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States ex rel. Hanlon v. Columbine Management Services, Inc.

United States District Court, D. Colorado

March 28, 2017

UNITED STATES ex rel. ANTHONY HANLON, UNITED STATES ex rel. LINDA DOLLAR, and STATE OF COLORADO ex rel. RELATORS, Plaintiffs,
v.
COLUMBINE MANAGEMENT SERVICES, INC., a Colorado corporation doing business as COLUMBINE HEALTH SYSTEMS, and POUDRE VALLEY HEALTH CARE, INC., a Colorado nonprofit corporation doing business as POUDRE VALLEY HEALTH SYSTEM, Defendants. UNITED STATES, Interested Party.

          ORDER RE: DEFENDANTS MOTION FOR SANCTIONS AND ATTORNEY FEES

          Robert E. Blackburn United States District Judge

         The matter before me is the Defendants Columbine Management Services, Inc. and Poudre Valley Health Care, Inc.'s Motion For Sanctions and Attorneys' Fees [#107][1], filed April 11, 2016. The plaintiffs filed a response [#112], and the defendants filed a reply [#115]. I grant the motion in part.

         The defendants filed the motion for attorney fees after I entered an Order Overruling Objections And Adopting Recommendation of United States Magistrate Judge [#104');">104');">104');">104]. In that order, I dismissed the plaintiffs qui tam complaint with prejudice.

         I. STANDARD OF REVIEW

         I have the authority to award attorney fees under the statutes and rules summarized below. First, 31 U.S.C. § 3730(d)(4) concerns qui tam actions, such as this case. Under § 3730(d)(4), I may award attorney fees if the following statutory requirements are met: (1) the government does not proceed with the action; (2) the person bringing the action conducts the action; (3) the defendant prevails in the action; and (4) I find that the claim of the plaintiff was “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4). Vexatious means “without reasonable or probable cause or excuse.” United States v. Gilbert, 198 F.3d 1293, 1298 (11th Cir. 1999) (citing Black's Law Dictionary). Frivolous means “[g]roundless . . . with little prospect of success.” Id. at 1299. This is “a difficult standard to meet, to the point that rarely will a case be sufficiently frivolous to justify imposing attorney fees on the plaintiff.” U.S. ex rel. Grynberg v. Praxair, Inc., 389 F.3d 1038, 1059 (10th Cir. 2004) (citation omitted). Subjective bad faith by the plaintiffs is not a prerequisite to the defendant recovering attorney fees. Id. at 1058.

         Second, under 28 U.S.C. § 1927, “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the . . . attorneys' fees reasonably incurred because of such conduct.” This power must be construed strictly and utilized only in instances evidencing a‘serious and studied disregard for the orderly process of justice.” Braley v. Campbell, 832 F.2d 1504, 1512 (10th Cir. 1987) (citations omitted); Baca v. Berry, 806 F.3d 1262, 1268 (10th Cir. 2015). This standard does not require a motive involving subjective bad-faith. See Braley, 832 F.2d at 1512. “Although subjective good faith on the part of a non-attorney party appellant may in some instances excuse otherwise unreasonable conduct, we are entitled to demand that an attorney exhibit some judgment.” Id. I may award attorney fees when an attorney displays “conduct that, viewed objectively, manifests either intentional or reckless disregard of the attorney's duties to the court.” Id.

         Although the court should resort to such sanctions “only in instances evidencing a serious . . . disregard for the orderly process of justice, ” Dreiling v. Peugeot Motors of America, Inc., 768 F.2d 1159, 1165 (10th Cir. 1985) (citation and internal quotation marks omitted), “[t]he power to assess costs, expenses, and attorney's fees against an attorney personally in the appropriate case is an essential tool to protect both litigants and the ability of the federal courts to decide cases expeditiously and fairly, ” Braley, 832 F.2d at 1512. It is important to note that sanctions under § 1927 may not be based on the plaintiff's filing of her complaint. Steinert v. Winn Group, Inc. 440 F.3d 1214, 1224-1225 (10th Cir. 2006). Applying the language of § 1927 in Steinert, the United States Court of Appeals for the Tenth Circuit held that it “is not possible to multiply proceedings [unreasonably and vexatiously] until after those proceedings have begun.” Id. at 1225.

         Third, I may award attorney fees to sanction a litigant for bad-faith conduct under the inherent power of the court. Chambers v. NASCO, Inc., 501. U.S. 32, 35 (1991). In Chambers, the Supreme Court identified three circumstances where the inherent power of the court to assess attorney fees is relevant: (1) when the litigation of a party directly benefits others, a circumstance known as the “common fund” exception; (2) when a party willfully disobeys a court order; and (3) when a party acts “in bad faith, vexatiously, wantonly, or for oppressive reasons.” Id. at 45-46. Actions that fit into the third category include when a party practices fraud upon the court and when a party “shows bad faith by delaying or disrupting the litigation or by hampering enforcement of a court order.” Id. at 46.

         II. BACKGROUND

         The plaintiffs brought this action as a qui tam action under the False Claims Act (FCA) 31 U.S.C. §§ 3729 - 3733. The FCA prohibits any person from making false or fraudulent claims for payment to the United States and provides for substantial damages and civil penalties for making such claims. 31 U.S.C. § 3729. Under the FCA, private individuals, such as the plaintiffs in this case, may bring a qui tam action in the name of the government based on violations of § 3729. 31 U.S.C. § 3730(b)(1). Such qui tam plaintiffs often are referred to as relators. In addition, the plaintiffs asserted claims under the Antikickback Statute, 42 U.S.C. § 1320a-7b, and the Colorado analog to the False Claims Act.

         The plaintiffs filed this case under seal on March 29, 2013. On June 20, 2014, the government declined to intervene [#22]. The defendants were served with a summons and the complaint in May 2015. The defendants filed motions to dismiss [#60 & #62] in June 2015. In those motions, the defendants asserted that the plaintiffs failed to state viable claims in their complaint. The plaintiffs then filed a motion [#75] to amend their complaint and to add a party. In their responses [#77 & #78] to the motion to amend, the defendants argued that the proposed amended complaint again failed to state any viable claims.

         In a detailed order [#81], the magistrate judge denied the motion to amend [#75] without prejudice. The magistrate judge detailed the reasons why the proposed amended complaint was insufficient. The magistrate judge wrote "it may be helpful for Plaintiffs to provide clearer statements regarding each cause of action being asserted by Plaintiffs, " and, "the Court strongly advises [the plaintiffs] to closely examine Defendants' other arguments in the Responses [#77, #78] to determine whether further amendment is appropriate in order to address the issues that have been raised." Order [#81], pp. 5 - 6.

         Two weeks later, the plaintiffs filed their second motion [#82] to amend their complaint. In a detailed recommendation [#96], the magistrate judge analyzed the latest proposed amended complaint in great detail. Again, the magistrate judge concluded the plaintiffs had not made allegations sufficient to support any of their proposed claims. She recommended that the motion to amend [#82] be denied and that the motions to dismiss of the defendants be granted.

         In my order [#104');">104');">104');">104] adopting the recommendation, I summarized and adopted the analysis of the magistrate judge. I noted that the “plaintiffs have caused nearly three years of undue delay as they attempted, but failed, to state claims which are viable.” Order [#104');">104');">104');">104], p. 6.

Despite many opportunities to cure the deficiencies in the various iterations of their complaints, the plaintiffs have failed to cure those deficiencies. Three years is more than enough time for the plaintiffs to file a valid complaint, if they can. After nearly three years, the plaintiffs have not ...

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