Application of 18 U.S.C. § 203 to Former Employee's Receipt of Attorney's Fees in Qui Tam Action ( 2002 )

Application of 18 U.S.C. § 203 to Former Employee’s
Receipt of Attorney’s Fees in Qui Tam Action
Title 18, section 203, U.S. Code, would not bar a former federal employee from sharing in attorney’s
fees in a qui tam action, provided that those fees, calculated under the lodestar formula, are prorated
such that the former employee does not receive any fees attributable to his time in the government.
February 28, 2002
MEMORANDUM OPINION FOR THE
DEPUTY GENERAL COUNSEL AND DESIGNATED AGENCY ETHICS OFFICIAL
EXECUTIVE BRANCH DEPARTMENT *
You have asked for our opinion whether, under 18 U.S.C. § 203 (1994), a
former federal employee may share, on a prorated basis, in fees awarded to his
firm for representational services in a qui tam action that was pending both during
periods in which he was working for the federal government and during a period
in which he was working for his firm. See Letter for Daniel Koffsky, Acting
Assistant Attorney General, Office of Legal Counsel, from Deputy General
Counsel, Executive Branch Department, Re: Request for Written Opinion on
Former Employee’s Receipt of Attorney’s Fees (June 6, 2001) (“Department
Letter”). We conclude that, subject to the conditions set out below, the statute
would not bar his receiving a prorated share of attorney’s fees that are calculated
under the lodestar method. 1
I. Background
A former employee of your agency is now a member of a law firm that repre-
sents relators in a qui tam action. The United States intervened in the action and
settled it in April 2000, Department Letter at 1; see 31 U.S.C. § 3730(b)(2) (1994);
and the relators have petitioned the court for an award of attorney’s fees to be paid
by the defendant to the law firm. Id. § 3730(d); see United States ex rel. Virani v.
Jerry M. Lewis Truck Parts & Equip., Inc., 89 F.3d 574, 578 (9th Cir. 1996). The
petition seeks “lodestar” fees calculated as “the product of reasonable hours times
*
Editor’s Note: We are not identifying in the published version of this opinion the Executive
Branch department that employed the individual who is the subject of the opinion.
1
As you suggest, see Department Letter at 3, 18 U.S.C. § 205 (1994 & Supp. II 1996) would not be
implicated by the former employee’s receipt of fees now, because that provision applies only to current
federal employees. See Application of 18 U.S.C. § 205 to Communications Between the National
Association of Assistant United States Attorneys and the Department of Justice, 18 Op. O.L.C. 212(1994).
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Application of 18 U.S.C. § 203 to Former Employee’s Receipt of Attorney’s Fees
a reasonable rate.” 2 See Pennsylvania v. Delaware Valley Citizens’ Council for
Clean Air, 478 U.S. 546, 565 (1986) (defining “lodestar”); see also City of
Burlington v. Dague, 505 U.S. 557, 560-61, 562, 565 (1992) (distinguishing fees
calculated under the lodestar method from “certain” fees, which are “payable
without regard to the outcome of the suit,” and from fees under “the contingent-fee
model,” which “would make the fee . . . a percentage of the value of the relief
awarded in the primary action”).
The former employee worked for the federal government during two separate
periods when his current firm was working on the qui tam case. It was during the
first of these periods, in November 1995, that the firm entered the case. The
former employee left federal employment in June 1997 and worked for the firm
from July 1997 until December 1999, during which time he took part in the firm’s
efforts in the case. After a second period of federal employment from December
1999 until January 2001, he returned to the firm. Department Letter at 1. The fee
petition covers the firm’s work from November 1995 through April 2000. The
former employee seeks to share in the fees awarded, under a formula designed to
identify the proportion of the fees attributable to the time he was not employed by
the federal government:
He is seeking only his partnership share of the fees attributable to the
actual hours worked by the law firm during the 2½-year period in
which he was not in Federal service. For example, if the law firm
worked 100 hours in total on the case, 25 hours of which occurred
during that 2½-year period, the Employee would receive only his
partnership share of the attorneys’ fees attributable to the 25 hours.
Department Letter at 4.
This formula is designed to comply with 18 U.S.C. § 203(a), which, among
other things, subjects to criminal penalties anyone who,
otherwise than as provided by law for the proper discharge of official
duties, directly or indirectly—
(1) demands, seeks, receives, accepts, or agrees to receive or accept
any compensation for any representational services, as agent or
attorney or otherwise, rendered or to be rendered either personally or
by another—
***
2
Here, the firm has sought an upward adjustment through a multiplier of the lodestar. Our opinion
should not be read as addressing the former employee’s receipt of a share in any such adjustment,
should the court grant it.
