11-1565-cv

Fair Laboratory Practices Assocs. v. Quest Diagnostics, Inc.

In the

United States Courts of Appeals

For the Second Circuit

________

AUGUST TERM 2012

No. 11-1565-cv

UNITED STATES OF AMERICA,

Plaintiff,

FAIR LABORATORY PRACTICES ASSOCIATES,

Plaintiff-Appellant,

v.

QUEST DIAGNOSTICS INCORPORATED, UNILAB CORPORATION,

D/B/A QUEST DIAGNOSTICS, AND XYZ CORPORATIONS 1-100,

Defendant-Appellant,

________

Appeal from the United States District Court

for the Southern District of New York.

No. 11-1565-cv―Robert P. Patterson, Judge.

________

ARGUED: AUGUST 23, 2012

DECIDED: OCTOBER 25, 2013

________
2 No. 11-1565-cv

Before: CABRANES, STRAUB, and HALL, Circuit Judges.

________

This appeal reflects the tension between an attorney’s ethical 

duty of confidentiality and the federal interest in encouraging 

“whistleblowers” to disclose unlawful conduct harmful to the 

government. We consider two questions: (1) whether the United 

States District Court for the Southern District of New York (Robert 

P. Patterson, Judge) correctly held that a former general counsel to 

defendant violated his ethical obligations under the New York Rules 

of Professional Conduct (“N.Y. Rules”) by participating in this qui 

tam action; and, if so, (2) whether the District Court erred in

dismissing the complaint and disqualifying plaintiff, all of its 

general partners including the former general counsel, and its 

outside counsel from bringing any subsequent qui tam action based

on similar facts.

First, we agree that the attorney in question, through his 

conduct in this qui tam action, violated N.Y. Rule 1.9(c) which, in 

relevant part, prohibits lawyers from “us[ing] confidential 

information of [a] former client protected by Rule 1.6 to the 

disadvantage of the former client,” N.Y. Rule 1.9(c), except “to the 

extent that the lawyer reasonably believes necessary . . . to prevent 

the client from committing a crime,” id. 1.6(b)(2).

Second, we hold that the District Court did not err by

dismissing the complaint as to all defendants, and disqualifying 

plaintiff, its general partners, and its outside counsel on the basis

that such measures were necessary to avoid prejudicing defendants 

in any subsequent litigation on these facts. 

Affirmed.
3 No. 11-1565-cv

________

ANDREW H. SCHAPIRO, Quinn Emanuel Urquhart 

& Sullivan, LLP, New York, NY, (Charles P. 

Greenman, Karen F. Lederer, Elliot Cohen, 

George A. Somerville, Christina H. Bost Seaton, 

Troutman Sanders LLP, New York, NY; Philip R. 

Michael, Michael Law Group, P.C., New York, 

NY, on the brief), for Plaintiff-Appellant.

PETER D. KEISLER, Sidley Austin LLP, 

Washington, DC (Richard D. Raskin, Scott D. 

Stein, Allison W. Reimann, Sidley Austin LLP, 

Chicago, IL; Kevin McGinty, Mintz Levin Cohn 

Ferris Glovsky and Popeo, P.C., Boston, MA, on 

the brief), for Defendants-Appellees.

________

JOSÉ A. CABRANES, Circuit Judge:

Plaintiff appeals from the July 12, 2011 judgment of the United 

States District Court for the Southern District of New York (Robert 

P. Patterson, Judge) dismissing this qui tam action and disqualifying 

plaintiff, its individual members―including a former general 

counsel to defendant―and its outside counsel from bringing a 

subsequent qui tam action on the basis that the suit was brought in 

violation of the general counsel’s ethical obligations under the New 

York Rules of Professional Conduct (the “N.Y. Rules”).1 The issues 

 

1 The current version of the New York Rules of Professional Conduct took 

effect on April 1, 2009, and is reprinted with amendments in N.Y. Jud. Law App. 

(McKinney 2013). The District Court evaluated this claim under a version of the 

New York Code of Professional Responsibility which has since been replaced by 
4 No. 11-1565-cv

on appeal arise out of the tension between an attorney’s ethical duty 

of confidentiality and the federal interest in encouraging 

“whistleblowers” to disclose unlawful conduct harmful to the 

government.

We consider here two questions: (1) whether the District 

Court correctly held that the former general counsel to defendant

violated his ethical obligations under the N.Y. Rules by participating 

in this qui tam action; and, if so, (2) whether the District Court erred 

in dismissing the complaint and disqualifying plaintiff, all of its 

general partners including the former general counsel, and its 

outside counsel from bringing any subsequent qui tam action based 

on similar facts. 

We agree that the attorney in question, through his conduct in 

this qui tam action, violated N.Y. Rule 1.9(c) which, in relevant part, 

prohibits lawyers from “us[ing] confidential information of [a] 

former client protected by Rule 1.6 to the disadvantage of the former 

client,” N.Y. Rule 1.9(c), except “to the extent that the lawyer 

reasonably believes necessary . . . to prevent the client from 

committing a crime,” id. 1.6(b)(2).

In addition, we hold that the District Court did not err by

dismissing the complaint as to all defendants, and disqualifying 

plaintiff, its individual relators, and its outside counsel on the basis

that such measures were necessary to avoid prejudicing defendants 

in any subsequent litigation on these facts. 

 

the current N.Y. Rules cited in this opinion, and relied upon by the parties in 

their briefs. The rules are substantively unchanged, but the language of the 

earlier version applied by the District Court is noted for reference throughout the 

opinion.
5 No. 11-1565-cv

Accordingly, we affirm the July 12, 2011 judgment of the 

District Court.

