United States of America ex rel. et al v. D.S. Medical LLC et al

Filing 278

MEMORANDUM AND ORDER re: 183 MOTION to Compel & Re-open Depositions of Mr. Fogle and Dr. Fonn filed by Plaintiff United States of America, 181 MOTION to Compel the Production of Additional Documents from Thompson Coburn LLP filed by Plaintiff United States of America - IT IS HEREBY ORDERED that the government's motion (ECF No. 181) to compel the production of documents from Thompson Coburn LLP regarding legal advice, as narrowed by the government's supplemen tal brief, is GRANTED as set forth above. Thompson Coburn LLP shall produce the documents with respect to which the motion is granted within five days of the date of this Memorandum and Order. IS FURTHER ORDERED that the government's motion (ECF . No. 183) to re-open the depositions of James Fogle and Dr. Sonjay Fonn is GRANTED. The government shall be allowed four hours with each deponent; the parties shall confer and arrange for a time and place for the new depositions that should be completed on or before September 15, 2017. Signed by District Judge Audrey G. Fleissig on 8/31/2017. (JMC)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISOURI
SOUTHEASTERN DIVISION

UNITED STATES OF AMERICA,
ex rel. PAUL CAIRNS, et al.,
Plaintiff,
vs.
D.S. MEDICAL, L.L.C., et al.,
Defendants.

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Case No. 1:12CV00004 AGF

MEMORANDUM AND ORDER
This qui tam action under the False Claims Act, 31 U.S.C. §§ 3729-33 (“FCA”)
is before the Court on two motions by the government: (1) a motion (ECF No. 181) to
compel the production of documents from the law firm Thompson Coburn LLP (“TC”)
regarding legal advice that the firm provided Defendants; and (2) a motion (ECF No.
183) to re-open the depositions of James Fogle (Defendants’ primary lawyer at TC) and
Defendant Dr. Sonjay Fonn to allow questioning regarding documents that were
produced by Defendants after these deponents were deposed; the government requests
an additional four hours of time with each deponent. For the reasons set forth below,
the motion to compel, as narrowed by the government’s supplemental brief, will be
granted.
The qui tam action was initiated by Relator on January 5, 2012. Upon being
served with the complaint, the government began parallel civil and criminal
investigations. The intervenor complaint in this civil action (ECF No. 26) claims that

the four Defendants – Dr. Sonjay Fonn, a neurosurgeon; Midwest Neurosurgeons, LLC,
a company formed and operated by Dr. Fonn; Deborah Seeger, Dr. Fonn’s fiancée; and
D.S. Medical, LLC (“DCM”), a company formed and created by Seeger for the
distributorship of spinal implant devices – violated the False Claims Act, 31 U.S.C.
§§ 3729-33, by submitting or causing to be submitted to the federal Medicare and
Medicaid programs false claims for reimbursement for Dr. Fonn’s services in
performing spinal surgeries at St. Francis Medical Center (“SFMC”) in Cape Girardeau,
Missouri, between December 2008 and March 2012, and for the purchase of implant
devices used in those surgeries. For purposes of the motion to compel under
consideration, it is not disputed that the first indication to Defendants of a government
investigation was the service of a subpoena on DSM in March 2012.
The FCA imposes civil liability on any person who “knowingly presents, or
causes to be presented, a false or fraudulent claim for payment or approval” to an
officer or employee of the United States. 31 U.S.C. § 3729(a)(1)(A), (b)(2)(A)(i). The
term “knowingly” means that a person, with respect to information contained in a
claim, (1) “has actual knowledge of the information;” (2) “acts in deliberate ignorance
of the truth or falsity of the information;” or (3) “acts in reckless disregard of the truth
or falsity of the information.” Id. § 3729(b)(1). The purpose of the FCA’s scienter
requirement is to avoid punishing “honest mistakes or incorrect claims submitted
through mere negligence.” United States ex rel. Owens v. First Kuwaiti Gen. Trading
& Contracting Co., 612 F.3d 724, 728 (4th Cir. 2010).
The claims for reimbursement in this case were allegedly false because they did
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not disclose that they were the result of alleged kickbacks that violated the federal
criminal Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a, et seq. The AKS
punishes “knowing and willful” violations. 42 U.S.C. § 1320a–7a(h). “[A] person
need not have actual knowledge of this section or specific intent to commit a violation
of this section”; a person need only have acted with a wrongful purpose. United States
v. Jain, 93 F.3d 436, 441 (8th Cir. 1996).
On June 1, 2016, Defendants filed a notice stating that they would be asserting
an advice-of-counsel defense. Specifically, Defendants asserted that they “anticipate
introducing evidence at trial regarding communications between Defendants and their
attorney [Fogle], and, therefore, will be conceding to a limited waiver of the attorney
client privilege.” ECF No. 148. The conceded waiver was limited to communications
prior to the time Defendants learned of the government’s investigation arising from the
qui tam suit; and to nine topics, including, for example, the relationship between Dr.
Fonn and the other three Defendants. Id. 1

