marks omitted)). Second, Miller predates
the adoption of Comment 5 to Rule 4.2 of the MRPC, which expressly includes preindictment government investigative activities as conduct that is “authorized by law.”
See MRPC 4.2 cmt. 5. Third, Defendants have not demonstrated that any conduct by the
United States in this case was so egregious as to impair the fair administration of justice.
Indeed, Defendants effectively concede that they were not harmed as a result.
8
United States intervened.
Defendants counter that civil enforcement proceedings
commenced when Fesenmaier filed his qui tam complaint on November 1, 2013. And it
is undisputed that 13 of Fesenmaier’s recorded conversations with represented persons
occurred after that date.
The procedures that govern qui tam actions provide instructive context for the
analysis of this dispute. The United States is required by statute to investigate possible
violations under the FCA. 31 U.S.C. § 3730(a). Either the United States or a private
party may initiate a civil action alleging fraud on the United States in violation of the
FCA. Id., § 3730(b). When a private party initiates such an action, the United States
must review the claim and decide whether to “elect to intervene and proceed with the
action.” Id., § 3730(b)(2), (b)(4). Although a private party’s FCA action is pursued on
behalf of the United States, the United States becomes a party to an FCA action “only if
[the United States] intervenes in accordance with the procedures established by federal
law.” United States ex rel. Eisenstein v. City of New York, 556 U.S. 928, 933 (2009).
Here, although Fesenmaier commenced this civil proceeding against Defendants in
November 2013, the United States did not commence a civil proceeding against
Defendants until it intervened and became a party to this lawsuit in February 2018.
Defendants maintain that this distinction is immaterial, arguing that “[n]othing in
Comment 5 [to Rule 4.2] says that the criminal or civil enforcement proceedings must be
commenced by the United States or even suggest[s] that it is triggered only if the
government intervenes.” While no such requirement expressly appears in Comment 5 to
Rule 4.2, Comment 5 plainly addresses the “investigative activities of lawyers
9
representing governmental entities.” MRPC 4.2 cmt. 5. Comment 5 does not address
investigative activities conducted by private parties. See id. And when read in context,
the plain language of Comment 5 strongly suggests that the phrase “commencement of
criminal or civil enforcement proceedings” means commencement of such proceedings
by a governmental entity.7
Moreover, this interpretation of Comment 5 to Rule 4.2 is consistent with both the
statutory procedure in qui tam cases and the governing case law in the context of criminal
proceedings. It is well-established in the Eighth Circuit that, during the period before the
government has filed criminal charges, government attorneys and investigators are
permitted to have ex parte contact with an investigatory target who has retained counsel.
See Plumley, 207 F.3d at 1095. When comparing a criminal proceeding to a qui tam
proceeding, the closest analogy to the government filing criminal charges is the
government filing an intervenor complaint.
In both instances, the timing is—to a
significant extent—within the government’s discretion. And both actions occur only
after the government has exercised its obligation to investigate alleged wrongdoing and
made the decision to invoke its enforcement authority.
Although a relator’s filing of a qui tam complaint bears some similarities to the
filing of criminal charges, it also differs in several important respects. The government
has the primary responsibility to prosecute an FCA action if it elects to intervene, but
nonetheless lacks control over the substance and timing of a relator’s complaint. See
31 U.S.C. § 3730(b), (c). In some (if not most) qui tam cases, the government does not
7
Notably, criminal proceedings may be commenced only by a governmental entity.
10
begin its investigation until after the relator’s complaint is filed, which is the point when
a relator is required to disclose to the government the relator’s allegations and material
evidence. See id., § 3730(b)(2). Indeed, the government might first become aware of the
allegations when the relator’s complaint is filed. See id.
Notably, a relator’s qui tam complaint must “be filed in camera, shall remain
under seal for at least 60 days, and shall not be served on the defendant until the court so
orders.” Id. “The purpose of these provisions is to protect the [g]overnment’s interest in
criminal matters by enabling the government to investigate the alleged fraud without
tipping off investigation targets at a sensitive stage.” United States ex rel. Yesudian v.
Howard Univ., 153 F.3d 731, 743 (D.C. Cir. 1998) (internal quotation marks omitted);
accord State Farm Fire & Cas. Co. v. U.S. ex rel. Rigsby, 137 S. Ct. 436, 443 (2016)
(explaining that “the seal provision was meant to allay the Government’s concern that a
relator filing a civil complaint would alert defendants to a pending federal criminal
investigation” and “was intended in main to protect the Government’s interests”).
