Asserting The Fifth Amendment Privilege In Civil Proceedings Can Be Tricky

By Michael J. Spithogiannis, Esq. and Floyd G. Grossman, Esq.

Among the inalienable rights scrupulously protected is the privilege against self-incrimination.  The Fifth Amendment of the United States Constitution states that “[n]o person . . . shall be compelled in any criminal case to be a witness against himself. . . .”¹  The United States Supreme Court has ruled that the Fifth Amendment privilege is not only applicable to criminal proceedings, but “can be asserted in any proceeding, civil or criminal, . . . and it protects against any disclosures the witness reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used.”² 

Whether to remain silent in connection with a criminal case seems clear-cut.  But whether to do so in a civil case requires a thorough understanding of its implications.  In a civil suit, the privilege against self-incrimination is often at odds with the obligation to disclose information to the other side.  

Fifth Amendment issues can arise in connection with pre-trial discovery and post-judgment collection proceedings, when it is not so clear that the privilege could or should be asserted.  

Pre-trial discovery.

The right to compel a party in a civil case to appear for a deposition under oath or produce documents is, with few exceptions, well-established.  Article 31 of New York’s Civil Practice Law and Rules (“CPLR”), the statute governing procedure in civil cases, compels “full disclosure of all matter material and necessary in the prosecution or defense of an action. . . .”³  To facilitate this mandate, courts are empowered to supervise discovery proceedings.  Invariably, civil courts not only make rulings compelling depositions or production of documents, but also rule on instances where a party seeks to avoid disclosure on Fifth Amendment grounds.⁴

CPLR §4501 provides that witnesses in a civil action are not required to answer questions that will tend to incriminate them. That said, refusing to provide discovery in a civil case on Fifth Amendment grounds has consequences.

If a defendant remains silent in a criminal case, no negative inference may be drawn from the refusal to testify.  It is always up to the prosecution to prove guilt beyond a reasonable doubt.  In a civil case, on the other hand, an adverse inference may be drawn against a party who refuses to testify on Fifth Amendment grounds.⁵  This means that a judge or jury may consider the refusal to testify in assessing the strength of the evidence offered by the opposing party.⁶  Moreover, unlike a criminal case, blanket refusals to answer questions in a civil action will not be permitted absent unique circumstances, and may only be asserted where there is reasonable cause to fear self-incrimination from a direct answer.⁷  The witness who asserts the privilege is required to justify his or her silence.⁸ To effectively invoke Fifth Amendment protections in a civil case, the witness has the burden to make particularized objections to each discovery request, and demonstrate that the evidence sought will either prove a crime or provide the source from which evidence of its commission might be found.⁹

Therefore, merely invoking the privilege is generally insufficient to preclude all discovery in a civil case.¹⁰ For example, even though a party in a civil case has the right to assert the privilege in the context of a deposition, it may only be asserted on a question-by-question basis; the testimony cannot be prevented altogether.¹¹  Even if criminal prosecution is pending, a witness is not entitled to stay the civil action until the criminal case is decided.¹²  In addition, asserting the privilege in a civil case does not relieve that party of his or her own evidentiary burden, or afford any protection against a failure to submit evidence.  The plaintiff is left to choose between, on the one hand, remaining silent and risk jeopardizing the case;¹³ and, on the other, presenting evidence that may constitute a waiver of the privilege, and opening the door to incriminating evidence.¹⁴    

Enforcement proceedings.

New York’s policy is to put no obstacle in the path of one seeking enforcement of a valid judgment.¹⁵  Enforcement proceedings, also referred to as supplementary proceedings, are civil proceedings to which a judgment debtor may be subjected.  Under New York law, supplementary proceedings aid in identifying and locating assets to satisfy a judgment and offer creditors tools for this purpose.¹⁶  

If the judgment creditor has some knowledge of who may have possession of property subject to collection, the CPLR permits service of restraining notices to prevent dissipation of the assets until they can be turned over in whole or partial satisfaction of the judgment.  As is often the case, however, a judgment creditor has little or no idea where money or other assets are hidden.  To address this problem, a judgment creditor can compel disclosure of all information relevant and material to the location of hidden assets.  A judgment creditor has the power to issue subpoenas compelling the judgment debtor to appear for a deposition, produce documents for examination, or disclose information in writing and under oath.  

