A common occurrence in False Claims Act (FCA) qui tam cases is the transmission of a corporate defendant’s internal documents between the Government and the relator. This occurs largely in two situations. The first is when a relator takes documents from his employer during the course of unilaterally “investigating” the alleged misconduct and later transmits those documents to the Government. The second is when the Government transmits or otherwise discloses to a relator the documents received from the corporate defendant pursuant to subpoena or other official request.
These situations prove frustrating to corporate counsel, who see the practices as dangerously undermining their corporation’s ability to protect the confidentiality of proprietary and sensitive documents and information. Central to this frustration is a common lack of transparency regarding what is occurring and who has custody of corporate documents. This is because corporate defendants are rarely if ever provided contemporaneous notice that either a relator has absconded with corporate documents, or that the Government has provided a relator with access to or copies of subpoenaed documents. Quite often the first true notice corporate counsel have of such actions is when the corporation receives its own documents back from a relator during civil discovery. Even more problematic is when the corporation learns its proprietary and sensitive documents have been disclosed into the public domain, either via the news media or the internet. This paper addresses potential limitations on such “self help” discovery and government disclosures and discusses how a company might protect its confidential documents in these situations.
I. “Self Help” Discovery: The Relator’s Acquisition of Internal Corporate Documents and Subsequent Transmission to the Government
As noted above, it is not uncommon in FCA qui tam matters for corporate counsel to realize that the relator, and in due course the Government, has come into possession of the corporation’s confidential internal records through methods other than traditional legal process like investigative subpoenas or other formal discovery. When faced with the existence of such “self help” discovery, or the possibility of it, corporate counsel must bear in mind a few key points. Foremost, corporate counsel must remember that the FCA provides retaliation protections for whistleblowers that might limit the actions the corporation may desire to take in response to “self help” discovery activities. That being said, it is also true that such protections have limits and under certain circumstances corporations may have leeway to act assertively to protect their interests. Furthermore, in determining how to respond to such situations, corporate counsel should consider the limitations on the conduct of the Government with regard to encouraging “self help” activities by relators.
A. False Claims Act Whistleblower Protections: When is “Self Help” Discovery A Protected Activity
The FCA provides protections from employment retaliation to relators for “lawful acts” done in furtherance of an FCA action. Specifically, the FCA states:
(h) Relief from retaliatory actions.
(1)In general. Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, or agent on behalf of the employee, contractor, or agent or associated others in furtherance of other efforts to stop 1 or more violations of this subchapter.
(2)Relief. Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. An action under this subsection may be brought in the appropriate district
court of the United States for the relief provided in this subsection.1
While these protections apply to “lawful acts” done by relators, the question arises whether the theft of confidential corporate documents for transfer to the Government -- or for other usage -- is a “lawful act.” This is because, depending on the surrounding circumstances, such “self help” discovery may violate various federal and state criminal and civil statutes.2 Unfortunately, whether such activity would be interpreted by the courts as a “lawful act” under the FCA is not clear, as there are few cases dealing directly with the issue in a clear and concise manner. So while the courts clearly frown on “self help” discovery in other areas of litigation,3 in FCA cases
* A previous version of this article was published in connection with an American Bar Association CLE presentation on the False Claims Act, which took place on June 3, 2010. 1 31 U.S.C. § 3730(h) (emphasis added).
When determining whether a relator’s “self help” discovery of confidential documents violates specific federal or state laws, a number of statutes may need to be analyzed. See generally UNIF.
TRADE SECRETS ACT (amended 1985), 14 U.L.A. 529 (2005 & Supp. 2009) (the Uniform Trade
Secrets Act has been adopted in almost all states and provides for damages and injunctive relief for the misappropriation of trade secrets); Joseph W. Cormier et al., Intellectual Property Crimes, 46 AM. CRIM. L. REV. 761, 776 (2009) (noting that all states have laws protecting against the theft of trade secrets); Georgia Trade Secrets Act of 1990, O.C.G.A. § 10-1-760 et seq.; O.C.G.A. §16-8-13 (providing for imprisonment and fines for theft of trade secrets); Economic Espionage Act of 1996, 18 U.S.C. §§ 1831 - 1839 (criminalizing, among other things, the theft of trade secrets for economic advantage); Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (prohibiting obtaining information in excess of authorization by means of a protected computer); 18 U.S.C. § 2314 (prohibiting transportation of stolen goods in interstate commerce); International Traffic in Arms Regulations, 22 C.F.R. §§ 120-130 (forbidding disclosure of “technical data” related to defense articles to any “foreign person”). Furthermore, “self help” discovery may also violate the professional ethical obligations of the individual in question, if that individual is a licensed attorney. See, e.g., N.Y. Code of Professional Conduct Rule 1.9(c) (precluding a lawyer from “us[ing] confidential information of [a] former client . . . to the disadvantage of the former client, except as these Rules would permit or require with respect to a current client or when the information has become generally known; or [from] reveal[ing] confidential information of the former client . . . except as these Rules would permit or require with respect to a current client”)
Many courts that have addressed self help discovery in non-FCA cases have employed a balancing test approach, with the majority finding that the improper taking of confidential
documents from the workplace is generally not protected activity within the retaliation protections of other statutes. See Niswander v. Cincinnati Ins. Co., 529 F.3d 714 (6th Cir. 2008)
(employing a balancing test to hold that plaintiff who copied and gave documents to her attorney in furtherance of pending class action lawsuit had not engaged in protected activity);
Argyropoulos v. City of Alton, 539 F.3d 724, 733-34 (7th Cir. 2008) (holding that employer’s
the courts have come to disparate conclusions when analyzing such activities. Some cases have found such activities within the bounds of the FCA’s whistleblower protections,4 and other cases have approved counter-claims against relators for similar conduct or allowed corporations to sue to force the return of pilfered documents.