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The nine topics identified by Defendants were:
(1) contract negotiations between DS Medical/Deborah Seeger and the
spinal implant manufacturers/distributors with whom she interacted;
(2) the legal dispute between Verticor [a spinal device manufacturer] and
DS Medical related to inventory and failure to pay commissions;
(3) the relationship between DS Medical and St. Francis Medical Center;
(4) the relationship between Dr. Fonn, Midwest Neurosurgeons, Deborah
Seeger and DS Medical;
(5) discussions regarding a conflict in interest form from St. Francis
Medical Center;
(6) discussions regarding pricing of spinal implants with St. Francis
Medical Center;
(7) contracting issues related to individuals who would promote product for

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On June 3, 2016, the government served TC and Fogle with third party
subpoenas for “[a]ny documents related to legal advice” provided to each Defendant.
ECF No. 182. 2 TC withheld some documents based on Defendants’ “limited waiver”
of the attorney-client privilege, and other documents based on the work product
doctrine. These documents are the subject of the government’s present motion to
compel. The government challenges Defendants’ assertion of a “limited waiver,” and
TC’s reliance on that “limited waiver.” The government also argues that TC must
produce materials dated before March 2012 withheld on solely work product grounds
because TC did not have a reasonable anticipation of litigation before that date.
In a supplemental memorandum, the government states that since its current
motion to compel was briefed, Defendants produced additional documents, and that the
motion is now limited to the following documents: all documents discussing legal
advice regarding establishing DSM; draft versions of an AKS memorandum dated April

