February 5, 2023

Volume XIII, Number 36

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February 03, 2023

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February 02, 2023

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

On June 3, 2021, the Northern District of Texas ruled on a novel issue in U.S. v. Hagen (Case No. 3:19-CR-0146-B (N.D. Tex.)). In a health care fraud conspiracy case against DME suppliers, the court held that a good faith defense premised on legal advice received by anotheruncharged 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.

© 2023 Foley & Lardner LLPNational Law Review, Volume XI, Number 162

About this Author

Lisa Noller, Trial Lawyer, Foley Lardner Law Firm

Lisa Noller is a trial lawyer and investigator with Foley & Lardner LLP, where she is chair of the Government Enforcement, Compliance & White Collar Defense Practice. She has spent almost 20 years investigating, litigating and trying complex criminal and civil cases, including responding to government investigations, conducting corporate internal investigations, and persuading the government not to pursue clients. When cases proceed to trial, Ms. Noller also has significant experience successfully trying a wide variety of over 30 civil and criminal matters in...

Judith Waltz, False Claims Act Attorney, Foley Lardner Law Firm

Judith A. Waltz is a partner and business lawyer with Foley & Lardner LLP. Her practice focuses on government investigations, false claims act, corporate integrity agreements (CIAs), bankruptcy, and Medicare and Medicaid counseling. Ms. Waltz works with clients in various areas of the health care industry. She is former co-chair of the firm’s Life Sciences Industry Team, and former vice chair of the Health Care Industry Team. Ms. Waltz is also a member of the Government Enforcement, Compliance & White Collar Defense and Bankruptcy & Business Reorganizations...

Michael J. Tuteur, Foley Lardner, Healthcare lawyer, Government Enforcement Defense Attorney

Michael J. Tuteur is chair of the Litigation Department of Foley & Lardner LLP and focuses his practice on health care litigation and government enforcement defense. Mr. Tuteur represents clients in a broad range of industries, including healthcare, software, biotechnology, insurance, education, advertising, banking and mutual funds. His litigation experience is similarly diverse, and includes ERISA and RICO class actions, securities and syndicated debt disputes, licensing and copyright actions, contract and shareholder suits, and defense of civil false claims...

Olivia Singelmann Government Enforcement Attorney

Olivia Singelmann is an associate and litigation attorney with Foley & Lardner LLP. She is a member of the firm’s Government Enforcement Defense & Investigations, Business Litigation & Dispute Resolution, and Securities Enforcement & Litigation Practices.

Olivia’s practice includes litigation matters, with a focus on representing clients in investigations and/or enforcement proceedings by the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and the Public Company Accounting Oversight Board (PCAOB). Olivia has experience representing...