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Opinions of the Office of Legal Counsel in Volume 26
(B) at a time when such person is an officer or employee . . . of
the United States in the executive . . . branch of the Government,
or in any agency of the United States,
in relation to any proceeding, application, request for a ruling or oth-
er determination, contract, claim, controversy, charge, accusation,
arrest, or other particular matter in which the United States is a party
or has a direct and substantial interest, before any department, agen-
cy, court, court-martial, officer, or any civil, military, or naval com-
mission.
II. Discussion
As your letter notes, section 203, at the least, forbids the former employee from
sharing in fees covering the firm’s work performed while the former employee
was in the federal government. Department Letter at 2. The United States was a
party to the qui tam case, and section 203 reaches payments for representational
services, whether performed personally or by another, in such a matter. Further,
section 203 extends to compensation received after an employee leaves federal
service, if the payment is for representational services performed during the period
of federal employment: “18 U.S.C. § 203 prohibits a former government employee
from receiving any share of a fee earned by others for work they performed
[before an agency or court] at the time he was a federal employee. This section
requires a law firm which a former government lawyer joins to ensure that the
lawyer does not receive any share of the firm’s fee attributable to work it per-
formed [before such a forum] at the time the lawyer was with the Federal Gov-
ernment.” Memorandum for Lovida H. Coleman, Jr., Special Assistant to the
Deputy Attorney General, from Leon Ulman, Deputy Assistant Attorney General,
Office of Legal Counsel, Re: Application of Ethics Act Restrictions to United
States Trustees and Supervisors of Trustees at 5 (July 5, 1979). See also Memo-
randum, Re: Statutory and Ethical Restrictions on Former Non-Legal Government
Officers and Employees of the White House Staff at 5 (Feb. 10, 1971) (“The
section makes it unlawful for a former official to share in any fees received by the
firm for services in a matter covered by the statute and performed by the firm at
any time during the period of his government employment.”); H.R. Rep. No. 87-
748, at 20 (1961) (section 203 corrects the omission of the predecessor statute,
which did not cover post-employment receipt of compensation for services
rendered during the period of government employment).
The question here is whether, under the proposed formula for prorating an
award of attorney’s fees calculated under the lodestar method, the former employ-
ee would be receiving compensation for services that were rendered at a time
when he was a federal employee. We have not previously addressed the applica-
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Application of 18 U.S.C. § 203 to Former Employee’s Receipt of Attorney’s Fees
tion of section 203 in circumstances where a fee would be calculated under the
lodestar method and would cover some periods during which a former employee
worked in the federal government and some periods during which he did not. We
must decide whether to follow, in this context, the usual interpretation of section
203’s application to awards under the contingent fee model. Under that interpreta-
tion, for example, it has been “the longstanding view of the Office of Legal Counsel
that § 203 prohibits an individual entering government employment from maintain-
ing a contingent interest in fees recoverable in a proceeding involving the United
States.” Application of 18 U.S.C. § 203 to Maintenance of Contingent Interest in
Expenses Recoverable in Litigation Against the United States, 22 Op. O.L.C. 1, 2
(1998) (“1998 Opinion); see also Office of Government Ethics, Compensation
Arrangements for Former Federal Government Employees and 18 U.S.C. § 203,
Informal Advisory Op. 93x31 (Oct. 26, 1993), available at http://www.oge.gov/
OGE-Advisories/Legal-Advisories/Legal-Advisories/ (last visited Aug. 4, 2012)
(applying interpretation to receipt of contingency fee by former employee). We
observed in the 1998 Opinion that “the rationale underlying this longstanding
interpretation has never been articulated with clarity” but that “[a] rule against
retaining a contingent interest in fees reflects that a contingent fee covers the entire
representation up to the payment, the amount remains uncertain until then, and the
fee thus compensates, in part, for representational services performed after the
employee began working for the United States.” 22 Op. O.L.C. at 2 n.2. If fees under
the lodestar method are like fees under the contingent fee model, each dollar of
lodestar fees might be seen as compensating for the entire representation, including
(in a case like the present one) that part of the representation when the former
employee was with the federal government. In that event, section 203 would bar a
former employee from receiving any part of the lodestar award.
