Bogart v. King Pharm

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
7-16-2007
Bogart v. King Pharm
Precedential or Non-Precedential: Precedential
Docket No. 06-2098
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
No. 06-2098
__________
UNITED STATES OF AMERICA
ex rel. EDWARD BOGART;
EDWARD BOGART, individually;
STATE OF ILLINOIS
ex rel. EDWARD BOGART;
STATE OF CALIFORNIA
ex rel. EDWARD BOGART;
STATE OF FLORIDA
ex rel. EDWARD BOGART;
STATE OF TEXAS
ex rel. EDWARD BOGART;
STATE OF MASSACHUSETTS
ex rel. EDWARD BOGART;
STATE OF TENNESSEE
ex rel. EDWARD BOGART;
STATE OF DELAWARE
ex rel. EDWARD BOGART;
STATE OF NEVADA
ex rel. EDWARD BOGART;
(cont’d)
STATE OF LOUISIANA
ex rel. EDWARD BOGART;
STATE OF HAWAII
ex rel. EDWARD BOGART;
DISTRICT OF COLUMBIA
ex rel. EDWARD BOGART;
STATE OF VIRGINIA
ex rel. EDWARD BOGART;
STATE OF NEW MEXICO
ex rel. EDWARD BOGART
v.
KING PHARMACEUTICALS;
MONARCH PHARMACEUTICALS;
WYETH PHARMACEUTICALS;
AMERICAN SERVICE GROUP;
PRISON HEALTH SERVICES
Edward Bogart,
Appellant
__________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 03-cv-01538)
District Judge: Hon. Marvin Katz
__________
2
Argued on May 8, 2007
Before: RENDELL and JORDAN, Circuit Judges,
and VANASKIE,* District Judge
(Filed: July 16, 2007)
Samuel L. Boyd
Boyd & Associates
6440 North Central Expressway, #600
Dallas, TX 75206
Carl A. Solano [ARGUED]
Jennifer J. Nestle
Schnader Harrison Segal & Lewis
1600 Market Street, Suite 3600
Philadelphia, PA 19103
Timothy K. Lewis
Schnader Harrison Segal & Lewis
Suite 300
2001 Pennsylvania Avenue, NW
Washington, DC 20006
(cont’d)
*
The Honorable Thomas I. Vanaskie, United States District
Judge for the Middle District of Pennsylvania, sitting by
designation.
3
Joel M. Androphy
Berg & Androphy
3704 Travis
Houston, TX 77002
Counsel for Appellant
Edward Bogart
Michael T. Reynolds [ARGUED]
Cravath, Swaine & Moore
825 Eighth Avenue
Worldwide Plaza
New York, NY 10019
John G. Harkins, Jr.
Eleanor M. Illoway
David W. Angstrom
Harkins Cunningham
2005 Market Street
2800 One Commerce Square
Philadelphia, Pa 19103
Counsel for Appellees
King Pharmaceuticals;
Monarch Pharmaceuticals
(cont’d)
4
Guy W. Horsley, Jr. [ARGUED]
Office of Attorney General of Virginia
900 East Main Street
Richmond, VA 243219
Counsel for Appellee
State of Virginia
__________
OPINION
__________
VANASKIE, District Judge.
Appellant/Relator Edward Bogart (“Bogart”) commenced
this qui tam litigation on behalf of the United States, the District
of Columbia, and ten states with qui tam legislation.1 Appellees
King Pharmaceuticals and Monarch Pharmaceuticals
1
“Qui tam is short for ‘qui tam pro domino rege quam pro se
ipso in hac parte sequitur,’ which means ‘who pursues this
action on our Lord the King's behalf as well as his own.’”
Rockwell Int’l Corp. v. United States, 127 S. Ct. 1397, 1402 n.2
(2007).
5
(collectively, “King”) ultimately settled the claims of the
jurisdictions with qui tam statutes, and Bogart was paid counsel
fees and expenses of approximately $800,000, plus relator fees
in excess of $9 million. King also entered into settlement
agreements with the nearly 40 States without qui tam legislation
who were not parties to this case. Contending that his efforts
produced settlements totaling more than $30 million for the
non-qui tam States, Bogart unsuccessfully argued in the District
Court that he was entitled to be paid up to one-third of that
amount as attorneys’ fees under a common fund theory of
recovery. He has appealed the District Court’s ruling. Finding
no merit in Bogart’s contentions, we will affirm the District
Court.
