421 F.Supp.3d 1241
N.D. Ala.2019Background
- Relators Rich Chiba and Drake Maples, former officers of Guntersville Breathables, Inc. (GBI), filed a qui tam False Claims Act suit alleging (1) undervaluation of imported "boot-foot waders" and (2) misclassification of Alaska Tuff Marine boots, causing underpayment of customs duties.
- The United States intervened and settled the undervaluation claim (the Covered Conduct); GBI paid $273,495.67 (including $151,942.04 restitution). The government moved to dismiss the settled claims with prejudice and the court granted dismissal.
- The United States gave Relators an approximate 12% share of the recovery; Relators then sought attorneys’ fees ($85,912.50 for 182.7 hours), costs ($1,234.41), and expert fees ($4,237.50).
- GBI opposed fees, arguing (a) Relators perpetrated the fraud and so should be disqualified, (b) government‑action and public‑disclosure bars preclude recovery, (c) the Relators achieved only partial success, and (d) some time entries were duplicative or excessive.
- The court held Relators were prevailing parties entitled to fees under § 3730(d)(1), rejected GBI’s broad disqualification argument, found the government‑action and public‑disclosure bars inapplicable here, disallowed limited time for negotiating the relators’ share, and awarded a preliminary fee of $83,715.00 plus costs and expert fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Are the Relators "prevailing" and entitled to attorneys’ fees under 31 U.S.C. § 3730(d)(1)? | Relators: yes — they received a share of the government’s proceeds, and § 3730(d)(1) mandates fees and costs for such relators. | GBI: challenges prevailing‑party status via other defenses but does not dispute that a relator receiving a share ordinarily gets fees. | Held: Yes. A relator who receives a share of proceeds is entitled to reasonable attorneys’ fees, expenses, and costs under § 3730(d)(1). |
| 2) Does alleged relator wrongdoing bar an award of attorneys’ fees? | Relators: § 3730(d)(3) only allows court to reduce relator’s share (or deny a share upon criminal conviction); it does not authorize denying fees where no criminal conviction exists. | GBI: Relators participated in the fraud and therefore should be denied fees. | Held: Rejected. Absent criminal conviction, alleged participation does not bar fees; § 3730(d)(3) permits adjusting the relator’s share but does not negate the mandatory fee award. |
| 3) Do the government‑action or public‑disclosure bars preclude the fee award? | Relators: those bars apply to qui tam actions/claims (and were not implicated after settlement/dismissal) and prior disclosure here was not a public or administrative penalty proceeding that would trigger the bars. | GBI: prior disclosures to Customs and the existence of agency activity invoke the government‑action/public‑disclosure bars, barring relief (and fees). | Held: Rejected. The 2016 Customs prior disclosure did not start a § 1592 penalty proceeding (no pre‑penalty notice), was not a public disclosure substantially the same as the complaint, and the settled/dismissed intervened claim eliminated the bars’ relevance. |
| 4) Should the lodestar be reduced for partial success, duplicative entries, or poor billing judgment? | Relators: lodestar reasonable; they already excised some hours; the claims are factually/legal related so fees for overall litigation are appropriate. | GBI: seek substantial reduction for limited success, duplicate travel/meeting time, and other hours they characterize as unnecessary. | Held: Mostly rejected. Court disallowed limited time (4.5 hrs for Plant, 0.2 hrs for Battle) spent negotiating/processing relators’ share but declined broader reductions for partial success or most duplicative entries; awarded $83,715.00 plus costs and expert fees. |
Key Cases Cited
- Lamie v. U.S. Tr., 540 U.S. 526 (2004) (plain‑meaning statutory interpretation principles)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (lodestar method and reduction for partial success)
- Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010) (lodestar presumptively reasonable; factors for adjustment)
- United States v. Everglades Coll., Inc., 855 F.3d 1279 (11th Cir.) (2017) (consider degree of success in fee adjustments)
- United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081 (11th Cir.) (relators in intervened cases are ordinarily entitled to proceeds and fees)
- United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97 (3d Cir.) (public‑disclosure bar may prevent relator’s share when claim is subject to dismissal)
- United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032 (6th Cir.) (defendants lack standing to contest relator’s share proceedings)
- United States ex rel. Osheroff v. Humana Inc., 776 F.3d 805 (11th Cir.) (three‑part public‑disclosure/original‑source test)
- Shaw v. AAA Eng’g & Drafting, Inc., 213 F.3d 538 (10th Cir.) (FCA fee provisions are mandatory)
- Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002) (statutory‑construction negative inference principle)
- Yellow Pages Photos, Inc. v. Ziplocal, LP, 846 F.3d 1159 (11th Cir.) (warning against rigid ratio‑based fee reductions)
- Popham v. City of Kennesaw, 820 F.2d 1570 (11th Cir.) (when claims share a common core, fee award is based on overall relief obtained)