1. Where “Self Help” Discovery May Be A Protected Activity
admission that plaintiff employee’s surreptitious recording was a significant factor in her dismissal did not amount to direct evidence of retaliation because Title VII “does not grant the aggrieved employee a license to engage in dubious self help tactics or workplace espionage in order to gather evidence of discrimination.”); O’Day v. McDonnell Douglas Helicopter Co., 79 F.3d 756, 763 (9th Cir. 1996) (holding for employer under a balancing test for retaliation claims under the ADEA that an employee’s conduct in copying confidential personnel documents found in supervisor’s office and showing them to co-worker was not protected activity and noting that “we are loathe to provide employees an incentive to rifle through confidential files looking for evidence that might come in handy in later litigation.”); JDS Uniphase Corp. v. Jennings, 473 F. Supp. 2d 697 (E.D. Va. 2007) (holding for defendant employer and dismissing employee’s claim that state public policy permitted taking confidential documents in order to pursue wrongful discharge claim and to serve as effective Sarbanes-Oxley whistleblower); Watkins v. Ford Motor Co., No. C-1-03-033, 2005 WL 3448036 (S.D. Ohio Dec. 15, 2005) (holding that plaintiff’s copying documents from a binder of employee profiles in the personnel office and presenting them to his attorney was not protected activity under Ohio’s retaliation law that was similar to Title VII); State of New Jersey v. Ivonne Saavedra, Docket No. A-1449-12T4 (N.J. Sup. Ct. Dec. 24, 2013) (refusing to dismiss an indictment for official misconduct and theft in the case of a public employee who took highly confidential documents to support an employment discrimination suit); Pillsbury, Madison & Sutro v. Schectman, 64 Cal. Rptr. 2d 698, 705 (Cal. Ct. App. 1997) (upholding a preliminary injunction requiring defendant attorney to turn over documents removed from plaintiff’s offices and stating that “we will state clearly our agreement with those courts which have refused to permit ‘self help’ discovery which is otherwise violative of ownership or privacy interests and unjustified by any exception to the jurisdiction of the courts to administer the orderly resolution of disputes”). But see Kempcke v. Monsanto Co., 132 F.3d 442, 446 (8th Cir. 1998) (holding that summary judgment on retaliation claim under ADEA was improper because plaintiff had “innocently acquired” documents and noting that “when documents have been innocently acquired, and not subsequently misused, there has not been the kind of employee misconduct that would justify withdrawing otherwise appropriate § 623(d) protection [protection from retaliation under the ADEA]”). See also Quinlan v. Curtiss-Wright Corp., 204 N.J. 239 (2010) (interpreting New Jersey’s Law Against Discrimination, the N.J. Supreme Court found an employee’s copying and disclosure of one company document that she obtained in the ordinary course of her employment was protected activity, but her more substantial copying and disclosure of additional confidential documents as a result of her systemic review of company files to support her discrimination claim was not protected activity).
See generally Michael R. Grimm et al., Courageous Whistleblowers Are Not “Left Out In The Cold”: Legitimate Justifications for Collecting Evidence of False Claims Act Violations, 39
FALSE CLAIMS ACT & QUI TAM Q. REV. 19 (2005).
Central to the argument that “self help” discovery is a protected activity under Section 3730(h) is the idea that “public policy” should encourage the investigation and reporting of fraud to the Government. From this concept stems the argument that in order to encourage such investigations, relators and potential relators should be given expansive leeway in gathering evidence of such fraud for transmission to the Government. A number of cases have expressed some support for this concept. In United States ex rel. Grandeau v. Cancer Treatment Centers of America, the defendant filed counterclaims against the relator for, among other things, breach of a confidentiality agreement based on the transmittal of confidential corporate documents to the Government in response to a Government subpoena the relator received on behalf of the
company but of which she neglected to inform the company.5 In dismissing the corporation’s
breach of confidentiality claim, the court stated:
Relator and the government argue that the confidentiality agreement cannot trump the FCA’s strong policy of protecting whistleblowers who report fraud against the government. Their position is correct and the defendant concedes as much. It makes no difference whether we view defendant’s counterclaim to be based on relator’s response to the subpoena or in retaliation to the qui tam claim. Relator could have disclosed the documents to the government under any circumstances, without breaching the
Similarly, courts have at times included dicta in FCA retaliation rulings outside the “self help” discovery context that lend general support to these notions.7
Finally, there have been parallel proceedings where the courts have acknowledged a public policy interest in allowing relators to unilaterally provide confidential corporate
350 F. Supp. 2d 765, 768 (N.D. Ill. 2004). In Grandeau, the relator received a subpoena requesting production of documents relating to the DOJ’s investigation of defendant for health care offenses. The subpoena was addressed to Grandeau, at her office, in her capacity as custodian of the documents. Grandeau produced the documents to the Government without informing her employer of the subpoena. Subsequently, Grandeau filed a qui tam action. After the Government declined to intervene and the complaint was unsealed, defendant counterclaimed against Grandeau for breach of fiduciary duty, breach of confidentiality agreement, and conversion.
Id. at 773.
See generally United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 740 (D.C. Cir. 1998) (stating that § 3730(h) “manifests Congress’ intent to protect employees while they are
collecting information about a possible fraud”).
documents to the Government. For example, in E.A. Renfroe & Co. v. Moran, the Eleventh Circuit appeared to draw a distinction between providing stolen documents to the Government as opposed to other parties, potentially implying that transmission to the Government may be an acceptable course of action.8 In that case, which involved alleged fraud surrounding insurance claims related to Hurricane Katrina, two corporate employees copied approximately 15,000 documents and provided the documents to their attorney and the Government as well as ultimately discussing their contents with the news media. This in turn led the corporate defendant to move for an injunction alleging that the relators violated the non-disclosure provisions of their employment contracts. The district court entered the injunction and instructed the relators and their counsel to turn all of the documents over to the corporate defendant’s
counsel.9 However, the district court expressly exempted law enforcement officials from the
injunction.10 When the relators appealed the injunction they argued, among other things, that public policy favored “ferreting out corporate wrongdoing” and justified the breach of their employment contract. 11 The Eleventh Circuit disagreed, stating that this public policy concern “is adequately covered by disclosure of the alleged wrongdoing to state and federal law enforcement agencies.”12 As the district court’s injunction permitted “disclosure to and use by law enforcement agencies,” the Eleventh Circuit affirmed the injunction.13
2. Where “Self Help” Discovery May Not Be A Protected Activity
In comparison, a number of other cases have allowed counter-claims against relators in response to “self help” discovery activities or have otherwise indicated that, at least in certain circumstances, those activities are not protected.
(i) Relators Who Are Licensed Attorneys
249 F. App’x 88, 92 (11th Cir. 2007). For the employees’ related FCA claims, see United States ex rel. Rigsby v. State Farm Ins. Co., No. CV 06-0433, 2008 WL 2130314 (S.D. Miss.
May 19, 2008) and subsequent decisions.
9 E.A. Renfroe & Co. v. Moran, 508 F. Supp. 2d 986, 989-90 (N.D. Ala. 2007).
E.A. Renfroe & Co., 249 F. App’x at 90-92.
Id. at 92.