Endemic to enforcement proceedings, however, is a judgment-debtor’s resistance to paying the judgment and may involve unlawful or even criminal disposition of assets to avoid execution.  Consequently, during enforcement proceedings, it may become apparent that disclosure of information by a judgment debtor could be incriminating.

The CPLR attempts to strike a balance between protection against self-incrimination and disclosure of information regarding a debtor’s assets. If the danger of prosecution is eliminated, the witness may be compelled to give testimony and produce evidence that might otherwise be incriminating.  To facilitate collection of money judgments, civil courts are authorized to grant immunity from criminal prosecution to any witness for giving testimony or evidence in an enforcement proceeding relating to disposition of property in which the judgment debtor has an interest, provided any interested district attorney is given 24-hours’ notice.¹⁷  Once immunity is granted, the Fifth Amendment is not a basis for withholding evidence.

Conclusion.

The Fifth Amendment privilege against self-incrimination is fundamental, and usually arises in the context of criminal investigations.  There are instances, less obvious, where an individual must consider whether testimony or production of evidence may open the door to criminal prosecution.  

A clear understanding of the nature and scope of the underlying legal proceeding and the consequences of providing testimony or producing evidence is essential. A thorough and candid discussion with counsel about these issues is crucial to protecting one’s inalienable privilege against self-incrimination.

Michael J. Spithogiannis, Esq. and Floyd G. Grossman, Esq. each have over 35 years’ experience litigating commercial and real-property disputes in state and federal courts throughout New York.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

¹U.S. Const. amend. V.
²Kastigar v. United States, 406 U.S. 441, 444-45 (1972) (emphasis added). See Lefkowitz v. Turley, 414 U.S. 70, 77 (1973).
³CPLR §3101(a).
See Bank of Crete v. Koskotas, 1989 WL 46587 (S.D.N.Y. 1989).
Marine Midland Bank v. John E. Russo Produce Co., 50 N.Y.2d 31 (1980).  
El-Dehdan v. El-Dehdan, 114 A.D.3d 4 (2d Dep’t 2013), aff’d, 26 N.Y.3d 19.
Marine Midland Bank v. John E. Russo Produce Co., supra; Matter of Astor, 62 A.D.3d 867, 869 (2d Dep’t 2009); Wenham Realty Corp. v. Janoff, 1994 WL 16856431 (Sup.Ct. N.Y.Co. 1994).
Matter of Astor, 62 A.D.3d 867, 869-70 (2d Dep’t 2009).
State v. Carey Resources, Inc., 97 A.D.2d 508 (2d Dep’t 1983).
¹⁰Spencer v. City of Buffalo, 172 A.D.3d 1916 (4th Dep’t 2019).
¹¹Matter of Schwab, 233 A.D.2d 732 (3d Dep’t 1996); Wenham Realty Corp. v. Janoff, 1994 WL 16856431 (Sup.Ct. N.Y.Co. 1994).
¹²Spencer v. City of Buffalo, supra; Stuart v. Tomasino, 148 A.D.2d 370, 373 (1st Dep’t 1989).
¹³Federal Chandros, Inc. v. Silverite Construction Co.,  Inc., 167 A.D.2d 315 (1st Dep’t 1990), app. dis., 77 N.Y.2d 893; Laverne v. Incorporated Village of Laurel Hollow, 18 N.Y.2d 635 (2d Dep’t 1966); Levine v. Bornstein, 13 Misc.2d 161 (Sup.Ct. Kings Co. 1958), aff’d, 7 A.D.2d 995 (2d Dep’t), aff’d, 6 N.Y.2d 892.
¹⁴Access Capital, Inc. v. DeCicco, 302 A.D.2d 48 (1st Dep’t 2002).
¹⁵U.S. Bank National Association v. APP International Finance Co., B.V., 100 A.D.3d 179, 183 (1st Dep’t 2012).
¹⁶Id.
¹⁷CPLR §5211.

