U.S. ex rel. Kathleen Bryant v. Cmty. Health Sys., Inc.U.S. ex rel. Kathleen Bryant v. Cmty. Health Sys., Inc.
Before: MOORE, CLAY, and GIBBONS, Circuit Judges.
COUNSEL
ARGUED: David W. Garrison, BARRETT JOHNSTON MARTIN & GARRISON, LLC, Nashville, Tennessee, for Appellants James Doghramji, Sheree Cook, and Rachel Bryant. Patrick J. O‘Connell, LAW OFFICES OF PATRICK J. O‘CONNELL PLLC, Austin, Texas, for Appellants Nancy Reuille and Amy Cook-Reska. Michael L. Waldman, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER, & SAUBER LLP, Washington, D.C., for Appellees Community Health Systems, Inc. et al. ON BRIEF: David W. Garrison, Seth M. Hyatt, BARRETT JOHNSTON MARTIN & GARRISON, LLC, Nashville, Tennessee, Daniel Berger, GRANT & EISENHOFER P.A., New York, New York, for Appellants James Doghramji, Sheree Cook, and Rachel Bryant. Patrick J. O‘Connell, LAW OFFICES OF PATRICK J. O‘CONNELL PLLC, Austin, Texas, for Appellants Nancy Reuille and Amy Cook-Reska. Michael L. Waldman, D. Hunter Smith, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER, & SAUBER LLP, Washington, D.C., William M. Outhier, RILEY, WARNOCK & JACOBSON, PLC, Nashville, Tennessee, for Appellees Community Health Systems, Inc. et al. Mitchell R. Kreindler, KREINDLER & ASSOCIATES, Houston, Texas, for Appellant Kathleen Bryant.
KAREN NELSON MOORE, Circuit Judge. Various relators in these consolidated cases sued Community Health Systems (“CHS“) and others, alleging that CHS submitted fraudulent claims for medically unnecessary hospital admissions to federal public-health insurance programs, such as Medicaid and Medicare. Relators’ counsel performed thousands of hours work in assisting the government with the investigation. Seven years ago, the relators, the government, and CHS entered into a settlement agreement, disposing of the underlying claims in the cases. The settlement agreement left undecided the allocation of attorney fees under the relevant provision of the False Claims Act (“FCA“),
We hold that CHS cannot now rely on these separate provisions of the FCA as a last-ditch effort to deny attorney fees to the relators. After the global settlement reached pursuant to a collaborative process
I. BACKGROUND
Our previous opinion provides a background of the relevant proceedings. United States ex rel. Doghramji v. Cmty. Health Sys., Inc., 666 F. App‘x 410 (6th Cir. 2016). We highlight in greater detail the facts relevant to this appeal.
A. Overview of allegations against CHS
Federal public-health insurance programs, such as Medicare, reimburse hospitals for treating patients covered by those programs. See, e.g., R. 1 (Case No. 3:11-cv-00442) (Doghramji Compl. ¶ 96) (Page ID #38); R. 2 (Case No. 3:14-cv-02160) (Cook-Reska Compl. ¶ 32) (Page ID #11). Hospitals receive different rates of reimbursement from federal programs depending on whether a patient receives inpatient or outpatient care. R. 1 (Case No. 3:11-cv-00442) (Doghramji Compl. ¶ 100) (Page ID #39). For example, if a hospital admits to the hospital a patient who enters through the emergency room, that patient receives inpatient care. Id. ¶ 97 (Page ID #38). If, however, a patient enters the emergency room, is treated, and is subsequently discharged, that patient has received outpatient care. Treating a patient in a hospital and monitoring the patient for a short period of time also qualifies as outpatient care. Id. ¶ 99 (Page ID #39).
