United States ex rel. Nichols v. Computer Sciences Corporation

499 F.Supp.3d 32

UNITED STATES of America and State of New York EX REL. NICHOLS

v.COMPUTER SCIENCES CORPORATION and City of New York, Defendants.

12-CV-1750 (JSR)

United States District Court, S.D. New York.

Signed November 9, 2020

Konrad Francis Payne, Attorney General of the State of New York, New York, NY, for State of New York.

OPINION & ORDER

JED S. RAKOFF, U.S.D.J.

Relator Vincent Forcier¹ filed this qui tam action under seal on March 9, 2012 on behalf of the United States of America (the "Government") and the State of New York (the "State"). Complaint, Dkt. No. 130. Relator brought claims under, inter alia, the False Claims Act (the "FCA") against New York City (the "City") and its billing agent Computer Sciences Corporation("CSC"), alleging that they carried out an $80 million fraud on the federal-state Medicaid program by wrongfully obtaining reimbursement from that program. On July 28, 2020, after more than eight years of litigation before two federal judges, the parties submitted and the Court approved stipulations resolving the pending causes of action on the merits. The City agreed to pay $925,000, while CSC agreed to pay $1.85 million. Dkt. Nos. 191-193.

Now before the Court is Relator's motion, pursuant to 31 U.S.C. § 3730(d)(1), for reasonable expenses necessarily incurred and reasonable attorneys’ fees and costs, against the City. Relator seeks an award against the City of $1,621,007.18 in legal fees for the services of three law firms that worked on this matter and $26,797.87 in expenses. Objecting on numerous grounds to the scale of this request, the City argues that Relator's request should either be denied in whole or else awarded in part in an amount no greater than $64,47 9.85 in legal fees and $4,098.72 in expenses. For the reasons set forth below, Relator's motion is granted in part and denied in part, and the Court awards Relator attorneys’ fees in the amount of $317,668.77 and expenses in the amount of $21,782.87 against the City.

I. Background

A. Statutory Background

The FCA prohibits any person from "knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval," as well as "knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(A)-(B). While the Attorney General is primarily responsible for investigating and suing over violations of the FCA, private parties -- known as "relators" -- are also permitted to bring a "civil action for a violation of section 3729 on behalf of the United States Government." Id. § 3730(a), (b)(1). In that event, the Government may "elect to intervene and proceed with the action." Id. § 3730(b)(2). If it does, "it shall have the primary responsibility for prosecuting the action." Id. § 3730(c)(1)-(2)(B).

When the Government intervenes and prevails on one or more claims, the relator may "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." Id. § 3730(d)(1). The relator "shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs," for successful claims. Id.

B. Factual Background

On March 9, 2012, Vincent Forcier filed this qui tam action on behalf of the United States alleging, among other things, fraud by the City and CSC with regard to the New York Medicaid Program. Dkt. No. 130 ("Complaint").² The purpose of the fraud scheme was to enable the City to increase the amount and speed of Medicaid reimbursements for Early Intervention Program ("EIP") services. EIPs, which are established by states and cities to qualify for federal funding under the Individuals with Disabilities Education Act, 20 U.S.C. §§ 1431 - 1444, provide interventional therapy to young children who have or are likely to develop developmental delays. Compl. ¶ 2. At all times relevant to the lawsuit, EIP services for children in the City were provided by service providers under contract with the City. Id. The City would reimburse these providers and, in turn, would itself seek reimbursement -- first, from private insurers and, only after exhausting private insurance coverage, then from Medicaid. Id. ¶¶ 27, 36-37. To obtain reimbursement from Medicaid, the City would have to provide certain information regarding, among other things, a child's diagnosis and gender, and where the service was provided. Id. ¶¶ 33, 82-83.

The Complaint alleged numerous fraudulent schemes (some in more detail than others):

• The 315.9 Claim: The City, in conspiracy with CSC, used a made-up diagnosis code -- 315.9 -- when a service provider did not supply the City with a valid diagnosis code. Id. ¶¶ 49-71.

• The Switching Claim: The City, in conspiracy with the CSC, fraudulently "switched" certain codes -- such as gender codes -- in order to get claims paid faster. Id. ¶¶ 81-83.

• The Refund Claim: The City, in conspiracy with CSC, failed to refund overpayments received from the Medicaid Program. Id. ¶ 78.

• The Other State Claims: CSC violated New Jersey and Indiana Medicaid requirements in various ways. Id. ¶¶ 84-105.

• The Secondary Payer Claim: The City, in conspiracy with CSC, "submitted claims to Medicaid when claims to third-party insurance were pending," in violation of the requirement to exhaust private insurance coverage before submitting claims to Medicaid. Id. ¶ 75.

