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United States ex rel. Chiba v. Guntersville Breathables Inc.

United States District Court, N.D. Alabama, Northeastern Division

October 9, 2019




         This matter proceeds before the court on Relators' Motion for Reasonable Expenses, Attorneys' Fees, and Costs (Doc. 26), and their Motion to Strike Portions of Defendants' Response to Relators' Attorney's Fee Petition and Exhibits Accompanying That Response. (Doc. 43). The Defendant alleges the Relators perpetrated the wrongdoing underlying their Fair Claims Act qui tam claims, which disqualifies them from obtaining attorneys' fees. Moreover, the Defendant contends the FCA's government action and public disclosure bars preclude an award of attorneys' fees, and further, the court should reduce the fee request due to the Relators' partial success on their qui tam claims, as well as their lack of billing judgment as to certain hours expended by the Relators' attorneys.

         As the analyses herein portray, the Relators secured prevailing party status pursuant to the FCA, entitling them to attorneys' fees, and the FCA does not preclude them from obtaining attorneys' fees due to their alleged wrongdoing. Furthermore, the government action and public disclosure bars do not foreclose the Relators' entitlement to attorneys' fees; pursuant to the terms of the applicable FCA provisions, those prohibitions typically apply to bar qui tam actions and claims, not attorneys' fee requests, and concomitantly, the court has already dismissed with prejudice the qui tam claims to which the prohibitions may apply. Moreover, the prohibitions' terms depict that the bars do not encompass the pre-suit disclosure at issue. Finally, the court will reduce the Relators' attorneys' fees award by some hours attributed to securing their share of the proceeds the Government obtained from the Defendant, yet the court will not reduce the requested award based upon the results the Relators obtained on their qui tam claims.

         Therefore, for the reasons set out herein, the court GRANTS the Motion for Reasonable Attorneys' Fees, Certain Expenses, and Costs and MOOTS the Motion to Strike.


         On May 10, 2017, Relators Rich Chiba and Drake Maples commenced this action against Defendants Guntersville Breathables, Inc. (GBI), R. Christopher Lumpkin, and Tori Chase Handley, pursuant to the False Claims Act, 31 U.S.C. §§ 3729-3733 (“FCA”). Relator Chiba served as GBI's manufacturing vice president from January 2011 to February 2015, and as manufacturing director before that period. Relator Maples worked for GBI from May 2005 to September 2014 as vice president of sales and then chief executive officer.

         The complaint alleged GBI and the individual defendants failed to report, for customs duty purposes, the full value of goods imported from China, namely boot-foot waders[1] and insulated knee boots (known as Alaska Tuff Marine boots). GBI declared the value of just one of the component products for the boot-foot wader, allegedly resulting in underpayment of customs duties approximating $700, 000. GBI's declaration concerning the Alaska Tuff Marine boots resulted in a tariff rate of 9%, rather than the appropriate personal protective equipment rate of 37.5%, resulting in the underpayment of approximately $200, 000 in customs levies. The complaint alleges Defendant Lumpkin (CEO assistant, logistics manager, and freight forwarder) instituted and perpetuated the scheme, with assistance from Defendant Handley (chief financial officer).

         The United States intervened and settled with Relators and GBI the undervaluation claim involving the boot-foot waders, regarded by the parties as the Covered Conduct. The settlement released GBI from any civil or administrative monetary claim the United States may pursue for the Covered Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; 19 U.S.C. §§ 1592 and 1595a of the Tariff Act of 1930, as amended; and the common law theories of unjust enrichment and fraud. GBI agreed to pay the United States $273, 495.67, of which $151, 942.04 represented restitution.[2] The government gave the Relators a share of the recovery from GBI, amounting to an approximate three point downward departure from the 15% statutory minimum for a relator's share pursuant to the False Claims Act. 31 U.S.C. § 3730(d)(1).

