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United States ex rel. Doghramji v. Community Health Systems, Inc.

United States District Court, M.D. Tennessee, Nashville Division

October 2, 2019

UNITED STATES OF AMERICA ex rel. JAMES DOGHRAMJI, SHEREE COOK, and RACHEL BRYANT, Plaintiffs,
v.
COMMUNITY HEALTH SYSTEMS, INC., et al., Defendants. UNITED STATES OF AMERICA and STATE OF TEXAS ex rel. AMY COOK-RESKA, Plaintiffs,
v.
COMMUNITY HEALTH SYSTEMS, INC., et al., Defendants. UNITED STATES OF AMERICA ex rel. NANCY REUILLE, Plaintiffs,
v.
COMMUNITY HEALTH SYSTEMS PROFESSIONAL SERVICES CORP., et al., Defendants. UNITED STATES OF AMERICA ex rel. KATHLEEN A. BRYANT, Plaintiffs,
v.
COMMUNITY HEALTH SYSTEMS, INC., et al., Defendants.

          MEMORANDUM OPINION & ORDER

          Marvin E. Aspen United States District Judge

         Relators in the above-captioned cases (collectively “Relators”) seek reasonable attorneys' fees from defendants, Community Health Systems, Inc. and many of its subsidiaries (collectively “CHS”), following the parties' execution of a settlement agreement that resolved all underlying claims brought pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq. The parties disagree as to whether the settlement agreement allows CHS to challenge Relators' entitlement to fees under the False Claims Act.

         Presently before us is Magistrate Judge Barbara D. Holmes' Report and Recommendation (R. & R. (Dkt. No. 286)), [1] which interpreted the settlement agreement in Relators' favor, and CHS's objections to the Report and Recommendation (Obj. (Dkt. No. 290)). We consider this matter on remand in accordance with the Sixth Circuit's instructions to consider extrinsic evidence of the parties' negotiations “to ascertain the parties' original understanding of [the settlement agreement's] terms.” United States v. Cmty. Health Sys., Inc., 666 Fed.Appx. 410, 418 (6th Cir. 2016). After a careful review of the extrinsic evidence submitted by the parties, the Report and Recommendation, and the parties' briefs, we conclude that CHS's interpretation of the settlement agreement prevails, and that the agreement does not preclude CHS from asserting challenges to Relators' entitlement to attorneys' fees. Accordingly, we modify the Report and Recommendation consistent with this opinion.

         BACKGROUND

         Magistrate Judge Holmes' Report and Recommendation sets out the relevant background of this case and its procedural history. (See R. & R. at 1-7.) We assume familiarity with the Report and Recommendation's recitation of that history and recount it only as necessary for this opinion.

         I. THE PRESENT DISPUTE

         This dispute concerns the meaning of a provision in a Settlement Agreement (Dkt. No. 75-1) between the United States (the “Government”), CHS, and nine individuals (called “relators”) who brought actions under the False Claims Act, 31 U.S.C. § 3729 et seq. The Settlement Agreement ended a years-long investigation into claims of improper hospital admission and billing practices at CHS hospitals nationwide. Pursuant to the Settlement Agreement, the Government intervened in all relators' cases to move for dismissal, and CHS agreed to pay the Government $97, 257, 500 to resolve all claims. (See Id. ¶¶ 1, 15.) CHS received a global release, with select exceptions, from claims brought by the Government and all relators. (See Id. ¶¶ 2-5.) However, the Settlement Agreement did not purport to release or dismiss any claims the relators may have for statutory attorneys' fees. (Settlement Agreement ¶ 15(c)(1).)

