United States ex rel. Doghramji v. Cmty. Health Sys. Inc.

UNITED STATES OF AMERICA ex rel. JAMES DOGHRAMJI, SHERRE COOK,and RACHEL BRYANT, Plaintiffs, v. COMMUNITY HEALTH SYSTEMS INC., et al., Defendants.

UNITED STATES OF AMERICA and STATE OF TEXAS ex rel.AMY COOK-RESKA, Plaintiffs, v. COMMUNITY HEALTH SYSTEMS INC., et al., Defendants.

UNITED STATES OF AMERICAex rel. NANCY REUILLE, Plaintiffs, v. COMMUNITY HEALTH SYSTEMS

PROFESSIONAL SERVICES, CORP., et al., Defendants.

UNITED STATES OF AMERICA ex rel.KATHLEEN A. BRYANT, Plaintiffs, v. COMMUNITY HEALTH SYSTEMS, INC., et al., Defendants.

Case No. 3:11-cv-0442

Case No. 3:14-cv-2160

Case No. 3:15-cv-0110

Case No. 3:14-cv-2195

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

August 30, 2018

To: The Honorable Marvin E. Aspen, United States District Judge

REPORT AND RECOMMENDATION

On August 6, 2015, former Chief Judge Kevin H. Sharp entered an order holding that none of the various claims for attorneys' fees asserted by the relator plaintiffs (the "Plaintiffs" or the "Relators") in the above-captioned cases¹ were precluded by the so-called "first-to-file" or "public disclosure" challenges under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. See Docket Entry ("DE") 185.² Defendants Community Health Systems, Inc. and many of its subsidiaries(collectively "CHS") appealed. The Sixth Circuit ultimately reversed this Court's determination and remanded for further proceedings.³

On remand this case was referred to the undersigned Magistrate Judge to conduct an evidentiary hearing to determine the meaning of "Term 8," a provision in the Settlement Agreement entered into by the parties pertaining to the scope of CHS's ability to challenge any claims for attorneys' fees filed by the Relators post-settlement. DE 257 at 2. Accordingly, an evidentiary hearing was held on June 27 and 28, 2017, at which all parties were represented by counsel. See DE 273, 274. The parties filed post-hearing briefs that have been considered by the Court. See DE 276, 277, 279, and 280.

Before explicating the meaning of Term 8, the Court pauses to echo (and paraphrase) the Sixth Circuit's observations of disputed contract language representative of poor drafting on a par with that found in the instant case:

That [the parties] now ardently argue for two opposing interpretations of the contract language, however, belies the notion that they shared any common assumptions about the contract's meaning. Regardless, the parties now rely on this court to resolve the dispute between them and [the Court is] placed at a disadvantage in so doing because of the ... lack of clarity. The parties' sloppy drafting may represent carelessness or an attempt by each side to disguise its own intentions and evade hard negotiation. In either case, [the parties are urged] to take far more care in drafting future [settlement agreements], to avoid expensive litigation and unnecessarily consuming this court's resources.

Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd., 525 F.3d 409, 424 (6th Cir. 2008). For the reasons that follow, the undersigned Magistrate Judge concludes that the meaning ofTerm 8 must be supplied by the Court, as there was no mutuality of assent among the parties. The undersigned Magistrate Judge therefore respectfully recommends that Term 8 be construed to preserve only CHS's right to challenge the reasonableness (and not recoverability) of the Relators' attorneys' fees.

I. INTRODUCTION AND BACKGROUND

Plaintiffs are seven separate relators who filed qui tam actions against CHS in various federal courts between 2009 and 2011 for several alleged violations of the FCA.⁴ At the request of the United States (the "Government"), all of the Relators worked collaboratively with the Government and with each other. On August 4, 2014, Relators, CHS, and the Government filed a notice that the parties had entered into a global settlement agreement ("Settlement Agreement") that resolved all seven of these actions, which involved two types of claims against CHS: (1) one concerning "Medically Unnecessary Emergency Department Admissions" ("national ED claim"); and (2) claims that one of the CHS subsidiary hospitals in Laredo, Texas had improperly billed for inpatient procedures and engaged in improper financial relationships ("Laredo claims"). See DE 75, 184; Cook-Reska, DE 64. Pursuant to the Settlement Agreement, CHS paid the Government $88,257,500 for the national ED claim and $9,000,000 for the Laredo claims in exchange for the dismissal of all claims against it. DE 75-1 at 7-8; DE 184 at 3.

