United States v. Donovan

UNITED STATES OF AMERICAand NEW YORK STATE, ex rel. Irina Gelman, DPM, Plaintiffs, v. GLENN J. DONOVAN, DPM, NEW YORK CITY HEALTH and HOSPITALS CORPORATIONand PHYSICIAN AFFILIATE GROUP OF NEW YORK, P.C., Defendants.

12-CV-5142-RJD-SJB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

September 17, 2020

REPORT AND RECOMMENDATION

BULSARA, United States Magistrate Judge:

The parties have jointly filed a motion for approval of their settlement agreement (the "Settlement Agreement") in this federal False Claims Act ("FCA") and New York False Claims Act ("NY FCA") qui tam action filed by Irina Gelman ("Gelman" or "Relator"), a former podiatry resident at Coney Island Hospital, on behalf of the United States and the State of New York (collectively, the "Government"), against Defendants Glenn J. Donovan, DPM ("Donovan"), the New York City Health and Hospitals Corporation ("NYC HHC"), and the Physician Affiliate Group of New York, P.C. ("PAGNY") (collectively, "Defendants"). (Mot. for Settlement Approval dated June 29, 2020, Dkt. No. 122; Settlement Agreement and Order dated June 26, 2020 ("Settlement Agreement"), Dkt. No. 123; Parties' Joint Mem. in Supp. of Mot. of Settlement Agreement dated July 16, 2020 ("Mem."), Dkt. No. 124). The Amended Complaint alleges Defendants falsified patient records and program-accreditation papers to hide the fact that residents were not supervised while servicing hospital patients and some residents lacked licenses.¹

The Settlement Agreement, effective on the date it is approved by the Court, is entered into by Donovan, NYC HHC, and Gelman to resolve all allegations in the Amended Complaint. (Settlement Agreement at 1, 4, 10-11). Per the Settlement Agreement, Gelman agrees to dismiss PAGNY from the case with prejudice, and PAGNY is not a party to the Settlement Agreement. (Id. ¶ C).

The Honorable Raymond J. Dearie referred the motion for settlement approval to the undersigned for a report and recommendation. (Mot. Referred dated June 29, 2020).

The parties failed to submit a memorandum of law with their first motion for approval. The Court directed them to do so. (Order dated July 7, 2020 ("The parties filed a motion for settlement approval. The motion only contains the agreement between parties, but no legal memorandum demonstrating that the agreement is consistent with 31 U.S.C. § 3730. The parties shall submit a memorandum . . . by 7/21/2020. So Ordered by Magistrate Judge Sanket J. Bulsara on 7/7/2020.") (citations omitted)). On July 23, 2020, the Court denied the motion for approval without prejudice to renewal because the parties "failed to provide evidence that (1) Relator Gelman's settlement recovery is reasonable and within the statutorily required ranges and (2) the amounts to be paid by Defendants for expenses are reasonable and were necessarily incurred and for attorney's fees and costs are reasonable." United States exrel. Gelman v. Donovan (Gelman II), No. 12-CV-5142, 2020 WL 4251363, at *1 (E.D.N.Y. July 23, 2020). The Court permitted the parties to resubmit the Settlement Agreement for approval if they supported a renewed submission with arguments in a memorandum of law and declarations to support a conclusion "that Gelman's recovery of settlement proceeds is between 25 and 30 percent of the federal FCA portion of the settlement pursuant to 31 U.S.C. § 3730(d)(2), and between 25 and 30 percent of the NY FCA portion of the settlement pursuant to N.Y. State Fin. Law § 190(6)(b), a range of $312,500.00 and $375,000.00 when considering the entire settlement amount," and that "expenses are reasonable and were necessarily incurred and such fees and costs are reasonable pursuant to 31 U.S.C. § 3730(d)(2) and N.Y. State Fin. Law § 190(6)(b)." Gelman II, 2020 WL 4251363, at *4.