         The United States requested the court dismiss with prejudice all claims included in the settlement. However, the United States did not seek the dismissal of any remaining claims in this action beyond the scope of the Covered Conduct, including any claims Relators may have for costs and attorney fees pursuant to 31 U.S.C. § 3730(d)(1), any criminal liability, and any individual liability. The Relators moved to dismiss with prejudice the remaining claims regarding the misclassification of the knee boots as well as any claims against Defendants Lumpkin and Handley. (Doc. 25). The court entered an order on March 19, 2019, granting the United States' and Relators' motions, thereby dismissing all claims with prejudice. (Doc. 36).

         The Relators filed their motion for attorneys' fees and costs after dismissal. Throughout this litigation, attorneys Robert E. Battle and Adam P. Plant of Battle & Winn LLP represented Relators. Relators seek attorneys' fees of $85, 912.50 for 182.7 hours expended through March 5, 2019, ostensibly excluding time dedicated to non-intervened claims. In particular, Relators seek the following amounts for each attorney and paralegal providing representation and services during this litigation:


Hourly Rate



Robert E. Battle



$20, 895.00

Adam P. Plant



$63, 937.50

Amy L. Rodgers




Mariah Hall






$85, 912.50

         Relators also seek $1, 234.41 in costs and expenses and $4, 237.50 for expert witness fees. In addition, Relators seek recompense for the fees and costs of litigating their fee petition, which awaits presentation after adjudication of the instant Motion.


         The False Claims Act provides the United States Government a right of recovery against any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1). In addition, the FCA allows private parties to file a qui tam action and serve as relators to recover damages on behalf of the United States. 31 U.S.C. § 3730(b). Violators of the FCA suffer liability to the government for a civil penalty between $5, 000 and $10, 000 per claim and treble damages. 18 U.S.C. § 3729(a)(1). In appropriate circumstances, the FCA entitles relators to a percentage of any recovery from a settlement or judgment plus reasonable attorneys' fees and costs. 31 U.S.C. § 3730(d).

         As provided in the background, the Government intervened into this action to assume its prosecution, id. at § 3730(c), and subsequently reached a settlement with GBI. GBI agreed to pay the United States $273, 495.67, and the Relators obtained an approximate 12% share of the United States' recovery. However, GBI argues the Relators should not receive attorneys' fees, or should receive a reduction in attorneys' fees, for various reasons.

         As an initial matter, the court must determine whether the Relators are prevailing parties entitled to FCA attorneys' fees. The FCA deems a party a “prevailing” or successful relator entitled to attorneys' fees and costs in the following applicable circumstances:

If the Government proceeds with an action brought by a person under subsection (b), such person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. . . . Any payment to a person under the first or second sentence of this paragraph shall be made from the proceeds. Any such person 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.A. § 3730(d)(1) (emphasis added). The “starting point in discerning congressional intent is the existing statutory text, ” and “when the statute's language is plain, the sole function of the courts -- at least where the disposition required by the text is not absurd -- is to enforce it according to its terms.” Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004) (citations and internal quotation marks omitted); see also United States v. AseraCare, Inc., __ F.3d __, 2019 WL 4251875, at *10 (11th Cir. Sept. 9, 2019) (“The analysis begins with the language of the relevant statute and regulations.”) (citation omitted).

         Applying the foregoing prescription here, § 3730(d)(1) plainly illustrates the circumstances in which a relator prevails and secures entitlement to attorneys' fees. The first sentence of § 3730(d)(1), which applies to the determination at bar, sets forth the method for calculating a relator's share of proceeds garnered by the United States in an FCA action in which it has intervened. Then, § 3730(d)(1)'s third sentence states that the United States shall award the relator's share from the actual proceeds received from the FCA defendant. Finally, § 3730(d)(1) declares “[a]ny such person shall also receive” attorney's fees, expenses, and costs “awarded against the defendant.” Id. (emphasis added). As clearly set forth, a prevailing relator entitled to attorneys' fees and expenses includes any person who filed a qui tam action and received a share of the proceeds obtained by the United States from an FCA defendant. See United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081, 1087 (11th Cir.), aff'd sub nom. Cochise Consultancy, Inc. v. U.S. ex rel. Hun, 139 S.Ct. 1507 (2019) (“In an intervened case, the relator usually is entitled to . . . proceeds, as well as reasonable expenses, attorney's fees, and costs.”) (citing § 3730(d)(1)) (emphasis added); Shaw v. AAA Eng'g & Drafting, Inc., 213 F.3d 538, 544 (10th Cir. 2000) (“The only significant difference between the FCA and the attorney's fees provisions in the other statutes is that the FCA provisions are mandatory on their face.”).

