Chiba v. Guntersville Breathables IncChiba v. Guntersville Breathables Inc
This matter proceeds before the court on Relators’ Motion for Reasonable Expenses, Attorneys’ Fees, and Costs (Doc. 26), and their Motion to Strike Portions of Defendants’ Response to Relators’ Attorney‘s Fee Petition and Exhibits Accompanying That Response. (Doc. 43). The Defendant alleges the Relators perpetrated the wrongdoing underlying their Fair Claims Act qui tam claims, which disqualifies them from obtaining attorneys’ fees. Moreover, the Defendant contends the FCA‘s government action and public disclosure bars preclude an award of attorneys’ fees, and further, the court should reduce the fee request due to the Relators’ partial success on their qui tam claims, as well as their lack of billing judgment as to certain hours expended by the Relators’ attorneys.
As the analyses herein portray, the Relators secured prevailing party status pursuant to the FCA, entitling them to attorneys’ fees, and the FCA does not preclude them from obtaining attorneys’ fees due to their alleged wrongdoing. Furthermore, the government action and public disclosure bars do not foreclose the Relators’ entitlement to attorneys’ fees; pursuant to the terms of the applicable FCA provisions, those prohibitions typically apply to bar qui tam actions and claims, not attorneys’ fee requests, and cоncomitantly, the court has already dismissed with prejudice the qui tam claims to which the prohibitions may apply. Moreover, the prohibitions’ terms depict that the bars do not encompass the pre-suit disclosure at issue. Finally, the court will reduce the Relators’ attorneys’ fees award by some hours attributed to securing their share of the proceeds the Government obtained from the Defendant, yet the court will not reduce the requested award based upon the results the Relators obtained on their qui tam claims.
Therefore, for the reasons set out herein, the court GRANTS the Motion for Reasonable
BACKGROUND
On May 10, 2017, Relators Rich Chiba and Drake Maples commenced this action against Defendants Guntersville Breathables, Inc. (GBI), R. Christopher Lumpkin, and Tori Chase Handley, pursuant to the False Claims Act,
The complaint alleged GBI and the individual defendants failed to report, for customs duty purposes, the full value of goods imported from China, namely boot-foot waders1 and insulated knee boots (known as Alaska Tuff Marine boots). GBI declared the value of just one of the component products for the boot-foot wader, allegedly resulting in underpayment of customs duties approximating $700,000. GBI‘s declaration concerning the Alaska Tuff Marine boots resulted in a tariff rate of 9%, rather than the appropriate personal protective equipment rate of 37.5%, resulting in the underpayment of approximately $200,000 in customs levies. The complaint alleges Defendant Lumpkin (CEO assistant, logistics manager, and freight forwarder)
instituted and perpetuated the scheme, with assistance from Defendant Handley (chief financial officer).
The United States intervened and settled with Relators and GBI the undervaluation claim involving the boot-foot waders, regarded by the parties as the Covered Conduct. The settlement released GBI from any civil or administrative monetary claim the United States may pursue for the Covered Conduct under the False Claims Act,
The United States requested the court dismiss with prejudice all claims included in the settlement. However, the United States did not seek the dismissal of any remaining claims in this action beyond the scope of the Covered Conduct, including any claims Relators may have for costs and attorney fees pursuant to
prejudice the remaining claims regarding the misclassification of the knee boots as well as any claims against Defendants Lumpkin and Handley. (Doc. 25). The court entered an order on March 19, 2019, granting the United States’ and Relators’ motions, thereby dismissing all claims with prejudice. (Doc. 36).
| Attorney/Paralegal | Hourly Rate | Hours | Lodestar |
|---|---|---|---|
| Robert E. Battle | $525 | 39.8 | $20,895.00 |
| Adam P. Plant | $465 | 137.5 | $63,937.50 |
| Amy L. Rodgers | $200 | 3.7 | $740.00 |
| Mariah Hall | $200 | 1.7 | $340.00 |
| Totals | 182.7 | $85,912.50 |
Relators also seek $1,234.41 in costs and expenses and $4,237.50 for expert witness fees. In addition, Relators seek recompense for the fees and costs of litigating their fee petition, which awaits presentation after adjudication of the instant Motion.
ANALYSIS
The False Claims Act provides the United States Government a right of recovery against any person who “knowingly presents, or causes to be presented, a falsе or fraudulent claim for payment or approval; [or] knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”
As provided in the background, the Government intervened into this action to assume its prosecution, id. at
As an initial matter, the court must determine whether the Relators are prevailing parties entitled to FCA attorneys’ fees. The FCA deems a party a “prevailing” or
successful relator entitled to attorneys’ fees and costs in the following applicable circumstances:
If the Government proceeds with an action brought by a person under subsection (b), such person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. . . . Any payment to a person under the first or
second sentence of this paragraph shall be made from the proceeds. Any such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.
