LIFEBRITE HOSPITAL GROUP OF STOKES, LLC v. BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

LIFEBRITE HOSPITAL GROUP )

OF STOKES, LLC, )

)

Plaintiff, )

)

v. ) 1:18cv293

)

BLUE CROSS AND BLUE SHIELD )

OF NORTH CAROLINA, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

This case comes before the Court on LifeBrite Hospital Group

of Stokes, LLC (“LifeBrite Hospital”), LifeBrite Hospital Group,

LLC, LifeBrite Laboratories, LLC (“LifeBrite Labs”), Christian

Fletcher (“Fletcher”), and Amber Fletcher’s (collectively,

“LifeBrite’s”) Motion to Quash (Docket Entry 86), to which Blue

Cross and Blue Shield of North Carolina (“BCBSNC”) responded

(Docket Entry 88) and LifeBrite replied (Docket Entry 89). The

Motion to Quash targets subpoenas directed to Adam Walters, an

attorney (and nonparty) who previously represented Fletcher and

LifeBrite Labs. (See Docket Entry 86 at 2.) For the reasons that

follow, the Court denies the Motion to Quash, but without prejudice

to Walters’s right to maintain objections he timely made to the

subpoenas.

I. Background

This case concerns reimbursement of health insurance claims

associated with a rural, critical access hospital (“CAH”). (See

Docket Entry 5 at 1.) According to the Complaint in this case,

BCBSNC, a private health insurance provider, “refus[ed] to

compensate LifeBrite for [] services rendered to BCBSNC and/or its

affiliate’s insureds.” (Id.) Such refusal allegedly contravenes

a contract between LifeBrite Hospital and BCBSNC. (Id. at 2.)

BCBSNC, in turn, has contended (via Counterclaims) that the

persons and entities comprising LifeBrite “engaged in a deceptive

scheme to enrich themselves . . . by using LifeBrite Hospital’s

[billing identifiers] to bill for laboratory tests that LifeBrite

Hospital did not perform.” (Docket Entry 75 at 12.) BCBSNC’s

Counterclaims further assert that LifeBrite Labs conducted the

laboratory tests at issue, and the reimbursement requests to BCBSNC

should have identified LifeBrite Labs as the entity responsible for

conducting the tests. (See id.) According to the Counterclaims,

that scheme resulted in BCBSNC making outsized claim reimbursements

to LifeBrite, to the tune of “more than $11 million in less than

one year.” (Id. at 14.)

Separate from this litigation, Christian Fletcher faced

criminal charges for participating in a scheme involving LifeBrite

Labs. (See id. at 23 (citing United States of America v. Perez,

No. 3:20-cr-86 (M.D. Fla. June 27, 2022)). That alleged scheme

involved LifeBrite Labs contracting with several CAHs across the

southeastern United States and conducting laboratory testing on

behalf of those hospitals, but then billing health insurance

2

providers using the CAH’s hospital identification number, rather

than that of LifeBrite Labs. (See generally id.; see also Docket

Entry 86 at 4 (Motion to Quash reporting that, “[i]n 2020, the

United States brought criminal charges against [] Fletcher for

conspiracy to commit health care fraud”).) The CAHs under scrutiny

in that criminal case did not include LifeBrite Hospital. (See

id.)

Fletcher testified during his criminal trial. (See Docket

Entry 86 at 4-5; see also Docket Entry 89-1; Docket Entry 89-2;

Docket Entry 89-3 (trial transcripts) In that testimony,

Fletcher explained that he relied upon the advice of his counsel,

Walters, in contracting with the CAHs, and that Walters had

concluded that the arrangements between LifeBrite Labs and the CAHs

complied with applicable law. (See generally Docket Entry 86 at 4-

5; see also Docket Entry 89-2 at 11, 93-94 (testimony describing

Walters’s conclusions that said arrangements violated no law or

contract) .)

A jury acquitted Fletcher. (See id. at 5 (citing United

States of America v. Perez, No. 3:20-cr-86 (M.D. Fla. June 27,

2022) .) Thereafter, on May 23, 2023, BCBSNC served subpoenas on

Walters and his former law firm. (See Docket Entry 86-2 at 5

(certificate of service).) The subpoenas seek Walters’s

communications with Fletcher and LifeBrite regarding “use of a

[h]ospital’s [bJilling [i]ldentifiers to bill for [l]laboratory

[s]ervices,” as well as other documents and communications

regarding LifeBrite entities and the CAHs at issue in Fletcher’s

criminal trial. (Id. at 13-14.)

As a result, LifeBrite filed the Motion to Quash, contending

that this Court should quash the subpoenas “because on their face

they seek communications and documents protected from disclosure by

the attorney-client privilege and the work product doctrine.”

(Docket Entry 86 at 2.) The Motion to Quash also asserts that

“LifeBrite has not waived its privilege as to these documents[,

because Fletcher’s testimony in his criminal trial concerned]

hospitals other than the one at issue in this case (specifically,

. . . hospitals in Florida, Georgia, and Missouri—none of which are

the subject of this litigation) and claims submitted under the

network agreements between those hospitals and payors other than

BCBSNC.” (Id.) Finally, the Motion to Quash argues that the

subpoenas partly target “irrelevant contracts not at issue in this

case.” (Id. at 6.)

BCBSNC’s Response first asserts that LifeBrite failed to

sufficiently identify the documents and/or communications to which

the attorney-client privilege would attach. (See Docket Entry 88

at 17-18.) Next, the Response contends that any attorney-client

privilege “was waived—and documents on the subject became

discoverable—when Fletcher testified broadly about the legal advice

provided by Walters in connection with his advice-of-counsel

4

defense in the criminal case.” (Id. at 18-19; see also id. at 23

(averring that “LifeBrite Labs’ relationship with lLifeBrite

Hospital is nearly identical to its relationships with [the CAHs in

the criminal trial]”).) Third, the Response argues that the

sought-after discovery bears relevance to LifeBrite’s intent when

it submitted claims to BCBSNC. (See id. at 28.)

