United States of America ex rel. et al v. D.S. Medical LLC et al
MEMORANDUM AND ORDER re: 139 MOTION to Compel Discovery and Memorandum in Support filed by Defendant Sonjay Fonn. IT IS HEREBY ORDERED that Defendant Sonjay Fonns motion (Doc. No. 139) to compel production of the four Reports of Interview is GRANTED. The government shall forthwith produce the four Reports of Interview. Signed by District Judge Audrey G. Fleissig on 8/26/16. (CSG)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
UNITED STATES OF AMERICA,
ex rel. PAUL CAIRNS, et al.,
D.S. MEDICAL, L.L.C., et al.,
Case No. 1:12CV00004 AGF
MEMORANDUM AND ORDER
This qui tam action is before the Court on Defendant Dr. Sonjay Fonn’s motion
(Doc. No. 139) to compel production of Reports of Interview of five interviews
conducted in 2010 by the government in connection with a criminal investigation in
Texas. The government asserts the investigative (law enforcement) privilege. For the
reasons set forth below, the motion to compel will be granted.
The qui tam complaint in the present action was filed on January 5, 2012,
claiming, inter alia, that Dr. Fonn violated the False Claims Act, 31 U.S.C. §§ 3729-33,
by submitting to the Medicare and Medicaid programs false claims for reimbursement,
for his services in performing spinal surgeries between December 2008 and March
2012, and for the purchase of implant devices, from manufacturers including Verticor,
LTD, used in those surgeries. The claims for reimbursement were allegedly false
because they were the result of kickbacks that violated the federal criminal AntiKickback Statute. On June 30, 2014, the government filed its notice of intention to
intervene in the case. On September 18, 2014, the government filed criminal charges
against Defendants, arising out of the same conduct involved in this civil case, and the
Court thereafter granted Defendant’s motion to stay the civil case in light of the
pendency of the criminal case. On December 15, 2015, the government dismissed the
criminal charges, and the stat in this case was lifted on December 17, 2015.
Dr. Fonn seeks production, in the present case, of Reports of Interview of
interviews of five individuals conducted by the government in 2010 in connection with
a criminal investigation in Texas of an alleged kickback scheme involving Verticor and
its owner, Todd Stanaford. The five individuals are Stanaford and four other employees
of Verticor. The Texas allegations were that consulting agreements between Verticor
and ten surgeons, not including Dr. Fonn, constituted kickbacks paid to the surgeons for
using Verticor spinal implants. No criminal charges were ever brought as a result of the
Texas investigation, and it is undisputed that that investigation has been closed for
several years. In its Rule 26 disclosures, the government has disclosed the names of the
five individuals whose interview reports Dr. Fonn seeks, as witnesses who may be
called in the present case. It is undisputed that each of the interviews at issue was
conducted under a proffer agreement.
During the now dismissed criminal case against Defendants, the government
turned over the 15-page affidavit in support of the search warrant executed on
Verticor’s facilities on February 1, 2010, as part of the Texas investigation; the affidavit
included information provided by two of the five individuals whose interviews are now
at issue. Also during the criminal case against Defendants, the government sent
Defendants an email dated May 22, 2015, with a brief synopsis of the Texas interviews
with the Verticor employees.
In response to Defendants’ request for the production of the Reports of
Interview, the government maintained that the reports were protected by the
investigative privilege, whereupon Dr. Fonn filed the present motion to compel
production of the Reports of Interview.
ARGUMENTS OF THE PARTIES
Dr. Fonn argues that circumstances indicate that in their interviews, none of the
five Texas witnesses stated that Dr. Fonn was involved in a kickback scheme with
Verticor, and thus what these witnesses were asked, what they said, and what they did
not say is important to possible impeachment of the witnesses, if they make such
allegations against Dr. Fonn now. Dr. Fonn points out that the interviews were
conducted at a time when, according the complaint itself, he was in an adversarial
position with Verticor, such that the five Verticor employees would have had no
motivation to protect him. He argues further that what the four witnesses other than
Stanaford might have said about Stanaford could provide evidence to impeach
Stanaford. The government has not disputed Dr. Fonn’s assertion that Stanaford will be
a key witness against Defendants in the present case. Thus, according to Dr. Fonn, the
Reports of Interview could lead to discoverable evidence. He further argues that he
cannot obtain the equivalent of the withheld materials by deposing the five individuals
now, because the interviews took place in 2010, at a time more contemporaneous with
the kickbacks alleged in the present case, and thus have unique value.
Dr. Fonn argues that because the interviews at issue were part of an investigation
in Texas, Fifth Circuit law on the scope of the investigative privilege should apply, but
that in any event, the privilege does not apply, because the factors favoring disclosure
outweigh any factors suggesting the privilege should be applied here. He also argues
that the government’s assertion of the privilege is flawed because it is not being
asserted by the United States Attorney’s Office in Texas.
Lastly, Dr. Fonn argues, in the alternative, that the government waived the
investigative privilege by turning over to Defendants the affidavit in support of the
Texas search warrant, which included information provided by two of the five
individuals whose interviews are now at issue; and sending the May 22, 2015 email.