In the Doghramji appeal, the Sixth Circuit summarized the procedural aspects pertinent to the instant dispute as follows:

This FCA case involves seven different qui tam complaints, all of which alleged that CHS defrauded the Government by admitting Medicare patients for medically-unnecessary emergency room visits. The first four complaints were filed under seal between 2009 and 2011 in Illinois, Indiana, and Texas. In early 2011, the Government first told the relators in these four cases of the similarities among their qui tam suits, which had "triggered a nationwide investigation on the part of the U.S." The Government encouraged these relators "to work together on the cases and share any proceeds that might result." At the Government's request, these relators then reached a sharing agreement in April 2011.

Appellees are three relators who were not involved in the original four cases. Appellees met with officials from the U.S. Department of Justice in Washington, D.C., U.S. Attorney's Office for the Eastern District of Pennsylvania, and U.S. Attorney's Office for the Middle District of Tennessee between February 2011 and April 2011. They disclosed the results of their investigation, begun in October 2010, which included "an original, robust statistical analysis of CHS admission practices" and an "extensive factual investigation." Their statistical analysis covered 74 different hospitals. To develop the facts of CHS's alleged fraud, they "contacted approximately 100 current and former doctors and nurses at approximately 20 CHS facilities in nine states."

In May 2011, these three relators (hereinafter Tennessee Relators) filed suit under seal in the Middle District of Tennessee. The Government then partially unsealed the four other qui tam complaints to the Tennessee Relators for their review and requested that they "actively participate in its investigation, which was led by the U.S. Attorney's Office in Nashville, on an on-going basis." Counsel for relators thereafter engaged in a "collaborative effort" involving "bi-monthly calls with the Government." "The Government lawyers mapped out the investigation and assigned work to all relators' counsel in an organized manner," with "the majority of the assignments [being] made without regard to the individual complaint." At the Government's request, from 2011 to 2014 the Tennessee Relators' counsel organized and analyzed thousands of documents produced by CHS, drafted letters and memoranda related to these documents, created lists of witnesses, drafted outlines for questioning witnesses, and conducted extensive legal and factual research. All told, they calculated their work on the case at nearly 7,000 billable hours.

Three years later, in the spring of 2014, the Government informed relators of a "handshake" deal with CHS. Because CHS required that, as part of settlement, all of the qui tam complaints—now seven in total—be dismissed with prejudice, the Government urged the Tennessee Relators to join the original relators' sharing agreement. After private mediation in early May 2014, relators in all seven cases reached a sharing agreement.

The Government intervened in each of the relators' actions on July 24, 2014. The Government filed a notice of settlement on August 4, 2014, and the district court unsealed the case. The settlement agreement provided that the Government and the seven relators would dismiss their claims upon payment by CHS of $88 million. As provided in § 3730(d), the Government awarded 19 percent of the total recovery to the relators, or about $16.4 million. See 31 U.S. § 3730(d) ("If the Government proceeds with an action brought by a person under subsection (b), such person shall ... receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim...."). This sum was split among all the individual relators in the various cases according to the sharing agreement that relators had reached before the settlement was finalized. The Tennessee Relators collectively received a 14 percent share, or about $2.3 million.

Pursuant to the settlement agreement, the district court dismissed the claims in October 2014, but retained jurisdiction to decide "statutory attorneys' fees and costs pursuant to 31 U.S.C. § 3730(d)." Between October 2014 and January 2015, three district courts in Texas and Indiana transferred their cases to the Middle District of Tennessee for resolution of fee disputes. In February 2015, the court consolidated the fee disputes in the four cases before it. The court subsequently ordered the parties to brief "whether all or some of the relators are precluded from recovery of attorneys' fees and costs by the first-to-file rule provided in 31 U.S.C. § 3730(b)(5) and/or by the public disclosure bar."

CHS argued that Term 8 of the agreement preserved its right to make first-to-file and public-disclosure challenges. The relevant sentence in Term 8 reads as follows: "All Parties agree that nothing in this Paragraph or this Agreement shall be construed in any way to release, waive or otherwise affect the ability of CHS to challenge or object to Relators' claims for attorneys' fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d)." Tennessee Relators argued that the phrase "pursuant to 31 U.S.C. § 3730(d)" limited the scope of CHS's objections to those listed in that provision. Because first-to-file and public-disclosure challenges are located

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