Congress not only contemplated that the government’s investigatory activities would
occur after the relator’s complaint is filed, Congress also affirmatively sought to protect
the government’s interests in commencing or continuing such investigations, in secret,
after the relator’s complaint is filed. See Yesudian, 153 F.3d at 743; Rigsby, 137 S. Ct. at
443. As such, the MRPC’s reference to investigative activities of the United States prior
to the commencement of civil enforcement proceedings, when evaluated in the qui tam
context, most reasonably pertains to investigative activities conducted before the United
States intervenes.
11
The decisions of the Eighth Circuit on which Defendants rely are inapposite. In
Midwest Motor Sports, the Eighth Circuit affirmed the district court’s imposition of
sanctions for violations of Rule 4.2. 347 F.3d at 698–99. But Midwest Motor Sports
involved private parties.
The case did not involve investigative activities by a
governmental entity, nor did the Eighth Circuit’s decision address the authorized-by-law
exception to Rule 4.2. Id. at 697–99. In O’Keefe, a qui tam case, the Eighth Circuit
affirmed the district court’s issuance of a protective order that prevented the
government’s attorneys from engaging in ex parte contacts with the defendant
corporation’s employees. 132 F.3d at 1256–57. But O’Keefe is factually and legally
distinguishable for at least two reasons: the ex parte contacts at issue in O’Keefe were
post-intervention, and the legal question at issue was whether those contacts were
authorized by law pursuant to a now-invalid federal regulation that is not implicated here.
Id. at 1253–57. Moreover, both Midwest Motor Sports and O’Keefe predate Minnesota’s
adoption of Comment 5 to Rule 4.2 of the MRPC, which expressly provides that conduct
authorized by law may include the government’s investigative activities. MRPC 4.2,
cmt. 5.
Defendants contend that Rule 4.2 should apply to investigative activities before
the government intervenes because, without Rule 4.2’s protection, “the government can
manipulate the timing of its intervention to avoid the no-contact rule.”8 Applying that
8
Defendants also contend that the United States may have intentionally delayed
intervening in this case so as to avoid the no-contact rule. But Defendants provide no
evidence to support this allegation, and the record suggests otherwise.
12
logic, Rule 4.2 also should govern pre-indictment criminal investigative activities
because the government similarly has discretion to control the timing of criminal charges
to avoid the no-contact rule. But that is not the law. It is well-established that the
authorized-by-law exception to Rule 4.2 applies to the government’s pre-indictment
investigative activities. See Plumley, 207 F.3d at 1095. And in the qui tam context, the
closest analogy to the government’s decision to seek an indictment is the government’s
decision to intervene. It is not categorically improper for the government to exercise its
discretion in deciding when to bring criminal charges or when to intervene in a qui tam
proceeding.9
For these reasons, the pre-indictment and pre-intervention investigative activities
conducted by the United States in this case were authorized by law and, therefore, did not
violate MRPC Rule 4.2. Because Defendants have not demonstrated the existence of a
9
Defendants also suggest that the government will have unfair and unfettered
power if Rule 4.2 does not prohibit the investigative tactics used by the United States in
this case. The Court disagrees. By concluding that the government’s pre-indictment,
pre-intervention investigatory activities are authorized by law, the Court’s ruling does not
mean that the government is subject to no ethical limitations. Courts have concluded that
certain illegitimate investigative tactics might fall outside the authorized-by-law
exception to Rule 4.2. See, e.g., United States v. Hammad, 858 F.2d 834, 836, 839–40
(2d Cir. 1988) (concluding that use of a “sham” grand jury subpoena was not one of the
“legitimate investigative techniques” that a prosecutor is authorized by law to employ);
Miller, 600 N.W.2d at 468 (concluding that prosecutor’s “systematic isolation of [a
suspect] from his attorney by refusing to terminate [a] non-custodial interview despite the
attorney’s request and prohibiting the attorney from speaking with the client” was
“sufficiently egregious to implicate concerns relating to the fair administration of
justice”). Neither Hammad nor Miller is binding authority here. But even if they were,
these cases are factually inapposite because Defendants have not demonstrated that the
investigative techniques used in this case were illegitimate or implicate concerns as to the
fair administration of justice.
13
Rule 4.2 violation, the Court need not address what sanctions would be warranted had
such a violation occurred.10
ORDER
Based on the foregoing analysis and all the files, records and proceedings herein,
IT IS HEREBY ORDERED that Defendants’ motion to dismiss, (Dkt. 288), is
DENIED.
Dated: March 2, 2020
s/Wilhelmina M. Wright
Wilhelmina M. Wright
United States District Judge
10
Even if a violation had occurred, Defendants all-but concede that they have not
been harmed by the United States’s conduct, and the record does not demonstrate any
such harm. Moreover, even if Defendants are correct that this Court has discretion to
order sanctions absent a showing of harm, the sanctions that Defendants seek—dismissal
and disqualification—are disproportionate to the alleged violations in light of the record
and, therefore, unwarranted.
14
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