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Communications with special master not subject to discovery

Purchase of hospital in Woonsocket at issue

A U.S. magistrate judge has ruled that a health care provider that brought suit over a failed attempt to buy Landmark Medical Center in Woonsocket need not disclose the communications it had with a special master concerning asset purchase agreements.

In response to a discovery request from defendant Blue Cross and Blue Shield of Rhode Island, the plaintiff provider argued that the communications were protected from disclosure under the “common interest” doctrine.

Judge Lincoln D. Almond agreed, writing that while it was true that the plaintiff was acting in corporate self-interest and the special master was acting in the interest of the creditors and the public, “they did share a common legal interest in the operation of Landmark and consummation of the acquisition during the periods when the [asset purchase agreements] were in place.”

The four-page decision is Steward Health Care System, LLC, et al. v. Blue Cross and Blue Shield of Rhode Island, Lawyers Weekly No. 54-019-16. The full text of the ruling can be found here.

The plaintiff was represented by Robert C. Corrente and Joseph M. Cooper, both of Providence. The defense team was comprised of Providence attorneys Patricia K. Rocha, John A. Tarantino and Joseph Avanzato.

No deal

The case arose out of plaintiff Steward Health Care System’s failed attempt to acquire Landmark. The plaintiff and its predecessor, Caritas Christi, pursued the medical center for more than three years, planning to integrate it into a system with a significant presence in southeastern Massachusetts

But the plaintiff eventually backed out of an agreed sale, announcing that unnamed “private health care entities” and the special master who had run the bankrupt hospital had failed to meet conditions specified in the proposed deal.

The plaintiff alleged that its proposal to acquire the medical center triggered a series of anti-competitive steps by Blue Cross and Blue Shield of Rhode Island aimed at blocking the plaintiff’s entry into the Rhode Island market.

The plaintiff claimed that the defendant’s anti-competitive actions prevented it “from acquiring Landmark, from fulfilling its plans to form an efficient network of community hospitals in Rhode Island and from participating in the market for the sale of commercial health insurance in Rhode Island by partnering with insurance companies to offer lower-cost limited provider network products.”

During discovery, the plaintiff withheld or redacted some documents on the basis of the common interest doctrine.

Commonality of interest

The defendant responded with a motion to compel production of those documents.

The defendant argued that the plaintiff did not share a common interest with the special master simply because they were parties to the Landmark acquisition. According to the defendant, the plaintiff actually had inherently divergent goals regarding the transaction.

The common interest doctrine is not an independent basis for claiming privilege, Almond noted. It is an exception to the general rule that the attorney-client privilege is waived when privileged information is disclosed to a third party.

“The common-interest doctrine prevents clients from waiving the attorney-client privilege when attorney-client communications are shared with a third person who has a common legal interest with respect to these communications, for instance, a codefendant,” Almond wrote. “The purpose is to permit ‘allied lawyers and clients — who are working together in prosecuting or defending a lawsuit or in certain other legal transactions — [to] exchange information among themselves without loss of the privilege.’”

The defendant contended that “parties to an acquisition do not share the requisite common legal interest to avoid waiver of shared privileged communications.”

The defendant also argued that since the plaintiff and the special master had inherently divergent goals, they could not have shared a common legal interest.

“Neither side cites any case law dealing with this issue in an analogous factual situation,” Almond said, noting that the plaintiff relied on case law generally holding that the common interest doctrine is not limited to the litigation context and can also apply in transactional contexts.

“Here, Steward has shown the presence of a shared common legal interest during the periods that the [asset purchase agreements] were in effect,” he said.

Almond pointed out that the special master and the plaintiff entered into an “Agreement for Advisory Services,” under which the plaintiff was engaged to provide the services of an experienced team of health care executives “along with such management and services described herein until the consummation of the transactions contemplated” in the asset purchase agreements.

The plaintiff also agreed to provide a consultant, as well as an additional number of employees as necessary to provide management and other services. In addition, the special master authorized the plaintiff, “on the Owners’ behalf, to exercise reasonable business judgment in the discharge of its duties hereunder, including oversight, supervision, and effective management of the day-to-day business operations of the Facilities through the Consultant.”

That agreement “reflects an interrelationship and commonality of interest well beyond just being parties to a pending acquisition,” Almond concluded.

Though the agreement contained a disclaimer of any fiduciary or confidential relationship between Steward and the special master, it was in a boilerplate section entitled “Independent Contractors” that was intended “to narrow the potential for liability arising out of the cooperative business relationship created by the Advisory Services Agreement,” the magistrate judge found.

“It does not deal with the issue of sharing privileged communications and cannot reasonably be construed as a clear and unequivocal waiver of the attorney-client privilege by Steward,” he wrote.

 

CASE: Steward Health Care System, LLC, et al. v. Blue Cross and Blue Shield of Rhode Island,Lawyers Weekly No. 54-019-16

COURT: U.S. District Court

ISSUE: Could a health care provider withhold requested documents concerning communications with a special master over an attempted purchase of a hospital?

DECISION: Yes, under the “common interest” doctrine

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