United States of America et al v. Claris Vision, LLC et al

UNITED STATES DISTRICT COURT
DISTRICT OF RHODE ISLAND
UNITED STATES OF AMERICA, 	:
THE STATE OF RHODE ISLAND and 	:
THE COMMONWEALTH OF 	:
MASSACHUSETTS ex rel. MICHELE 	:
BISBANO and STEFANIE PAOLINO 	:
:
v. 	: 	C.A. No. 18-00176-MSM
:
CLARIS VISION, LLC, et al. 	:
REPORT AND RECOMMENDATION
Lincoln D. Almond, United States Magistrate Judge
Pending before me for report and recommendation1 is the Relators’ Motion for Award
of Reasonable Expenses, Attorneys’ Fees and Costs. 	(ECF No. 29). 	Defendant Dr. Paul S.
Koch filed an Amended Objection. (ECF No. 47). The Relators filed a Reply. (ECF No. 52).
Background
In 2018, Relators Michele Bisbano and Stefanie Paolino filed this qui tam action
pursuant to the federal False Claims Act (“FCA”), 31 U.S.C. § 3730(b), against certain
Defendants, including Dr. Koch and his practice, Koch Eye Associates, LLP a/k/a Claris Vision,
LLC. 	The Relators alleged that Defendants engaged in fraudulent business practices, i.e.,
referral kickbacks, resulting in the submission of false claims for eye surgeries and related
services to Medicare, Medicaid, and other federally funded health care programs. The Relators
1 	Although District Judge Mary S. McElroy referred this Motion to me for determination, Rule 54(d)(2)(D)
provides for referral of a motion for attorneys’ fees under Rule 72(b) as if it were a dispositive pretrial motion,
and, thus, I will issue a report and recommendation on the Motion in accordance with Rule 72(b) and 28 U.S.C. §
636(b)(1)(B).
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also alleged that they were the victims of whistleblower retaliation in violation of the FCA that
ultimately resulted in the termination of their respective employment by Claris Vision.
Following a federal investigation into the Relators’ allegations, a settlement was reached
on or about March 30, 2023 between the United States, Relators, and Dr. Koch. Pursuant to the
settlement, Dr. Koch agreed to pay $1,166,072.00 in settlement to the United States, and the
United States agreed to pay Relators $256,535.84 (a 22% share) out of such settlement
proceeds.
On March 31, 2023, the United States filed a Notice of Election to Intervene, in part,
for the purpose of effectuating the settlement. (ECF Nos. 18, 19). Pursuant to this Notice, a
Stipulation of Partial Dismissal among the United States, Relators, and Dr. Koch was filed and
entered by the Court. 	(ECF No. 20). 	The Stipulation expressly excepts dismissal of the
Relators’ claims for attorneys’ fees against Dr. Koch pursuant to 31 U.S.C. § 3730(d) and certain
individual claims brought against Dr. Koch. Id.
The March 30, 2023 Settlement Agreement contains a non-admission clause in which
Dr. Koch denies liability and disputes the Relators’ entitlement to attorneys’ fees. 	(ECF No.
32-1 at p. 8). The Relators filed the instant Motion for attorneys’ fees on June 30, 2023. (ECF
No. 29). On July 25, 2023, the Relators filed a Voluntary Dismissal without prejudice (pursuant
to Fed. R. Civ. P. 41(a)(1)) of their remaining FCA whistleblower retaliation claims as to Dr.
Koch but again expressly reserving their pending claim against Dr. Koch for attorneys’ fees
pursuant to 31 U.S.C. § 3720(d). (ECF No. 31).
Discussion
The Relators argue that they have an absolute statutory entitlement to an award of fees
in this case pursuant to 31 U.S.C. § 3730(d)(1) and that nothing in the Settlement Agreement
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or the circumstances here disturbs that legal entitlement. Dr. Koch counters that the Relators
are not legally entitled to an award of fees because (1) he expressly “denied and contested” such
entitlement in the Settlement Agreement; and (2) they settled and did not “prevail on any of
their claims against [him].” 	(ECF No. 47 at p. 1). 	As briefly discussed below, both legal
arguments are meritless.
