In light of a recent federal court order, companies – especially those at risk of False Claims Act suits – should revisit their protocol for handling communications with in-house counsel.
In United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, a federal magistrate judge ordered Halifax Hospital to produce communications involving in-house lawyers in an ongoing FCA suit against the hospital.1 The court determined that the communications contained “business advice,” rather than “legal advice,” or fell within the crime-fraud exception to the attorney-client privilege.
The FCA suit was brought by an employee, alleging that Halifax had illegally paid compensation to physicians in violation of the Stark Law2 and the Anti-Kickback Statute.3 The United States intervened in the case and sought production of documents related to Halifax’s statutory and regulatory compliance, including communications with the in-house compliance and legal departments.
Application of the Attorney-Client Privilege
- Referral log. The compliance department’s record of compliance issues was not privileged because it simply recorded facts and did not seek legal advice.
- Audits by case management, compliance, and finance departments. Many of the company’s audit documents were not privileged because they did not primarily seek legal advice. Even emails that copied in-house lawyers were not privileged where the lawyer was copied only to be kept “in the loop.”
- Communications between finance and in-house counsel. Emails between the finance department and in-house lawyers were not privileged under the crime-fraud exception where the emails sought the lawyers’ approval regarding payments to physicians.
Impact of Halifax
This decision is a reminder that companies should carefully consider their practices for communicating with in-house counsel. The fact that an in-house lawyer is copied on an email – even if the email concerns a legal issue – may not automatically protect the communication from production. Likewise, communications between in-house lawyers and compliance departments may not be protected if the communications merely recite facts or do not seek legal advice.