United States District Court, D. South Carolina, Columbia Division
CATHERINE A. SCHAEFER, M.D., Plaintiff,
FAMILY MEDICINE CENTERS OF SOUTH CAROLINA, LLC, STEPHEN F. SERBIN, M.D., PETER J. STAHL, M.D., BHAVESH R. AMIN, M.D., SPRINGWOOD LAKE PRIMARY CARE, LLC, SPRINGWOOD LAKE BUILDING, LLC, SOUTHEAST PROFESSIONAL PLAZA, LLC, MIDTOWN BUILDING, LLC, SALUDA POINTE BUILDING, LLC, and LAKE MURRAY FAMILY MEDICINE BUILDING, LLC, Defendants.
OPINION AND ORDER
Margaret B. Seymour Senior United States District Judge
Catherine A. Schaefer, M.D. (“Plaintiff”) brought
the within action asserting claims for fraudulent inducement,
tortious interference with contract, and civil conspiracy
relating to a settlement agreement she entered into with the
United States government and Defendant Family Medicine
Centers of South Carolina, LLC to resolve claims arising
under the False Claims Act. The following Defendants remain
parties to the litigation: Stephen F. Serbin, M.D.
(“Defendant Serbin”); Peter J. Stahl, M.D.
(“Defendant Stahl”); Family Medicine Centers of
South Carolina, LLC (“FMC”); Lake Murray Family
Medicine Building, LLC; Midtown Building, LLC; Saluda Pointe
Building, LLC; Southeast Professional Plaza, LLC; Springwood
Lake Building, LLC; and Springwood Lake Primary Care, LLC
matter is now before the court on the following motions:
Plaintiff's motion to quash FMC's subpoena duces
tecum to the United States, ECF No. 93; the United
States' motion to quash subpoena duces tecum,
ECF No. 129; Plaintiff's motion to amend the Parties'
confidentiality order to permit disclosure of confidential
materials to the United States, ECF No. 130; Defendants
Serbin and Springwood Lake Primary Care, LLC's motion to
compel, ECF No. 133; and the United States' motion for
protective order, ECF No. 142.
February 12, 2014, Plaintiff filed a qui tam action under the
False Claims Act, 31 U.S.C. § 3729 et seq., on
behalf of the United States against Defendants FMC, Serbin,
and Stahl, among others, styled United States ex rel.
Schaefer v. Family Medicine Centers of South Carolina,
LLC, 3:14-cv-00382 (D.S.C. Feb. 12, 2014) (the
“FCA Action”). ECF No. 4-2. Defendants Serbin and
Stahl are founders, owners, and members of FMC. On May 5,
2016, the United States filed a complaint in intervention
alleging in relevant part that FMC and Defendant Serbin
submitted false claims to Medicare, Tricare, and the Federal
Employees Health Benefits Program. ECF No. 4-3. The United
States ultimately filed a joint stipulation of dismissal
pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii),
citing in relevant part a settlement agreement executed on
September 11, 2017 between the United States, Plaintiff, and
FMC (“Settlement Agreement”). United States
v. Family Medicine Centers of South Carolina, LLC,
3:14-cv-00382 at ECF No. 114.
respect to the Settlement Agreement, Plaintiff asserts that
in April 2016, FMC offered a lump sum settlement, to which
the United States responded with a counter offer. ECF No. 1-1
at ¶ 42. The following month, the United States and
Plaintiff entered into an Agreement Regarding Common Interest
and Disclosure of Information (“Common Interest
Agreement”), which memorialized in writing their common
legal interest in the FCA Action and efforts to settle that
action and addressed the treatment of documents shared
between the United States and Plaintiff. ECF No. 129-6. On
October 24, 2016, FMC proposed a counteroffer of $1.5 million
to be paid over five years in monthly installments of $25,
000. Plaintiff asserts, “FMC claimed its settlement
offer was based solely on ability to pay and that FMC no
longer had the ability to make the lump sum payment offered
in April 2016 because its business had declined since the
United States' intervention.” ECF No. 1-1 at ¶
43. Also, “[o]n March 9, 2017, FMC told the United
States that banks were declining to extend lines of credit
because of concerns with the ‘delay' in reaching a
settlement and that four employees were being laid
off.” Id. at ¶ 44. The United States
thereafter proposed settlement substantially similar to
FMC's October 2016 counteroffer, and, on August 2, 2017,
the United States and FMC agreed to the settlement.
