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Two of the country's most prominent law firms just got handed a bill few attorneys ever see. A Georgia federal judge ordered a $2 million sanction against defense attorneys from Kirkland & Ellis LLP and Skadden Arps Slate Meagher & Flom LLP, describing their conduct in a fraud case as "a widespread, long-running cover-up" built around repeatedly concealing evidence damaging to their client.

The Sanction and Its Purpose

U.S. District Judge Marc T. Treadwell said Wednesday that the two firms agreed to pay $2 million for withholding evidence and engaging in discovery abuse during the underlying False Claims Act case. Rather than simply compensating the opposing side, the funds will instead go toward promoting "instruction on the subjects of ethics and professionalism in Georgia's accredited law schools," according to the judge, with payment due within 10 business days.

A Scathing June Ruling Sets the Stage

Judge Treadwell's Wednesday order attached a June ruling for context, one that pulled no punches in describing the conduct of attorneys representing defendant eClinicalWorks LLC, an electronic health records software provider. The judge characterized the actions of Geoffrey Wyatt of Kirkland and Richard Bernardo of Skadden as "egregious."

What the Cover-Up Actually Involved

According to the judge, the scheme centered on concealing a critical fact: one of eClinicalWorks' key expert witnesses had overlapped with, participated in, and relied upon the work of the company's own litigation consultants. Judge Treadwell found the attorneys repeatedly hid evidence unfavorable to their client and then lied about having done so.

"Clear and convincing evidence shows that eCW's misconduct — its own and misconduct imputed from its lawyers — constitutes subjective bad faith," Judge Treadwell wrote in the June filing. "ECW repeatedly lied to the relators and the court for strategic gain."

In a footnote, the judge went further still, adding that "even if the evidence did not directly establish subjective bad faith, the misconduct here is so egregious that it could only be committed in bad faith" — leaving essentially no room for an innocent explanation.

Excuses That Didn't Hold Up

The June order also noted that the court had repeatedly warned eClinicalWorks and its attorneys that "claims of mistakes and forgetfulness, even if credible, do not excuse discovery abuse, particularly abuse on the scale seen in this case" — a warning that apparently went unheeded until this latest, far larger sanction.

Not the First Time Around

This wasn't eClinicalWorks' first brush with sanctions in the case. Judge Treadwell noted that before this latest round, the company had already been sanctioned twice previously for withholding evidence, with the judge earlier ordering eClinicalWorks to cover the plaintiffs' attorneys' costs and fees.

The Plaintiffs' Attorney Reacts

Robert Snyder of Cannella Snyder LLC, counsel for the plaintiffs, told Law360 Pulse Friday that his clients have recovered "a little more than $1.5 million in attorneys' fees and expenses because of the court's three sanctions orders."

A Sanction Unlike Any He's Seen

Snyder said he'd previously only ever seen sanctions take the form of awarded attorneys' fees, calling this the first instance he's encountered where a sanction gets paid directly to the court for a separate purpose entirely — and by far the largest sanction amount he's ever witnessed in his career.

"It is uncommon that lawyers get sanctioned, in my experience, and the judge devoted a lot of time and energy to it, and we're grateful that he took it very seriously," Snyder said. "Hopefully, it sends a message to attorneys and law firms that engaging in this type of conduct is going to cost you. There's a lot of reasons why you shouldn't do it. Obviously, as lawyers, we have ethical obligations not to do things like that, but making people pay when they break the rules is one of the few things that the court can do. We were grateful that the court stuck with it even after the case was over."

The Underlying Case

The lawsuit itself dates back to 2018 and was ultimately settled midtrial in July, according to Snyder, who said the specific settlement terms remain confidential.

The Fraud Allegations at the Core

Plaintiffs Alex Permenter, Eric Rodighiero and Chris Wheeler alleged that eClinicalWorks fraudulently obtained certification for its software, a scheme that allegedly caused medical providers to submit false claims, ultimately costing the government millions in federal healthcare reimbursement and incentive payments.

No Comment From the Firms Involved

Counsel for eClinicalWorks and representatives from both Kirkland and Skadden did not immediately respond to requests for comment Friday.

The Legal Teams Involved

The plaintiffs are represented by Cannella Snyder LLC, Cross Kincaid Baskam LLC and Adams Law Firm. eClinicalWorks is represented by James Bates Brannan Groover LLP, Aaron Katz Law LLC, Kirkland & Ellis LLP, Caplan Cobb LLC and Skadden Arps Slate Meagher & Flom LLP.