United States v. Fresenius Med. Care Holdings

1

UNITED STATES OF AMERICA, ex rel. CHRISTOPHER DRENNEN, Relator, v. FRESENIUS MEDICAL CARE HOLDINGS, INC., d/b/a FRESENIUS MEDICAL CARE NORTH AMERICA, Defendant.

Civil Action No. 09-10179-GAO

United States District Court, D. Massachusetts

May 28, 2024

OPINION AND ORDER

GEORGE A. O'TOOLE, JR. UNITED STATES DISTRICT JUDGE.

This dispute over attorneys' fees and costs arises from the settlement of a qui tam action brought against the defendant Fresenius Medical Care Holdings, Inc. pursuant to the False Claims Act (the “FCA”), 37 U.S.C. § 3729 et seq. The action was filed by the relator, Christopher Drennen, in 2009, alleging that Fresenius had billed the federal government for certain laboratory tests that were not reasonable or medically necessary under applicable guidelines. After receiving several extensions of time to decide whether to intervene, the government declined to intervene. The complaint was unsealed in February 2011, and later amended the following July in response to Fresenius's motion to dismiss, which was denied.

In 2015, more than six and a half years after Relator Drennen filed his original complaint and after the completion of fact discovery, the government successfully moved to intervene with respect to allegations that Fresenius filed false claims with Medicare for medically unnecessary hepatitis B surface antigen tests. It did not intervene with respect to other fraudulent billing theories related to tests for hepatitis B surface antibody and ferritin.

In 2019, after extensive negotiations the parties executed settlement agreements. Under the settlement, Fresenius agreed to pay the government $5,200,000 and the government agreed to pay Relator $1,430,000, plus a 27.5% share of the accrued interest on the government's recovery. The settlement between Fresenius and the government was only with respect to the FCA claims based on fraudulent billing of antigen testing. The other two claims based on hepatitis B surface antibody testing and ferritin testing were expressly excluded as non-intervened conduct. The government's settlement with Relator was a global settlement except that it reserved any claim for attorneys' fees.

Relator subsequently filed his motion for attorneys' fees and costs, which Fresenius has opposed for numerous reasons including the attorneys' hourly rates, problematic aspects of the attorneys' billing practices, and the limited nature of Relator's success.^[1]

I. Fee Request

Typically, “each litigant pays his own attorneys' fees, win or lose, unless a statute or contract provides otherwise.” In re Volkswagen & Audi Warranty Extension Litig., 692 F.3d 4, 13 (1st Cir. 2012). The FCA is one such statute that provides otherwise. In relevant part, § 3730(d) makes mandatory the granting the relator “reasonable” attorneys' fees, expenses, and costs from the defendant in some circumstances.

To calculate reasonable attorneys' fees, district courts generally start with the “lodestar” method, the “method of choice for calculating fee awards.” Perez-Sosa v. Garland, 22 F.4th 312, 321 (1st Cir. 2022); accord Hutchinson ex rel. Julien v. Patrick, 636 F.3d 1, 13 (1st Cir. 2011). In general, the lodestar is the product of the number of hours reasonably worked and a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983); Gay Officers Action League v. Puerto Rico, 247 F.3d 288, 295 (1st Cir. 2001) (“GOAL”). To determine the lodestar amount, a court first must “calculate the number of hours reasonably expended by the attorneys for the prevailing party, excluding those hours that are ‘excessive, redundant, or otherwise unnecessary.'” Perez-Sosa, 22 F.4th at 321 (quoting Cent. Pension Fund of the Int'l Union of Operating Eng'rs & Participating Emplr. V. Ray Haluch Gravel Co., 745 F.3d 1, 5 (1st Cir. 2014)). The court may further discount the total hours if the time claimed is inadequately documented, Hensley, 461 U.S. at 433, including when available records are “too generic . . . to permit a court to answer questions about excessiveness, redundancy, and the like,” Torres-Rivera v. O'Neill-Cancel, 524 F.3d 331, 336 (1st Cir. 2008). After the number of reasonable hours is determined, the court then “must identify a reasonable hourly rate or rates-a determination that is often benchmarked to the prevailing rates in the community for lawyers of like qualifications, experience, and competence.” Perez-Sosa, 22 F.4th at 321 (quotations omitted). The court may then conduct a “final corrective gesture,” electing to “adjust the lodestar amount, either upward or downward, if the specific circumstances warrant such an adjustment.” Id.