Id. at ¶¶ 45, 46. Plaintiff asserts
“FMC claimed it was unable to pay anything to
compensate [her] for her employment retaliation claim beyond
the monies [she] would receive from the statutory
whistleblower reward paid from the government's
recovery.” ECF No. 1-1 at ¶ 47. Accordingly,
“[b]ased on the representations made by FMC to the
United States government and the United States' agreement
to an ‘ability to pay' settlement, Dr. Schaefer
agreed to join the proposed settlement.” Id.
at ¶ 48.
now alleges that FMC intentionally thwarted its obligations
to her and the United States under the Settlement Agreement
by ceasing to make payments after ten months, while FMC's
members “established ‘new' medical practices,
often in the same locations seeing the same patients,
operating under with new corporate entities [sic].” ECF
No. 1-1 at ¶ 3. Plaintiff further alleges that
Defendants never intended for FMC to honor the Settlement
Agreement. Id. at ¶ 5. Plaintiff alleges that
almost immediately after the execution of the Settlement
Agreement, FMC's member physicians wound up the practice.
On March 15, 2018, Defendant Serbin created Defendant
Springwood Lake Primary Care, LLC, where he currently
practices and to which Defendant Stahl has referred his
patients. Id. at ¶ 27. FMC then announced its
closure on April 3, 2018, effective May 31, 2018, and its
website directed FMC patients to continue to see former FMC
physicians at their new practices. Id. at
¶¶ 10, 68. On July 1, 2018, FMC defaulted under the
Settlement Agreement; FMC has not cured the default to date.
Id. at ¶¶ 69, 72, 73. On this basis,
Plaintiff asserts claims for fraud in the inducement as to
Defendants FMC, Serbin, and Stahl; tortious interference with
contract as to Defendants Serbin and Stahl; and civil
conspiracy as to all Defendants.
January 25, 2019, Defendant FMC served the United States with
a subpoena requesting “all correspondence between the
Office of the U.S. Attorney's Office and Catherine A.
Schaefer, M.D. or her attorneys at Richard A. Harpootlian,
P.A. concerning Family Medicine Centers of South Carolina,
LLC , in the period of February 12, 2016 to the present,
” (the “Subpoena”). ECF No. 98-1. The Chief
of the Civil Division of the United States Attorney's
Office for the Western District of North Carolina thereafter
sent letters to counsel for FMC objecting to the Subpoena on
a variety of bases. ECF No. 129 at 2. On January 28, 2019,
Plaintiff filed her motion to quash the Subpoena. ECF No. 93.
FMC filed its response, ECF No. 98, to which Plaintiff filed
a reply, ECF No. 101, to which FMC filed a sur reply, ECF No.
106. Around this time, the Parties moved for a
confidentiality order, which the court entered on February
20, 2019. ECF No. 105.
March 8, 2019, the United States Attorney's Office
(“USAO”) met with attorneys representing FMC and
conferred regarding the Government's objections to the
Subpoena. On March 14, 2019, FMC submitted to the Government
a written statement, pursuant to 28 C.F.R. § 16.22(d),
narrowing the scope of the Subpoena to seek only
“communication between the U.S. Attorney's Office
and Dr. Schaefer, or her attorneys, relating to the
negotiations of the Settlement Agreement and FMC's
financial position, ” (hereinafter,
“Subpoena”). ECF No. 129-4. Defendants
additionally “limit[ed] the time period for the
subpoena to January 1, 2017 through September 30,
March 27, 2019, the United States sent a letter to FMC
objecting to the Subpoena as narrowed by Defendants in its
March 14 letter on the basis that “the documents that
FMC seeks are categorically privileged.” ECF No. 129 at
4; ECF No. 129-5. The Government additionally disputed
FMC's contention that the United States had waived the
common interest privilege “by not preventing Schaefer
from relying on her privileged communications with the United
States in this litigation, ” stating that “[t]he
United States has no control over-or responsibility for-
Schaefer's conduct.” ECF No. 129 at 4; ECF No.
