In healthcare, companies often hire consultants to review billing and coding, privacy and security and a host of other technical issues that regular staff does not have the time or expertise to pursue.\u00a0 A recent discovery ruling in federal court in the Eastern District of Pennsylvania holds that communications with such outside consultants are privileged from discovery if they are made for the purpose of assisting the company in securing legal advice or making legal decisions.<\/p>\n
In Smith v. Unilife Corporation, <\/em> a whistleblower brought an action under Sarbanes-Oxley and Dodd-Frank alleging shareholder fraud and failure to comply with certain FDA requirements.\u00a0 The plaintiff sought discovery of two non-lawyer consultants regarding drafts of the company’s SEC Form 10-K filing.\u00a0 The Court’s decision to deny the plaintiff’s motion to compel was based on the “functional equivalent” doctrine, a principle already adopted in the 8th, 9th and D.C. Circuits, but not yet in the 3rd Circuit.<\/p>\n <\/p>\n Under this doctrine, an independent consultant may be viewed as an employee if the consultant is the “functional equivalent” of an employee.\u00a0\u00a0 Just as an employee’s communications with counsel would be privileged, the consultant’s communications are not subject to discovery if the consultant is simply performing a function that a company employee could also provide.\u00a0 This common-sense approach\u00a0replaces the narrow “control group” test, rejected by the U.S. Supreme Court in Upjohn Company v. U.S., <\/em>that limited the privilege to\u00a0communications\u00a0of officers and agents able to direct the company’s actions.<\/p>\n The Smith <\/em>decision points out that some courts\u00a0nominally invoking the “functional equivalent” test actually impose “control group” criteria, thereby defeating the purpose of the broader definition.\u00a0 In particular, the Court rejected the four-factor test outlined by the District of New Jersey\u00a0in In re Bristol-Myers Squibb Securities Litigation.\u00a0 <\/em>The third factor of that test — that the consultant possess authority to make decisions on behalf of the company — was viewed in\u00a0Smith<\/em> as an unnecessary requirement in light of the reality of company fact-finding and decision-making.<\/p>\n Thus, healthcare companies in need of assistance by outside consultants to conduct review or investigations of internal operations may retain them with some assurance that the consultants’ communications and reports will be privileged from discovery.\u00a0 It is important for asserting the privilege that any letter or agreement engaging\u00a0a consultant be handled through counsel and document that the consultant’s service is needed for the purpose of assisting the company in securing legal advice and making legal decisions.<\/p>\n","protected":false},"excerpt":{"rendered":" In healthcare, companies often hire consultants to review billing and coding, privacy and security and a host of other technical issues that regular staff does not have the time or expertise to pursue.\u00a0 A recent discovery ruling in federal court in the Eastern District of Pennsylvania holds that communications with such outside consultants are privileged … <\/p>\n Continue reading “Consultants’ Communications Privileged from Discovery”<\/span><\/a><\/p>\n","protected":false},"author":104,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,413],"tags":[486,487,485,50,225,406,428],"ppma_author":[914],"class_list":["post-288","post","type-post","status-publish","format-standard","hentry","category-health-law","category-healthcare-litigation-2","tag-attorney-client-privilege","tag-consultant","tag-discovery","tag-healthcare","tag-lebowitz","tag-litigation","tag-whistleblower"],"authors":[{"term_id":914,"user_id":104,"is_guest":0,"slug":"lebowitz","display_name":"Philip H. Lebowitz","avatar_url":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-content\/uploads\/sites\/8\/2014\/07\/lebowitzphillip-125x150.jpg","author_category":"","last_name":"Lebowitz","first_name":"Philip H.","job_title":"","user_url":"http:\/\/www.duanemorris.com\/attorneys\/philiphlebowitz.html","description":"Read Philip's bio.<\/a>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/posts\/288","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/users\/104"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/comments?post=288"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/posts\/288\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/media?parent=288"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/categories?post=288"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/tags?post=288"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/healthlaw\/wp-json\/wp\/v2\/ppma_author?post=288"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}