In a stunning case out of Minnesota yesterday, a district court has blessed the government's use of a relator as an undercover witness to record conversations with personnel of an ophthalmic products company that was the target of a False Claims Act investigation even after lawyers for the company told the government not to communicate with company personnel without notifying counsel. United States ex rel. Fesenmaier v. The Cameron-Ehling Group, Inc., 2020 WL 986577 (D.Minn. March 2, 2020). In Fesenmaier, after FBI agents interviewed the defendant's personnel in February 2013, counsel for the defendant informed the government of his representation and asked that communications with company personnel be coordinated through him. Id. at *5. Yet, ignoring this entreaty, the government wired up the relator to surreptitiously tape conversations with the defendant's founder and majority owner and other company personnel over a five-year period as part of the government's investigation of kickback allegations raised in relator's qui tam. Id.
As expected, when the defendant learned of these recordings, the defendant's counsel screamed bloody murder and sought to sanction the government's attorneys for violation of Minnesota's no contact rule (Minnesota Rule of Professional Conduct 4.2), seeking dismissal or preclusion of evidence. Like other state ethics rules, Minnesota's Rule 4.2 prohibits contact with represented persons, but not when a lawyer is "authorized to do so by law." A comment to that rule explains that contacts authorized by law may include investigative activities of government lawyers prior to "the commencement of criminal or civil enforcement proceedings." Fesenmaier, 2020 WL 986577, *4 (citing Minn. R. Prof. Conduct 4.2, cmt. 5) (this rule and its comments are similar to many other state ethics rules; see N.Y. R. Prof. Conduct 4.2, cmt. 5). The government claimed that it could contact the defendant's personnel to its heart's content before it intervened in the case (which it eventually did). The defendant claimed that the relator's filing of the qui tam in the name of the government constituted the commencement of a civil enforcement proceeding, triggering the no-contact rule. Id. at * 4.
The district judge sided with the government, finding that the structure of the FCA, which requires government investigation of qui tam complaints and makes the United States a "party" only on intervention, allows for the government investigation exception to apply. Id. at *5. The district court also noted that the government has no control over a qui tam action until it intervenes and may not even be aware of the alleged improper conduct until receiving relator's complaint. Id. at *4. The district court did not, however, explain why the filing of a complaint by a relator commences a proceeding for statute of limitations purposes, but does not for purposes of the no contact rule. The district court dismissed the defendant's concerns that the government could manipulate the timing of its intervention to gather more secret evidence from recordings by noting that the government could do so in criminal cases as well. Id. at *5.
This case should serve as a strong wake-up call to defendants being investigated by the government that the no contact rule means nothing until the government formally intervenes in your case. Unless this case is reversed—and even if it's not—practitioners handling a government investigation of a company should assume that the government is enlisting cooperators (who could be anyone, not just relators) to wear a wire and gather admissions without counsel's knowledge.
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