7th Circuit affirms dismissal of qui tam for counsel’s disclosure of document

by bvernia | August 28th, 2009

In an August 27 opinion, the Seventh Circuit affirmed the Northern District of Illinois’ dismissal of a relator’s qui tam suit as a sanction for her trial attorney’s disclosure of a discovery document whose confidentiality he had agreed to protect.

The attorney had, earlier in the case, raised the District Judge’s ire through his dilatory conduct, and had been given a “final warning” that future misconduct would not be tolerated. Then, a bates-stamped contract at issue in the case appeared on the Wikileaks website, and was reported in the Chronicle of Higher Education (the suit alleged fraud in student loan debt collection practices).

In the District Court, the relator’s trial counsel admitted that he gave the document to three sources: his client, another attorney whom he was considering bringing onto the case as co-counsel, and a reporter for the Chronicle. The District Court found that the relator’s trial counsel had reached an oral agreement to provide “attorney’s eyes only” protection to the document, and that his breach of this agreement was willful and inexcusable.

The Seventh Circuit agreed, rejecting the relator’s arguments that the document in question was not specifically covered by the “eyes only” agreement, that the agreement only applied to documents which were the subject of a protective order, and that the District Court’s finding of willfulness was erroneous. The Court likewise disagreed that the District Court should not have sanctioned her in the absence of a protective order (this disregarded the “eyes only” agreement, the Court reasoned), or that the District Court was required to find good cause for keeping the agreement confidential before sanctioning its disclosure.

The Court was no more accomodating of the relator’s argument that the defendant was at fault for the protective order’s absence because it waited more than 17 months for her trial counsel’s feedback on a draft they had given him:

It does appear that nothing prevented USA Funds’s lawyers from protecting their client’s interests sooner, and perhaps they should have. But Salmeron’s argument essentially boils down to faulting USA Funds’s lawyers for not protecting their client from an adversary who might not be trustworthy. We cannot accept that assertion.

The relator had sufficient notice that dismissal might result from the disclosure, because her suit had already been dismissed (and reinstated) once when her trial attorney tried the District Court’s patience.

Lastly, the Court rejected the relator’s argument that dismissal of the case would harm the government’s interests (and was improper in the absence of the Attorney General’s written consent, under 31 USC § 3730(b)(1)). The US had been given ample notice of the misconduct of the relator’s counsel, could have intervened, but did not.

For the appeal, the relator was represented by Barry Levenstam of Jenner & Block. Jeffrey Sarles of Mayer, Brown, represented Sallie Mae, and argued the case for it, and for another aggrieved defendant, Enterprise Recovery Systems.

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