Federal health-insurance programs reimburse hospitals at much higher rates for inpatient care than for outpatient care. Id. ¶ 100 (Page ID #39). Under these programs’ regulations, however, reimbursement is proper only for treatment that is “reasonable and necessary for the diagnosis or treatment of illness or injury.” See, e.g.,
On January 7, 2009, Nancy Reuille, a Case Management Supervisor at CHS-owned Lutheran Hospital, was the first in time to file her complaint against Lutheran and Community Health Systems Professional Services, a subsidiary of CHS. R. 1-3 (Case No. 3:15-cv-00110) (Reuille Compl. ¶ 9) (Page ID #17). Relator Amy Cook-Reska followed, filing a complaint against CHS and CHS-owned Laredo Medical Center on May 22, 2009. R. 2 (Case No. 3:14-cv-02160) (Page ID #1). Both Reuille and Cook-Reska alleged that hospital personnel were fraudulently billing for long post-outpatient-surgery observation periods that did not correspond with the actual observation time and designating short hospital stays as “inpatient” stays contrary to Medicare criteria. R. 1-3 (Case No. 3:15-cv-00110) (Reuille Compl. ¶ 10, 12) (Page ID #20–21); R. 2 (Case No. 3:14-cv-02160)
B. The government investigation and settlement negotiations
In early 2011, the government informed the first four relators—Reuille, Cook-Reska, Plantz, and Bryant—that their claims had “triggered a nationwide investigation on the part of the U.S.” Cmty. Health Sys., 666 F. App‘x at 411. “The Government encouraged these relators ‘to work together on the cases and share any proceeds that might result.‘” Id. Following the government‘s encouragement, the relators entered into a sharing agreement in April 2011. Id.
In February 2011, the Doghramji relators met with the U.S. Department of Justice and disclosed the result of an almost year-long investigation into CHS. Id. at 411–12. After the meeting, the Doghramji relators filed their FCA suit against CHS. The government then asked the Doghramji relators to “actively participate in its investigation” and partially unsealed the first four relator complaints to assist the Doghramji relators in their investigation. Id. at 412. For the next several years, all the relators worked together to assist the government in its prosecution of the claims against CHS:
Counsel for relators thereafter engaged in a “collaborative effort” involving “bi-monthly calls with the Government.” “The Government lawyers mapped out the investigation and assigned work to all relators’ counsel in an organized manner,” with “the majority of the assignments [being] made without regard to the individual complaint.” At the Government‘s request, from 2011 to 2014 the [Doghramji] Relators’ counsel organized and analyzed thousands of documents produced by CHS, drafted letters and memoranda related to these documents, created lists of witnesses, drafted outlines for questioning witnesses, and conducted extensive legal and factual research. All told, they calculated their work on the case at nearly 7,000 billable hours.
In the spring of 2014, the Doghramji relators joined the original relators’ sharing agreement. Id. Because the government had learned through preliminary settlement negotiations that CHS would require that all seven qui tam complaints be dismissed with prejudice, the Doghramji relators entered into the agreement upon the government‘s encouragement. Id.; R. 89 (Case No. 3:11-cv-00442) (Buschner Decl. ¶ 15) (Page ID #921).
In exchange for a payment exceeding $97 million (approximately $88 million of which stemmed from the MUED Claims and $9 million from the Laredo Claims), the settlement agreement provided that the government and the seven relators would dismiss all their claims against CHS. Id. at 6–7 (Page ID #138–39). The settlement agreement reserved the issue of allocation of attorney fees, providing in relevant part:
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) .
Id. at 10 (Page ID #142).
