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Category: Qui Tam / Whistleblower

Judge Settles $21M Attorney Fee Allocation Dispute

December 20, 2023

A recent Law 360 story by Micah Danney, “Judge Divvies Up Atty Fees From $785M FCA Deal”, reports that a Massachusetts federal judge issued a more than 70-page finding of facts settling an attorney fee dispute over $21 million from a seven-year-old judgment, saying two firms earned portions of what they sought for their early work on the case.  U.S. District Judge Douglas P. Woodlock held that Sakla Law Firm in New Orleans gets 55% while the two firms, Vezina & Gattuso of Louisiana and Boone & Stone of Georgia, pushed out before a Pfizer subsidiary's $785 settlement, get 30% and 15% respectively. 

While Sakla had argued the firms were absent from eight years of litigation that followed their exit, the judge determined their efforts contributed to the federal government's intervention on behalf of one of the qui tam case's relators.  "In this respect, the work performed here to get the government to intervene, particularly after an initial declination when the original complaint was filed, was a significant and important development to the overall success of the case," Judge Woodlock said.

The judge cited U.S. Department of Justice statistics showing a 90% success rate for cases where the government intervenes, taking primary responsibility for the litigation, compared to a success rate of 25-30% without its intervention.  Vezina & Gattuso and Boone & Stone had accused Sakla of trying to take credit for the initial research and legal foundation they provided, saying they were promised a three-way fee split in a contract that was still enforceable.

Sakla had countered that it was solely responsible for convincing Wyeth Pharmaceuticals Inc. of its exposure, and said it "pinned down" witnesses, argued and won motions in court, and calculated damages in a tedious endeavor that required hospital invoices to be individually analyzed.  Relator William St. John LaCorte, a hospital physician, fired Vezina & Gattuso and Boone & Stone in 2008.

LaCorte had claimed that Wyeth overbilled Medicare and Medicaid from 2001 to 2006 in violation of the government's "best price" provisions.  Pfizer acquired Wyeth in 2009 and took over its defense and settlement.  The companies argued that Wyeth reasonably interpreted the law and believed that its rebate program was legal.

The federal government and 36 states intervened in LaCorte's suit as well as a similar claim from a hospital sales representative, Lauren Kieff. Their claims ended in the 2016 settlement, of which nearly $120 million went to the whistleblowers and about $24 million has already been paid to attorneys.  The government had initially declined to intervene in support of LaCorte's allegations but was always on board with Kieff's claims, Judge Woodland said. He also noted that the complaints were "not fighting in the same weight class."

"Nevertheless, I find Dr. LaCorte's team, including V&G and B&S, was eventually able to capture the government's attention and sufficiently present the merits of the case so that the government intervened largely because of their efforts," the judge said.

Bank Whistleblower Wins $2.4M in Attorney Fees

September 29, 2023

A recent Law 360 story by James Mills, “Auditor’s Atty Wins $2.4M Fees in Bank Whistleblowing Case”, reports that an attorney representing a former BofI Federal Bank employee was mostly successful in winning more than $2.4 million in fees for work on a suit that resulted in a jury finding the employee was illegally fired from the bank, with a California federal judge applying a multiplier of 1.1 "to account for contingency risk."

Plaintiff Charles Matthew Erhart had sued the bank for whistleblower retaliation and wrongful termination, with the suit taking seven years to reach a jury.  After he won his case, Erhart asked the court to recover $3 million in attorney fees for an estimated 4,470 hours of work, but also requested the court enhance the fee award to a total of $7.3 million.

"The court agrees Erhart is entitled to recover fees," U.S. District Judge Cynthia Bashant wrote in the order.  "That said, some of the hours his counsel spent will not be included in the lodestar.  And the motion stumbles when it comes to justifying counsel's hourly rates.  Ultimately, the court awards $2,405,559.20 in attorneys' fees."