Applying the foregoing prescription here,
an FCA action in which it has intervened. Then,
Prevailing rules of statutory construction buttress this conclusion. The “use of a definite article preceded by an indefinite article can be persuasive evidence that Congress intended to link two clauses.” Schroeder v. United States, 793 F.3d 1080, 1084-85 (9th Cir. 2015) (citing Gale v. First Franklin Loan Services, 701 F.3d 1240, 1246 (9th Cir. 2012)); see also Am. Bus Ass‘n v. Slater, 231 F.3d 1, 4–5 (D.C. Cir. 2000) (“Indeed, ‘[i]t is a rule of law well established that the definite article ‘the’ particularizes the subject
which it precedes. It is a word of limitation as opposed to the indefinite or generalizing force of ‘a’ or ‘an.‘“) (quoting Brooks v. Zabka, 168 Colo. 265 (1969) (en banc); citing Black‘s Law Dictionary 1477 (6th ed. 1990) (“In construing [a] statute, [the] definite article ‘the’ particularizes the subject which it precedes and is [a] word of limitation as opposed to [the] indefinite or generalizing force ‘a’ or ‘an.‘“)).
In
A. Relators’ Alleged Involvemеnt Does Not Preclude an Award of Attorneys’ Fees and Costs
Notwithstanding the plain meaning of
First, as discussed,
This barrier manifests morе concretely when examining the structure of the FCA. See AseraCare, supra, 2019 WL 4251875, at *10 (“To determine the plain meaning
of a statute or regulation, we do not look at one word or term in isolation, but rather look to the entire statutory or regulatory context.“) (citing Sec. & Exch. Comm‘n v. Levin, 849 F.3d 995, 1003 (11th Cir. 2017)). The FCA actually contains a provision governing relators who participated in the fraud underlying the claim:
Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circumstances
pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.
As delineated,
entitlement to attorneys’ fees, expenses, and costs. Sections
Of course, if a court had adjudged the Relators criminally liable for an alleged violation of the FCA,
99th Cong., 2d Sess. 29 (July 28, 1986), reprinted in 1986 U.S. Code Cong. & Admin. News 5294).
Therefore, the court cannot heed GBI‘s entreaty to deny Relators’ attorneys’ fees due to their alleged wrongdoing. Ferreting out the veracity of GBI‘s allegations about the Relators vis-a-vis the Relators’ averments in the complaint about the dismissed individual defendants would enmesh the court in protracted proceedings disfavored for the adjudication of fee petitions. See Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (“A request for attorney‘s fees should not result in a second major litigation.“). Indeed, the Relators’ share of the Government‘s proceeds amounted to less than the 15% statutory minimum,
B. The Public Disclosure and Government Action Bars Do Not Preclude Relators’ Attorneys’ Fees and Costs
In a further bid to deny attorneys’ fees, expenses, and costs to the Relators, GBI contends the FCA‘s government action and public disclosure bars prohibit the Relators from obtaining recovery. The FCA‘s government action bar requires dismissal of “an action under subsection (b)” – that is, a qui tam action under
“which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.”
First, the posture of this case at this juncture casts GBI‘s reliance upon the
Furthermore, a more fundamental anomaly may preclude GBI‘s attempts to dismiss the attorneys’ fees request pursuant to the pertinent
In this guise, the Relators’ qui tam claims merged into the court‘s judgment extinguishing the claims with prejudice, and as such, GBI‘s defenses also dissipated. C.f., Restatement (Second) of Judgments § 18 (1982) (“When the plaintiff recovers a valid and final personal judgment, his original claim is extinguished and rights upon the judgment are substituted for it. The plaintiff‘s original claim is said to be ‘merged’ in the judgment. . . . It is immaterial whether the judgment was rendered upon a verdict or upon a motion to dismiss or other objection to the pleadings or upon consent,
confession, or default.“)4. Therefore, GBI “cannot avail [itself] of defenses [it] might have interposed, or did interpose . . . .” Rstmt. (2nd) Jgmt. § 18; c.f., Key v. Wise, 629 F.2d 1049, 1063 (5th Cir. 1980) (“Once a lawsuit reaches a final judgment on the merits, the doctrine of res judicata bars litigation in a second
In sum, once the parties settled the pertinent qui tam claims, the court dismissed the claims with prejudice, and the Relators obtained a share of the proceeds, the Relators became prevailing parties pursuant to
The decisions relied upon by GBI do not caution otherwise; the courts therein dismissed the relators’ claims before resolution of the government‘s FCA allegations, or otherwise denied relators a share of the government‘s proceeds, thus preventing recognition of the relators as prevailing parties pursuant to
receive any share of the proceeds attributable to that claim.” Id. at 106. On its face, Merena does not apply to the determination at bar because it does not concern an entitlement to attorneys’ fees. Furthermore, in this action the United States аccorded Relators a share of the proceeds, thus entitling Relators to attorneys’ fees as prevailing parties and further rendering Merena inapposite.
