Opinion
Case No. 1:01-CR-238
March 15, 2002
Attorney(s) for Defendant(s), Gregory G. Drutchas, Kitch, Drutchas, Wagner, DeNardis Valitutti, Detroit, MI. Albert b. Addis, P.C. Mt. Clemens, MI.
ORDER
Defendant United Memorial Hospital has moved for reconsideration of the Court's Order of February 26, 2002, which denied it a motion filing extension until April 2, 2002. The Motion for Reconsideration seeks to file a single defense motion, a motion to dismiss, which, if granted, would save effort, expense and time of both the parties and the Court. See United States v. Levin, 973 F.3d 463, 467 (6th Cir. 1992) (stating that criminal pretrial practice is preferred to avoid unnecessary trials). The Motion is well taken and is in the interests of justice.
THEREFORE, IT IS HEREBY ORDERED that Defendant United Memorial Hospital's Motion for Reconsideration (Dkt. No. 70) is GRANTED and that Defendant United Memorial Hospital is granted leave to file a motion to dismiss, not to exceed twenty pages in length, on or before April 2, 2002.
OPINION
This matter is before the Court to resolve four motions of the parties: (1) Defendant United Memorial Hospital's Motion for Protection and to Quash Subpoena; (2) the United States of America's Motion to Compel Compliance with Administrative Subpoena; (3) the United States of America's Motion to Disqualify Attorney for United Memorial Hospital; and (4) the United States of America's Motion to Disqualify Attorney for Matthew DeWys.
I. BACKGROUND
This criminal prosecution, if the Third Superceding Indictment is to be believed, is the story of a rural hospital (Defendant United Memorial Hospital) led astray by an imposing, articulate and charming doctor with impeccable credentials (Jeffrey Askanazi, M.D.) and also with a proclivity for billing the government and insurance companies for surgical anesthesia procedures which were not medically necessary. Indeed, the proclivity for performing and billing unnecessary procedures now seems a valid part of the story in that Dr. Askanazi was convicted in December 1998 on 33 criminal counts in Case No. 1:98-CR-130 (assigned to the Hon. Robert Holmes Bell). What is disputed here is whether the Hospital itself and two of its top decision-makers, Defendants Daniel Seward and Matthew DeWys, were in on the scheme. The United States of America charges, in its Count One, that the Hospital and the individual Defendants conspired with Dr. Askanazi to commit wire and mail fraud by use of the interstate mails and wires to submit fraudulent claims for unnecessary medical services to Medicare, Medicaid and private insurance companies and to collect payments for such services. It is the United States of America's theory of the case that the individual Defendants participated in the conspiracy by taking actions which stifled criticisms and investigations of Dr. Askanazi. It is part of the theory that the individual Defendants failed to properly supervise Askanazi's hospital medical practice, including before the Medical Executive Committee (the Hospital's licensing and peer review committee) to which the individual Defendants were both assigned. The Third Superseding Indictment also charges the Hospital with 17 counts of mail fraud and 11 counts of wire fraud in connection with its patient billings.
This description of Dr. Askanazi is borrowed from Defendant DeWys' Brief in Opposition, at page 4.
The instant motions essentially involve two controversies: whether the United States of America's administrative subpoena of January 3, 2002 should be enforced; and whether counsel for the Hospital and Defendant DeWys should be disqualified due to conflicts of interest.
II. ADMINISTRATWE SUBPOENA OF JANUARY 3, 2002
This Subpoena directs the production of original documents including the "original credentialing files of Matthew DeWys and Daniel Seward." (Subpoena at 3.) These materials, which describe the credentials and training of the doctors, are viewed by Defendants as "peer review" materials because they are maintained by the doctors for the purpose of conducting peer review of other physicians reviewed by the Hospital's peer review committee. The parties do not dispute that these materials are properly deemed "peer review" materials.
A. Privilege
Defendant United Memorial Hospital argues that the subpoena should be quashed because this Court should recognize a federal medical peer review privilege extending to the papers sought. In favor of this argument, Defendant cites, most pertinently, some Michigan statutes discussing medical peer review, the decision of the Michigan Supreme Court in Attorney General v. Bruce, 369 N.W.2d 826, 827-31 (Mich. 1985) and the decision in Bredice v. Doctors' Hospital, Inc., 50 F.R.D. 249, 350 (D.D.C. 1970) (recognizing qualified peer review privilege for the purpose of a medical malpractice suit). See also Kent Community Hosp. v. Attorney General, 2002 WL 374121 (Mich.Ct.App. March 8, 2002) (applying privilege to bar a search warrant in a state criminal prosecution).
