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June 16, 1999


The opinion of the court was delivered by: McCLURE, District Judge.



These related actions were brought by relators Brentley and Linda Hicks under the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729-3733, specifically § 3730. Relators filed the first complaint, docketed to No. 4:CV-96-0611, on April 5, 1996. That complaint alleged that defendant Pennsylvania Blue Shield, d/b/a Xact Medicare Services, now known as Highmark Inc., used "force codes" to by-pass computer audits for claims submitted by Medicare Part B providers. An amended complaint was filed on June 12, 1996.

Relators filed a second complaint, docketed to No. 4:CV-96-1303, on July 12, 1996, alleging that defendant failed to comply with instructions of the Health Care Financing Administration (HCFA) of the Department of Health and Human Services concerning the processing of laboratory claims submitted for treatment of patients with End Stage Renal Disease (ESRD).

In accordance with the False Claims Act, relators filed the complaints under seal and served them on the government, along with "voluntary disclosure statements." The government conducted an investigation which also involved allegations by two other relators who filed complaints against defendant, as well as a problem disclosed to the government by defendant itself.

In the end, the government negotiated, and relators accepted, a global settlement of the claims with defendant for $38,500,000.00. Of that amount, $14,000,000.00 was attributed to relators' claims, and they were awarded 18% of the recovery, or $2,252,000.00. Relators then paid a contingency fee to their counsel of 40% of the recovery, or $1,008,000.00. It was only after the settlement was accepted by relators that the government formally intervened and moved for dismissal. The dismissal was with prejudice, with the reservation of relators' right to petition for a statutory award of attorney's fees.

On September 25, 1998, relators petitioned the court for the award of attorney's fees. Since defendant opposed the award, an evidentiary hearing was conducted on April 26-28, 1999, and May 11-12, 1999. The request is now ripe for disposition.



The relevant statute provides that a relator in a successful qui tam action "shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant." 31 U.S.C. § 3730(d)(1). That relators are entitled to reasonable fees and costs is not in dispute. Rather, it is whether the fees claimed by relators are reasonable which is disputed by defendant.

The parties agree that the proper manner for determining the amount of the fees is the "lodestar method," which is the general method for determining reasonable attorney's fees in cases involving fee-shifting statutes. See, e.g., Marinelli v. City of Erie, 25 F. Supp.2d 674, 680-681 (W.D.Pa. 1998) (using lodestar method under Americans with Disabilities Act, which incorporates attorney's fees provision of Title VII); Boykin v. Bloomsburg Univ. of Pennsylvania, 905 F. Supp. 1335, 1348 (M.D.Pa. 1995) (Muir, J.; Conclusion of Law No. 8; fee award against attorney who unreasonably and vexatiously multiplies proceedings under 28 U.S.C. § 1927), aff'd, 91 F.3d 122 (3d Cir. 1996) (table), cert. denied sub nom. Mirin v. Eyerly, 519 U.S. 1078, 117 S.Ct. 739, 136 L.Ed.2d 678 (1997).

The proper application of the lodestar method was recited at length by the Third Circuit in Rode v. Dellarciprete, 892 F.2d 1177 (3d Cir. 1990). The fee applicant has the initial burden of proving that its fee request is reasonable by submitting evidence of the number of hours worked and the hourly rate claimed; multiplying the number of hours by the rate is the starting point. Id. at 1183 (quoting Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)). The party opposing the fee award then has the burden of challenging the reasonableness of the fee requested, with the challenge being asserted by affidavit or brief sufficiently specific to give the applicant notice of the challenge. Id. (citing Bell v. United Princeton Properties, Inc., 884 F.2d 713 (3d Cir. 1989)).

Hours may be excluded if they are not reasonably expended, meaning that they are excessive, redundant, or otherwise unnecessary, that they relate to distinct claims on which the applicant did not succeed, or that the hours are inadequately documented. Id. (citing Hensley at 433, 440, 103 S.Ct. 1933; Institutionalized Juveniles v. Secretary of Public Welfare, 758 F.2d 897, 919 (3d Cir. 1985)). An hourly rate is reasonable if it is consistent with the prevailing market rates in the relevant community. Id. (citing Blum v. Stenson, 465 U.S. 886, 895, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984)). This requires an assessment of the experience and skill of the applicant's attorneys and a comparison of their rates to the rates prevailing in the community in which the attorneys practice for similar services provided by attorneys of similar skill, experience, and reputation. Id. (citing Blum at 895 n. 11, 104 S.Ct. 1541; Student Public Interest Research Group v. AT & T Bell Laboratories, 842 F.2d 1436, 1447 (3d Cir. 1988)).

