In United States ex rel. Holmes v. Northrop Grumman Corp., No. 1:13-cv-85, 2015 WL 3504525 (S.D. Miss. June 3, 2015), the court answered this question with a resounding “no” and provided a laundry list of ethical violations that the attorney Relator had violated in attempting to advance his qui tam action. The Holmes court’s holding serves as a staunch reminder to attorneys that their ethical obligations are paramount and reinforces the notion that courts throughout the nation do not look favorably upon opportunistic relators who rely on improper means to gain access to documents to support their FCA claims.
In 2005, Hurricane Katrina severely damaged several ships that Defendant had been contracted to construct for the United States Navy. As a result of the damage, Defendant filed a claim with its insurer, Munich Re, who in turn was represented by Holmes—the Relator in the instant dispute. During the course of the adjustment process, Defendant and Munich Re entered into a Confidentiality Agreement governing the documents produced by Defendant. Munich Re, Defendant, and the U.S. Navy also agreed to a Stipulated Protective Order, which was entered by a D.C. district court. The Stipulated Protective Order stated that any documents produced by the U.S. Navy could only be used for purposes of the claim adjustment dispute between Defendant Munich Re.
The Relator subsequently filed an FCA action relying heavily on the documents produced under the Confidentiality Agreement and the Stipulated Protective Order to allege that Defendant had submitted a false claim for reimbursement to the Government. Specifically, the Relator alleged that Defendant had falsely claimed that its ships were destroyed by Hurricane Katrina and had subsequently been appropriated funds by Congress to cover its damages when, in fact, Defendant was seeking reimbursement for unrelated cost overruns in construction. Defendant moved to disqualify the Relator, arguing that he had violated numerous ethical obligations by deliberately violating the Confidentiality Agreement and Stipulated Protective Order in filing his qui tam action.
The district court agreed with the Defendant, holding that the Relator was disqualified from serving as a relator in the qui tam action. In so holding, the court rejected the Relator’s argument that the FCA somehow trumped his ethical obligations as an attorney and held that the relevant Model Rules of Professional Conduct govern an attorney’s obligations when it is proceeding as a pro se relator in an FCA action. The Court went on to find that the Relator had violated his duty of candor to the D.C. district court in providing a pretense reason for needing documents from the U.S. Navy, had violated his duty of loyalty to Munich Re by failing to fully and adequately explain to his client that he was filing an FCA action based on documents and information obtained during the adjustment process, and violated his duty to retain the confidentiality of information by disclosing information obtained under the Confidentiality Agreement. However, the court found that the Relator’s most egregious violation was his admitted disregard of the D.C. district court’s mandate in the Stipulated Protective Order that the documents produced by the Navy “shall not be used in any other proceeding or for any other purpose without further order of this Court.”
Along with disqualifying the Relator, the court dismissed his complaint with prejudice, reasoning that Defendant would be greatly prejudiced from defending itself should the case proceed to trial because “the case would be tried on a record developed primarily through the fruits of [the Relator’s] unethical conduct.” Consequently, the court dismissed the action with prejudice as to the Relator and without prejudice as to any rights of the Government (which had previously declined intervention).