BACKGROUND

Plaintiff-appellant Fair Laboratory Practices Associates 

(“FLPA” or “plaintiff”) brought this qui tam action2 pursuant to the 

federal False Claims Act (“FCA”)3, 31 U.S.C. §§ 3729-3733, against 

defendants-appellees Quest Diagnostics Incorporated (“Quest”) and

Unilab Corporation (“Unilab”)4for alleged violations of the federal 

Anti-Kickback Statute, 42 U.S.C. § 1320a-7b (“AKS”).5 One of FLPA’s 

 

2 “Qui tam is short for ‘qui tam pro domino rege quam pro se ipso in hac parte 

sequitur,’ which means ‘who pursues this action on our Lord the King’s behalf as 

well as his own.’” Rockwell Int’l Corp. v. United States, 549 U.S. 457, 463 n.2 (2007).

The False Claims Act’s qui tam provision allows “a private plaintiff, known as a 

relator, [to] bring[ ] suit on behalf of the [g]overnment to recover a remedy for a 

harm done to the [g]overnment.” Woods v. Empire Health Choice, Inc., 574 F.3d 92, 

97 (2d Cir. 2009); see 31 U.S.C. § 3730(b). As the “real party in interest” in a qui 

tam action, United States ex rel. Eisenstein v. City of New York, New York, 556 U.S. 

928, 930 (2009) the government may intervene and take over prosecution of the 

lawsuit, 31 U.S.C. § 3730(b)(2), (4). In such cases, however, the relator is still 

entitled to a share of any recovery. 31 U.S.C. § 3730(d).

3 The FCA creates a cause of action against one who “knowingly presents, or 

causes to be presented , a false or fraudulent claim for payment or approval.” 31 

U.S.C. § 3729(a)(1). Plaintiff also brought claims under the false claims statutes 

of several states. 

4 FLPA also sued XYZ Corporations 1-100, which are unnamed entities 

allegedly controlled by Quest. 

5 Title 42 U.S.C. § 1320a-7b(b)(2) provides that

whoever knowingly and willfully offers or pays any remuneration 

(including any kickback, bribe, or rebate) directly or indirectly, 

overtly or covertly, in cash or in kind to any person to induce such 

person―(A) to refer an individual to a person for the furnishing or 
6 No. 11-1565-cv

general partners, Mark Bibi, was formerly General Counsel to 

defendant Unilab. The facts set forth below are drawn from the 

record on appeal, including the account of facts found by the District 

Court.

A. The Parties

Quest is a Delaware corporation founded in 1996 and 

headquartered in New Jersey that provides diagnostic medical 

testing services for managed care organizations (“MCOs”)6 and 

independent practice associations (“IPAs”)

7 nationwide. In 2003, 

Quest acquired Unilab―a clinical laboratory company 

headquartered in California―through a “cash tender offer.” Unilab 

became a wholly-owned subsidiary of Quest through a subsequent 

merger.

 

arranging for the furnishing of any item or service for which payment 

may be made in whole or in part under a Federal health care 

program, or (B) to purchase, lease, order, or arrange for or 

recommend purchasing, leasing, or ordering any good, facility, 

service, or item for which payment may be made in whole or in part 

under a Federal health care program, shall be guilty of a felony and 

upon conviction thereof, shall be fined not more than $25,000 or 

imprisoned for not more than five years, or both.

6 MCOs “are entities that, for agreed upon fees, terms, and conditions, 

undertake to pay the health care costs of its enrollees. Such plans are an 

alternative to traditional indemnity health insurance plans.” Joint App’x 209.

7 The Second Amended Complaint (“Complaint”) describes the relationship 

between IPAs and MCOs as follows: “In some cases, rather than contracting with 

individual physicians . . . , an MCO contracts with [IPAs], and the [IPA], in turn, 

contracts with hospital providers and independent clinical laboratory providers 

such as the Defendants. In other cases, a large [IPA] operates as a full-fledged 

MCO.” Joint App’x 210.
7 No. 11-1565-cv

FLPA, the “relator” in this qui tam action, is a Delaware 

general partnership formed in 2005 by three former Unilab 

executives, Andrew Baker (“Baker”), Richard Michaelson

(“Michaelson”), and Mark Bibi (“Bibi” and jointly, the “individual 

relators”) for the purpose of bringing this qui tam action. The 

individual relators worked for Unilab prior to its acquisition by 

Quest in 2003. Baker was Unilab’s Chairman and Chief Executive 

Officer from 1993 to about December 1996. Michaelson was Unilab’s 

Chief Financial Officer from 1993 to January 1998, and was a director 

of and consultant to Unilab from January 1998 to November 1999.

Bibi was Unilab’s Vice President, Executive Vice President, 

Secretary, and General Counsel from November 1993 to March 2000, 

and then served only as an Executive Vice President through June 

2000, after which he was retained as a consultant by Unilab until 

December 2000.

Bibi’s role as Unilab’s General Counsel is central to the issues 

presented on appeal. Bibi, who has been practicing law in New York 

since 1985, was Unilab’s sole “in-house” lawyer from 1993-2000. In 

that capacity, he was responsible for all of Unilab’s legal and 

compliance affairs, such as advising Unilab on matters relating to its 

MCO contracts and managing all litigation against the company.

