District Court Allows Derivative Advice of Counsel in Support of Good Faith Defense

11 June 2021 Health Care Law Today Blog
Authors: Lisa M. Noller Judith A. Waltz Michael J. Tuteur Olivia S. Singelmann

On June 3, 2021, the Northern District of Texas ruled on a novel issue in U.S. v. Hagen (No. 3:19-CR-0146-B, 2021 U.S. Dist. LEXIS 104028 (N.D. Tex. June 3, 2021)). In a health care fraud conspiracy case against DME suppliers, the court held that a good faith defense premised on legal advice received by another, uncharged co-conspirator and passed along to the defendants may be introduced at trial. This ruling allows a defendant to introduce derivative advice of counsel to establish his own good faith, i.e., lacking knowledge of wrongdoing and an absence of intent to participate in the offense.

In Hagen, the government alleged that defendants Leah and Michael Hagen (the Hagens), who owned durable medical equipment businesses, conspired with a third, uncharged individual (Kimble) to defraud Medicare. The Court ordered the Hagens to provide notice of their intent to assert an advice of counsel defense, or any good faith defense that in any way related to advice of counsel, and the Hagens timely indicated they did not intend to raise that defense. Subsequently, the Hagens sought to call four of Kimble’s former attorneys to testify, and the government argued the Hagens were attempting to make an end run around the court’s order.

The court noted that the Hagens said their defense was not premised upon any legal advice received from their own counsel, and there was no indication they had received any legal advice from Kimble’s counsel. Neither the court nor the parties had found any case law for the particular issue of whether a defense premised on legal advice received by a person other than the defendant could constitute an “advice of counsel” defense warranting pretrial notice and disclosure of materials. The court said it could not create an advice of counsel defense where one could not exist. But it also ruled that, because the Hagens did not have an attorney-client relationship with Kimble’s former counsel, the Hagens could call Kimble’s four former attorneys as witnesses, and they also could present evidence of Kimble’s attorney-client communications, if admissible, to demonstrate their own good faith. (The court noted that Kimble had waived any attorney-client privilege with respect to these communications, apparently in connection with his cooperation with the government.)

This novel ruling can affect joint defense and common interest communications. When parties involved in a particular transaction or venture are each being advised by their own counsel, they should make known to one another that each is proceeding based on their counsel’s advice that no unlawful act is being committed. Also, in conspiracy cases Hagen raises another opportunity to show the government has failed to prove the key element of intent, where it was the defendant’s good faith understanding that he was transacting with an individual or entity who did not intend to violate the law.

Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues.  Please reach out to the authors or your Foley relationship partner with any questions.
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Insights

Review of Recent Whistleblower Developments
30 July 2021
Legal News: Whistleblower Developments
$4.24M Now the Average Cost Per Data Breach!
30 July 2021
Internet, IT & e-Discovery Blog
Podcast Episode 56: All Things Summer Associate Recruiting
30 July 2021
Foley Career Perspectives
Foley Podcast to Live Panel Discussion
29 July 2021
Foley Career Perspectives
30th Annual Law of Product Distribution & Franchise Seminar
29 September | 7 & 20 October 2021
Milwaukee | Chicago | Dallas
7th National Telehealth Summit
4-5 October 2021
Miami Beach, FL
AHLA Fraud & Compliance Forum
21-22 September 2021
Baltimore, MD
2nd Clinical Trial Agreements Forum
16-17 September 2021
Online Livestream