The district courts where relators filed suit entered judgments in each of the relators’ actions, dismissing all the relators, but retained jurisdiction over the allocation of attorney fees. R. 77 (Case No. 3:11-cv-00442) (8/14/2014 Order Dismissing Doghramji Compl.) (Page ID #645); R. 80 (Case No. 3:11-cv-00442) (9/3/2014 Order Granting Extension of Time to File Petition for Recovery of Attorney Fees) (Page ID #656); R. 41 (Case No. 3:14-cv-02195) (9/4/2014 Order Dismissing Bryant Compl. ¶ 2–3) (Page ID #292); R. 1-4 (Case No. 3:15-cv-00110) (Joint Status Report Noting Dismissal of Reuille Compl. ¶ 4) (Page ID #47). After the district courts approved the settlement agreement, the government announced that it would award Plantz the relators’ share for the MUED claims and Cook-Reska the relators’ share for the Laredo Claims. R. 115-15 (Case No. 3:11-cv-00442) (Plantz Settlement Agreement) (Page ID #2760); R. 115-16 (Case No. 3:11-cv-00442) (Cook-Reska Settlement Agreement) (Page ID #2766). Pursuant to the government-encouraged share agreement into which the relators previously entered, the remaining relators all received a share of the Plantz award for their work on the MUED claims. App. at 17–25; R. 89 (Case No. 3:11-cv-00442) (Buschner Decl. ¶ 15) (Page ID #921–22). Some of the attorneys collected a percentage of the Plantz recovery as a contingency fee. App. at 34.
C. Procedural history of attorney-fees dispute
All relators’ lawsuits were subsequently transferred to the Middle District of Tennessee for resolution of the attorney-fees dispute. Cmty. Health Sys., 666 F. App‘x at 412. In February 2015, the district court consolidated the cases and directed the parties to brief “whether all or some of the relators are precluded from recovery of attorneys’ fees and costs by the first-to-file rule provided in
The first round of litigation before this court involved the interpretation of the
On remand, Magistrate Judge Holmes found, after thorough review of the extrinsic evidence, that the language in the Settlement Agreement “limit[ed] any challenges or objections to attorneys’ fees to the grounds specifically listed in
In April 2020, the district court found that the FCA‘s first-to-file rule and public-disclosure bar preclude all the relators’ claims for attorney fees under its interpretation of the section of the FCA governing attorney fees,
II. ANALYSIS
The FCA subjects to civil liability “any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.”
To incentivize private actors to bring qui tam actions, the FCA allows for the recovery of a share of government proceeds if the government successfully litigates or settles a claim that the relator originally brought. See
As a counterbalance to these incentives, the FCA also contains provisions that aim “to discourage opportunistic plaintiffs from bringing parasitic lawsuits whereby would-be relators merely feed off a previous disclosure of fraud.” Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970 (6th Cir. 2005). Courts apply these statutory provisions, colloquially called the first-to-file rule and the public-disclosure bar, to protect the government from harms stemming from private opportunism. See Health Possibilities, 207 F.3d at 340. The central issue in this case is whether we should apply these statutory bars to limit awards of attorney fees seven years after a global, cooperative settlement between the government, relators, and defendants.
Because the settlement agreement incorporated
A. Requirement of a relator‘s share to recover attorney fees under § 3730(d)(1)
Section 3730(d)(1) describes the “bounty” to which the qui tam relator is entitled when the government intervenes in the relator‘s lawsuit. That section provides:
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.
We first consider the relationship between the sentence governing the award to the relators of a portion of the government‘s proceeds, called the “relator‘s share,” and the sentence governing the award of attorney fees to the relator. We decide whether the award of attorney fees is predicated on the award to the relators of the relator‘s share and, if so, whether the relators here received a relator‘s share as defined by the statute.