I
On March 12, 2003, Bogart commenced a qui tam action
against King under the False Claims Act (“FCA”), 31 U.S.C.
§§ 3729-3732.2 He also asserted claims on behalf of ten states
and the District of Columbia that had statutes similar to the
FCA, seeking a relator’s share and attorneys’ fees under these
2
The FCA authorizes private individuals to bring claims in the
name of the United States to recover for alleged false or
fraudulent claims submitted for payment to the United States.
31 U.S.C. § 3730(b)(1).
6
statutes as well.3 Bogart, a former employee of King, alleged
that King misrepresented pricing information it supplied to the
federal and state governments as a condition of its participation
in various Medicaid programs.
Bogart filed amended complaints on July 1, 2003, and
June 17, 2004, to assert claims on behalf of Appellee Virginia
and New Mexico, respectively, which had recently enacted false
claims statutes. In accordance with the FCA, the original
complaint and the amended complaints were filed under seal.
At the time Bogart filed the second amended complaint,
the United States permitted notification to the qui tam States of
this litigation. Bogart was also permitted to notify the National
Association of Medicaid Fraud Control Units (“NAMFCU”), an
association of state attorney general offices that coordinates
interstate efforts to prosecute Medicaid fraud claims
After notice of this lawsuit, the NAMFCU formed a
committee to negotiate a settlement with King on behalf of its
members, many of whom did not have qui tam statutes and were
not parties to this litigation. Each state individually negotiated
with King as well. Bogart did not participate in these settlement
discussions.
3
The ten states were California, Delaware, Florida, Hawaii,
Illinois, Louisiana, Massachusetts, Nevada, Tennessee, and
Texas.
7
On September 22, 2004, in anticipation of impending
settlements, Bogart filed a Third Amended Complaint, asserting
a request for “Common Fund Relief” with respect to amounts
recovered by non-qui tam jurisdictions. In Paragraph 221 of the
Third Amended Complaint, Bogart asserted:
While the states possessing qui tam statutes have
a regulatory scheme for rewarding the Relator for
coming forward, those which have none will
potentially receive a windfall with little or no
investigation or commitment of time or resources
to the recovery. The Common Fund doctrine
preserves the right of the litigant or counsel to an
award from the Common Fund generated.
Bogart sought recovery of up to one-third of the purported
common fund, although he did not specify whether this
percentage represented a relator’s share or counsel fees.
On October 31, 2005, the United States, the States, and
King announced an aggregate settlement of $124,057,318. Of
this amount, $73,420,225 was payable to the United States;
$20,239,317 was payable to the qui tam States; and $30,397,776
was payable to the non-qui tam States. Bogart did not
participate in the negotiation of the settlements and was not a
party to any of the settlement agreements.
8
King executed separate settlement agreements with the
United States and each individual state. Although the Federal
Settlement Agreement noted that King agreed to pay the States
$50,637,093, the agreement explicitly stated that King’s
obligation to pay the United States was independent of King’s
settlement agreements with the individual States, and that
“King’s obligation to pay the State Settlement Amount . . . shall
arise only under the NAMFCU Agreement and the State
Settlement Agreements.”
On October 30, 2005, one day before the announcement
of the settlements, Bogart moved for emergency injunctive relief
to restrain King from making any payments pursuant to the
settlement agreements. Among other things, Bogart alleged that
he would be irreparably harmed if King paid the non-qui tam
settlements – the so-called “common fund” – because the
District Court would no longer have jurisdiction to provide from
the settlement amounts what Bogart contends are his legal
entitlements.
On October 31, 2005, the District Court denied Bogart’s
motion for a temporary restraining order. The court deferred
consideration of Bogart’s preliminary injunction motion until
after the completion of pertinent discovery.
