Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Schaefer v. Family Medicine Centers of South Carolina, LLC

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

May 16, 2019

CATHERINE A. SCHAEFER, M.D., Plaintiff,
v.
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

         Plaintiff 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 (hereinafter, “Defendants”).[1]

         This 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.

         I. BACKGROUND

         On 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”).[2] United States v. Family Medicine Centers of South Carolina, LLC, 3:14-cv-00382 at ECF No. 114.

         With 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.

         Plaintiff 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.[3]

         On 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.[4] 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.

         On 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, 2017.” Id.

         On 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.

         On 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.

         II. DISCUSSION

         The 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.

         Federal 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.

         A 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).

         The 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 308.

         A. The Motions to Quash

         1. Applicable Law

          The 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 circumstances:

(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 the client.

Hawkins v. Stables, 148 F.3d 379, 382-83 (4th Cir. 1998) (citations omitted).[5] 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).

         The 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. 26(b)(3)(B).

         Finally, 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 their claims.

In re Grand Jury Subpoenas, 902 F.2d 244, 249 (4th Cir. 1990).[6] “[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).

         2. Application

         In 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.

         The 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.

         The 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 waiver.

         a. At Issue Waiver

         “The ‘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 defense.

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).

         A 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 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.