1. Section 3730(d)‘s relator-share requirement
The next to the last sentence of
Looking then, to the first sentence of
person‘s action. Weaving the “person” back through the provisions of
Relators argue that they are entitled to attorney fees any time the government intervenes in an action. Bryant Br. at 25–26; Cook-Reska Br. at 29; Reuille Br. at 17; Doghramji Br. at 29. But this unlimited reading would suggest that relators are entitled to attorney fees, even if the lawsuit is ultimately unsuccessful. Such a result would run afoul of the presumption that a party must achieve a “degree of success” to recover attorney fees. Ruckelshaus v. Sierra Club, 463 U.S. 680, 684 (1983). The link between the relator as the “person” bringing an action under subsection 3730(b) and the recovery of “the proceeds of the action or settlement of the claim” in
That the “person” referred to in the first sentence of
2. Receipt of the relator‘s share
Having determined that the receipt of a portion of the “proceeds of the action or settlement” is necessary for the recovery of attorney fees, we examine whether the relators here received a relator‘s share within the meaning of
The plain terms of
CHS argues that the relators did not receive a portion of the “proceeds of the action or settlement of the claim” as defined by
Finding no support in the text of
The plain meaning of
It is unclear, moreover, why a successful relator would contract away its share of proceeds to an “opportunistic” relator who raised a tag-along claim and did not contribute to the successful prosecution of the suit. Nor would an “opportunistic” relator contracting with another relator for a low sum be able to recover attorney fees without providing the number of hours the attorney spent on the matter and proving that the requested fees are reasonable. See Gonter v. Hunt Valve Co., 510 F.3d 610, 616 (6th Cir. 2007).
Allowing relators to recover attorney fees when they receive portions of a settlement pursuant to privately negotiated
B. First-to-file rule and public-disclosure bar
We have concluded that relators have satisfied
We briefly explain these statutory provisions. Section 3730(b)(5) mandates that “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” This “first-to-file” rule bars “successive plaintiffs from bringing related actions based on the same underlying facts.” Walburn, 431 F.3d at 971 (quoting United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2001)). The FCA‘s public-disclosure bar, now codified at
1. Statutory text and legislative intent
Except in the “rare cases” when the plain language of a statute is inconsistent with legislative intent, we follow the text of the statute. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982)). We therefore begin our analysis with the statutory text. Under
The plain text of
Panama R. Co. v. Johnson, 264 U.S. 375, 392 (1924). But we cannot say that subsection (d)(1)‘s reference to subsection (b) fairly covers all of
Following the text of the statute and allowing relators to proceed would not run contrary to the intent of Congress or produce an absurd result. See Donovan v. FirstCredit, Inc., 983 F.3d 246, 254 (6th Cir. 2020). The FCA encourages and incentivizes citizens to prevent the defrauding of public funds. As the Committee on the Judiciary noted in its Senate Report recommending the passage of the 1986 version of the FCA:
In the face of sophisticated and widespread fraud, the Committee believes only a coordinated effort of both the Government and the citizenry will decrease this wave of defrauding public funds. [The FCA] increases incentives, financial and otherwise, for private individuals to bring suits on behalf of the Government.
S. Rep. No. 99-345, at 2 (1986). Nowhere is such a “coordinated effort” more salient than when multiple relators each describe pertinent aspects of a broad-reaching fraud.
In fact, this case illustrates the absurdity of rote application of the first-to-file rule in complex global settlements. If multiple relators uncover multiple independent parts of the same complex scheme and the government uses the relators’ collective resources to investigate the fraud, it would be unfair to allow solely the first relator‘s attorney to recover all the attorney fees because that relator discovered one part of the fraud first.
Of course, the first-to-file rule and public-disclosure bar aim to protect the government from plaintiffs who “feed off a previous disclosure of fraud.” Walburn, 431 F.3d at 970. But the relators in this case differ from the proverbial “opportunistic plaintiffs” to which courts often refer. See, e.g., id.; Poteet, 552 F.3d at 507. Relators and their counsel expended significant time and resources assisting the government in developing the claims against defendants. See Cmty. Health Sys., 666 F. App‘x at 412. Recognizing this, the government encouraged the relators to cooperate and divide the relators’ share among themselves. Id. Because the
government recognized the relators’ contributions, declining to apply the FCA‘s bars to attorney-fees recovery would not harm the government. To the contrary, allowing relators to recover attorney fees in a broad-reaching fraud such as this one would help the government by incentivizing multiple relators and their counsel to prosecute a case that the government may not be able to pursue on its own. See id. at 420 (Stranch, J., concurring) (“If both parties are not fairly compensated,
The text of
2. Jurisdictional arguments
Without a strong hook in
We are not persuaded that the public-disclosure bar creates jurisdictional problems for relators. After the 2010 amendments to the FCA, the public-disclosure bar is no longer jurisdictional. United States ex rel. Advocs. for Basic Legal Equal., Inc. v. U.S. Bank, N.A., 816 F.3d 428, 433 (6th Cir. 2016). Even when, as here, relators sued for conduct spanning both before and after the 2010 FCA amendments, we have rejected challenges to our jurisdiction based on the public-disclosure bar. Id. at 430, 433.