In Fed. Recovery Servs., Inc. v. United States, 72 F.3d 447 (5th Cir. 1995), the government intervened in an FCA qui tam action, and subsequently the district court dismissed the relator for lack of subject matter jurisdiction due to the public disclosure
In U.S. ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032 (6th Cir. 1994), an individual joined with Taxpayers Against Fraud (“TAF“), a non-profit corporation, as relators in a qui tam action. Id. at 1039. However, the individual relator‘s attorneys founded TAF, and 95% of TAF‘s expenses in the qui tam litigation represented fees owed to the same attorneys. Id. Based upon these circumstances, the Sixth Circuit ordered the district court on remand to determine “whether TAF had standing to act” as a relator and thus obtain attorneys’ fees. Id. at 1044. In particular, the court cited another decision determining TAF did not have such standing because the organization did not have any direct and independent knowledge of the fraud and ascertained the FCA violations from the individual relator therein. Id. (citing United States v. Rockwell Int‘l Corp., 730 F. Supp. 1031, 1035 (D. Colo. 1990)). Clearly, those circumstances do not arise in this case, as the Relators do not remotely constitute attorneys who discovered FCA violations from other individuals.
In Miller v. Holzmann, 575 F. Supp. 2d 2 (D.D.C. 2008), amended in part, vacated in part sub nom. U.S. ex rel. Miller v. Bill Harbert Int‘l Const., Inc., 786 F. Supp. 2d 110 (D.D.C. 2011), the court dismissed relator‘s qui tam claims against one of six defendants as time-barred, and the government subsequently prevailed on an FCA claim against the same defendant at trial. Id. at 5. Post-trial, the relator moved for attorneys’ fees against the defendant. The court ruled that the relator could not recover attorneys’ fees from the defendant because his claims “were dismissed in their entirety,” thus
depicting the relator did not prevail against the defendant. Id. at 9. Contrastingly, in this dispute the court dismissed the Relators’ qui tam claims with prejudice pursuant to the parties’ settlement, and the United States subsequently shared its proceeds with the Relators.
Based upon the foregoing analyses, GBI cannot prevail on the government action and public disclosure bars because all of the parties settled one of the qui tam claims with prejudice. The U.S. accorded Relators a share of the proceeds garnered by the settlement, thus entitling Relators to attorneys’ fees.
Moreover, review of the
1. The Government Action Bar Does Not Apply Due to the Lack of a Prior Civil Suit or Administrative Civil Money Proceeding
As referenced previously, the government action bar provides as follows: “In
Pursuant to
As for the pertinent activity at bar, on June 15, 2016, GBI filed a prior disclosure with U.S. Customs disclosing a misclassification of its boot-foot waders -- the product underlying the pertinent qui tam claim settled by the parties -- and therewith remunerated unpaid duties of $656,813.21 and a $97,212.88 interest penalty. As noted by GBI, the FPF office assigned this 2016 prior disclosure a case number. (Doc. 41 at 6). Based upon this 2016 prior disclosure, GBI contends the Government maintained an administrative civil money proceeding regarding the qui tam claim, thus barring the Relators’ claim pursuant to
Pursuant to the applicable statute, regulations, and decisions relied upon GBI, it cannot prevail on the government action bar. Although GBI‘s 2016 prior disclosure reported the transactions containing the boot-wader undervaluation, it does not satisfy the government action bar because prior disclosures under the applicable statutory regime do not constitute administrative civil money penalty proceedings.