LifeBrite’s Reply initially insists that LifeBrite

sufficiently identified the categories of documents over which it

asserts attorney-client privilege. (See Docket Entry 90 at 5-7.)

Then, the Reply rejoins that Fletcher’s testimony in the criminal

trial involved “a far more limited subject matter [than that

advanced by BCBSNC].” (Id. at 8.) Finally, the Reply disputes the

relevance of the discovery. (See id. at 12 (arguing that “[t]he

legality of LifeBrite Labs’ contracts with the [CAHs in the

criminal trial], and Fletcher’s testimony that he followed his

lawyers’ advice, does not tend to prove or disprove the intent or

negligence of Fletcher in acquiring and operating LifeBrite

Hospital”) .)

II. Discussion

A. Discovery Standards

“Parties may obtain discovery regarding any nonprivileged

matter that is relevant to any party’s claim or defense and

proportional to the needs of the case ... .” Fed. R. Civ. P.

26(b) (1). This standard applies to “[a]ll civil discovery, whether

sought from parties or nonparties.” Virginia Dep’t of Corr. v.

Jordan, 921 F.3d 180, 188 (4th Cir. 2019). “Discovery rules are to

be accorded broad and liberal construction,” Boshea v. Compass

Mktg., Inc., No. 21-CV-309, 2021 WL 4425765, at *2 (D. Md. Sept.

27, 2021), and “[r]elevance is not, on its own, a high bar,”

Jordan, 921 F.3d at 188. That said, Federal Rule of Civil

Procedure 45 imposes “[a] more demanding variant of [Federal Rule

of Civil Procedure 26’s] proportionality analysis,” id. at 189, in

order to ensure that parties do not draw nonparties “into the[ir ]

dispute without some good reason,” id. Notwithstanding the greater

scrutiny of discovery requests to nonparties, “the ultimate

question [under either Federal Rules of Civil Procedure 26 or 45]

is whether the benefits of discovery to the requesting party

outweigh the burdens on the recipient.” Id.

When faced with a motion to quash a subpoena directed to a

nonparty, “the court for the district where compliance is required

must quash or modify [the] subpoena [if it] . . . requires

disclosure of privileged or other protected matter, if no exception

or waiver applies[,] or [] subjects a person to undue burden.”

Fed. R. Civ. P. 45(d)(3)(A). An overbroad subpoena imposes an

undue burden. See In re Subpoena Duces Tecum to AOL, LLC, 550 F.

Supp. 2d 606, 612 (E.D. Va. 2008). In addition, although “[n]o

requirement of relevance is included in the text of [Federal] Rule

[of Civil Procedure] 45[], it is settled that a subpoena is limited

6

in scope by Rule 26(b)(1) of the Federal Rules of Civil Procedure.”

Coleman v. District of Columbia, 275 F.R.D. 33, 36 (D.D.C. 2011).

Accordingly, courts may quash subpoenas directed to third parties

when those subpoenas target materials that “bear little apparent

connection [to matters at issue].” In re Non-Party Subpoena to

Ctr. for Study of Soc. Pol’y, No. 21-MC-65, 2023 WL 2467738, at *3

(D.D.C. Mar. 7, 2023).

B. The Attorney-Client Privilege

“The attorney–client privilege is the oldest of the privileges

for confidential communications known to the common law.” Upjohn

Co. v. United States, 449 U.S. 383, 389 (1981). The privilege “is

founded upon the necessity . . . of the aid of persons having

knowledge of the law . . ., which assistance can only be safely and

readily availed of when free from the consequences or the

apprehension of disclosure.” Hunt v. Blackburn, 128 U.S. 464, 470

(1888); see also United States v. (Under Seal), 748 F.2d 871, 873

(4th Cir. 1984) (recounting that, “[a]s modern society became

increasingly complex, courts recognized that individuals would need

to rely on experts to transact business involving legal problems”).

“[W]hen the privilege applies, it affords confidential

communications between lawyer and client complete protection from

disclosure.” Hawkins v. Stables, 148 F.3d 379, 383 (4th Cir.

1998).

7

Importantly, the “party asserting privilege has the burden of

demonstrating its applicability.” National Lab. Rels. Bd. v.

Interbake Foods, LLC, 637 F.3d 492, 501 (4th Cir. 2011). In that

regard, the proponent must “specifically and factually support his

claim of privilege, . . . [because] an improperly asserted

privilege is the equivalent of no privilege at all.” Byrnes v.

Jetnet Corp., 111 F.R.D. 68, 71 (M.D.N.C. 1986). A party may meet

this burden by “establishing an evidentiary basis .. . for each

element of [the attorney-client privilege] for each... category

of document.” Victor Stanley, Inc. v. Creative Pipe, Inc., 250

F.R.D. 251, 267 (D. Md. 2008); see also Fed. R. Civ. P. 26(b) (5);

Fed. R. Civ. P. 45(e) (2) (A) (both requiring that the person

asserting privilege “describe the nature of the [privileged

material] in a manner that . . . will enable other parties to

assess the claim”).

On the substance:?

1 The Parties stand in agreement that “federal common law

applies to the privilege issues.” (Docket Entry 86 at 8 n.2; see

also Docket Entry 88 at 17 n.5 (“agree[ing] . . . that federal

common law applies to the privilege issues”).) But neither Party

cites any support for their proffered proposition that removing a

case “on the basis that BCBSNC ‘has been sued for actions taken as

a person acting as a federal officer of an agency of the United

States or under color of such office’” (Docket Entry 86 at 8 n.2

(citing Docket Entry 75 at 23)) sufficiently implicates a federal

question such that federal common law governs questions of

privilege. See Ohio v. Doe, No. 3:04-CV-155, 2005 WL 5610228, at

*3 #(S.D. Ohio Apr. 22, 2005) (applying Ohio statute regarding

waiver of attorney-client privilege after federal public defender

removed dispute to federal court pursuant to 28 U.S.C. § 1442,

while observing that, “by exercising removal jurisdiction over this

The privilege applies only if (1) the asserted holder of

the privilege is or sought to become a client; (2) the

person to whom the communication was made (a) is a member

of the bar of a court, or his subordinate and (b) in

connection with this communication is acting as a lawyer;

(3) the communication relates to a fact of which the

attorney was informed (a) by his client (b) without the

presence of strangers (c) for the purpose of securing

primarily either (i) an opinion on law or (ii) legal

services or (iii) assistance in some legal proceeding,

and not (d) for the purpose of committing a crime or

tort; and (4) the privilege has been (a) claimed and (b)

not waived by the client.

United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982) (citing

United States v. United Shoe Mach. Corp., 89 F. Supp. 357, 359 (D.

Mass. 1950)).

dispute, this [c]ourt has stepped into the shoes of [the state

court judge], and will apply the law of Ohio in the same manner as

that judicial officer would have applied it, had [the federal

public defender] not removed this matter”).

Even so, the Court concludes that federal common law applies,

for two alternative reasons. First, BCBSNC’s Counterclaims raise

questions related to ERISA (see Docket Entry 75 at 27-28), and when

a case “involv[es] both federal and state law claims, the federal

law of privilege applies.” Virmani v. Novant Health Inc., 259 F.3d

284, 287 n.3 (4th Cir. 2001). Second, this dispute involves

alleged waiver of the attorney-client privilege (by virtue of

testimony in a federal proceeding) and, under those circumstances,

federal standards govern waiver “even if state law [would]

provide[] the rule of decision.” Fed. R. Evid. 502(f). In any

event, “the elements of the North Carolina attorney-client

privilege are similar to the attorney-client privilege recognized

under federal common law,” Mason C. Day Excavating, Inc. v.

Lumbermens Mut. Cas. Co., 143 F.R.D. 601, 607 (M.D.N.C. 1992), so

the Court’s analysis would not meaningfully differ whether it

consulted federal or state law, see, e.g., State v. Murvin, 304

N.C. 523, 531 (listing same elements of attorney-client privilege

as federal common law); State v. Tate, 294 N.C. 189, 193

(discussing “well-settled” principle of North Carolina privilege

law that a party may waive the privilege by “offer[ing] testimony

concerning the substance of the communication”).

9

“Although the privilege has a venerable pedigree and helps to

ensure competent and complete legal services, it is nonetheless

inconsistent with the general duty to disclose and impedes the

investigation of the truth.” (Under Seal), 748 F.2d at 875; see

also United States v. Aramony, 88 F.3d 1369, 1389 (4th Cir. 1996)

(observing that claims of privilege “interfere[] with the

truthseeking mission of the legal process” (internal quotation mark

omitted); see also Trammel v. United States, 445 U.S. 40, 50 (1980)

(“Testimonial exclusionary rules and privileges contravene the

fundamental principle that the public has a right to every man’s

evidence.” (cleaned up).) As a consequence, “courts are careful to

construe recognized privileges narrowly.” In re Sealed Case, 676

F.2d 793, 806-07 (D.C. Cir. 1982); see also In re Grand Jury Proc.,

727 F.2d 1352, 1355 (4th Cir. 1984) (reporting view that attorney-

client privilege “is not favored by federal courts” (internal

quotation marks omitted)).

Strict construction of the attorney-client privilege has led

courts to conclude that “[a]lny disclosure inconsistent with

maintaining the confidential nature of the attorney-client

relationship waives the attorney-client privilege.” Jones, 696

F.2d at 1072. Moreover, “[a]lny voluntary disclosure by the client

to a third party waives the privilege not only as to the specific

communication disclosed, but often as to all other communications

relating to the same subject matter.” Id. (emphasis added); see

10

also Fed. R. Evid. 502(a) (providing that intentional disclosure of

privileged information in federal proceeding results in waiver of

privilege for other information that “concern[s] the same subject

matter” and “ought in fairness to be considered together”). A

voluntary disclosure of privileged material effects a broader

waiver of the privilege than an inadvertent disclosure because

parties should not enjoy the freedom to selectively disclose “part

of a privileged communication to gain an advantage in litigation.”

Id.; see also Sealed Case, 676 F.2d 809 n.54 (noting that courts

may “retain discretion not to impose full waiver as to all

communications on the same subject matter where the client has

merely disclosed a communication to a third party, as opposed to

making some use of it”).) Concluding otherwise would permit the

privilege to further interfere with the truth-seeking function of

the legal process because “a party [could] reveal[] one beneficial

communication but fail[] to reveal another, less helpful,

communication on the same matter.” U.S. ex rel. Mayman v. Martin

Marietta Corp., 886 F. Supp. 1243, 1252 (D. Md. 1995).

Although the United States Court of Appeals for the Fourth

Circuit has not directly answered “[w]hether assertion of the

advice-of-counsel defense constitutes a waiver of the

attorney-client privilege,” United States v. Dallmann, 433 F. Supp.

3d 804, 813 (E.D. Va. 2020), other circuits to consider the issue

have concluded that “the waiver certainly extends to the advice

11

given by the attorney and any communication made or evidence

submitted to the attorney upon which the attorney’s advice is

based,” id. at n.8 (collecting cases). Thus, courts across the

country apply a fairly uniform standard: effectively that, “[w]hen

a party raises an advice of counsel defense, [] all advice on the

pertinent topic becomes fair game.” U.S. ex rel. Drakeford v.

Tuomey, 792 F.3d 364, 391 (4th Cir. 2015) (Wynn, J., concurring).

“Of course, defining the ‘subject matter,’ and thus the scope

of the waiver, is a critically important aspect of the waiver

analysis.” E.I. Dupont de Nemours & Co. v. Kolon Indus., Inc., 269

F.R.D. 600, 605 (E.D. Va. 2010). Even in the case of a voluntary

disclosure for tactical purposes, courts must take heed not to

“open up the possibility of a fishing expedition of all

confidential communications.” Hawkins, 148 F.3d at 384 n.4.

Courts must therefore closely scrutinize the disclosed material so

as to balance the risk of a “fishing expedition,” id., with the

risk that a party could “use the attorney’s opinions as [both]

sword [and] shield to affect the factfinding process,” Vaughan

Furniture Co. Inc. v. Featureline Mfg., Inc., 156 F.R.D. 123, 128

(M.D.N.C. 1994).

Due to the critical importance of accurately defining the

“subject matter” when faced with an argument for waiver of

privilege, the Court highlights certain specific applications of

the doctrine with the goal of clarifying some common principles.

12

For example, Martin Marietta involved a government contractor that

faced a government investigation over its billing practices.

Martin Marietta, 886 F. Supp. at 1244. The contractor, in the

process of performing a contract to develop a prototype of a

missile defense system, billed the government for research and

development costs it incurred, ultimately exceeding the contract

value, which the government argued the contractor could not do.

See id. at 1244-45. During settlement negotiations, the contractor

informed the government that a legal memorandum drafted by in-house

counsel had concluded that the contractor’s billing practices (as

it related to research and development costs) complied with the

relevant Defense Acquisition Regulation (as recently interpreted in

a court opinion). See id. at 1247-48. As a result, the court

concluded that the scope of the subject matter waiver included all

in-house legal advice on the propriety of seeking reimbursement for

research and development over and above the value of existing

contracts, during the period the contractor employed that practice

to support development of the missile defense system prototype.

See id. at 1252. Thus, the scope of the waiver could theoretically

include other government contracts, because the advice of in-house

counsel consisted of interpreting one regulation in light of one

court decision. See id. at 1247-48. In so holding, the court

implicitly recognized that the contractor could apply the same

legal advice to different contracts.

13

In E.I. DuPont, a company CEO issued a press release alleging

that a competitor visited its facilities “expressly for the purpose

of obtaining confidential [company] technology.” E.I. Dupont, 269

F.R.D. at 603. As it turned out, the FBI orchestrated that visit

as a sting operation, and the company later learned as much during

discussions between its in-house counsel and the government, the

details of which the company’s in-house counsel subsequently

relayed to the CEO. Id. at 605. Given the company CEO’s

disclosure of that information (via press release), the court held

that the scope of the subject-matter waiver consisted of the

company’s communications with the government regarding the

competitor’s “one [visit] and [] the purpose for that [one visit].”

Id. at 607. The court, however, declined to “artificially expand

the scope of the subject matter to . . . all communications in [the

company]’s possession relating to the [g]overnment’s investigation

of [the competitor].” Id. E.I. DuPont thus distinguishes between

communications regarding (A) one general topic, and (B) individual

transactions that fall under that topic. See id. (emphasizing that

“the scope of the waiver is measured by the substance of the

protected information that has been publicly disclosed,” as well as

importance of not “ignor[ing] what [the company] actually

published”). In other words, E.I. DuPont recognizes that, when a

party voluntarily discloses privileged communications regarding a

14

particular transaction, subject matter waiver should not extend to

the entire (more general) topic.

Finally, in Blue Lake Forest Products, a timber company sought

damages when the United States Forest Service suspended the

company’s timber operations. See Blue Lake Forest Prod., Inc. v.

United States, 75 Fed. Cl. 779, 781 (2007). The Forest Service did

so because, in prior litigation involving a different plaintiff, a

court had concluded that the Forest Service had failed to

adequately conduct certain environmental impact studies prior to

awarding timber contracts. See id. In that prior litigation, the

Forest Service had disclosed an internal legal memorandum that

evaluated the Forest Service’s compliance with its statutory

obligations to conduct those environmental impact studies. See id.

at 787-90. As a consequence, the court in Blue Lake Forest

Products defined the scope of subject matter waiver as all

documents and communications concerning the Forest Service’s

interpretation and implementation of its obligations in conducting

environmental impact studies under the applicable federal law. See

id. at 794. Blue Lake Forest Products highlights not just the

possibility of cross-litigation subject matter waiver, but, like

Martin Marietta, also stands for the proposition that the waiver

can extend to a party’s transactions with separate entities, so

long as the underlying legal assessment governing the dealings with

those entities remains the same.

15

C. The Motion to Quash

Request One

In light of the foregoing principles, the Court turns first to

Request One in the subpoenas, which calls for “[a]ll

[c]ommunications [Walters] had with any LifeBrite Entity, Christian

Fletcher, or Amber Fletcher, [r]elated [t]o the use of a

[h]ospital’s [b]illing [i]dentifiers to bill for [l]aboratory

[s]ervices.” (Docket Entry 86-2 at 13.) As an initial matter, and

contrary to BCBSNC’s contention, LifeBrite has met its burden of

demonstrating that these communications implicate the attorney-

client privilege. (See Docket Entry 88 at 17-18.) In that regard,

the parties do not dispute that Fletcher and LifeBrite Labs

employed Walters as outside counsel, that Walters acted in that

capacity while rendering advice, or that LifeBrite has sought to

claim the privilege. (See generally id.) Rather, BCBSNC’s

argument appears to center on whether LifeBrite adequately

described the documents to which the privilege would apply. (See

id. at 18.)

Request One calls for communications concerning use of a CAH

billing identifier to bill for laboratory services. (See Docket

Entry 86-2 at 13.) And, as the criminal trial transcript amply

demonstrates, Walters frequently provided Fletcher and LifeBrite

Labs with counsel related to said topic. (See, e.g., Docket Entry

89-1 at 29-30 (testimony reflecting that Fletcher hired Walters “to

16

ensure that [they] were compliant” when contracting with CAHs), 32

(noting that Fletcher retained Walters “with the specific purpose

of giving advice about the reference laboratory agreement and the

legalities surrounding it”), 50 (testimony describing memorandum

Walters drafted addressing legality of proposed laboratory services

agreement with one CAH); Docket Entry 89-2 at 12 (documenting

Walters’s conclusion from memorandum), 75-76 (testimony regarding

Walters’s assistance in drafting laboratory services agreement with

second CAH), 126 (detailing Walters’s time entries for work related

to third CAH).) Accordingly, a sufficient evidentiary basis exists

to support LifeBrite’s invocation of privilege as to the

communications covered by Request One. See Victor Stanley, 250

F.R.D. at 267.

Even so, BCBSNC urges that any claim of “privilege was

waived—and documents on the subject became discoverable—when

Fletcher testified broadly about the legal advice provided by

Walters in connection with his advice-of-counsel defense in the

criminal case.” (Docket Entry 88 at 18-19.) Here, the Court must

first distinguish between the CAHs at issue in the criminal trial,

and LifeBrite Hospital; LifeBrite does not appear to dispute that

Fletcher waived the privilege as to the former category. (See

Docket Entry 90 at 7 (conceding that Fletcher testified regarding

“contracts with [CAHs at issue in criminal trial]”), 9 (detailing

17

testimony related to said hospitals), 10 (seeking to distinguish

LifeBrite Hospital from other CAHs).)

The Court agrees, and concludes that Fletcher did waive

attorney-client privilege as it relates to communications with

Walters concerning laboratory services agreements with the CAHs at

issue in the criminal trial. Fletcher’s testimony, which he could

have withheld, plainly constitutes a “voluntary disclosure by [him,

which] waives the privilege not only as to the specific

communication disclosed, but [also] as to all other communications

relating to the same subject matter.” Jones, 696 F.2d at 1072; see

also Fed. R. Evid. 502(a). In that regard, Fletcher testified at

length in describing the advice he received from Walters when

researching, negotiating, drafting, and ultimately executing

agreements with those CAHs. (E.g., Docket Entry 89-1 at 32, 46,

48, 50; Docket Entry 89-2 at 12, 75-76.)

Further, Fletcher appears to have injected this testimony into

the criminal trial in order “to gain an advantage in litigation,”

Jones, 696 F.2d at 1072, i.e., by raising an advice of counsel

defense (which likely contributed to his acquittal). Thus, absent

a finding of waiver, Fletcher “[could] reveal[] one beneficial

communication but fail[] to reveal another, less helpful,

communication on the same matter,” Martin Marietta, 886 F. Supp. at

1252, and thereby “use [Walter]’s opinions as [both] sword [and]

shield to affect the factfinding process,” Vaughan Furniture, 156

18

F.R.D. at 128. Accordingly, Fletcher waived any privilege with

regard to communications with at least three CAHs named in Request

One.2

The question remains whether Fletcher’s testimony at trial

involved the same “subject matter” as his communications with

Walters regarding a laboratory services agreement with LifeBrite

Hospital. As noted, “defining the ‘subject matter,’ . . . is a

critically important aspect of the waiver analysis.” E.I. Dupont,

269 F.R.D. at 605. Additionally, the Court must endeavor to avoid

“open[ing] up the possibility of a fishing expedition of all

confidential communications,” Hawkins, 148 F.3d at 384 n.4.

In deference to those concerns, the Court finds that the bulk

of Fletcher’s trial testimony, which addressed laboratory service

agreements with other CAHs, does not result in a subject matter

waiver as to Walters’s communications with LifeBrite regarding the

laboratory services agreement with LifeBrite Hospital, for two

2 The subpoenas define “Hospital” to include five CAHs,

including LifeBrite Hospital, the three CAHs Fletcher discussed in

detail during the criminal trial, and “Chestatee Regional Hospital

in Chestatee, Georgia.” (Docket Entry 86-2 at 11.) However,

Chestatee rarely appears in the trial transcript, and only does so

in the context of Fletcher stating that he has “never been involved

with Chestatee at all.” (Docket Entry 89-3 at 22; see also id. at

23 (testimony that he “never had anything to do with Chestatee”).

The record does not reflect that LifeBrite Labs ever entered into

a laboratory services agreement with a CAH in Chestatee. (See

generally Docket Entry 89-1; Docket Entry 89-2; Docket Entry 89-3.)

Therefore, the Court would not consider Fletcher to have waived any

privilege over communications with Walters regarding a CAH in

Chestatee, to the extent those communications even exist.

19

reasons. First, as the trial transcript establishes, Walters’s

legal analysis in evaluating potential agreements entailed

consideration of federal law, but also relevant state law. (See

Docket Entry 89-2 at (memorandum discussing “[federal] [A]nti-

[K]ickback [S]tatute” as well as Medicare’s “Shell Laboratory

Rule”).) For example, the memorandum Walters drafted when

LifeBrite Labs sought to enter an agreement with a CAH in Florida

specifically included review of “the Florida Brokering Act.” (Id.

at 11.) Additionally, Walters’s time entries reflect further

conferral with Fletcher regarding “Florida fraud and abuse concerns

with hospital/lab arrangement and physician marketing.” (Id. at

121; see also id. at 122 (entries noting “[r]eview [of] Florida

statutes and regulations,” “Florida law,” “Florida fraud and abuse

issues,” and “Florida compliance issues”), 220 (cross-examination

addressing section in memorandum on “Florida Anti-brokering Patient

Act”), 233 (same), 235 (same), 237 (same); Docket Entry 89-3 at 46

(inclusion in contract with Florida CAH of language indicating that

“[t]he parties believe that th[eir] agreement complies with . . .

all relevant fraud and abuse laws and regulations for the state of

Florida”), 51 (inclusion in contract with Missouri CAH of similar

language that refers to Missouri law).)

Separately, but as importantly, Walters also reviewed each

CAH’s contracts with health insurance providers “before he rendered

his opinion on whether there was any prohibitive language in

20

th[os]e contract[s] that would deem it inappropriate for the

reference lab agreement that he was drafting.” (Docket Entry 89-1

at 48.) That included, for the first CAH in Florida, at least

thirteen separate contracts with providers. (See id.; see also

Docket Entry 89-2 at 12-13 (reflecting that Walters “reviewed the

insurance contracts” for first CAH).) The record shows that

Walters repeated this exercise for each subsequent laboratory

services agreement. (See id. at 212 (discussing Walters’s review

of payer contract for CAH in Missouri).)

Florida law would have no bearing on Walters’s analysis of a

laboratory services agreement between LifeBrite Hospital (a CAH in

North Carolina) and LifeBrite Labs (a Georgia entity). Moreover,

Walters likely would have (as his past practice suggests)

undertaken a separate review of LifeBrite Hospital’s contracts with

insurance providers prior to rendering a final opinion on the

permissibility of an agreement with LifeBrite Hospital. Therefore,

unlike the scope of the counsel’s review in Martin Marietta, see

886 F. Supp. at 1247-48, Walters’s legal advice here required

examining the laws of different jurisdictions, as well as distinct

sets of contracts with payers. Thus, unlike in Blue Lake Forest

Products, LifeBrite Labs could not readily transpose Walters’s work

regarding an agreement with one CAH to another. Put another way,

and as the E.I. Dupont Court similarly recognized, the general

topic of Walters’s representation consisted of advising on

21

laboratory services agreements with CAHs; but that general topic

included discrete transactions with distinct legal issues, and the

Court must not “ignore what [Fletcher] actually published [at the

criminal trial].” E.I. Dupont, 269 F.R.D. at 607. Therefore,

Fletcher’s testimony disclosing Walters’s advice related to

agreements with CAHs in Florida and Missouri does not waive

privilege as to LifeBrite’s communications with Walters for a

similar agreement with LifeBrite Hospital.

However, BCBSNC’s Response highlights three additional

passages that it contends effect a broad subject-matter waiver, and

the Court ultimately concludes that one of those passages does

waive any privilege for LifeBrite’s communications with Walters

regarding the laboratory services agreement with LifeBrite

Hospital. First, the Response cites a portion of Fletcher’s

testimony for the proposition that Fletcher and Walters discussed

“[w]hether there were any legal concerns about LifeBrite Labs

contracting with a rural hospital to perform tests that the

hospital would bill commercial insurers for.” (Docket Entry 88 at

12.) But in that portion of testimony, Fletcher only confirms

that, “anytime [he was] going to deal with a critical access

hospital, [he] made sure [] Walters was aware of what [he was]

doing to get legal advice from [Walters].” (Docket Entry 89-2 at

33 (emphasis added).) This general testimony as to unspecified

dealings, and Walters’s awareness (but not approval of any

22

particular transaction), falls short of establishing a subject

matter waiver for communications related to a specific agreement

with LifeBrite Hospital. See United States v. White, 887 F.2d 267,

271 (D.C. Cir. 1989) (holding that “general assertion lacking

substantive content that one’s attorney has examined a certain

matter is not sufficient to waive the attorney-client privilege”).

Next, the Response contends that Fletcher used one legal

memorandum from Walters for “every [] arrangement LifeBrite Labs

considered” (Docket Entry 88 at 12), because “it applied with equal

force to [all CAHs]” (id.). However, the passage BCBSNC cites as

support, placed in context, pertains only to LifeBrite Labs’

agreement with the first CAH in Florida. (See Docket Entry 89-3 at

42-43.) In that passage, Fletcher testified about the memorandum

Walters prepared prior to LifeBrite Labs entering an agreement with

that CAH. (See id.) Then, Fletcher’s attorney asked:

Q. And . . . this is the only memorandum we have before

[] Walters drafts all of the contract, right?

A. Yes, sir.

(Id. at 43 (emphasis added).) The question specifically probed the

contract with the first CAH in Florida, and sought to ascertain

whether Fletcher consulted any other source before Walters drafted

all of that (one, particular) contract, not all contracts with all

CAHs, as the Response suggests.3 The Court thus concludes that any

3 Elsewhere, Fletcher maintains that Walters’s memorandum

“[was] relevant for all three contracts [with the CAHs at issue in

23

subject matter waiver as a result of Fletcher’s answer would not

extend to LifeBrite Hospital.

Nonetheless, the Court does find that one passage from

Fletcher’s testimony waives privilege regarding the laboratory

services agreement with LifeBrite Hospital. As the Response

explains, Fletcher did “disclose[] that he relied on advice Walters

provided about how LifeBrite Labs could contract with any rural

hospital that would bill insurers for tests performed by the lab.”

(Docket Entry 88 at 20-21 (emphasis in original).) In the relevant

passage, Fletcher’s criminal trial counsel asked him, with regard

to a draft agreement with the CAH in Missuori, whether “[LifeBrite

Labs’ in-house counsel] or [] Walters [had] told [Fletcher that] it

would have been improper to enter into this type of agreement”

(Docket Entry 89-2 at 93), to which Fletcher replied, “ [n]o[, and

that t]hey told [him] that it was proper as addressed in the

contract that was written” (id.). The line of questioning

continued:

the criminal trial].” (Id. at 237.) True enough, because (as the

Court has recounted) the memorandum discussed federal law, which

would not vary from CAH to CAH, while also highlighting the

importance of reviewing pertinent state law, as well as each CAH’s

contracts with payers. In that regard, the memorandum holds

relevance across the board, at least in the sense that it

established a framework for evaluating the propriety of laboratory

services agreements with CAHs. But, as the entire transcript

indicates, Walters had to review separate state laws, and separate

contracts, for each CAH. Accordingly, Fletcher’s suggestion that

the one memorandum had relevance for all contracts does not lead to

the conclusion that all contracts entailed the same “subject

matter,” for purposes of privilege waiver.

24

Q. If they had told you it was illegal, would you have

done it?

A. No. We -- there was several proposals that they gave

that said we should not do them, and we did not do them.

Q. So every time you were -- you brought something to Mr.

Bonner or Mr. Walters, if they told you, you couldn't do

it, you didn't do it?

A. Correct. Every time.

(Id. at 94 (emphasis added).) Fletcher’s testimony here represents

the classic embodiment of an advice of counsel defense: Fletcher

stated, in effect, that whenever Walters voiced disapproval towards

a proposal, Fletcher would discontinue the transaction, thereby

prompting the jury to draw the inescapable inference that Walters

approved of each agreement Fletcher and LifeBrite Labs completed.

(See id.; see also Dallmann, 433 F. Supp. 3d at 813 (discussing

scope of waiver when party raises advice of counsel defense and

concluding that “[m]erely disclosing the advice received from the

attorney would be a selective disclosure” and that “the waiver

certainly extends to the advice given by the attorney and any

communication made or evidence submitted to the attorney upon which

the attorney’s advice is based”). This particular testimony,

unlike the prior two passages, does not address Walters’s mere

“aware[ness].” (See id. at 33.) Nor did Fletcher confine the

scope of this testimony to an individual contract, or a particular

CAH. (See Docket Entry 89-3 at 42-43.) Rather, Fletcher spoke to

25

“every time [ he] brought something to [] Walters.” (Docket Entry

89-2 at 94.)

To reiterate, this testimony constitutes a “voluntary

disclosure by [Fletcher].” Jones, 696 F.2d at 1072. Voluntary

disclosures of privileged information “waive[] the privilege not

only as to the specific communication disclosed, but [also] as to

all other communications relating to the same subject matter.”

Id.; see also Fed. R. Evid. 502(a). Fletcher used this testimony

in order “to gain an advantage in litigation,” id., insofar as he

“reveal[ed] one beneficial communication but [potentially] fail[ed]

to reveal another, less helpful, communication on the same matter,”

Martin Marietta, 886 F. Supp. at 1252. The Court cannot

countenance the “use [of Walters]’s opinions as [both] sword [and]

shield to affect the factfinding process.” Vaughan Furniture, 156

F.R.D. at 128.

As a result, the Court finds Fletcher waived the attorney-

client privilege, and the subject matter of that waiver consists of

all communications between LifeBrite and Walters related to

Walters’s approval of a laboratory services agreement between

LifeBrite Labs and LifeBrite Hospital. For the sake of clarity,

this waiver extends not just to communications, but also to any

26

“evidence submitted to [Walters] upon which [his] advice [wal]s

based.” Dallmann, 433 F. Supp. 3d at 813.’

The foregoing analysis of Request One leaves LifeBrite’s

argument that the topic partly calls for irrelevant material

because any communications regarding the CAHs at issue in the

criminal trial “have absolutely no bearing on the claims or

defenses in the instant litigation.” (Docket Entry 86 at 11.) For

one, such “conclusory assertions,” Johns Hopkins Univ. v. Datascope

Corp., No. 05-CV-759, 2007 WL 1450367, at *2 (D. Md. May 16, 2007),

fail to meet LifeBrite’s burden as the moving party. Putting that

aside, considering that “[d]iscovery rules are to be accorded broad

and liberal construction,” Boshea, 2021 WL 4425765, at *2, and that

“[r]lelevance is not, on its own, a high bar,” Jordan, 921 F.3d at

188, the Court finds that those communications (at a minimum) bear

relevance to LifeBrite’s state of mind in dealing with BCBSNC.

To recap, BCBSNC has alleged that LifeBrite made fraudulent

misrepresentations by falsely certifying that LifeBrite Hospital

4 The Court could read Fletcher’s statement more broadly, and

plausibly find a waiver as to the entire attorney-client

relationship. (See Docket Entry 89-2 at 94 (not limiting testimony

to any particular type of proposal).) However, the Court elects to

read Fletcher’s facially unqualified statement in context, and

interpret it as a reference to proposals related to laboratory

services agreements with CAHs. (See id. at 93 (discussing

agreement with CAH in Missouri prior to relevant line of

questioning) .) In so doing, the Court aims to scrutinize “what

[Fletcher] actually published,” E.I. Dupont, 269 F.R.D. at 607,

and avoid “artificially expand[ing] the scope of the subject

matter,” id.