On August 4, 2020, Relator Gelman filed both a memorandum of law and a declaration from her counsel addressing the issues identified by the Court. (See Relator's Suppl. Mem. of Law in Further Supp. of Settlement Agreement dated Aug. 4, 2020 ("Suppl. Mem."), Dkt. No. 126; Decl. of Kevin P. Mulry in Supp. of Settlement Agreement dated Aug. 4, 2020 ("Mulry Decl."), Dkt. No. 127). The additional submission includes three agreements that were not previously provided and which operate in conjunction with the Settlement Agreement: (1) an agreement between Gelman and the United States for the payment of Relator's share pursuant to the portion of the settlement to be paid to the United States, (Agreement Regarding Payment of Relator's Share Between Relator Irina Gelman, DPM, and the United States dated June 5, 2020 ("Federal Recovery Agreement"), attached as Ex. B to the Mulry Decl., Dkt. No. 127); (2) an agreement between Gelman and the State of New York for Relator's share from the New York portion of the settlement, (Agreement Regarding Payment ofRelator's Share Between Relator Irina Gelman, DPM and the State of New York dated July 7, 2020 ("State Recovery Agreement"), attached as Ex. C to the Mulry Decl., Dkt. No. 127); and (3) an agreement whereby NYC HHC and Donovan agree to pay certain fees, costs, and expenses to Gelman, (Agreement Regarding Payment of Attorneys' Fees, Expenses, and Other Legal Costs dated June 26, 2020 ("Attorneys' Fees and Costs Agreement"), attached as Ex. D to the Mulry Decl., Dkt. No. 127). Defendants NYC HHC, PAGNY, and Donovon filed a letter stating they did not object to Plaintiffs' submissions. (See Defs.' Letter dated Aug. 6, 2020, Dkt. No. 128 at 1). And "[t]he attorneys for the United States and New York State were provided with the Attorneys' Fees and Costs Agreement and advised that they had no objection to the attorneys' fees and costs being paid." (Mulry Decl. ¶ 30).

For the reasons stated below, and in light of the supplemental submissions, the Court respectfully recommends that the settlement agreement be approved.

DISCUSSION

The FCA permits a private person to bring a qui tam action on behalf of the United States. 31 U.S.C. § 3730(b)(1). The statute "unambiguously states that a qui tam action 'may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.'" Mei Xing Yu v. Hasaki Rest., Inc., 944 F.3d 395, 401 (2d Cir. 2019) (quoting § 3730(b)(1)). The FCA is one of the "substantive statutes that specifically require[s] the district court's consent before cases involving those statutory causes of action may be settled." Id. "[T]his provision 'applies only in cases where a plaintiff seeks voluntary dismissal of a claim or action brought under the False Claims Act, and not where the court orders dismissal.'" Chailla v. Navient Dep't of Educ., 791 F. App'x 226, 229 (2d Cir. 2019) (quoting Minotti v.Lensink, 895 F.2d 100, 103 (2d Cir. 1990) (per curiam)), cert. denied, 140 S. Ct. 2527 (2020); e.g., United States ex rel. Mergent Servs. v. Flaherty, 540 F.3d 89, 91 (2d Cir. 2008) ("Because the dismissal in this case came not as a result of a settlement, the district court did not err by neglecting to secure the Attorney General's consent." (citing Minotti, 895 F.2d at 104)).

"To incentivize private persons to uncover, report, and prosecute FCA claims for the benefit of the United States, the FCA provides that if a qui tam action is successful, the relator will generally be entitled to receive a portion of the amount recovered from the defendants." United States v. L-3 Commc'ns EOTech, Inc., 921 F.3d 11, 14 (2d Cir. 2019) (citations omitted). A successful relator is entitled to "receive an amount which the court decides is reasonable for collecting the civil penalty and damages," which "shall be not less than 25 percent and not more than 30 percent of the proceeds of the . . . settlement and shall be paid out of such proceeds." 31 U.S.C. § 3730(d)(2). The relator is entitled to a higher minimum percentage than a case where the government decides to intervene. Compare id., with § 3730(d)(1) (setting relator's recovery at a minimum of 15, but no more than 25, percent when the government intervenes); see United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., 741 F.3d 390, 398 n.7 (4th Cir. 2013) ("The government's decisions as to intervention bear not only on who conducts the litigation in the respective matters, but also the eventual award, if any, to the relator."). "These sections indicate that the district court plays an important role in allocating the proceeds of a settlement by determining the amount to be received by the qui tam plaintiff within the overall limitation of no more than 30% of those proceeds[.]" United States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715, 724 (9th Cir. 1994). In either case, the relator is also entitled to "receive an amount for reasonable expenseswhich the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs," to be "awarded against the defendant." 31 U.S.C. § 3730(d)(1)-(2).

The NY FCA includes virtually identical provisions. See N.Y. State Fin. Law § 190(6)(b) ("If the attorney general or a local government does not elect to intervene or convert the action, and the action is successful, then the person or persons who initiated the qui tam action which obtains proceeds shall be entitled to receive between twenty-five and thirty percent of the proceeds recovered in the action or settlement of the action. . . . Such person shall also receive an amount for reasonable expenses that the court finds to have been necessarily incurred, reasonable attorneys' fees, and costs . . . . All such expenses, fees, and costs shall be awarded against the defendant."). "Additionally, because '[t]he NYFCA follows the federal False Claims Act,' New York courts 'look toward federal law when interpreting the New York act.'" Dhaliwal v. Salix Pharms., Ltd., 752 F. App'x 99, 100 (2d Cir. 2019) (alteration in original) (quoting State ex rel. Seiden v. Utica First Ins. Co., 96 A.D.3d 67, 71 (1st Dep't 2012)).

Thus, to grant approval of...