In support of its position that prior disclosures in the customs context represent administrative civil money penalty proceedings, GBI cites Schagrin v. LDR Indus., LLC, No. 14 C 9125, 2018 WL 2332252, at *2 (N.D. Ill. May 23, 2018) (Schagrin I), adhered to on reconsideration sub nom. United States ex rel. Schagrin v. LDR Indus., LLC, No. 14 C 9125, 2018 WL 6064699 (N.D. Ill. Nov. 20, 2018) (Schagrin II). In Schagrin I, the court ruled the government action bar prohibited the relators’ claims because the government pursued the alleged fraud in a prior administrative civil money penalty proceeding. Id. at **1-2. In particular, pursuant to
However, in Schagrin II, the court reversed its ruling and determined that the U.S. Customs’ assessment of a penalty against the defendant did not constitute an administrative civil money penalty proceeding. 2018 WL 6064699, at **3-4. As explained by the court,
[I]n support of Relators’ motion to reconsider, the government has submitted
affidavits from U.S. Customs indicating that -- contrary to the Court‘s May 23 findings -- no penalty proceeding was ever initiated. . . . The government contends that a penalty proceeding under 19 U.S.C. § 1592 can be initiated only by issuance of a pre-penalty notice pursuant to19 U.S.C. § [1592] , and no such notice was ever issued to [defendant]. . . . The government contends further that U.S. Customs investigated [defendant] in 2012 and assessed [defendant] for unpaid customs duties. According to the government, the results of this investigation were the basis for the “estimated” potential penalties described in the bankruptcy proof of claim. . . . The government argues that the statements referencing a penalty proceeding concerned “cоntingent or unmatured” claims that U.S. Customs “might have” but never “actually assessed.” * * *Defendants apparently do not dispute that U.S. Customs never issued a pre-penalty notice to [defendant]. Defendants also do not contend that investigation prior to the issuance of a pre-penalty notice could constitute a penalty proceeding for purposes of the government action bar under
31 U.S.C. § 3730(e)(3) . Absent argument to the contrary from Defendants, the Court agrees with the government and Relators that issuance of a pre-penalty notice pursuant to19 U.S.C. § 1592 is necessary for a penalty proceeding to be in progress such that the government action bar is implicated. Therefore, since there is no dispute that a pre-penalty notice was never issued, that fact is dispositive of the issue in this case at this point in the proceedings, and the Court must reverse its dismissal of the case based on the government action bar.
Schagrin II, 2018 WL 6064699, at *3-4. Therefore, Schagrin II extinguished Schagrin I‘s disposition on the government action bar because U.S. Customs had not initiated a
In the case at bar, U.S. Custom‘s FP&F office did not issue a pre-penalty noticе against GBI pursuant to
As recounted previously, GBI tendered its prior disclosure pursuant to
In contrast to the prior statutory provisions detailing a process for adjudicating a claim, the prior disclosure regime falls under the “Maximum penalties” section of the statute.
The prior disclosure regulations buttress this conclusion. In particular, U.S. Customs may withhold “prior disclosure treatment” for an entity filing a prior disclosure; in that instance, U.S. Customs commences “a formal investigation of the disclosed violation [and initiates] a penalty action against the disclosing party . . . .”
Therefore, pursuant to the statute and regulations, a prior disclosure does not necessarily instigate an “administrative civil money proceeding” in which the “government is a party.”
In the case at bar, the record does not contain any evidence that U.S. Customs
2. The Public Disclosure Bar Does Not Apply
GBI‘s resort to the public disclosure bar suffers even more infirmities than its reliance upon the government action bar. The public disclosure bar provides as follows:
(A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed--
- in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
- in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
- from the news media,
unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, “original source” means an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.
A three-part test governs the
Applying the standard, the first barrier arises as to whether the 2016 prior disclosure was publicly disclosed. Although information published or distributed by an agency “may be considered publicly disclosed,” a transaction does not comprise a “public disclosure when information is reported to a government agency and filed away in a bureaucrat‘s office.” 31 U.S.C.S. § 3730 Commentary 168 (LexisNexis 2006). In this case, the record does not reveal any evidence that U.S. Customs publicly disclosed GBI‘s 2016 prior disclosure. The record essentially exhibits a letter and attachments GBI sent to U.S. Customs FP&F, and a couple of forms, titled “Collection Receipt or Informal Entry,” indicating the agency‘s receipt of the letter and attendant checks. (Doc. 42-9 at 20-33). This evidence does not constitute a public
GBI also fails the substantial sameness prong of the public disclosure bar, as the Relators’ FCA allegations regarding the boot-foot waders differ from the allеgations lodged in the 2016 prior disclosure. As Osheroff elucidated, this element queries whether there exists “significant overlap” between the qui tam allegations and the putative, publicly disclosed information. 776 F.3d at 814. The Osheroff decision discerned such overlap between media and internet sources – which revealed that defendants’ “clinics provided [certain] services, including transportation, meals, entertainment, and spa services, at no cost” to patients – and the relator‘s qui tam complaint, which alleged “the clinics provided a wealth of free services” in violation of the Anti-Kickback Statute,
Other courts establish similar inquiries for the substantial sameness test. The “First Circuit held that the substantial sameness test bars ‘a complaint that targets a scheme previously revealed through public disclosures . . . even if it offers greater detail about the underlying conduct.‘” United States ex rel. Gilbert v. Virginia Coll., LLC, 305 F. Supp. 3d 1315, 1321 (N.D. Ala. 2018) (quoting United States ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201, 210 (1st Cir. 2016)). The “Seventh Circuit uses several factors to determine substantial sameness, asking whether the complaint 1) presents genuinely new and material information beyond what has been publicly disclosed; 2) alleges a different kind of deceit; 3) requires independent investigation and analysis to reveal any fraudulent behavior; 4) involves an entirely different time period than the publicly disclosed allegations; and 5) supplies vital facts not in the public domain.” Id. (citing Bellevue v. Universal Health Servs. of Hartgrove, Inc., 867 F.3d 712, 718–19 (7th Cir. 2017)).