Based on these allegations, Relator asserted causes of action under 31 U.S.C. § 3729(a)(1)(A)³ for the knowing submission of false claims and 31 U.S.C. § 3729(a)(1)(G) for the knowing and improper concealment or avoidance of obligations to pay or transmit money to the Government. Compl. ¶¶ 109, 112. Relator alleged that these fraudulent schemes generated $80 million, of which more than $70 million was traceable to the 315.9 Claim. Id. ¶¶ 1, 70. On October 27, 2014, Relator filed a First Amended complaint, which added additional allegations regarding the Switching Claim and added another $20 million in damages. Dkt. No. 15 ("FAC"), ¶¶ 1, 76-94.

Also on October 27, 2014, after a two and half-year investigation into Relator's allegations in which Relator and counsel were heavily involved, the Government intervened and filed its own complaint. Dkt. No. 13 ("U.S. Complaint").⁴ The U.S. Complaint adopted Relator's 315.9 Claim. U.S. Compl ¶¶ 97-105. In addition, the Government included Relator's Switching Claim, albeit not as a separate cause of action against the City but as evidence of a "pattern of deliberate disregard for complying with the billing rules or submitting accurate information." Id. ¶¶ 117-121, 124-127. Finally, the U.S. Complaint fleshed out Relator's Secondary Payer Claim, which was only briefly mentioned in Relator's complaint, by alleging the means through which the City and CSC circumvented the requirement to exhaust private insurance coverage before submitting to Medicaid:

• The Nine 9's Claim: The City, in conspiracy with CSC, used a placeholder (999,999,999) to submit claims to private insurers knowing that the claim would be denied, and subsequently submitted those claims to Medicaid. Id. ¶¶ 70-76.

• The 0Fill Claim: The City, in conspiracy with CSC, submitted Medicaid claims that contained a "0Fill" modifier," indicating that the claim had been rejected by private insurance, when, in fact, the claim was still pending before private insurance. Id. ¶¶ 77-86.

On December 12, 2014, Relator filed a Second Amended Complaint ("SAC"), which "incorporate[d] by reference and adopt[ed] the United States’ Complaint-in-Intervention." Dkt. No. 25, ¶ 1.

On January 26, 2015, the City and CSC moved to dismiss the U.S. Complaint and the Relator's SAC. Dkt. No. 37.⁵ On April 28, 2016, Judge Batts, to whom the case was then assigned, denied the motions to dismiss the Secondary Payer Claims, granted the motions to dismiss the 315.9 Claims and the Refund Claims, and granted the motion to dismiss Relator's SAC as duplicative of the U.S. Complaint. See United States ex rel. Forcier v. Computer Sciences Corp., 183 F. Supp. 3d 510 (S.D.N.Y. 2016). In doing so, Judge Batts made clear that the dismissal of Relator's SAC "does not alter or impair Relator's continuing statutory rights" as set forth in the FCA. Id. at 529.

On September 6, 2016, the Government filed an amended complaint, adding a claim -- the Fraudulent Inducement Claim -- that CSC fraudulently induced Medicaid to approve its enrollment as a billing agent by failing to disclose an incentive fee provision in its contract with the City that enabled CSC to share in certain of the City's Medicaid profits. Dkt. No. 83 ("U.S. Amended Complaint"), ¶¶ 9, 119-126.⁶ While the Government had alleged the existence of this fee provision in its original complaint, it did so only to explain how the City motivated CSC to overbill Medicaid. See U.S. Compl ¶¶ 53-60. On November 14, 2016, the City filed its answer to the U.S. Amended Complaint. Dkt. No. 97.

CSC, meanwhile, moved to dismiss the U.S. Amended Complaint. Dkt. No. 91. The City did not participate in this motion practice, because the Government's only new allegation (the Fraudulent Inducement Claim) was brought against CSC, not the Government. On August 10, 2017, Judge Batts denied CSC's motion to dismiss and allowed the Government's Fraudulent Inducement Claim to proceed. See United States ex rel. Forcier v. Computer Sciences Corp., No. 12-cv-1750 (DAB), 2017 WL 3616665 (S.D.N.Y. Aug. 10, 2017).

Thereafter, the parties -- but not the City -- engaged in additional motion practice and participated in unsuccessful mediation. Dkt. Nos. 117-40. In October 2018, the parties commenced discovery.

On February 19, 2020, the case was reassigned to the undersigned. On July 28, 2020, the Government submitted -- and this Court approved -- stipulations resolving the pending...