Once the court determines the reasonable number of hours expended and the reasonable hourly rate, it multiplies the two to obtain the lodestar, which is presumed to be the reasonable fee. Id. (citing Blum at 897, 104 S.Ct. 1541). The court then has the discretion to make certain adjustments to the lodestar, the necessity of which must be proven by the party seeking the adjustment. Id. (citing Cunningham v. City of McKeesport, 753 F.2d 262, 268 (3d Cir. 1985), vacated on other grounds, 478 U.S. 1015, 106 S.Ct. 3324, 92 L.Ed.2d 731, reinstated, 807 F.2d 49 (3d Cir. 1986), cert. denied, 481 U.S. 1049, 107 S.Ct. 2179, 95 L.Ed.2d 836 (1987)).

The lodestar may be adjusted downward if the lodestar is not reasonable in light of the results obtained, thereby accounting for time spent litigating unsuccessful or partially unsuccessful claims that are related to the successful claims. Id. (citing Hensley at 434-437, 103 S.Ct. 1933). While there are instances in which an upward adjustment may be appropriate, id. at 1183-1184, such are not applicable in this case and are not claimed by relators.

Under federal law regarding fee shifting statutes, time expended by attorneys seeking an award of fees (sometimes called "fees on fees") justifiably may be included in the application and the award. Polselli v. Nationwide Mutual Fire Insurance Co., 126 F.3d 524, 537 (3d Cir. 1997) (citing Prandini v. National Tea Co., 585 F.2d 47, 53 (3d Cir. 1978); Public Interest Research Group of New Jersey v. Windall, 51 F.3d 1179, 1190 (3d Cir. 1995)).


Based on the applicable standard, a number of the arguments raised by defendant may be rejected summarily.

First, relators met their initial burden of proof by introducing the legal bills and the testimony of counsel that the hours expended were reasonable. Defendant's argument that relators must produce evidence regarding why each hour billed was reasonable simply contradicts the law of the Third Circuit on the lodestar method.

Related arguments are asserted by defendant with respect to certain categories of hours spent by counsel which purportedly are unnecessary. For instance, defendant contends that counsel's hours should have been reduced because the government was conducting a vigorous investigation. Such an assertion is insufficient: defendant must point to specific hours which need not have been expended because the government investigators had performed the task already or would be performing the task.

Defendant also contested the time spent drafting the complaints and disclosure statements prepared by relators pursuant to § 3730(b)(2). No evidence was provided by defendant as to the amount of time the drafting should have taken, although relators responded to the general "too much" objection by providing testimony of a qui tam practitioner that the hours billed were reasonable. Given the complicated nature of the actions and the heightened pleading requirement for complaints alleging fraud, as well as the necessity of preparing the requisite disclosure statements, we cannot say that the hours billed were unreasonable. The same problem exists with respect to defendant's objections to internal consultation within the law firm representing relators, and the amount of time spent on the telephone by counsel consulting among themselves, with government counsel, and with relators individually.

Defendant seeks a 25% reduction in the travel time billed by relators' counsel. Relators have withdrawn claimed fees representing duplicate billings when multiple attorneys attended meetings, which would include the travel time. This withdrawal is sufficient to cover the claimed excess.

Defendant also makes a general argument of duplicate effort. To the extent this refers to such things as meetings attended by both counsel and local counsel, we see no reason to exclude these hours from the lodestar: the complicated nature of the case makes employment of multiple attorneys proper for such a task. For the sake of comparison, we would not find multiple criminal defense attorneys in a complicated prosecution, such as a capital or RICO case, to be unreasonable. We disagree with defendant's general proposition that it is inherently unreasonable to have more than one attorney involved in such matters as meetings and telephone conferences, and see no basis for excluding hours from the lodestar calculation based on "duplication of effort."

Defendant contends that it was unnecessary to consult a litigation expert within the firm employed by relators. Since there was a good chance that the government would choose not to intervene, particularly with respect to the force code complaint, it was reasonable for counsel to prepare for the eventuality that relators would have to pursue the action themselves.