B. The Alleged Scheme

FLPA alleges that “[f]rom at least 1996 through at least 2005, 

Unilab and Quest violated the AKS8 by operating a ‘pull-through’ 

scheme by which they charged MCOs and IPAs commercially 

unreasonable discounted prices [on non-federal business] to induce 

referrals of Medicare and Medicaid business and then billed the 

Medicare and Medicaid business to the Government at dramatically 

 

8 For the text of the Anti-Kickback Statute, see Note 5, ante.
8 No. 11-1565-cv

higher prices than those charged to the MCOs and IPAs [on the nonfederal business].” Appellant’s Br. 6 (citing Complaint ¶¶43-52).

Specifically, FLPA argues that the “commercially unreasonable 

discounted prices” constituted “kickback[s], bribe[s] or rebate[s]” 

insofar as they were designed to induce referrals of Medicare and 

Medicaid business. Appellant’s Br. 6 (internal quotation marks 

omitted).

Between 1993 and 1996, the individual relators began to 

question whether Unilab’s pricing structure violated the AKS. For 

example, as Chief Financial Officer, Michaelson allegedly knew that 

Unilab often charged its MCO clients prices that were sometimes 

less than 50% of Unilab’s actual testing costs. And Bibi allegedly 

advised Baker that Unilab’s pricing structure, as it was then 

formulated, potentially facilitated “kickbacks.”

In response to these concerns about Unilab’s pricing structure,

“Unilab, under its then-CEO [Baker], established a new pricing 

policy . . . that included negotiated increases to the rates under its 

existing contracts.” Joint App’x 213. Specifically, in 1996 Unilab 

delivered a letter to its MCO and physician-association customers

“stating that it was reserving its contractual right to terminate its 

contract with that customer and would, in thirty days, cease 

providing laboratory services to any customer that did not agree to a 

price increase.” Id. Following Unilab’s notice that it was raising its 

prices, some of Unilab’s “customers began to slowly slip away to 

[its] competitors.” Id. at 214.

FLPA asserts that Baker’s tenure as CEO ended in 1997 as a 

result of the falling profits caused by this increase in Unilab’s prices.

When Baker left, Unilab’s shares were selling for less than $3 per 

share. In 1999, Kelso & Co. completed a leveraged buy-out of Unilab 

for $5.85 per share and installed a new management team, including 
9 No. 11-1565-cv

Robert Whalen as CEO. Whalen reversed course from Baker’s 

pricing policy, informing other executives that “Baker’s increased 

pricing had been a mistake, and that Unilab needed to (i) accept 

commercially unreasonable contracts with MCOs and physician 

associations and (ii) implement a strategy that required physicians 

to refer, and the MCOs to arrange for or recommend that physicians 

refer, fee-for-service business, including Medicare and Medicaidreimbursable business, to Unilab.” Id. at 215-16.

In December 1999, the U.S. Department of Health and Human 

Services Office of Inspector General (“OIG”) published Advisory 

Opinion (“AO”) 99-13, which addressed the pricing practices of 

clinical pathologists. In particular, AO 99-13 indicated that if the 

prices offered to MCOs on non-federal business were below “actual

cost,” such an arrangement “might” violate the AKS because the 

OIG would infer that such discounts were offered for the purpose of 

inducing physicians to refer their Medicare and Medicaid business.

The month after AO 99-13 was published, Bibi had a meeting 

with Whalen during which Bibi stated his “personal opinion,” that 

AO 99-13 created an inference of illegality with respect to Unilab’s

existing pricing structure. Whalen allegedly instructed Bibi to work 

with outside counsel to “find a way around” AO 99-13. In response 

Bibi obtained an opinion letter from an outside law firm, Winston & 

Strawn, on this issue.9 Bibi never reported his concerns to the Unilab 

Board. 

 

9 The District Court reviewed in camera the Winston & Strawn opinion letter, 

which was never produced to FLPA’s counsel, and referred to the letter in its 

Opinion and Order. FLPA contends that this was error. It argues that “[w]hen 

one side, seeking to block consideration of relevant matter, asserts an evidentiary 

privilege, the court may inspect the evidence in camera . . . for the limited purpose 

of determining whether the asserted privilege is genuinely applicable. . . . [I]f the 
10 No. 11-1565-cv

FLPA alleges that Bibi was subsequently “frozen out” by 

Unilab’s management as a result of his concerns related to Unilab’s 

pricing structure and was no longer asked for advice on compliance 

matters. By March 2000, Bibi had been replaced as General Counsel.

After the individual relators left Unilab, the company 

allegedly “continued its illegal pull-through strategy and as a result 

significantly improved its profitability.” Id. at 216. In 2003, Quest 

acquired Unilab at a price of $26.50 per share. According to Bibi, 

Baker―who had sold his remaining Unilab shares for $5.85 per 

share three years earlier― felt “shortchanged.” Baker contacted 

Jeffrey Lanzolatta, a longtime Unilab executive, who allegedly told 

Baker that Unilab “had become very profitable engaging in the pullthrough practice.” Id. at 918. Baker relayed this information to Bibi, 

stating that he was in a tax dispute with Unilab/Quest and “wanted 

to go after them . . . . [t]hrough a qui tam lawsuit.” Id.