Based upon the foregoing precedent and authority, GBI‘s 2016 prior disclosure did not reveal information substantially the same as the Relators’ revelation in their qui tam complaint. GBI‘s 2016 prior disclosure involved the misclassification of the boot-foot waders for tariff purposes, as GBI should have classified the items pursuant to a schedule warranting a higher tariff rather than the tariff originally levied. (See Doc. 41 at 6, 15; Doc. 42 at 11; ¶ 35; Doc. 42-5 at 12 ¶ 38; Doc. 42-10 at 7 ¶ 26; Doc. 42-13 at 14, ¶ 40; 15 ¶ 50.). The Relators’ claims in the qui tam complaint, however, involve the undervaluation of the boot-foot waders, whereby GBI failed to disclose the full value of the item for customs duty purposes. (Doc. 1 at 14-18). GBI readily admits the misclassification issue at the center of the 2016 prior disclosure differs from the qui tam complaint‘s undervaluation issue settled by the parties. (Doc. 41 at 15; Doc. 42-13 at 14, ¶ 40; 15 ¶ 50).
Pursuant to the foregoing standards, this distinction between a tariff misclassification
Finally, the Relators qualify as original sources of the information provided in their qui tam complaint on both definitions provided by the statute. As to the first definition, an original source constitutes an individual who “prior to a public disclosure under subsection (e)(4)(A), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based.”
As for the other definition, an original source constitutes an individual “who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.”
C. The Relators’ Partial Success on One Claim Only Does Not Warrant a Downward Departure in the Attorneys’ Fees Award
As a final matter, GBI contests several aspects of the Relators’ specific attorneys’ fees request. “The general rule in our legal system is that each party must pay its own attorney‘s fees and expenses.” Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 550 (2010). As discussed previously, however, the FCA entitles a successful qui tam relator to attorneys’ fees.
Generally, determining reasonable attorneys’ fees requires calculation of a “lodestar figure,” which is determined by multiplying the number of hours reasonably expended on a case by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The “lodestar method yields a fee that is presumptively sufficient to achieve [the] objective” of inducing capable attorneys to undertake representation of FCA relators. Perdue, 559 U.S. at 552 (citations omitted). “‘[T]he lodestar figure includes most, if not all, of the
Relators seek only the lodestar amount, without any request for upward adjustment.9 (Doc. 27 at 18). Defendants do not challenge the reasonableness of the hourly rates. (See Doc. 41). Indeed, they describe Realtors’ counsel as “exceptionally capable and well-respected” and “due to be paid for their work.” (Doc. 41 at 2). Furthermore, GBI does not dispute the reasonableness of the Relators’ standard costs and expenses, $1,234.41, or the reasonableness of $4,237.50 expended for Relators’ expert witnesses regarding the fee petition. (Doc. 41 at 25). However, GBI challenges some of the recorded attorney hours, and it seeks a fee reduction based on the results obtained.
Specifically, GBI seeks a reduction for any redundant or duplicative time entries expended by Relators’ attorneys, including an idеntical 8.6 hours reported by both attorneys Robert Battle and Adam Plant on the same date. GBI essentially questions the attorneys’ billing judgment, as “Counsel for the prevailing party should make a good faith effort to exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary . . . .” Hensley, 461 U.S. at 434.
