Attorney-Client Privileged Documents: Federal District Court Limits the Scope of Attorney-Client Privilege Granted Involving In-House Counsel

Attorney-Client Privileged Documents: Federal District Court Limits the Scope of Attorney-Client Privilege Granted Involving In-House Counsel -- United States ex rel. Elin Baklid-Kunz v. Halifax Hospital Medical Center1 -- The United States District Court for the Middle District of Florida upheld in part and denied in part the defendant's assertion of attorney-client privilege over documents submitted to the court.2 The court granted the privilege narrowly only to documents that sought or reflected legal advice.3Elin Baklid-Kunz (Relator) worked at Halifax Medical Center (Halifax),4 the largest healthcare provider in Central Florida, for over fifteen years as the Director of Physician Services prior to filing a qui tam False Claims Act action against Halifax in 2009.5 The United States intervened on behalf of the Department of Health and Human Services and the Centers for Medicare and Medicaid Services on November 4, 2011. 6 The government alleged that Halifax Staffing, a whollyowned subsidiary of Halifax, paid compensation to ten physicians that not commercially reasonable, exceeded [fair market value], and/or took into account the volume or value of referrals or other busin ess generated for the hospital.7 Thus, the Relator and the government (together, the Plaintiffs) requested damages for Halifax's violations of the False Claims Act (FCA), the Stark Amendment, and the Anti-Kickback Statute.8In response to the government's claim, Halifax requested a preliminary injunction to enjoin the Relator from testifying and to exclude evidence derived from certain documents, claiming that those documents and were protected under attorney-client and attorney work product privileges. 9 Halifax asserted attorney-client privilege over several sets of documents, including emails sent between the legal and finance departments, documents and created for audit and internal review purposes, and compliance referral logs that recorded reported incidents.10 Halifax claimed that the referral logs were because the Halifax compliance department created the logs primarily to seek legal advice on whether the incidents exposed Halifax to any liability and because the documents were stamped as privileged.11 Halifax argued that the audit and review materials and emails sent between the finance and legal departments were because they were prepared to seek legal advice or reflected legal advice already given.12The Relator requested that the court make a determination concerning the status of these documents, alleging that the referral logs and the internal review and audit documents were not prepared to seek legal advice but were kept in the normal course of business.13 The Relator also argued that, although the emails between the finance and legal departments reflected legal advice, the documents should not be protected because Halifax used the legal advice derived from these to offer impermissible incentives to physicians. 14 Thus, since attorney-client privilege does not extend to communications made in furtherance of a crime or fraud, the privilege should not be granted.15The Magistrate Judge ruled on the privilege issues raised based on whether the documents reflected or were created to seek legal advice. Privilege did not apply to referral logs16 or documents marked as privileged without any other indication of their status17 since records of fact or a mere stamp did not signify that such documents contained legal advice. Privilege also did not apply to conversations or documents associated with audit and internal reviews that did not primarily seek or reflect legal advice.18 For the emails that the Relator claimed qualified for the crime-fraud exception, since the Plaintiffs had made a prima facie showing that Halifax was about to be engaged in fraudulent activity, and the Plaintiffs established that Halifax sought its attorneys' assistance to participate in fraudulent activity, the Magistrate Judge ruled that the crime-fraud exception applied and ordered Halifax to produce the emails. …

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