United States ex rel. Rafter H Constr., LLC v. Big-D Constr. Corp.

350 F.Supp.3d 938

The UNITED STATES of America, EX. REL. RAFTER H CONSTRUCTION, LLC, an Idaho Limited Liability Company, and Neal Hikida, Plaintiffs,

v.BIG-D CONSTRUCTION CORP., a Utah Corporation, and Big-D Corporation, a Utah Corporation and Doe Defendants 1-20, Defendants.

Case No. 4:16-cv-00401-DCN

United States District Court, D. Idaho.

Signed October 24, 2018

John A. Bailey, Jr., Hawley Troxell Ennis & Hawley, LLP, Pocatello, ID, Frederick J. Hahn, III, Hawley Troxell Ennis & Hawley, LLP, Idaho Falls, ID, for Plaintiffs.

Brian J. Babcock, Babcock Scott and Babcock, P.C., Salt Lake City, UT, for Defendants.

MEMORANDUM DECISION AND ORDER

David C. Nye, U.S. District Court Judge

I. INTRODUCTION

Pending before the Court is Plaintiffs/Relators, Rafter H Construction, LLC, and Neal Hikida's ("Plaintiffs") Motion for Attorney Fees and Costs. Dkt. 15. Having reviewed the record and briefs, the Court finds that the facts and legal arguments are adequately presented. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court will decide the Motion without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). For the reasons set forth below, the Court finds good cause to GRANT the Motion.

II. BACKGROUND

On September 6, 2016, Plaintiffs filed a qui tam action pursuant to the False Claims Act ("FCA") against Defendants Big-D Construction Corporation and Big-D Corporation ("Defendants"). Plaintiffs filed their Complaint under seal in the United States District Court for the District of Idaho.¹ On March 6, 2018, the United States filed its Notice of Intervention for the Purpose of Settlement and to Unseal the Case. Dkt. 13. Subsequently, on April 24, 2018, Plaintiffs notified the Court that the matter had settled and moved for dismissal of the Complaint. Dkt. 16. The Court granted the same on April 25, 2018. Dkt. 18. Importantly, even though the Court dismissed the case, it retained jurisdiction for the sole purpose of "resolv[ing] any outstanding issues regarding Relators' entitlement to a share of the proceeds of the settlement amount and to attorneys' fees." Dkt. 18, at 2.

The settlement agreement in this case (the "Big-D Settlement Agreement") included another qui tam action filed against the same Big-D defendants in the United State District Court for the District of Utah.² The Big-D Settlement Agreement resulted in a payment by the Big-D defendants to the United States in the amount of $1,500,00.00, of which $437,100.00 was designated as settlement of the Idaho Action. The Big-D Settlement Agreement specifically preserved the Relators' right and claim to attorneys' fees from the Big-D defendants. Following the Big-D Settlement Agreement, the United States and the Relators entered into a settlement agreement (the "Relator Settlement Agreement") regarding the disbursement of the Relators' settlement proceeds pursuant to 31 U.S.C. § 3730(d)(1). Importantly, the Relator Settlement Agreement also specifically preserved the issue of Relators' entitlement to expenses, costs, and attorneys' fees pursuant to 31 U.S.C. § 3730(d)(1).

III. LEGAL STANDARD

In an FCA action, a qui tam plaintiff is entitled to "an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. " 31 U.S.C. § 3730(d)(1) (emphasis added). Furthermore, these expenses "shall be awarded against the defendant" and not taken out of the overall proceeds—a portion of which the qui tam plaintiff is also entitled to. Id.

After determining that a basis exists for a proper award of attorney fees, the Court must calculate a reasonable fee award. Hensley v. Eckerhart , 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40, (1983). Generally, the Court utilizes the "lodestar figure," which multiplies the number of hours reasonably expended on the litigation by a reasonable hourly rate. Id. The Court can then adjust the lodestar figure if necessary, based upon the factors set forth in Kerr v. Screen Extras Guild, Inc. , 526 F.2d 67 (9th Cir. 1975), that have not been subsumed in the lodestar calculation. See Camacho v. Bridgeport Fin., Inc. , 523 F.3d 973, 982 (9th Cir. 2008).

IV. ANALYSIS

The Ninth Circuit has succinctly described the structure of an FCA case as follows:

Under the False Claims Act, any person who defrauds the United States Government is liable for civil penalties. 31 U.S.C. § 3729 (1994). Although the FCA requires the Attorney General to investigate possible violations, id. § 3730(a), the FCA also permits civil qui tam actions by private persons, known as relators, id. § 3730(b). In a qui tam action, the relator sues on behalf of the government as well as himself. If the relator prevails, he receives a percentage of the recovery, with the remainder being paid to the government.