         Relators in this consolidated action-Amy Cook-Reska; Nancy Reuille; Kathleen A. Bryant; and a group of individuals from Tennessee: James Doghramji, Sheree Cook, and Rachel Bryant (together the “Doghramji Relators”)-seek reasonable attorneys' fees, expenses, and costs for work done leading to the settlement pursuant to 31 U.S.C. § 3730(d)(1).[2]Section 3730(d)(1) provides that when the Government intervenes in a case brought by a relator under the False Claims Act, that relator shall receive a share of the proceeds returned to the Government (known as a “relator's share”) and “shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs . . . awarded against the defendant.” Id. (emphasis added). CHS seeks to challenge Relators' eligibility to collect attorneys' fees under, as relevant here, two statutory bars contained within the False Claims Act. See Cmty. Health Sys., Inc., 666 Fed.Appx. at 413. The first is the “first-to-file” bar, pursuant to 31 U.S.C. § 3730(b)(5), which prevents any relator other than the first to file in court from bringing a case based on the same allegations. The second is the “public disclosure” bar, pursuant to 31 U.S.C. § 3730(e)(4), which generally blocks any case filed after the operative allegations have been publicly disclosed through the media, public court filings, or government communications. Both sides dispute whether CHS may assert these two statutory bars to Relators' entitlement to fees under Term 8 of the Settlement Agreement. Term 8 broadly released Relators from any claims CHS might have, but also included a reservation of CHS's rights to challenge Relators' claims for attorneys' fees. In relevant part, Term 8 reads as follows:

CHS . . . fully and finally release[s], waive[s] and forever discharge[s] each of the Relators . . . from any and all manner of claims, controversies, actions, causes of actions, demands, torts, damages, costs, attorneys' fees, moneys due on account, obligations, judgments or liabilities of any kind whatsoever in law or equity, arising out of agreement or imposed by statute, common law or otherwise, from the beginning of time to the date this Agreement is signed, whether or not known now, anticipated, unanticipated, suspected or claimed, fixed or contingent, whether yet accrued or not and whether damage has resulted from such or not. 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).

(Settlement Agreement ¶ 8 (emphasis added).)

         CHS argues that the second sentence of Term 8 preserved its right to challenge Relators' statutory entitlement to attorneys' fees. Relators argue that the second sentence of Term 8 limits CHS to challenge only the reasonableness of, but not eligibility for, Relators' attorneys' fees.

         II.PRIOR PROCEEDINGS

         This dispute over attorneys' fees has been brewing for nearly five years. As such, before delving into the substance of the Report and Recommendation and CHS's objections, we briefly review how we got here.

         A. Original Proceedings Before the District Court

         After Relators settled their cases, filed their fee petitions, and those fee petitions were transferred to and consolidated before this Court, former Chief Judge Kevin H. Sharp considered CHS's objections to the petitions under the first-to-file and public disclosure bars. U.S. ex rel. Doghramji v. Cmty. Health Sys., Inc., No. 3:11-442, 2015 WL 4662996 (M.D. Tenn. Aug. 6, 2015), rev'd and remanded sub nom. United States v. Cmty. Health Sys., Inc., 666 Fed.Appx. 410 (6th Cir. 2016). Chief Judge Sharp determined that the second sentence of Term 8 of the Settlement Agreement failed to preserve CHS's proffered challenges to Relators' attorneys' fee claims. Id. at *8. Chief Judge Sharp reasoned that the phrase “pursuant to 31 U.S.C. § 3730(d)” preserved only challenges or objections contained within that section, i.e., challenges to the reasonableness of Relators' claimed fees, but not to Relators' entitlement to fees. Id. at *6. Chief Judge Sharp stated that CHS “could easily have specified that they intended to raise a challenge to Plaintiffs' entitlement to fees under the first-to-file or public disclosure provisions, or, at a minimum, simply cited Section 3730(b)(5) and (e)(4), much like the Government reserved specific statutory rights and negotiated a carve-out for those provisions” in Term 7 of the Settlement Agreement. Id. Moreover, he believed that CHS's “silence in response to ‘Recital G' which provided that ‘Relators and their counsel claim entitlement under 31 U.S.C. § 3730(d) . . . to [their] reasonable expenses, attorneys' fees and costs,' (Settlement Agreement Recital G at 5), sp[oke] volumes.” Id.

         “Given the stakes” at play in the Settlement Agreement, Chief Judge Sharp found that CHS's failure to include references to the False Claims Act's first-to-file bar, § 3730(b)(5), or public-disclosure bar, § 3730(e)(4), in Term 8's reservation of rights rendered these challenges unpreserved, leaving CHS with only the option to challenge the reasonableness of-but not entitlement to-Relators' attorneys' fees. Id. at *7-8.

