Gonter v. Hunt Valve Co., Inc.

• Decision Date: 18 December 2007
• Docket Number: No. 06-4266.,No. 06-4256.,No. 06-4184.,06-4184.,06-4256.,06-4266.
• Citation: 510 F.3d 610
• Parties: Tina Marie GONTER; Charles William Gonter, bringing this action on behalf of the United States of America, as relators, Plaintiffs-Appellants/Cross-Appellees (06-4184), United States of America, Interested Party, v. HUNT VALVE COMPANY, INC., et al., Defendants, General Dynamics, Marine Systems Division, Electric Boat, Defendant-Appellee/Cross-Appellant (06-4256), Northrup Grumman Newport News, formerly known as Newport News Shipbuilding, Defendant-Appellee/Cross-Appellant (06-4266).
• Court: U.S. Court of Appeals — Sixth Circuit

510 F.3d 610

Tina Marie GONTER; Charles William Gonter, bringing this action on behalf of the United States of America, as relators, Plaintiffs-Appellants/Cross-Appellees (06-4184) United States of America, Interested Party, v. HUNT VALVE COMPANY, INC., et al., Defendants General Dynamics, Marine Systems Division, Electric Boat, Defendant-Appellee/Cross-Appellant (06-4256) Northrup Grumman Newport News, formerly known as Newport News Shipbuilding, Defendant-Appellee/Cross-Appellant (06-4266).

No. 06-4184.

No. 06-4256.

No. 06-4266.

United States Court of Appeals, Sixth Circuit.

Argued: October 24, 2007.

Decided and Filed: December 18, 2007.

ARGUED: James B. Helmer, Jr., Helmer, Martins, Rice & Popham, Cincinnati, Ohio, for Appellants. Michael L. Waldman, Robbins, Russell, Englert, Orseck, Untereiner & Sauber, Washington, D.C., for Appellees. ON BRIEF: James B. Helmer, Jr., Robert M. Rice, Helmer, Martins, Rice & Popham, Cincinnati, Ohio, for Appellants. Michael L. Waldman, Robbins, Russell, Englert, Orseck, Untereiner & Sauber, Washington, D.C., Kali N. Bracey, Jenner & Block, Washington, D.C., Charles B. Sklarsky, Jenner & Block, Chicago, Illinois, for Appellees.

Before: MERRITT and CLAY, Circuit Judges; COX, District Judge.^*

OPINION

MERRITT, Circuit Judge.

I.

This appeal, arising from a dispute between a law firm that represented qui tam plaintiffs and the defendant shipbuilders, raises the issue of whether the district court exceeded its discretion in awarding attorneys' fees of $1,749,245 under the False Claims Act. The Plaintiff, a Cincinnati law firm, contends that the amount was unjustifiably low, while the Defendants urge this Court in a cross-appeal to find the lower court's award excessive. Two additional issues are before us: first, the Defendants challenge the Plaintiff's standing to bring this suit; and second, the Plaintiff argues that portions of the Defendants' reply brief for the cross-appeal contravene Fed. R.App. P. 28.1(c)(4).

The Plaintiff has standing to appeal the lower court's decision, while the Plaintiff's motion to strike portions of the reply brief is denied for failing to show prejudice. Turning to the substantive issues raised by both parties, we hold that, with the exception of the exclusion of fees related to the fee litigation, the district court's calculation of attorneys' fees falls within the broad discretion afforded under the statutory scheme. Consequently, with the exception of its ruling on the fee litigation issue, the district court's decision is AFFIRMED.

II.

The law firm of Helmer, Martins, Rice & Popham Co., L.P.A. ("HMRP") represented Relators Tina and William Gonter from 2001 until March 25, 2005, in an investigation of faulty valves produced by Hunt Valve Company for use in submarines and ships built for the U.S. Navy by Northrop Grunman Newport News and General Dynamics Electric Boat (collectively "Shipbuilders"). In March 2001, the Relators filed a False Claims Act ("FCA") action against Hunt Valve Company and the Shipbuilders. The Department of Justice intervened in the Hunt Valve case—its prerogative under the FCA—and ultimately announced a $666,000 settlement with the company in the spring of 2005. This settlement resulted from a collaboration between the Department of Justice and the private attorneys representing the Relators. The Department of Justice did not, however, choose to intervene in the suit against the Shipbuilders, which allowed the Relators to prosecute the case as qui tam plaintiffs on the taxpayers' behalf.

In January 2005, two attorneys, Frederick Morgan and Jennifer Verkamp, and one paralegal, Mary Jones, left HMPR to join another firm, Volkema, Thomas, Miller, Scott & Merry L.P.A. ("Volkema"). Because Morgan and Verkamp had spearheaded the work on the FCA claims, the Relators chose to conclude HMRP's representation in March 2005 and continue with Volkema. That fall, the Relators—represented by Volkema—reached a $12.5 million settlement with the Shipbuilders, the details of which were finalized in March 2006.

