On January 25, 2022, the United State Court of Appeals for the 6th Circuit released an opinion awarding attorney’s fees to the whistleblower relators in the case of U.S. ex rel. Bryant, et al. v. Cmty. Health Sys., Inc, et al. The parties settled the underlying qui tam action in 2014 for almost 100 million dollars but left the allocation of attorney’s fees to be resolved by the Court. The Court’s decision resolves nearly seven and a half years of post-settlement litigation in which Community Health Systems (“CHS”) has refused to pay attorney’s fees to the whistleblower relators.
The proceedings began in 2009 when several whistleblowers alleged that CHS submitted fraudulent claims for medically unnecessary inpatient care to federal healthcare programs like Medicare and Medicaid. In 2014, CHS entered into a settlement agreement with the government and relators. In exchange for a $97 million payout, the government and whistleblowers agreed to dismiss all claims against CHS. However, the agreement failed to specify the allocation of the relator’s attorney’s fees, only saying:
All parties agree that nothing in this Paragraph or this Agreement shall be construed in any way to release, waive or otherwise affect the ability of CHS to challenge or object to Relators’ claims for attorneys’ fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d).
Post-settlement, CHS argued that relators are not entitled to fees under the False Claims Act (“FCA”) because the First-to-File Rule and Public Disclosure Bar prohibit their claims. Specifically, CHS argued that the First-to-File Rule barred all relators’ claims for attorney’s fees because the first relator had already settled with CHS. Also, CHS tried to use the Public Disclosure Bar to foreclose certain relator’s claims, as the claims were based upon information previously disclosed in a securities lawsuit against CHS.
The 6th Circuit shot down CHS’s First-to-File and Public Disclosure arguments believing them to contradict the goal of the FCA, explaining that if relators were not entitled to attorney’s fees, it would discourage future whistleblowers from reporting possible cases of fraud. Additionally, the Court ruled that each relator that receives a portion of the proceeds from the settlement satisfies the conditions to receive attorney’s fees under the FCA, saying:
All the relators in this case received a portion of the proceeds of the settlement, satisfying§ 3730(d)(1)’s conditions to receive attorney fees. After a defendant settles with both the relators and the government, § 3730(d)(1) does not require us to apply the first-to-file rule or public-disclosure bar to claims for attorney fees.
The 6th Circuit’s opinion sets a strong precedent for future qui tam cases in which the defendant refuses to pay attorney’s fees to the relator. The Court’s interpretation of the FCA ensures that any relator in a successful qui tam action that receives a relator’s share is also entitled to receive attorney’s fees paid by the defendant(s). Additionally, the Court’s opinion prevents the First-to-File Rule and Public Disclosure Bar from being used to invalidate the FCA’s fee provision in future cases. This case ensures that future relators are entitled to attorney’s fees following a successful whistleblower action and encourages future whistleblowers to come forward to report fraud.
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