United States ex rel. Lovell v. AthenaHealth, Inc.
| Decision Date | 21 December 2022 |
| Docket Number | 22-1245, No. 22-1246 |
| Parties | UNITED STATES, EX REL. Cheryl LOVELL and William McKusick, Plaintiffs, Appellants, United States, ex rel. Geordie Sanborn; State of Vermont, State of California, State of Colorado, State of Delaware, State of Florida, State of Georgia, State of Hawaii, State of Illinois, State of Indiana, State of Iowa, State of Maryland, Commonwealth of Massachusetts, State of Michigan, State of Minnesota, State of Montana, State of Nevada, State of New Jersey, State of New York, State of North Carolina, State of Oklahoma, State of Rhode Island, State of Texas, State of Wisconsin, District of Columbia, Commonwealth of Virginia, State of New Mexico, State of Tennessee, State of Washington, State of Connecticut, State of Louisiana, ex rel. Cheryl Lovell and William McKusick, Plaintiffs, v. ATHENAHEALTH, INC., Defendant, Appellee, John Does 1-10, Defendants. United States, ex rel. Geordie Sanborn, Plaintiff, Appellant, United States, ex rel. Cheryl Lovell and William McKusick; State of Vermont, State of California, State of Colorado, State of Delaware, State of Florida, State of Georgia, State of Hawaii, State of Illinois, State of Indiana, State of Iowa, State of Maryland, Commonwealth of Massachusetts, State of Michigan, State of Minnesota, State of Montana, State of Nevada, State of New Jersey, State of New York, State of North Carolina, State of Oklahoma, State of Rhode Island, State of Texas, State of Wisconsin, District of Columbia, Commonwealth of Virginia, State of New Mexico, State of Tennessee, State of Washington, State of Connecticut, State of Louisiana, Ex Rel. Cheryl Lovell and William McKusick, Plaintiffs, v. AthenaHealth, Inc., Defendant, Appellee, John Does 1-10, Defendants. |
| Court | U.S. Court of Appeals — First Circuit |
Hyland Hunt, with whom Ruthanne M. Deutsch, Deutsch Hunt PLLC, Suzanne E. Durrell, and Whistleblower Law Collaborative LLC were on brief, for appellants Lovell and McKusick.
Andrew D. Schlichter, with whom Joel D. Rohlf and Schlichter Bogard & Denton, LLP were on brief, for appellant Sanborn.
Sarah E. Walters, with whom Mark W. Pearlstein, Natasha L. Dobrott, and McDermott Will & Emery LLP were on brief, for appellee.
Before Barron, Chief Judge, Lynch and Gelpí, Circuit Judges.
In these two different qui tam cases in which the United States executed a settlement agreement with defendant AthenaHealth, Inc. ("Athena") and multiple relators, relators Cheryl Lovell and William McKusick appeal from the district court's denial of their entire claim for attorneys' fees under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. The district court did so on the basis that such fees were available only to first-to-file relators and Lovell and McKusick were not first-to-file relators.
The first-to-file relator, Geordie Sanborn, appeals from the omission of certain claimed fees from his award of attorneys' fees. Both appeals present questions of first impression for this court.
We affirm as to Lovell and McKusick on narrow reasoning, confined to the facts concerning the provisions of the government's settlement agreement. We conclude that Lovell and McKusick did not receive a relator's share and so are not entitled to attorneys' fees. We leave for another day the issue of whether such fees are restricted to first-to-file relators. We also do not address different factual situations where the settlement agreement reached by the United States provides for payment of relator's shares to multiple relators. We affirm as to Sanborn, rejecting his argument under the text of 31 U.S.C. § 3730(d)(1) that he may be allowed fees associated with his claim in which the government did not intervene.
The False Claims Act imposes liability on any person who, inter alia, "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," 31 U.S.C. § 3729(a)(1)(A), "to an officer, employee, or agent of the United States," id. § 3729(b)(2)(A)(i). The statute authorizes two types of actions. The government can bring a civil action against the alleged false claimant. Id. § 3730(a). Alternatively, a private person (a "relator") can bring a qui tam civil action in the government's name "for the person and for the United States Government." Id. § 3730(b). Qui tam plaintiffs must file their complaints under seal and serve a copy of the complaint, along with all material evidence, on the government. Id. § 3730(b)(2). The government may then decide to intervene, "in which case the action shall be conducted by the Government." Id. § 3730(b)(4)(A). If the government does not intervene, the qui tam plaintiff "shall have the right to conduct the action." Id. § 3730(b)(4)(B). A plaintiff's complaint may remain sealed for an extended period while the government investigates the allegations prior to making its intervention decision. See id. § 3730(b)(2)-(3).