         B. Remand from Sixth Circuit

          On appeal, the Sixth Circuit disagreed with Chief Judge Sharp's assessment, finding Term 8 subject to two reasonable interpretations and, thus, ambiguous. Cmty. Health Sys., Inc., 666 Fed.Appx. at 418. On one hand, two rules of contract construction-the last-antecedent presumption and the consistent-usage presumption-favored CHS's interpretation that the phrase “pursuant to 31 U.S.C. § 3730(d)” attached only to the phrase “Relators' claims for attorneys' fees, expenses and costs” in Term 8, and therefore did not limit CHS's ability to object to the Relators' entitlement to fees. Id. On the other hand, these presumptions “can assuredly be overcome by other indicia of meaning, ” id. (quoting United States v. Hayes, 555 U.S. 415, 425, 129 S.Ct. 1079, 1081 (2009)), and Relators produced two such indicia: “[1] CHS's failure to expressly preserve the first-to-file and public-disclosure challenges in Term 8, and [2] CHS's silence in response to Recital G.” Id.

         Because Term 8 was ambiguous, the Sixth Circuit reversed and remanded to this Court to consider extrinsic evidence “to ascertain the parties' original understanding of [the Settlement Agreement's] terms.” Cmty. Health Sys., Inc., 666 Fed.Appx. at 418.

         C. Proceedings Before the Magistrate Judge

         Upon remand, we referred the matter to Magistrate Judge Holmes to “conduct all proceedings necessary to determine the meaning of Term 8 of the settlement agreement, including conducting an evidentiary hearing, consistent with the mandate issued by the Sixth Circuit.” (Dkt. No. 257 at 2; Case 3:14-2195, Dkt. No. 80.)[3]

         In preparation for the evidentiary hearing, the parties jointly submitted 144 exhibits. (See Am. Joint Ex. List (Dkt. No. 269).)[4] The exhibits consisted of non-privileged email communications between counsel for CHS, the Government, and various Relators' counsel before and after execution of the Settlement Agreement; drafts of the Settlement Agreement reflecting changes before execution; deposition testimony from several involved individuals; and assorted motions and briefs of the parties as the present dispute wended its way through various district courts.

         Magistrate Judge Holmes conducted the evidentiary hearing on June 26 and 27, 2017.[5]Following the courtroom proceedings, the parties submitted post-hearing briefs (Dkt. Nos. 276, 277) and responses (Dkt. Nos. 279, 280). Magistrate Judge Holmes issued her Report and Recommendation on August 30, 2018. (R. & R.)

         III. EXTRINSIC EVIDENCE BEFORE MAGISTRATE JUDGE HOLMES

         As described above, the Magistrate Judge considered a large body of extrinsic evidence that she synthesized in a succinct and organized manner in the Report and Recommendation. CHS “do[es] not object to most of the facts found in the R&R (at 13-27), ” and we therefore quote at length from that description to set out the evidence here. (Mem. in Supp. of Defs.' Objs. to Magistrate J.'s R. & R. (“Mem”) (Dkt. No. 290-1) at 7.)[6] Unless indicated, all footnotes in the quoted material are supplied by this Court, and are not taken from the Report and Recommendation.

         1. Extrinsic evidence of circumstances leading up to final Settlement Agreement.

         As an initial matter, the Court notes that, under the FCA, once the Government elects to intervene in a qui tam action, it is the Government that controls litigation on behalf of the relators:

If the Government proceeds with the action, it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action. Such person shall have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).

. . .

The Government may settle the action with the defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good cause, such hearing may be held in camera.

31 U.S.C. § 3730(c)(1)-(2). Further, as noted during the evidentiary hearing, once the Government decides to intervene, the Government “takes over the action as the plaintiff.” DE 273 at 29. Although the Government did not officially intervene in the various cases until July of 2014 following execution of the Settlement Agreement, the Government undisputedly took the lead role in negotiating the terms of the final Settlement Agreement beginning in early March of 2014.