The contested entries represent the attorneys’ travel time and initial meeting with the Relators.10 “An award for time spent by two or more attorneys is proper as long as it reflects the distinct contribution of each lawyer to the case and the customary practice of multiple-lawyer litigation.” Johnson v. Univ. Coll. of Univ. of Alabama in Birmingham, 706 F.2d 1205, 1208 (11th Cir. 1983), holding modified by Gaines v. Dougherty Cty. Bd. of Educ., 775 F.2d 1565 (11th Cir. 1985). In this case, Battle and Plant both contributed their expertise in complex litigation, including FCA cases; thus, the court cannot fault the attorneys for both meeting potential clients at an initial meeting. An initial meeting with a client carries great import, and the court finds it was not unreasonable for both attorneys to participate in this initial meeting. As for the rest of the time entries, the court does not discern any other duplicative or redundant entries.
GBI further requests exclusion of 89 hours from Battle‘s and Plant‘s entries, claiming this time arose in a period from May 10, 2017, to February 25, 2019, during which GBI performed all of the discovery and negotiations resulting in the settlement of this case. The records do not support GBI‘s contention, as they portray Battle‘s and Plant‘s engagement with this action by interacting with the Government and their clients; reviewing, analyzing, and revising settlement agreement drafts provided
However, the Relators cannot obtain recompense for the time Plant and Battle spent negotiating and processing the Relators’ share of the proceeds. See United States ex rel. Poulton v. Anesthesia Assocs. of Burlington, Inc., 87 F. Supp. 2d 351, 358 (D. Vt. 2000); United States ex rel. Thompson v. Walgreen Co., 621 F. Supp. 2d 710, 726 (D. Minn. 2009); see also Taxpayers Against Fraud, 41 F.3d at 1044-46; Miller, 575 F. Supp. 2d at 26 (time spent negotiating relator‘s share non-compensable because defendant had no right to participate in the process and nothing suggested defendant had prolonged the process or could have hastened its conclusion). Plant expended 4.5 hours and Battle expended .2 hours on Relators’ share matters, which the court will disallow as part of the claimed fees. This reduces the fees by $2,197.50 (4.5 hours x $465 plus .2 hours x $525).
Most critically for the assessment at bar, a court may adjust the lodestar amount “downward depending on the ‘results obtained,‘” United States v. Everglades Coll., Inc., 855 F.3d 1279, 1292 (11th Cir. 2017) (quoting Hensley, 461 U.S. at 434), a factor “particularly crucial where a plaintiff is deemed ‘prevailing’ even though [succeeding] on only some of [the] claims for relief.” Hensley, 461 U.S. at 434. “In this situation two questions must be addressed. First, did the plaintiff fail to рrevail on claims that were unrelated to the claims on which he succeeded? Second, did the plaintiff achieve a level of success that makes the hours reasonably expended a satisfactory basis for making a fee award?” Id.
As for the first question, “a plaintiff may present in one lawsuit distinctly different claims for relief that are based on different facts and legal theories.” Id. “In such a suit, . . . counsel‘s work on one claim will be unrelated to his work on another claim.” Id. at 435. “Accordingly, work on an unsuccessful claim cannot be deemed to have been ‘expended in pursuit of the ultimate result achieved,’ . . . requir[ing] that these unrelated claims be treated as if they had been raised in separate lawsuits, and therefore no fee may be awarded for services on the unsuccessful claim.” Id. (citation omitted).
Regarding this first question, GBI contends the Relators only prevailed on one of the two schemes it averred in the qui tam Complaint. As discerned, the issue regarding the boot-foot waders involved an undervaluation, whereas the Alaska Tuff Marine boots involved a misclassification. The settlement did not involve any claims regarding the Alaskan Tuff Marine boots, and the subsequent dismissals in this case occasioned no relief for Relators regarding the scheme.
Relatedly, GBI contends the Relators only prevailed on one of five, separate claims alleged in the Complaint. The five claims comprise the following: the qui tam Complaint‘s Count I averred an FCA violation against GBI and the two individual defendants regarding the undervaluation of the boot-foot waders and misclassification of the Alaska Tuff Marine boots, and Count II averred an FCA conspiracy charge against the two individual defendants regarding the undervaluation and misclassification. (Doc. 1 at 25-27).
In any event, further separation is not warranted because the successful claim regarding the boot-foot wader intertwines with the unsuccessful claim regarding the Alaska Tuff Marine boot. Pursuant to Hensley, where the prevailing party‘s “claims for relief . . . involve a common core of facts or [are] based on related legal theories,” such that “counsel‘s time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis[,] . . . the district court should focus on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation.” 461 U.S. at 435 (emphasis added); see also Popham v. City of Kennesaw, 820 F.2d 1570, 1578 (11th Cir. 1987) (“If the claims on which the plaintiff did not prevail and the claims on which he did prevail were ‘distinctly different claims . . . based on different facts and legal theories,’ the court cannot award any fee for services on the unsuccessful claims. . . . However, if the unsuccessful and the successful claims ‘involve a common core of facts’ or are ‘based on related legal theories,’ the court must compare the plaintiff‘s overаll relief with the number of hours reasonably expended on the litigation.“) (quoting Hensley, 461 U.S. at 434-35) (emphasis added).