Ambulatory Surgery Centers As Investments

By Mathew J. Levy, Esq. and Mauro Viskovic, Esq

Investments in ambulatory surgery centers (“ASC”) appear to be on the rise. On April 29, 2021, the Office of Inspector General (“OIG”) posted an important advisory opinion¹ in which it concluded that a specific investment in an ASC by certain medical providers would not result in sanctions under the Anti-Kickback Statute (“AKS”)².

The transaction at issue involved a health system, individual surgeons and a medical management company that wished to invest in an ASC. As a general matter, AKS prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid, and from entering into certain kinds of financial relationships.  As such, AKS would be a potential impediment to the contemplated investment because the offer or payment of investment returns from an ASC to an investor constitutes remuneration under AKS.      

In concluding that the transaction would not result in sanctions under AKS, the OIG cited numerous factors mitigating the risk that the investment returns to the medical providers would be problematic under AKS, including the following factors:

  • All ASC investors would invest directly in the ASC.  That is, no investor would hold any ownership through a pass-through entity, which could be used to redirect revenues to reward referrals or otherwise erode the safeguards provided by direct investment.
  • The management company certified that it would not make or influence referrals, directly or indirectly, to the surgeon investors or to the new ASC; and (ii) no surgeon investor has or would have ownership in the management company.
  • The health system certified that the surgeon investors would use the new ambulatory surgery center on a “regular basis” as part of their medical practices. In referring to this aspect, it is interesting to note that OIG concluded the surgeon investors would fail to meet the hospital-physician ASC safe harbor provision requirement that a physician investor derive at least one-third of his or her medical practice income for the previous fiscal year or previous 12-month period from the performance of ASC-qualified procedures.
  • The contemplated arrangement would contain certain safeguards to reduce the risk that the health system would make or influence referrals to the ASC or the surgeon investors. For example, the health system certified that any compensation paid by the health system to its affiliated physicians for services furnished would be consistent with fair market value and would not be related, directly or indirectly, to the volume or value of referrals such affiliated physicians may make to the ASC or its surgeon investors. In addition, the health system certified that it would refrain from any action to require or encourage its affiliated physicians to refer patients to the ASC or to its surgeon investors and would not track referrals made to the ASC by its affiliated physicians.
  • Neither the ASC, nor any investor, would loan funds to or guarantee a loan for any investor to obtain ownership in the ASC. The ASC would not offer ownership to any party based on the previous or expected volume or value of referrals made. In addition, capital contributions and profit distributions would be made in proportion to an investor’s ownership in the ASC. 
  • Certain safeguards would be implemented to reduce the risk that the ASC’s investors would receive profit distributions for referrals of patients to the ASC. The health system certified that any space or equipment leased by the ASC from the health system or an affiliated real estate company would comply with AKS safe harbors for space rental and equipment rental, as applicable, and any services performed by the health system or the real estate company for the ASC would comply with the safe harbor for personal services and management contracts and outcomes-based payments. 
  • Additional safeguards would be adopted that are designed to reduce fraud and abuse risks (e.g., improper billing). The ASC, the health system, the surgeon investors, and the management company would treat patients receiving medical benefits or assistance under any Federal health care program in a nondiscriminatory manner. Further, the health system certified that all ancillary services provided to Federal health care program beneficiaries performed at the ASC would be related directly and integrally to primary procedures performed at the ASC and would not be billed separately to Medicare or any Federal health care program. The health system also certified that it would not include on any cost report or any claim for payment from a Federal health care program any costs associated with the ASC, unless such costs are required to be included by a Federal health care program.
  • The ASC and its investors would provide written notice to patients referred by ASC investors to the ASC of the referral source’s investment interest in the ASC.