 

court’s finding is that the privilege does apply, then the court may not rely upon 

the information in reaching its judgment.” Abourezk v. Reagan, 785 F.2d 1043, 1061 

(D.C. Cir. 1986) (citations omitted). Here, however, the pertinent inquiry was not 

the effect of the letter on the merits of FLPA’s case, but whether the information 

was subject to the attorney-client privilege so as to trigger Bibi’s ethical 

obligations under the N.Y. Rules. See id. (“Only in the most extraordinary 

circumstances does our precedent countenance court reliance upon ex parte 

evidence to decide the merits of a dispute.” (emphasis supplied)). Under the

circumstances here, in camera review is appropriate and the documents in 

question need not be disclosed to the parties. Cf. In re The City of New York, 607 

F.3d 923, 948-49 (2d Cir. 2010) (explaining that a proper procedure for 

determining whether certain materials are privileged is to “require that the party 

possessing the documents appear ex parte in chambers to submit the documents 

for in camera review by the judge, after which the materials can be returned to the 

custody of that party”).
11 No. 11-1565-cv

C. Procedural History

Baker initiated the filing of this qui tam action and invited 

Michaelson and Bibi to join him as individual relators; in particular,

he believed Bibi’s status as a lawyer “would improve our credibility 

with the government.” Id. at 920. Recognizing the potential ethical 

implications of a former general counsel bringing a qui tam lawsuit 

against his former company and client, Bibi consulted the N.Y. Rules 

and the American Bar Association’s Model Rules of Professional 

Conduct to determine whether he could participate. Bibi concluded 

that certain exceptions to the attorney-client confidentiality rules 

permitted his participation, and “did not feel it was necessary” to 

verify his understanding with the New York state bar. Id. at 932.

On January 1, 2005, FLPA was formed for the purpose of 

acting as a relator in one or more qui tam actions against defendants 

for alleged violations of the AKS. Pursuant to the FLPA partnership 

agreement, Bibi stands to collect 29% of any qui tam recovery, while 

Baker and Michaelson would receive 57% and 14%, respectively. On 

June 7, 2005, FLPA filed this qui tam action in the Southern District of 

New York. After FLPA filed the operative Second Amended 

Complaint (“Complaint”) on May 18, 2010,

10 the District Court 

permitted defendants to take discovery regarding whether Bibi and 

FLPA had improperly used or disclosed Unilab’s confidences in this 

lawsuit. Following the completion of this discovery, defendants filed 

a motion to dismiss the Complaint, arguing that Bibi’s participation 

in this qui tam action violated two provisions of the N.Y. Rules.

First, defendants argued that Bibi violated N.Y. Rule 1.9(a), 

known as the “side-switching” rule, which provides that 

 

10 The complaint was filed under seal in accordance with procedures 

governing the FCA. See 31 U.S.C. § 3730(b)(2).
12 No. 11-1565-cv

[a] lawyer who has formerly represented a client in a 

matter shall not thereafter represent another person in 

the same or a substantially related matter in which that 

person’s interests are materially adverse to the interests 

of the former client unless the former client gives 

informed consent, confirmed in writing.

N.Y. Rule 1.9(a).11 Defendants asserted that, by acting as an 

individual relator in this qui tam action, Bibi essentially “switched 

sides” and represented the government against Unilab, his former 

client. 

Second, defendants argued that Bibi violated the N.Y. Rules 

by making use of Unilab’s confidential information for this 

litigation. Pursuant to N.Y. Rule 1.9(c),12

[a] lawyer who has formerly represented a client in a 

matter or whose present or former firm has formerly 

represented a client in a matter shall not thereafter . . . 

(1) use confidential information13 of the former client 

 

11 The District Court applied the earlier version of Rule 1.9(a), DR 5-108, 

reprinted in N.Y. JUD. LAW APP. (McKinney 1992), which stated, in relevant part, 

“a lawyer who has represented a client in a matter shall not, without the consent 

of the former client after full disclosure . . . [t]hereafter represent another person 

in the same or a substantially related matter in which that person’s interests are 

materially adverse to the interests of the former client.” 

12 The District Court applied the earlier version of Rule 1.9(c), DR 4-101, 

which stated in relevant part, “Except when permitted . . . , a lawyer shall not 

knowingly: (1) [r]eveal a confidence or secret of a client [or] (2) [u]se a 

confidence or secret of a client to the disadvantage of the client [or] (3) [u]se a 

confidence or secret of a client for the disadvantage of the lawyer or of a third 

person, unless the client consents after full disclosure.” 

13 N.Y. Rule 1.6(a) defines “confidential information” as follows:
13 No. 11-1565-cv

protected by Rule 1.6 to the disadvantage of the former 

client, except as these Rules would permit or require 

with respect to a current client or when the information 

has become generally known; or (2) reveal confidential 

information of the former client protected by Rule 1.6 

except as these Rules would permit or require with 

respect to a current client.

FLPA, in turn, relied upon the exception in N.Y. Rule 1.6(b), which 

permits a lawyer to “reveal or use confidential information to the 

extent that the lawyer reasonably believes necessary . . . to prevent 

the client from committing a crime . . . .” N.Y. Rule 1.6(b)(2).14

On March 24, 2011, the District Court granted defendants’ 

motion to dismiss, presumably pursuant to the “inherent power. . . 

necessarily vested in courts to manage their own affairs,” Chambers 

v. NASCO, Inc., 501 U.S. 32, 49 (1991) (discussing authority to 

dismiss sua sponte for failure to prosecute). See United States ex rel. 

Fair Lab. Practices Assocs. v. Quest Diagnostics Inc., No. 05 Civ. 5393

 

“Confidential information” consists of information gained during or 

relating to the representation of a client, whatever its source, that is (a) 

protected by the attorney-client privilege, (b) likely to be 

embarrassing or detrimental to the client if disclosed, or (c) 

information that the client has requested be kept confidential. 