The party seeking an award has the burden of producing materials that support the request. Hensley, 461 U.S. at 437. “Attorneys' time records, submitted in support of fee requests, often contain questionable entries, and the district court's discretion in separating wheat from chaff is quite broad.” Torres-Rivera, 524 F.3d at 340. And while the lodestar method includes arithmetical calculations, the court's “task in fashioning a reasonable fee . . . ‘is to do rough justice, not to achieve auditing perfection.'” Perez-Sosa, 22 F.4th at 321-22 (quoting Fox v. Vice, 563 U.S. 826, 838 (2011)). District judges “need not, and indeed should not, become green-eyeshade accountants,” and “may take into account their overall sense of a suit, and may use estimates in calculating and allocating an attorney's time.” Id. (quoting Fox, 563 U.S. at 838).

Here, Relator requests the court to award $10,824,456 in merits fees and $724,272 in expenses and costs, in addition to fees for work expended on the fee-related proceedings and subsequent submissions.^[2]

II. Hourly Rates

“[H]ourly rates ‘are to be calculated according to the prevailing market rates in the relevant community.'” Guckenberger v. B.U., 8 F.Supp.2d 91, 105 (D. Mass. 1998) (quoting Blum v. Stenson, 465 U.S. 886, 895 (1984)). The First Circuit places the “burden on a party requesting attorneys' fees to establish-by evidence other than [their] own attorneys' affidavits-the prevailing hourly rate in the community for comparable legal services.” Bordanaro v. McLeod, 871 F.2d 1151, 1168 (1st Cir. 1989). Reasonable hourly rates are established “by reference to rates in the court's vicinage rather than in the lawyer's region of origin.” GOAL, 247 F.3d at 296 (citing Adcock-Ladd v. Sec'y of Treasury, 227 F.3d 343, 350 (6th Cir. 2000)).

Here, Relator has requested application of hourly rates ranging from $825 per billable hour to $1,140 per billable hour. To be sure, on review of the Relator's several counsels' qualifications and achievements, counsel here performed ably. They collectively pursued the case through discovery on their own and marshalled a strong enough case to persuade the government to intervene. Counsel are also well qualified, and possess expertise in the field of qui tam actions, a complex area of the law often requiring specialized knowledge.

That said, however, Relator's fees requests do not establish that their requested hourly rates are the prevailing market rates in Boston for similar services of comparable lawyers. See Blum, 465 U.S. at 895 n.11. First, there is reason to conclude that the attorneys contend that because they work on a contingency basis, the hourly rates they have proposed essentially are devised by taking an already high proposed hourly fee and then more or less adding an apparently arbitrary “premium” because of their specialized knowledge of such cases, the lead roles of at least some of the lawyers, and, significantly, the risks inherent in pursuing a FCA case. Second, the rates claimed are not reliably supported in the Boston legal market. Fees counsel borrows rates by reference to partner rates at large corporate defense law firms, fees which do not establish the norm and have even been rejected by other district judges. See, e.g., Patel v. 7-Eleven, Inc., No. CV 17-11414-NMG, 2020 WL 7626592, at *4-5 (D. Mass. Dec. 10, 2020).

Following the collective guidance or many prior cases, the Court adopts “base rates” described by fees counsel before any additional claimed premiums. Based upon the parties' submissions and relevant authority, those rates are broadly within the range of fair and reasonable hourly professional rates for counsel's work, experience, and diligence in this long running case, especially where much of the work was conducted long ago when rates would have been less. The originally proposed rates are not unreasonable. The claimed base rate for Durrell/Thomas, Worel, and Thronson, who graduated from law school within a few years of one another and have considerable legal experience, is $950 per hour. The claimed base rate for Johnson and Lamberth, who similarly graduated from law school within a few years of each other, is $750. Such rates, as described by fees counsel, are “well within the rates charged by similarly skilled attorneys in Boston to work on a non-contingent hourly basis.”^[3] (Decl. of Jeremy L. Friedman in Supp. of Mot. for an Award of Expenses, Att'y's Fees, and Costs ¶ 30 (dkt. no. 345).) Additionally, for the other Parsons Behle & Latimer attorneys involved in the case, I assign a blended hourly rate of $350 as reasonable. See Riley v. Mass. Dep't of State Police, No. 15-14137, 2019 WL 4973956, at *2 (D. Mass. Oct. 8, 2019). The paralegal rate is assigned a reasonable rate of $150 per hour. See id.; Boadi v. Ctr. For Hum. Dev., Inc., 14-CV-30162-KAR, 2017 WL 5178791, at *3 (D. Mass. Nov. 8, 2017).

III. Reasonableness of Expended Hours

Relator claims over 11,630 hours for work performed by counsel and staff during the course of the litigation. While much of the work identified in the brief appears reasonably necessary to further the...