Perhaps unsurprisingly, some courts have placed limits on the ability of attorney-relators to engage in “self help” discovery that violates the ethical rules of the legal profession. The most recent and arguably the most significant decision on this point is United States ex rel. Fair Laboratory Practices Associates v. Quest Diagnostics Inc. 734 F.3d 154 (2d Cir. 2013). In that case, Relator Fair Laboratory Practices Associates (FLPA) brought an FCA qui tam action before Judge Robert P. Patterson of the District Court for the Southern District of New York regarding alleged violations of the Anti-Kickback Statute by Defendants Quest Diagnostics Incorporated (Quest) and Unilab Corporation (Unilab). FLPA was formed by three former Unilab employees
– Andrew Baker (former Unilab Chief Executive Officer), Richard Michaelson (former Unilab Chief Financial Officer), and Mark Bibi (former Unilab General Counsel) – specifically for the purpose of bringing a qui tam action against Defendants.14 Prior to bringing suit, Bibi consulted the N.Y. Code of Professional Conduct and the American Bar Association’s Model Rules of Professional Conduct to determine whether his status as the former Unilab General Counsel precluded his participation. He concluded that he could proceed with suing his former client in the qui tam, but he did not verify his understanding with the New York State Bar.15
After service of process and the filing of a second amended complaint, Defendants were permitted to take limited discovery regarding whether FLPA and/or Bibi had improperly used or disclosed Unilab’s confidential information in bringing the litigation. Following that discovery, Defendants filed a motion to dismiss on the grounds that Bibi’s participation in the qui tam violated two rules of the N.Y. Code of Professional Conduct.
First, Defendants asserted that Bibi’s conduct violated Rule 1.9(a) (known as the “side- switching rule”), which prevents a lawyer who “has formerly represented a client in a matter [from] thereafter represent[ing] another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the
former client gives informed consent, confirmed in writing.”16 Second, Defendants argued that
Bibi’s conduct violated Rule 1.9(c), which precludes a lawyer from “us[ing] confidential information of [a] former client . . . to the disadvantage of the former client, except as these Rules would permit or require with respect to a current client or when the information has
14 FLPA, 734 F.3d at 157-59.
15 Id. at 161.
16 Id. at 161-62.
become generally known; or [from] reveal[ing] confidential information of the former client . . . except as these Rules would permit or require with respect to a current client.”17 In response, FLPA argued, among other things, that its and Bibi’s actions were authorized pursuant to Rule 1.6(b) (known as the “crime-fraud rule”). That Rule allows a lawyer to “reveal or use confidential information to the extent that the lawyer reasonably believes necessary . . . to prevent the client from committing a crime . . . .”18
On March 24, 2011, Judge Patterson rejected FLPA’s contentions and granted Defendants’ motion to dismiss. Furthermore, Judge Patterson concluded that disqualification of FLPA, all three of the individual relators, and of FLPA’s counsel, from this suit or any other suit on related facts, was “necessary to protect Defendants from the use of their confidential
information against them.”19 Although Judge Patterson stated that the dismissal and
disqualification did not affect the rights of the United States to intervene and proceed with the action, the United States ultimately declined to intervene. Judgment was entered on July 12, 2011, and FLPA appealed.20
On appeal before the Second Circuit, FLPA argued that Judge Patterson’s ruling undermined the federal interest in encouraging whistleblowers to root out fraud against the government. In a unanimous panel decision affirming the opinion below, the Court declined to embrace FLPA’s argument. Writing for the Court, Judge José A. Cabranes acknowledged that protecting client confidences may in some circumstances be “inconsistent with or antithetical to federal interests,” but he emphasized that the FCA reflects no clear legislative intent to supplant
state rules of ethics.21 Moreover, Judge Cabranes noted that the N.Y. Code of Professional
Conduct implicitly recognizes and balances federal interests within its prescriptions.22 Accordingly, FLPA and Bibi were not permitted to act as they had, violating N.Y. Rule 1.9(c) by disclosing confidential information beyond what was “necessary” to prevent a future crime within the meaning of N.Y. Rule 1.6(b).23
Id. at 162.
19 Id. at 162-63.
Id. at 163.
Id. at 165.
FLPA was no more successful on the matter of remedy. Having affirmed Judge Patterson’s decision on the merits, the Court of Appeals also concluded that Judge Patterson did not abuse his discretion in dismissing the complaint and disqualifying FLPA, the individual relators, and their counsel. Again, the Court recognized “the particularly strong federal interest underpinning qui tam litigation pursuant to the FCA,” yet again, the Court decided in favor of Defendants, holding that dismissal and disqualification were permissible due to the need to
prevent the use of Bibi’s unethical disclosures against Defendants.24
Similarly, in a second case where the whistleblower was a former inside lawyer, the court granted injunctive relief, imposing limitations on his ability to transmit confidential and/or privileged documents to the Government. In X Corp. v. Doe, the employer company filed suit in the United States District Court for the Eastern District of Virginia for alleged breach of a confidentiality agreement by a former in-house counsel and moved for a preliminary injunction seeking, inter alia: (1) to prohibit defendant and his lawyer from making any disclosures of the company’s allegedly privileged and confidential information to agents or representatives of the federal government or its agencies; and, (2) to compel the defendant to return all allegedly misappropriated documents.25 X Corporation terminated Doe as part of a company-wide reduction in force but Doe alleged that he was unlawfully fired in retaliation for actions X Corporation believed he was taking in furtherance of a possible qui tam action and claimed that the documents he took revealed that X Corporation was defrauding the Government in violation of the FCA.26 It was not clear at the time the preliminary injunction motion was heard whether there was a pending qui tam action because the court found that Doe was prohibited from disclosing whether he had filed a qui tam action.27
The court found that X Corporation was entitled to a preliminary injunction enjoining
Doe from making further disclosures until such time as the matter was fully litigated based on a comparison of the potential harm to the parties if the injunction was issued or not.28 However,
24 Id. at 165-68.
805 F. Supp. 1298, 1302 (E.D. Va. 1992), aff’d sub nom. Under Seal v. Under Seal, 17 F.3d
1435 (4th Cir. 1994).
Id. at 1301.
Id. The court noted in a later order on summary judgment that there was no evidence that he had initiated or in any way assisted in the filing of a qui tam suit while employed at X
Corporation. X Corp. v. Doe, 816 F. Supp. 1086, 1095 (E.D. Va. 1993).
28 Id. at 1310-12.
the court did not grant X Corporation’s request for an immediate return for the documents noting that X Corporation bore a heavier burden in seeking such relief as opposed to preserving the status quo through enjoining any disclosure by Doe.29 In a subsequent order the court examined the documents obtained by Doe and held that Doe had failed to meet his burden of establishing that the documents reflected convincing evidence of fraud.30 The court therefore granted summary judgment for X Corporation and ordered the disputed documents to be returned and permanently enjoined Doe from disclosing X Corporation’s confidences.31 The court also granted summary judgment for X Corporation on Doe’s counterclaim for retaliation under the FCA whistleblower provision because it found that Doe could not show that any actions he took while at X Corporation were in furtherance of a qui tam suit so there was no causal relationship between his acts and X Corporation’s termination decision.32
Finally, in United States ex rel. Frazier v. IASIS,33 the relator, the chief compliance
officer, who also happened to be a lawyer, was ultimately determined not to have an attorney- client relationship with IASIS. However, his access to attorney-client privileged documents, a number of which he took when he left IASIS, ultimately led to sanctions against his attorneys based on their handling of those documents. Following the termination of his employment, the relator filed a qui tam lawsuit, and in the course of that litigation it came out that relator had taken approximately 1300 pages of confidential documents from IASIS, including attorney-client privileged documents, when he left. Although relator’s counsel had segregated what it identified to be privileged documents, it did not seek a ruling from the Court on what to do with those privileged documents before serving the unsealed complaint on IASIS, nor did it contact IASIS after serving the complaint to notify it of the existence of those privileged documents in its possession. Rather, after reading the complaint IASIS believed the complaint was based in part on privileged documents and contacted relator’s counsel about those documents.