On December 20, 2005, Bogart filed his First Amended
Petition for Fees, claiming that he was entitled to one-third of
the aggregate settlement proceeds payable to the non-qui tam
9
States under the common fund doctrine. Though one might
conclude that, given its title, the petition was for counsel fees,
Bogart once again failed to specify within the submission
whether this percentage constituted a relator’s share or counsel
fees. The Amended Petition, however, stated that King had
agreed to pay all fees and expenses to which Bogart was entitled
under the FCA fee-shifting provision, 31 U.S.C. § 3730(d)(1).4
The District Court addressed Bogart’s claim for relief
under the common fund doctrine in connection with its decision
on a motion to dismiss filed by New Mexico, one of the two
States Bogart added to this case in amended complaints. United
States ex rel. Bogart v. King Pharms., 410 F. Supp. 2d 404 (E.D.
Pa. 2006). New Mexico argued that its false claims statute did
not apply because King’s alleged fraudulent activity had ended
4
King paid Bogart approximately $800,000 in full satisfaction
of his attorneys’ fees claim. Bogart noted in his First Amended
Petition for Fees that the amount King agreed to pay pursuant to
31 U.S.C. § 3730(d)(1) did not “include services performed with
respect to Relator share issues and post-fairness hearing motion
practice.” (App. 1137 n.3.) He also asserted, however, that he
“did not compromise on the amount of his statutory entitlement
to fees, costs and expenses with King.” (Id.) It thus appears
that the fees and expenses incurred by Bogart in connection with
the prosecution of the qui tam claims were paid by King. In this
regard, Bogart represented that he had “committed,
approximately, $800,000 of attorneys’ time and expense . . .
which resulted in [the] settlement.” (Id. at 1035.)
10
before New Mexico’s false claims statute went into effect on
May 19, 2004. The District Court agreed that the statute could
not apply retroactively and dismissed the claim under the New
Mexico False Claims Act.5 Id. at 408.
Bogart argued alternatively that he was entitled to a share
of New Mexico’s settlement under the common fund doctrine.
In a well-reasoned opinion, the District Court concluded that the
common fund theory of recovery did not apply. Id. at 409-10.
The court noted that the common fund doctrine has never been
applied in a qui tam action, but rather its application has been
limited to a narrow range of situations involving “trust law, class
actions and insurance subrogation.” Id. Moreover, the District
Court was not persuaded by Bogart’s arguments that the
common fund doctrine should apply in this instance. First, the
District Court concluded that a common fund did not exist
because the United States, the qui tam States, and the non-qui
tam States negotiated and executed “separate and severable”
settlement agreements with King. Id. Second, the primary
consideration of the common fund doctrine – to avoid inequity
that results where one party bears the cost of litigation that
benefits others – was not implicated because New Mexico and
5
Virginia also moved to dismiss its claim against King on the
same grounds asserted by New Mexico. In light of the District
Court’s determination as to New Mexico, Bogart did not oppose
Virginia’s motion to dismiss. Virginia, like New Mexico, is
effectively a non-qui tam State.
11
the non-qui tam States retained their own counsel to negotiate
and execute the settlement agreements with King, and Bogart’s
fees and expenses had been paid by King. Finally, the District
Court reasoned that Bogart’s request for litigation costs under
the common fund doctrine was simply a veiled attempt to obtain
a reward for providing information about King to States that
have declined to authorize payment of relator fees. Id. In this
regard, the court observed that granting Bogart’s request would
effectively impose qui tam statutes on sovereign state
governments that have decided against such legislation. Id. at
409-10. Therefore, the District Court denied Bogart’s request
for common fund relief as to New Mexico, and later
incorporated this opinion into an Order denying Bogart’s request
as to the remaining non-qui tam States.6 (See App. 22.)
On March 3, 2006, the qui tam States, King, and Bogart
filed a Joint Stipulation of Dismissal and Order, acknowledging
the dismissal of the qui tam States’ claims against King and the
resolution of all of Bogart’s claims, “with the exception only of
his claim to a share from Virginia and the [non-qui tam States]
under the so-called ‘Common Fund Relief’ as asserted in
paragraph 221 of the Plaintiff’s Third Amended Complaint.”
(App. 1066.) King thereafter satisfied its obligations to the
States under the State Settlement Agreements and the NAMFCU
6
New Mexico has settled Bogart’s claim for attorneys’ fees.
Virginia, however, refused to pay any amount to Bogart, and
thus remains a party to this case.
