United States ex rel. Derrick v. Roche Diagnostics Corp.

UNITED STATES OF AMERICA EX REL. CRYSTAL DERRICK, Plaintiff-Relator, v. ROCHE DIAGNOSTICS CORPORATION; ROCHE DIABETES CARE, INC.;HUMANA, INC.; AND HUMANA PHARMACY, INC. Defendants.

No. 14 CV 04601

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

April 24, 2019

Judge Elaine Bucklo

Magistrate Judge Jeffrey T. Gilbert

MEMORANDUM OPINION AND ORDER

This case is before the Court on Plaintiff-Relator Crystal Derrick's ("Relator") Motion to Compel Defendants-Roche Diagnostic Corporation, Roche Diabetes Care, Inc., Humana, Inc, and Humana Pharmacy, Inc. (together "Roche") to produce documents withheld on the basis of attorney-client privilege. For the reasons discussed below, the Court hereby denies Relator's Motion without prejudice with respect to the production of documents requested.

BACKGROUND

This False Claims Act action involves allegations by Relator that Roche violated two provisions of the Anti-Kickback Statute contained in 42 U.S.C. § 1320a-7b(b) and 42 U.S.C. § 1320a-7b(g). Relator claims Roche agreed to forgive debt owed by Humana in order to induce Humana to place Roche products on its formulary for Medicare Advantage members. Relator alleges this scheme caused false or fraudulent claims to be submitted for payment by Government health-care programs. Relator further describes that when she raised concerns about these practices with corporate management, Roche terminated her employment.

Roche denies these allegations and, among other affirmative defenses, asserts that "Relator's claims are barred because Roche at all times relevant to this Action acted in good faith, in compliance with applicable law, and consistent with industry practice." [ECF No. 95]. In support of the instant Motion to Compel, Relator argues that by pleading the affirmative defense of good faith and producing documents that show it consulted with counsel in connection with the agreements it reached with Humana, Roche injected its state of mind and, implicitly, its reliance on advice of counsel, into the case and therefore waived its attorney-client privilege.

DISCUSSION

District courts have broad discretion in matters relating to discovery. James v. Hyatt Regency Chi., 707 F.3d 775, 784 (7th Cir. 2013). "Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case." Fed.R.Civ.P. 26(b)(1). Above all, the Court shares a duty, along with the parties, to administer the discovery process in a manner to "secure the just, speedy, and inexpensive determination of every action and proceeding." Fed. R. Civ. P. 1.

The issue in this case is whether Roche has waived its attorney-client privilege by pleading as an affirmative defense that it "acted in good faith, in compliance with applicable law, and consistent with industry practice" and by producing documents that show it consulted with counsel in connection with its negotiations with Humana.¹ [ECF No. 95]. Attorney-client privilege is "one of the oldest recognized privileges for confidential communications," United States v. BDO Seidman, 337 F.3d 802, 810 (7th Cir. 2003), and exists primarily to "'encourage full and frankcommunication between attorneys and their clients.'" United States v. Zolin, 491 U.S. 554, 562 (1989) (quoting Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). However, the attorney-client privilege can be waived, either explicitly or by implication. Lorenz v. Valley Forge Ins. Co., 815 F.2d 1095, 1098 (7th Cir. 1987); see also, United States v. Nobles, 422 U.S. 225, 239 (1975); United States v. Brock, 724 F.3d 817, 821 (7th Cir. 2013). Express waiver occurs where "information that would otherwise be privileged is not kept confidential." Patrick v. City of Chicago, 154 F. Supp. 3d 705, 711 (N.D. Ill. 2015). Implied waiver, the relevant inquiry in this case, can occur when a client asserts claims or defenses that put his or her attorney's advice "at issue" in the litigation. Paters v. United States, 159 F.3d 1043, 1047 (7th Cir. 1998).

The "at issue" waiver doctrine is limited and "should not be used to eviscerate the attorney-client privilege." Silverman v. Motorola, Inc., 2010 WL 2697599 at *4 (N.D. Ill. 2010) (citing LG Electronics v. Whirlpool Corp., 2009 WL 3294802 (N.D. Ill. 2009)). Merely asserting a claim or defense to which attorney-client communications are relevant, without more, does not constitute a waiver of attorney-client privilege. The privileged party must affirmatively put at issue the specific communication to which the privilege attaches before the privilege will be deemed waived. United States v. Capital Tax Corp., 2011 WL 1399258 (N.D. Ill. 2011); Beneficial Franchise Co., Inc. v. Bank One, N.A., 205 F.R.D. 212, 216 (N.D. Ill. 2001). To put the advice of counsel at issue by asserting a claim or defense, as Relator argues Roche has done here, the client must attempt to prove that claim or defense by disclosing or describing an attorney-client communication. Capital Tax Corp., 2011 WL 1399258 at *2 (citing Rhone-Poulenc v. Rorer Inc. v. Home Indemnity Co., 32 F.3d 851, 863 (3d Cir. 1994); Beneficial Franchise Co., 205 F.R.D. at 216-17.