“Confidential information” does not ordinarily include (i) a lawyer’s 

legal knowledge or legal research or (ii) information that is generally 

known in the local community or in the trade, field or profession to 

which the information relates.

14 The District Court applied the earlier version of Rule 1.6(b)(2), DR 4-

101(c)(3), which allowed a lawyer to reveal “[t]he intention of a client to commit 

a crime and the information necessary to prevent the crime . . . .” 
14 No. 11-1565-cv

(RPP), 2011 WL 1330542, at *11 (S.D.N.Y. Apr. 5, 2011).15 The District 

Court concluded that the FCA did not preempt applicable state 

ethical rules, and that Bibi’s participation in this action violated Rule 

1.9(a)―the “side-switching rule”―and Rule 1.9(c)’s prohibition on

disclosing client confidences beyond what was “necessary,” within 

the meaning of Rule 1.6(b), to prevent the commission of a crime. Id.

at *6-11.

In light of these conclusions, the District Court held that the 

appropriate remedy was to (1) dismiss the Complaint as to all 

defendants, and (2) disqualify FLPA, each of the individual relators, 

and FLPA’s counsel from bringing this suit or any subsequent suit 

based on the same facts. Id. at *11-13. The District Court reasoned 

that these measures were “necessary to protect Defendants from the 

use of their confidential information against them.” Id. at *13. The 

District Court clarified that the dismissal in no way affected the right 

of the United States to intervene and bring an action against 

defendants. Id. at *14. On July 5, 2011, however, the United States 

gave notice that it was declining to intervene. Judgment was entered 

on July 12, 2011.

This appeal followed.

DISCUSSION

On appeal, FLPA argues principally that (1) the District Court 

erred in holding that Bibi violated his ethical duties under the N.Y. 

Rules; and (2) the District Court erred in granting an overly broad 

 

15 The District Court noted that “[c]ourts in this District have not hesitated to 

dismiss claims brought by lawyers [in violation of their ethical obligations].” 

Quest Diagnostics, 2011 WL 1330542, at *11.
15 No. 11-1565-cv

remedy in favor of the defendants. We consider each argument in 

turn.

A. Bibi Violated N.Y. Rule 1.9(c) by Disclosing Unilab’s 

Confidential Information

We review a district court’s grant of a motion to dismiss a qui 

tam action de novo. United States ex rel. Mergent Servs. v. Flaherty, 540 

F.3d 89, 91 (2d Cir. 2008) (reviewing a district court’s order 

dismissing a qui tam action on the ground that a non-lawyer cannot 

bring a qui tam action pro se).

1. The FCA Does Not Preempt State Ethical Rules

As a general matter, the “salutary provisions [of New York’s 

ethical rules] have consistently been relied upon by the courts of this 

district and circuit in evaluating the ethical conduct of attorneys.”

Hull v. Celanese Corp., 513 F.2d 568, 571 n.12 (2d Cir. 1975). Nothing 

in the False Claims Act evinces a clear legislative intent to preempt 

state statutes and rules that regulate an attorney’s disclosure of 

client confidences. See See Bates v. Dow Agrosiences LLC, 544 U.S. 431, 

449 (2005) (“In areas of traditional state regulation, we assume that a 

federal statute has not supplanted state law unless Congress has 

made such an intention clear and manifest.” (internal quotation 

marks omitted)). See also Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 

516 (1992) (same). As one court recognized, “[w]hile the [FCA] 

permits any person . . . to bring a qui tam suit, it does not authorize 

that person to violate state laws in the process.” United States ex rel. 

Doe v. X. Corp., 862 F. Supp. 1502, 1507 (E.D. Va. 1994) (emphasis 

supplied).

At the same time, we are mindful that the central purpose of 

the N.Y. Rules―to protect client confidences―can be “inconsistent 

with or antithetical to federal interests,” Grievance Comm. for 
16 No. 11-1565-cv

S.D.N.Y. v. Simels, 48 F.3d 640, 646 (2d Cir. 1995), which under the 

FCA, are to “‘encourage private individuals who are aware of fraud 

being perpetrated against the [g]overnment to bring such 

information forward,’” U.S. ex rel. Dick v. Long Island Lighting Co., 

912 F.2d 13, 18 (2d Cir. 1990) (quoting H.R. Rep. No. 660, 99th Cong., 

2d Sess. 22 (1986)). In such instances courts must interpret and apply 

the N.Y. Rules in a manner that “balances the varying federal 

interests at stake.” Simels, 48 F.3d at 646. We conduct the following 

analysis with these principles in mind.

2. Bibi Violated Rule 1.9(c) by Disclosing Confidential 

Information Beyond What Was “Necessary” Within the Meaning 

of N.Y. Rule 1.6(b).

FLPA concedes that N.Y. Rule 1.9(c) governs Bibi’s conduct in 

this case. See Appellant’s Br. 18. As noted above, N.Y. Rule 1.9(c) 

provides that

[a] lawyer who has formerly represented a client in a 

matter . . . shall not thereafter:

(1) use confidential information of the former client 

protected by Rule 1.6 to the disadvantage of the former 

client, except as these Rules would permit or require 

with respect to a current client or when the information 

has become generally known; or

(2) reveal confidential information of the former client 

protected by Rule 1.6 except as these Rules would 

permit or require with respect to a current client.

N.Y. Rule 1.6(b)(2), in turn, authorizes a lawyer to “reveal or use 

confidential information to the extent that the lawyer reasonably 
17 No. 11-1565-cv

believes necessary: . . . (2) to prevent the client from committing a 

crime . . . .”