First, Dr. Koch overplays the import of the non-admission and reservation of rights
language in the Settlement Agreement. There is nothing in that language that could reasonably
be interpreted as a waiver of the Relators’ entitlement to fees. 	In fact, to the contrary, the
Settlement Agreement carves the issue of attorneys’ fees out of the release provision (paragraph
8) and indicates (paragraph 3) that the Relators and Dr. Koch “will determine whether they will
be able to enter into a separate agreement with respect to Dr. Koch’s payment to Relators for
expenses, attorneys’ fees, and costs.” 	(ECF No. 47-1 at pp. 8, 10). 	More to the point, the
Settlement Agreement makes clear (paragraph 18) that:
As 	a 	condition 	for 	Relators’ 	agreement 	herein, 	including
dismissal of Relators’ claims with prejudice, Dr. Koch agrees that
Relators and their attorneys are entitled to reasonable expenses,
attorneys’ fees and costs pursuant to 31 U.S.C. § 3730(d) and
(d)(2); provided, however, Dr. Koch expressly reserves the right
to challenge the amounts and reasonableness of Relators’ claims
for attorneys’ fees, expenses, and costs, and the application of
such 	claimed 	attorneys’ fees, 	expenses 	and 	costs 	to 	him
individually. Relators and Dr. Koch agree that the United States
District Court shall have continuing jurisdiction to issue orders
with regard to any disputes over the amounts for expenses,
attorneys’ fees and costs. 	Relators and Dr. Koch further agree
that, should the parties be unable to reach an agreement on
amounts, Relators may file a motion for attorneys’ fees, costs and
expenses in the District Court within 60 days of the date of
dismissal seeking a determination by the Court.
(ECF No. 47-1 at pp. 14-15) (emphasis added).
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Second, Dr. Koch’s argument is directly at odds with the pertinent FCA language and
existing case precedent. The Relators move for an award of fees pursuant to the FCA, 31 U.S.C.
§ 3730(d)(1), which provides as follows:
If the Government proceeds with an action brought by a person
under subsection (b), such person shall, subject to the second
sentence of this paragraph, receive at least 15 percent but not
more than 25 percent of the proceeds of the action or settlement
of the claim, depending upon the extent to which the person
substantially contributed to the prosecution of the action….Any
payment to a person under the first or second sentence of this
paragraph shall be made from the proceeds. 	Any such person
shall also receive an amount for reasonable expenses which the
court finds to have been necessarily incurred, plus reasonable
attorneys’ fees and costs. All such expenses, fees, and costs shall
be awarded against the defendant.
31 U.S.C. §3730(d)(1) (emphasis added).
Here, the Relators check all the boxes to establish legal entitlement to a fee award. The
Relators initially commenced this action pursuant to 31 U.S.C. § 3730(b), and the Government
later proceeded with the action and intervened to effectuate an FCA settlement. The Relators
also received a payment between 15% and 25% (here, 22%) of the proceeds of the action “or
settlement of the claim.” Having met those preconditions, the FCA provides that the Relators
“shall also receive an amount for reasonable expenses” including attorneys’ fees which “shall
be awarded against the defendant.” In other words, the payment of reasonable fees is mandatory
where the Relators recover a relators’ share of proceeds including proceeds from a settlement.
United States ex rel. Lowell v. AthenaHealth, Inc., 56 F.4th 152, 158 (1st Cir. 2022).
Dr. Koch argues that the Relators are not entitled to a fee because they are not
“prevailing parties.” Dr. Koch concedes that “a relator will be considered a prevailing party if
the government has intervened in the action, the action has settled and the relator is paid a share
of the settlement proceeds.” (ECF No. 47 at p. 9). However, he claims that this case does not
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fit that mold “based on the language of the Settlement Agreement” which gives him the “right
to argue that he owes no fees to Relators and that they must show that they are a traditional
‘prevailing party.’” 	Id. 	As previously noted, Dr. Koch overplays his hand regarding the
Settlement Agreement language. While he may have reserved the right to argue certain points
regarding entitlement to fees, the language does not grant validity to those arguments or lead to
the unsupported conclusion that the Agreement somehow requires the Relators to show
“traditional prevailing party” status. 	Dr. Koch’s arguments are unsupported by both the
Agreement and the FCA. 	United States ex rel. Averback v. Paster Med. Assocs. P.C., 224
F.Supp.2d 342, (D. Mass. 2002) (describing the award of fees per 31 U.S.C. § 3730(d)(1) as
“mandatory” in a case resolved in a settlement whereby defendants “admitted no wrongdoing”).
