Court Rules Medicare Fraud Defendant’s Lawyer Not Required to Warn of Civil Liability Consequences

In a significant ruling for the legal profession, the Third Circuit Court of Appeals has determined that defense attorneys are not constitutionally required to advise clients about potential civil liability resulting from guilty pleas in criminal cases.

The case involves Nita Patel, who operated companies providing mobile diagnostic testing services to physician offices. Patel and her husband were at the center of a multi-million dollar Medicare fraud scheme that ultimately led to criminal convictions and subsequent civil liability.

According to court documents, when applying for Medicare approval to conduct specialized neurologic diagnostic testing, Patel’s husband falsely claimed that a licensed neurologist would supervise the procedures. Medicare approved the companies as service providers based on this misrepresentation. The companies then conducted tests with one of the owners—who was not a licensed physician—forging a doctor’s signature on test results.

The fraudulent operation generated more than $4 million before being exposed by a disgruntled employee who filed a qui tam action. In such civil actions, individuals who report fraud against the government may receive a portion of any monetary recovery if the case succeeds.

The employee’s report prompted a government investigation that resulted in criminal indictments against the Patels. The couple pleaded guilty in 2016, and the following day, federal authorities took over the qui tam lawsuit from the employee, asserting a False Claims Act cause of action.

The timing created a significant problem for the defendants. Their guilty pleas in criminal court essentially sealed their fate in the civil action, as those admissions could be used as evidence against them in the False Claims Act lawsuit.

This cascading effect prompted Nita Patel to file a motion under 28 U.S.C. § 2255, arguing that her defense attorney had provided ineffective assistance of counsel by failing to inform her that her guilty plea could be used against her in subsequent civil litigation. Patel’s argument relied heavily on the Supreme Court’s 2009 decision in Padilla v. Kentucky, which established that defense attorneys must advise non-citizen clients about the immigration consequences of guilty pleas.

Patel contended that this duty should extend to other collateral consequences of guilty pleas, including potential civil liability.

Despite having completed her prison sentence and supervised release, the Third Circuit determined that Patel still met the “in custody” requirement for bringing a § 2255 motion because she faced substantial civil consequences stemming from her conviction.

However, the court ultimately rejected her ineffective assistance claim. In its ruling last week, the Third Circuit held that Padilla does not broadly mandate that attorneys advise clients about all collateral consequences of guilty pleas. Instead, the court found that deportation represents a unique non-criminal consequence requiring proper attorney advice under the Sixth Amendment.

“The notion that if you rip off the government, you might be forced to pay the government back is not such a hard idea to wrap your head around,” noted legal commentator Thomas L. Root in analyzing the case. “Likewise, if you swear under oath that you committed a crime in doing so—necessary if you’re pleading guilty—you shouldn’t be shocked if another court relies on that admission.”

The ruling highlights the limited scope of Padilla and clarifies the boundaries of what constitutes constitutionally required legal counsel under the Sixth Amendment’s “reasonable professional assistance” standard as defined in Strickland v. Washington.

While the court acknowledged that discussing potential civil liability resulting from admitting criminal guilt to a $4 million fraud scheme would have been advisable, the failure to do so did not rise to the level of constitutionally ineffective assistance of counsel.

The case, Patel v. United States (Case No. 23-2418), was decided on October 17, 2025, and establishes an important precedent regarding the scope of defense attorneys’ constitutional obligations when advising clients considering guilty pleas in white-collar and healthcare fraud cases.