In this case, the Relators’ claims involve related legal theories and a common core of facts. As for the related legal theory, both claims involved violations of
Furthermore, the very nature of the claims portrays the existence of related legal theories and a common core of facts, and a concomitant difficulty with dividing the hours expended on a claim-by-claim basis. The Relators advanced an FCA qui tam action, which by its very nature requires allegations that a defendant knowingly submitted false or fraudulent claims to the government for payment or approval.
Therefore, the nature of fraud, and the requirements for pleading and proving fraud, reveal the inter-relation of the boot-foot waders and Alaska Tuff Marine boots claims. The Relators proceeded with the theory that the undervaluation of the boot-foot waders and misclassification of the Alaska Tuff Marine boots comprised one fraudulent scheme perpetrated by GBI. Furthermore, the Relators contended that the dismissed, individual defendants perpetrated the inter-related scheme regarding the boot-foot waders and the Alaska Tuff Marine boots, demonstrating that the court cannot separate the claims factually. Although the allegations regarding the individual defendants may very well be untrue, GBI settled the intervened, FCA claim regarding the boot-foot waders. The court need not engage in a protracted proceeding determining the true wrongdoers when the intervened claim conceptually encapsulates the unsuccessful claim both legally and factually. That is, some coterie of GBI officers falsely reported information to U.S. Customs regarding the boot-foot waders and the Alaska Tuff Marine boots, and although GBI settled the former only, the Complaint alleges the same wrongdoers perpetrated the activities underlying both claims.
Therefore, the court must proceed to the second Hensley question, that is, to compare the Relators’ overall recovery with the number of attornеy hours reasonably expended on the litigation to assess whether the level of success warrants the requested fee award. When “the prevailing party achieved only a ‘partial or limited success,’ the lodestar figure ‘may be an excessive amount’ because ‘the most critical factor is the degree of success obtained.‘” Everglades College, 855 F.3d at 1292 (quoting Hensley, 461 U.S. at 436) (emphasis in original). “Moreover, when the district court ‘reduces the award to account for the limited success, the court necessarily has discretion in making this equitable judgment.‘” Id. (quoting Hensley, 461 at 436–37) (internal alterations omitted).
Nevertheless, “the Supreme Court has frowned on a strictly mathematical approach calculating attorney‘s fees based on a ratio of total claims to successfully litigated ones, explaining that ‘such a ratio provides little aid in determining what is a reasonable fee in light of all the relevant factors.‘” Yellow Pages Photos, Inc. v. Ziplocal, LP, 846 F.3d 1159, 1164 (11th Cir. 2017) (quoting Hensley, 461 U.S. at 435 n. 11) (internal alterations omitted). Therefore, “while the amount of damages is relevant to assessing the degree of success enjoyed by the plaintiff, the ‘court may not employ a cash register approach in which setting a fee is merely an arithmetical function.‘” Id (quoting Cullens v. Georgia Dept. of Trans., 29 F.3d 1489, 1493 (11th Cir. 1994)). “‘The risk is too great that a multiple-of-damages approach will subsume, or override, or erode other relevant considerations, or place undue tensions upon them’ even if ‘the use of the multiplier is explained and justified.‘” Id. (quoting Cullens, 29 F.3d at 1494) (internal alterations omitted).
Based upon the foregoing principles, GBI cоntends the Relators’ partial, limited
As an initial matter, the Government and the Relators did not secure a mere “technical” victory upon settlement of the qui tam claim. Id. at 1292. As provided in Everglades College, technical victories comprise recoveries of nominal damages, or statutory penalties as in the decision itself, rather than actual damages. Everglades College, 855 F.3d at 1284, 1292 (statutory penalties amounted to $11,000 recovery for Government)(citing Farrar v. Hobby, 506 U.S. 103, 114-15 (1992) (nominal damages do not constitute actual damages)). In this case, the Government and the Relators secured restitution in the amount of $151,942.04, and a near 100 percent multiplier in the amount of $121,553.63, which together totaled $273,495.67. This sum represents more than a technical victory for the Government and the Relators. Indeed, in Everglades College itself, the Court upheld the relators’ downward-adjusted $60,000 fee award for the $11,000 in statutory penalties secured by the relators at trial. Id. at 1292-93.11 Surely, the $273,495.67 recovery here represents a greater degree of success, and the application for approximately $85,000 in attorneys’ fees constitutes a substantially more modest request than the $1 million in fees sought in Everglades College.