129-5 at 2. The Government nonetheless stated that “it
would remind Schaefer of her obligation not to disclose her
privileged communications with the United States to other
parties, ” and, finally, the Government requested that
Defendants withdraw the Subpoena. ECF No. 129 at 4; ECF No.
129-5 at 3. The United States also sent Plaintiff a letter on
March 27, “invoking their May 31, 2016 Common Interest
Agreement, ” and reminding Plaintiff “of her
obligation not to disclose her privileged communications with
the government, or any work product shared by the government
with her, absent written consent from DOJ counsel.” ECF
No. 129 at 5; ECF No. 129-7 at 1-2. The letter advised
Plaintiff to “take care that she does not [disclose
privileged communications with the United States] in the
context of th[is] Litigation (or otherwise).”
Id. at 5; ECF No. 129-7 at 2. The same day,
Plaintiff filed a notice of supplemental authority regarding
her motion to quash to which she attached copies of these two
letters. ECF No. 122.
March 29, 2019, the Government and FMC met and conferred
again. On April 3, 2019, FMC informed the Government that it
would not withdraw the Subpoena and, in response, the
Government informed FMC of its intention to move to quash the
Subpoena. The United States thereafter filed a motion to
quash. ECF No. 129. The same day, Plaintiff filed a motion to
amend the Parties' confidentiality order to permit
disclosure of confidential documents to the United States.
ECF No. 130. FMC filed a response to the Government's
motion to quash on April 22, 2019, ECF No. 138, to which the
Government filed a reply on April 29, 2019, ECF No. 149. FMC
also filed a response to the motion to amend confidentiality
order on April 22, 2019, ECF No. 137, to which Plaintiff
filed a reply on April 29, 2019, ECF No. 150. On April 11,
2019, Defendants Serbin and Springwood Lake Primary Care, LLC
filed a motion to compel seeking in large part the documents
requested by the Subpoena. ECF No. 133. Plaintiff filed a
response, ECF No. 147, to which the movants filed a reply,
ECF No. 153. On April 24, 2019, the United States filed a
motion for protective order, ECF No. 142, to which FMC filed
a response, ECF No. 156, to which the United States filed a
reply, ECF 158.
motions to quash and motion for protective order seek
protection against disclosure of the subpoenaed documents
(“FCA Correspondence”) on the basis of attorney
client privilege, attorney work product doctrine, and the
joint prosecution or common interest privilege. The motion to
compel asks the court to order Plaintiff to produce those
same documents, amongst other materials. The motion to amend
confidentiality order seeks to modify the existing
Confidentiality Order to allow Plaintiff to disclose to the
United States confidential discovery responses produced by
Defendants. With the exception of the motion to amend
confidentiality order, all motions herein at issue turn on
the question of whether Plaintiff and the United States have
waived their respective privileges.
Rule of Civil Procedure 26(b)(1) authorizes discovery of any
nonprivileged matter relevant to the party's claim or
defense, as long as it is proportional to the needs of the
case. “The scope and conduct of discovery are within
the sound discretion of the district court.”
Erdmann v. Preferred Research, Inc. of Georgia, 852
F.2d 788, 792 (4th Cir. 1988). Subject to certain
limitations, parties to an action may stipulate to procedures
governing or limiting discovery. Fed.R.Civ.P. 29.
subpoena served on a third party pursuant to Rule 45 is
considered discovery within the meaning of the Federal Rules
of Civil Procedure. Under Rule 45(d)(3), the court for the
district where compliance is required must quash a subpoena
that requires disclosure of privileged or other protected
matter, if no exception or waiver applies. Fed.R.Civ.P.
