Originally published April 27, 2011
Keywords: Attorneys' fees, False Claims Act, government contracts
The United States Court of Appeals for the Fourth Circuit's recent decision in United States ex rel. Ubl v. IIF Data Solutions, No. 09-2280, 2011 WL 1474783 (4th Cir. Apr. 19, 2011), overturned an award of attorneys' fees under the False Claims Act, 31 U.S.C. §§ 3729-33 (FCA). Although bound by an abuse of discretion standard of review, the Fourth Circuit overturned the award of over $500,000 in attorneys' fees to a government contractor after the district court's determination that relator Ubl's claims "were sufficiently baseless to warrant an award of attorneys' fees."
The case involved FCA allegations relating to "multiple award schedule" contracts awarded by the General Services Administration to IIF Data Solutions, Inc. (IIF). Among other allegations, Ubl, a former IIF employee, asserted that IIF made false representations about its prior pricing and discounting practices when applying for the contract, and that IIF billed certain employees at rates higher than warranted by their education and experience. A jury found for IIF on all counts, and the district court subsequently determined that the action was "clearly frivolous" and ordered Ubl to pay IIF over $500,000 in attorneys' fees.
The FCA authorizes a prevailing defendant to receive an award of attorneys' fees when "the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment" if the government has declined to intervene in the case. In Ubl, the Fourth Circuit noted that the FCA does not define "clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment" and that courts "have given somewhat varying definitions of the phrase."1 The Fourth Circuit relied on the definition contained in United States ex rel. Vuyyura v. Jadhav, 555 F.3d 337, 356 (4th Cir.), cert. denied, 130 S. Ct. 788 (2009): whether the relator's claim, when viewed objectively, clearly had "no reasonable chance of success."
The Fourth Circuit recognized that the standard for reviewing the district court's award of attorneys' fees was abuse of discretion and that the court in Vuyyura stated that "because a district court has close and intimate knowledge of the efforts expended and the value of services rendered, the fee award must not be overturned unless it is clearly wrong." The Fourth Circuit nonetheless overturned the fee award.
The court started by finding it "significant" that the district court twice denied IIF's motions to dismiss and also denied IIF's motion for summary judgment. Additionally, while the Fourth Circuit agreed with the district court's view that the jury found Ubl inherently unbelievable, the Fourth Circuit stated that FCA claims "generally are based on and proven by documentary evidence," and Ubl "presented evidence that could have supported a verdict in his favor even if the jury did not find Ubl himself to be at all credible." The Fourth Circuit held that the "district court was clearly wrong when it concluded that Ubl's claims had no reasonable chance of success" regardless of the district court's determination that Ubl was "inherently unbelievable."
This case highlights an issue that prevailing defendants may face in trying to recover attorneys' fees under the FCA. However, defendants may be able to enhance their ability to prevail on a claim for attorneys' fees under the FCA by discrediting the relator's credibility and also by explaining why the relator's claim has no reasonable chance of success based on the documentary evidence.
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1. The court cited the following definitions: "not frivolous if existing law or a reasonable suggestion for its extension, modification, or reversal supports the action," (quoting United States ex rel. Rafizadeh v. Continental Common, Inc., 553 F.3d 869, 875 (5th Cir. 2008)); "clearly frivolous when the result is obvious or the appellant's arguments of error are wholly without merit," (quoting Pfingston v. Ronan Eng'g Co., 284 F.3d 999, 1006 (9th Cir. 2002)); "frivolous when, viewed objectively, it may be said to have no reasonable chance of success, and present no valid argument to modify present law," (quoting Mikes, 274 F.3d at 705; and when "[T]he plaintiff's action must be meritless in the sense that it is groundless or without foundation," (quoting United States ex rel. Grynberg v. Praxair, Inc., 389 F.3d 1038, 1058 (10th Cir. 2004)). 2011 WL 1474783 at *11.
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