More importantly, the Relators achieved a significant public benefit for the United States. As the Eleventh Circuit declares, “public benefit . . . is an important measure of success” in an action underlying an attorney‘s fees petition. Villano v. City of Boynton Beach, 254 F.3d 1302, 1307 (11th Cir. 2001) (citing Popham, 820 F.2d at 1580). Successful litigation of an FCA qui tam claim certainly serves a public benefit. The FCA prevents the United States Treasury from being drained of millions of dollars by fraudulent billings or omissions by federal government contractors and commercial entities. See S. Rep. No. 345, 99th Cong., 2d Sess. 3, reprinted in 1986 U.S. Code Cong. & Admin. News 5266, 5268. In furtherance of that purpose, Congress strengthened the FCA in 1986 by revamping its qui tam provisions to encourage private individuals to bring suits on behalf of the government. See United States ex rel. McCoy v. California Medical Review, Inc., 715 F. Supp. 967, 968 (N.D. Cal.1989) (“Congress’ objectives
In this case, the Relators’ successful qui tam claim occasioned a significant public benefit for the United States. As described previously, the United States obtained restitution in the amount of $151,942.04, and a near 100 percent multiplier in the amount of $121,553.63, totaling $273,495.67. More significantly, the nature of the recovery indicates its significance. As recounted previously, GBI had issued prior disclosures to U.S. Customs to pay duties and tariffs on the misclassified boot-foot waders and the Alaska Tuff Marine boots. Laudable as this effort may be, the prior disclosures still did not report the undervaluation of the boot-foot waders. Therefore, even though GBI‘s prior disclosures included the same boot-foot waders transactions underlying the successful claim at bar, GBI failed to disclose to U.S. Customs the undervaluation aspect of the transactions. The Relators’ qui tam claim revealed the undervaluation, and its revelation amounted to a recovery of close to $273,495.67. This recovery represents a significant public benefit given the failure of GBI‘s prior efforts at disclosure to reveal the undervaluation.
Considering the “‘policy considerations on all sides (including the encouragement of whistle-blowers, . . . and considerations of judicial economy), and the fact that the suit may have had a positive impact on [GBI‘s] conduct,” Everglades College, 855 F.3d at 1293 -- pаrticularly as it failed to disclose the boot-foot waders’ undervaluation even after disclosing another issue with the product -- the Relators’ fee application does not warrant a downward departure.
Therefore, based upon the foregoing evaluation, the court will preliminarily award the following attorneys’ fees to the Relators, subject to a subsequent application for attorneys’ fees, expenses, and costs in litigating the instant application:
| Attorney/Paralegal | Hourly Rate | Hours | Lodestar |
|---|---|---|---|
| Robert E. Battle | $525 | 39.6 | $20,790.00 |
| Adam P. Plant | $465 | 133 | $61,845.00 |
| Amy L. Rodgers | $200 | 3.7 | $740.00 |
| Mariah Hall | $200 | 1.7 | $340.00 |
| Totals | 178 | $83,715.00 |
D. Motion to Strike
Because the court adjudicated GBI‘s contention that the court should not award Relators’ fees, costs, and expenses because they allegedly participated in the conduct giving rise to this action, the court DENIES the Relators’ Motion to Strike as MOOT. However, the court DIRECTS the Clerk to maintain Doc. 42 under seal.
Based on the foregoing analysis, the court GRANTS Relators’ Motion for Reasonable Expenses, Attorneys’ Fees, and Costs. The court preliminarily AWARDS attorneys’ fees against GBI in the amount of $83,715.00, costs and expenses against GBI in the amount of $1,234.41, and expert witness fees against GBI in the amount of $4,237.50.
Relators shall file their final petition seeking reimbursement for fees and costs incurred after March 5, 2019, in litigation of the fee petition, within fourteen (14) days from the entry date of this order. Defendants shall file any response within seven (7) days thereafter.
DONE this 9th day of October, 2019.
HERMAN N. JOHNSON, JR.
UNITED STATES MAGISTRATE JUDGE
Notes
While the penalty process generally begins with the FPFO‘s [Fines, Penalties and Forfeiture Office] issuance of the Penalty Notice (CF 5955A) to the alleged violator, some statutes require the issuance of a prepenalty notice and opportunity for response before Customs makes its penalty claim ( i.e. , issues a penalty notice). * * *
Upon receipt of the alleged violator‘s prepenalty response, the FPFO either will proceed to issue a penalty claim if the violation is substantiated or issue a written statement that Customs has chosen not to assess a penalty.