         The parties were also operating under a court-imposed deadline in finalizing the Settlement Agreement, an important contextual fact about which there is no dispute. Under the FCA, complaints filed by relators are kept under seal for at least 60 days, which is meant to allow the government time to decide whether to intervene in the action. 31 U.S.C. § 3730(b). The government may, for good cause, move for extensions beyond this 60-day window, during which time the complaint remains under seal. Here, however, the district court where Relator Scott Plantz filed his complaint apparently notified the parties that there would be no extensions beyond July 14, 2014, at which point the Plantz complaint would be unsealed and become public. DE 274 at 191; JEX 62 at 335. All parties therefore treated July 14, 2014 (the “Plantz deadline”) as the operative deadline to finalize a settlement.

         On March 7, 2014, then Assistant U.S. Attorney (“AUSA”) John-David Thomas and Richard Sauber, one of the attorneys for CHS, reached a “handshake deal” that informally resolved all claims against CHS. JEX 3. From the outset of this handshake deal, CHS considered indispensable the condition that any global settlement include “dismissal with prejudice by each relator as it applies to them individually.” Id. At the time, AUSA Thomas advised that any agreement to this expected requirement “may depend upon how CHS approaches the attorney fee issue.” Id.

         Four days later, Robert McAuliffe, another attorney for the Government, sent a draft of a proposed settlement agreement to CHS's attorneys. JEX 4. This draft included the following placeholder language, which appears to represent an implicit request that counsel for CHS prepare language for the settlement agreement addressing CHS's position regarding relator attorney's fees: “[IF APPLICABLE: Insert logistics relating to CHS's payment to Relators for expenses, and attorneys' fees and costs].” Id. at 33 (emphasis in original). Recital G, which the Sixth Circuit found favorable to the Relators' interpretation of Term 8 due to CHS's failure to respond, was also included in this initial draft, though identified as Recital F: “Relators claim entitlement under 31 U.S.C. § 3730(d) to a share of the proceeds of this Settlement Agreement and to Relators' reasonable expenses, attorneys' fees and costs.” JEX 4 at 32.

         [CHS counsel] Sauber responded to the Government on March 13 with a revised version of the settlement agreement that did not alter or remove the placeholder language from the initial draft. See JEX 5. Nor did CHS's proposed revisions address the Relators' recited claims of entitlement to attorneys' fees. Id. Sauber's version did, however, add a paragraph (“Term 10”) requiring the Relators to “release CHS . . . from any liability to Relators arising from the filing of the Civil Action, or under 31 U.S.C. § 3730(d) for expenses or attorneys' fees and costs.” JEX 5 at 62-63. On March 17, another attorney for CHS, Michael Waldman, sent an email to the Government's attorney, McAuliffe, requesting copies of the sealed complaints filed by each of the Relators in this case, which Waldman said would “allow [CHS] to work through some of the first-to-file issues.” JEX 6. No. further explanation of the substance or timing of the anticipated first-to-file issues was given.

         The Government accepted the insertion of Term 10 in the draft settlement agreement on March 20, but advised CHS that any release of claims for attorneys' fees would have to be negotiated directly with the Relators. JEX 8. On April 21, the Government, via attorney Melissa Handrigan, emailed a copy of the revised settlement agreement, which included Term 10, to counsel for each of the Relators. JEX 16. This group included Reuben Guttman, Traci Buschner, and David Young (counsel for the Tennessee Relators), Mitch Kreindler (counsel for Kathleen Bryant), Matthew Organ (counsel for Scott Plantz and Nancy Reuille), Jan Soifer and Patrick O'Connell (counsel for Amy Cook-Reska and Nancy Reuille), Mark Raspanti (counsel for Thomas Mason), and Ronald Osman (counsel for Brian Carnithan). Id.; DE 276-1 at 2. See Appendix.[7] The Government requested “comments” from the Relators' counsel regarding the provisions in the draft settlement agreement and imposed a deadline of May 9 for the Relators to reach a sharing agreement delineating the manner in which they planned to distribute the statutory relator's share among the group. JEX 16 at 339.

