February 13, 2017 False Claims Act Information
Piercing the Attorney Client Privilege in Qui Tam Whistleblower Cases Under the False Claims Act
It is well established that the scope and conduct of discovery are well within the sound discretion of the trial court. Gaul v. Zep Mfg. Co., No. 03-2439, 2004 U.S. Dist. Lexis 1990, at *3 (E.D. Pa. Feb. 5, 2004) (quoting Marroquin-Manriquez v. Immigration and Naturalization Serv., 699 F.2d 129, 134 (3d Cir. 1983)).
Pursuant to Federal Rule of Civil Procedure 26(b)(1), a party may seek discovery of “matter that is relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Id. Rule 37 of the Federal Rules of Civil Procedure “authorizes a party who has received evasive or incomplete answers to discovery authorized by Federal Rule of Civil Procedure Rule 26(a) to bring a motion to compel disclosure of materials sought.” Northern v. City of Phila., No. 98-6517, 2000 U.S. Dist. LEXIS 4278, at *3 (E.D. Pa. April 4, 2000).
Waiving Attorney Client Privilege in Qui Tam Whistleblower Cases Under The False Claims Act
When a party waives the attorney client privilege in a qui tam whistleblower case under the False Claims Act – for example, in order to assert an “advice of counsel” defense – the law in the Third Circuit is clear: a party waiving the attorney client privilege must make a full and timely disclosure as to the entire subject matter at issue in the case. As noted by this Court:
[W]hen one party intentionally discloses privileged material with the aim, in whole or in part, of furthering that party’s case, the party waives its attorney-client privilege with respect to the subject-matter of the disclosed communications.
Murray v. Gemplus Int’l, S.A., 217 F.R.D. 362, 367 (E.D. Pa. 2003) (emphasis added) accord SEC v. Welliver, No. 11-CV-3076, 2012 U.S. Dist. LEXIS 188019, *31-32 (D. Minn. Oct. 26, 2012) (“If a party waives attorney-client privilege by putting privileged communications at issue, “the scope [of the waiver] must of necessity be somewhat broad and, is, in fact, a ‘subject matter’”) (quotation omitted). This is known as the subject-matter waiver rule.
Subject-Matter Waiver Rule
The underlying purpose of the subject-matter waiver rule is to prevent the party waiving the privilege as to certain communications from gaining an advantage in litigation by presenting a one-sided story. See Glenmede Trust Co. v. Thompson, 56 F.3d 476, 486 (3d Cir. 1995) (finding that in the context of an affirmative advice of counsel defense, the defendant had waived “all communications, both written and oral, to or from counsel as to the entire transaction… include[ing the attorney’s] internal research and other file memoranda”). As this Court has previously stated: “Courts have recognized that it would be fundamentally unfair to allow a party to disclose opinions which support its position and to simultaneously conceal those that are unfavorable or adverse to its position.” Katz v. AT&T Corp., 191 F.R.D. 433, 439 (E.D. Pa. 2000).
These principles apply to all attorney client privilege waivers. For example, in the case of Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195,(3d Cir. 2006), the Third Circuit rejected the lower court’s grant of summary judgment for the Defendant [Berckeley], which was based in part on Berckeley’s contention, supported by an attorney affidavit, that it did not act with the requisite state of mind. Id. at 217. In remanding the matter, the Court held,
For purposes of the remand … we remind the parties that the attorney-client privilege cannot be used as both a “shield” and a “sword”: Berckeley cannot rely upon the legal advice it received for the purpose of negating its scienter without permitting Colkitt the opportunity to probe the surrounding circumstances and substance of that advice.
Id. at 222. (emphasis supplied) (citing Livingstone v. North Belle Vernon Borough, 91 F.3d 515, 537 (3d Cir. 1996).
In conclusion, when a party in a qui tam whistleblower lawsuit under the False Claims Act waives the attorney client privilege, that waiver should be interpreted broadly in order to allow the opposing party to fully explore any materials related to the waiver.
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 See also Dietz & Watson, Inc. v. Liberty Mut. Ins. Co., No.14-CV-4082, 2015 U.S. Dist. LEXIS 58827, at *15 (E.D. Pa. May 5, 2015) (“‘If partial waiver does disadvantage the disclosing party’s adversary by, for example, allowing the disclosing party to present a one-sided story to the court, the privilege will be waived as to all communications on the same subject.’”) (quoting Westinghouse Elec. Corp. v. Republic of Phil., 951 F.2d 1414, 1426 fn. 13 (3d Cir. 1991)); Pallares v. Kohn (In re Chevron Corp.), No. 10-MC-209, 2010 U.S. Dist. LEXIS 134970, at *22 (E.D. Pa. Dec. 20, 2010) (“The voluntary disclosure by a client of a privileged communication waives the privilege as to other such communications relating to the same subject matter made both prior to and after the occurrence of the waiver.”) (emphasis added), rev’d on other grounds, Pallares v. Kohn (In re Chevron Corp.), 650 F.3d 276 (3d Cir. 2011).