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Attorneys – Fees – False Claims Act

1st Circuit

By: R.I. Lawyers Weekly Staff//December 27, 2022//

Attorneys – Fees – False Claims Act

1st Circuit

By: R.I. Lawyers Weekly Staff//December 27, 2022//

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Where two relators who filed a qui tam complaint under the False Claims Act sought an award of counsel fees after the United States executed a settlement agreement with the defendant, a U.S. District Court judge’s decision to deny their fee request should be upheld because the payment they received via a private sharing agreement was not a relator’s share within the meaning of 31 U.S.C. §3730(d)(1) and thus they are not entitled to fees under that provision.

“In these two different qui tam cases in which the United States executed a settlement agreement with defendant AthenaHealth, Inc. (‘Athena’) and multiple relators, relators Cheryl Lovell and William McKusick appeal from the district court’s denial of their entire claim for attorneys’ fees under the False Claims Act (‘FCA’), 31 U.S.C. §3729 et seq. The district court did so on the basis that such fees were available only to first-to-file relators and Lovell and McKusick were not first-to-file relators. …

“The first-to-file relator, Geordie Sanborn, appeals from the omission of certain claimed fees from his award of attorneys’ fees. Both appeals present questions of first impression for this court.

“We affirm as to Lovell and McKusick on narrow reasoning, confined to the facts concerning the provisions of the government’s settlement agreement. We conclude that Lovell and McKusick did not receive a relator’s share and so are not entitled to attorneys’ fees. We leave for another day the issue of whether such fees are restricted to first-to-file relators. We also do not address different factual situations where the settlement agreement reached by the United States provides for payment of relator’s shares to multiple relators. We affirm as to Sanborn, rejecting his argument under the text of 31 U.S.C. §3730(d)(1) that he may be allowed fees associated with his claim in which the government did not intervene. …

“We begin with Lovell and McKusick’s claim to attorneys’ fees for their Kickback Claim under §3730(d)(1). Athena defends the district court’s denial of fees on two independent bases: (1) that the FCA’s first-to-file bar, 31 U.S.C. §3730(b)(5), precludes Lovell and McKusick, who filed their complaint after Sanborn, from recovering attorneys’ fees on this claim and (2) that receipt of a relator’s share is a precondition for recovery of fees under §3730(d)(1) and that the payment Lovell and McKusick received from Sanborn via a private sharing agreement was not a relator’s share. We reach only the second argument. …

“There are two conditions for receipt of a relator’s share within the meaning of the statute that are stated in the first sentence of §3730(d)(1). First, the relator must have brought an ‘action’ in which the government intervenes. 31 U.S.C. §3730(d)(1). Second, the relator must receive a payment of ‘at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim.’ … The ‘such person’ who is entitled to reasonable attorneys’ fees is defined as one who meets these requirements and receives a relator’s share. …

“Other courts have agreed that relators do not receive a statutory relator’s share when they receive funds via a private sharing agreement. …

“This conclusion is supported by the FCA’s overall statutory scheme. …

“Relators do not receive a relator’s share within the meaning of the statute, see 31 U.S.C. §3730(d)(1), when the payment they receive is pursuant to a private agreement under which they receive payment from a relator who has received a relator’s share. Lovell and McKusick did not receive a relator’s share within the meaning of §3730(d)(1) and thus are not entitled to fees under that provision.”

Other issue

“We next consider Sanborn’s claim to attorneys’ fees for work on his [electronic health record (HER)] Compliance Claim, in which the government did not intervene. In the district court, Sanborn moved for fees solely pursuant to § 3730(d)(1). We conclude that Sanborn is not entitled to fees associated with his EHR Compliance Claim under the text of §3730(d)(1) and that he has waived any entitlement to fees under §3730(d)(2).

“The relevant language in §3730(d)(1) is the first clause: ‘If the Government proceeds with an action. …’ 31 U.S.C. §3730(d)(1) (emphasis added). The question is whether ‘action’ refers to a case as a whole or to individual claims. We conclude that the latter reading is the better construction of the statute. …

“We … hold that government intervention in an ‘action’ under the first sentence of §3730(d)(1) means government intervention in an individual claim.”

United States ex rel. Lovell, et al. v. AthenaHealth, Inc. (Lawyers Weekly No. 01-267-22) (20 pages) (Lynch, J.) Appealed from a decision by Gorton, J., in the U.S. District Court for the District of Massachusetts. Hyland Hunt, with whom Ruthanne M. Deutsch, Deutsch Hunt PLLC, Suzanne E. Durrell and Whistleblower Law Collaborative LLC were on brief, for appellants Cheryl Lovell and William McKusick; Andrew D. Schlichter, with whom Joel D. Rohlf and Schlichter Bogard & Denton were on brief, for appellant Geordie Sanborn; Sarah E. Walters, with whom Mark W. Pearlstein, Natasha L. Dobrott and McDermott Will & Emery were on brief, for the defendant-appellee (Docket No. 22-1245 and 22-1246) (Dec. 21, 2022).

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