45(d)(3)(A). Generally, “a party does not have standing
to challenge a subpoena issued to a nonparty unless the party
claims some personal right or privilege in the information
sought by the subpoena.” HDSherer LLC v. Nat.
Molecular Testing Corp., 292 F.R.D. 305, 307 (D.S.C.
2013) (citations omitted).
Federal Rules of Civil Procedure permit a court to restrict
or preclude discovery when justice requires so as to protect
a party or person from annoyance, embarrassment, oppression,
or undue burden or expense. Fed.R.Civ.P. 26(c)(1). The party
moving for a protective order bears the burden of
establishing good cause. HDSherer LLC, 292 F.R.D. at
The Motions to Quash
attorney client privilege “excludes from evidence
confidential communications of a professional nature between
attorney and client, unless the client, for whose benefit the
rule is established, waives the privilege.” Floyd
v. Floyd, 615 S.E.2d 465, 482 (S.C. App. 2005)
overturned on other grounds by 2008 S.C. Acts 211,
§ 1. The attorney client privilege belongs solely to the
client and can be waived only by the client. State v.
Love, 271 S.E.2d 110, 112 (S.C. 1980). “[T]he
burden of establishing the [attorney-client] privilege rests
upon the party asserting it.” Wilson v.
Preston, 662 S.E.2d 580, 585 (S.C. 2008). Under Fourth
Circuit law, the privilege applies in the following
(1) the asserted holder of the privilege is or sought to
become a client; (2) the person to whom the communication was
made (a) is a member of the bar of a court, or his
subordinate and (b) in connection with this communication is
acting as a lawyer; (3) the communication relates to a fact
of which the attorney was informed (a) by his client (b)
without the presence of strangers (c) for the purpose of
securing primarily either (i) an opinion on law or (ii) legal
services or (iii) assistance in some legal proceeding, and
not (d) for the purpose of committing a crime or tort; and
(4) the privilege has been (a) claimed and (b) not waived by
Hawkins v. Stables, 148 F.3d 379, 382-83 (4th Cir.
1998) (citations omitted). The Government may also invoke the
attorney client privilege in civil litigation. United
States v. Jicarilla Apache Nation, 564 U.S.
162, 169-70 (2011).
attorney work product doctrine pertains to documents and
tangible things “that are prepared in anticipation of
litigation or for trial by or for [a] party or its
representative (including the . . . party's attorney,
consultant, surety, indemnitor, insurer, or agent).”
Fed.R.Civ.P. 26(b)(3)(A). The rule governing attorney work
product is applicable to Government attorneys. N. L. R.
B. v. Sears, Roebuck & Co., 421 U.S. 132, 154
(1975). There are two types of work product:
“opinion” work product and “ordinary”
(or “fact”) work product. Opinion work product
consists of “mental impressions, conclusions, opinions,
or legal theories . . . concerning the litigation, ”
and “is immune to the same extent as an attorney-client
communication.” Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa. v. Murray Sheet Metal Co., 967 F.2d 980,
984 (4th Cir. 1992) (internal quotation marks and citations
omitted). Ordinary work product, or “[a]ll other
documents and tangible things prepared in anticipation of
litigation or for trial[, ] may be discovered, but only on a
showing of substantial need.” Id. (internal
quotation marks omitted); Fed.R.Civ.P. 26(b)(3)(A)(i)-(ii)
(providing that such materials may be discovered if they are
otherwise discoverable under Rule 26(b)(1), and “the
party shows that it has substantial need for the materials to
prepare its case and cannot, without undue hardship, obtain
their substantial equivalent by other means.”). The
party claiming work product protection has the burden of
establishing entitlement to the protection. In re Martin
Marietta Corp., 856 F.2d 619, 626 (4th Cir. 1988). Even
where the court orders discovery of materials protected by
the work product doctrine, “it must protect against
disclosure of the mental impressions, conclusions, opinions,
or legal theories of a party's attorney or other
representative concerning the litigation.” Fed.R.Civ.P.