This OIG Advisory Opinion provides helpful guidance for analyzing the AKS implications of a contemplated ASC investment by a medical provider.  It is critical to note, however, that the advisory opinion is limited in scope to the specific arrangement described therein, has no applicability to any other arrangements, and cannot be relied on by other parties.

Should you have any questions regarding the structuring of investments in ambulatory surgery centers, please contact Mathew Levy at 516-926-3320 or MLevy@weisszarett.com.

About the Authors: 

Mathew J. Levy is a Partner of the firm and co-chairs the Firm’s corporate transaction and healthcare regulatory practice. Mr. Levy has extensive experience in, defending healthcare professionals in actions brought by State licensing authorities and the Federal agencies (OIG, Medicare, OMIG, Medicaid, DEA, OSHA, OCR OSHA, Hospital Review Boards, Office of Professional Medical Conduct and Office of Professional Discipline.) Mr. Levy has successfully defended numerous healthcare providers in actions involving the US Attorney’s Office investigations, Medicare Fraud Waste and Abuse investigations, Medicaid Fraud Control Unit investigations, OPMC, OPD, Medicare, Medicaid as well as commercial insurance audits including Prepayment Review, Post Payment Review, Medicare Hearings and Hospital Discipline Investigations.

Mr. Levy has successfully structured and negotiated joint venture agreements, private equity transactions, venture capital transactions, stock purchase agreements, asset sale agreements, shareholders agreements, partnership agreements, employment contracts, managed care agreements and commercial leases. Among the areas in which he focuses are coordinating mergers and acquisitions, compliance programs, ambulatory surgery centers, the establishment of diagnostic and treatment centers, HIPAA privacy regulations, fee-splitting issues, Stark law issues, fraud and abuse rules and regulations and Medicare/ Medicaid, Oxford, Americhoice, Fidelis, Healthfirst and other third-party payor settlements.

Mauro Viskovic is a Partner in the Firm’s corporate and transactions practice group, where he focuses on providing high quality and cost-effective solutions to clients’ legal matters.  He represents entrepreneurs through all stages of their ventures’ development, including advice on structure, initial company formation and organization, private financings, commercial transactions, mergers and acquisitions and liquidity events.  In addition, Mauro represents investors in all aspects of corporate finance transactions and also focuses his practice on the representation of private investment fund advisers and portfolio managers

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

¹OIG Advisory Opinion 21-02.
²42 USC § 1320a-7b(b).

DID YOU SIGN A NON-COMPETE AGREEMENT?

By Mauro Viskovic, Esq.
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These days, more and more companies are requiring their employees to sign restrictive covenant agreements.  These are agreements that are designed to protect a business’s legitimate interests and assets from being misappropriated or improperly utilized by a former employee.  Such agreements often contain non-competition provisions, which may provide that an employee is prohibited from working with a competitor of the employer or starting a competitive business during employment and for a period after his or her employment ends. 

Non-compete restrictions are common in the context of physician employment contracts, which are discussed here:  https://weisszarett.com/2020/06/01/understanding-physician-employment-contracts-3/.  In addition, in recent years, the NYS Attorney General’s office has investigated suspected misuse of noncompetes for rank-and-file employees, and has reached agreements with employers to stop using non-competes for employees who do not have access to trade secrets or confidential information.

New York resident individuals who have signed non-compete agreements and are transitioning between employers or starting a new business venture must analyze the extent of the applicable non-compete restrictions and whether such restrictions may be enforceable under New York law.  In addition, the prospective employers or business partners of such individuals must be equally diligent regarding those non-compete restrictions.

