United States ex. rel. Rai v. KS2 TX. P.C.

          RULING ON MOTION FOR ATTORNEY FEES

          JANET BOND ARTERTON, U.S.D.J.

         Relators Poonam Rai, D.D.S., and Robin Fitzgerald ("Relators") brought this 40-count action to recover damages and civil penalties on behalf of the United States, as well as eleven Plaintiff States, under the Federal False Claims Act ("FCA") and various State FCAs. (Third Am. Compl. [Doc. #311 ¶ 1.)

         1. Background and Procedural History

         On January 16, 2018, the United States and Relators notified the Court of the voluntary dismissal of this action pursuant to separate Federal and State Settlement Agreements. (Not. Voluntary Dismissal [Doc. # 81] at 1.) This Notice specifically excepted from this dismissal "any claims by Relators for reasonable expenses, costs and attorneys' fees under 31 U.S.C. § 3730(d)," and under the State FCAs. (Id. at 2.) On January 26, 2018, the Court ordered that in light of the Notice of Dismissal, all claims arising from the Covered Conduct as defined in the parties' settlement agreements were dismissed with prejudice, with the exception of Relator claims for expenses, costs, and fees, and with the Court retaining jurisdiction to enforce the terms of the settlement agreements. ([Doc. # 82] at 1-2.) This Motion for Attorney Fees by Relators Rai and Fitzgerald followed. ([Doc. # 96].)

         Relators seek attorney's fees, costs, and expenses under both the FCA and the State FCAs, including Connecticut (Conn. Gen. Stat. § 4-278(e)), District of Columbia (D.C. Code § 2-381.03(f)(1)(C)), Georgia (Ga. Code Ann. § 49-4-168.2(i)(1)), Indiana (Ind. Code § 5-11-5.5-6(a)(1)), Louisiana (La. Stat. Ann. § 46:439.4(C)(1)), Maryland (Md. Code Ann., Health-General § 2-605(a)(4)(2)), Massachusetts (Mass. Gen. Law ch. 12, § 5F(3)), New Mexico (N.M. Stat. Ann. § 27-14-9(A)), Oklahoma (Okla. Stat. tit. 63, § 5053.4(A)(3)), Texas (Tex. Hum. Res. Code Ann. § 36.110(c)), and Virginia (Va. Code Ann. § 8.01-216.7 (A)). (Id. at 1.)

         Relators concede that they filed this case after Relators Adam Abendano ("Abendano") and Michael Greenwald ("Greenwald") filed their own Federal FCA actions "against various defendants related to Kool Smiles[, ]" (id. at 2), but argue that those complaints made no claims under any State FCAs. Relators alleged "four [prevailing] theories of liability: 1) medically unnecessary dental crowns, 2) medically unnecessary extractions, 3) medically unnecessary pulpotomies, and 4) violations of the Texas Medicaid 'First Dental Home' program (the 'FDH' claim)." (Id. at 3 (citing Third Am. Compl.).) Relators' Complaint "pled violations of [both] the Federal FCA and violations of its State FCA analogues. (Id.)

         With respect to the first three of the prevailing theories of liability, Abendano brought these claims as Federal FCA claims before Relators did, although Relators brought substantively identical claims as State FCA claims before any other relator did so. Additionally, Relators were the first to file the FDH claim.

         "On December 21, 2017, the United States, Defendants, and Relators executed a settlement agreement[, ]" obligating "Defendants to pay $23.9 million ($14, 244, 073 plus interest to the federal government, and $9, 655, 926 plus interest to the Plaintiff States)." (Id. (citing Ex. 2 to Mot. Fees).)

         2. Relators' Attorney Fee Petition

         Relators represent that the total time expended by the Berger Firm is $1, 197, 024, the total time for the Kreindler Firm is $39, 197, and the total time for predecessor counsel is $82, 500, which sum up to $1, 318, 721. (Id. at 9.) However, Relators "removed time for certain categories of work, including, inter alia: a) time spent negotiating 'first to file' issues with relators in other cases filed against Kool Smiles, b) time spent negotiating 'relator's share' with the government, and c) all time expended by predecessor counsel." (Id. (emphasis in original).) Mr. Kreindler further attests that the time records for his firm "reflect reductions made after applying billing judgment to each time and billing entry." (Kreindler Dec. [Doc. # 96-5] ¶ 10.) With a total reduction of $380, 853, ^[1] Relators seek an attorney's fee award of $937, 868. (Id.) Relators also seek an award of $67, 345 in costs and expenses (consisting of $39, 193 in expenses of the Berger Firm, $518 in expenses of the Kreindler Firm, and $27, 634 in expenses of predecessor counsel). (Id. at 10.)