Erhart worked for Bank of the Internet Federal Bank, now known as Axos Bank, as an auditor for about 18 months, starting in 2014.  According to the order, when he found evidence of wrongdoing, he reported it to a federal regulator.  Soon after, he was terminated, with the bank saying he was incompetent at his job.  Erhart filed a lawsuit for whistleblower retaliation with 10 causes of action which described over a dozen instances of alleged wrongdoing. His attorney tipped off The New York Times, which wrote about Erhart's lawsuit. The bank's stock plummeted 30% and several securities class actions were filed.

The bank responded by suing Erhart, contending it was his intention to "bring down the bank." With that suit came countless motions by the bank. Over the next several years, the parties and the court whittled down all the claims to the essence of the case: Erhart's whistleblower retaliation and wrongful termination claims.

In spring 2022, the case was finally heard in a three-week trial with Erhart prevailing.  The jury found the bank violated the Sarbanes-Oxley Act, California Labor Code section 1102.5 and California public policy when it terminated Erhart.  The jury awarded him $1 million for emotional distress and harm to his reputation, and another $500,000 on a California state law defamation claim.

The jury also said Erhart was entitled to punitive damages, but was deadlocked over an amount. A second trial to determine an amount resulted in the jury saying punitive damages were not appropriate.  Erhart's estimate of 4,470 hours of attorneys work breaks down to lead counsel expending approximately 1,581 hours, associate counsel spending 2,069 hours, their paralegals working for 780 hours, and one additional attorney working 40 hours.  However, the bank argued these hours are unreasonable and asked the court to exclude 1,265 hours.

The court noted the case took seven years to get to trial and most of the hours were justifiable, but did eliminate some of the hours the bank requested. Similarly, it ruled the attorney's rates were higher than standard for San Diego and the Southern District of California.  "The prevailing rates in the Southern District of California are generally lower than the Central District of California," wrote Judge Bashant. "And it is commonplace for attorneys based in one district to solicit work in the other.  Courts nevertheless reject attorneys' attempts to cherry-pick and run with higher rates from the Central District."

Fee Request Reduced in Hospital Whistleblower Action

February 23, 2021

A recent Law 360 story by Nathan Hale, “Hospital Whistleblower’s $1M Fees Award Falls Short of Goal, reports that a whistleblower whose complaint against now-defunct hospital chain Health Management Associates Inc. helped the federal government secure more than $260 million to settle fraud charges will receive less than one-twelfth of his $12 million attorney fees request but may get more for himself, a Florida federal judge ruled.  Fort Myers-based U.S. District Judge John E. Steele's award of $952,480 to relator Bradley Nurkin, who was previously chief executive officer of the HMA-owned Charlotte Regional Medical Center, ended Nurkin's lengthy fight with HMA over how much Nurkin should recover under the fee-shifting provision of the False Claims Act.

"The Supreme Court has stated that 'a request for attorney's fees should not result in a second major litigation.'  That ship sailed long ago in this case," Judge Steele said.  In a 51-page order, the judge rejected HMA's argument that he should eliminate the fees award as a sanction against Nurkin for alleged "grossly excessive" or "outright fictitious" billing estimates, but also rejected several of Nurkin's arguments for how to calculate the proper amount.

"While the court will make reductions to the requested attorney fees and expenses, it will not do so as a sanction under its inherent authority," the judge said.  But the court also rejected the position taken by Nurkin and his lead counsel Edward Sanders that any award should go directly to Nurkin's attorneys.

"If Nurkin owes Sanders fees for services not encompassed by the FCA representation, then obviously he may use any of his resources, including these awarded fees, to pay his obligations.  However, this award of attorney fees does not belong to Sanders, but to Nurkin, as the relator," Judge Steele said.

"By all accounts, the recovery made by the government attributable to Nurkin's case was excellent.  The resulting dollar amount of Nurkin's share was substantial enough to result in a contingent attorney fee which was ample and did not need to be supplemented to arrive at a 'reasonable' amount," the judge added, explaining why this case was not one where the award belongs to the relator's counsel.

