A former hospital in-house counsel is prevented by his professional duties of confidentiality and loyalty from disclosing sufficient information to bring a qui tam action under the California False Claims Act against the hospital that employed him, according to a May 8 unpublished opinion of the California Court of Appeal, Fifth Appellate District.

Arent Fox attorneys represented the hospital at the trial level and developed the arguments that prevailed on appeal. The qui tam relator, Robert Bury, had served as the hospital's general counsel from 1986 through 1998.

In 1999, he filed a complaint alleging that the hospital violated the California False Claims Act, which is modeled after the federal False Claims Act and includes a qui tam provision permitting private individuals to sue on behalf of the state of California.

The hospital moved to dismiss the complaint on the grounds that Bury could not serve as a qui tam relator because

(1) the attorney's duty of confidentiality prevented him from disclosing information he learned about the hospital while serving as its general counsel and

(2) the attorney's duty of loyalty prevented him from assuming a position adverse to his former client. Both the trial court and the Court of Appeal agreed with the hospital and determined that Bury's duty of confidentiality and loyalty precluded him from disclosing sufficient information to prosecute his qui tam complaint.

Both courts rejected Bury's argument that he was permitted to disclose information based on the judicially created business-negotiator exception to the attorney-client privilege. As the Court of Appeal noted, because Bury's duty of confidentiality and loyalty to his former client precluded the action, it was not necessary to determine whether the information in his possession was subject to the attorney-client privilege.

As such, the Court recognized the critical distinction between the attorney-client privilege and the duty of confidentiality. The hospital was represented at the trial level by Arent Fox attorneys Ronald H. Clark and Lisa A. Estrada of the Firm's Health Care Practice Group and D. Jacques Smith of the Litigation Practice Group.

The hospital was represented at the appellate level by attorneys in the California office of Littler Mendelson.