         Defendants "do not dispute that Plaintiffs are entitled to receive some attorneys' fees and costs arising from the settlement of this action" but contend that this claim "is wildly bloated and excessive by any measure." (Opp'n to Mot. Fees [Doc. # 102] at 1.)

         According to Defendants, "Plaintiffs are not prevailing relators on most of the claims for which they seek attorneys' fees and costs, and thus are not entitled to recover for work on such claims, because they either (1) did not file them first, or (2) were not successful on them, as required for recovery under the fee-shifting provision of the False Claims Act ("FCA"), 31 U.S.C. § 3730(d)(1)." (Opp'n to Mot. Fees at 1-2.) Defendants further contend that the Relators' requested fee amount "is grossly excessive, unreasonable and predicated on time entries that are facially inadequate in a variety of ways[, ]" and that any "award of fees and costs to Plaintiffs should not exceed $112, 500.00." (Id. at 2.)

         Defendants argue that Relators' fee request is disproportionate because "[t]he Texas FDH allegations were" the sole "contribution by Plaintiffs to the allegations encompassed by the Covered Conduct" in the Settlement Agreement, with "Relator Abendano first fil[ing] the remaining allegations in the Covered Conduct." (Id. at 5.) Defendants note that under the federal Settlement Agreement, Relator Abendano received a "relator's share of approximately $1.9 million, nearly four times the share collectively allocated to Plaintiffs (approximately $512, 000)[.]" (Id.) However, as Defendants also claim, "[u]nlike the federal agreement, the settlement agreements with the participating states do not allocate shares among the relators." (Id. n. 2 (citing Pearlstein Aff.¶ 8).) Moreover, Defendants argue, because Abendano settled his claim for fees and costs for only $225, 000, Relators' claim for fees and costs in excess of $1 million is plainly unreasonable. (Id. at 6, 10.)

         "In the Second Circuit, '[t]he lodestar method is ordinarily the starting point in determining the amount of fees that maybe awarded.'" Pugach v. M&T Mortg. Corp., 564 F.Supp.2d 153, 155 (E.D.N.Y. 2008) (quoting Seitzman v. Sun Life Assurance Co. of Canada, Inc., 311 F.3d 477, 487 (2d Cir. 2002)). "Under this method, attorneys' fees are calculated by taking 'the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.'" Id. (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)) (other citation omitted). "A district court's 'choice of rates [is] well within [its] discretion.'" Id. (quoting Cabrera v. Jakabovitz, 24 F.3d 372, 393 (2d Cir. 1994)).

         a. Reasonable Hourly Rate

         In determining what constitutes a reasonable hourly rate, this Court "may use an out-of-district hourly rate-or some rate in between the out-of-district rate sought and the rates charged by local attorneys-in calculating the presumptively reasonable fee if it is clear that a reasonable, paying client would have paid those higher rates." Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty. of Albany & Albany Cty. Bd. of Elections, 522 F.3d 182, 191 (2d Cir. 2008). In the general run of cases, "[w]e presume ... that a reasonable, paying client would in most cases hire counsel from within his district, or at least counsel whose rates are consistent with those charged locally." Id. "This presumption may be rebutted-albeit only in the unusual case-if the party wishing the district court to use a higher rate demonstrates that his or her retention of an out-of-dislrict aLLoniey was reasonable under the circumstances as they would be reckoned by a client paying the attorney's bill." Id.

