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United States v. Patterson

United States District Court, W.D. Kentucky, Louisville Division

September 4, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
JANICE PATTERSON, Defendant.

          MEMORANDUM OPINION & ORDER

          Colin H Lindsay, Magistrate Judge United States District Court.

         Before the Court is the Motion to Disqualify Counsel (DN 78) filed by the United States. The United States sought to disqualify James A. Earhart (“Earhart”), appointed counsel for Defendant Janice Patterson (“Patterson”). Patterson filed a response (DN 84), and the United States filed a reply (DN 85). The Court held a hearing on the United States' Motion on August 19, 2019 at which it heard the arguments of counsel and testimony from witnesses. (DNs 92, 94.)

         For the reasons set forth below, the United States' Motion to Disqualify Counsel (DN 78) is DENIED.

         I. BACKGROUND

         On March 9, 2017, Earhart was appointed to represented Patterson's husband, Marvin Patterson (“M. Patterson”), in the Southern District of Indiana. Order Appointing Counsel, DN 12, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. Mar. 9, 2017). M. Patterson was charged with two counts of possession of a machine gun in violation of 18 U.S.C. §§ 922(o), 924(a)(2) and one count of possession of a sawed-off shotgun in violation of 26 U.S.C. §§ 5845, 5861(d), 5871. Indictment, DN 1, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. Feb. 28, 2017). The gun charges arose from a search warrant issued for M. Patterson's home that was executed as part of an investigation of Patterson for health care fraud. (DN 95, at Gov't's Ex. 1.) On the date the warrant was executed and prior to Earhart's representation of him, M. Patterson gave a recorded statement to law enforcement that overwhelmingly focused on the investigation of health care fraud and not the firearms discovered in the home and for which he was eventually charged. (DN 78, at Ex.F; DN 80.)

         As part of his representation of M. Patterson, Earhart filed a motion to suppress the fruits of the search warrant arguing that the affidavit justifying the search warrant was unsupported by probable cause and the seizure of the firearms exceeded the scope of the warrant. Motion to Suppress, DN 25, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. Sept. 12, 2017). While the United States filed a response to the motion, and Earhart filed a reply, the district court never held a hearing on the motion because the parties reached a plea agreement. Courtroom Minutes, DN 37, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. Feb. 14, 2018). M. Patterson pleaded guilty to possession of a sawed-off shotgun, and the United States dismissed the other two counts of the indictment. Courtroom Minutes, DN 48, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. July 24, 2018). Earhart filed a sentencing memorandum and objections to the presentence investigative report. Sentencing Memorandum, DN 45, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. July 3, 2018). M. Patterson was ultimately sentenced to one year of probation. Judgment, DN 49, USA v. Patterson, No. 4:17-cr-06-SEB-VTW (S.D. Ind. July 26, 2018).

         On June 27, 2017, Patterson was indicted in the instant action for health care fraud, conspiracy to commit health care fraud, money laundering, aggravated identity theft, and conspiracy to unlawfully distribute controlled substances. (DN 1.) The charges relate to Patterson's actions during her management of the Kentuckiana Medical Clinic (“KMC”) and J.M. Autism Foundation (“J.M. Autism”). (DN 78, at PageID # 188.) Patterson was initially represented by retained counsel, Frank Mascagni. (DNs 11, 17.) After Mascagni moved to withdraw (DN 68), on November 20, 2018, the Court appointed Earhart to represent Patterson (DN 69).

         On June 10, 2019, the United States moved to disqualify Earhart based on his prior representation of M. Patterson. (DN 78.) The United States cited to evidence that M. Patterson was an authorized signer of multiple J.M. Autism bank accounts, is listed on the Indiana Secretary of State's website as an incorporator of J.M. Autism, acted as an ABA Services Coordinator for J.M. Autism, and received a 1099 from J.M. Autism in 2014. (DN 85, at PageID # 252.) Based on this evidence, the United States argued that M. Patterson “is an unindicted co-conspirator who had knowledge of and was participating in the crimes for which Janice Patterson is charged . . . .” (Id. at 253.) The United States also noted that the search warrant that resulted in M. Patterson's charges was issued as part of the investigation that led to Patterson's instant charges and stated that because of the overlap, it is likely Earhart received confidential information from M. Patterson that creates a conflict for his representation of Patterson.