We do not believe that this treatment of contingent fees should be extended to
lodestar awards. Under the contingent fee model, because the fee is for the whole
representation, no part of the fee is assigned to any particular time. By contrast,
under the lodestar model, the fees are segregated by time. The value of work
during any particular period is fixed, according to the hours worked, multiplied by
the reasonable rate. A lawyer who receives only fees generated during the time he
was not with the government thus does not receive “any compensation for any
representational services, as agent or attorney or otherwise, rendered or to be
rendered either personally or by another . . . at a time when such person is an
officer or employee” of the United States. 18 U.S.C. § 203(a).
To be sure, without the work that took place here during the time of the
employee’s service in the federal government, the qui tam action would not have
succeeded, and it might therefore be argued that, in receiving a portion of the
firm’s fees, the employee necessarily would be compensated for representational
services performed during that time. But our 1998 Opinion, which examined
reimbursement for expenses in contingent cases, concluded that the statutory
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language “compensation for representational services” would not support such an
argument:
[T]he use of the word “for” makes clear that § 203 embodies an ele-
ment of exchange . . . . [T]he fact that a government officer or
employee receives a monetary payment or something else of value
will not alone trigger a violation of § 203. Nor is it sufficient that an
officer or employee receives something of value because a represen-
tational service occurred during his or her government tenure. The
provision requires that the officer or employee receive something of
value in exchange for the representational services performed on the
client’s behalf during the officer’s or employee’s government tenure.
22 Op. O.L.C. at 3 (emphasis added).3 Here, under the same reasoning, the hours
worked by others while the employee was with the government were necessary to
the successful outcome resulting in the firm’s entitlement to receive any fees, but
that fact means only that the former employee would receive fees because of work
done while he was a federal employee, not that he would receive a share of fees
paid in exchange for that work.
In the 1998 Opinion, we noted that the interpretation of section 203 as applica-
ble to contingent fees was “consistent with a view of § 203 as primarily seeking to
prevent the actual or apparent influence of an officer or employee over a proceed-
ing involving the government by virtue of the individual’s pecuniary interest in the
proceeding’s outcome.” 22 Op. O.L.C. at 2 n.2 (citation omitted). In that opinion,
we concluded that the statute did not reach a contingent arrangement for the
recovery of expenses, as opposed to fees, but we conceded that, to the extent the
statute’s purpose was to guard against the influence that might be exercised by a
government employee with an interest in a proceeding, the statute arguably should
receive a broader interpretation than we were giving it. There, as here, it could
have been said that “the official’s incentive to influence the outcome of a proceed-
ing, the danger that an adjudicator would be affected by the knowledge that the
official possesses an interest in the proceeding’s outcome, or the possibility that
the interest would cause the official to be biased in other government matters,” id.
at 6, would be just as strong as in the paradigm case of a contingent fee for
services. Nevertheless, we did not find ourselves “free to interpret § 203 without
regard for its textual boundaries.” Id.
Our analysis here rests on the critical assumptions that the fees in question will
be awarded under the lodestar method, see United States ex rel. John Doe I v.
Pennsylvania Blue Shield, 54 F. Supp.2d 410, 414 (M.D. Pa. 1999) (applying
3
We made the additional argument that the repayment of expenses was not “compensation” for
“representational services” under the statute. 1998 Opinion at 3.
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Application of 18 U.S.C. § 203 to Former Employee’s Receipt of Attorney’s Fees
method to fee calculation in qui tam action), and that the lodestar amount will not
be enhanced or otherwise adjusted (e.g., based on the special value of services
provided by the firm when the former employee was working for the federal
government) in ways that render our analysis inapplicable. Moreover, the details
of the formula in the present case for computing the former employee’s share,
which we do not know, could raise issues under section 203. The formula, as
described in general terms by your letter, is based on the firm’s hours devoted to
the case while the former employee worked there, divided by the firm’s total hours
in the whole case. However, unless the formula takes account of the other factor in
the lodestar calculation—the billing rates on which the fee award is based—this
calculation may not completely separate the fees attributable to the time that the
former employee was in the government from the other fees in the case. Particular
periods may be tied to higher or lower payments for the same hours, to the extent
reasonable billing rates for those hours differ. A similar attribution problem might
arise if the court disallows inclusion in the lodestar amount of a number of billed
hours but fails to make clear for which periods those hours were billed.
M. EDWARD WHELAN III
Principal Deputy Assistant Attorney General
Office of Legal Counsel
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