Nurkin, who received just under $15 million of the $93.5 million the government attributed to his specific case from the 2018 settlement — it had consolidated eight cases against HMA as a multidistrict litigation — already has paid his attorneys one-third of that amount, more than $4.9 million, under a contingency fee contract, according to the order.  In his motion, he presented the court with three figures based on it awarding fees using either a contingency fee basis, a lodestar or and enhanced lodestar method.

His request under the contingency fee basis came out the highest at more than $11.9 million, which represented 15% of the $79.5 million recovered by the government after paying Nurkin his share, but Judge Steele said the U.S. Supreme Court has ruled that courts should use the lodestar method to calculate a reasonable attorney fee in FCA cases.

Judge Steele also pointed out that Nurkin's contingency fee request, based on an expert witness's suggestion, would be grossly excessive, coming out to an hourly rate of $2,581 based on the number of hours he estimated his lawyers worked on the case — on top of the nearly $5 million they already received from him.  Under the lodestar method, in which a court determines a prevailing market billing rate and then multiplies that by a reasonable number of hours expended on the case, Nurkin requested $4.1 million and also suggested applying a multiplier of 2.23 for an "enhanced lodestar" request of $9.2 million.

Judge Steele rejected Nurkin's argument for $894 as a reasonable hourly rate, which he based on the case having been transferred to the District of Columbia, where it was settled, and instead found it should be based on Fort Myers, where it was first filed and the majority of his attorneys' work was performed.

The court instead concluded on a rate of $400 an hour for Sanders and co-counsel Robert Branning and $300 for Bethany Johnson, a younger attorney who helped prepare the application for attorney fees.  Judge Steele declined the HMA's request to reduce the hourly rate for work that a larger firm would have assigned to an associate, saying he would make any needed adjustments on the number of hours allowed.

On that front, Judge Steele broke down Nurkin's total request of 4,618.55 hours into the periods spent prior to filing the complaint, litigating prior to the government's intervention, after government intervention and on the attorney fee application, looking at specific tasks within those periods.  In total, the court approved 2,391.2 hours.  In terms of the time spent preparing the attorney fee application, the judge allowed 40 hours out of 457.8 asserted by Nurkin.

Judge Steele also denied Nurkin's request for a multiplier, saying he found the lodestar calculation "takes into account all factors which may be properly considered in this case."  The judge also declined to award prejudgment interest on the fees award. He awarded $7,232.70 in cost and expenses.  While far from the high point of Nurkin's request, Judge Steele's award still was several times the $229,544 suggested by HMA, according to the order.

$11M Fee Request in Home Health Care FCA Case

January 19, 2021

A recent Law 360 story by Sarah Jarvis, “Attys Want $11M After Record Home Health Care FCA Deal,” reports that a whistleblower is seeking more than $11 million in attorney fees and costs for a $57 million deal in his suit alleging the Visiting Nurse Service of New York defrauded the government, saying the figure is reasonable for the scope and outcome of the case.

Former VNSNY executive Edward Lacey asked a New York federal court for an order requiring the agency to pay him more than $11,147,000 in fees, costs and expenses incurred in Constantine Cannon LLP's successful litigation of the case, which resulted in a record deal last June to resolve Lacey's False Claims Act suit.  Lacey had claimed that VNSNY, the largest not-for-profit home health care agency in the U.S., billed for services it never provided and disregarded patients' formal treatment plans.

"Relator is seeking payment for a total attorneys' fee lodestar of $10,110,337.50," Lacey said.  "This amount is reasonable by any objective measure based on [Constantine]'s hourly rates and the hours the firm worked to secure this historic result."  Lacey said the firm spent 17,374 hours in attorney and legal support time on the case and used the smallest team possible to avoid duplicating resources, noting that only two lawyers worked on the case for its first 18 months.  After that, another lawyer joined in October 2015 and another in January 2016, but that principal team didn't expand again for almost two years to handle an accelerated schedule, according to Lacey's memorandum.

In support of his request, Lacey also noted the quality of the result, saying the $57 million settlement is one of the largest home health care fraud settlements ever and the only one to successfully challenge the failure to comply with patient plans of care.  Lacey said the settlement "hopefully remedies — or at least turns a regulatory spotlight on — a practice that adversely affects millions of sick and elderly patients across the country."