         In response, Earhart argued that M. Patterson's gun charges and the instant charges against Patterson bear no relationship to each other save for the common search warrant. (DN 84, at PageID # 245.) He represented that he received no discovery from the United States as part of his representation of M. Patterson that related to the health care investigation outside from the search warrant and affidavit. (Id. at 245-46.) The Court held an evidentiary hearing on the United States' Motion on August 19, 2019. (DNs 88, 92, 94.)

         At the evidentiary hearing, the United States subpoenaed M. Patterson to testify. (DN 92, at PageID # 297.)[1] M. Patterson testified that he had retained another attorney to represent him in connection with this matter. (Id. at 298.) He indicated that he got the name of his new attorney from Earhart and that he retained his new counsel after he was served with the subpoena to testify. (Id. at 302-03.) The United States also called investigator Diane Hedges with the Indiana Attorney General's Office to testify regarding the investigation that let to these charges and service of the subpoena to M. Patterson (Id. at 303-04.) She testified that on the date she served the subpoena on M. Patterson, Patterson was present and stated that both she and M. Patterson were “represented.” (Id. at 305.) M. Patterson then stated that “this is all about Janice not having the same attorney representing her.” (Id. at 306.)

         Counsel for the United States then proceeded to ask Hedges a number of questions related to the investigation that led to the instant charges against Patterson and M. Patterson's relationship to the investigation. Hedges testified that she was investigating as fraudulent certain prescriptions written to M. Patterson using the DEA and NPI number of a physician who had left KMC and which were written after that physician left KMC. (Id. at 308-10.) She testified that she was also investigating similar suspicious prescriptions written to Patterson. (Id. at 311-12.) She stated that that she was presently investigating J.M. Autism and the J.M. Autism Trust for suspected fraud. (Id. at 312-13, 317.) She indicated that M. Patterson was both an incorporator of and served as the ABA Coordinator for J.M. Autism. (Id. at 312-13.) She testified that M. Patterson received a 1099 from the J.M. Autism Foundation Trust. (Id. at 315.) She also testified that M. Patterson was an authorized signer on several bank accounts for J.M. Autism and the J.M. Autism Trust. (Id. at 315-17.) She also testified that M. Patterson was listed as the Assistant Director of J.M. Autism on the Indiana Medicaid Provider form submitted to the state of Indiana. (Id. at 317-19.) Finally, she also testified that the search warrant executed in December 2016 of the residence shared by Patterson and M. Patterson was acquired as part of the health care fraud investigation. (Id. at 319.)

         While Earhart did not ask any questions of either M. Patterson or Hedges at the evidentiary hearing, Earhart represented to the Court that he advised M. Patterson to seek third-party counsel to discuss the instant motion to disqualify and to get advice about how to proceed. (Id. at 290.) Earhart stated that M. Patterson had produced an affidavit, with the advice of another attorney, regarding these issues. (Id. at 290-91.) In the affidavit, M. Patterson stated that after discussing the matter with his attorney Scott C. Cox, he “knowingly, intelligently, and voluntarily release[d] Mr. Earhart to discuss, testify and provide documents regarding the above-referenced matters.” (DN 95, at Def.'s Ex. 1.) He further stated that he “fully, knowingly, intelligently, and voluntarily waive[d] the attorney-client privilege between [him]self and James A. Earhart relat[ed] to” his prior criminal case in the Southern District of Indiana and the instant case against Patterson. (Id.) Further, upon inquiry by the Court, Patterson indicated that she waived any conflict to the extent one existed. (Id. at 322.) Finally, Earhart affirmed at the hearing that he did not learn or receive any confidential information from M. Patterson that bears on the current case against Patterson. (Id. at 296.)

         II. DISCUSSION

         A. ...


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