Settling False Claims Act Cases Involves More than Just Cutting a Check to DOJ

In late March 2023, Dr. Paul Koch, the former owner of a chain of Rhode Island ophthalmology practices, agreed to pay $1.1 million to the U.S. Attorney’s Office to settle false claims act allegations.  This case arose from a qui tam complaint brought by two whistleblowers alleging that over a five-year period, Koch paid kickbacks to optometrists to induce referrals for patients for cataract surgeries.  Notably, the settlement included a non-admission clause by Dr. Koch, denying liability and disputing the relators’ entitlement to attorneys’ fees, and the court entered a Stipulation of Partial Dismissal and Consent to Dismissal on Behalf of the United States shortly thereafter.

However, the relators then filed a motion for attorneys’ fees and costs which kicked off a series of motions, additional discovery, a referral to a magistrate judge, and a number of hearings and oral arguments.  After an additional year of litigation, the court partially granted relators’ motion for attorney’s fees and costs, ultimately awarding over $400,000 to relators over Dr. Koch’s objections.  The court applied the “lodestar” approach to determine a reasonable amount for fees, considering the hourly rates and the number of hours reasonably expended on the litigation.

This decision demonstrates the court’s discretion in awarding attorneys’ fees in qui tam actions brought under the False Claims Act.  Perhaps more importantly, it also underscores the reality that an FCA defendant’s exposure is never simply limited to the settlement payment; rather, defendants must be informed that they are also responsible for reasonable attorney’s fees and those fees must be factored into the price of resolution even where, as here, the fees are as large as 34% of the settlement amount.