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United States ex rel. Zediker v. State ex rel. Zediker

United States District Court, M.D. Georgia, Macon Division

September 25, 2019

UNITED STATES OF AMERICA ex rel. MELISSA D. ZEDIKER,
v.
ORTHOGEORGIA. Defendant. And STATE OF GEORGIA ex rel. MELISSA D. ZEDIKER, Plaintiff – Relator,

          ORDER

          MARC T. TREADWELL, UNITED STATES DISTRICT JUDGE

         On November 9, 2015, Relator Melissa Zediker brought a qui tam action under the False Claims Act, 31 U.S.C. §§ 3729-3732 (“FCA”), and the Georgia False Medicaid Claims Act, O.C.G.A. § 49-4-168, et seq. (“GFMCA”), alleging the Defendants[1]submitted false claims to federal healthcare programs and took illegal kickbacks. See generally Doc. 2. After the Government (the United States and the State of Georgia), intervened with its own complaint and some Defendants were dismissed, the Relator, the Government, and Defendant OrthoGeorgia[2] reached a $760, 000.00 settlement of the Government’s claims. The only remaining issues are (1) what percentage of the settlement Zediker should recover for her contribution to the qui tam action and (2) what amount Zediker’s counsel should be awarded in attorneys’ fees and costs. For the following reasons, Zediker is awarded a 15% share ($114, 000.00) of the $760, 000.00 settlement amount, and her counsel are awarded $145, 303.37 in attorneys’ fees and costs.

         I. BACKGROUND

         Zediker was employed by OrthoGeorgia for over ten years. Doc. 2 ¶ 30. She initially handled administrative work, then worked her way up to become Chief Operating Officer. Id. After leaving OrthoGeorgia in December 2014, Zediker worked for now-dismissed defendant Urology Specialists of Georgia (“USG”) until she was terminated in July 2015. Id. ¶ 32. Zediker was then arrested and subsequently indicted under state law for stealing from OrthoGeorgia and USG. Coincidentally, or not, between the time of her arrest and indictment, Zediker filed this qui tam action against OrthoGeorgia and USG. Apparently convinced that Zediker had a “near photographic memory, ” Zediker’s counsel included in the 158-page complaint a vast and wide array of allegations, so vast and so wide that the Government argues the complaint was a mostly unhelpful “shotgun” pleading. Docs. 44 at 13; 47 at 14; see generally Doc. 2. Shortly after filing her complaint, Zediker asked the Court to unseal her complaint because of the criminal proceeding. Doc. 52 n.12. While her qui tam complaint may have been of some benefit to Zediker in the criminal prosecution, from that point forward, the Government could not investigate the case covertly. See Doc. 47 at 3.

         Still, the Government thoroughly investigated Zediker’s myriad theories of liability and concluded most were “not substantiated by other evidence, were not valuable enough to be worthy of pursuit, were not legally viable, or were factually impossible in light of the factual claims submitted by the Defendants.” Doc. 47 at 5. According to the Government, had Zediker complied with Federal Rule of Civil Procedure 9(b)’s pleading requirements for fraud, she would have made the Government’s job much easier. For example, a properly drafted complaint could have likely eliminated the need for the Government to ask extensive follow-up questions about the allegations and “expend a disproportionate number of resources at the outset of the case to develop a meaningful investigative plan.” Id. at 4-5. But even then, Zediker’s responses were not satisfactory. For example, Zediker misidentified a key witness for one of her claims. Id. at 5-6.

         Perhaps most significantly, the Government doubted, reasonably, Zediker’s credibility and usefulness, given, initially, the pending criminal charges and, ultimately, her guilty plea to 50 counts of theft and forgery. Id. at 3, 7. Unquestionably, and pretermitting whether Zediker’s qui tam complaint was in whole or in part a tactic employed in Zediker’s criminal defense, [3] Zediker’s crimes have loomed large throughout this litigation. In her guilty plea colloquy, the presiding judge told Zediker that “[r]egardless of what OrthoGeorgia or the other entity may have been doing . . . [t]wo wrongs don’t make a right. . . .” Doc. 47-2 at 33:13-15. Zediker’s wrongs were certainly significant. In a nutshell, through a multifaceted series of fraudulent schemes involving company credit cards, misuse of social security numbers, and forged loan applications, Zediker stole $711, 881, or at least that’s what she agreed to pay in restitution. Id. at 5-16, 35. According to the prosecution, the evidence would have showed that Zediker stole more. Doc. 47-2 at 8.