Ultimately, the qui tam was dismissed for failure to state a claim, but IASIS also had moved for sanctions against relator and his counsel, as well as relator’s disqualification, based on the taking and use of privileged documents. The motion for sanctions against relator, but not
29 Id. at 1303, 1311.
30 X Corp., 816 F. Supp. at 1095.
31 Id. at 1095-97.
32 Id. at 1096-97.
33 Order dated 01/10/2012, Case No. 2:05-CV-00766 (D. Ariz.)
against his counsel, was dropped as part of a settlement agreement. With regard to relator’s counsel, however, the district court held that it “did engage in misconduct by withholding IASIS’s documents and failing to seek either a court ruling while the case was sealed or failing to contact IASIS after the seal was lifted” and imposed sanctions of attorneys’ fees and costs expended by IASIS in its efforts to get its privileged documents back, and disqualified counsel from assisting or representing relator or any other party adverse to IASIS. The Court, though, found that the circumstances did not establish the “extraordinary circumstances of bad faith” requiring independent dismissal of the action because relator’s counsel did keep the undisputed privileged documents in a sealed box.
(ii) Lay Relators
Judicial skepticism of “self help” discovery has not been limited solely to those situations in which the relator was an attorney. For instance, in Zahodnick v. International Business Machines Corp., the Fourth Circuit affirmed the district court’s entry of summary judgment against a relator who had engaged in “self help” discovery:
As to [the defendant’s] counterclaim for breach of confidentiality, the record discloses that [the relator] signed two nondisclosure agreements. In these agreements, [the relator] agreed not to disclose confidential information to anyone outside of [the defendant company] and to return all [company] property to [the company] when he left [the company’s] employment. [The relator] retained confidential materials belonging to [the company] after termination of his employment and forwarded those documents to his counsel without [the company’s] consent. Under such circumstances, the district court did not err either in enjoining [the relator] from disclosing [the corporate defendant’s] confidential materials to third parties or in ordering [the relator] to return all confidential materials to [the corporate defendant].
Accordingly, we affirm the district court’s order.34
In discussing the availability of similar counterclaims in the FCA context, the Ninth Circuit in United States ex rel. Madden v. General Dynamics Corp., noted that it was not persuaded that it needed to bar all counterclaims in order to provide relators with incentive to file suit, “[r]ather, we believe that some mechanism must be permitted to insure that relators do not
34 135 F.3d 911, 915 (4th Cir. 1997).
engage in wrongful conduct in order to create the circumstances for qui tam suits and to discourage relators from bringing frivolous actions. Counterclaims for independent damages serve these purposes.”35
In line with those cases, in United States ex rel. Cafasso v. Gen. Dynamics C4 Systems, Inc., a corporate defendant brought counterclaims against a relator for breach of a confidentiality agreement based on disclosure of confidential materials to the relator’s counsel.36 In holding against the relator after having previously dismissed the underlying qui tam action, the district court noted:
[The relator] contends the FCA protects her conduct violating the Agreement because “[p]ublic policy grants Relator a privilege in gathering copies of documents as part of an investigation under the FCA and gives Relator immunity from civil liability based on claims against her for doing so.” …
Public policy does not immunize [the relator]. [The relator] confuses protecting whistleblowers from retaliation for lawfully reporting fraud with immunizing whistleblowers for wrongful acts made in the course of looking for evidence of fraud.37
The court did, however, indicate in dicta that under certain hypothetical circumstances a limited privilege in this area could exist such that a confidentiality agreement “might be unenforceable if the interest in its enforcement is outweighed in the circumstances by a substantial public interest,
e.g. the public interest in filing an FCA qui tam action….”38 In affirming the district court’s
decision granting summary judgment for breach of the confidentiality agreement, the 9th Circuit agreed with the district court that there might be some merit to a public policy exception to the enforcement of confidentiality agreements where the information disclosed is in furtherance of an FCA action, but stated:
Were we to adopt a public policy exception to confidentiality agreements to protect relators—a matter we reserve for another day—those asserting its protection would need to justify why removal of the documents was reasonably necessary to pursue an FCA claim. [The relator] has made no such particularized
35 4 F.3d 827, 831 (9th Cir. 1993).
36 No. CV 06-1381, 2009 WL 1457036, at *13-14 (D. Ariz. May 21, 2009).
Id. at *14.
showing. The need to facilitate valid claims does not justify the wholesale stripping of a company's confidential documents. Although courts perhaps should consider in particular instances for particular documents whether confidentiality policies must give way to the needs of FCA litigation for the public's interest, [the relator’s] grabbing of tens of thousands of documents here is overbroad and unreasonable, and cannot be sustained by reference
to a public policy exception. 39
B. The Government Is Not Free To Encourage Relators To Conduct “Self Help” Discovery
In situations where employees have taken company records, the Government is not free to encourage relators to engage in “self help” discovery for the Government’s benefit.40 This is because after a relator has contacted the Government with information or evidence, depending on the circumstances the relator might be considered to have become a “state actor” such that any further evidence obtained by the relator is in violation of the employer’s Fourth Amendment rights. While there has been little to no treatment of this issue in FCA case law,41 the majority of circuits in other non-FCA circumstances have adopted a two-part test to determine if a private citizen has become a state agent.42 These cases consider two critical factors: “(1) whether the
United States ex rel. Cafasso v. Gen. Dynamics C4 Systems, Inc., 627 F.3d 1047, 1062 (9th
Potential ethical issues are implicated by either Government counsel or relator’s counsel actively encouraging “self help” discovery. While these issues do not appear to have been
directly addressed in the FCA context, under the ABA Model Rules of Professional Conduct, a
lawyer is prohibited from inducing a client to steal an adversary’s privileged or confidential information. MODEL RULES OF PROFESSIONAL CONDUCT R. 4.4(a) (“In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person, or use methods of obtaining evidence that violate the legal rights of such a person.”). Some states have added a comment to elaborate on a lawyer’s duty under R. 4.4.
See, e.g., GEORGIA RULES OF PROFESSIONAL CONDUCT R. 4.4 cmt. 1 (“Responsibility to a client
requires a lawyer to subordinate the interests of others to those of the client, but that responsibility does not imply that a lawyer may disregard the rights of third persons. It is impractical to catalogue all such rights, but they include legal restrictions on methods of obtaining evidence from third persons.”).
Isaac Rosenberg, Raising the Hue . . . And Crying: Do False Claims Act Qui Tam Relators Act Under Color of Federal Law?, 37 PUB. CONT. L.G. 271, 300 (2008) (stating the “state action
theory has not been raised to challenge any FCA investigations of record”).
See, e.g., United States v. Alexander, 447 F.3d 1290, 1295 (10th Cir. 2006); United States v.
Smith, 383 F.3d 700, 705 (8th Cir. 2004); United States v. Jarrett, 338 F.3d 339, 344 (4th Cir.
government knew of and acquiesced in the intrusive conduct, and (2) whether the party performing the search intended to assist law enforcement efforts or to further his own ends.”43 This fact-intensive analysis varies in result from case to case. However, the first factor requires that the Government know of the individual’s conduct. Accordingly, the state actor argument likely would only apply to relators after they have conferred with the Government.
The more significant hurdle to applying the state actor theory to FCA cases is the second factor. A private search becomes a governmental search “only where there is ‘some exercise of governmental power over the private entity, such that the private entity may be said to have acted on behalf of the Government rather than for its own, private purposes.’”44 As the Seventh Circuit stated, “a private citizen might decide to aid in the control and prevention of criminal activity out of his or her own moral conviction, concern for his or her employer’s public image
or profitability, or even desire to incarcerate criminals, but even if such private purpose should happen to coincide with the purpose of the government, ‘this happy coincidence does not make a private actor an arm of the government.’”45 While active encouragement by and coordination with government agents to perform “self help” discovery would seem to lend great credence to an argument that a relator was attempting to further law enforcement purposes, a simple truth previously recognized by the Supreme Court should also be born in mind: qui tam relators “are motivated primarily by prospects of monetary reward rather than the public good.”46
II. Transmission of Documents and Information From Government to Relator
In addition to “self help” discovery placing confidential corporate documents in unknown hands, corporate counsel also must be cognizant of the possibility of the transmission of confidential information in the other direction -- from the Government to the relator. It is not uncommon in qui tam cases for the Government to share documents and information in its possession with relators, including documents that it received via administrative subpoena from the company under investigation. Reasons for this include the belief that the relator may have
2003); United States v. Steiger, 318 F.3d 1039, 1045 (11th Cir. 2003); United States v. Crowley,
285 F.3d 553, 558 (7th Cir. 2002).
United States v. Miller, 688 F.2d 652, 657 (9th Cir. 1982) (citations omitted).
United States v. Shahid, 117 F.3d 322, 325 (7th Cir. 1997) (quoting United States v. Koenig,
856 F.2d 843, 849-50 (7th Cir. 1988)).
Id. at 326 (quoting Koenig, 856 F.2d at 850-51).
Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 949 (1997).
some form of “insider” expertise and insight into the documents that may assist the Government in its investigation. However, from the perspective of corporate counsel, once the corporation’s confidential documents and information are in the hands of relators, the risk of misuse or disclosure to other parties exponentially increases. For example, in a few recent cases, defendant’s documents have been produced to the government and then obtained through third
party subpoenas by relators and used to amend the existing qui tam complaint.47 This inevitably
leads corporate counsel to question what protections exist for the company’s confidential or sensitive business information once it is produced to the Government.
At the outset, it should be noted that the Department of Justice (DOJ) has acknowledged that certain limitations exist on the Government’s ability to publicly disclose subpoenaed materials. For instance, in a report to Congress on “The Use of Administrative Subpoena Authorities by Executive Branch Agencies and Entities,” the DOJ identified various statutory and regulatory privacy limitations and notice provisions that apply to documents produced pursuant to administrative subpoenas, such as the Trade Secrets Act, 18 U.S.C. § 1905, the
Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, and the Privacy Act, 5 U.S.C. § 552a.48
In referencing 18 U.S.C. § 1905, the DOJ acknowledged:
The language of the statute clearly requires federal employees to protect certain personal and business information obtained under an issued administrative subpoena from public disclosure, and the consequences for a statutory violation–including fine, imprisonment, or both–are stringent.49
Individual DOJ attorneys have also on occasion cited 18 U.S.C. § 1905 to corporate counsel when discussing the protections provided to subpoenaed confidential information. That being said, DOJ attorneys also regularly attempt to “reserve” the right to disclose subpoenaed
47 See, e.g., United States ex rel. Underwood v. Genentech, Inc., Memorandum & Order, Civil Action No. 03-3983 (June 2, 2010, E.D. Pa.) (district court permitted the relator to amend his complaint based on the defendant’s own documents that relator obtained through a third party subpoena to DOJ); United States ex rel. King v. Solvay S.A., Memorandum & Order, Civil Action H-06-2662 (July 20, 2010, S.D. Tex.) (district court allowed relators to amend their complaint using documents obtained from the defendant pursuant to CIDs issued by Texas and Virginia, that the relator in turn subpoenaed from those States).
Office of Legal Policy, U.S. Dep’t of Justice, Report to Congress on the Use of Administrative
Subpoena Authorities by Executive Branch Agencies and Entities (May 13, 2002), http://www.usdoj.gov/archive/olp/rpt_to_congress.pdf, at Section II(A)(3).
Id. at Section II(A)(3)(b)(iii)(dd).
documents to third parties that may be “witnesses” or who may otherwise assist in the DOJ’s “investigation” or “assessment of facts.” Such reservations imply that the Government intends to unilaterally disclose their confidential corporate documents to the relator. In such circumstances, corporate counsel should consider the practical benefits that might be achieved by obtaining a confidentiality agreement with the Government that places some restrictions on third parties to whom the Government discloses the company’s documents. However, successfully negotiating such a confidentiality agreement is by no means assured. With that in mind, corporate counsel must be aware of three important points. First, the FCA recently was amended to specifically allow the Government to share with relators documents received via an FCA Civil Investigative Demand (CID). Second, a number of courts have been willing to issue protective orders to provide additional protections to confidential corporate documents sought by administrative subpoena or CID; protections over and above that normally afforded by the agencies seeking the documents. Third, there is a significant body of case law in the “reverse FOIA” area that may provide useful guidance to corporate counsel seeking to actively restrict the Government’s disclosure of specific documents to non-governmental third parties.
