[co-author: Kali Yallourakis]
On June 11, 2019, the Tenth Circuit affirmed an award of $92,592.75 in attorneys’ fees to the defendants in Pack v. Hickey, 776 F. App’x 549 (10th Cir. 2019). Pack had appealed the district court’s entry of summary judgment and related orders in favor of Defendants Maureen Hickey (“Hickey”) and Cloud Peak Initiatives, Inc. (“Cloud Peak”) on Pack’s claims under the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733. The Wyoming District Court also granted the defendants’ motion for attorneys’ fees on April 6, 2018, Case No. 15-CV-185.
Summary:
Under the whistleblower provisions of the FCA, Pack served as a qui tam relator in a suit against Defendants Cloud Peak and Hickey. Cloud Peak is a private mental health facility. Hickey was Cloud Peak’s President, owner, and sole shareholder. The individual parties in the lawsuit were allegedly in a prior relationship and it was alleged that Hickey had terminated Pack as CEO of Cloud Peak and had also terminated their romantic relationship. This background is relevant because the Tenth Circuit’s opinion noted these details in finding that the defendants deserved attorneys’ fees because Pack’s suit was frivolous and motivated by personal animus.
Pack alleged that Hickey was the sole person responsible for reviewing and submitting bills to Medicaid and that she committed Medicaid fraud based upon three types of purportedly false billing: improperly billing skills groups as therapy groups, improperly billing group therapy sessions as individual therapy sessions, and billing of unauthorized direct targeted case management without necessary medical documentation, all in violation of the FCA.
Pack had submitted an affidavit in connection with the District Court proceeding, but the District Court struck portions of the affidavit on multiple grounds, including issues of personal knowledge, hearsay, and impermissible beliefs, opinions, and conclusions.
On appeal, Pack failed to address the district court’s specific findings and failed to identify by number any of the paragraphs from his affidavit that were at issue. Instead, Pack relied on what Judge Briscoe called “generalized propositions, lengthy string cites, and conclusory statements.” Id.
In addition to Pack’s lack of personal knowledge, the court found the absence of evidence supporting the scienter element required for an FCA claim to be striking.
Award of attorneys’ fees to Defendants:
The False Claims Act permits an award of attorneys’ fees in favor of the Defendants where the Defendants prevailed in the litigation and the relator had asserted a claim that was “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4).
In this case, the district court awarded the Defendants $92,592.75 in attorneys’ fees and the appellate court affirmed the award, finding “no reversible error.” Pack, 776 F. App’x at 558. The court based its ruling on, among other things, Pack’s failure to adduce evidence of false billing claims, the failure to satisfy the scienter requirement of an FCA claim by not deposing Hickey and others, the lack of documentary evidence and relyiance on hearsay and speculation, and the proposal of a settlement offer which “tended to show [Pack] brought the action for an improper purpose.” Pack, 776 F. App’x at 559.
Conclusion:
In light of the high standard, it is rare that defendants in FCA suits are able to recover attorneys’ fees. Further, relators in qui tam suits do not typically have deep pockets, and courts are sympathetic to a private citizen bringing an action on the government’s behalf. However, the Pack case provides an outline of some of the considerations that a Court will view as appropriate to justify an award of attorneys’ fees for the Defendant. We expect that Defendants will continue to evaluate the possibility of recovering attorneys’ fees in the future, particularly in situations where a relator brings claims that are motivated entirely by personal animus or where the claims were knowingly brought despite a lack of merit.
