A decision by the Fifth Circuit Court of Appeals may help FCA defendants challenge relators’ claims for attorneys’ fees, especially where relators’ counsel fails to keep adequate time records distinguishing between work for which the relators recovered an award and work where they did not.
In August 2014, Tennessee-based Community Health Systems, Inc. (“CHS”) paid $98.15 million to settle seven FCA whistleblower lawsuits alleging the hospital system overbilled the government for inpatient services that should have been outpatient services. One of those lawsuits was brought by former CHS coding specialist Amy Cook-Reska (“Relator”).
Relator’s counsel originally requested $3.5 million in attorneys’ fees and costs, but the district court later reduced the award to less than $730,000, finding that counsel had been informed years earlier that there were separate and distinct sets of claims involved in the lawsuit and that they should have been separating their time entries. One set of claims was a nationwide investigation, the other was an investigation directly related to this Relator’s disclosures. The court found that Relator’s attorneys could be reimbursed only for work they did on the claims related to Relator’s investigation, as well as anything that was fairly categorized as “both” (meaning it would have been required to pursue the qualifying claims alone), up until the point the court ordered them to keep separate records.
A whistleblower’s lawyer bears the burden of keeping billing records in a manner that enables the court to identify each distinct claim, the Fifth Circuit affirmed. Here, many of the lawyers’ time entries were in “block-billing” format, making allocation between the sets of claims difficult. The court also found that Relator’s attorneys, who were experienced FCA litigators, should have been on notice that the FCA’s first-to-file rule might require greater granularity in time keeping. 31 U.S.C. § 3730(b)(5) (in order to recover reasonable attorneys’ fees and costs, relator must be the first to file those claims).
Additionally, the district court cut the lawyers’ hourly rates from $800 to $550, and their investigator’s rates from $250 to $125, based on prevailing market rates in the local geographic community. The Fifth Circuit affirmed the district court’s decision to cut the rates based on a Texas Lawyer survey of median rates charged in the Houston and Texas legal markets, as well as the court’s own knowledge of customary rates in Houston.
As a practical tip, health care companies facing FCA lawsuits may consider requesting a court order requiring the whistleblower’s counsel to keep separate billing records when the case contains separate and distinct claims that do not involve a common core of facts.