The government responds that “[i]n the final analysis, all that Dr. Fonn’s motion
demonstrates is the possibility that the reports might lead to the discovery of some
cumulative impeachment evidence that would likely not be admissible,” and so the
motion should be denied. The government argues that Dr. Fonn has failed to show a
need for the Reports of Interview, and maintains that the Reports of Interview would
reveal the government’s investigative techniques and procedures. In support of this
position, the government has submitted a declaration from the FBI and a declaration
from the Office of Inspector General for HHS, the two federal agencies that generated
the Reports of Interviews at issue. Both declarations state that production of the
Reports of Interview would reveal the agents’ choices regarding which facts,
transactions, and persons they believed to be significant. (Doc. Nos. 142-2 and 142-3.)
Both declarations also state that as the interviews occurred under proffer letters,
production “may motivate potential witnesses in the future to avoid proffer interviews
with [the government].” Id.
The government also argues that the Reports of Interview are “unlikely” to help
Dr. Fonn impeach the witnesses who were interviewed in Texas, because he has not
shown that those individuals adopted the statements therein. The government notes that
there is nothing to prevent Dr. Fonn from deposing the five individuals and attempting
to impeach them by their own prior statements made in such depositions. Lastly, the
government argues that there is no support for applying Fifth Circuit case law on the
scope and application of the investigative privilege.1
The Court first agrees with the government that to the extent Eighth Circuit and
Fifth Circuit law differ on the scope of the investigative privilege, Eighth Circuit law
applies here. Similarly, Dr. Fonn’s unsupported argument that the United States
Attorney’s Office in this judicial district cannot assert the privilege because the
interviews were conducted by the United States Attorney’s Office in another judicial
district is without merit.
The Court rejects out of hand the government’s argument that the motion now under
consideration should be denied for the additional reason that the motion “fails to clearly
identify a request and response for the Court’s consideration.” (Doc. No. 142 at 4.)
The investigative privilege is a qualified privilege, and, as the Eighth Circuit has
held, the privilege is “a very narrow one.” Stephens Produce Co. v. NLRB, 515 F.2d
1373, 1377 (8th Cir. 1975). The privilege “need only be honored where the policy
behind its invocation by the agency outweighs any necessity for the information shown
by the party seeking it.” Id. “The privilege is predicated on the public interest in
minimizing the disclosure of documents that would tend to reveal law enforcement
investigative techniques or sources.” SEC v. Shanahan, No. 4:07CV270 JCH, 2009
WL 1955747, at *1 (E.D. Mo. July 6, 2009).
The proponent of protection under the investigative privilege has the burden of
establishing its applicability. Id. at *2. The factors a district court should consider in
balancing the public interest in nondisclosure against the need of a particular litigant for
access to the privileged information include the extent to which disclosure will thwart
governmental processes by discouraging citizens from giving the government
information, the impact upon persons who have given information of having their
identities disclosed, whether the investigation has been completed, whether the
information sought is available through other discovery or from other sources, and the
importance of the information sought to the litigant’s case. Id. (citation omitted).
“Importantly, across-the-board claims of law enforcement privilege supported only by
conclusory statements will not suffice.” Id.
Upon consideration of the foregoing, the Court finds that the relevant factors favor
requiring the government to produce the requested Reports of Interview. For example,
with respect to the extent to which disclosure would thwart governmental processes by
discouraging citizens from giving the government information, the Court finds that the
declarations noted above consist primarily of conclusory statements. With respect to the
impact upon the five individuals of having their identities disclosed, as stated above the
government has revealed their names in its Rule 26 disclosures, and provided a brief
summary of the interviews in Defendants’ criminal case. The Court notes that the
government has not asserted that the proffer agreements with the five individuals
provided that the individuals’ statements would remain confidential. And while the
government calls Dr. Fonn’s supposition that none of the five witnesses implicated him in
a kickback scheme “speculative and counter-intuitive,” the government does not suggest
that in fact any of them did.
Importantly, case against Verticor and Stanaford has been closed, and the criminal
charges against Dr. Fonn (and the other Defendants in this case) have been dismissed.
Thus, there is no concern that disclosure of the Reports of Interview will provide Dr.
Fonn with “premature discovery of law enforcement actions that may be taken against
him.” See id. at *3 (citation omitted) (ordering the SEC, in a civil fraud case, to produce
summaries of investigative interviews conducted with potential witnesses in a prior
related criminal investigation against the defendant in which it was alleged, as was
alleged in the civil case, that stock options were backdated, where the SEC did not make
a specific showing that producing the summaries would discourage citizens from giving
the government information, the identities of the witnesses were already revealed, and
taking current depositions would not be an acceptable substitute for the information
contained in the summaries taken several years earlier).
On the other side of the scale, the Court finds that Dr. Fonn has made a
reasonable showing with respect to the importance of the information sought. If,
indeed, the Reports of Interview show that the five witnesses did not implicate Dr. Fonn
in any kickback scheme with Verticor, that could provide valuable impeachment
evidence if the witnesses testify otherwise at trial in this case. Moreover, the
interviews’ possible impeachment value is increased due to their timing. And if the
individuals interviewed made statements implicating Dr. Fonn, the passage of time and
the prospect of fading memories also weighs in favor of disclosing the interview notes.
In sum, the Court concludes that the government has not met its burden of showing that
the policy behind invocation of the investigative privilege outweighs the necessity for
the information shown by Dr. Fonn.
IT IS HEREBY ORDERED that Defendant Sonjay Fonn’s motion (Doc. No.
139) to compel production of the four Reports of Interview is GRANTED. The
government shall forthwith produce the four Reports of Interview.
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 26th day of August, 2016.
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