Plaintiff and the United States claim the common interest
privilege, which the Fourth Circuit explains as follows:
[w]hether an action is ongoing or contemplated, whether the
jointly interested persons are defendants or plaintiffs, and
whether the litigation or potential litigation is civil or
criminal, the rationale for the joint defense rule remains
unchanged: persons who share a common interest in litigation
should be able to communicate with their respective attorneys
and with each other to more effectively prosecute or defend
In re Grand Jury Subpoenas, 902 F.2d 244, 249 (4th
Cir. 1990). “[T]he joint defense or common
interest rule presupposes the existence of an otherwise valid
privilege, and the rule applies not only to communications
subject to the attorney-client privilege, but also to
communications protected by the work-product doctrine.”
Id. at 249. Furthermore, courts to consider the
question have found that the common interest privilege exists
between the Government and a relator. See, e.g., United
States ex rel. Purcell v. MWI Corp., 209 F.R.D. 21, 25,
27 (D.D.C. 2002) (holding “that in FCA cases in which
the government intervenes, a joint-prosecutorial privilege
exists between the government and the relator”). The
privilege cannot be waived without the consent of all parties
who share the privilege, and thus it serves as an exception
to the general rule that disclosure of privileged information
to a third party waives the privilege. In re Grand Jury
Subpoenas, 902 F.2d at 248; LaSalle Bank Nat.
Ass'n, v. Lehman Bros. Holdings, Inc., 209 F.R.D.
112, 116 (D. Md. 2002).
their respective motions to quash, Plaintiff and the United
States assert attorney client privilege, work product
protection, and common interest privilege as to the FCA
Correspondence and seek to quash the Subpoena on those bases.
FMC does not contest Plaintiff and the United States'
assertions of attorney client privilege and work product
protection or that the common interest privilege extends to
the FCA Correspondence. See ECF Nos. 98, 138. FMC
furthermore concedes that Plaintiff cannot unilaterally waive
the common interest privilege. ECF No. 138 at 7. FMC contends
that Plaintiff placed the FCA Correspondence at issue in
alleging fraud in the inducement, and thereby waived the
attorney client privilege and work product protection. FMC
further contends that the United States “similarly
waived the [common interest] privilege by failing to take
steps to prevent [Plaintiff] from doing so, ” and
asserts that the Government “at least tacitly
accepted” Plaintiff's waiver of the common interest
privilege. ECF No. 138 at 3.
Subpoena seeks “all communication between the U.S.
Attorney's Office and Dr. Schaefer, or her attorneys,
relating to the negotiations of the Settlement Agreement and
FMC's financial position” for “the period
between January 1, 2017 through September 30, 2017.”
ECF Nos. 129-1, 129-4 at 3. Plaintiff asserts that during the
FCA Action, she “always corresponded with the
government through her attorneys”; the Government
communicated with her through its attorneys; and the FCA
Correspondence is comprised entirely of “correspondence
between attorneys about a case they were jointly prosecuting
on behalf of their respective clients.” ECF No. 93 at
6. The Government asserts that “[a]ll communications
between the USAO and Schaefer regarding settlement
negotiations . . . necessarily relates to the collective
decision by the United States and Schaefer to resolve the FCA
Action on the terms memorialized in the final settlement
agreement.” ECF No. 129 at 7. Again, FMC does not
contest that the FCA Correspondence is work product and
subject to attorney client privilege, and also acknowledges
that “the Common Interest Agreement gave the common
interest privilege to Plaintiff and the United States.”
ECF No. 138 at 4.
court agrees that the FCA Correspondence qualifies for
protection as work product and as privileged attorney client
communications, and that both Plaintiff and the United States
hold these privileges. The court further finds that the FCA
Correspondence is protected by the common interest privilege.
