Court Upholds $401,994 Attorney Fee Award in False Claims Act Settlement

A U.S. District Court judge has affirmed a magistrate judge’s recommendation to award over $400,000 in attorney fees following a significant False Claims Act settlement case in Rhode Island.

Judge Mary S. McElroy upheld the fee award of $401,994.30, which came after a $1.16 million settlement in a qui tam action—a type of lawsuit that allows private individuals to file claims on behalf of the government against those who have defrauded government programs.

The case was initiated by two whistleblowers, Michele Bisbano and Stefanie Paolino, who alleged that Dr. Paul S. Koch and his medical practice, Koch Eye Associates, LLP, engaged in fraudulent practices resulting in false claims submissions to Medicare, Medicaid, and other federally funded healthcare programs.

In her decision, Judge McElroy addressed several objections from the defendants. Dr. Koch primarily challenged the use of national or regional rates for qui tam litigation rather than Rhode Island’s prevailing market rates. The judge agreed with this objection, noting that courts typically look to “the prevailing market rate in the community within which the court sits.”

The judge explained that out-of-town rates are typically only appropriate when a case’s complexity requires specialized expertise not available locally or when local attorneys are unwilling to handle an undesirable case. Finding that neither circumstance applied, she declined to apply national False Claims Act market rates.

However, the court rejected Dr. Koch’s submission of an affidavit from Attorney Marc DeSisto intended to establish prevailing Rhode Island rates. Judge McElroy agreed with the magistrate judge’s assessment that this affidavit was “conclusory and unsupported,” leaving the rates proposed by the relators’ independent attorney affidavits essentially unchallenged.

“Taking into account the complexity of this matter, the contingent-fee risk, and the quality of the representation, the Court concludes that the hourly rates proposed by Relators — while high — reasonably reflect the upper end of the prevailing local market for complex FCA litigation in Rhode Island,” wrote McElroy in her decision.

The court also addressed the whistleblowers’ contention that the magistrate judge erred by reducing their hourly rates to $450 for time spent on the fee petition itself and applying a 20% across-the-board reduction of hours. The relators argued this constituted “double discounting,” but Judge McElroy disagreed, finding the adjustment reasonable given that counsel billed more hours on fees than on the merits of the case.

This case highlights the significant financial implications of False Claims Act litigation in the healthcare sector. The healthcare industry has seen an increase in qui tam actions in recent years, with whistleblowers exposing fraudulent billing practices and improper financial arrangements that cost government programs billions of dollars annually.

For medical practices like Koch Eye Associates, such cases represent not only financial liability through settlements but also substantial additional costs in legal fees. The $1.16 million settlement, combined with over $400,000 in attorney fees, demonstrates the serious consequences for healthcare providers found to have submitted false claims to government programs.

The six-page decision, titled “United States ex rel. Bisbano, et al. v. Claris Vision, LLC, et al.,” establishes important precedent for how attorney fees are calculated in complex False Claims Act cases in Rhode Island, particularly regarding the application of local versus national rate standards.