DS Medical;
(8) difficulties with Bootheel Fencing, Patriot [Sunrooms], and Bloomfield
Landscaping [contractors who did renovations on Seeger’s home]; and
(9) discussion of the peer review done in early 2010 and communicated to
Dr. Fonn by Dr. Schell.
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The government served document requests directly upon Defendants, seeking their
documents regarding that same legal advice. Following negotiations, the parties
narrowed their advice-of-counsel discovery dispute to four documents (some with
attachments), that were submitted to the Court for in camera review. By Order dated
August 9, 2017, the Court ordered Defendants to produce one of the four documents,
with its attachments. ECF No. 264. The Court determined that the other documents were
pivileged.
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1, 2009, prepared by Fogel and sent to Dr. Fonn; 3 any unproduced documents regarding
legal advice about a commission and inventory dispute with Verticor; any documents
related to legal advice regarding difficulties with three companies doing construction
work on Seeger’s house (Bloomfield Landscaping, Patriot Sunrooms, and Bloomfield
Fencing); and any unproduced documents that were generated before March 2012 and
withheld solely on work product grounds.
DISCUSSION
A defendant may avoid liability under the FCA if it can show that it acted in
good faith on the advice of counsel. United States ex rel. Drakeford v. Tuomey, 792
F.3d 364, 381 (4th Cir. 2015). To establish an advice-of-counsel defense in this
context, a defendant “must show the (a) full disclosure of all pertinent facts to counsel,
and (b) good faith reliance on counsel’s advice.” Id. When a party raises an advice of
counsel defense, “all advice on the pertinent topic becomes fair game. “It has . . .
become established that if a party interjects the advice of counsel as an essential
element of a . . . defense, then ‘all advice received concerning the same subject matter’
is discoverable, not subject to protection by the attorney-client privilege.” Id. at 391
(quoting McCormick on Evid. § 93 (7th ed. 2013)).
The party seeking work product protection has the burden to prove that the
materials were prepared in anticipation of litigation, that is “because of the prospect of
litigation.” PepsiCo, Inc. v. Baird, Kurtz & Dobson LLP, 305 F.3d 813, 817 (8th Cir.
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In this memorandum, Fogel discussed TC’s “conclusion and belief” that SFMC could
purchase spinal implants through DSM even when the implants were for use with respect
to Dr. Fonn’s patients and he recommended their purchase. ECF 182-9.
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2002). “[T]he mere possibility that litigation may result is not sufficient to trigger the
protection of the work product doctrine.” In re Advanced Pain Centers Poplar Bluff v.
Ware, 11 F. Supp. 3d 967, 973 (E.D. Mo. 2014). The Eighth Circuit has articulated the
test for “in anticipation of litigation” as follows:
[T]he work product rule does not come into play merely because there is a
remote prospect of future litigation. In 8 Wright & Miller, [Federal
Practice & Procedure, Civil] pp. 198-99, it is said . . . Prudent parties
anticipate litigation, and begin preparation prior to the time suit is formally
commenced. Thus the test should be whether, in light of the nature of the
document and the factual situation in the particular case, the document can
fairly be said to have been prepared or obtained because of the prospect of
litigation.
Diversified Indus., Inc. v. Meredith, 572 F.2d 596, 604 (8th Cir. 1977). “The party
asserting the work product privilege must set forth objective facts to support its claim of
privilege; a mere conclusory statement that the work product was created in anticipation
of litigation is not enough.” AAB Joint Venture v. United States, 75 Fed. Cl. 432, 445
(2007).
Here, the Court agrees with the government that by asserting the advice-ofcounsel defense, Defendants have waived the attorney-client privilege with regards to
TC documents discussing legal advice on establishing DSM, and documents regarding
legal advice related to Verticor, Bloomfield Landscaping, Patriot Sunrooms, and
Bootheel Fencing. The Court further agrees with the government that TC has not
supported its claim of work product protection for any documents generated prior to
March 2012, including draft versions of the April 1, 2009, AKS memorandum that were
or were not sent to any Defendant. The record indicates that in one draft, Fogle
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concluded that the arrangement proposed by Dr. Fonn would violate the AKS. The
government presents a plausible theory of relevance of the drafts – that they may reflect
that Fogle received additional or different information from Defendants as he was
working on the final memorandum, a factor relevant to the advice-of-counsel defense.
Moreover, because TC and Fogle have already produced other versions of the
memorandum, work product protection has been waived for the withheld drafts. See,
e.g., In re Chrysler Motor Corp., 860 F.2d 844, 845 (8th Cir. 1988).
In light of the supplemental production of documents, both by agreement of the
parties and pursuant to Court Orders, after Dr. Fonjay and Fogle were deposed, the
Court will grant the government’s motion to redepose these two individuals. “[C]ourts
frequently permit a deposition to be reopened where the witness was inhibited from
providing full information at the first deposition . . . . [or] where new information
comes to light triggering questions that the discovering party would not have thought to
ask at the first deposition.” Keck v. Union Bank of Switzerland, No. 94CIV.4912
(AGS)(JCF), 1997 WL 411931, at *1 (S.D.N.Y. July 22, 1997).
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that the government’s motion (ECF No. 181) to
compel the production of documents from Thompson Coburn LLP regarding legal
advice, as narrowed by the government’s supplemental brief, is GRANTED as set forth
above. Thompson Coburn LLP shall produce the documents with respect to which the
motion is granted within five days of the date of this Memorandum and Order.
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IS FURTHER ORDERED that the government’s motion (ECF. No. 183) to reopen the depositions of James Fogle and Dr. Sonjay Fonn is GRANTED. The
government shall be allowed four hours with each deponent; the parties shall confer and
arrange for a time and place for the new depositions that should be completed on or
before September 15, 2017.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 31st day of August, 2017.

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