June's settlement ended Lacey's claims that VNSNY billed Medicare and Medicaid for therapy and services that doctors never provided and maintained an "accept all referrals" policy regardless of capacity constraints. VNSNY did not admit liability as part of the deal and maintains that it didn't bill for visits doctors never provided.  As part of the settlement, the federal government was stipulated to receive $50.1 million of the settlement, with New York state getting about $6.8 million.  Lacey was then awarded a 29% share of the total $57 million award, his counsel said, and Lacey noted in his memo that this amount was the outer limit of what the government was allowed to award.

UBS Whistleblower Awarded $1.8M in Fees in $1M Jury Verdict

December 16, 2020

A recent Law 360 story by Jack Queen, “UBS Whistleblower Naps $1.8M in Atty Fees on $1M Jury Win,” reports that a Manhattan federal court awarded a former UBS Securities analyst who won a $1 million retaliatory firing verdict $1.77 million in attorney fees and costs, granting half the sum requested by his lawyers at Stulberg & Walsh LLP and Herbst Law PLLC.  U.S. District Judge Katherine Polk Failla said the case was one of the "closest [her] court has ever observed" in her 74-page order, which parsed seven years of tenacious litigation between Trevor Murray and UBS in two separate cases that yielded five published opinions and a $3.2 million request for fees that the investment bank pilloried as "jaw-dropping" and "excessive."

Judge Failla slashed Murray's fee request for both of his firms, finding that while he notched a victory in a developing area of the law against a well-armed opponent, there were "enormous disparities" between what Murray sought, what he got and what his attorneys ultimately asked for.  "Putting to the side the policy goals ostensibly vindicated by the jury's verdict, the fact remains that plaintiff obtained significantly less relief, quantitatively and qualitatively, than he sought," Judge Failla said.

Murray sought $14 million in damages under the Sarbanes-Oxley Act in a case Judge Failla described as "far from a slam dunk."  Jurors awarded the former mortgage-backed securities analyst about $1 million in 2017, finding he was fired for refusing to skew his research to impress investors but concluding he wasn't entitled to damages for future wages.  Murray argued that substantial fees were warranted because he secured an extremely rare trial win on a Sarbanes-Oxley retaliation claim after weathering a years-long onslaught from UBS' legal team.  Healthy compensation for his attorneys would encourage other lawyers to represent whistleblowers, he said.

UBS countered that Murray's lawyers "wasted countless hours in pursuing losing positions" and won only a "'success' worse than defeat" after years of fighting.  Murray won $653,300 in back pay and $250,000 in noneconomic damages plus interest while striking out on future pay and reinstatement, UBS noted.  Judge Failla found merit in both positions but still trimmed Murray's hours significantly, pointing to the gulf between his demand and award, the "top-heavy" billing practices of his lawyers and their litigation and staffing strategies, which she said led to wasted effort.

Murray waited until the eve of trial to hire Herbst Law because Stulberg & Walsh had inadequate trial experience to argue the case, which Judge Failla said led to duplicative billing.  Murray also mothballed his initial claim under the Dodd-Frank Act when it went to arbitration only to see it gutted by the U.S. Supreme Court's decision in Digital Realty Trust Inc. v. Somers , which found plaintiffs can only qualify as whistleblowers under Dodd-Frank if they go directly to the U.S. Securities and Exchange Commission.

"The court does not fault plaintiff or his counsel for not being prescient," Judge Failla wrote.  "That said, plaintiff and his counsel made strategic litigation decisions that had dramatic impact on his legal bills."  In a statement to Law360, Murray's attorney Robert L. Herbst said the "huge reduction disincentivizes civil rights lawyers and their clients to take on these difficult and protracted legal struggles against major law firms whose billings and hourly rates are double ours."  Robert Stulberg concurred, adding that "if courts do not believe that vindication of a whistleblower's rights, and a million-dollar judgment, are a 'success,' then the reason for fee-shifting in civil rights statutes has not been served."