         The Relators discussed the proposed agreement over the next several days. On April 25, Osman suggested that CHS and the Government insert a “carve out” provision if the parties could not come to an agreement over fees, ostensibly meaning that the issue of attorneys' fees would be addressed after the parties had executed a settlement agreement. JEX 17 at 367 and 370. Osman also commented that if the attorneys' fees were not resolved in the settlement, litigation would need to occur in the district where each complaint was filed. JEX 17 at 375.[8]

         Raspanti similarly referenced an attorneys' fees carve out provision, noting that “due to the scope of the Relators' release in Paragraph 5, ” which released CHS from any liability under the FCA subject to CHS's payment of the agreed settlement amount (“Term 5”), the Relators would need “an agreement on attorneys' fees or the usual carve out language if attorneys' fees and costs are not resolved before the execution of the . . . agreement.” JEX 18 at 25. Soifer and O'Connell appear to have agreed with this opinion (see JEX 18, 19), [9] while Kreindler proposed that Terms 5 and 10 be combined in an effort to “prevent [the Government] from separating the issue of attorneys' fees from the settlement by making clear that they are a single issue.” JEX 21. Organ drafted a revised version that included Kreindler's proposal and submitted it to the Government on April 29. JEX 24 at 88 and 91. This version of the settlement agreement still included the placeholder (now renumbered as Term 3) for a description of the logistics for payment of attorneys' fees to the Relators. Id. at 87.[10] In his accompanying email to the Government, Organ made clear that the suggested revisions “assume that we are able to successfully resolve the issues raised in our April 9, 2014 letter to you, including Relators' claims for attorneys' fees.” Id. at 81.[11]

         On May 7, the Government, acting as an intermediary between the Relators and CHS for finalization of the settlement, advised the Relators that CHS had requested fees information from any Relator that planned to file an application for attorney's fees. JEX 26. This May 7 email from the Government's counsel to the Relators' attorneys identified Waldman and Sauber as the individuals to whom such information should be sent. Id.

         David Garrison, another attorney representing the Tennessee Relators, sent the first documented correspondence to counsel for CHS on May 9, in which he identified, and expressly claimed entitlement to, more than $3 million in attorney's fees and expenses under 31 U.S.C. § 3730(d). JEX 27 at 553. Counsel for other Relators followed suit with similar communications on May 12 (Organ), May 19 (O'Connell), and June 6 (Guttman and Kreindler). JEX 28, 38, 47, 48. Other Relators also specifically referred to the fees as incurred at the request of the Government and in “furtherance of claims for which CHS will be obtaining a release from [the Relators].” JEX 38 at 2 [(O'Connell letter)]. On May 13, Guttman also inquired about CHS's anticipated “time frame” for resolving the attorneys' fees claims, to which CHS's attorney, Waldman, responded on that same day: “[W]e don't have any deadlines, but the sooner CHS has the fee requests with backup the sooner it can respond and hopefully resolve.” JEX 30 at 825.[12] Despite the clear statements by each group of Relators claiming entitlement to fees, CHS did not take this opportunity to state that it intended to contest all fees other than those of the first relator to file.

         On May 14, the Government's attorney, Handrigan, circulated an updated draft of the proposed settlement agreement, which removed the Term 3 placeholder language for payment of the Relators' attorneys' fees, replacing it instead with language intended to “reflect that relator's share and attorneys' fees will be addressed after the settlement agreement is executed[.]” JEX 31 at 394. The operative language, in Term 15, stated the following:

(c) Provided, however, that the following claims shall not be dismissed, unless they are settled, adjudicated, or otherwise resolved, and any required consent by the United States is obtained, and the Courts are so informed:
(1) Relators' claims for reasonable attorneys' fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d)[.]

Id. at 410. Notably, this language is almost identical to the language that was ultimately included in the final Settlement Agreement, particularly the relevant portion of Term 8, the limiting phrase “pursuant to 31 U.S.C. § 3730(d), ” at the crux of the Court's analysis. The May 14 draft of the settlement agreement also included the Relators' requested provision that their fee claims could be brought in the different jurisdictions where each case was filed. Id.

