United States of America et al v. Bluewave Healthcare Consultants Inc et al

Filing 604

ORDER AND OPINION re 406 Defendant Latonya Mallory's MOTION to Compel the Government to respond fully to Mallory's first set of Requests for Production ("RFPs"). The Government is hereby ordered to produce documents to Defendants consistent with this order. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 8/22/2017. (sshe, )

IN THE UNITED ST ATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION

United States of America, et al.,
Plaintiffs,
ex rel. Scarlett Lutz, et al. ,

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Plaintiffs-Relators,
v.

Berkeley Heartlab, Inc., et al.,

Civil Action No. 9:14-cv-00230-RMG
(Consolidated with 9: 11-cv-1593-RMG and
9: 15-cv-2458-RMG)

ORDER and OPINION

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Defendants.
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This matter is before the Court on Defendant Latonya Mallory's motion to compel the
Government to respond full y to Mallory's first set of Requests for Production ("RFPs"). (Dkt.
No. 406.) The Government claimed that documents responsive to Mallory' s RFP Nos. 26 and 27
were protected by the deliberative process privilege. On June 19, 2017, this Court ordered the
Government to submit to the Court all documents responsive to Mallory' s RFP Nos. 26 and 27
for in camera review to determine whether Defendants' interest in discovering the documents
outweighs the Government's interest in confidentiality. (Dkt. No. 494.) The Court has
determined that most, but not all documents responsive to RFP Nos. 26 and 27 are protected by
the deliberative process privilege and has provided instructions below regarding which
documents the Government must produce.
I.

Background and Relevant Facts
The Government has filed a complaint in intervention against the BlueWave Defendants

and Latonya Mallory alleging violations of the Anti-Kickback Statute ("AKS"), 42 U.S .C. §
1320a-7b(b), and the False Claims Act ("FCA"), 42 U.S.C. § 3729. (Dkt. No. 75 .) The alleged
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FCA violations anse from BlueWave's marketing of laboratory tests for two laboratory
companies, Health Diagnostic Laboratory, Inc. ("HDL") and Singulex, Inc. ("Singulex"),
between 2010 and 2015. The Government has alleged that Defendants violated the FCA when
they engaged in multiple kickback schemes to induce physicians to refer blood samples to HDL
and Singulex for large panels of blood tests, many of which were medically unnecessary. For
example, the Government alleges that Defendants offered and facilitated the payment of
processing and handling ("P&H") fees to physicians to induce referrals in violation of the AKS
and FCA.

II.

Discussion
As issue are the following to requests for production made by Defendant Mallory to the

United States of America:
RFP 26: Produce all documents relied upon or considered by OIG in determining
to issue the "Special Fraud Alert: Laboratory Payments to Referring Physicians"
Dated June 25, 2014.
RFP 27: Produce all documents, including all emails, correspondence or other
communications, exchanged between DOI and OIG relating to the issuance of the
"Special Fraud Alert: Laboratory Payments to Referring Physicians" dated June
25, 2014.
In its previous order, the Court determined that in camera review of documents responsive to
these two requests was necessary for the following reasons:

