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United States ex rel. Jacobs v. CDS, P.A.

United States District Court, D. Idaho

June 7, 2018

CDS, P.A. d/b/a POCATELLO WOMEN'S HEALTH CLINIC; POCATELLO HOSPITAL, LLC, d/b/a PORTNEUF MEDICAL CENTER, LLC, a Delaware limited liability company; LHP POCATELLO, LLC, a Delaware limited liability company, Defendants.


          B. Lynn Winmill Chief U.S. District Court Judge.


         Before the Court is Plaintiff-Relator Dr. Jeffrey Jacobs' Motion for Reasonable Attorneys' Fees and Costs (Dkt. 65). For the reasons explained below, the Court will deny the motion without prejudice for lack of standing.


         In July 2014, Dr. Jeffrey Jacobs filed this action on behalf of the United States pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3724 et. seq. Jacobs alleged that the Pocatello Women's Health Clinic and the Portneuf Medical Center submitted patient claims to the Medicare and Medicaid programs, falsely certifying that such claims were in compliance with the Stark Act, 42 U.S.C. § 1395nn and the Anti-Kickback Act, 42 U.S.C. § 1320a-7b. According to Dr. Jacobs, the Medical Center and the Women's Health Clinic engaged in a scheme to illegally shift the clinic's overhead costs to the medical center as a reward to the clinic for referrals.

         In January 2017, Dr. Jacobs filed a Chapter 7 bankruptcy petition, and shortly after that the United States decided not to intervene in this action. See In re Jacobs, No. 17-00018-TLM (Bankr. D. Idaho); Notice of Election to Decline Intervention, Dkt. 53. The bankruptcy trustee was prepared to abandon the estate's interest in this action, which would have allowed Dr. Jacobs to pursue it on his own. When defendants learned of a potential abandonment, however, they indicated a willingness to settle. See Ex. B to Casperson Dec., Motion to Approve Compromise, Dkt. 65-4, at 6.

         In late 2017, defense counsel and the bankruptcy trustee reached an agreement. See Settlement Agreement, In re Jacobs, No. 17-00018-TLM, Dkt. 41-1 (Bankr. D. Idaho). Under the agreement, defendants agreed to pay $69, 087 to settle the matter. See Id. ¶ 1. Of this amount, the United States would keep $51, 816 and the remaining $17, 271 would be paid to Dr. Jacobs' bankruptcy estate. The settlement agreement did not obligate defendants to pay attorneys' fees, but the trustee did not release that claim either. Id. ¶ 2. Instead, the settlement agreement provided that this Court would retain jurisdiction to enforce the terms of the settlement agreement, “including but not limited to any claim by Relator for attorneys' fees.” See Id. ¶ 13; see also Joint Stipulation of Dismissal, Dkt. 63, ¶ 5 (“The Court will retain jurisdiction over the Parties to the extent necessary to enforce the terms and conditions of the Settlement Agreement, including but not limited to any claim by Relator for attorney's fees.”).

         Shortly after the settlement agreement was finalized, Dr. Jacobs filed the pending motion. He asks the Court to award $97, 945 in attorneys' fees and $1, 130.57 in costs.


         A. Qui Tam Actions

         The False Claims Act, 31 U.S.C. § 3729 et. seq., authorizes a private suit against a party that has defrauded the United States. If the suit is successful, the United States and the private plaintiff (called the “relator”) divide the proceeds. 31 U.S.C. § 3730(d). “Such suits are known as qui tam actions, from the Latin qui tam pro domino rege quam pro se imposo sequitur, meaning ‘he who brings the action for the king as well as for himself.'” United States v. Texas Instruments Corp., 104 F.3d 276, 277 (9th Cir. 1997). The government may choose to intervene in the action, or it may decline to do so. Either way, a successful relator is entitled not only to a share of the proceeds, but also to “an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs.” 31 U.S.C. § 3730(d)(2). Here, Dr. Jacobs' bankruptcy estate settled the claim with defendants, so an award for costs and fees should be issued.

         B. Standing

         The problem, however, is that Dr. Jacobs lacks standing to pursue fees and costs. As noted, Dr. Jacobs filed a chapter 7 bankruptcy petition in January 2017. Under the Bankruptcy Code, the filing of a Chapter 7 petition creates an estate consisting of “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Dr. Jacobs' claim against defendants includes the potential right to an attorneys' fee award arising from the claim. Thus, after Dr. Jacobs filed bankruptcy, the trustee - not Dr. Jacobs individually - gets to decide whether to pursue attorneys' fees.

         For Dr. Jacobs to pursue a fee motion on his own, the Trustee would first have to abandon this aspect of the qui tam claim. See 11 U.S.C. § 554(a)-(c). Generally, a bankruptcy trustee can abandon a claim in one of three ways: (1) the trustee, after notice and hearing, may abandon property deemed burdensome or of inconsequential value to the estate; (2) the bankruptcy court, at the request of a party and after notice and hearing, may order the trustee to abandon any property; and (3) property is ...

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