A. Recent Amendments to The FCA’s Civil Investigative Demand Provisions
Changes to the FCA by the Fraud Enforcement Recovery Act (FERA) of 2009 may result in a more expansive use of Civil Investigative Demands (CIDs) issued pursuant to the FCA, which historically has been an under-used tool in the government investigative arsenal.50 With regard to the disclosure of corporate documents to relators, the most important change occurring in FERA is an amendment that permits the DOJ to share materials received pursuant to CID with relators (as well as with Congress and federal, state, and local agencies and their contractors).51 Furthermore, while authority for issuing CIDs previously rested in the hands of the Attorney General, pursuant to the FERA amendments, the Attorney General may now delegate authority for their issuance to selected Department officials. On January 15, 2010, Attorney General Eric Holder signed an order delegating his authority to the Assistant Attorney General for the Civil
The Fraud Enforcement and Recovery Act, S. 386, became Public Law 111-21 on May 20, 2009.
31 U.S.C. § 3733(a)(1)(D). FERA did, however, leave untouched the provision in the FCA that states that CID information is exempt from disclosure by the Department under the Freedom
of Information Act. 31 U.S.C. § 3733(k).
Division. On March 24, 2010, the Assistant Attorney General delegated his authority to issue CIDs to all U.S. Attorneys across the nation, potentially ushering in an increased use of these investigative tools.
B. Seeking Protective Orders for Documents Produced Pursuant to Subpoena or CID
When faced with an administrative subpoena or CID, corporate counsel should evaluate the potential options for limiting further disclosure of the requested documents. A number of courts have been willing to issue protective orders to provide additional protections to confidential corporate documents sought by administrative subpoenas or CIDs beyond that normally afforded by the agencies seeking the documents. Such protective orders include additional protections such as: (1) providing the producing party notice prior to disclosure to third parties in order to permit objection to the Government or in court; (2) requiring a court order or court permission for any disclosure to third parties; and/or, (3) requiring any third party receiving the documents to guarantee confidential treatment. Although the few FCA cases discussing protective orders involve subpoenas, such protective orders have also been sought and
successfully granted in non-FCA cases involving CIDs authorized under other statutes.52 While
the recent changes to the FCA via FERA allow CID information to be shared with relators, statutorily allowing such disclosures does not necessarily equate to a limitation on the court’s ability to place reasonable restrictions on such disclosures. Accordingly, it is likely that if CIDs are used more frequently by the Government and CID information is shared with relators, more
52 See United States v. AMR Corp., No. 99-1180, 2001 WL 303048 (D. Kan. Feb. 5, 2001) (entering a modified protective order that permitted a defendant in a Government antitrust action who was also a defendant in private class actions to provide notice of the protective order to third parties who produced CID documents to the Government in the Government antitrust action that the defendant would produce CID documents in its private lawsuits and permit the third parties twenty one days to seek a protective order to prevent disclosure); United States v. Dentsply Int’l, Inc., 187 F.R.D. 152 (D. Del. 1999) (granting modified protective order for CID documents in an antitrust action brought by the government pursuant to Fed. R. Civ. P. 26 but asking the parties to eliminate the many provisions in the suggested protective orders that called for court supervision and intervention); Aluminum Co. of Am. v. U.S. Dep’t of Justice, 444 F. Supp. 1342
(D.D.C. 1978) (granting a protective order for documents produced pursuant to CID in antitrust
investigation but noting that Alcoa should designate the confidential documents with as much specificity as possible as the court would look “with disfavor upon unnecessarily broad designations.”).
parties will seek additional safeguards of protective orders as well as confidentiality agreements in those circumstances.53
In determining when such protective orders should be granted, the Supreme Court has held that a certain amount of deference should be given to a government agency’s rules of procedure including what protections and notice provisions the agency accords to documents collected in response to a subpoena. In F.C.C. v. Schreiber, MCA, Inc., a major producer of network television programs, refused to produce materials subpoenaed by the FCC in an investigation of the television industry. 54 The FCC refused to grant confidential treatment to the specific documents MCA sought protection for because the FCC had determined that “public proceedings should be the rule herein” and non-public procedures used only in “extraordinary instances where disclosure would irreparably damage private, competitive interests and where such interests could be found by the Presiding Officer to outweigh the paramount interest of the
public… .”55 The FCC petitioned the district court for enforcement of the subpoena, and the
court ordered MCA to comply with the subpoena but also ordered that “all testimony given and documents produced by respondents be received and held in confidence” in order to protect the respondents’ rights and to preclude disclosure of trade secrets.56 On appeal, a divided court of appeals found that the district court had not abused its discretion in conditioning its order to require confidential treatment of the information sought.57 The Supreme Court found that neither of the lower courts had properly respected the congressional distribution of authority to government agencies to create their own administrative procedures stating that “[t]o permit federal district courts to establish administrative procedures de novo, would, of course, render nugatory Congress’ effort to insure that administrative procedures be designed by those most
53 In explaining the new ability to share CID information with relator, one FCA author has noted that “[i]f confidential information is sought that will cause harm if released to the relator (such as a case in which the relator is a competitor), the target of the CID can and should seek a confidentiality agreement with DOJ as a condition to complying with the CID.” John T. Boese, Civil False Claims and Qui Tam Actions, § 4.05[E] (3d ed. 2006 & Supp. 2010-1). If such an agreement cannot be reached or if the party believes it needs additional protection and notice, it should evaluate the potential for seeking a protective order.
54 381 U.S. 279 (1965).
55 Id. at 285.
56 Id. at 286-87.
57 Id. at 287-88.
familiar with the regulatory problems involved.”58 The Supreme Court found that the FCC’s weighing of the interests involved and deciding in favor of public proceedings was not an arbitrary exercise of the Commission’s authority and noted that the court of appeals had erred in focusing on the district court’s decision because the “question for decision was whether the exercise of discretion by the Commission was within permissible limits, not whether the District Judge’s substituted judgment was reasonable.”59
While such deference to an agency’s procedures on the confidential treatment of
subpoenaed documents is a baseline, numerous courts have identified circumstances where such additional protections are warranted. In those cases, the courts have focused on the fact that the agency did not have clear procedures, that even with established procedures more protection was warranted, or that the parties themselves came to an agreement that a protective order served the needs of that particular investigation.
In United States International Trade Commission v. Tenneco West, the Court of Appeals for the District of Columbia upheld the district court’s order that required the ITC to afford Tenneco West ten days notice prior to releasing to any third party any of the documents submitted pursuant to an administrative subpoena (except a grand jury or congressional
committee for which there were other notice requirements).60 The ITC appealed arguing, inter
alia, that the district court had abused its discretion in issuing a protective order. The court of appeals reviewed Schreiber and the Owens case that had followed Schreiber’s guidance and noted that an important distinction between those cases and the current case was that the ITC had no set procedure and had made no formal promise of how it would provide notice to Tenneco
West in the event of requested disclosure.61 The court of appeals did not agree that the
Id. at 290.
