Recently, a federal judge in Manhattan ordered a Relator To Pay Defense Attorney’s Fees in an FCA case. The case is United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., 2014 U.S. Dist. LEXIS 166493 (S.D.N.Y. Dec. 1, 2014).
What is noteworthy in Fox Rx is that after the government declined to join the case and before the relator amended the complaint, defense counsel made a power point presentation to relator’s attorney showing why the defendant could not possibly be liable under the FCA. Notwithstanding that showing, relator’s attorney went ahead and amended the complaint and then continued to proceed against the defendant. The amended complaint was subsequently dismissed by the judge. Thereafter, the defendant made an attorney fee application under 31 U.S.C. § 3730(d)(4) and the application was granted. The judge concluded that relator’s litigation conduct became “objectively unreasonable” after the defense counsel power point presentation.
Practice tip: Relators and relators counsel should anticipate that it will become increasingly more common for defense lawyers to propose meeting with them following government declinations in order to talk relators out of going forward on a non-intervened basis, presumably using a power point presentation that could well feature as Ex. A in a subsequent motion for attorney’s fees if the case is later dismissed. Such invitations will have to be thoughtfully considered. Relator’s counsel will have to balance the benefit of receiving information from defense counsel against the risk that relators may face an increased risk of liability for defense attorney’s fees under Section 3730(d)(4).
One way to balance these considerations is to make such a meeting conditioned on the parties signing an agreement that covers what the fact of the meeting and the information exchanged thereat can be used or not used for. The agreement should also require the defendants to agree to “open file discovery” on any factual assertions they make and allow relators access to such evidence before formulating a response to the defendant’s request that the relator voluntarily dismiss the lawsuit.