         On May 15, in response to the Government's “carve out” of the attorneys' fees issue, Organ emailed counsel for the other Relators to alert them that the Government was “concerned that [Relators] are taking too long to work out relator share and attorney fee issues, but that it is still possible that we get those all resolved if we keep moving.” JEX 33 at 132. Organ contacted the other Relators' counsel again the following day to assure them, regarding the placeholder deletion, that “[i]t is my understanding that the provisions were pulled from the latest draft out of a concern that there is not enough time to resolve those issues-not because [the Government] and CHS are not still willing to address those issues.” JEX 34 at 417. To that end, Organ encouraged all of the Relators to quickly finalize and execute the sharing agreement pertaining to the relator's share. Id.

         There is little doubt that the Relators, even while contemplating a carve out of objections to reasonableness of attorneys' fees, recognized at least the possibility that CHS might make some attempt to avoid paying all of Relators' attorneys' fees. The Relators attempted to directly address this possibility. On May 29, Organ sent a revised draft settlement agreement with O'Connell and Soifer's proposed revisions, which included the following unnumbered term:

In exchange for the releases described in Paragraph 6 below . . . CHS agrees to pay to Relators their reasonable expenses, attorneys' fees and costs. Any disputes between CHS and any Relator regarding the reasonableness of that Relator's request for expenses, attorneys' fees and costs shall be brought in the United States District Court in which that Relator's action is pending.

JEX 43 at 486. And included “Term 6, ” which stated:

Notwithstanding the releases given in paragraphs 2-5 . . . of this Agreement, or any other term of this Agreement, the following claims of the United States and/or Relators are specifically reserved and are not released:
. . .
Relators' claims for reasonable attorneys' fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d).

Id. at 489-90.

         On June 2, the Government hosted a teleconference with counsel for the Relators to discuss, among other things, the proposed revisions, during which, according to a subsequent email from Buschner to Organ, the Government advised the Relators that the issue of attorneys' fees was beyond the Government's purview: “I think [then AUSA John-David Thomas] is right on the fee situation, no matter what [the Government] does it's probably not going to make a difference. Hopefully we will all get our fees.” JEX 45 at 925. Two days later, Handrigan sent a revised draft of the settlement agreement to CHS with an accompanying email indicating that the Relators and the Government had agreed to reserve the attorneys' fee issue until after the settlement agreement was executed: “With regard to share/[attorney's] fees, those issues were carved out of this agreement so we can move the settlement along quickly. They can be addressed in separate agreements with relators.” JEX 46 at 830. The reservation of the attorneys' fees issues was in Term 16 of this revised draft, and additionally referenced in Term 17 relating to each party bearing its own costs. Id. at 847-48. The June [4] revised draft also included the exception to the forum selection clause for attorneys' fees disputes to be litigated in the district where each complaint was filed. Id. at 848. However, the Government's revised draft did not remove the previously unnumbered term, now identified as “Term 2, ” in which CHS “agree[d] to pay to Relators their reasonable expenses, attorneys' fees and costs.”[13] Id. at 837.

         On June 9, CHS, via Waldman, responded to the Government with its own revisions. JEX 50 at 893. CHS's draft deleted the Relators' proposed Term 2 and included the version of Term 8 that is the subject of the current dispute. Id. at [893, ] 897. The draft also retained reservation of the claims for fees pursuant to § 3730(d) (but now again in numbered Term 15 due to the deletion of Term 2) and made no change to either the carve-out now in Term 16 for fees awarded under § 3730(d) or the exception to the Middle District of Tennessee forum selection clause (now Term 18). Id. at 901-03. Waldman's accompanying email to the Government included a statement that CHS's proposed settlement agreement “makes clear that [] CHS is preserving its rights to object to the various relators' claims for attorneys['] fees[.]” Id. at 886. No. other information was provided as to the grounds on which CHS contemplated such objections could be made. On June 10, the Government relayed CHS's proposals, including Waldman's comments regarding fees, to the Relators and recommended that, in light of the pending dispute as to attorneys' fees, the Relators reach out to CHS's attorneys directly to resolve the issue. JEX 53 at 292.

