Prosecutors can’t use attorney-client or work-product privilege as a sweeping bar to keep a Pittsburgh-based for-profit education company from deposing officials in the complex discovery of a multibillion-dollar qui tam case, a federal judge has ruled.
U.S. District Judge Terrence F. McVerry of the Western District of Pennsylvania adopted the recommendation of the special master in the case, who had sided with the company, Education Management Corp., or EDMC, which runs more than 100 for-profit campuses across the country.
EDMC had sought to depose government officials, including a senior enforcement attorney at the education department, as part of the 70 hours of deposition allowed to each side before the close of document discovery. Prior to issuing the case management order last year granting each side 70 hours of deposition, McVerry characterized discovery in the case as “herculean.”
“The United States believes that EDMC is attempting to misuse the ‘early deposition’ procedure, which was intended to streamline discovery, to instigate premature and unnecessary disputes regarding the attorney-client privilege and attorney work product,” McVerry said, summarizing the prosecution’s argument to quash the depositions.
The suit, filed in 2007, alleges that EDMC defrauded the federal government of $11 billion in federal student aid by violating the terms of the Higher Education Act, which bars the distribution of incentives to college recruiters based on the number of students they draw. Prosecutors filed the government’s notice of intervention in 2011.
EDMC, for its part in the deposition dispute, “contends that it is seeking relevant, factual information regarding ‘what the government knew and when it knew it,’” McVerry said.
Referring to the Department of Education attorney who EDMC sought to depose, Russell Wolff, McVerry said, “EDMC points out that Wolff has personal knowledge of core matters and is not an attorney of record in this litigation. EDMC characterizes the interrogatory responses of the United States as ‘inscrutable’ such that follow-up questions are necessary.”
The prosecution carries the burden to prove that the depositions should be quashed and it hasn’t carried that burden, EDMC argued. “It cannot assert attorney-client privilege and/or work product in a preemptive and blanket manner,” McVerry said, summarizing EDMC’s argument.
Rather than asserting those privileges as a bar to the depositions as a whole, the prosecution should instead assert them in relation to specific questions during the deposition, EDMC argued.
The special master, former District of Columbia Superior Court Judge Richard A. Levie, was persuaded.
“He analogized Wolff’s status as akin to that of a corporate in-house counsel; deemed the proposed deposition to be ‘appropriately tailored’; and found the assertions of privilege and work product by the United States to be premature,” McVerry said. Levie also “recommended that the deposition of Wolff should proceed, with the United States asserting privilege and work-product objections, if appropriate, during the deposition.”
“The United States argues that the special master erred by: (1) placing the burden to quash the depositions on the United States; (2) accepting EDMC’s representations that the depositions will be tailored to obtain facts, rather than attorney communications and impressions; and (3) requiring it to prematurely answer contention interrogatories, which it fears will be used to unfairly limit its theory of the case,” according to McVerry’s opinion.
The judge was not convinced.
Under the U.S. Court of Appeals for the Third Circuit’s 1986 opinion in Cipollone v. Liggett Group, the burden rests with the party seeking to quash a deposition, McVerry said. “There is no binding authority to shift this burden if the deponent is an attorney,” the judge said.
Even if EDMC did bear the burden, he would still allow the depositions to go forward because there is “good cause” to take them, McVerry said in a footnote.
He further endorsed Levie’s opinion, saying, “The special master also correctly concluded that the attorney-client privilege and work-product doctrines cannot be wielded as a preemptive shield to quash the depositions in advance … such assertions must be made during the deposition on a question-by-question basis.”
McVerry summed up the situation this way: “Plaintiffs have filed serious charges against EDMC and seek recovery of billions of dollars. EDMC has been subject to a tremendous burden in discovery.
“The United States made a knowing and informed decision to voluntarily intervene in this qui tam litigation. In that light, the United States’ concerns with the burden of reciprocal discovery by EDMC ring hollow.
“Moreover, the United States cannot reasonably expect to dictate its opponent’s strategy and tactics.”
The judge said that he has “little sympathy” for the prosecution’s argument that its disclosures would be premature since the litigation has been pending since 2007. “It is seven years old and counting,” McVerry said.
Although he sided largely with EDMC, as did Levie, McVerry allowed that “some of the concerns expressed by the United States do resonate with the court.”
He suggested that the parties, perhaps with the assistance of Levie, agree on ground rules before the depositions start since “EDMC’s decision to take these particular depositions, which implicate difficult attorney-client privilege and work-product issues, has the potential to adversely impact the remaining discovery.”
(Copies of the eight-page opinion in United States v. Education Management, PICS No. 14-0528, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •