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FCA Qui Notes
June 26, 2024

When Waiting Equals Waiver: Court Finds Privilege Waived After Delayed Clawback Attempt

Qui Notes: Unlocking the False Claims Act

Recently, in U.S. ex rel. Omni HealthCare, Inc. v. MD Spine Solutions LLC et al., the District Court for the District of Massachusetts granted a relator’s motion to compel defendants to produce 613 privileged documents (totaling over 2,000 pages) after finding that the defendants had waived privilege by failing to take steps to identify and claw back inadvertently produced documents until more than two-and-a-half years later.

The underlying litigation began in December 2018, and stems from relator Omni Healthcare, Inc.’s (Omni) claims that the defendants violated the False Claims Act by engaging in allegedly fraudulent billing practices for multiple varieties of urine testing. The case remained under seal for approximately three years while the government investigated Omni’s claims, during which the defendants produced more than 91,000 documents to the government.

During the government’s investigation, it became evident that the defendants had inadvertently included privileged materials in their document productions. In April 2021, the government notified defendants about the production of 12 potentially privileged documents, which the defendants subsequently clawed back. The defendants, however, did not review the rest of their productions to determine if they had inadvertently produced other privileged documents.

In October 2021, the government settled with the defendants, and the parties stipulated to the dismissal of all claims except for Omni’s claims against the defendants for allegedly misleading Omni into ordering costly and medically unnecessary PCR urinary track infection testing for its patients. Omni continued to litigate its claims against the defendants. In November 2023, the defendants learned — when Omni used a produced, privileged document as an exhibit at a deposition — that the government had shared with Omni all of defendants’ document productions. This prompted the defendants to review their productions, after which they attempted to claw back 613 privileged documents.

The court determined that the defendants’ inadvertent disclosure resulted in an implied waiver of the privilege after examining the following five factors:

  1. Reasonableness of the precautions taken to prevent inadvertent disclosure
  2. Amount of time it took the producing party to recognize its error
  3. Scope of the production
  4. Extent of the inadvertent disclosure
  5. Overriding interest of fairness and justice

The passage of two years and seven months since the inadvertent disclosure in April 2021 and the attempted clawback in November 2023 was deemed “significant” and was a focal point of the court’s analysis and ultimate finding of waiver.

With respect to the reasonableness of the precautions taken, the court observed that the defendants themselves, rather than their counsel, had conducted the initial privilege review, which the court deemed “hardly a reasonable precaution.” Moreover, because the defendants were made aware in April 2021 that their productions included 12 privileged documents, the court found that they “should have been on notice that there was at least a reasonable probability that they had inadvertently produced more privileged documents than the 12 that the United States had identified.” The defendants, however, waited more than two-and-a-half years to review their productions, even though “they could have reasonably foreseen that the United States would share documents with Omni considering Omni was prosecuting the case on behalf of the United States.” The court also found that the defendants’ reliance on the clawback provision in their production cover letters was insufficient given the delay in invoking the provision, and further noted that such provision was not a reasonable precaution to prevent inadvertent disclosure but was intended to mitigate the impact of such disclosure.

The court further found that the extent of the inadvertent disclosure was “significant,” given the number of documents at issue and the length of time that both the government and Omni had access to (and during which likely reviewed at least some portion of) the privileged documents prior to the attempted clawback. The court further cited the delay when finding that the overriding interests of fairness and justice weighed in favor of an implied waiver.

This recent decision in Omni serves as a good reminder of the importance of responding timely to notifications of inadvertent disclosure and conducting the necessary due diligence to follow up appropriately on any additional privileged documents that may have been inadvertently produced.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.