A federal district court in Illinois recently held that Kmart waived attorney work-product protection over documents that it had produced in response to a Department of Health and Human Services Office of Inspector General ("OIG") subpoena but later sought to withhold from a relator in subsequent qui tam litigation. See United States ex rel. Garbe v. Kmart Corp., No. 3:12-cv-881, 2014 U.S. Dist. LEXIS 73261 (S.D. Ill. May 29, 2014). The case highlights the care that counsel and clients must exercise in deciding what information to disclose during government investigations.
Garbe is one of a series of lawsuits alleging that pharmacies misrepresented the "usual and customary prices" of generic prescription drugs. This particular lawsuit was filed under seal in 2008 by a former pharmacist alleging that Kmart operated a generic drug discount program that offered the general public lower prices on drugs than what it billed Medicare and Medicaid for identical medications.
In 2009, OIG issued a subpoena to Kmart, in response to which the company produced thousands of pages of documents. Included in the production was a "subset of transactional data in an easier-to-understand format" that the district court said had been created "to appear cooperative in order to hopefully obtain a more favorable result in the investigation so that Kmart would not ultimately have to make expenditures of money to defend a case brought against it by the federal government." Kmart withheld from production many other documents on the basis of attorney-client privilege or the attorney work-product doctrine.
The United States eventually declined intervention in the lawsuit, and the relator moved forward with prosecuting the case. The relator issued discovery requests to Kmart seeking production of all documents that Kmart had produced to the government during its investigation. Kmart responded by producing these documents with the exception of (1) documents that it had withheld from the government on privilege grounds and (2) the subset of transactional data which it claimed was protected from disclosure to relator on work-product grounds. Even though Kmart had produced the subset of transactional data to OIG, Kmart argued that the doctrine of "selective waiver" applied and that production of the data to the government did not waive the work-product protection as to the relator.
The district court ruled that the data subset likely met the requirements for work-product protection but that Kmart forfeited those protections by producing the data to an adverse party. The district court explained that both the United States and the relator were Kmart's adversaries, and Kmart could not "pick and choose" to which adversary it waived work-product protection and to which it did not.
Kmart argued that not recognizing selective waiver in these circumstances would discourage corporate cooperation with government investigations. The district court agreed that increased cooperation with the government was a "laudable" goal but noted that the attorney-client privilege and work-product doctrine did not exist to foster full and frank conversation with the government but, rather, to allow an attorney to prepare a client’s case in confidence. The court held that Kmart had calculated that the risk of waiver of work-product protection was outweighed by the benefit of appearing cooperative with the government and ultimately decided to "relinquish work-product protection in order to obtain a strategic advantage in the 2009 OIG investigation."
The court's decision in Garbe is in line with the law of most other jurisdictions rejecting the concept of selective waiver. In almost all situations, production to the government of documents covered by the attorney-client privilege or work-product doctrine will constitute a waiver of that privilege as to other parties. Additionally, many courts hold that waiver of the attorney-client privilege extends not just to specific documents on which it is waived but all other documents involving the same subject matter.
demonstrates, this can create tension in determining what information to share with the government during an investigation. In some circumstances, waiving the privilege or producing documents prepared in anticipation of litigation may best serve a client's interest in responding to a government inquiry. But, counsel must make these decisions cognizant of relator's or other plaintiff's counsel waiting in the wings, who are likely to get access to any information that is shared with the government.