We recite only the necessary undisputed facts. Athena is a medical software company that sells health record services and other cloud-based products. Relator Sanborn works in business development and sales for one of Athena's competitors. Relators Lovell and McKusick operate a home-healthcare service that was one of Athena's clients.
On October 30, 2017, Sanborn filed a sealed qui tam complaint against Athena. The complaint alleged that Athena had operated incentive programs to induce purchases of Athena's services in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (the "Kickback Claim"). Sanborn's complaint also alleged that Athena marketed its electronic health record technology with a false guarantee of compliance with federal certification requirements (the "EHR Compliance Claim").
Roughly two months later, on December 21, 2017, Lovell and McKusick filed a separate qui tam complaint against Athena. They amended that complaint on April 18, 2018. Like Sanborn, Lovell and McKusick alleged that Athena's incentive programs violated the Anti-Kickback Statute (again, the "Kickback Claim"). They also alleged that Athena's billing software submitted false claims for services (the "Billing Claim").
The government conducted an investigation over the next three years. On September 22, 2020, the government reached an agreement in principle with Athena to settle all the claims. At some point in December 2020, both sets of relators reached an agreement between themselves as to how to allocate any relator's share from the anticipated settlement. The terms of this agreement are not in the record. On January 22, 2021, the government filed a notice in court that it was electing to intervene in part in both Sanborn's case and Lovell and McKusick's case. The government's complaint in intervention, filed on January 25, 2021, intervened as to the relators' Kickback Claims. The government did not intervene in Sanborn's EHR Compliance Claim or in Lovell and McKusick's Billing Claim.
On January 27, 2021, the government, the relators, and Athena entered into a settlement agreement, which settled both the Kickback Claims in which the government had intervened and the relators' remaining claims.1 Athena agreed to pay the government (not the relators) over $18,250,000. The settlement agreement stated that "[i]t is understood by all the Parties that Relator Sanborn and Relators Lovell and McKusick have reached their own agreement regarding their respective shares of any funds paid by the United States to Relator Sanborn." The settlement agreement also reserved the relators' ability to seek, and Athena's ability to contest, payment of attorneys' fees pursuant to § 3730(d).
In February 2021, the government and the relators executed a separate agreement. The parties agree that, pursuant to this agreement, the government paid an agreed amount to Sanborn on March 15, 2021. Under the terms of the private agreement among the relators, not involving the government or Athena, Sanborn paid to Lovell and McKusick a sum purporting to be part of the payment he received from the government. The sum paid is not in evidence.
Both sets of relators sought an award of attorneys' fees from the district court under § 3730(d). Sanborn sought roughly $762,000 in attorneys' fees and $15,000 in expenses; Lovell and McKusick sought roughly $1,079,000 in fees and $4,000 in expenses.2
The district court denied Lovell and McKusick's motion for attorneys' fees and denied Sanborn's motion in part. AthenaHealth, 2022 WL 658654, at *8. As to Lovell and McKusick, the court held that they were barred from recovering fees for their Kickback Claim under § 3730(d)(1) because they were not the first-to-file relator. Id. at *4-5 (citing 31 U.S.C. § 3730(b)(5) ). As to Sanborn, the court held that he was entitled to fees under § 3730(d)(1) for his Kickback Claim but not his EHR Compliance Claim, because the government did not intervene in the latter claim. Id. at *5-6. The court also held that Sanborn had waived any alternative argument for fees under § 3730(d)(2) by failing to brief the issue. Id. at *6. The court thus reduced the fee lodestar it had calculated for Sanborn by 50 percent to reflect the exclusion of the EHR Compliance Claim3 and awarded Sanborn roughly $391,000 in fees and expenses. See id. at *6-8.
These timely appeals followed. The government has not taken a position in either appeal.
We review questions of statutory interpretation de novo. See Baker v. Smith & Wesson, Inc., 40 F.4th 43, 47 (1st Cir. 2022).
These consolidated appeals turn on relators' entitlement to attorneys' fees under the text of 31 U.S.C. § 3730(d). This was the ground on which the settlement agreement provided for a potential award.
We begin with Lovell and McKusick's claim to attorneys' fees for their Kickback Claim under § 3730(d)(1). Athena defends the district court's denial of fees on two independent bases: (1) that the FCA's first-to-file...
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United States ex rel. Sanborn v. AthenaHealth, Inc.
...whether it wishes to address, as it has not done explicitly, Sanborn's claim for additional fees incurred during the fee proceedings. Id. at 159 n.8. this Court inadvertently failed to resolve that issue in its original memorandum and order and because relator Sanborn has filed his motion w......