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Ropes & Gray Client IASIS Healthcare Achieves Victory in Qui Tam Lawsuit
Court Orders Sanctions against Opposing Counsel for Ethical Misconduct

Practices: Government Enforcement / White Collar Criminal Defense, Anti-Corruption / International Risk, Consumer Protection, Criminal Antitrust, False Claims Act, Administrative Litigation, Securities & Futures Enforcement, Data Practice

Ropes & Gray client IASIS Healthcare® LLC has won an important court decision that confirms the company’s steadfast contention that an unsuccessful “whistleblower” lawsuit against the company was improperly based upon stolen documents and privileged information.

Chief U.S. District Judge Robert Clive Jones, in a Jan. 10, 2012 opinion, ruled that the attorneys who represented a former IASIS executive had engaged in “ethical misconduct” and ordered them to pay to IASIS Healthcare certain fees and costs incurred by the company in defending the qui tam lawsuit.

The court-ordered sanctions were a further repudiation of the lawsuit, which already had been dismissed twice in separate court proceedings. The former executive, Jerre H. Frazier, agreed in November 2011 to bring an end to his role in the lawsuit and to voluntarily withdraw his appeal of Judge Jones’s prior dismissal of his claims. The settlement, which came at no cost to IASIS, was approved by the Court. Left unresolved at that time was IASIS’ claim that Frazier’s attorneys had engaged in ethical misconduct in violation of IASIS’ attorney-client privilege.

Chief Judge Jones of the District of Nevada – sitting by designation in Phoenix – found that Frazier had stolen privileged documents from IASIS and, with the help of his counsel, used them against the company in his unsuccessful lawsuit. Many of the documents at issue were prepared by employees of IASIS, at the direction of legal counsel, in their efforts to ensure compliance with complex healthcare laws and regulations.

The court’s decision is especially noteworthy because Judge Jones imposed sanctions, including disqualification, on the Washington, D.C. law firm Phillips & Cohen LLP, one of the leading “whistleblower” firms in the country.

“Ethical misconduct has no place in the federal courthouse,” said Joan McPhee, a government enforcement partner at Ropes & Gray. “The Court’s determination in this case reflects not only the seriousness of the misconduct, but also the perseverance of IASIS Healthcare in bringing it to light.” From the time attorneys at Ropes & Gray first identified the misconduct in question, it took more than four years of contentious litigation to achieve the sought-after sanctions.

“IASIS and its legal team should be applauded for their unwavering commitment to the long, arduous process required to ferret out the truth and to hold opposing counsel to account for their mishandling of IASIS’s privileged communications,” said Ropes & Gray government enforcement partner Michael McGovern.

In support of the Court’s finding that sanctions against Frazier’s counsel were warranted, Chief Judge Jones specifically noted that, after IASIS requested return of its privileged documents, Frazier’s counsel appeared to “play dumb” as to what privileged documents IASIS was talking about and “feigned ignorance” of their possession of any privileged documents belonging to IASIS.

“I cannot express in strong enough words my admiration for and debt of gratitude to Joan McPhee, Michael McGovern, Stephen Warnke and the other equally talented attorneys at Ropes & Gray who helped guide my company so expertly through this test of fortitude," said Frank Coyle, General Counsel of IASIS Healthcare. “The integrity, smarts and commitment to excellence of my Ropes & Gray team has been truly exceptional, and the vindication we achieved is a testament to their careful professionalism. I always had confidence this day would come, but I’m grateful beyond expression that I am able to share this moment now with such great colleagues.”

This final resolution of the sanctions motion officially brings an end to the Frazier qui tam litigation that has been pending against IASIS since March 2005.

In January 2012, Ropes & Gray was named one of the top white-collar criminal defense firms and top securities litigation firms in the United States by Law360.

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