U.S. ex rel. Biddle v. Bd. of Trustees of Leland Stanford, Jr. Univ. , 161 F.3d 533, 535 (9th Cir. 1998). "Two of the primary purposes of the FCA are to alert the government as early as possible to fraud that is being committed against it and to encourage insiders to come forward with such information where they would otherwise have little incentive to do so." Id. at 538. After a qui tam action has been filed, the government may elect to "(1) intervene in such an action and take over its prosecution, 31 U.S.C. § 3730(b)(2) ; (2) ‘pursue its claim through any alternate remedy available to the Government,’ instead, id. § 3730(c)(5) ; or (3) decide not to take any action, allowing the private individual, ... to pursue the claim to completion, id. § 3730(c)(3)." United States v. Sprint Commc'ns, Inc. , 855 F.3d 985, 988 (9th Cir. 2017). If the government proceeds with an action, the qui tam plaintiff is entitled to a share of the proceeds and his fees and costs. 31 U.S.C. § 3730(d)(1).

In this case, the government elected to intervene. Subsequently, the parties agreed to a settlement that encompassed both the Idaho action and the Utah action.

This outcome—as outlined in the FCA—mandates that Plaintiffs receive a share of the proceeds as well as their reasonable costs and attorney fees.

Here, Defendants raise three arguments in opposition to Plaintiffs' request for attorney fees. First, Defendants claim that because this case was not filed first, Plaintiffs are barred from recovering their fees and costs. Second, Defendants claim that Plaintiffs requested fees are excessive or improper. Third, Defendants assert that the Court should apply any award as an offset to monies owing, rather than a direct payment to either Plaintiffs or Plaintiffs' Counsel. The Court will address each argument in turn.

A. First to file

Defendants claim that the instant action is a subsequent action and therefore, Plaintiffs cannot recover their attorney fees. While Defendants cite to a correct legal principle in FCA actions,³ this argument is misplaced for three reasons.

First, there is no indication that Plaintiffs knew about the Utah action. While the Utah case was filed on December 16, 2011—almost five years before this case (Dkt. 24-3, at 3)—it was not unsealed until October 6, 2017—approximately 11 months after this case was filed (Id. at 7). Plaintiffs' Counsel testified that they were wholly unaware of the Utah action until it was unsealed and brought to their attention. Dkt. 24-2, at 3. Additionally, the fact that both complaints allege similar behavior—which, according to Defendants, is an indication of a copycat suit—does not indicate that these actions were filed as a coordinated effort. Big-D points to seven lines that are similar between the two suits, but any similarities are more likely due to the fact that Big-D was engaging in similar behavior that resulted in multiple lawsuits. In support of this idea is the fact that the Big-D Settlement Agreement outlines ten separate federal contracts wherein Defendants were in violation of the FCA. In short, the Idaho suit is not a copycat suit and there is no indication that Plaintiffs filed it in an effort to piggyback off of the Utah action.

Second, it is not entirely clear that this provision would even apply under the posture of the two cases. The FCA prevents the litigation of subsequent cases. Here both cases were part of a global settlement agreement and raising this defense now seems late at best. There is no "subsequent lawsuit" to prevent.

Finally, claiming now that this suit is barred—and subsequently that any request for attorney fees is likewise barred—contradicts contracts already in place. The Big-D Settlement Agreement specifically preserved the Relators' right and claim to attorneys' fees from the Big-D defendants. The Relator Settlement Agreement also specifically outlines that Plaintiffs are entitled to attorney fees and costs.⁴ Defendants cannot absolve themselves of their responsibility now. The Court finds Defendants' first to file argument meritless.

B. Type of fees

Second, most attorney fees issues the Court sees are where one party objects to an attorney's hourly rate. Here, Defendants do not contest the hourly rates of Plaintiffs' attorneys, but rather claim that some of the fees requested are not related to this action, but to another lawsuit between the parties.

Although Defendants do not object, the Court will state that it is very familiar with rates charged in Eastern Idaho for legal services and Mr. Hahn's and Mr. Bailey's requested rates—as well as those for their paralegals—are appropriate for attorneys in the area with their level of experience. See also , Dkt 15-2 (Declaration of Deanne Casperson attesting to the skills and qualifications of each attorney and that the rate of $300.00 per hour is reasonable and consistent with local market rates for comparable work).

Defendants' main contention in response to Plaintiffs' fee request is that Plaintiffs' have improperly included over $25,000 in fees not related to the instant lawsuit. Defendants claim that it "ap...