Accordingly, review of the District Court’s determination that 

Bibi’s participation in the qui tam action violated Rule 1.9(c) requires 

us to decide whether Bibi reasonably believed that (1) the 

defendants intended to commit a crime when FLPA filed this action 

in 2005, and (2) the disclosures were necessary to prevent the 

defendants from committing a crime. 

a.

We agree with the District Court that “Bibi could have 

reasonably believed in 2005 that [d]efendants had the intention to 

commit a crime.” Quest Diagnostics, 2011 WL 1330542, at *9 

(emphasis omitted); see also id. at *10 (“[I]t is reasonable to infer that 

Bibi believed Quest intended to violate the AKS in 2005. . . .”). The 

District Court made specific factual findings as to what Bibi knew 

about defendants’ alleged violations of the AKS. See Quest 

Diagnostics, 2011 WL 1330542, at *9-10. Defendants do not argue that 

any finding made by the District Court in this regard was erroneous.

Finding no error based on the record before us, we affirm the

judgment of the District Court insofar as it rests on its conclusion 

that Bibi reasonably could have maintained such a belief.

b.

The second question is whether Bibi reasonably believed that 

his disclosures were necessary to prevent defendants from 

committing a crime. FLPA asserts that it was “necessary”―within 

the meaning of N.Y. Rule 1.6(b)―for Bibi to reveal the confidential 

information disclosed in this lawsuit because the terms of the FCA 

required Bibi to make “‘written disclosure of substantially all 

material evidence and information the person possesses’” to the 
18 No. 11-1565-cv

government. Appellant’s Br. 33 (quoting 31 U.S.C. § 3730(b)(2)).

Thus, FLPA argues, “[u]nder elementary principles of the 

supremacy of federal law, the FCA preempts application of Rule 1.6

. . . .” Appellant’s Br. 33-34. We disagree, in light of the balancing

principles set forth in Part A.1, ante.

Rule 1.6(b)(2) implicitly accounts for the federal interests at 

stake in the FCA by permitting disclosure of information 

“necessary” to prevent the ongoing commission of a crime. As 

illustrated by this very case, Rule 1.6’s prohibition on Bibi’s 

disclosures could not have undermined the qui tam action in light of 

the alternative means, discussed below, of exposing the alleged 

kickback scheme. Because Rule 1.6 itself balances the interests at 

stake, it need not give way to section 3730(b)(2)’s requirement of full 

disclosure of material evidence.

Alternatively, FLPA contends that even if Rule 1.6(b) does not 

give way to section 3730, Bibi complied with its requirements by 

“tempering his disclosures” until his deposition, when he finally 

testified as to the details of his conversations with Whalen and 

revealed the existence of the Winston & Strawn opinion letter upon 

solicitation by Unilab. Appellant’s Br. 34. FLPA argues further that 

the ongoing nature of the alleged crime necessitated the broad 

disclosures. Id. at 35. 

The District Court concluded that “[e]vidence of the 

continuing crime in 2005 could be shown by evidence of Quest’s 

pricing agreements with MCOs and IPAs in effect in 2005 and not, 

for example, through Bibi’s disclosures [confidential information].” 

Quest Diagnostics, 2011 WL 1330542, at *10. Thus, the Court 

reasoned, the confidential information divulged by Bibi, dating back 

to 1996, went beyond what was reasonably necessary to prevent any

alleged ongoing crime in 2005, when the suit was filed. See id.

(“Further, FLPA has not articulated a persuasive reason why 
19 No. 11-1565-cv

disclosure of confidences from the 1990s to March 2000 would be 

necessary to prevent the commission or continuation of a crime in 

2005.”).

We agree with the District Court that the confidential 

information Bibi revealed was greater than reasonably necessary to 

prevent any alleged ongoing fraudulent scheme in 2005. By FLPA’s 

own admission, it was unnecessary for Bibi to participate in this qui 

tam action at all, much less to broadly disclose Unilab’s confidential

information. See Appellant’s Br. 43 (“Baker and Michaelson each has 

ample relevant information to bring this case”).16 FLPA could have 

brought the qui tam action based on the information that Baker and 

Michaelson possessed as former executives of Unilab, or, if necessary, 

Bibi could have made limited disclosures.17 Instead, Bibi chose to 

participate in the action and disclose protected client confidences, see

App’x 900, in violation of N.Y. Rule 1.9(c).

Because we affirm the judgment of the District Court on the 

grounds that Bibi violated N.Y. Rule 1.9(c), we need not consider 

whether Bibi also violated N.Y. Rule 1.9(a)―the “side-switching” 

rule―by participating in this qui tam action.18

 

16 We note that the presence of at least two willing relators with ample 

information to bring the suit further confirms that, under these circumstances, 

application of Rule 1.9(c) would not affect, much less undermine, the federal 

interests embodied in the FCA qui tam provision. 

17

 Cf. New York County Lawyers’ Ass’n, Committee on Professional Ethics 

Formal Opinion 746 (Oct. 7, 2013) (“As a general principle, there are few 

circumstances, if any, in which, in the Committee’s view, it would be reasonably 

necessary within the meaning of [Rule] 1.6(b) for a lawyer to pursue the steps 

necessary to collect a bounty as a reward for revealing confidential material.”).