New York courts have noted that there are powerful public policies weighing against depriving people of their ability to earn a living, but have also held that non-competition agreements are enforceable so long as they meet an overriding limitation of reasonableness. For a non-compete restriction to be deemed reasonable under New York law, it must meet each of the following three conditions:

1.        The restriction is required for the protection of the legitimate interest of the employer;

2.        The restriction does not impose undue hardship on the employee;

3.        The restriction is reasonable in time period and geographic scope; and

3.        The restriction is not injurious to the public.

In addition to the above items, former employers seeking to enforce a non-compete agreement will need to evidence that the employee was given consideration, i.e., something of value, in exchange for agreeing to the non-compete restriction.  Examples of consideration include new employment, a promotion, garden leave payments, a raise or any form of bonus compensation.  Continuing employment (“sign this or you’re fired”) is also valid form of consideration for at-will employees.  The value of consideration given to the employee will influence any determination of the reasonableness of the non-compete restriction.  

In that regard, an additional critical issue is the skill set of the employee.  New York courts will generally uphold a non-compete restriction against a former employee whose services are “unique or extraordinary”.  To meet that standard, it would need to be shown that the services are irreplaceable or that the loss of services would cause irreparable injury to the employer.   

Geography, duration and scope are important factors for establishing the reasonableness of the non-compete restriction.  None of those factors, however, should be reviewed independently.  For example, a New York court upheld an unlimited non-compete restriction in a case where the restraint was limited to only a small geographic area.  The scope of the restriction, however, generally cannot be overbroad, such as the restricting of employment in an entire major industry without regard to the specific type of services provided by the individual.

Employees in transition, along with their future prospective employers or business partners, should carefully assess any applicable non-compete agreements with a qualified attorney to minimize or avoid any potential liability.  Each situation is unique and will merit its own considerations in evaluating the reasonableness of the non-compete restriction.

Weiss Zarett provides legal counsel and solutions to businesses and individuals for a broad variety of corporate law and employment law matters. If you need guidance with a matter concerning a current or prospective non-compete agreement, please email Mauro Viskovic, Esq. at Mviskovic@weisszarett.com or call us at (516) 627-7000.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care and financial services industries, including corporate and transactional matters, employment, civil and administrative litigation, regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

EEOC TO RESUME DATA COLLECTION APRIL 26, 2021

By Carla Hogan, Esq.
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The Equal Employment Opportunity Commission (“EEOC”) enforces federal laws applicable generally to employers with 15 or more employees (age discrimination requires 20 employees) and prohibits discriminating against a job applicant or employee because of an employee’s protected characteristics such as race, gender and age, among others.  The laws apply to all work activities such as hiring, promotion, wages and benefits and firing.

On March 29, 2021, EEOC announced it will resume collecting work force data from private employers. The deadline for submitting 2019 and 2020 EEO-1 component data will be Monday, July 19, 2021. Public employers also have to submit, but at a later date.

Work place data is summary pay data that provides EEOC wage information broken down by race, ethnicity and gender.  It is used by EEOC to help identify pay trends, inform investigations and focus resources.  It is human resource summary data, not individual pay dat., The goal is to help identify and evaluate pay disparities.

The collection had been suspended last year due to COVID.  Therefore, employers are being given 12 weeks (rather than ten weeks) to enter their data into the EEOC’s portal because it is a two year collection.  This obligation to produce and file the data through their portal is incumbent upon employers with 100 or more employees and federal contractors with 50 plus employees.

Employers can obtain more information at https:/EEOCdata.org. You should receive an email from the EEOC beginning March 29, 2021.  When collection begins, there are resources available at that website to help employers with their filings.  

Weiss Zarett Brofman Sonnenklar & Levy, P.C provides legal counsel and solutions to businesses and individuals for a broad variety employment law matters. If you need guidance with a matter concerning a current or prospective employment issue, including matters relating to discrimination, please email Carla Hogan, Esq. at 518-527-9981 or call us at (516) 627-7000.