12
Agreement. On March 15, 2006, the District Court entered a
final judgment, dismissing “[a]ll claims and counts, including
but not limited to, common fund allegations against all states
without qui tam statutes.” (Id. at 25.) This timely appeal
followed.
II
A.
We have jurisdiction over Bogart’s appeal pursuant to
28 U.S.C. § 1291. This Court reviews the District Court’s
decision whether to award attorneys’ fees for abuse of
discretion, but exercises plenary review over the lower court’s
application of legal standards in making that determination.
Brytus v. Spang & Co., 203 F.3d 238, 244 (3d Cir. 2000).
B.
Under the “American Rule,” litigants generally must bear
their own attorneys’ fees. Id. at 241-42. The common fund
doctrine is an exception to this rule. It “‘provides that a private
plaintiff, or plaintiff’s attorney, whose efforts create, discover,
increase, or preserve a fund to which others also have a claim,
is entitled to recover from the fund the costs of his litigation,
including attorneys’ fees.’” In re Cendant Corp. Sec. Litig., 404
F.3d 173, 187 (3d Cir. 2005) (quoting In re Gen. Motors. Corp.
13
Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 820
n.39 (3d Cir. 1995)).
The Supreme Court first recognized the common fund
doctrine in Internal Improvement Fund Trs. v. Greenough, 105
U.S. 527 (1881), a case involving a bondholder’s successful
lawsuit on behalf of himself and other similarly situated
bondholders. The Court held that the plaintiff, who incurred the
entire expense of the litigation, was entitled to an award of fees
from the common fund because it would be inequitable to allow
the other bondholders to share in the recovery without
“contribut[ing] their due proportion of the expenses.” Id. at 532.
We have also recognized the common fund doctrine. See, e.g.,
Cendant, 404 F.3d at 187; Gen. Motors Corp., 55 F.3d at 820,
822.
The common fund doctrine is equitable in nature,
intended to avoid unjust enrichment at the expense of the
successful litigant. Boeing Co. v. Van Gemert, 444 U.S. 472,
478 (1980). The doctrine operates to charge an award against
the fund itself, rather than to impose personal liability against a
party or beneficiary. See In re Smithkline Beckham Corp. Sec.
Litig., 751 F. Supp. 525, 531 (E.D. Pa. 1990); In re DN Assocs.,
165 B.R. 344, 348 n.14 (Bankr. D. Me. 1994).
In Boeing Co., the Supreme Court explained that
“[j]urisdiction over the fund involved in the litigation allows a
court to prevent . . . inequity by assessing attorney’s fees
14
against the entire fund, thus spreading fees proportionately
among those benefited by the suit.” 444 U.S. at 478 (emphasis
added). Application of the common fund doctrine thus requires
court “control over a fund or jurisdiction over the parties. . . .”
Vincent v. Hughes Air West, Inc., 557 F.2d 759, 774 n.15
(9th Cir. 1977).
Asserting that this is a “classic” common fund case,
Bogart contends that the District Court had control over the
non-qui tam States’ settlement proceeds based upon its
responsibility to approve King’s settlement with the United
States. See 31 U.S.C. § 3730(c)(2)(B). Bogart claims that the
District Court’s power to approve the Federal Settlement
Agreement gave it control over the non-qui tam States’
settlement agreements because (1) the Federal Settlement
Agreement referred to the aggregate settlement amount and the
portion thereof allocated to the States, and (2) the States could
not receive payment before the United States was paid.
Neither fact, however, shows that the non-qui tam States’
settlements were under the District Court’s control or subject to
its approval. To the contrary, the Federal Settlement Agreement
expressly stated that “King’s obligation to pay the State
Settlement Amount [of $50,637,093], or any individual State’s
share thereof, shall arise only under the NAMFCU Agreement
and the State Settlement Agreements.” (App. 282 (emphasis
added).) There is nothing in the settlement agreements executed
by the non-qui tam States that would indicate they were subject
15
to District Court approval or control. The District Court thus
lacked control over the purported “common fund.”