18 We note that the District Court gave no indication that the finding with 

respect to Rule 1.9(a) affected its decision on remedies.
20 No. 11-1565-cv

B. The District Court Did Not Err or “Abuse Its Discretion” in 

Dismissing the Complaint and Disqualifying FLPA and Its 

Counsel

Having affirmed the judgment of the District Court insofar as 

it concluded that Bibi violated N.Y. Rule 1.9(c), we must decide 

whether the District Court’s remedy―dismissing the complaint and 

disqualifying FLPA, FLPA’s counsel, and the individual relators

from bringing this action or any subsequent action based on the 

same facts―was proper.

We review a district court’s decision on remedies for ethical 

violations for “abuse of discretion.” See W. T. Grant Co. v. Haines, 531 

F.2d 671, 676 (2d Cir. 1976) (remedy of disqualification will only be 

upset upon a showing of “abuse”). A district court has abused its 

discretion if it “(1) based its ruling on an erroneous view of the law, 

(2) made a clearly erroneous assessment of the evidence, or (3) 

rendered a decision that cannot be located within the range of 

permissible decisions.” NML Capital, Ltd. v. Republic of Argentina, 680 

F.3d 254, 257 (2d Cir. 2012) (internal quotation marks omitted).

We have long recognized “the power of trial judges to 

disqualify [attorneys] where necessary to preserve the integrity of 

the adversary process . . .”―most commonly “where the attorney is 

at least potentially in a position to use privileged information 

concerning the other side through prior representation . . . . ” Bd. of 

Ed. of New York v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979) (internal 

quotation marks omitted). Dismissal of a complaint prepared in 

reliance on privileged information may also be an appropriate 

remedy. See, e.g., Ackerman v. Nat'l Prop. Analysts, Inc., 887 F. Supp. 

510, 519 (S.D.N.Y. 1993), aff’d without opinion, 60 F.3d 810 (2d Cir. 

1995) (disqualifying counsel and dismissing complaint prepared in 

reliance on improper disclosures by the opposing party’s former 
21 No. 11-1565-cv

counsel); Doe v. A Corp., 330 F. Supp. 1352, 1353 (S.D.N.Y. 1971), aff'd 

sub nom. Hall v. A. Corp., 453 F.2d 1375 (2d Cir. 1972) (dismissing 

complaint in a derivative action brought by a lawyer against a 

former client on the basis of confidential information obtained while 

representing that client, and disqualifying lawyer). 

We are conscious that, notwithstanding any salutary effect on 

attorney ethics or the appearance of fairness, dismissal or 

disqualification for violations of ethical rules may impede the 

pursuit of meritorious litigation to the detriment of the justice 

system. See, e.g., Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 

F.2d 225, 236 (2d Cir. 1977) (affirming a district court’s refusal to 

dismiss a complaint due to ethical violations on the ground that “we 

are loathe to countenance a remedy which will affect the rights of a 

plaintiff embarked on serious litigation”). Accordingly, courts must 

balance these competing concerns by limiting remedies for ethical 

violations to those necessary to avoid “taint[ing] the underlying 

trial.” Nyquist, 590 F.2d at 1246; see also Fund of Funds, 567 F.2d at 

236-37 (“[W]e have sought to strike a delicate balance between the 

[litigant’s] interest in representation by counsel of its choice and the 

need to maintain high ethical standards within the profession of 

law.”); cf. Hull, 513 F.2d at 572 (“[A party’s] right to counsel of her 

choice . . . . must yield . . . to considerations of ethics which run to 

the very integrity of our judicial process.”).

We have repeatedly cautioned that, “[w]hen dealing with 

ethical principles, we cannot paint with broad strokes.” Fund of 

Funds, 567 F.2d at 227 (internal quotation marks, citations and 

alteration omitted). In evaluating the remedies ordered here, we 

note FLPA’s unusual posture in this litigation by virtue of its status 

as relator. While FLPA stands to benefit from any recovery in this 

case, it brings this suit on behalf of the United States government. As 

such, it acts neither as the real party in interest nor in a 
22 No. 11-1565-cv

representative capacity. In addition, we recognize the particularly 

strong federal interest underpinning qui tam litigation pursuant to 

the FCA. 

1. Dismissal of the Complaint and Disqualification of FLPA

We first address the District Court’s decision to dismiss the 

Complaint as to all defendants and disqualify FLPA and its 

individual relators. In ordering remedies for Bibi’s violation of the 

N.Y. Rules, the District Court correctly recognized that “[n]ot all 

violations of the legal code of ethics require dismissal or 

disqualification of counsel,” and that the relevant inquiry was the 

“possibility of prejudice at trial.” Quest Diagnostics, 2011 WL 

1330542, at *11 (internal quotation marks omitted). After considering 

lesser alternatives, the District Court concluded that because FLPA 

“pursued this litigation on the basis that Bibi could ‘spill his guts’ 

and freely disclose Unilab’s confidential information,” it would be 

“virtually impossible to identify and distinguish each improper 

disclosure.” Id. at *12. Furthermore, given the concessions by Baker 

and Michaelson that Bibi had revealed information about 

confidential communications with Whalen, id. at *5, “[a]llowing 

Baker and Michaelson to proceed with the suit would allow that 

taint to proceed into trial,” id. at *12.

We do not conclude that the District Court erred or “abused 

its discretion” in finding that, in view of Bibi’s unrestricted sharing 

of confidential information with the other individual relators, 

permitting FLPA or any of its individual relators to proceed with the 

suit would taint the trial proceedings and prejudice defendants.