Weiss Zarett is a Long Island law firm with an Albany, New York presence, providing a wide array of legal services to the members of the health care and financial services industries, including corporate and transactional matters, employment maters, civil and administrative litigation, regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

HHS Exercises Discretion and Declines to Enforce HIPAA Privacy Rules for Use of Web-Based COVID-19 Vaccine Appointment Scheduling Platforms

By Seth A. Nadel, Esq.
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On January 19, 2021, the U.S. Department of Health and Human Services (HHS) issued a notification that the Office of Civil Rights (OCR), the entity responsible for enforcement of HIPAA privacy rules, would exercise its discretion and decline to impose penalties against certain covered entities or their business associates with respect to the use of online scheduling applications to schedule individual patient appointments to receive a COVID-19 vaccination. 

Per the notification, OCR recognizes that certain covered health care providers or their business associates have chosen to use web-based scheduling applications (“WBSA’s”) to schedule patients in connection with large-scale COVID-19 vaccination efforts. These WSBA’s are “non public facing,” in that they are not viewable by the public and are only intended to be viewed by the patient, provider and scheduling entity. WSBA’s and the companies which provide them, by their very nature, are also considered “business associates” of the HIPAA-covered healthcare entities which use their platforms.

Generally, the HIPAA Privacy Rules allow a covered entity to share Protected Health Information (PHI) with a business associate, but only pursuant to a written business associate agreement (BAA) or in accordance with pre-existing federal regulations established by HHS. However, recognizing the public need to schedule large numbers of COVID-19 vaccine appointments within  a short period of time, OCR has opted not to impose penalties for noncompliance with these regulatory requirements when either covered entities or their business associates are, in good faith, using WSBA’s to schedule such appointments.

As to the requirement of good faith, the notification outlines the recommended and reasonable safeguards that these entities should employ in their use of WSBA’s, which mirror the general requirements for the handling of HIPAA-protected information. These include: (1) using and disclosing only the minimum PHI necessary for the purpose of scheduling; (2) use of encryption technology; (3) enabling maximum privacy settings on the scheduling software; (4) ensuring that storage of PHI is only temporary; and (5) ensuring that WBSA vendors do not disclose PHI to any third party in a manner which is inconsistent with HIPAA rules.

HHS explicitly states that “[failure] to implement recommended reasonable safeguards above will not, in itself, cause OCR to determine that a covered health care provider or its business associate failed to act in good faith” for the purposes of the notification. However, from a practical compliance standpoint, a covered entity or business associate should still take tangible steps to implement reasonable safeguards, such that they may more easily be able to show good faith efforts in meeting OCR’s requirements should they later be required to do so. HHS also encourages covered health care providers to use WBSA’s which explicitly represent that they support compliance with applicable HIPAA rules.

It should be noted that the scope of the notification does not extend to appointment scheduling technology that links directly to a covered entity’s EHR system. The notification likewise does not extend to any activities other than the scheduling of COVID-19 vaccinations, including other activities related to COVID-19 vaccination or treatment in any other respect. This includes determining an individual’s eligibility for receiving a COVID-19 or screening a patient for COVID-19 prior to an appointment. The notification also does not extend to activities undertaken without any reasonable safeguards in place, underlining the importance of documenting that at least some manner of safeguarding is implemented.

Although announced in late-January, the notification is retroactive to December 11, 2020, and will remain in effect until the expiration of the public emergency declaration, or until HHS determines in its discretion that the public emergency no longer exists. A copy of HHS’s notification may be found here.

Weiss Zarett has assisted numerous physicians and health-related businesses in connection with concerns regarding HIPAA compliance and other regulatory issues. If you have questions about any such issues, please reach out to Seth A. Nadel, Esq. at snadel@app-60705ed4c1ac183264fb7857.closte.com or 516-627-7000.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.