Nor did the District Court have jurisdiction over the
non-qui tam States. Indeed, Bogart does not argue to the
contrary. Bogart does contend, however, that the District
Court’s jurisdiction over King allowed it to award common fund
relief, even though the non-qui tam States were not participants
in this litigation, because King was the party responsible for
making payments to the non-qui tam States. Bogart, however,
has not cited any authority that holds that jurisdiction over the
defendant, alone, is sufficient to confer authority to grant
common fund relief. Consequently, because the District Court
did not have jurisdiction over the fund or the non-qui tam States,
it lacked the authority to award common fund relief from the
non-qui tam States’ settlement proceeds.
Even if the District Court had such authority, an award to
Bogart would be inappropriate. First, we agree with the District
Court that Bogart’s litigation did not create a common fund. In
the “classic” common fund case, like a class action, the
litigation generates a pool of money, either through a judgment
or settlement, to which the beneficiaries are entitled to claim a
portion. See, e.g., Boeing Co., 444 U.S. at 479, 481;
Greenough, 105 U.S. at 529; Wininger v. SI Mgmt. L.P., 301
F.3d 1115, 1120 (9th Cir. 2002). In this matter, there was no
pool of money generated to which the non-qui tam States had a
claim. Instead, each non-qui tam State separately negotiated a
16
settlement agreement with King. While Bogart argues that the
$30,397,776 paid to the non-qui tam States constitutes the
common fund, this figure only represents the sum of the
separately negotiated and independent settlements between King
and the non-qui tam States. As the District Court observed,
“[t]he mere fact that a large number of parties has reached such
settlements does not mean that the sum of the settlement
amounts somehow constitutes a common fund in the manner of
a class action award.” Bogart, 410 F. Supp. 2d at 409. Cf.
United States ex rel. Merena v. SmithKline Beecham Corp.,
52 F. Supp. 2d 420, 440 (E.D. Pa. 1998) (calculating relator’s
share under 31 U.S.C. § 3730(d) based upon the amount
received by the United States exclusive of the amounts received
by the states pursuant to separate settlement agreements), rev’d
on other grounds, 205 F.3d 97 (3d Cir. 2000).
Bogart contends that the District Court took an
impermissibly narrow view of what constitutes a “common
fund.” (Appellant’s Br. 32-34.) None of the cases cited by
Bogart, however, involves circumstances similar to those
presented here. For instance, In re Prudential Ins. Co. Am. Sales
Practice Litig. Agent Actions, 148 F.3d 283, 295-96 (3d Cir.
1998), involved a class action settlement in which the defendant
agreed to pay a set amount in counsel fees in addition to a base
amount of $410 million to resolve claims through a streamlined
alternative dispute resolution process. At issue in Prudential
was the valuation of claims to be pursued through the ADR
process plus the valuation of other aspects of the settlement.
17
Significantly, the attorneys’ fees were not payable from the
funds to be paid or monetary benefits provided to class
members. The purpose of assessing the value of the settlement
was to determine the reasonableness of the $90 million fee
Prudential had agreed to pay. Moreover, we questioned the
propriety of including in the valuation those claims that would
be pursued under a plan that had been put into place separate
and apart from the settlement, observing:
While a party need not be the only catalyst in
order to be considered a “material factor” and
may be credited for extra-judicial benefits created,
there must still be a sound basis that the party was
more than an initial impetus behind the creation of
the benefit. Allowing private counsel to receive
fees based on the benefits created by public
agencies would undermine the equitable
principles which underlie the concept of the
common fund . . . .
Id. at 337.
By way of contrast to the context in which Prudential was
decided, this case is not a class action, does not involve an
assessment of the reasonableness of a fee the defendant has
agreed to pay in addition to the amount to be recovered by
claimants, and does not involve a settlement negotiated by the
attorneys seeking recovery of a fee under common fund
18
principles. Instead, this case presents an attempt by Bogart’s
counsel to recover substantial fees from settlements negotiated
independently by non-qui tam States who, with the exception of
Virginia, are not parties to this litigation. Although Bogart may
have been the “impetus for the creation of the benefits” to the
non-qui tam States, he has shown nothing more that would make
recognition of a common fund appropriate here.
In Puerto Rico v. Heckler, 745 F.2d 709, 711 (D.C. Cir.