Accordingly, the court turns to FMC's arguments of
At Issue Waiver
‘at issue' waiver of the attorney-client privilege
occurs when the party puts ‘at issue' some fact
which necessarily involves an examination of the
attorney's advice [or communication] to the
client.” United States v. White, 944 F.Supp.2d
454, 459 (D.S.C. 2013) (quoting In re Long Point Road
Limited Partnership v. RTC Land Assets Trust, 1997 WL
33344311, *3-4 (Bkrtcy. D.S.C. 1997)). The waiver is
triggered where the following is satisfied:
(1) assertion of the privilege was a result of some
affirmative act, such as filing suit, by the asserting party;
(2) through this affirmative act, the asserting party put the
protected information at issue making it relevant to the
case: and (3) application of the privilege would have denied
the opposing party access to information vital to his
Id. The doctrine is “based on notions of
fairness and truth-seeking” and “has been
analogized to the door-opening doctrine in evidence, ”
under which “evidence that is otherwise inadmissible
may become admissible if the opposing party ‘opens the
door' and the evidence should be considered by the
factfinder in ‘fairness and completeness of the
information.”' E. Bridge Lofts Prop.
Owners Ass'n, Inc. v. Crum & Forster Specialty Ins.
Co., No. 2:14-CV-2567-RMG, 2015 WL 12831737, at *2
(D.S.C. June 11, 2015). “[I]f a [party] voluntarily
injects an issue in the case, whether legal or factual, [that
party] voluntary waives, explicitly or impliedly, the
attorney-client privilege.” City of Myrtle Beach v.
United Nat. Ins. Co., No. CIV.A. 4:08-1183, 2010 WL
3420044, at *5 (D.S.C. Aug. 27, 2010). Accord 8
Charles Alan Wright, Arthur R. Miller & Richard L.
Marcus, Federal Practice and Procedure § 2016.6 (3d ed.
2010) (“When a party puts a privileged matter in issue
as evidence in a case, it hereby waives the privilege as to
all related privileged matters on the same subject”).
The doctrine applies equally to the attorney client privilege
and the work product doctrine. IntegraMed Am., Inc. v.
Patton, 298 F.R.D. 326, 330 (D.S.C. 2014).
plaintiff establishes liability for fraud by demonstrating
the following elements: (1) a representation; (2) its
falsity; (3) its materiality; (4) either knowledge of its
falsity or a reckless disregard of its truth or falsity; (5)
intent that the representation be acted upon; (6) the
hearer's ignorance of its falsity; (7) the hearer's
reliance on its truth; (8) the hearer's right to rely
thereon; and (9) the hearer's consequent and proximate
injury. Mosely v. All Things Possible, Inc., 694
S.E.2d 43, 45 (S.C. App. 2010), aff'd, 719
S.E.2d 656 (S.C. 2011). In response to Plaintiff's motion
to quash, FMC argues “[t]he instant action is
predicated on allegations that FMC fraudulently induced
Plaintiff into the Settlement Agreement in the FCA action
based on a future promise that FMC would remain solvent
throughout the term of the Settlement Agreement”; and
further states that “[t]he claims in this action arise
out of FMC's alleged misrepresentations of its financial
condition in an effort to induce Plaintiff into the
Settlement Agreement.” ECF No. 98 at 4, 5. FMC asserts
that the “communications between the United States and
Plaintiff in the FCA action go directly to each element of
fraud Plaintiff will attempt to prove and FMC will attempt to
refute in this action.” Id. at 4. In reply,
Plaintiff contends that “FMC, not Plaintiff, has
attempted to place [the FCA correspondence] at issue by
asserting Plaintiff had access to the financial information
Defendants provided to the United States during settlement
discussions.” ECF No. 101 at 1-2. Plaintiff further
states that she “received government lawyers'
opinions and mental impressions regarding FMC's ...