Fair Laboratory Practices Assocs. v. Quest Diagnostics, Inc.
734 F.3d 154
| 2d Cir. | 2013Background
- FLPA filed a qui tam under the FCA against Quest Diagnostics and Unilab for alleged AKS violations.
- Mark Bibi, a former Unilab General Counsel, joined as an individual relator and participated in the action.
- Bibi consulted NY Rules to determine participation; he concluded exceptions allowed but did not verify with the NY state bar.
- The District Court dismissed the Complaint and disqualified FLPA, its general partners, and its outside counsel to avoid taint in future litigation.
- The District Court held Bibi violated NY Rule 1.9(c) by using confidential information; it did not preempt state ethics rules and balanced interests.
- The United States declined to intervene, but the court’s ruling proceeded; the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Bibi violate NY Rule 1.9(c)? | Bibi disclosed confidences to pursue a valid FCA action under 1.6(b)(2). | Bibi's disclosures went beyond what was necessary to prevent a crime. | Yes; Bibi violated 1.9(c). |
| Does the FCA preempt state ethical rules governing confidences? | FCA preemption should permit necessary disclosures to expose fraud. | State ethics rules may constrain disclosures despite FCA. | No preemption; NY rules govern and balance federal interests. |
| Was the remedy of dismissing the complaint and disqualifying FLPA and counsel proper? | Remedies should be more narrowly tailored to avoid prejudice, not total dismissal. | Disqualification and dismissal were necessary to prevent taint and protect defendants. | Remedies were not an abuse of discretion and were within range of permissible decisions. |
Key Cases Cited
- Hull v. Celanese Corp., 513 F.2d 568 (2d Cir. 1975) (state ethics guidance used in FCA balancing)
- Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 (2d Cir. 1977) (limits on disciplinary remedies to avoid prejudice)
- Nyquist v. Board of Ed. of City of New York, 590 F.2d 1246 (2d Cir. 1979) (disqualification as remedy to preserve integrity)
- Grievance Comm. for the S.D.N.Y. v. Simels, 48 F.3d 646 (2d Cir. 1995) (balancing federal and state interests in ethics)
- Mergent Servs. v. Flaherty, 540 F.3d 89 (2d Cir. 2008) (applies de novo review to dismissal for ethical grounds)