Court Refuses to Recognize “Compliance Officer Privilege” in Qui Tam Action

The growing number of corporate compliance officers, most with law degrees and housed in the corporate legal department, will increasingly raise the issue whether some evidentiary privilege protects from compelled disclosure corporate communications with the CCO.  A Texas federal court, interpreting a Texas state statute, refused to find a statutory “compliance officer privilege” that protects a CCO’s communications.  U.S. v. Austin Radiological Association, 2013 WL 1136668 (W.D. Tex. Mar. 18, 2013). You may access the opinion here.

The Case

In Austin Radiological, a former employee of Austin Radiological Association (ARA) brought a qui tam action under the False Claims Act. She alleged that ARA retained Medicare overpayments, wrongfully billed Medicare, and wrongfully discharged him.  She sought discovery from ARA’s compliance officer, but ARA objected asserting a “compliance officer privilege” under Texas Health & Safety Code § 161.032(e).

The Statute and Ruling

This statute provides, in part, that

The records, information, and reports received or maintained by a compliance officer retain the protection provided by this section only if the records, information, or reports are received, created, or maintained in the exercise of a proper function of the compliance officer . . .

The question whether this statutory section created an evidentiary privilege depended upon the court’s statutory interpretation.

Upon review, the court determined that this section incorporated another section, Texas Gov’t Code § 552.005), stating that the “protection provided by this section” did not “create new privileges from discovery.”  The court therefore rejected a statutory “compliance officer privilege” and ordered the CCO’s documents produced.

POP Analysis

This decision raises several issues for in-house lawyers and corporate compliance officers.  First, the court and parties applied Texas state law even though the presence of a federal claim could have provided an opportunity to argue for a common law compliance privilege.  Second, the case is silent regarding whether the compliance officer was a lawyer working in ARA’s legal department.

If so, then perhaps an argument that the corporate attorney-client privilege protected the compliance officer’s communications would have proved more successful.  While a few cases address a compliance officer’s privilege in the attorney-client privilege context, the cases are fact-specific and rely on a traditional analysis whether the compliance officer was acting in a legal versus a business capacity.  See, e.g., Leazure v. Apria Healthcare, Inc., 2010 WL 3397685 (E.D. Tenn. Aug. 26, 2010); U.S. ex rel. Parikh v. Premera Blue Cross, 2006 WL 3733783 (W.D. Wash. Dec. 15, 2006).

And finally, this case reminds us that statutory confidentiality rules are not the equivalent of evidentiary privileges.  As courts note, “[c]onfidential does not necessarily mean privileged,” In re Grand Jury Subpoena Dated Dec. 17, 1996, 148 F.3d 487, 492 (5th Cir. 1998), and “confidentiality and privilege are two separate, albeit overlapping, legal concepts.”  Gaumond v. Trinity Repertory Co., 909 A.2d 512, 518-19 (R.I. 2006).