The Seventh Circuit has not addressed directly the federal common law standard for when a party waives attorney-client privilege by putting privileged information "at issue" in a case.However, in Garcia v. Zenith Electronics Corp., 58 F.3d 1171, 1175 n. 1 (7th Cir. 1995), the Seventh Circuit cited with seeming approval the standard adopted by the Third Circuit in Rhone-Poulenc. Taking direction from the Seventh Circuit, district courts within this circuit have applied the Rhone-Poulenc standard. See, e.g., DR Distributors, LLC v. 21 Century Smoking, Inc., 2015 WL 5123652 (N.D. Ill. 2015) (cited favorably in Novak v. State Parkway Condo. Ass'n, 2017 WL 1086767 (N.D. Ill. 2017)); Capital Tax Corp., 2011 WL 1399258; Silverman, 2010 WL 2697599 at *4 (noting that "courts in this district have followed the Third Circuit's guidance that "at issue' waiver applies only where the client asserts a claim or defense and attempts to prove that claim or defense by disclosing or describing attorney-client communication); Bosch v. Ball-Kell, 2007 WL 601721 (C.D. Ill. 2007); Schofield v. U.S. Steel Corp., 2005 WL 3159165 (N.D. Ind. 2005); Chamberlain Group v. Interlogix, Inc., 2002 WL 467153 (N.D. Ill. 2002); Beneficial Franchise Co., 205 F.R.D. at 216.

Rhone-Poulenc and its progeny are persuasive. The Court is particularly swayed by the balance these cases strike between the presumption that a waiver of attorney-client privilege is to be narrowly construed and the principle that a party should not be able to selectively disclose privileged information it believes works to that party's advantage. See Beneficial Franchise Co., 205 F.R.D. at 216. As Judge Schenkier noted in Beneficial Franchise, were the balance to be struck differently so that merely asserting a claim or defense would be sufficient to waive the privilege, "then any party asserting a claim or defense on which it bears the burden of proof would be stripped of its privilege and left with the draconian choice of abandoning its claim and/or defense or pursuing and protecting its privilege." Id. at 216.

The Court finds Roche has not waived its attorney-client privilege merely by asserting the separate defenses of good faith and reliance on applicable law or by producing documents thatindicate it consulted with counsel when it documented its agreement with Humana. In the Court's view, Roche must not only assert a defense, but also attempt to support that defense by relying on advice of counsel or disclosing an attorney-client communication before it may be deemed to have waived the privilege. In other words, by putting counsel's advice in issue. Roche has not yet done so. Roche has denied the allegations made by Relator and asserted, generally, the affirmative defenses it intends to present. This does not automatically waive the privilege as to any communications Roche may have had with counsel concerning the legality of its agreement with Humana.

Whether an attorney-client privilege exists or has been waived is a fact intensive inquiry. See In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir. 2000); see also, Motorola Sols., Inc. v. Hytera Commc'ns Corp., 2018 WL 1804350 (N.D. Ill. 2018). Based on the record as it has been developed on the instant Motion, both parties appear to recognize this Motion is somewhat premature. Relator acknowledges on several occasions that Roche has not yet offered either the fact of its consultation with counsel or the contents of any communication with counsel for any purpose. All that Roche has done is assert a defense that it acted in good faith and in accordance with law and produced documents responsive to Relator's requests. Relator, however, expresses concern that failure to raise the waiver issue at this early stage would prevent her from raising it in the future, as was the fate of the plaintiff in Dorr-Oliver. [ECF No. 145, p. 10, n. 6] (citing Dorr-Oliver Inc. v. Fluid-Quip, Inc., 834 F.Supp. 1008, 1012 (N.D. Ill. 1993) (holding that the plaintiff had exercised a lack of diligence by, in part, failing to file a motion to compel disclosure of defendant's privileged communications until the defendant offered consultation with counsel as substantive evidence). Roche, for its part, consistently urges the Court to wait and see if it attemptsto prove its affirmative defense using attorney-client communications before finding waiver, and Roche disclaims any intention to support its affirmative defense with advice of counsel.

Relator's argument that Roche has waived the privilege by tendering the documents contained within Exhibits C - I to its Motion is misplaced. [ECF No. 145]. Attorneys, unsurprisingly, were involved in the purchase, rebate, and settlement negotiations between Roche and Humana. The mere fact...