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Hospital System Can Challenge Attorney Fees in FCA Case

October 3, 2019 | Posted in : Fee Collection, Fee Dispute, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Request

A recent Law 360 story by Adam Lidgett, “Hospital Chain Can Fight FCA Atty Fees, Judge Rules,” reports that hospital giant Community Health Systems (CHS) Inc. can challenge the pursuit of attorney fees by whistleblowers in False Claims Act (FCA) lawsuits alleging improper inpatient admissions, a Tennessee federal judge has ruled, citing murky settlement language.

U.S. District Judge Marvin E. Aspen held that a settlement agreement reached by CHS — in which it agreed to pay $97.3 million plus interest to end claims in various FCA cases — doesn't bar the company from contesting whether the whistleblowers were eligible to collect attorney fees.  The judge said that the whistleblowers, or relators, were aware "or had reason to know" that CHS intended to retain its ability to fight whether the relators could collect those fees.

"Even if we found that relators did not share CHS' interpretation of their rights under the settlement agreement, the evidence ... establishes that they knew of CHS' position," the judge wrote.  "Multiple communications also show that relators had reason to know of CHS' position."

The judge was careful, however, to note that his ruling did not decide whether the whistleblowers can actually collect those fees.  The decision stood in contrast to a recommendation from U.S. Magistrate Judge Barbara D. Holmes that interpreted the agreement in favor of the whistleblowers.  One group of relators had sought $2.65 million in fees, according to that recommendation.

The ruling came on remand from the Sixth Circuit, which in November 2016 scrapped a lower court's decision that CHS waived its right to challenge the fee award.  The company's appeal at the Sixth Circuit centered on whether a sentence in the settlement agreement meant CHS could only challenge fees under a specific FCA provision dealing with the reasonableness of fees, or instead could reserve its right to such challenges on any basis.  While a Tennessee federal judge in 2015 found the former, the Sixth Circuit held that the language was ambiguous and therefore warranted a remand for further proceedings.