Health Law Daily Wrap Up, QUI TAM (WHISTLEBLOWER SUITS)—D. Mass.: Relators can receive attorney’s fees, costs only for intervened claims, (Oct 13, 2023)

By Patricia K. Ruiz, J.D.

The district court applied First Circuit precedent and declined to grant the relators costs and fees associated with claims for which the government declined to intervene.

After the U.S. and state governments intervened in a qui tam whistleblower lawsuit and settled only one of eight of the relators’ claims, the U.S. District Court for the District of Massachusetts granted in part the relators’ request to recover attorney’s fees, costs, and expenses. The court granted only one-eighth of the incurred fees because the relators’ counsel did not differentiate between time spent on the intervened and declined claims and because there was no evidence to indicate the intervened claim involved significantly more intricate and complex facts or more legal research than the denied claims (U.S. ex. Rel. Zappala v. Steward Healthcare System, LLC, October 11, 2023, Stearns, R.).

Request for costs and fees. The relators brought an action against Steward Health Care System LLC and its related entities (Steward, collectively) for alleged violations of the False Claims Act and its Massachusetts analogs. The U.S. and the Commonwealth of Massachusetts (government, collectively) intervened as a matter of right and settled one of the eight asserted claims. The relators moved to recover attorney’s fees, costs, and expenses under 31 U.S.C. §3730(d)(1). While Steward did not dispute that the relators are entitled to receive a portion of their attorney’s fees and costs arising from the settlement of the action, it did oppose the relators’ request to recover all attorney’s fees, costs, and expenses. Steward argued the relators should, at most, recover only one- eighth (12.5%) of the fees, costs, and expenses currently submitted to the court.

First Circuit precedent. Previously, the First Circuit expressly rejected the proposition that a relator is entitled to recover attorney’s fees and costs incurred for claims upon which the government did not intervene. The relators in the instant case asked the court to award them the full sum of their attorney’s fees and costs, asserting that the intervened and declined claims are inextricably interwoven, arguing the First Circuit precedent actually expanded a defendant’s liability to pay fees, costs, and expenses for attorney work on interrelated denied case. However, the court found the relators misunderstood the holding, as the First Circuit did not hold that fees from interrelated work on intervened and declined claims are compensable under §3730(d)(1). The First Circuit merely determined that, where the relator’s counsel did not differentiate between time spent on the intervened and denied claims, the district court did not abuse its discretion by applying a 50% reduction to reflect the exclusion of the declined claim, based on its own assessment of the relative complexity of the two claims and their potential overlap.

Intervened vs. declined claims. In the instant case, the relators’ counsel did not indicate which hours were spent on which claims. There is no evidence that the intervened claim involved significantly more intricate and complex facts or more legal research than the denied claims. The court noted that the relators admitted the declined claims were more fact intensive than the intervened claim. Additionally, the court saw only minimal overlap between the claims. Accordingly, the court granted the relators one-eighth of the incurred fees, which was representative of the single claim, out of eight, that the government intervened.

The case is No. 1:18-cv-12125-RGS.

Attorneys: Charles B. Weinograd, U.S. Attorney's Office, for the U.S. Ian R. Marinoff, Office of the Attorney General, for The Commonwealth of Massachusetts. Gary L. Azorsky (Cohen Milstein Sellers & Toll, PLLC) and Lisa G. Arrowood (Arrowood LLP) for Stephen M. Zappala and Eric Wojcik. Mark W. Pearlstein (McDermott Will & Emery LLP) for Steward Health Care System LLC, Steward Health Care System LLC, Steward St. Elizabeth's Medical Center of Boston, Inc., Steward Holy Family Hospital, Inc., Steward Good Samaritan Medical Center, Inc., Steward St. Anne's Hospital Corp., Steward Norwood Hospital, Inc., Steward Carney Hospital, Inc., Nashoba Valley Medical Center, Morton Hospital, Quincy Medical Center, New England Sinai Hospital, Steward Good Samaritan Radiation Oncology Center, Inc., Steward Sebastian River Medical Center, Inc., Steward Rockledge Hospital, Inc., Steward Melbourne Hospital, Inc., Steward Trumbull Medical Hospital, Inc., Steward Sharon Regional Health System, Inc., Steward Easton Hospital, Inc., Steward Medical Group, Inc., Steward Health Care Network, Inc., Steward Integrated Care Network, Inc., Steward National Care Network, Inc. and Steward Medicaid Care Network, Inc.

Companies: Steward Health Care System LLC; Steward Health Care System LLC; Steward St. Elizabeth's Medical Center of Boston, Inc.; Steward Holy Family Hospital, Inc.; Steward Good Samaritan Medical Center, Inc.; Steward St. Anne's Hospital Corp.; Steward Norwood Hospital, Inc.; Steward Carney Hospital, Inc.; Nashoba Valley Medical Center; Morton Hospital; Quincy Medical Center; New England Sinai Hospital; Steward Good Samaritan Radiation Oncology Center, Inc.; Steward Sebastian River Medical Center, Inc.; Steward Rockledge Hospital, Inc.; Steward Melbourne Hospital, Inc.; Steward Trumbull Medical Hospital, Inc.; Steward Sharon Regional Health System, Inc.; Steward Easton Hospital, Inc.; Steward Medical Group, Inc.; Steward Health Care Network, Inc.; Steward Integrated Care Network, Inc.; Steward National Care Network, Inc.; Steward Medicaid Care Network, Inc.

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