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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-10849
________________________
D.C. No. 0:12-cv-60185-WPD
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
STATE OF FLORIDA, et al.,
Plaintiffs,
MANUEL CHRISTIANSEN,
ex. Rel.,
BRIAN ASHTON,
Plaintiffs-Appellants,
versus
EVERGLADES COLLEGE, INC.,
d.b.a. KEISER UNIVERSITY,
Defendant-Appellee.
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________________________
No. 16-11839
________________________
D.C. No. 0:12-cv-60185-WPD
UNITED STATES OF AMERICA, et al.,
Plaintiffs,
MANUEL CHRISTIANSEN,
ex. Rel.
BRIAN ASHTON,
Plaintiffs-Appellants,
versus
EVERGLADES COLLEGE, INC.,
d.b.a. KEISER UNIVERSITY,
Defendant-Appellee.
________________________
Appeals from the United States District Court
for the Southern District of Florida
________________________
(May 3, 2017)
Before, HULL, MARTIN, and EBEL, ∗ Circuit Judges.
EBEL, Circuit Judge:
∗
The Honorable David M. Ebel, Senior United States Circuit Judge for the United States Court
of Appeals for the Tenth Circuit, sitting by designation.
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Manuel Christiansen and Brian Ashton (Relators) brought a qui tam lawsuit
against Everglades College, Inc., d.b.a. Keiser University (Keiser University)
under the federal False Claims Act (FCA). They alleged that Keiser University, a
participant in federal student financial-aid programs, falsely certified compliance
with a federal law banning incentive payments to university admissions counselors.
When the United States initially declined to intervene and take over the case,
Relators pursued the action and won only a limited trial victory—no damages and
only $11,000 in penalties—so they appealed to this Court. During the pendency of
that appeal, however, the United States stepped in and settled the case with Keiser,
securing a much larger monetary recovery than Relators procured at trial.
Confident that they could have prevailed on appeal, Relators believed the
rug had been pulled out from under them. They argued the United States had no
right to intervene so late in the proceedings, they challenged the underlying
fairness of the settlement, and they asked for an evidentiary hearing and discovery
into the government’s settlement deliberations in search of a nefarious motive.
The district court rejected these arguments and allowed the United States to
intervene, approved the settlement, and denied Relators’ requests for an
evidentiary hearing and discovery pertaining to the government’s decision to
intervene and settle the case. Relators now appeal those rulings. Appeal No. 16-
10849.
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Relators also appeal from the district court’s subsequent award of reduced
attorneys’ fees and costs. Appeal No. 16-11839. In light of the paltry outcome
secured at trial and Relators’ opposition to the eventual settlement, which had
resulted in a significantly greater monetary recovery, the district court trimmed
Relators’ fees and costs to a small fraction of the requested award.
Recognizing that the settlement and the attorneys’ fees are inextricably
linked, we consolidated these appeals. Exercising jurisdiction under 28 U.S.C.
§ 1291, we AFFIRM in both Appeals Nos. 16-10849 and 16-11839.
I. BACKGROUND
A. The Alleged FCA Violations
Keiser University is a non-profit college offering undergraduate and
graduate programs across more than a dozen campuses. Many of Keiser’s students
receive federally sponsored financial aid under Title IV of the Higher Education
Act of 1965, 20 U.S.C. §§ 1070-1099d. In order to receive Title IV funds, schools
must enter into “program participation agreements” with the Department of
Education that condition eligibility for financial aid funds on the institution’s
compliance with various enumerated requirements. 20 U.S.C. § 1094(a). One of
those requirements is known as the Incentive Compensation Ban (ICB), which
prohibits a school from paying incentives to recruiters and admissions personnel
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based on the number of students they enroll. Id. § 1094(a)(20); see also 34
C.F.R. § 668.14(b)(22).
Relators, two former employees who worked in Keiser’s admissions
department, alleged that Keiser submitted more than 230,000 claims for a total of
$1.2 billion in federal financial aid, all the while falsely certifying to the United
States that Keiser was complying with the ICB. According to Relators, Keiser
knew that its admissions personnel received incentive payments based on their
success in securing enrollments. Even with that knowledge, Keiser expressly
certified compliance with the ICB on multiple occasions and—more important to
Relators’ theory of the case—Keiser caused its students to submit claims for
financial aid to the government, all the while knowing that it was violating the
ICB. Relying on the “implied false certification” theory, 1 Relators asserted that
Keiser was liable not only for its own express certifications, but also for the
enormous volume of student-submitted claims.
B. The District Court’s Merits Decision
When Relators initially brought the FCA action, the United States declined
to take over the case, which is the government’s prerogative under 31 U.S.C.