         Prevailing rules of statutory construction buttress this conclusion. The “use of a definite article preceded by an indefinite article can be persuasive evidence that Congress intended to link two clauses.” Schroeder v. United States, 793 F.3d 1080, 1084-85 (9th Cir. 2015) (citing Gale v. First Franklin Loan Services, 701 F.3d 1240, 1246 (9thCir. 2012)); see also Am. Bus Ass'n v. Slater, 231 F.3d 1, 4-5 (D.C. Cir. 2000) (“Indeed, ‘[i]t is a rule of law well established that the definite article ‘the' particularizes the subject which it precedes. It is a word of limitation as opposed to the indefinite or generalizing force of ‘a' or ‘an.'”) (quoting Brooks v. Zabka, 168 Colo. 265 (1969) (en banc); citing Black's Law Dictionary 1477 (6th ed. 1990) (“In construing [a] statute, [the] definite article ‘the' particularizes the subject which it precedes and is [a] word of limitation as opposed to [the] indefinite or generalizing force ‘a' or ‘an'.”)).

         In § 3730(d)(1), “a person” garners a share of the proceeds obtained by the United States from a defendant, and in the very next sentence “[a]ny such person” secures a mandatory entitlement to attorneys' fees, expenses, and costs. 31 § 3730(d)(1) (emphasis added); see also United States v. Pittman, 151 F.2d 851, 852 (5th Cir. 1945) (“We cannot throw away the word ‘such' [in a statute]. It is descriptive and limiting, referring always to a class just before pointed out.”); Black's Law Dictionary (11th ed. 2019) (defining “SUCH” as “That or those; having just been mentioned <a newly discovered Fabergé egg will be on auction next week; such egg is expected to sell for more than $500, 000>”); c.f., Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 146 (2012) (“A pronoun that is the subject of a sentence and does not have an antecedent in that sentence ordinarily refers to the subject of the preceding sentence. And it almost always does so when it is the word that begins the sentence.”). Because the Relators at bar obtained a share of the proceeds recovered by the Government, they secure an entitlement to attorneys' fees, expenses, and costs.

         A. Relators' Alleged Involvement Does Not Preclude an Award of Attorneys' Fees and Costs

         Notwithstanding the plain meaning of § 3730(d)(1), GBI contends that several other provisions of the FCA preclude the Relators' entitlement to attorneys' fees. First, GBI argues the Relators, not the individual Defendants, perpetrated the fraud underlying the FCA action, and then revealed the fraud after they left GBI's employ. Due to the alleged perpetration of the fraud by the Relators, GBI argues the court should not award them any attorneys' fees.

         First, as discussed, § 3730(d)(1) declares that attorneys' fees are mandatory: relators “shall . . . receive” such fees if they obtain a share of the proceeds recovered by the government. See Claire M. Sylvia, The False Claims Act: Fraud Against the Government § 9:3 (“Following the Act's reference to an award of part of the ‘proceeds of the action or settlement,' the Act provides that such a relator ‘shall also' receive reasonable attorneys' fees. . . . A relator whose claim does not result in settlement or a judgment is not entitled to fees.”) (emphasis in original) (footnotes omitted); id. at § 1.18 (“In addition to a share of the proceeds, the relator is entitled to reasonable expenses, attorneys' fees, and costs, which are to be awarded against the defendant.”). Therefore, GBI faces a tough hurdle to circumvent this clear statutory requirement.

         This barrier manifests more concretely when examining the structure of the FCA. See AseraCare, supra, 2019 WL 4251875, at *10 (“To determine the plain meaning of a statute or regulation, we do not look at one word or term in isolation, but rather look to the entire statutory or regulatory context.”) (citing Sec. & Exch. Comm'n v. Levin, 849 F.3d 995, 1003 (11th Cir. 2017)). The FCA actually contains a provision governing relators who participated in the fraud underlying the claim:

Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.