         This case was originally filed in Houston, Texas, and subsequently was transferred to the District of Connecticut on motion by the United States. Relators were represented initially by James Moriarty, P.C., which seeks reimbursement of costs but no fees, and then shortly after the case was initiated in 2011 became represented by Berger & Montague, P.C. (the "Berger Firm") and Kreindler & Associates (the "Kreindler Firm"). (Mot. Fees at 2.) Lead counsel Daniel Miller of the Berger Firm seeks an hourly rate of $725 and Attorney Kreindler seeks an hourly rate of $600. Defendants contend that all of the hourly rates sought by attorneys and paralegals at the Berger Firm are excessive but do not challenge Kreindler's rate.

         Relators support the reasonableness of their requested hourly rates with the Declaration of Mr. Miller, ([Doc. # 96-2]), the Declaration of Marc S. Raspanti, ([Doc. # 96-4]), and the Declaration of Mr. Kreindler, ([Doc. # 96-5]). Mr. Miller details his experience in FCA claims, including more than 16 years as a Deputy Attorney General for the Delaware Department of Justice, where he "tried more than 125 cases to jury verdict[, ]" and 15 years of experience investigating and litigating FCA cases. (Miller Dec. ¶ 2.) He is a "past President of the National Association of Medicaid Fraud Control Units[.]" (Id.) The Bcrgcr Firm, as of the filing of the fee petition, represented "FCA whistleblowers in federal courts across the country, including in California, Connecticut, the District of Columbia, Florida, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Nevada, Pennsylvania, Rhode Island, South Carolina, and Texas." (Id. ¶ 4.)

         Mr. Miller views his law firm as "one of the top complex commercial litigation plaintiffs firms in the country." (Id. ¶ 24.) The attorneys from the Berger Firm who worked on this case range from being 5 years out of law school to 60 years out of law school, with the median being 25 years out of law school. (Id. ¶ 25.) These attorneys seek hourly rates ranging from $405 to $975, with a median rate of $675. (Id.) Mr. Miller attests that all of these attorneys focus their practice on complex commercial litigation, and that "the rates charged for each attorney are reasonable given their relative experience, credentials, and professional acumen." (Id. ¶ 26.)

         In his Declaration, Marc S. Raspanti attests that he is a 1984 law school graduate who has represented whistleblowers for approximately 30 years, also "frequently act[ing] as defense counsel in white collar fraud cases including health care fraud, anti-kickback investigations, SEC violations, tax prosecutions, political corruption, and defense contracting cases." (Raspanti Dec. ¶¶ 2-4.) He has "published more than two dozen articles regarding whistleblower cases and ha[s] spoken at more than 80 conferences over a period of more than 25 years." (Id. ¶ 5.) He "lecture[s] and comment [s] frequently on the False Claims Act at national organizations, law schools, and for national publications." (Id.)

         Mr. Raspanti was "asked by the attorneys for the Relators in this action to offer [his] opinion regarding whether the hourly billing rates of the attorneys in the case at bar are reasonable, and whether the work in this case was reasonable at the time it was performed." (Id. ¶ 8.) Mr. Raspanti notes that plaintiff-side FCA litigation "is an extremely risky, complex and time-consuming enterprise[, ]" in which "[virtually all of the work is on a contingent basis, such that the lawyers that undertake these cases bear most of the financial risk involved, both in terms of their own time, and in terms of out-of-pocket costs." (Id. ¶ 9.) Further, attests Mr. Raspanti, "FCA cases have additional and unique risks [, ]" including "procedural hazards not present in many types of civil litigation, including the risk of not being the 'first to file,' changes in policy, practice and procedure from the Executive Branch, the risk that the allegations have somehow been publicly disclosed, and the risk of not being considered an original source of the allegations." (Id. ¶ 10.) "In short," he concludes, "FCA practice is fraught with traps for the untrained or unwary." (Id.)

         Mr. Raspanti claims familiarity with this case. (Id. ¶ 11.) He states that "Mr. Miller's experience as a False Claims Act lawyer is deep, his reputation is impeccable, and his abilities are in my opinion stellar." (Id.) Accordingly, Mr. Raspanti concludes that Mr. Miller's hourly rate of $725 is "certainly in line with if not less than other FCA experts of similar skill, experience, and reputation." (Id.) Mr. Raspanti is "also very familiar with [Mr.] Kreindler, having worked with and against him over many years [, ]" and states that Mr. Kreindler is ...