         In response, Organ set up a conference call with the other Relators and the Government. Id. At the same time, Buschner sent an email to Organ indicating she would assent to CHS's revisions: “I'm okay with the agreement as is. . . . As to CHS not agreeing to pay us fees, I assumed that would be the case.” JEX 54 at 929. Organ submitted a letter to Waldman that same day, in which Organ advised that his clients were “prepared to proceed with the [attorney's] fee petition process if necessary, [although] we hope the attached un-redacted time records will help move this negotiation forward and allow us to reach an amicable resolution on this issue.” JEX 57 at 936. O'Connell also sent an email to Waldman on June 10, in which he clearly stated his Relator clients' intention to seek fees under § 3730(d), and offered to submit time records as an attempt to reach a resolution of any attorney's fees issues. JEX 58. Waldman responded that CHS agreed to the conditions for submission of the time records (JEX 59), but did not state that the issues in dispute included recoverability of fees. On June 20, Soifer sent an email to counsel for Relators Scott Plantz and Kathleen Bryant recounting a conversation with Waldman in which Waldman requested a different breakdown of fees, presumably because of first-to-file issues. JEX 60. Soifer relayed that she explained to Waldman “about the first four cases all working together at the behest of the DOJ, working on the national case” and that, for that reason, all of the Relators' attorneys “needed [their] fees paid, ” adding that “[i]t seemed clear he had no clue.” Id.

. . . On June 23, O'Connell emailed Handrigan with a bleak forecast following a June 20 telephone conversation with Waldman: “[I] am not optimistic that CHS will enter into agreement to pay fees before July 21. They are already making noises about claiming first to file challenges to fees. . . . So, the fees will have to be handled after the settlement.” JEX 61 at 333. The following day, Organ emailed Waldman and Sauber to convey objections to CHS's deletion of Term 2, arguing that “because the Government is intervening in Relators' cases, and Relators are dismissing their claims in their entirety, Relators are entitled to their reasonable expenses, attorneys' fees and costs.” JEX 63 at 1206. Organ further advised Waldman and Sauber that if CHS was unwilling to resolve attorneys' fees and expenses as part of the settlement, “[Relators] will need to revisit the language in the settlement agreement, and prepare our petitions for attorneys' fees.” Id.[14]Later email exchanges, from June 25 through July 1, between CHS's counsel and these same attorneys confirmed that this particular group of Relators asserted their entitlement to attorneys' fees, which CHS continued to refer to as an open issue. JEX 65, 66, 69, 70.

(R. & R. at 13-23.)

         We pause to emphasize the just-cited email exchange. Waldman, representing CHS, clearly indicated on June 25 that first-to-file challenges were an active possibility as CHS collected billing information from attorneys for relators Reuille, Cook-Reska, and Plantz.

         (JEX 64.) He stated that CHS's “ability to work out an agreement on attorneys' fees also is hampered by your refusal to break out your fee request [by client] . . . or to identify which of your clients you believe is the first to file.” (Id. at 1208.) He asserted that if the attorneys believed Plantz was the first to file, “of course, then O'Connell Soifer [representing Reuille and Cook-Reska] would not be entitled to recover their attorneys' fees for work on” the main improper billing claim. (Id.) Organ sent a lengthy response to Waldman on June 26 that addressed the topic of “[e]xpenses, [c]osts and [f]ees, ” including CHS's “concerns about ‘duplicative work' and ‘first to file' issues.” (JEX 66 at 1213.) Organ explained that his and O'Connell and Soifer's firms had worked cooperatively, under a formal agreement and at the Government's direction, on the overall False Claims Act investigation. (Id.) Organ also directly addressed CHS's first-to-file concern:

As you undoubtedly know, any first-to-file analysis is complicated and fact-intensive. While we understand the strategy behind your first-to-file questions, forcing Relators to take positions on first-to-file as a precondition for engaging in [fee] settlement discussions may affect certain Relators' willingness to sign the settlement agreement and forfeit claims that they would otherwise have the right to pursue. Even if all Relators and their counsel sign the settlement agreement, we believe that all Relators will take the position that their work was in support of [the Government's] successful, coordinated national investigation, and is therefore recoverable under 3730(d)(1). However that multi-jurisdictional battle turns out, neither CHS, nor Relators, will have complete peace, all parties will have to bear significant expense, and CHS will have to pay for at least one Relator's fees for fighting that battle . . . . [I]f you are willing to negotiate the reasonableness of our expenses, fees and costs, we are confident we can reach a reasonable resolution. If you are not willing to do so because we will not identify which of our clients is “first to file, ” then we will have to revisit the language in the settlement agreement we are being asked to sign.