31 U.S.C. § 3730(d)(3).

         As delineated, § 3730(d)(3) authorizes a court in its discretion to reduce a relator's share of the proceeds due to his role in planning or initiating an FCA violation, and to outright deny a share of the proceeds if the relator is held criminally liable for the FCA violation.[3] However, § 3730(d)(3) says nothing about adjusting a relator's entitlement to attorneys' fees, expenses, and costs. Sections 3730(d)(1) and (2) govern the relator's entitlement to attorneys' fees, expenses, and costs, and those paragraphs' silence as to a reduction for wrongdoing, as compared to § 3730(d)(3)'s prescriptions, portrays the court cannot countermand the requirement to award attorneys' fees when the Relators obtain a share of the United States' recovery. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 439-40 (2002) (“[W]hen one statutory section includes particular language that is omitted in another section of the same Act, it is presumed that Congress acted intentionally and purposely.” (citing Russello v. United States, 464 U.S. 16, 23 (1983) (same))); United States v. Spoor Tr. of Louise Paxton Gallagher Revocable Tr., 838 F.3d 1197, 1202-03 (11th Cir. 2016) (“'A familiar principle of statutory construction . . .is that a negative inference may be drawn from the exclusion of language from one statutory provision that is included in other provisions of the same statute.'” (quoting Hamdan v. Rumsfeld, 548 U.S. 557, 578 (2006))).

         Of course, if a court had adjudged the Relators criminally liable for an alleged violation of the FCA, § 3730(d)(3) prohibits a share of the award, and by extrapolation, such a finding removes the basis for an award of attorneys' fees pursuant to § 3730(d)(1). Yet, a court has not criminally adjudged the Relators liable for the FCA violations at issue, so this court has no recourse to reduce their attorneys' fees award due to their alleged wrongdoing.

         Indeed, because the FCA does not entirely divest relators who perpetrated the underlying violation from a share of proceeds, awarding such persons attorneys' fees should not be inherently offensive. As § 3730(d)(3) indicates, the FCA's qui tam structure “seeks to tap the self-interest of individuals with information about fraud against the Government, including those who may have been involved in the fraud.” Sylvia, supra, at § 1.1. “Although many . . . ‘relators' who bring qui tam actions may be motivated by public service or a sense of moral duty, Congress did not assume that all relators would be so motivated.” Id. Therefore, contrary to GBI's arguments that attorneys' fees incentivize relators to serve the public good only, the plain meaning and structure of the statute indicate Congress did not intend withholding of the FCA's attorneys' fee incentive from whistleblowers who perpetrated the violation (unless the whistleblowers warrant criminal liability for the violation). See Joel M. Androphy, Federal False Claims Act and Qui Tam Litigation § 2.06 n. 64 (“‘Subsection (d)(5) of section 3730 provides that prevailing qui tam relators may be awarded reasonable attorneys [sic] fees in addition to any other percentage of award recovered. . . . Unavailability of attorneys [sic] fees inhibits and precludes many private individuals, as well as their attorneys, from bringing civil fraud suits.'”) (quoting S. Rep. No. 99-345, 99th Cong., 2d Sess. 29 (July 28, 1986), reprinted in 1986 U.S. Code Cong. & Admin. News 5294).

         Therefore, the court cannot heed GBI's entreaty to deny Relators' attorneys' fees due to their alleged wrongdoing. Ferreting out the veracity of GBI's allegations about the Relators vis-a-vis the Relators' averments in the complaint about the dismissed individual defendants would enmesh the court in protracted proceedings disfavored for the adjudication of fee petitions. See Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (“A request for attorney's fees should not result in a second major litigation.”). Indeed, the Relators' share of the Government's proceeds amounted to less than the 15% statutory minimum, § 3730(d)(1), depicting that the Government may have already relied upon § 3730(d)(3) to reduce the Relator's share based upon participation in the FCA violation. That reduction represents the means to sanction the Relators for any alleged wrongdoing contributing to the FCA violation, and their attorneys should not suffer any detriment therewith in light of the statutory mandate for fees.

