Second Circuit Affirms Dismissal Of Qui Tam Case Based On Attorney’s Use Of Confidential Information

The decision by the District Court for the Southern District of New York to disqualify Fair Laboratory Practices Associates (FLPA) from its qui tam suit against Quest Diagnostics (Quest) and Unilab Corporation (Unilab) was recently affirmed by the US Court of Appeals for the Second Circuit.  Unilab’s former general counsel, Mark Bibi, planned to use confidential information in disclosures against Quest and Unilab.

While Bibi was aware that he was intending to use confidential information, he believed that False Claims Act’s (“FCA)” provided an exception to the applicable ethical rules.

The FPLA Suit alleged that Unilab illegally priced its medical testing services by providing significant discounts to medical care providers to induce them to refer Medicare and Medicaid business. Unilab then proceeded to charge significantly higher rates for incoming federal business. This “pull-through” scheme is expressly prohibited by the US Department of Health and Human Services.

The District Court held that the FCA does not preempt state ethical rules, including attorney-client confidentiality.  The Second Circuit affirmed, noting that Bibi’s disclosures exceeded what was reasonably necessary to prevent a crime.

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