Order granting 47 Motion to — United States ex rel. James R. Berkley v. Ocean State, LLC (Dkt. 58, D.R.I.)

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An order in United States ex rel. James R. Berkley v. Ocean State, LLC, Case 1:20-cv-00538-JJM-PAS, in the United States District Court for the District of Rhode Island, filed June 26, 2024 as Document 58. The order describes the case as one under the False Claims Act, 31 U.S.C. § 3729, and addresses two discovery motions. It grants Defendants' motion to compel responses to a second set of interrogatories because Plaintiff has no objection, with responses due on or before June 28, 2024. It also grants Plaintiff's motion to compel communications between Defendants and their attorneys, reasoning that Defendants' good-faith defense to scienter, made in consultation with attorneys, supports implied waiver of the attorney-client privilege.

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Case 1:20-cv-00538-JJM-PAS Document58 _ Filed 06/26/24 Page 1 of 4 PagelD #:
2331

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND

UNITED STATES OF AMERICA, ex
rel. JAMES R. BERKLEY,
Plaintiff,

OCEAN STATE, LLC; NEW HARBOR
CAPITAL FUND LP; NEW HARBOR
CAPITAL FUND II LP; NEW
HARBOR CAPITAL MANAGEMENT
LP; BLUEPRINT TEST
PREPARATION, LLC; and FYZICAL
ACQUISITION HOLDINGS, LLC
Defendants.

C.A. No. 20°538-JJM-PAS

ORDER

This is a case under the False Claims Act, 31 U.S.C. § 3729. Plaintiff has
succinctly stated its claims as follows: “This case is about the PPP [Paycheck
Protection Program”] Recipients’ false certifications of compliance with the PPP’s
Affiliation Requirement and Necessity Requirement. It is also about the New Harbor
Defendants’ knowledge, direction, oversight and control over the conduct and
operations of the PPP Recipients both generally and with respect to submission of
their PPP loan applications and receipt of PPP loan funds.” ECF No. 40 at 18. Before
the Court are two discovery motions: Plaintiff has moved to compel certain documents
between Defendants and their attorneys, ECF No. 47, and Defendants have moved to

compel Plaintiff to answer their second set of interrogatories. ECF No. 48.
Case 1:20-cv-00538-JJM-PAS Document58 _ Filed 06/26/24 Page 2 of 4 PagelD #:
2332

The Court will deal with the latter motion first. Because Plaintiff has no
objection,! ECF No. 56, the Court GRANTS Defendants’ Motion to Compel Relator’s
Responses to Defendants’ Second Set of Interrogatories. ECF No. 48. Plaintiff shall
respond to Defendants’ Second Set of Interrogatories on or before June 28, 2024.

As to Plaintiffs motion, he requests copies of all communication that
Defendants had with their attorneys concerning the PPP loans at issue in the lawsuit.
ECF No. 47. Plaintiff claims that because Defendants have impliedly waived the
attorney-client privilege by asserting that they had a good-faith belief in the
lawfulness of their conduct, it is only fair that he also be given access to the
communications. Defendants object and claim that they have not waived the
attorney-client privilege and that they do not rely on their attorneys’ advice to prove
their scienter defense.

Implied waiver “may occur whenever party takes a position that makes it
unfair to protect attorney-client communications, such as when a client testifies about
portions of such communications or [a] client relies on [an] attorney’s advice as lan]
element of [a] claim or defense.” United States v. Desir, 273 F.3d 39, 45 (1st Cir.
2001) (citing Jack B. Weinstein & Margaret A. Berger, Weinstein’s Federal Evidence
§ 503.41 (Joseph M. McLaughlin ed. 1997)). This waiver of the attorney-client
privilege rule ensures that a party cannot “selectively assertl] the privilege to block

the introduction of information harmful to his case after introducing other aspects’ of

1 While Plaintiff does not object to responding to the interrogatories
themselves, the Court does not agree with Defendants’ assertion that Plaintiff has
“abandonled] all his objections.” ECF No. 57 at 1.
Case 1:20-cv-00538-JJM-PAS Document58 _ Filed 06/26/24 Page 3 of 4 PagelD #:
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attorney-client communications that are beneficial; ‘attorney client privilege cannot
be used as both a shield and a sword.” Desir, 273 F.3d at 45 (citing United States v.
Workman, 138 F.3d 1261, 1263-64 (8th Cir. 1998)).2 In waiver by implication cases,
a “common denominator” is that “the party asserting the privilege placed protected
information in issue for personal benefit through some affirmative act, and the court
found that to allow the privilege to protect against disclosure of that information’
would have been unfair to the opposing party.” Jn re Keeper of Recs. (Grand Jury
Subpoena Addressed to XYZ Corp.) 348 F.3d 16, 24 (1st Cir. 2003) (quoting 3
Weinstein, supra § 503.41[1)).

Here, Defendants assert the affirmative defense of lack of scienter-knowingly
presenting a false claim—and claim that they acted in good faith in applying for the
PPP loans. Additionally, Defendants acknowledge that they determined that their
actions were done in good faith and in consultation with their attorneys. ECF No. 47-
lat 4. Defendants have also produced evidence to show that their attorneys provided
advice, and helped draft and reviewed many documents concerning Defendants’
eligibility for the PPP loans. See ECF No. 47-2.3 Defendants also testified that their
attorneys participated in the PPP loan applications. See ECF No. 47-3.

The Court finds that since Defendants are asserting and vigorously supporting

the assertion that they acted in good faith in applying for the PPP loan after

2 This is a factual determination that the trial judge makes based on all the
specific facts of the case before them. Texaco P.R., Inc. v. Dept of Consumer Affairs,

60 F.3d 867, 883 (1st Cir. 1995).
3 This document is filed under seal as ECF No. 51-1.
Case 1:20-cv-00538-JJM-PAS Document58 _ Filed 06/26/24 Page 4 of 4 PagelD #:
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consulting their attorneys who participated in the application process on some levels,
Plaintiffs should be allowed to review the communications that Defendants received
from their attorneys on this issue. To hold otherwise, in this case, on these facts,
would be unfair to Plaintiff and to the ultimate trier of fact. Jn re Keeper of Recs.,
348 F.3d at 24 Gmplied waiver “ensures fairness because it disables litigants from
using the attorney-client privilege as both a sword and a shield. Were the law
otherwise, the client could selectively disclose fragments helpful to its cause, entomb
other (unhelpful) fragments, and in that way kidnap the truth-seeking process.”).

The Court GRANTS Plaintiffs Motion to Compel Discovery. ECF No. 47.

J ohn J. McConnell, Jy.
Chief United States District Judge

June 26, 2024


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