We also disagree with defendant's argument that any hours represented in block billing which cannot be supported in detail should be excluded. Block billing is a common practice which itself saves time in that the attorney summarizes activities rather than detailing every task. While a substantial number of vague entries may be a reason to exclude hours from the lodestar calculation, that a block may have an entry such as "review file" is not a reason to exclude the entire entry. We believe the more appropriate approach would be to look at the entire block, comparing the listed activities and the time spent, and determining whether the hours reasonably correlate to all of the activities performed.

Defendant points to the large number of hours spent on researching various aspects of the False Claims Act by relators' counsel. Again, a general "too much" argument is insufficient, as it is necessary to point to the specific area researched and to provide reasons why the research or the amount of time on the research is unreasonable.

Finally, defendant argues that hours are reasonable only if they are spent advancing the government interest, and that hours spent working against the government and the other relators should be excluded from the lodestar. Nothing in § 3730(d)(1) so limits an award of attorney's fees. In fact, this argument is inconsistent with the nature of legal representation: counsel represents relators, not the government. While there may be times when the interests of the relators and the government diverge, or there is otherwise a conflict or disagreement, this does not mean that fees incurred which relate to such an event are not reasonable. It is collateral litigation against the government, such as a dispute over the appropriate percentage of the proceeds to be awarded to a relator, not every bit of time related to a subject over which the government and the relator have a divergence of interest or opinion, which is excludable.

In this instance, relators claimed that the damages were much greater than the government at first thought likely. While relators' view eventually seemed inflated, the fact is that the government's recovery was considerably greater than its initial estimate. It clearly was reasonable, then, for relators' counsel to attempt to convince the government to change its view. Moreover, the government increased the percentage of the proceeds awarded to relators as part of the overall settlement of the case, not in collateral litigation. We see no basis for reducing the number of hours for purposes of determining the lodestar based on the nature of this work by relators' counsel.

For their part, relators initially claimed that they were entitled to an award of attorney's fees in an amount equal to the contingency fee paid to their counsel. This contention was based on a statement in the legislative history of § 3730 to the effect that most qui tam cases would involve counsel with contingency agreements with the relators. Relators seem to have abandoned this position, and we agree with defendant that it may be rejected out of hand. As noted, the Third Circuit employs the lodestar method in statutory fee-shifting cases. Moreover, a single statement in a legislative history is not a part of the statute, and can hardly be said to override the plain language of the statute.

We turn to the relevant facts as established at the evidentiary hearing. In so doing, we address only those facts relevant for purposes of the thirteen areas listed by defendant as being the subjects of challenge, Defendant's Exhibit 4 (Biesecker Report) at 3-4, and which the court is able to extract from defendant's proposed findings of fact and conclusions of law. Most of the latter have been addressed above as being easily rejected. Remaining are arguments concerning hours spent on drafting of False Claims Act memoranda for the government, researching the right to attorney's fees under the False Claims Act, and reviewing documents provided by defendant to the government.


1. These actions, along with two related qui tam actions brought by relators Lynn M. Bultena and Susan L. Howell, were resolved in a global settlement agreement between defendant, the government, and all of the relators, said agreement being dated August 12, 1998.

2. Under the terms of the agreement, defendant paid the government $38,500,000.00, in contrast to an initial government estimate for recovery of $7,000,000.00.

3. That total was allocated by the government as follows: $16 million to Bultena's complaint; $3.2 million to Howell's complaint; $13 million to the Hicks' ESRD claims and $1 million to their Force Code qui tam action; $4.8 million to an overpayment issue disclosed by defendant (not a subject of any qui tam action); and $500,000.00 for the government's civil investigative costs.

4. The government in turn paid each of the four relators 18% of their portion of the settlement, as follows: Bultena, $2,880,000.00; relators, $2,252,000.00; and Howell, $576,000.00.

5. Relators never agreed to the government's unilateral allocation of $13,000,000.00 to their ESRD claim and $1,000,000.00 to their force code claim, although they did agree to the $14,000,000.00 total.

6. In accordance with the settlement agreement, on September 11, 1998, the court dismissed all four of the qui tam actions with prejudice as to the government and relators, with the exception of any claims for attorneys' fees and costs by relators under § 3730(d)(1).

7. The legal bills introduced by relators relating to the underlying qui tam litigation reflect a total of $717,115.25 (reflecting 3,427.45 hours at the rates actually charged according to the bills) in incurred legal ...

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