666 F. App'x 410
6th Cir.2016Background
- Seven qui tam relators sued CHS alleging fraudulent Medicare admissions; the Government investigated, intervened, and negotiated a global $88 million settlement in 2014.
- The Government awarded relators 19% of the recovery under 31 U.S.C. § 3730(d); the Tennessee relators received ~14% (~$2.3M) and their counsel claimed nearly 7,000 billable hours for work performed largely at the Government’s direction.
- The settlement dismissed the underlying claims but reserved jurisdiction for adjudication of statutory attorneys’ fees and costs under § 3730(d).
- Term 8 of the settlement stated that nothing in the agreement "shall be construed ... 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)."
- CHS argued Term 8 preserved its right to raise entitlement defenses (including first-to-file and public-disclosure bars under § 3730(b)(5) and § 3730(e)(4)); relators argued Term 8 limited CHS’s objections to challenges grounded in § 3730(d) only.
- The district court held Term 8 unambiguously limited CHS to reasonableness challenges under § 3730(d); the Sixth Circuit reversed and remanded, finding Term 8 ambiguous and directing consideration of extrinsic evidence.
Issues
| Issue | Plaintiff's Argument (Tennessee Relators) | Defendant's Argument (CHS) | Held |
|---|---|---|---|
| Whether Term 8 preserved CHS’s right to make entitlement challenges (first-to-file, public-disclosure) to relators’ fee claims | Term 8 limits CHS to objections grounded in § 3730(d); absence of explicit statutory citations means CHS did not preserve entitlement defenses | The phrase "pursuant to 31 U.S.C. § 3730(d)" modifies only "claims for attorneys’ fees, expenses, and costs," so CHS preserved all fee challenges | Ambiguous: both interpretations reasonable; remanded to permit extrinsic evidence to resolve intent |
| Proper application of canons (last-antecedent and consistent usage) in interpreting Term 8 | N/A (relators rely on contextual indicia and recitals) | These textual canons support attaching the limiting phrase to the fee claim language, not to CHS’s reservation of rights | Canons support CHS’s view but are only presumptions and may be overcome; ambiguity remains |
| Weight of Recital G (relators’ claimed entitlement under § 3730(d)) in contract construction | Recital G supports relators’ expectation of entitlement and CHS’s tacit acceptance of that recital supports limiting CHS’s preserved challenges | Recitals are not operative and cannot create binding obligations; Recital G is therefore weak evidence | Recitals can inform interpretation where operative language is ambiguous; admissible extrinsic evidence on remand |
| Whether § 3730(d) incorporates first-to-file limits thereby allowing CHS to raise that defense even if limited to § 3730(d) challenges | N/A | § 3730(d) references § 3730(b) and thus could be read to incorporate first-to-file limits | Court rejects incorporation argument as anomalous; if Term 8 limits CHS to § 3730(d), first-to-file challenge is precluded without extrinsic evidence to the contrary |
Key Cases Cited
- United States v. Bornstein, 423 U.S. 303 (discusses FCA’s punitive and deterrent goals)
- United States v. Hayes, 555 U.S. 415 (last-antecedent presumption in statutory/contract interpretation)
- Barnhart v. Thomas, 540 U.S. 20 (canon limiting modifying clauses to nearest antecedent)
- In re AmTrust Fin. Corp., 694 F.3d 741 (contractual ambiguity standard; two reasonable interpretations)
- Prater v. Ohio Educ. Ass'n, 505 F.3d 437 (consideration of contract text, context, and canons)
- Sault Ste. Marie Tribe of Chippewa Indians v. Granholm, 475 F.3d 805 (admissibility of extrinsic evidence and allocation between judge and factfinder)