         B. The Public Disclosure and Government Action Bars Do Not Preclude Relators' Attorneys' Fees and Costs

          In a further bid to deny attorneys' fees, expenses, and costs to the Relators, GBI contends the FCA's government action and public disclosure bars prohibit the Relators from obtaining recovery. The FCA's government action bar requires dismissal of “an action under subsection (b)” - that is, a qui tam action under 31 U.S.C. § 3730(b) - “which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.” 31 U.S.C.A. § 3730(e)(3). The FCA's public disclosure bar requires dismissal of a § 3730 action or claim - unless the government opposes - “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” in one of several enumerated fora. 31 U.S.C.A. § 3730(e)(4). As the following analyses reveal, GBI cannot prevail on its contentions for several reasons.

         First, the posture of this case at this juncture casts GBI's reliance upon the § 3730 prohibitions as an anomaly. Section 3730(e)(3)'s government action bar clearly applies to effect dismissal of § 3730(b) qui tam actions, yet the Relators' request for attorneys' fees, etc., arises under § 3730(d). Therefore, at first blush, § 3730(e)(3) may not even warrant dismissal of Relators' attorneys' fees request. The public disclosure bar effects dismissal of an “action or claim” advanced under § 3730, 31 U.S.C. § 3730(e)(4), and a consistent evaluation with other provisions of § 3730 yields the interpretation that “action or claim” references the underlying qui tam action or such a claim presented within an action. See 31 U.S.C. § 3130(d)(2) (providing attorneys' fees for a relator who brings an action or settles a claim in which the government does not intervene); id. at § 3730(d)(4) (providing attorneys' fees and expenses to a defendant for a relator's claim that “was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment”).

         Furthermore, a more fundamental anomaly may preclude GBI's attempts to dismiss the attorneys' fees request pursuant to the pertinent § 3730(e) prohibitions. The government action and public disclosure bars serve to facilitate dismissal of qui tam actions and claims charging defendants with FCA violations. Yet, pursuant to a settlement agreement consummated by all of the parties, the United States intervened and moved for dismissal with prejudice of the Relators' pertinent qui tam claims (the boot-foot waders claim). (Docs. 22 & 24). The court granted the United States' motion and dismissed the pertinent qui tam claims with prejudice. (Doc. 36). Therefore, the government action and public disclosure bars serve no purpose at this juncture because the court has already extinguished the Relators' underlying qui tam claims.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this guise, the Relators&#39; qui tam claims merged into the court&#39;s judgment extinguishing the claims with prejudice, and as such, GBI&#39;s defenses also dissipated. C.f., Restatement (Second) of Judgments &sect; 18 (1982) (&ldquo;When the plaintiff recovers a valid and final personal judgment, his original claim is extinguished and rights upon the judgment are substituted for it. The plaintiff&#39;s original claim is said to be &lsquo;merged&#39; in the judgment. . . . It is immaterial whether the judgment was rendered upon a verdict or upon a motion to dismiss or other objection to the pleadings or upon consent, confession, or default.&rdquo;).[4] Therefore, GBI &ldquo;cannot avail [itself] of defenses [it] might have interposed, or did interpose . . . .&rdquo; Rstmt. (2nd) Jgmt. &sect; 18; c.f., Key v. Wise, 629 F.2d 1049, 1063 (5th Cir. 1980) (&ldquo;Once a lawsuit reaches a final judgment on the merits, the doctrine of res judicata bars litigation in a second lawsuit on the same cause of action &lsquo;of all grounds for, or defenses to, recovery that were available to the parties (in the first action), regardless of whether they were asserted or determined in the prior proceeding.&#39;&rdquo;) (quoting Brown v. Felsen, 442 U.S. 127, 131 (1979)); Todd v. Daewon Am., Inc., No. 3:11CV1077-MHT, 2014 WL 2002855, at *2 (M.D. Ala. ...

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