Government Sanctioned For Destruction Of Documents

U.S. district court decision may now allow defendants in False Claims Act cases to obtain sanctions where potentially relevant documents are lost or destroyed due to the government's failure to issue a timely litigation hold.

In United States ex rel. Baker v. Community Health Systems, Inc., the U.S. District Court for the District of New Mexico upheld Magistrate Judge Alan Torgerson's recommendation of sanctions against the federal government for failing to issue a timely and adequate litigation hold.1 The court held that sanctions were appropriate because the government's actions resulted in the destruction of electronically stored information (ESI) that could have been helpful to Community Health Systems' defense.

Untimely Litigation Hold

On April 29, 2005, relator Robert Baker filed a qui tam lawsuit under the False Claims Act (FCA) alleging that the defendant hospitals had engaged in Medicaid fraud. The government investigated for several years before deciding to intervene, filing its notice of intervention on February 20, 2009. Although the government issued a notice to the defendants to preserve documents in 2005, the government did not issue its own litigation hold to safeguard its internal documents until the day it intervened, by which time certain relevant ESI had been deleted or destroyed.

Magistrate Judge Torgerson applied the general spoliation rule that the duty to preserve documents arises once a party "'reasonably anticipates litigation.'"2Under this standard, he rejected the government's argument that it could not have reasonably anticipated litigation until it received permission from the Department of Justice to intervene in the case. Instead, Magistrate Judge Torgerson found that the "Government's intervention was reasonably foreseeable after receipt of defense counsel's letter rejecting the Government's offer of settlement on September 5, 2008."3 Giving the government the "benefit of the doubt," Magistrate Judge Torgerson came to the conclusion that litigation could be considered "imminent" on September 5, 2008, by applying the standard set forth by the U.S. Court of Appeals for the Tenth Circuit in Burlington Northern and Santa Fe Railway v. Grant.4The court agreed with Magistrate Judge Torgerson's findings regarding the timing and adequacy of the government's litigation hold.5

As a result of the untimely and inadequate litigation hold, the ESI of two key employees at the Centers for Medicare and Medicaid Services...