         The Government only learned of Zediker’s guilty plea the day after it was entered, and only then from news coverage and counsel for OrthoGeorgia. Doc. 47 at 7. Up until then, Zediker’s counsel had assured the Government that the criminal charges were “trumped up.” Id. at 17. Clearly, this was not true. Id.

         As the Government came to the realization that almost all of Zediker’s claims lacked merit, it engaged in settlement discussions with OrthoGeorgia. Persistently and aggressively, Zediker attempted to inject her rejected allegations into those discussions. The Government, convinced her allegations were unfounded, again and again rebuffed Zediker, sticking to its decision to narrow the case and dismiss USG as a defendant. Id. at 8.

         In December 2018, the Government and OrthoGeorgia reached an agreement in principle, which Zediker strongly opposed. Id. Then, days before the Government’s deadline to intervene, Zediker “abruptly changed position, reserving only disputes concerning Relator’s share and attorney’s fees.” Id. at 9. Zediker agreed “that [the] Agreement is fair, adequate, and reasonable under all the circumstances.” Doc. 47-1 at 5.

         On February 19, 2019, with the final settlement pending, the Government filed its scaled-down intervenor complaint and dismissed USG as a defendant. Docs. 35; 36. The complaint raised only three relatively minor claims. See generally Doc. 35. They were: (1) the E/M-Injection claim, (2) the Arthrex claim, and (3) the Veritas claim.[4] Significantly, of Zediker’s 158-page complaint, only a small fraction of the allegations are specifically related to these claims. Docs. 47 at 4; 47-1 at 2; see generally Doc. 2. On March 27, 2019, the parties filed a joint stipulation of dismissal, stating that the parties had finalized their settlement agreement. Doc. 38. Pursuant to the agreement, OrthoGeorgia paid $760, 000, only $380, 000 of which was restitution. See generally Doc. 47-1; Doc. 47 at 3.

         II. DISCUSSION

         In her briefing, Zediker expends much energy extolling generally the virtues of the FCA-a point, the Court told Zediker’s counsel, not necessary to make; the Court knows the FCA to be a good thing, its experience in this case notwithstanding. Enacted in 1863 in an effort to combat massive fraud perpetrated by large contractors during the Civil War, the FCA prohibits false or fraudulent claims for payment from the Government. Universal Health Servs., Inc. v. United States ex. rel. Escobar, - U.S. -, 136 S.Ct. 1989, 1996 (2016) (internal quotation marks and citation omitted). The FCA authorizes civil actions to remedy such prohibited conduct, which may be brought by the Attorney General, 31 U.S.C. § 3730(a), or by private individuals in the Government's name, § 3730(b)(1), also known as “qui tam” suits. Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1321-22 (11th Cir. 2009). When an FCA suit is brought by an individual, the Government has the right to intervene and take control of the action. 31 U.S.C. § 3730(b)(2), (c)(1). When the Government intervenes and the suit is successfully concluded, the FCA provides that the individual initiating the suit-known as the relator-is entitled to an award, or relator’s share, of “at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action, ” plus reasonable attorneys’ fees and costs. 31 U.S.C. § 3730(d)(1).

         A. Relator’s share

          The Government contends that Zediker is entitled to the statutory minimum share: 15% of the $760, 000 settlement. Doc. 47 at 13. Zediker strongly disagrees. She unhelpfully devotes a significant portion of her briefs complaining about how the Government’s “cram[ming] statutory minimums on relators” shows its “animosity toward relators.”[5] See Docs. 44 at 3-7; 52 at 2-7. She then argues that, under the “two-prong contribution” test, she should be awarded a 24% share. Id. at 9, 20. Her argument lacks merit.