27

conducted certain tests that Lifebrite Labs actually conducted, a

practice that LifeBrite Hospital’s contract with BCBSNC allegedly

prohibited. (See Docket Entry 75 at 12-13, 17, 51.) A claim for

fraudulent misrepresentation requires an “intent to deceive.”

Taylor v. Gore, 161 N.C. App. 300, 303 (2003). Fletcher’s

testimony at the criminal trial indicates that he understood the

importance of evaluating a CAH’s contracts with insurance providers

prior to entering a laboratory services agreement. (See Docket

Entry 89-1 at 48 (reflecting that Walters insisted on reviewing

payer contracts before opining on permissibility of laboratory

services agreement).) Therefore, the communications with Walters

concerning agreements with those CAHs shed light on LifeBrite’s

knowledge (and intent) when executing the laboratory services

agreement at issue in this case and submitting reimbursement claims

to BCBSNC. Accordingly, LifeBrite’s argument of irrelevance lacks

merit.

In sum, the Court denies the Motion to Quash as to Request

One, but does so without prejudice to Walters maintaining any

objections he timely lodged.

Requests Two and Three

Request Two seeks production of Walters’s communications “with

anyone other than [LifeBrite r]elated [t]o the use of a

[h]ospital’s [b]illing [i]dentifiers to bill for [l]aboratory

[s]ervices.” (Docket Entry 86-2 at 13.) Request Three further

28

seeks, as a catch-all request, “all communications [Walters] ha[s]

had [r]egarding [the CAHs]” (id. at 13-14), {t]o the extent [the

communications were not] responsive to Request [One]” (id. at 13).

LifeBrite does not meaningfully address either of these requests in

the Motion to Quash or Reply, describing them in the introduction

of the Motion to Quash as “seek[ing] entirely irrelevant

information” (Docket Entry 86 at 6), but otherwise failing to

develop any argument to support quashing the particular requests

(see generally id. at 6-12 (failing to discuss Requests Two or

Three); Docket Entry 90 at 1-15 (same)).

On its face, Request Two does not raise any issues with

privilege, as it targets Walters’s communications with third

parties. (See Docket Entry 86-2 at 13.) In addition, in

connection with the discussion as to Request One, the Court has

already concluded that communications on the topic of laboratory

services agreements with CAHs hold relevance to LifeBrite’s intent

in dealing with BCBSNC. Finally, although the language of Request

Three could potentially include privileged communications (in view

of the constraints the Court adopted in defining the waiver), and

could raise concerns of overbreadth, the Court declines to quash or

modify either Request Two or Request Three, given that LifeBrite

failed to develop any argument on those fronts. See Hughes v. B/E

Aerospace, Inc., No. 1:12CV717, 2014 WL 906220, at *1 n.1 (M.D.N.C.

Mar. 7, 2014) (emphasizing that “[a] party should not expect a

29

court to do the work that it elected not to do”). Accordingly, the

Court denies the Motion to Quash as to Requests Two and Three, but

does so without prejudice to Walters maintaining any objections he

timely lodged.

Requests Four, Five, and Six

Requests Four, Five, and Six all demand production of

documents. (See Docket Entry 86-2 at 14 (seeking documents

“reflecting the relationship between [the] LifeBrite [entities]”),

id. (requesting production of documents “[r]elated [t]o [l]abratory

[s]ervices performed by Lifebrite Labs and billed using a [CAH

identifier]”), id. (soliciting documents on topics of “any

[i]vestigation by BCBSNC, other [p]ayors, or any governmental

organization [r]elated [t]o the billing of [l]abratory [s]ervices

by a [CAH]”).) Like with Requests Two and Three, LifeBrite does

not develop an argument in support of modifying or quashing

Requests Four, Five, and Six; the Motion to Quash only contends in

a conclusory fashion that “these categories of documents [are]

overbroad and entirely irrelevant [and also] clearly encompass

documents protected by the work product privilege.” (Docket Entry

86 at 10-11.) Given the lack of argument on point, see Hughes,

2014 WL 906220, at *1 n.1, the different purposes underlying work-

product protection and the attorney-client privilege, see United

States v. Nobles, 422 U.S. 225, 238 (1975), and the distinct

standards for ascertaining a waiver as to each, see E.I. Dupont,

30

269 F.R.D. at 606, the Court declines to grant relief to LifeBrite

on this aspect of its Motion to Quash. See generally United States

v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (cautioning that “a

litigant has an obligation to spell out its arguments squarely and

distinctly, or else forever hold its peace” (internal quotation

marks omitted)). Accordingly, the Court will also deny the Motion

to Quash as it relates to Requests, Four, Five, and Six, without

prejudice to Walters’s right to maintain any objections he timely

lodged.

III. Conclusion

Fletcher’s testimony at his criminal trial waived the

attorney-client privilege as to all communications between

LifeBrite and Walters regarding evaluation and establishment of a

laboratory services agreement between LifeBrite Labs and LifeBrite

Hospital, as well as the three CAHs at issue in the criminal trial.

Further, LifeBrite has failed to substantiate any other basis for

the Court to quash or to modify any of the subpoena requests.

IT IS THEREFORE ORDERED that the Motion to Quash (Docket Entry

86) is DENIED without prejudice to Adam Walters maintaining any

objections he timely lodged to the subpoenas at issue.

This 9th day of August, 2023.

/s/ L. Patrick Auld

L. Patrick Auld

United States Magistrate Judge

31