1984), another case cited by Bogart, the Court of Appeals for the
District of Columbia Circuit approved a fee award under the
common fund doctrine where the judgment expressly provided
for the recovery by non-party beneficiaries. In other cases cited
by Bogart, the efforts of counsel had created binding precedent
entitling the non-party beneficiaries to recover under principles
of stare decisis. See Sprague, 307 U.S. at 166; cf. City of
Klawock v. Gustafson, 585 F.2d 428, 431 (9th Cir. 1978)
(administrative policy change attributable to litigation efforts
may support common fund relief).
Bogart’s litigation did not create a legal entitlement on
behalf of the non-qui tam States. Significantly, but for the
negotiated settlement agreements between the non-qui tam
States and King, the only recourse available to the non-qui tam
States would have been to commence litigation on their own.
Accordingly, Bogart and his attorneys did not create a common
fund for the benefit of the non-qui tam States.
19
Another reason for denying common fund relief in this
case is there is no inequity that needs redress. Bogart’s fees and
expenses attributable to prosecution of the FCA claims were
paid in full by King. Where, as here, someone other than the
plaintiff ultimately bears the costs of litigation, there is no
inequity to redress because, irrespective of whether the
non-party beneficiaries are unjustly enriched, it is not at the
expense of the plaintiff. See Brytus, 203 F.3d at 245.
In Brytus, plaintiffs brought a class action lawsuit under
the Employee Retirement Income Security Act of 1974
(“ERISA”) that yielded a favorable judgment to the class of
approximately $12.5 million. Id. at 240-41. Plaintiffs sought
attorneys’ fees under ERISA’s statutory fee provision, 29 U.S.C.
§ 1132(g)(1), and plaintiffs’ counsel sought an additional award
under the common fund doctrine. Id. at 241. The district court
granted attorneys’ fees and expenses under ERISA, but denied
the recovery of fees under the common fund doctrine because it
determined an additional fee award was not warranted. Id. On
appeal, this Court affirmed the district court’s decision denying
a fee award under the common fund doctrine. Discussing the
Supreme Court’s decisions in Greenough and Boeing, we noted
that “the common fund doctrine ‘rests on the perception that
persons who obtain the benefit of a lawsuit without contributing
to its cost are unjustly enriched at the successful litigant’s
expense.’” Id. at 245 (quoting Boeing Co., 444 U.S. at 478).
We determined that “there is no inequity to redress” because the
defendant, rather than the plaintiffs, ultimately bore the entire
20
cost of litigation under ERISA’s statutory fee provision. Id. at
246. “The class members may have been enriched, but their
enrichment was not at the expense of either the litigating parties
or their counsel.” Id.
Though Brytus was an ERISA case, its reasoning justifies
a similar conclusion in this matter. Under the FCA, Bogart was
entitled to “reasonable attorneys’ fees and costs,” and “[a]ll such
expenses, fees, and costs shall be awarded against the
defendant.” 31 U.S.C. § 3730(d)(1). Bogart and King filed a
joint stipulation with the District Court whereby the latter agreed
to pay the former $787,088.56 pursuant to 31 U.S.C.
§ 3730(d)(1). (App. 765.) While portions of the record indicate
the attorneys’ fees and expenses incurred by Bogart may have
been higher, Bogart conceded in a subsequent filing with the
District Court that he “committed, approximately, $800,000 of
attorneys’ time and expense and . . . effort which resulted in [a]
settlement.” (Id. at 1035.) Because King, rather than Bogart,
ultimately subsidized this litigation, there is no inequity to
redress. “The [non-qui tam States] may have been enriched, but
their enrichment was not at the expense of [Bogart] or [his]
counsel.” Brytus, 203 F.3d at 246.
Finally, Bogart’s request for litigation costs under the
common fund doctrine is but a thinly-veiled attempt to obtain a
reward for providing information about King from States that
have declined to enact qui tam laws providing for such a reward.
As the District Court observed:
21
To grant such request would pervert the intentions
of states which have decided not to codify qui tam
statutes, effectively requiring them to offer a
higher award in qui tam actions than the federal
government or other states who have chosen to
pass such statutes.5
5
The FCA allows a relator to
recover up to twenty five percent
(25%) of the final judgment or
settlement against a defendant. 31
U.S.C. § 3730(d)(1). Ten of the 13
states with existing qui tam statutes
have adopted this federal
maximum. See § 740 ILCS
175/4(d)(1); Fla. Stat. § 68.085(1);
Tex. Hum. Res.Code § 36.110(a);
ALM GL ch. 12, § 5F(1);
T e n n . C o d e A n n .
