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Tuesday, October 22, 2019

Appeals court rejects sealing of settlement in Quest Diagnostics qui tam case

By Rebecca Campbell | Feb 9, 2017

PHILADELPHIA — The U.S. Court of Appeals for the 3rd Circuit has ruled that a shared agreement between two claimants who brought qui tam suits against Quest Diagnostics International should not have been placed under a seal.

In the Fair Laboratory Practices Associates v. Riedel, the appeals court said that it failed to find any personal harm that would result if the settlement agreement was made available for public view. It also discounted the public interest in learning about the settlement terms.

According to, a qui tam suit is defined as one in which a private party starts an action on behalf of the government, with the party sharing in the award if the action is successful.

The case originated from a qui tam suit brought against QDI in a California state court by Chris Riedel and Hunter Laboratories, according to a report on National Law Journal's website. A second was brought against QDI in the Southern District of New York by Fair Laboratory Practices Associates and NPT Associates. According to the suit finding, both parties have filed numerous qui tam suits against QDI and other laboratories.

In May 2010, according to court documents, the suit detailed that FLPA and Hunter entered a qui tam sharing agreement where they agreed to share the proceeds of their respective qui tam suits against QDI and other clinical laboratories.

In 2011, FLPA filed a lawsuit against QDI and Unilab, a subsidiary of QDI, in the Southern District of New York. However, the district court dismissed the lawsuit because FLPA and its principals, including Unilab’s former general counsel, Mark Bibi, had improperly used and disclosed Unilab’s privileged information as part of the lawsuit, in violation of the New York Rules of Professional Conduct. As the suit details, also in 2011, QDI settled a separate qui tam lawsuit filed by Hunter in California state court asserting claims under California law.

Because of the qui tam sharing agreement between Hunter and FLPA made in 2010, FLPA asserted that Hunter owed FLPA 15 percent of its proceeds of the settlement between Hunter and QDI, according to the National Law Journal report. Yet, Hunter is reported to have declined to remit payment, citing the Southern District’s dismissal of the FLPA suit.

Also according to the National Law Journal report, FLPA then sued Hunter in the District of New Jersey, seeking the percentage it previously asked for from the California settlement. District Judge William Martini granted FLPA summary judgment, holding that the Southern District of New York dismissal did not breach the profit-sharing agreement.

Several months later, a joint stipulation was filed by FLPA and Hunter announcing an agreement had been reached granting Hunter the amount already awarded by Martini. However, before the condition could be approved, Martini asked the two parties to file their settlement agreement in court, which they did under seal.

As the National Law Journal report said, QDI opposed the sealing and attempted to intervene; however, Martini failed to let the company join the case and proceeded with allowing the item to be sealed.

Appellate Judges Thomas Ambro, Patty Shwartz and Julio Fuentes ruled for a seal reversal, stating that the district court “too quickly discounted the public’s interest,” and that in future the district court should consider redacting confidential information, which would help protect the parties’ privacy instead of sealing a case.

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