While the State of Michigan certainly has authority to recognize a privilege for medical peer review under state law, the pertinent question here under Federal Rule of Evidence 501 is whether the federal government should recognize a medical peer review privilege in this context. The arguments against recognizing such a privilege are multiple and compelling. In 1986, the Health Care Quality Improvement Act, codified at 42 U.S.C. § 11101 et seq., was enacted to create a qualified immunity defense as to peer review activities. However, the Act failed to enact any privilege respecting medical peer review. See Syposs v. United States, 63 F. Supp.2d 301, 306-08 (W.D.N.Y. 1999); Teasdale v. Marin General Hosp., 138 F.R.D. 691, 694 (N.D. Cal. 1991). In 1990, the United States Supreme Court in the case of University of Pennsylvania v. Equal Employment Opportunity Comm'n, 493 U.S. 182 (1990) held that there was no academic peer review privilege that would privilege university communications relevant to a Title VII investigation. The United States has cited over 20 cases rejecting the creation of a peer review privilege under federal law, including the Fourth Circuit's recent decision in Virmani v. Novant Health, 259 F.3d 284, 290-92 (4th Cir. 2001).
While there are contexts in which the creation of a new peer review privilege might be plausible, such as the adjudication of state medical malpractice claims subject to Michigan law, it is not appropriate to recognize such a privilege in the context of a federal prosecution for conspiracy to commit wire and mail fraud by manipulation of state peer review processes. See Burtrum v. United States, 17 F.3d 1299, 1301 (10th Cir. 1994) (stating "[w]e have been reluctant to create privileges in the criminal context where none existed at common law."). In this context, the federal government has a very strong interest in the use of relevant peer review information to prosecute crimes. In the absence of any Congressional recognition of the privilege or any widespread academic or judicial recognition that such a privilege must be recognized under federal law for peer review to function effectively and in consideration of the government's strong interest in discovering and prosecuting health care fraud, today is not the day for the recognition of such a privilege under federal law.
B. Enforcement of the Administrative Subpoena
The United States of America has moved to compel compliance with the administrative subpoena. Under the case law of the Sixth Circuit Court of Appeals, there is a four factor test for enforcement of an administrative subpoena:
1) . . . the terms of its authorizing statute [are satisfied], 2) the documents requested [are] relevant to the [agency] investigation, 3) the information sought is not already in the [agency's] possession, and 4) enforcing the subpoena will not constitute an abuse of the court's process.Doe v. United States, 253 F.3d 256, 265 (2001) (citing United States v. Markwood, 48 F.3d 969, 980 (6th Cir. 1995)).
1. Authorizing Statute
Title 18 United States Code section 3486 expressly authorizes the Department of Justice to issue administrative subpoenas to investigate a "Federal health care offense." The terms "Federal health care offense" are broadly defined and include mail and wire fraud where the violations are related to a federal health care benefit program (such as Medicare and Medicaid). See Doe, 265 F.3d at 265-66. The statute in question poses few prerequisites for the issuance of an administrative subpoena other than the presence of an ongoing criminal investigation of a federal health care offense. The statute does require that subpoenas describe the materials to be produced, allow reasonable time for production, and not be delivered outside a 500-mile area. See 18 U.S.C. § 3486(a)(2), (a)(3). In this case, the statute authorized the subpoena and the Department of Justice has complied with the procedural requirements for the issuance of the subpoena.
2. Relevance
Under Doe, the information sought must be relevant to the investigation. However, this does not mean that the information must be technically admissible as to a criminal prosecution. Rather, the information is deemed relevant if it might shed light on the matters within the criminal investigation. Doe, 253 F.3d at 266-67 (citing Equal Employment Opportunity Comm'n v. Ford Motor Credit Co., 26 F.3d 44, 47 (6th Cir. 1994)); see also United States v. Arthur Young Co., 465 U.S. 805, 814-16 n. 11 (1984) (adopting "may shed light upon" standard of relevance as to Internal Revenue Service statute).
In this case, the individual Defendants' credential files will inform the investigation of the Department. The Department needs to know the individual Defendants' level of training as to anesthetics in order to make inferences about whether failures to supervise Askanazi effectively regarding his treatment were due to simple mistakes or were part of a criminal plan to defraud insurance providers and Medicaid and Medicare. Thus, the information is relevant. The production of this information would also not cause any undue burden on Defendants. 3. Previously Produced
Defendant United Memorial Hospital has also argued in its Sur-Reply Brief that the credentialing files are unnecessary because Seward and DeWys's curriculum vitae are available. Defendant should acknowledge, however, that the credentialing files provide a means to double check Seward and DeWys' curriculum vitae and also contain information about their mental and physical health (and ethical conduct) which may shed light on whether poor supervision of Askanazi was due to mistake, illness and/or criminal intent. The Court does, however, expect that the United States will treat this information with the care and sensitivity it deserves.
