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Court Ruling Includes Important Reminders on Attorney-Client Privilege

on Monday, 13 January 2014 in Health Law Alert: Erin E. Busch, Editor

Many providers wrongly assume that copying their lawyer on communications somehow means that the communication is automatically protected from discovery under an attorney-client privilege. A recent ruling in U.S. v. Halifax Hospital Medical Center points out that this is not always the case and includes important reminders for what is necessary for the privilege to apply.


The case is a qui tam case brought by a hospital’s former compliance officer, who alleged that the hospital paid illegal kickbacks, profit-based incentives and other illegal compensation to physicians in violation of Stark and federal anti-kickback laws.


The government sought discovery of a large number of hospital documents concerning its statutory and regulatory compliance, including all documents and/or communications that related to fair market value determinations or analyses with respect to physician compensation and drafts of such documents. The hospital claimed attorney-client privilege applied to most of these documents. The Court made several important rulings on the privilege issues in the case, as follows:


  1. There is a presumption that communications between a client and outside counsel are privileged, but that presumption doesn’t apply as to communications with in-house counsel. Such communications must satisfy a “primary purpose and intent” threshold test. The court noted that modern corporate counsel have become involved in all facets of the enterprises for which they work, and as a consequence, in-house legal counsel participates in and renders decisions about business, technical scientific, public relations and advertising issues, as well as purely legal issues. Accordingly, the Court held that the attorney-client privilege would not apply unless the subject of the communication was clearly and solely for the purpose of seeking or receiving legal advice, regardless of how the company categorized or used the information. As such, general business advice, unrelated to legal advice, is not protected by the privilege even though conveyed by an attorney to the client, because the purpose and intent is not to communicate legal advice.

  2. If a document is prepared for simultaneous review by legal and non-legal personnel, it is not considered to have been prepared primarily to seek legal advice.

  3. When an email is sent to a lawyer, and others in the organization are copied, the courts will evaluate whether the primary purpose was to seek legal advice or assistance.

  4. Communications between in-house counsel and various compliance personnel were not privileged because they sought “compliance” assessments or the email was not addressed “to” or “from” legal counsel.

  5. Emails that copy legal counsel merely to “keep an attorney in the loop” were not privileged.

  6. “Strings of emails” are not one communication, but instead require the hospital to demonstrate why each email in the string was privileged. The court explained, “each email string listed in Halifax’s privilege log must be disassembled and each email listed separately in an amended privilege log.” The premise here is that simply because technology permits separate communications to be linked does not justify treating them as one communication.

  7. The Court held that certain matters were not inherently privileged. These include:

a. the compliance department’s log of compliance issues that need to be investigated;
b. audits and reviews performed by the hospital’s Case Management Department, Compliance Department, Finance Department and/or any hospital department other than the Legal Department; and
c. fair market value determinations or analyses with respect to physician compensation.


In each case, each matter was to be separately reviewed to see whether it involved communication with legal counsel for the rendering of legal advice.


The Court’s ruling is an important reminder that communications with legal counsel are privileged only in connection with the seeking of or providing of legal advice, and that most internal communications involving day-to-day compliance issues will likely not be privileged.


John R. Holdenried


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