On December 23, 2005, HMRP filed a motion for an award of attorneys' fees and expenses for the considerable work it performed from 2001 until early 2005 in preparing and settling the FCA claims against both Hunt Valve and the Shipbuilders. The district court denied the initial petition on two grounds: first, the request was premature, and second, the FCA statute only permits Relators to file attorneys' fee petitions. Shortly thereafter, the Relators—acting through Volkema—filed another petition on behalf of HMRP for attorneys' fees and expenses. In the petition, HMRP sought $2,758,748.12 in attorneys' fees¹ and $124,498.29 in reimbursable expenses, for a total of $2,883,246.41. The Shipbuilders allowed that they owed fees and expenses, but argued that the amount should total $1,110,789.85, representing $1,019,953.71 in attorneys' fees and $90,836.14 in expenses. After considering the evidence offered by both parties, the district court ultimately awarded HMRP fees of $1,749,245.80 and expenses of $122,500.60, for a total amount of $1,871,746.40.

In this appeal, the Plaintiff, HMRP, argues that the district court abused its discretion in the following three ways: (1) by using allegedly unsubstantiated 2004 billing rates instead of current, 2005 rates; (2) by refusing to award attorneys' fees for litigation related to the fee petition itself; and (3) by refusing to enhance the award by 25% for "exceptional" results. The defendant Shipbuilders filed a cross-appeal, contending that the district court failed to exercise appropriate discretion in calculating the number of hours billed by the plaintiff; specifically, they fault the lower court for including—without sufficient explanation —hours in the lodestar valuation that were allegedly duplicative, unrelated to the litigation, or wasteful.

III. Jurisdiction over the appeal

The district court exercised subject matter jurisdiction over the federal question involved in this case—namely, the False Claims Act. See 31 U.S.C. § 3732(a). Appellate jurisdiction exists under 28 U.S.C. § 1291, as the district court issued a final order in this case. The Shipbuilders contend, however, that only the Relators could bring this appeal and that the case should thus be dismissed because HMRP is an improper party. For the reasons discussed below, the Plaintiff does have standing to proceed.

The False Claims Act, 31 U.S.C. § 3730(d), provides for fee-shifting and includes both attorneys' fees and expenses as part of the award to a successful qui tam plaintiff. The FCA reads in relevant part: "Such person [qui tam plaintiff] 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)(2). Notably, "only the plaintiff has the power to demand that the defendant pay the fees of the plaintiff's attorney" under the FCA; without such a demand, the defendant is under no obligation to pay. United States ex rel. Virani v. Jerry M. Lewis Truck Parts & Equip., 89 F.3d 574, 578 (9th Cir.1996), cert. denied, 519 U.S. 1109, 117 S.Ct. 945, 136 L.Ed.2d 834 (1997). "Once the power is exercised, however, the attorneys' right vests, and the defendant's duty becomes fixed." Id. at 578. Because the Relators, through a motion filed by Volkema, did seek attorneys' fees on behalf of HMRP, the Defendants' duty to pay such fees vested.

The Defendants point to several instances where courts have denied requests for attorneys' fees to support their argument. But in each of the cases the Defendants cite, the court refused attorneys' fees because the Relators never sought them. See, e.g., United States ex rel. Thornton v. Science Applications Int'l Corp., 79 F.Supp.2d 655, 659 (N.D.Tex.1988) (noting that because the Relators did not request attorneys' fees, their counsel lacked standing). These cases are thus inapposite to our case, where the Relators filed a fee petition on behalf of the Plaintiff. Moreover, the cases do not address the question before us regarding standing on appeal, but instead discuss the ability to recover an award in district court.

Whether HMRP has standing to appeal the district court's ruling is an issue of first impression in the Sixth Circuit. Other circuits have addresses this issue, but have reached different results. Compare Mathur v. Board of Trustees of Southern Illinois University, 317 F.3d 738 (7th Cir.2003) (finding standing), and Lipscomb v. Wise, 643 F.2d 319 (5th Cir.1981) (finding standing), with Willis v. Government Accountability Office, 448 F.3d 1341, 1349 n. 7 (Fed.Cir.2006) (denying standing). In Mathur, a case involving the 1964 Civil Rights Act, the plaintiff employee won a discrimination suit against a university that included an award of attorneys' fees. The attorneys—and not the plaintiff —appealed the district court's choice of rates in determining the award. While the Seventh Circuit noted that the right to fees belonged to the "prevailing party" and not his counsel, it did not find that this fact precluded counsel from having standing. Mathur, 317 F.3d at 741; see also Devlin v. Scardelletti, 536 U.S. 1, 7, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002) (the Supreme Court has "never restricted the right to appeal to named parties to the litigation"). Instead, the Seventh Circuit applied the following reasoning in determining that Mathur's attorneys did have standing to appeal the award:

Since an attorneys' fee award is considered part of the costs of litigation ... the award goes straight from the plaintiff to counsel and is not intended to serve as additional compensation for plaintiffs. This means that `the question whether the motion for fees is in the name of the party or his attorney is a technicality,' because `it would exalt form over substance to deny the motion for fees' if...