         The 15% minimum share is typically considered a finder’s fee. United States ex rel. Alderson v. Quorum Health Grp. Inc., 171 F.Supp.2d 1323, 1331 (M.D. Fla. 2001).[6]“This incentive compensation is paid to a relator ‘even if that person does nothing more than file the action in federal court.’” Id. n.29 (quoting 132 Cong. Rec. H9382–03 (Oct. 7, 1986) (statement of Rep. Berman)). Congress permits increased rewards, “above 15% and up to 25%, ” to “encourage assistance from the private citizenry that can make a significant impact on bolstering the Government's fraud enforcement effort.” See Id . at 1331, 1332 (quoting S.Rep. No. 99–345 at 8 (1986) and 132 Cong. Rec. H9382-03 (Oct. 7, 1986) (statement of Rep. Berman) (emphasis added)). The maximum reward of 25% is reserved for relators who “actively and uniquely assist the government in the prosecution of the case.” United States ex rel. Burr v. Blue Cross & Blue Shield of Fla., Inc., 882 F.Supp. 166, 168 (M.D. Fla. 1995) (citation omitted). The relator bears “the burden of proving that [her] contribution warrants up to 25% of the settlement.” United States ex rel. Marchese v. Cell Therapeutics, Inc., 2007 WL 4410255, at *7 (W.D. Wash. 2007). Logically, therefore, the starting point for determining the relator’s share is 15%, and greater assistance results in greater reward.[7] The actual percentage awarded is left to the court's informed discretion. Quorum Health, 171 F.Supp.2d at 1331.

         To inform that discretion, courts have turned to what has been called the “Senate factors” and the Department of Justice’s (“DOJ’s”) internal criteria for calculating the relator’s share. See Id . at 1332-33; United States ex rel. Barker v. Columbus Reg’l Healthcare Sys., 2016 WL 1241095, at *5 (M.D. Ga. 2016); see also United States ex rel. Bibby v. Wells Fargo Bank, N.A., 369 F.Supp. 3d 1346, 1354 (N.D.Ga. 2019). The Senate factors are: (1) the significance of the information provided to the government by the qui tam plaintiff, (2) the contribution of the qui tam plaintiff to the result, and (3) whether the information provided by the relator was previously known to the government. Quorum Health, 171 F.Supp.2d at 1332 (citing S. Rep. No. 99-345, at 28 (1986)). The DOJ guidelines cover these factors and more. They are broken into two categories. One category includes guidelines that increase the relator percentage:

1. The relator reported the fraud promptly.
2. When he learned of the fraud, the relator tried to stop the fraud or reported it to a supervisor or the Government.
3. The qui tam filing, or the ensuing investigation, caused the offender to halt the fraudulent practices.
4. The complaint warned the Government of a significant safety issue.
5. The complaint exposed a nationwide practice.
6. The relator provided extensive, first-hand details of the fraud to the Government.
7. The Government had no knowledge of the fraud.
8. The relator provided substantial assistance during the investigation and/or pre-trial phases of the case.
9. At his deposition and/or trial, the relator was an excellent, credible witness.
10. The relator's counsel provided substantial assistance to the Government.
11. The relator and his counsel supported and cooperated with the Government during the entire proceeding.
12. The case went to trial.
13. The FCA recovery was relatively small.
14. The filing of the complaint had a substantial adverse impact on the relator.

Id. at 1333-34. The second category includes guidelines that decrease the percentage:

1. The relator participated in the fraud.
2. The relator substantially delayed in reporting the fraud or filing the complaint.
3. The relator, or relator's counsel, violated FCA procedures:
a. complaint served on defendant or not filed under seal.
b. the relator publicized the case while it was under seal.
c. statement of material facts and evidence not provided.
4. The relator had little knowledge of the fraud or only suspicions.
5. The relator's knowledge was based primarily on public ...

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