(Id. at 1213-14.)

         Kreindler, representing Kathleen Bryant, separately emailed Organ on June 27 to inquire about the status of negotiations with CHS. (JEX 67.) Organ responded on June 30 that he was waiting for a response to his lengthy email to CHS (JEX 68), and forwarded Kreindler the full exchange to that point. (JEX 69.)

         The Report and Recommendation continues:

With the Plantz deadline imminent, Sauber confirmed to the Government on July 7 that CHS would “carve out . . . the attorneys['] fees” language from the Settlement Agreement and provided a revised draft to that effect so that the parties could “push this through[.]” JEX 72, 73. The updated revisions included a change to Terms 3 and 15 to indicate that nothing in the settlement agreement would be construed to release “any claims Relators may have for reasonable attorneys' fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d)[.]” JEX 73 at 1229, 1237 (emphasis added). But the exception language in Term 16 to the provision of each party's responsibility for its own costs remained unchanged: “[e]xcept for Relators' rights pursuant to 31 U.S.C. § 3730(d)” (JEX 73 at 1237), as did the exception to the forum selection clause for attorneys' fees disputes (JEX 73 at 1260) and the last sentence of Term 8 (JEX 73 at 1232) with the language currently in dispute. The Government forwarded the updated settlement agreement to Organ [and all other Relators' counsel] and noted that these revisions “carv[ed] out the attorneys' fees” from the document. JEX 74 at 663.
Multiple email exchanges took place over the next two days among the Relators in response to CHS's revisions. On July 8, counsel for Relators Bryant (Kreindler) and Mason (Raspanti) predicted that following execution of the settlement agreement by all parties, CHS would likely argue that at least five of the Relators' claims for attorneys' fees were barred. JEX 79.[15] While they also concurred that a “settlement under all circumstances[] includes attorneys' fees, ” there was no interest in holding up the settlement to “advance that view.” Id. at 746 (internal quotation marks omitted). But both also asserted that the Relators were “at a minimum, entitled to know CHS's position on [attorneys'] fees before we sign off on the settlement.” Id. Counsel for the Tennessee [Doghramji] Relators (Buschner) replied that while the situation was “not ideal, ” it was common for attorneys' fees issues to be resolved after a settlement agreement was entered and advised that “it would be a disaster” if the presiding judge learned that settlement was being impeded by disagreements regarding fees. JEX 81 at 754.
Counsel for Relator Carnithan (Osman) suggested that the Relators refuse to sign the settlement agreement “until CHS commits to payment of attorneys[']
fees for all Relators[, subject to proof of time spent, reasonableness, etc.]” (id.), and noted that the Government “certainly cannot settle the case in its present posture without our agreement.” JEX 82 at 460.[16] In a separate email chain to only the Non-[Doghramji] Relators, Kreindler asked whether anybody was “uncomfortable signing off on [the carve out of attorneys' fees] without having a clearer picture of CHS's intent on attorneys' fees[.]” JEX 83 at 464. Organ responded the following day, July 9, as follows:
I talked to [John-David Thomas] yesterday and shared our concerns about fees and relator share. He told me that CHS is absolutely going to fight about fees and won't agree to the language I proposed before.[17] Based on our very limited interaction with CHS's lawyers, that sounds right to me. I asked Melissa to help us on the issue by explaining all that we did at DOJ's request, and pushing them to negotiate. She said she would to talk to some people at DOJ about that request, but I got the distinct impression that she won't do much. And if she did, I don't think it would make a significant impact because CHS knows DOJ will NOT allow the settlement to get held up over our fees. So, the issue is whether to refuse to sign without language pursuant to which CHS agrees to pay our fees, subject to a reasonableness determination. I'm not exactly sure how that would play out, but I strongly ...

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