Ethics Rules Put the Brakes on Attorney Whistleblowers

Two recent decisions—one by the U.S. Court of Appeals for the Second Circuit and one by the New York County Lawyers’ Association (NYCLA) Committee on Professional Ethics—addressing the interplay between attorney ethical obligations and statutory regimes that provide bounty awards for whistleblowers reached the same conclusion: Professional ethical obligations preclude attorneys from being bounty-seeking whistleblowers against current or former clients. Although the two decisions addressed the New York ethical rules and specific whistleblower bounties available under the False Claims Act (FCA) and Securities and Exchange Commission whistleblower program created by the Dodd-Frank Act, respectively, they likely have broader application.

Dismissal of Qui Tam Suit

In 2005, Mark Bibi, a former general counsel (GC) of Unilab, and two other former executives formed Fair Laboratory Practices Associates (FLPA) for the purpose of acting as the relator in FCA qui tam actions against Unilab and its parent company, Quest Diagnostics. In June 2005, FLPA filed suit alleging FCA violations resulting from a “pull-through scheme” involving unreasonable discounts on medical testing services for patients with private insurance to induce use of its services on government health care patients. Defendants moved to dismiss, arguing that the former GC violated the New York ethical rules by disclosing confidential information about Unilab, his former client. The district court granted the defendants’ motion.