Id. at 291. See also Federal Trade Comm’n v. Owens-Corning Fiberglass Corp., 626 F.2d 966, 974-75 (D.C. Cir. 1980) (citing Schreiber and holding that the district court abused its discretion
by imposing additional protection requirements beyond the FTC’s customary procedures for confidential documents (including ten days’ notice before disclosure to anyone outside the
Commission) and failed to accord the presumption of administrative regularity and good faith to the Commission).
822 F.2d 73 (D.C. Cir. 1987). In the case of a grand jury or congressional committee, ITC had to give Tenneco West notice of the request “a reasonable time prior to disclosure” and inform the
requesting party of Tenneco West’s claims of confidentiality. Id. at 75.
The court noted that the record revealed no clear procedure for the ITC to provide notice and instead referred to the record of the district court proceeding where the ITC counsel had stated
Commission’s assurances of protection and notice “offer the same level of certainty as either a formal rule or published procedure like that involved in Schreiber or an explicit agreement like that involved in Owens.”62 The court said that “[w]hile Schreiber emphasizes the deference due an agency in choosing its own procedures for guarding confidentiality, we must remain cognizant of the correlative interests of the information-disclosers in knowing precisely how their materials will be protected.”63
Even with procedures in place for treatment of confidential documents and provision of notice, courts have granted additional protection. In SEC v. R.J. Reynolds Tobacco Holdings, Inc., the district court denied R.J. Reynolds’ (RJR) request pursuant to Federal Rule of Civil Procedure 26(c) for a broad protective order preventing disclosure to any third party, noting that although federal courts have “broad discretion” in issuing a protective order, the protective structures provided by the FOIA process in which RJR would be notified and could present
arguments in federal court by means of a “reverse FOIA” action was sufficient protection.64
However, the court did grant a limited protective order requesting that “before the Securities and Exchange Commission provides any information obtained pursuant to the Subpoena to lawyers or other persons involved in the Philip Morris case, the SEC shall, through an ex parte process, advise and obtain the permission of this Court.”65 The DOJ was in the process of litigating against RJR and other tobacco companies in the Philip Morris case. The court was concerned that FOIA confidentiality protection does not apply to the DOJ and that the SEC could disclose
information to the DOJ when it “deems it appropriate” and could do so “without providing any notice to RJR or any opportunity for RJR to contest the disclosure as being inconsistent with the SEC’s securities enforcement authority.”66
“that the ITC’s ‘practice’ has been to inform the provider of information whenever the Commission concludes the information might not be protected under [FOIA].” Id. at 77. The court said that this “is certainly not a promise to give notice a reasonable time before release of Tenneco’s information.” Id.
Id. at 79.
Id. at 79.
64 No. MISC.A.03-1651, 2004 WL 3168281 (D.D.C. June 29, 2003).
Id. at *13.
Id. The court stated that it “is troubled by the lack of any procedural check or balance in this unique context where another government agency is presently actively litigating against the
subject of the SEC’s investigation.” Id.
Although there are few FCA cases addressing seeking a protective order in response to a subpoena in the government investigation stage, in United States v. Chevron U.S.A., Inc., the Fifth Circuit upheld the enforcement of Department of Interior IG administrative subpoenas but only with a protective order that was drafted by the IG after the parties were unable to agree on
one.67 The protective order, as supplemented by the Government in a post-argument stipulation,
proscribed disclosure of any confidential material to any other person except in accordance with the procedures set by the protective order. The requirements of the protective order (with the stipulation) included a court order for disclosure to a private party, the IG being required to resist, to the extent permitted by law, such parties’ attempts to obtain documents (for instance
under FOIA) and notice to be given pre-disclosure to Chevron.68 The Fifth Circuit found that the
protective order was sufficient. Although Chevron argued that it was not permitted to object to disclosure to third parties (not including Congress or any agency of the United States), the court deemed it sufficient that the Government had agreed to resist any disclosure to private parties and Chevron was to be given as much notice as practical, “offering it opportunity to intervene
and, inter alia, make a reverse Freedom of Information Act claim.”69 Thus, courts understand
the importance of notice to an information-disclosing party in order for the party to be able to take necessary steps to protect the release of its confidential documents.70
186 F.3d 644 (5th Cir. 1999). In another FCA case in which the Government had intervened and documents had been produced in discovery, the district court granted a modified protective order to the defendant company that restricted access to financial information and trade secrets to the Government and to the relator’s attorney and protected the documents from being viewed by the relator himself, a former employee of the defendant who was currently employed at a competitor company. United States ex rel. Purcell v. MWI Corp., 209 F.R.D. 21 (D.D.C. 2002).
186 F.3d at 650. The Government had stipulated that it would not disclose any protected
information to any private party “unless compelled to do so by a judicial order entered by a court of competent jurisdiction.” Id. at 651. The protective order permitted disclosure to other agencies of the United States and to Congress but with the stipulation that Congress was to be advised of the protective order and Chevron was to be notified unless Congress objected. Id. at 650.
69 Id. at 651 (citing Chrysler Corp. v. Brown, 441 U.S. 281, 317-18 (1979)).
In In re: Department of Justice Subpoena Duces Tecum to Custodian of Records for Baptist Memorial Hospital, No. 04-MC-018, 2004 WL 2905391, at *3 (W.D. Tenn. June 22, 2004), the
district court granted the hospital’s motion for a protective order for documents produced by the hospital in response to a subpoena issued by the DOJ seeking the hospital’s records related to a
doctor who was criminally indicted. The court noted that in an earlier order it had ruled that any documents containing confidential patient information filed with the court in the criminal
prosecution of the doctor would be filed under seal and no party could disclose confidential
In an earlier case, Federal Trade Commission v. Texaco, Inc., the United States Court of Appeals for the District of Columbia Circuit found the protective order issued by the district court to be too broad, but did impose a modified protective order for certain information submitted by natural gas producers in response to a subpoena issued by the Federal Trade
Commission.71 The court disagreed with the district court’s protective order requirement that
“any release or use of the documents beyond the investigation first be cleared with the court” because it would place the court in a position of supervision and control over the FTC’s exercise of its statutory duties.72 The modified protective order required that the FTC to provide ten days’ notice to Texaco before disclosing any produced documents designated as confidential to any person outside the employ of the FTC (other than an outside consultant retained by the FTC who had agreed not to disclose the documents).73
Nevertheless, there is no guarantee that a company will be able to obtain a protective order. Other courts have found that protective orders are unnecessary and that confidentiality concerns are outweighed by governmental investigatory needs. In United States Department of Education v. National Collegiate Athletic Ass’n, the University of the District of Columbia (UDC), a member of the NCAA, voluntarily reported violations involving its basketball teams in
patient information without prior consideration of the court. The court stated that the “same terms of protection will apply to documents disclosed by Baptist in response to this subpoena duces tecum.” Id.