Moreover, FLPA is not the real party in interest here, and, as the 

District Court emphasized, its decision did not foreclose the 
23 No. 11-1565-cv

government (or, for that matter, a different relator)19 from bringing 

suit. Accordingly, dismissal of the Complaint and disqualification of 

FLPA does not significantly impair the federal interests embodied in 

the FCA. 

Alternatively, FLPA argues that it should be permitted to 

proceed against Quest, if not Unilab, because Bibi never owed any 

duty to Quest. Appellant’s Br. 46. This argument ignores the fact 

that “when control of a corporation passes to new management [as a 

result of, inter alia, a merger], the authority to assert and waive the 

corporation’s attorney-client privilege passes as well.” Commodity 

Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 349 (1985). The 

District Court thus correctly held that “any obligation Bibi had to 

Unilab was transferred to Quest upon its purchase.”20 Quest 

Diagnostics, 2011 WL 1330542, at *13. We hold that it was not error 

for the District Court to conclude that “simply dismissing Unilab 

from this action would not fully purge the taint associated with 

Bibi’s unethical disclosures of Unilab confidences[,]” id.

2. Dismissal of FLPA’s Counsel

We next consider whether the District Court abused its 

discretion by sua sponte disqualifying FLPA’s counsel, Troutman 

Sanders and the Michael Law Group, on the basis that such 

 

19 Although not expressly stated, we understand the District Court’s Order to 

dismiss the Complaint without prejudice to suit being brought by different 

relators who otherwise meet the statutory requirements of the FCA on similar 

facts (without improper disclosures).

20 In addition, the District Court held that “[a] financial judgment against 

Quest would . . . undoubtedly have effects on Quest’s wholly-owned subsidiary, 

Unilab.” Quest Diagnostics, 2011 WL 1330542, at *13 (citing Gillers Decl. ¶ 62, 

Joint App’x 396). 
24 No. 11-1565-cv

dismissal was “necessary to protect [d]efendants from the use of 

their confidential information against them.” Id.

We note at the outset that the ethical violations at issue here 

were committed by Bibi, a general partner of the client, FLPA, and

not by counsel in this case. As such, the circumstances of this 

disqualification do not lend themselves to the “precise application of 

precedent.” Fund of Funds, 567 F.2d at 227 (internal quotation marks 

omitted). We have, however, previously found it necessary to 

dismiss counsel who had themselves committed no ethical violation, 

on the basis that “confidences . . . could have been revealed [to 

them]” that would prejudice a party in litigation. Id. at 233

(dismissing co-counsel of a firm that was disqualified due to ethical 

conflicts because the conflicted firm had shared confidences with its 

co-counsel).

Here, the District Court concluded that, by virtue of the 

confidential information likely revealed to them, counsel for FLPA 

“are in a position to use [defendants’ confidential information] to 

give present or subsequent clients an unfair, and unethical, 

advantage.” Quest Diagnostics, 2011 WL 1330542, at *13; see also

Nyquist, 590 F.2d at 1246 (holding that disqualification may be 

warranted where the attorney is “potentially in a position to use 

privileged information concerning the other side”). Moreover, 

FLPA’s disqualification, by virtue of the intimate collaboration with 

Bibi in the ethics violations, alleviates the concern that “[t]he sins of 

counsel should not be visited upon his client so as to vitiate the 
25 No. 11-1565-cv

latter's cause of action.”21 W.T. Grant, 531 F.2d at 677. In sum, the 

District Court’s decision to disqualify FLPA’s counsel was not based 

on any error of law or fact, and is “located within the range of 

permissible decisions.” NML Capital, 680 F.3d at 257 (citations 

omitted).

CONCLUSION

To summarize: 

(1) The False Claims Act does not preempt state ethical rules

governing the disclosure of client confidences; therefore 

N.Y. Rule 1.9(c), which generally prohibits disclosure of 

confidential information of a former client, governs a New 

York attorney’s conduct as relator in a qui tam action under 

the False Claims Act.

(2) N.Y. Rule 1.6(b)(2), which permits a lawyer to reveal or use 

confidential information to the extent that the lawyer 

reasonably believes necessary to prevent the client from 

committing a crime, does not justify Bibi’s disclosures in 

this case: Bibi reasonably could have believed in 2005 that 

defendants intended to commit a crime. His disclosure of 

Unilab’s confidential information, however, went well 

 

21 The suggestion that disqualification of FLPA’s counsel is improper because 

those attorneys did not commit the violation misses the mark. Disqualification is 

not a sanction but a remedy that seeks to avoid prejudice to the party whose 

confidences have been revealed and, in so doing, promote the integrity of our 

justice system. Cf. Fund of Funds, 567 F.2d at 227 (noting that “[c]ompliance or 

noncompliance with Canons of Ethics frequently do not involve morality or 

venality, but differences of opinions among honest men over the ethical 

propriety of conduct,” but nonetheless dismissing counsel who violated those 

ethics and co-counsel who did not).
26 No. 11-1565-cv

beyond what was “necessary” within the meaning of N.Y. 

Rule 1.6(b)(2) to prevent Unilab from committing a crime 

inasmuch as there was ample non-confidential information 

on which to bring an FCA action. Therefore, Bibi’s conduct 

in this qui tam action violated his ethical obligations under 

N.Y. Rule 1.9(c).

(3) The District Court did not err or “abuse its discretion” in 

dismissing the Complaint and disqualifying FLPA, all of its 

general partners, and its outside counsel from bringing any 

subsequent related qui tam action, on the basis that such 

measures were necessary to prevent the use of Bibi’s 

unethical disclosures against defendants.

Accordingly, the judgment of the District Court is 

AFFIRMED.