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United States v. Berkeley Heartlab, Inc.

United States District Court, D. South Carolina, Beaufort Division

December 1, 2017

United States of America, et al, Plaintiffs,
Berkeley Heartlab, Inc., et al, Defendants. ex rel Scarlett Lutz, et al, Plaintiffs-Relators,



         This matter is before the Court on the Government's Motion to Quash two subpoenas issued by Defendants BlueWave Healthcare Consultants, Inc., Floyd Calhoun Dent, III, and Robert Bradford Johnson (together the "BlueWave Defendants") to the United States for trial testimony by Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") Special Agent Sui Kim ("Agent Kim") and Federal Bureau of Investigation ("FBI") Special Agent Karen Corbett ("Agent Corbett"). (Dkt. No. 747.) For the reasons set forth below, the Motion to Quash is GRANTED as to both subpoenas.

         I. Background and Relevant Facts

         The discovery period ended on June 2, 2017. (Dkt. No. 418.) Two months later, on August 7, 2017, the BlueWave Defendants, Defendant Mallory, and the United States each filed pre-trial disclosures naming at least one new witness not previously disclosed. (Dkt. Nos. 563, 564, 565, 568.) Defendant Mallory named Agent Kim and Agent Corbett in her August 7 disclosures, and there is no dispute that this was the first time any defendant attempted to name Agent Kim or Corbett as a potential trial witness.

         At a bar meeting held the next day, August 8, 2017, counsel for the United States raised the issue of newly-named witnesses with the Court. (Dkt. No. 593.) Among other new witnesses, he noted that Defendant Mallory had named Government agents for the first time, including Agent Kim and Agent Corbett. In response to the Court's request for an explanation as to why these witnesses had not been previously disclosed, Mr. Ashmore, counsel for Defendant Mallory, responded, "Judge, I'll withdraw those names." The Court then ruled, "All of them are ordered withdrawn from Mr. Ashmore." Counsel for the BlueWave defendants were present at that hearing and participated in the discussion about newly-named witnesses but did not mention Agent Kim or Agent Corbett or their belief they had incorporated either witness by reference. The Court ruled that all parties had to move the Court for leave to name new any witnesses, stating the reasons they believed they should be allowed to make a late witness identification (e.g. the discovery of new evidence). (Dkt. No. 593 at 5-7.)

         Almost three months after that August 8 hearing, on October 31, 2017, the BlueWave Defendants issued subpoenas for Agent Kim and Agent Corbett. In the intervening three months, the BlueWave Defendants did not seek leave of the Court to name Agent Kim or Agent Corbett as a witness. Before the Court is the Government's motion to quash both subpoenas on the grounds that neither Agent Kim nor Agent Corbett are named witnesses and that both were subpoenaed without authority. (Dkt. No. 747 at 1.)

         II. Discussion

         a. Compliance with Rule 26(a)(3)

         Pursuant to the Court's Amended Scheduling Orders, Defendants were required to identify their trial witnesses pursuant to Rule 26(a)(3) no later than twenty-one (21) days before jury selection. (Dkt. No. 418). Jury selection for this case took place November 1, 2017, so the parties were required to file their pre-trial disclosures no later than October 3, 2017. Defendants never disclosed that they intended to call Agent Kim or Agent Corbett as trial witnesses, so they failed to comply with Rule 26(a)(3) and the Court's scheduling order. Further, Defendants made no effort to comply with the Court's August 8, 2017 ruling from the bench that they move for leave to name new witnesses.

         Defendants argue that they complied with the notice requirements of Rule 26(a)(3) because they incorporated all of Defendant Mallory's witness identifications, including her August 7 identification of Agents Kim and Corbett, into their own pre-trial disclosures. It was clear from the Court's bench ruling at the August 8 hearing withdrawing Mr. Ashmore's identification of Agents Kim and Corbett that the Agents were "new witnesses" covered by the Court's order requiring all parties to move the Court for leave to name new witnesses. The Blue Wave Defendants therefore could not rely on Defendant Mallory's withdrawn August 7 identification of Agents Kim and Corbett.

         b. Rule 37(c)

         Under Rule 37(c)(1), "If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." To determine whether nondisclosure is justified or harmless, the Court "should be guided by the following factors: (1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the non-disclosing party's explanation for its failure to disclose the evidence." Wilkins v. Montgomery, 751 F.3d 214, 222 (4th Cir. 2014) (quoting Southern States Rack & Fixture v. Sherwin-Williams Co., 318 F.3d 592, 597 (4th Cir. 2003)) (emphasis omitted). However, the Court is "not required to tick through each of the Southern States factors. Southern States explains that district courts have 'broad discretion' to decide harmlessness and 'should'-not 'shall'-'be guided by' the five factors." Id. (emphasis in original). "The burden of establishing these factors lies with the nondisclosing party, " here, the Blue Wave Defendants. Id.

         1. Trial Disruption

         The testimony of Agents Kim and Corbett at trial may present evidentiary issues because much of their testimony may be protected by various privileges, including the attorney-client and work product privileges, or would constitute hearsay. The purpose of the disclosure requirements in the Federal Rules of Civil Procedure and the Court's own scheduling orders is to ensure that the parties identify and resolve these issues during the discovery period and, absent agreement, address them in their pre-trial briefs and motions in limine. By failing to timely name Agents Kim and Corbett, the Blue Wave Defendants have deprived the parties of the opportunity to properly brief these ...

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