555 F.2d 862 (D.C. Cir. 1977) cert. denied, Texaco, Inc. v. Federal Trade Comm’n, 431 U.S. 974 (1977). All eleven gas producers filed motions to quash the subpoenas and all of these
motions were denied by the FTC. Id. at 869. During subsequent negotiations between the FTC and the producers, the FTC offered additional confidentiality protection for the information to be
provided under certain specifications of the subpoena (G, H, and I). Id. After that, two producers agreed to comply in full with the subpoenas, one agreed to comply in part, and the rest refused to
comply. Id. Accordingly, petitions for enforcement were filed in the district court in June 1973. Id. The district court reviewed many aspects of the subpoena including the confidentiality
provisions agreed upon by the parties.
72 Id. at 883-84.
73 Id. at 884-85. The court noted that this would provide an opportunity for judicial review at a later date. The court provided certain distinct rules for disclosure requests by Congress or a
court and provided that in the event that the investigation resulted in the issuance of a complaint, the confidential status of the documents and limitations on disclosure would be governed solely
by the applicable provisions of the FTC’s Rules of Practice. Id. at 885. The court noted in a footnote that although in the past some courts had conditioned enforcement of an agency
subpoena upon a protective order, the Supreme Court case F.C.C. v. Schreiber, 381 U.S. 279 (1965) “makes clear however that it is the agencies, not the courts, which should, in the first
instance, establish the procedures for safeguarding confidentiality.” Id. at 885 n.62.
the 2004-2005 season to the NCAA in order to mitigate the punishment.74 The exact nature of the violations was unclear, but they included the misuse of federal funds. Consequently, the Inspector General of the Department of Education (DOE) began an investigation of that misuse.75 In the course of the investigation the DOE issued a subpoena to the NCAA for documents that UDC had submitted or the NCAA had prepared in connection with the NCAA’s investigation of UDC’s self-reported violations.76 The NCAA acknowledged that compliance with the subpoena was not burdensome with regard to the actual time and effort required in responding, but instead argued that “if the government can make unrestricted use of documents submitted to the Association in aid of the Association’s own investigations, this will impede those investigations because whistleblowers will worry that if they inform to the Association their cover will be blown.”77 The NCAA appealed the district court’s denial of a protective order that would forbid the DOE from showing the documents to anyone without five days advance notice to the NCAA.78 The Seventh Circuit stated that this requested protective order “would be enforcing a privilege under a different name; the government would have physical possession of the documents but its ability to use them would be severely limited.”79 Finally, the court held that “the burden of compliance with the subpoena, even without a protective order to cushion the effect of compliance, is speculative and is outweighed by the investigatory needs of the Department of Education.”80
C “Reverse FOIA” Actions
Where documents have been produced to the Government, a final protection from third party disclosure is through what is called a “reverse FOIA” action. The use of such actions
74 481 F.3d 936, 936-37 (7th Cir. 2007).
Id. at 938.
Id. During that time of five days, the NCAA would potentially be able to go to the intended recipient of the documents and ask for confidential treatment of the information, and if not given,
the NCAA would have the right to ask the court for a further protective order. Id. at 938-39. 79 Id. at 939. The court pointed out that the DOE had an interest in maintaining the confidentiality of the documents in order to encourage future reporting of NCAA violations stating that the DOE “does not want to kill the golden goose by promiscuously disclosing information it receives from the NCAA… .” Id. at 939-40.
80 Id. at 942.
should be examined if the Government decides to proceed with disclosure over the corporation’s objection. “Reverse FOIA” actions stem from Chrysler Corp. v. Brown where the Supreme Court was faced with a lawsuit by a corporation that had submitted various documents to the Government and was attempting to prevent a third party from receiving those documents via a
FOIA request.81 The Supreme Court held that the submitting corporation could not use either
FOIA itself or the federal Trade Secrets Act to prevent disclosure of documents submitted by the corporation to the Government. However, the Supreme Court did provide an avenue for private parties to attempt to prevent government disclosure of a private party’s documents. In Chrysler, the Supreme Court acknowledged that a party may challenge a government agency’s decision to
disclose information through a lawsuit under the Administrative Procedure Act (APA).82 Section
10 of the APA allows a person “adversely affected or aggrieved” by an “agency action” to seek judicial review of the agency action.83 The Supreme Court held that the agency’s decision to disclose information submitted by Chrysler was “agency action” and that Chrysler was a person “adversely affected or aggrieved” as those terms are used by the APA.84
Under the APA, a court can set aside an agency’s action if the court finds that the action was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”85 While courts have not always been entirely clear regarding the interpretation of those terms, a corporation seeking to prevent disclosure of information subject to a FOIA exemption or other protections should consider utilizing a “reverse FOIA” action to challenge the agency’s decision
81 441 U.S. 281 (1979).
82 Id. at 317-18.
83 5 U.S.C. § 702.
Chrysler Corp., 441 U.S. at 318.
5 U.S.C. § 706(2)(A). A court may also set aside agency action it finds to be:
(B)contrary to constitutional right, power, privilege, or immunity;
(C)in excess of statutory jurisdiction, authority, or limitations, or short of
(D)without observance of procedure required by law;
(E)unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F)unwarranted by the facts to the extent that the facts are subject to trial de novo
by the reviewing court.
to disclose such information.86 Given the short amount of notice often provided to producing parties of an intent to disclose by the Government, corporate counsel should familiarize themselves with the procedural requirements of a “reverse FOIA” action so that they are prepared to move forward with one if the need arises.
See e.g. Canadian Commercial Corp. v. Dep’t of Air Force, 514 F.3d 37, 39 (D.C. Cir. 2008) (noting that a person “whose information is about to be disclosed pursuant to a FOIA request may file a ‘reverse-FOIA action’ and seek to enjoin the Government from disclosing it”); John Doe # 1 v. Veneman, 380 F.3d 807, 813-14 (5th Cir. 2004) (private party may use the APA to challenge an agency decision to release information in response to a FOIA request). In addition, the Trade Secrets Act, 18 U.S.C. § 1905, is considered coextensive with Exemption 4 of FOIA. See McDonnell Douglas Corp. v. United States Dep’t of the Air Force, 375 F.3d 1182, 1185-86
(D.C. Cir. 2004) (citing CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1151 (D.C. Cir. 1987));
McDonnell Douglas Corp. v. Widnall, 57 F.3d 1162, 1164 (D.C. Cir. 1995) (“whenever a party succeeds in demonstrating that its materials fall within Exemption 4, the government is precluded from releasing the information by virtue of the Trade Secrets Act”). A private party may seek review of an agency action that violates the Trade Secrets Act on the ground that it is “contrary to law” per § 10 of the APA, 5 U.S.C. § 702. McDonnell Douglas Corp., 375 F.3d at 1186.