§ 71-5-183(d)(1)(A); 6 Del. C.
§ 1205(a); HRS § 661-27(a);
Va.Code Ann. § 8.01-216.7(A);
N.M. Stat. Ann. § 27-14-9(A).
California and Nevada allow up to
thirty-three percent (33%). See
Cal. Gov.Code § 12652(g)(2); NRS
§ 357.210(1). Louisiana and the
District of Columbia allow “not
22
more than twenty percent” (20%).
La. R.S. 46:439.4(A)(1); D.C.Code
§ 2-308.15(f)(1).
Relator's extension of the common fund doctrine
to the current context would essentially impose
whistleblower reward statutes on 38 sovereign
state governments that have decided not to enact
them. As noted above, Relator would have this
court impose the inequitable result of imposing a
more severe liability on the non-qui tam states
than the qui tam states, even though the non-qui
tam states do not receive the statutory benefits of
a qui tam statute, including service of the
complaint and the opportunity to review and
investigate. See 31 U.S.C. § 3730(b)(2).
Whether or not it is prudent for state governments
to reward whistleblowers, it is not the role of this
court to say.
410 F. Supp. 2d at 409-10.
In summary, contrary to the assertion of Bogart’s counsel
at oral argument, this is not the “classic” common fund case.
The District Court did not have jurisdiction over either the
purported fund or the parties against whom Bogart directed his
claim. Bogart did not participate in negotiating the settlements
from which he claims a significant share. Bogart’s counsel fees
23
and litigation expenses attributable to prosecution of FCA
claims were paid by King. And finally, Bogart essentially seeks
to recover a relator’s fee from sovereign States that have not
allowed such claims to be made against them. Under these
circumstances, the District Court properly concluded that
“application of the common fund theory cannot be justified in
this case.”7 Id. at 410.
7
We also reject Bogart’s contention that, notwithstanding
King’s disbursement of the purported “common fund” pursuant
to the settlement agreements, the payment of the settlements was
improper in light of his claim to common fund relief. In this
regard, Bogart, citing Savoie v. Merchants Bank, 84 F.3d 52 (2d
Cir. 1996), argues that King is liable for its “‘defiance of the
law’ in disbursing the full settlement amount to a party outside
the court’s jurisdiction.” (Appellant’s Br. 55.) Savoie,
however, is readily distinguishable. There, the defendant bank
disbursed the entire settlement amount of $9 million to its
customers after a magistrate judge had issued a report and
recommendation proposing that $500,000 of the settlement
proceeds be held in escrow pending a determination as to
whether plaintiffs’ attorneys were entitled to a fee award under
the common fund doctrine. Id. at 54. The defendant bank made
the disbursement even before filing objections to the report and
recommendation. Id. Unlike the defendant in Savoie, King did
not disburse any settlement amounts in the face of injunctive
relief recommended by a judicial officer, nor did King
circumvent any applicable procedural rules in “defiance of the
law.” King made payment only after the District Court had
(a) denied Bogart’s motion for a temporary restraining order;
24
III.
For the reasons stated, we will affirm the District Court.8
________________
(b) denied Bogart’s request for an award from the non-qui tam
States under the common fund doctrine; and (c) approved the
parties’ joint stipulation of dismissal. At that point, King was
legally obligated to make payments to the non-qui tam States,
and the fact that Bogart’s claim for common fund relief was still
outstanding had no bearing on King’s contractual obligations.
Only a court order could impose a duty on King to withhold
payment of the settlement amounts. See Knight v. United
States, 982 F.2d 1573, 1580-81 (Fed. Cir. 1993). Therefore, we
reject Bogart’s contention that King is liable to him for payment
of common fund relief.
8
In light of our decision, it is unnecessary to consider the
arguments presented by Virginia that the Eleventh Amendment
and/or sovereign immunity preclude an award against it under
the common fund doctrine.
25