HHS' s internal communications about the decision to issue the Special Fraud
Alert may be relevant to the reasonableness of the Defendants' actions, positions,
or interpretations with regard to their determination that the claims at issue were
not tainted by an illegal kickback scheme. See United States v. Newport News
Shipbuilding, Inc., 276 F. Supp. 2d 539, 564 (E.D. Va. 2003) (" [B]oth the clarity
of the regulation and the reasonableness of a contractor' s interpretation are
relevant in deciding whether a failure to disclose charging practices is indicative
of a reckless disregard of their falsity. "); see also US ex rel. Colucci v. Beth Israel
Med. Ctr., 785 F. Supp. 2d 303, 316 (S.D.N.Y. 2011), aff'd sub nom. Colucci v.
Beth Israel Med. Ctr. , 531 F. App 'x 118 (2d Cir. 2013) (" [W]hether a claimant
acted knowingly in submitting a false claim turns on 'the reasonableness of [the
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claimant's] interpretation. "') The Court finds that the requested documents may be
relevant to defendants' sci enter even if defendants were not aware of the content
of the Government's internal communications. See SEC v. Kovzan, No. 11-2017JWL, 2012 WL 4819011 , at *4 (D. Kan. Oct. 10, 2012) (disagreeing with
Magistrate' s determination that "sci enter relates to what defendant knew or
should have known, and that therefore information may be relevant to scienter
only if known to the public or to defendant" and allowing discovery of "internal
[SEC] documents concerning a final decision as to what guidance, if any, the SEC
staff may provide to reporting companies regarding the meaning of the perquisite
disclosure regulations and the definition of internal control over financial
reporting.").
Having determined that the Government' s internal deliberations leading up to
their decision to issue the Special Fraud Alert may be relevant to Defendant"
scienter, the Court must decide whether Defendants' interest in discovering the
documents outweighs the government' s interest in confidentiality. Courts
consider the following factors to determine whether the defendant' s interest in a
particular document outweigh[s] the government' s need for confidentiality: (1)
the relevance of the document to the litigation; (2) the availability of other
evidence; (3) the government' s role in the litigation; (4) the seriousness of the
litigation; and (5) the extent to which disclosure would chill future deliberations.
FDIC v. Giancola, 2015 WL 5559599, *5-6 (N.D. Ill. Sept. 18, 2015) (citations
omitted). The Court has no trouble finding that the Government' s role in this
litigation is significant and that the litigation is serious. While other evidence is
surely available that would shed light on whether Defendants' interpretation was
reasonable, internal government discussions about the need to issue further
guidance may contain particularly strong evidence on this point. The Court is also
cognizant of the obvious risk that "officials will not communicate candidly among
themselves if each remark is a potential item of discovery and front page news."
Dep 't of Interior v. Klamath Water Users Protective Ass 'n, 532 U.S. 1, 8-9
(2001 ).
(Dkt. No. 494 at 10-12.) The Court has reviewed the documents submitted for in camera review
and determined that the overwhelming majority need not be produced because Defendants'
interest in obtaining them is so negligible as to be insufficient to override the Government' s
interest in confidentiality. Representative, but not exhaustive, categories of documents include:
(1) numerous circulations of drafts of the Special Fraud Alert ("SF A") with edits and comments
that do not contain information that supports Defendants' arguments with regard to their scienter;
(2) agendas and other documents that that mention the existence of the SF A but have nothing to

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do with its substance or the decision to issue it; and (3) discussions about the logistics of
shepherding the SF A through the necessary channels for approval; and (4) duplicates of the first
three categories.
The Court finds that Defendants' interest in obtaining the following documents
outweighs the Government' s need for confidentiality due to the seriousness of this litigation, the
Government' s role in the litigation, and the potential relevance of these documents to
Defendants' argument that they did not have the requisite sci enter to be liable for the
Government's allegations. 1 For documents responsive to Mallory' s RFP Nos. 26 and 27, the
Government should produce the following, including entire document families as well as any
near-duplicates of the documents described :

From RFP 26 [InCam26-0000001 to InCam26-0001921]
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0000001 : Civil Frauds Report of Investigative Action dated July 18, 2011
0000014: Memorandum of Special Fraud Alert dated May 1, 2014

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0000080: Informational Briefing Notes on Special Fraud alert dated July 11, 2014

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0000835: Letters from various defendants explaining their understanding of the legality
of certain payment practices in response to the Government's position paper.
0000905 ; 0000920: Documents concerning requests from law firms for a special fraud
alert about laboratory relationships.

From RFP 27 [InCam27-0000001 to InCam270000984]
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0000030; 0000080: Internal government communications about the need for a Special
Fraud Alert.

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The Government has not submitted to the Court that these documents are subject to any other
privilege or protection.

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0000850: White Paper on P&H fees from the Centers for Medicare and Medicaid
Services authored by Daniel Duvall

III.

Conclusion

The Government is hereby ordered to produce documents to Defendants consistent with
this order.

AND IT IS SO ORDERED.

Richard Mark Gergel
United States District Court Judge
August 't L, 2017
Charleston, South Carolina

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