In a move that reminds us that successful defendants can—and should—seek attorneys’ fees in the right case, a magistrate judge in the U.S. Court of Appeals for the Ninth Circuit awarded pharmaceutical company Aventis Pharma SA (“Aventis”) attorneys’ fees in a False Claims Act (“FCA”) case brought by a competitor, Amphastar Pharmaceuticals Inc. (“Amphastar”). The FCA contains a fee-shifting component, permitting prevailing parties to recover attorneys’ fees from the opposing party—but the playing field is not equal. This fee-shifting provision entitles a prevailing plaintiff to an award of reasonable attorneys’ fees and costs, regardless of whether the government elects to intervene in the case. 31 U.S.C. § 3730(d)(1)-(2). A defendant, on the other hand, can only be awarded attorneys’ fees in cases in which the government has declined to intervene and where the defendant can show that the opposing party’s action was “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4).
In Amphastar Pharmaceuticals Inc. v. Aventis Pharma SA, Amphastar filed a whistleblower claim under the FCA (known as a “qui tam” claim), alleging that Aventis engaged in inequitable conduct while pursuing its patent application for an anticoagulant drug, fraudulently obtained its patent, and subsequently inflated the price and overcharged the government for the drug. The case was dismissed on July 13, 2015, after the court agreed with Aventis that Amphastar was not an “original source” of the information on which its allegations were based, as required by the FCA. After the dismissal was affirmed on appeal in May 2017,[1] Aventis filed an application requesting attorneys’ fees and expenses pursuant to 31 U.S.C. § 3730(d)(4). Magistrate Judge Shashi H. Kewalramani awarded Aventis $12.2 million in attorneys’ fees, $672,102 in expenses, and $3.3 million in interest for work completed from 2011 through 2018 and $101,248 in expenses, $811,056 in fees, and $60,333 in interest for work completed from 2018 through 2020.
Aventis’ staggering award of more than $17.2 million in total attorneys’ fees followed the district court’s determination that Amphastar’s suit met the exceptional circumstances to qualify as “clearly frivolous.” The court explained that Amphastar not only pursued an FCA theory that was “academically recognized as of questionable validity” but also “did ‘not come close’ to meeting its burden to establish that it was an original source” of the information that formed the basis of its lawsuit, which Amphastar clearly learned during discovery in the prior patent litigation. The court held that the suit was also vexatious and brought primarily for an improper purpose, particularly because the FCA’s fee-shifting language was specifically designed to protect defendants “against abusive [FCA] claims.” The court further held that Amphastar had engaged in numerous bad faith and abusive actions, including “discovery issues, improper conduct, incredible testimony, and a baseless claim with no supporting evidence,” all of which culminated to provide sufficient grounds for the court to “exercise its discretion and award Aventis its reasonable fees.”
This case serves as a reminder to defendants faced with an FCA case that attorneys’ fees and costs can and should be sought against relators under the right circumstances. These cases come at an enormous expense (monetary, reputational, or both) to defendants even if the result is a complete victory. Relators routinely take advantage of—and aggressively pursue—the right that the statute provides to seek fees and costs. Defendants, in an effort to “level the field,” ought to do nothing less.
[1] See Amphastar Pharms. Inc. v. Aventis Pharma SA, 856 F.3d 696 (9th Cir. 2017).
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