U.S. 5th Cir. Defends HealthTech Again!
Referred by an in-house colleague, a recent ruling within the Fifth Circuit again demonstrated its refusal to allow prosecutorial abuses against #HealthTech. In Harbor Healthcare Sys., L.P. v. United States, 5 F.4th 593 (5th Cir. 2021), the 5th Circuit ordered the U.S. Government to gird its loins and respect privacy rights. While cooperation with government entities during an investigation is often advantageous, such investigations neither excuse nor allow a governmental body to willfully ignore the attorney-client privilege (or any other privacy right).
In a per curiam opinion (where the court issues its opinion as a body, not as a majority of judges), the Fifth Circuit held that the U.S. Govt. owed a duty of privacy to a hospital network raided as part of a pending investigation for alleged violations of the False Claims Act, 31 U.S.C. §§ 3729 et seq.
Harbor’s internal compliance officer and outside counsel communicated with the Department of Justice (DOJ) to release certain requested information during the investigation. However, search warrants were eventually issued for various Harbor offices, seizing “twenty-two broad categories of documents dating from January 1, 2010 to May 2017.” In total, the government seized 29 smart phones, 20 computers, and the email accounts of 17 employees; equating to 3.59 terabytes of electronic data, as well as paper records.
Harbor asserted attorney-client privilege over a substantial amount of the materials (attorney-client privileged materials concerning compliance often include accountant-client privileged information and confidential employment records). The DOJ failed to inform the Magistrate Judge, who authorized the search warrant, that it seized privileged information. Harbor claimed that it unsuccessfully attempted to meet with the DOJ’s document review team to ensure privileged documents were exempted from review and ultimately returned to Harbor.
On September 7, 2018, Harbor filed a pre-indictment motion under Federal Rule of Criminal Procedure 41(g) in the Southern District of Texas, as its own civil case, demanding the return of its privileged documents. Succinctly stated, a Rule 41(g) motion protects persons from the "deprivation of property" via an unlawful search and seizure.
The Southern District transferred the motion to the Eastern District of Texas, the original location of the investigatory efforts against Harbor. The Eastern District refused to rule on the motion; instead encouraging the parties to develop an amicable process to identify and contest Harbor’s assertion of privileges, using Harbor’s compliance officer’s email account as initial test process.
During the process imposed by the Eastern District, the DOJ filed a motion to dismiss Harbor’s suit for lack of equitable jurisdiction. The Eastern District granted the motion, finding that Harbor failed to demonstrate “irreparable harm to its legitimate property interests" and that the Rule 41(g) motion was mooted by the privilege-screening process. The Eastern District instructed Harbor to save its objections following its eventual indictment (a little presumptuous?), which would likely be months or years later. Meanwhile, the DOJ failed to respond to Harbor’s assertions of privilege.
On July 15, 2021, the Fifth Circuit called both the Court and DOJ’s actions a “callous disregard” for Harbor’s right to attorney-client privilege, noting that “it is a stipulated fact in this case that ‘the government did not seek express prior authorization from the issuing Magistrate Judge for the seizure of attorney-client privileged materials.’” Regardless of a potential indictment against Harbor, the Fifth Circuit made clear that the “whole purpose of privilege is privacy,” which once violated cannot be remedied.
On October 6, 2021, the Southern District of Texas ordered the DOJ to return “all hard copies of the designated privilege documents obtained” from Harbor’s director of compliance and to destroy any electronically-stored materials (including those imaged from mobile phones). Following the precedent set by the Fifth Circuit’s ruling, the Southern District of Texas further required the DOJ to provide a list of privileged materials that it viewed and ordered the DOJ officials to swear, under oath, to compliance with the Court’s order.