Defendants have taken the position that any use of peer review materials is an undue burden in light of the importance of peer review and the holding in Bredice. As stated above, the Court does not find Bredice to be persuasive in light of the many cases rejecting its interpretation of federal law.
Documents need not be produced if they have been previously produced for the government in response to subpoenas. However, the documents requested do not fall within that category.
4. Abuse of Process
The burden is on the Defendants to show that production of the documents would be an abuse of a court process, such as when the requests are made for the institutional purpose of harassing a witness. Doe, 253 F.3d at 272. The burden of showing institutional bad faith is a "heavy" one. Id.
In this case, the only bases for a charge of harassment is the fact that the Department filed a February 12, 2002 subpoena seeking other peer review information that it previously had told Defendants it was not seeking to discover. This charge of harassment does not relate to the January subpoena and this change in position does not have any tendency to show that the January subpoena was issued in bad faith. Furthermore, even as to the February subpoena, the change in position only suggests that the Department of Justice after further reflection decided that it needed to review the additional materials. These materials may shed light on the investigation, i.e., they may show that the individual Defendants dealt swiftly with problems concerning physicians other than Dr. Askanazi, leaving the inference that Askanazi's treatment was part of an intentional scheme. Thus, Defendants have not shown "bad faith" or "harassment" as to any of the subpoenas discussed.
Accordingly, the Court concludes that the Motion for Protective Order and to Quash must be denied and that the Motion to Compel Compliance must be granted.
III. DISQUALIFICATION OF COUNSEL A. General Standards
In Wheat v. United States, 486 U.S. 153 (1988), the United States Supreme Court recognized the authority of a federal district court to disqualify chosen defense counsel, over objection and despite waivers of conflict of interest, because of actual conflicts of interest or serious potential conflicts of interest. In the words of Justice Rehnquist:
The District Court must recognize a presumption in favor of [a defendant's] counsel of choice, but that presumption may be overcome not only by a demonstration of actual conflict but by a showing of a serious potential for conflict. The evaluation of the facts and circumstances of each case under this standard must be left primarily to the informed judgment of the trial court.Wheat v. United States, 486 U.S. at 164.
Of course, this holding, like most things in life, is subject to misuse. Namely, overly vigilant prosecutors may use motions to disqualify as a trial tactic to defeat the defendant's choice of counsel and to disrupt continuity of his counsel. These Sixth Amendment interests are especially important and become critical in complex cases where the representation is by an attorney with experience and technical knowledge relating to the prosecution. Recognizing this possible misuse of disqualification motions, the Supreme Court in Wheat and later in the case of Caplin Drysdale, Chartered v. United States, 491 U.S. 617, 634 (1989) said that "`trial courts are undoubtedly aware of [the] possibility' of abuse, and would have to `take it into consideration,' when dealing with disqualification motions." Caplin, 491 U.S. at 634 (quoting Wheat, 486 U.S. at 163).
Sixth Circuit case law, like the Supreme Court cases, recognizes the inherent tensions between enforcing ethical rules and respecting a defendant's Sixth Amendment choices. These courts also recognize that disqualification motions, which must be decided pretrial, are murky matters, requiring the exercise of judgment as to uncertain future events. For these reasons, the Sixth Circuit, like the Supreme Court, has said that the district courts have wide discretion in deciding such motions. Serra v. Michigan Department of Corrections, 4 F.3d 1348, 1354 (6th Cir. 1994); United States v. Mays, 69 F.3d 116, 121 (6th Cir. 1995); United States v. Timmer, 70 F.3d 1273, 1995 WL 704186 at 2 (6th Cir. Nov. 29, 1995).