The first-to-file rule does not create a jurisdictional issue either. Although we have mentioned in passing that the first-to-file rule is “jurisdictional,” we have never examined the basis for that designation. See Walburn, 431 F.3d at 970; Poteet, 552 F.3d at 516. “[I]ntervening Supreme Court decisions allow a panel of our court to revisit prior precedent.” Rahimi, 3 F.4th at 829. Such intervening authority “need not be precisely on point, if the legal
reasoning is directly applicable.” Ne. Ohio Coal. for the Homeless v. Husted, 831 F.3d 686, 720–21 (6th Cir. 2016). As multiple other circuits have noted, the Supreme Court in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 575 U.S. 650 (2015), has subsequently “addressed the operation of the first-to-file bar on decidedly nonjurisdictional terms, raising the issue after it decided a nonjurisdictional statute of limitations issue.” United States v. Millenium Lab‘ys, Inc., 923 F.3d 240, 249 (1st Cir. 2019) (quoting United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 121 n.4 (D.C. Cir. 2015)); see also In re Plavix Mktg., Sales Pracs. & Prod. Liab. Litig. (No. II), 974 F.3d 228, 232 (3d Cir. 2020).
The Supreme Court‘s bright-line test distinguishing jurisdictional and claims-processing rules, moreover, confirms that the first-to-file rule is not jurisdictional. See United States v. Kwai Fun Wong, 575 U.S. 402, 409 (2015) (“[P]rocedural rules, including time bars, cabin a court‘s power only if Congress has ‘clearly state[d]’ as much.” (quoting Sebelius v. Auburn Reg‘l Med. Ctr., 568 U.S. 145, 153 (2013))). Unlike
resolved when the parties settled the covered qui tam claims, the court dismissed the claims with prejudice, and the United States accorded Relators a share of the proceeds.“). An attorney-fees dispute should not allow the litigants to revisit claims they settled and dismissed seven years ago. If CHS wished to challenge the district court‘s jurisdiction over the merits of relators’ claims, it should have done so, rather than settling the case and dismissing the claims.
3. Cases applying first-to-file rule and public-disclosure bar
CHS also argues that both our caselaw and caselaw outside the circuit mandate application of the first-to-file rule and public-disclosure bar. CHS Br. (Doghramji) at 41–43, 49. We have required that a relator satisfy statutory and rule-based prerequisites post-settlement, however, only when the government contested relators’ entitlement to settlement proceeds. We have never applied the first-to-file rule and public-disclosure bar when there was no reason to do so because the government, relators, and defendants all settled their claims together.
In all of the cases upon which CHS relies, either the defendant did not settle with the relators, the government contested the relators’ share, or both. In United States ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493, 522 (6th Cir. 2007), we held that a relator could not recover a relator‘s share of a settlement between the government and a defendant “[a]bsent a valid complaint which affords [him] the possibility of ultimately recovering damages.” Given that neither the government nor the defendant settled with the relator, we declined to award the relator proceeds because there was “no prospect for [the] relators to recover on their claims under any circumstances” absent compliance with Federal Rule of Civil Procedure 9(b). Id. But here, the relators already recovered on their claims. We need not ensure that the complaint would afford relators the “possibility” of recovering damages when the relators already recovered those damages through a settlement that both the government and defendants endorsed.