Further, the pertinent provision of the FCA, 31 U.S.C. § 3730(d)(1), is notable for its mandatory
“shall” language, as well as the absence of the word “prevailing” and the presence of the word
“settlement.”
Finally, from a big picture standpoint, “[t]he FCA affords the government broad
authority and contemplates that the government will serve a gatekeeping function…[which]
puts [it] in the driver’s seat and accords with the FCA’s goal of achieving a [balance] between
providing sufficient incentives to qui tam plaintiffs and discouraging opportunism.” 56 F.4th at
158-159. After it decides to intervene, the FCA gives the government the option of settlement
even over a relator’s objection (31 U.S.C. § 3130(c)(2)(B)) and accordingly it extends a relator’s
statutory entitlement to fees to a settled action (31 U.S.C. § 3130(d)(1)). 	Also, since it is
axiomatic that litigation settlements are negotiated compromises in which there is no admission
of liability, it would be directly contrary to the legislative intent underlying the FCA to interpret
the words “settlement of the claim” under 31 U.S.C. § 3130(d)(1) to be inapplicable to non-
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admission settlements as argued by Dr. Koch. The Relators here have clearly shown that they
are legally entitled to an award of reasonable fees and expenses under these circumstances.
Dr. 	Koch 	also 	challenges 	the 	Relators’ fee 	request 	as 	“grossly 	excessive 	and
unreasonable” in terms of time billed and hourly rates requested. Having made a substantive
recommendation to Judge McElroy (subject to potential objection) that the Relators are legally
entitled to a reasonable fee award under 31 U.S.C. § 3730(d)(1), the Court exercises its case
management discretion to effectively bifurcate the issues presented by the Relators’ instant
Motion and defer a recommendation to Judge McElroy on the reasonableness of the requested
time and rates for reasons of judicial economy until after she considers and acts on this
Recommendation. 	If this Recommendation is adopted, the Court will review the pending
arguments as to reasonableness and issue a report and recommendation in due course.2 If this
Recommendation is not adopted, there would be no need for the Court to review and opine on
such arguments.
Conclusion
For the foregoing reasons, I recommend that the Relators’ Motion for Award of
Reasonable Expenses, Attorneys’ Fees and Costs (ECF No. 29) be GRANTED, in part, solely
as to the legal determination that they are entitled to an award for reasonable expenses,
attorneys’ fees, and costs against Dr. Koch pursuant to 31 U.S.C. § 3730(d)(1). As stated herein,
the issue of reasonableness is deferred and will be the subject of a subsequent report and
recommendation, if necessary, after this Recommendation is acted upon by Judge McElroy.
2 	During this review period, the parties are strongly encouraged to recommence their prior efforts at settling
this fee dispute. If appropriate, the parties may request that the Court stay such review pending those settlement
efforts.
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Any objections to this Report and Recommendation must be specific and must be served
and filed with the Clerk of the Court within fourteen days of service of this Report and
Recommendation. See Fed. R. Civ. P. 72(b); DRI LR Cv 72. Failure to file specific objections
in a timely manner constitutes waiver of the right to review by the District Court and the right
to appeal the District Court’s decision. See Brenner v. Williams-Sonoma, Inc., 867 F.3d 294,
297 n.7 (1 st Cir. 2017); Santos-Santos v. Torres-Centeno, 842 F.3d 163, 168 (1st Cir. 2016).
/s/ Lincoln D. Almond
LINCOLN D. ALMOND
United States Magistrate Judge
January 16, 2024
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