Most experienced False Claims Act (FCA) practitioners are all too familiar with the statutory provision requiring defendants to pay whistleblowers’ attorneys’ fees at the end of FCA cases. What is less commonly known is the provision that grants defendants their attorneys’ fees in certain circumstances.
One whistleblower learned about that provision the hard way, when on March 14, 2024, a Mississippi federal judge ordered that he pay over $1 million to cover the defendants’ attorneys’ fees, following grant of summary judgment to defendants in what the judge labeled a “frivolous” qui tam. This blog post looks at the case that led to such a large attorneys’ fees award and considers the types of cases in which these efforts are wise.
How Defendants Can Obtain Attorneys’ Fees from Whistleblowers Bringing Frivolous Qui Tams
Husch Blackwell’s experienced False Claims Act team has previously covered instances where wrongfully accused defendants have brought cases for malicious prosecution against whistleblowers who sought to improperly use qui tams, such as this article about a West Virginia health system that had great success using such a suit. But for cases that might fall short of malicious conduct, but still assert clearly frivolous allegations, the FCA still has an answer that should be considered by wrongfully accused defendants.
The FCA makes clear that, in declined qui tams that the whistleblower nevertheless continues to litigate, “the court may award to the defendant its reasonable attorneys’ fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4).
While any of those three qualities—frivolous, vexatious, or harassing—suffice for an award of attorneys’ fees, the most commonly asserted theory against whistleblowers is the first one: bringing a clearly frivolous action. The second and third qualities should be considered in cases where the whistleblower uses the qui tam to improperly harass or irritate a defendant, but those typically carry high bars requiring some extra-judicial incentive.
But bringing a “clearly frivolous” qui tam is a clearer recipe for an award of attorneys’ fees, requiring not personal animosity but a straightforward consideration of the whistleblower’s factual and legal assertions. And when the whistleblower’s allegations are “demonstrably wrong,” an award of attorneys’ fees may be appropriate.
Background: How a Qui Tam Led to a Whistleblower Owing More Than $1 Million in Defendants’ Attorneys’ Fees
A Tennessee attorney was deposing a nurse in a wrongful death action when he found out that the nurse had some disciplinary action in Virginia relating to practicing without a valid nursing license. Based on this, the attorney filed a qui tam against the Mississippi nursing home that employed the nurse, claiming that because the nurse didn’t have adequate licensing, Medicare ought not to have paid for claims submitted by the nursing home.
The problem for the attorney-turned-whistleblower was that the nurse’s license had been reinstated shortly after revocation, and before the nurse gained employment with the nursing home. And the nursing home verified the nurse’s license with Virginia the day after her employment began at the nursing home.. In the words of the court, the attorney-turned-whistleblower “failed to conduct a simple online inquiry of Virginia’s public records which would have informed him that his core allegation and the primary basis for this lawsuit – that [the nurse] lacked a valid multistate license – was demonstrably wrong.”
This failure, combined with what the defendants called “discovery abuse” after learning of the flawed theory, led the court to conclude that the attorney-turned-whistleblower’s qui tam was “bereft of any objective factual support” and “clearly had no chance of success,” and thus “clearly frivolous” under the FCA.
The defendants obtained a rare win under the FCA, but not a total win. The defendants sought over $2 million in fees, but the court reduced that down to just over $1 million. In doing so, the court held that the applicable rate for the matter should be based on Mississippi rates instead of Washington, DC (where defense counsel was located) rates, reducing the lead partner’s rate to $450 per hour, and a mid-level associate’s rate from $740 per hour to $200 per hour. The court also reduced the number of hours spent by defense counsel by 20%, citing excessive hours billed but without providing any examples. Despite these reductions, the award of more than $1 million against a whistleblower is surely seen as a success by the defendants.
What Can Qui Tam Defendants Learn From This Case?
This case is a rare result. More often than not, when defendants prevail on summary judgment against whistleblowers in qui tams, the whistleblowers brought a theory that is wrong but not “clearly frivolous.” In this case, the court awarded fees because it viewed the qui tam as brought simply because the whistleblower failed to take reasonable steps to verify its factual allegations. Going forward, that is likely the type of instance in which courts will be most likely to award fees to qui tam defendants: where whistleblowers are not only wrong but could have gotten it right with reasonable diligence. In general, being accused of fraud is a big deal, and those accused of fraud should ensure that their interests are being defended by counsel with significant FCA and qui tam experience.
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