B. Counsel for United Memorial Hospital
United Memorial Hospital is represented by attorney Albert B. Addis and the law firm of Kitch, Drutchas, Wagner, Denardis Valitutti. Attorney Addis is of counsel with that law firm. Attorney Addis specializes in white collar crime. Attorney Greg Drutchas, of the law firm, specializes in health care law, including medical peer review procedures. The government's disqualification motion argues that Addis and the law firm should be disqualified because of prior representations of grand jury witnesses, especially including Defendant DeWys, Domenico Ausiello, James Banner, Melody Fitzer and Jeffrey Cook. The government anticipates that it will call Ausiello, Banner, Fitzer and Cook in its case as well as other witness/employees (James Kelly, Judith Kelly, Shannon German, Sue McIntyre, Rhonda Clevenger, Melissa Betser, Etta Barrera and Patricia Whitcomb). The latter group of witnesses are expected to testify generally about the Hospital's corporate knowledge, protocols and procedures for submitting insurance claims and the production of documents by the Hospital. The government anticipates that Dr. Ausiello will testify about Dr. Askanazi's financial motives in coming to the Hospital. The government anticipates that Dr. Fitzer will testify that she was reluctant to refer patients to Dr. Askanazi and will further testify that she reported to Dr. DeWys that Dr. Askanazi made the comment to a patient that the effectiveness of treatment was less important than whether an insurance company would pay for it. The government anticipates that Dr. Banner will testify that hospital staff was generally concerned about the volume of procedures done by Dr. Askanazi. The government also anticipates that one potential defense for the Hospital is that Dr. DeWys did not convey information to the Hospital concerning Dr. Askanazi's suspected inappropriate treatment of patients.
All of these witnesses, including all representatives and employees of the Hospital, have signed waiver forms, acknowledging a potential conflict of interest and waiving such conflict. ( See Defendant United Memorial Hospital's Amended Response, attachments.) Furthermore, these affidavits and waiver forms each describe the scope of the former representation as limited to giving advice about government questioning on the subjects of peer review matters, grand jury procedures and the right against self-incrimination. Counsel and the witnesses each indicate that the client/attorney discussions which went on were not private in character and that counsel did not obtain confidential information from the witnesses. ( Id.) Counsel has also provided the affidavit of Etta Barrera, the risk manager of the Hospital, which supports that at the time of Addis' representation of DeWys, Seward, Banner and Fitzer, she contacted FBI Agent David Kleinpaste and was assured that none of these individuals were a target of the investigation. ( Id.) Counsel also affirms that on September 13, 2001, he spoke with Assistant United States Attorney Barbara Tanase about potential conflicts of interest and was told that she did not believe him to have any conflicts of interest.
The United States' Motion made the claim that Drs. Ausiello and Banner are currently represented by Addis. Addis, Ausiello and Banner, in their affidavits, describe this representation in the past tense and as limited in scope. ( See UMH Response Brief, attachments.) Thus, the Court must assume that the representation has ceased. This conclusion is also supported by the Affidavit of Gregory Drutchas, which states that after Addis was engaged as counsel for the Hospital "there was no further representation of any physicians." (Drutchas Affidavit at ¶ 8.)
Pertinent to this discussion are the Michigan Rules of Professional Conduct, which provide the ethical standards for attorney practice in this Court. See Local Criminal Rules 57(j). Among these requirements are the requirements of Michigan Rule of Professional Conduct 1.7, which states that a "lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless (1) the lawyer reasonablely believes the representation will not adversely affect the relationship with the other client; and (2) each client consents after consultation." Rule 1.7(a). The Rule also contains similar language prohibiting, subject to an informed waiver, representation of a client that may be "materially limited" by representation of another client. Rule 1.7(b). Rule 1.9 also forbids the representation of a client when the client's interests are "materially adverse" to the interests of a former client, unless the former client consents after consultation. Rule 1.9(a). Rule 1.9(b) also makes clear in its description of the prohibition that it is intended to protect confidences learned from the former client and does not apply if no confidences were shared in the former representation or if the confidences have otherwise become generally known. See Rule 1.9(b)-(c).
The United States has also cited Mich. Ethics Opinion RI-218 (August 16, 1994) in favor of its position. A reading of the Opinion indicates that it is limited to disqualifications where a current client is testifying. Since this is not an issue in this matter, the Opinion is not pertinent.
Defendant Hospital urges that there is no conflict of interest for three separate reasons. First, its attorneys did not learn confidential information in any of the prior representations. See United States v. Agosto, 675 F.2d 965, 970-71 (8th Cir. 1982). Second, given the defense strategy planned (that the Hospital and individual Defendants aired concerns about Askanazi during peer review meetings), the interests of the witnesses and the client are not materially adverse. See Agosto, 675 F.2s at 699-70; United States v. Gehl, 852 F. Supp. 1135, 1143-44 (N.D.N.Y. 1994). Third, any conflict has been waived by intelligent and knowing waivers. See United States v. Straughter, 950 F.2d 1223, 1234 (6th Cir. 1991); United States v. Krebs, 788 F.2d 1166, 1172 (6th Cir. 1986); United States v. Lussier, 71 F.3d 456, 461 (2nd Cir. 1995). Given the present record, the Court cannot find any basis to disagree and must conclude that there is no legal basis for disqualification of defense counsel for the Hospital.