United States ex rel. Taxpayers Against Fraud v. General Electric Co., 41 F.3d 1032 (6th Cir. 1994) is likewise inapposite. The defendant in that case asked the court to reduce an award of attorney fees to the relators after the defendant settled with the government (but not relators). Id. at 1043. Among the many issues in the case, we noted that the district court should determine
on remand whether one of the
In the proceedings leading up to the appeal in Taxpayers Against Fraud, moreover, the government engaged in protracted litigation seeking to reduce or eliminate the relators’ share of the settlement under pressure from the defendant. Id. at 1039–40. As in Bledsoe, we instructed the district court to ensure that one of the co-relators was entitled to settlement proceeds pursuant to the FCA‘s statutory provisions considering the government‘s and the defendant‘s resistance to awarding any of the relators a share of the proceeds.
CHS also refers us to other circuits that have applied the first-to-file rule and public-disclosure bar to post-settlement recovery of the relator‘s share and attorney fees, Millenium Lab‘ys, 923 F.3d at 251; United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97, 106 (3d Cir. 2000) (Alito, J.); Fed. Recovery Servs., Inc. v. United States, 72 F.3d 447, 450 (5th Cir. 1995); United States ex rel. Greenwald v. Kool Smiles Dentistry, PC, No. 3:10-cv-1100 (JBA), 2018 WL 4356744, at *3 (D. Conn. Sept. 12, 2018).6 In these cases, however, the defendants did not settle with the relators or the level of collaboration between the government and the relators present in this case was entirely absent. Millenium Lab‘ys, 923 F.3d at 247–48 (district court dismissed relator‘s claims pursuant to settlement between government and defendant); Merena, 205 F.3d at 100 (dispute involved government contesting relator‘s share);
Fed. Recovery Servs., 72 F.3d at 449 (court dismissed relators before the government settled with defendant); Greenwald, 2018 WL 4356744, at *2 (relator seeking attorney fees received no relator share under the settlement and provided no documentation of any separate sharing agreements).
All of these cases show that courts apply the FCA‘s statutory bars when either defendants contest relators’ claims or the government contests the relators’ receipt of a share. In those circumstances, courts reasonably seek assurance that relators’ complaints satisfy the FCA‘s prerequisites, and thus that relators are not mounting “parasitic lawsuits” aimed at taking advantage of the government or defendants. Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 294–95 (2010). Here, however, in light
4. Risk of delay
Finally, CHS argues that requiring it to bring statutory FCA challenges before settlement would cause undue delay in settling any FCA case. CHS Br. (Doghramji) at 46. CHS‘s concern with delay is surprising given that it is still litigating the underlying merits of this case seven years after settlement. Under CHS‘s interpretation, parties still must decide whether the first-to-file rule and public-disclosure bar are satisfied at some point, either pre- or post-settlement. Our interpretation encourages parties to resolve efficiently disputes about attorney fees and statutory bars on the front-end, rather than years after settlement. In any case, if CHS were overly concerned with the time it takes to resolve attorney-fees disputes, it could choose to define more clearly the scope of attorney fees in its settlement agreement. To that end, CHS‘s concerns about delay do not persuade us.
* * *
The text of
would lead to an “absurd result” that is “inconsistent with the legislative intent.” See Donovan, 983 F.3d at 254 (quoting Tenn. Prot. & Advoc., Inc. v. Wells, 371 F.3d 342, 350 (6th Cir. 2004)).
But that is not what happened in this case. The government intervened in all the relators’ cases, collaborated with all the relators, and encouraged the relators to share the bounty from the settlement with CHS. We are satisfied that the government found relators’ claims worthy of prosecution. CHS would have us apply the first-to-file rule and public-disclosure bar to protect the government from opportunism of which we see no evidence. We decline to do so. Accordingly, we need not decide which relators were first to file or whether the Doghramji relators’ complaint satisfied the public-disclosure bar, for those constraints are not relevant here.
III. CONCLUSION
All the relators in this case received a portion of the proceeds of the settlement, satisfying