On February 19, 2013, in San Francisco Unified School District ex. Rel. Manuel Contreras et al. v. First Student, Inc., Case No. A134405, the First District Court of Appeal held that plaintiffs in a False Claims Act (FCA) action can communicate with current employees of defendant’s successor company who might have knowledge of fraudulent conduct by the defendant company.
Plaintiffs, who were former employees of defendant’s predecessor, brought an FCA claim against their former employer pursuant to Government Code section 12650, et seq. regarding the alleged failure by First Student, Inc. (“FSI”) to maintain and repair company buses per contract. FSI, the successor company, sought to enjoin plaintiffs, their counsel, and counsel’s investigators from discussing issues related to the case with its current employees. FSI argued that plaintiffs’ counsel had violated California Rule of Professional Conduct 2-100, which prohibits attorneys from communicating directly or indirectly with a represented party on the subject of the representation, without counsel consent. “Party” within 2-100 includes a party’s employee whose acts could vicariously bind the party. The court denied the injunction, but admonished plaintiffs in its minute order that the “[p]arties are to be instructed not to talk about the lawsuit with employees.”
Plaintiffs’ counsel contacted defense counsel to schedule the deposition of an employee of defendant who was on workers’ compensation leave. Plaintiffs’ counsel was referred to the workers’ compensation attorney, who authorized direct contact with the current employee. Plaintiffs’ counsel called the employee to discuss scheduling and sent him the transcript of another employee’s deposition. FSI sought another injunction on the basis that plaintiffs’ counsel had violated the first minute order. The trial court issued an injunction, which included an order that “[p]laintiffs …. are to refrain from discussing this case, or any subjects related to this case, with current [defendant] employees during the pendency of this lawsuit.” Plaintiffs appealed, arguing the injunction violated policies underlying the FCA and infringed on plaintiffs’ free speech rights.
The Court of Appeal vacated the injunction. The Court reasoned Rule 2-100 was not a prohibition on ex parte contacts by plaintiffs with defendant employees unless the contacts were wrongfully orchestrated by plaintiffs’ counsel, of which there was no evidence in this case. Importantly, the Court further reasoned the “policies in the [FCA] would be seriously undermined if … plaintiffs could not approach employees who might have knowledge of fraudulent conduct by the employer.” In this regard, the Court noted that the FCA prohibited an employer from adopting rules preventing an employee from investigating or assisting in an FCA action. Finally, the court noted that “free speech principles raise serious concerns about the order’s constitutionality.”
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