With this said, however, the Court is still concerned about the conflict issue. As noted by the Supreme Court in Wheat, it is very difficult to predict trial testimony and conflicts may arise in light of unexpected events. Thus, the Court agrees with the suggestion and proposal made by Defendant that the Court employ the "backup counsel" approach used in Agosto. Agosto, 675 F.2d at 974. The Court understands that Defendant and the proposed witnesses each have consented to such an arrangement. The "backup counsel" should be employed promptly by Defendant, should be utilized in Court for the cross-examination of Dr. Fitzer, Dr. Banner, Dr. Ausiello and Dr. DeWys (should Dr. DeWys elect to testify), and should be prepared to take over the overall defense should present counsel be later disqualified.
C. Counsel for Defendant DeWys
Defendant DeWys is represented by Ray Kent, an experienced criminal defense attorney who often appears in federal court. Much the same facts and analysis which this Court has discussed relating to Counsel for the Hospital apply to attorney Kent's representation of Defendant DeWys. Namely, his representation of grand jury witnesses, including Defendant Seward, in the past did not involve him obtaining confidential information; his representation of Defendant DeWys is not adverse to those grand jury witnesses; and those witnesses have each executed waivers.
One further complication relating to attorney Kent is his current representation of Michael Mihora in a separate and unrelated criminal prosecution for making false declarations, currently before the Honorable David W. McKeague (Case No. 1:01-CR-237). Mihora is the former Chief Executive Officer of the Hospital and was responsible for hiring Dr. Askanazi. The United States has been precluded from bringing any criminal charges against Mihora based on the billing practices of Dr. Askanazi because of the statute of limitations ( i.e., Mihora left the Hospital in May 1995, see Motion to Disqualify Attorney for Defendant DeWys at 3 n. 2, and the limitation period is by statute five years, see 18 U.S.C. § 3282). However, based on the government's analysis of Mihora's grand jury testimony, it has charged him with making false declarations before the grand jury under 18 U.S.C. § 1623. Now pending before Judge McKeague is a defense motion filed by attorney Kent to dismiss that Indictment. The United States also filed a motion to disqualify attorney Kent in that prosecution, which motion was denied at a hearing on March 11, 2002. Based on such facts, it does not appear that Attorney Kent's representation of Mihora is adverse and, even were it possibly adverse, both Mihora and DeWys have executed knowing and intelligent waivers of the potential conflict.
While the Court does not believe that counsel should be disqualified, the Court agrees that the "backup" counsel approach used in Agosto should also be utilized in this case. Agosto, 675 F.2d at 974. The Court understands that Defendant DeWys and the proposed witnesses each have consented to such an arrangement. The backup counsel should be employed promptly by Defendant and should be utilized in Court for the cross-examination of Defendant Seward (should he elect to testify), Dr. Fitzer, Dr. Mustonen, Dr. Danielsky, Dr. Barnes, Bill Collins and Larry Davis. The backup counsel should also be prepared to take over the overall defense should present counsel be later disqualified.
The Court does not anticipate that the government will call Michael Mihora. The government's Indictment of Mihora tends to indicate that it views him as an unreliable witness.
IV. CONCLUSION
For the reasons stated, an Order shall issue denying the Motion for Protection and to Quash, granting the Motion to Compel, denying the Motions to Disqualify, and requiring Defendants to employ backup counsel as directed in this Opinion.
ORDER
In accordance with the Opinion of this date;
IT IS HEREBY ORDERED that Defendant United Memorial Hospital's Motion for Protection and to Quash Subpoena (Dkt. No. 35) and Defendant Matthew DeWys' Concurrence and Joinder in the Motion (Dkt. No. 39) are DENIED.
IT IS FURTHER ORDERED that Plaintiff United States of America's Motion to Compel Compliance with Administrative Subpoena (Dkt. No. 45) is GRANTED and United Memorial Hospital shall comply with the January 3, 2002 administrative subpoena immediately and not later than ten (10) days from the issuance of this Order.
IT IS FURTHER ORDERED that Plaintiff United States of America's Motion to Disqualify Attorney for Defendant United Memorial Hospital (Dkt. No. 33) and Motion to Disqualify Attorney for Defendant DeWys (Dkt. No. 34) are DENIED.
IT IS FURTHER ORDERED that Defendants United Memorial Hospital and DeWys shall promptly employ "backup" counsel as described in the Court's Opinion.