§ 3730(b)(2). Relators thus exercised their statutory right to pursue the case on
1
According to this theory of FCA liability, the submission of a claim for payment may
“impliedly certify” compliance with the government’s payment conditions. See Universal
Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1999-2001 (2016).
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behalf of the United States. Id. § 3730(b)(4)(B). After a bench trial, the district
court handed Relators a victory that fell far short of their expectations. At the
outset, the court agreed that Keiser was in violation of the ICB during the relevant
period. But the court made three conclusions that severely limited Relators’
monetary victory.
First, the court rejected Relators’ theory that each student-submitted
application for financial aid was an actionable FCA claim, reasoning that Keiser
could not control the content, number, and submission of student financial-aid
requests. Second, turning to the certifications that Keiser itself actually sent to the
government, the court found that Keiser’s top policymakers did not become aware
of the improper compensation scheme until November 20, 2009, after which it
knowingly submitted only two certifications of compliance to the government. 2
Keiser was thus liable for only those two false claims, for which the district court
awarded the minimum statutory penalty of $5,500 each—a total of $11,000. Third,
the court rejected Relators’ argument that the government’s damages were equal to
the value of all educational assistance paid to Keiser during the period covered by
the false certifications. It reasoned that the Department of Education would not
have demanded reimbursement for the already-paid Title IV funds even if Keiser
2
On February 9, 2010, Keiser sent an “Electronic Certification” to the government that falsely
certified its compliance with Title IV funding conditions. And on March 5, 2010, Keiser
submitted a “Compliance Audit” that certified the same.
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had disclosed its ICB violations. Thus the government, according to the district
court, suffered no financial damages at all. Instead, the government was entitled
only to the nominal statutory penalties for the two express certifications sent by
Keiser.
C. The United States Intervenes to Settle the Case
Relators appealed the district court’s decision to our Court. The United
States, however, believed an appeal was risky because there was a chance the
Eleventh Circuit would affirm the district court’s narrow interpretation of FCA
liability, thereby impairing FCA enforcement efforts throughout the circuit. Thus,
after Relators’ opening brief was filed in this Court, but before the United States
moved to intervene in the qui tam action, the United States struck a tentative deal
with Keiser. The tentative settlement agreement provided that Keiser would pay
the United States $335,000—more than thirty times the amount recovered by
Relators at trial—and the United States would in turn release Keiser from any
further administrative or civil claims, and even more importantly, would also
refrain from suspending or terminating Keiser’s eligibility for future Title IV funds
based on Keiser’s challenged conduct in this case.
Relators’ merits appeal was still pending on this Court’s docket at the time,
so the district court did not have jurisdiction to enter any orders. Thus, after
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reaching a tentative settlement with Keiser, the United States moved the district
court for an indicative ruling stating that, if the district court reacquired jurisdiction
on remand from this Court, the district court would permit the United States’
intervention and approve the proposed settlement as fair and reasonable. The
district court agreed and issued an indicative order to that effect, reasoning that the
United States could intervene as the real party in interest and that the settlement
was fair and reasonable because it resulted in a recovery far exceeding the amount
obtained by Relators at trial. In light of that indicative ruling, this Court then
remanded the case back to the district court, whereupon the district court granted
the government’s intervention motion.
In that same order, the district court also affirmed a magistrate judge’s
determination that Relators were not entitled to discovery or a full-blown
evidentiary hearing to probe the settlement deliberations and the government’s
rationale for ending the case. Finally, the district court scheduled a statutorily
mandated hearing to confirm that the proposed settlement was fair and reasonable.
After the fairness hearing, the district court approved the settlement, and dismissed
the case with prejudice.
D. Attorneys’ Fees and Costs
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While these developments were unfolding, Relators also sought an award for
attorneys’ fees and costs. After the bench trial, but before the settlement, Relators
asked for over $1 million in attorneys’ fees and almost $76,000 in litigation costs.
In light of Relators’ limited success at trial, the district court reduced the fee award
to $60,000 for their efforts at trial, and trimmed the award of costs to $27,000.
After the eventual settlement, which Relators claimed was brought about by their
appeal, they sought enhanced fees and costs based on the larger settlement figure
that the United States had been able to procure with Keiser, as well as the
additional fees and costs they incurred for their efforts on appeal. The district
court denied that request on the ground that Relators objected to the settlement at
every stage of the proceedings and should not reap the benefits of an outcome they
so vigorously sought to prevent.
Relators now appeal all of these issues.
II. DISCUSSION
We resolve four principal issues on appeal: (1) whether the government was
required to satisfy the FCA’s good-cause intervention requirement as set forth in
31 U.S.C. § 3730(c)(3) when it intervened for the sole purpose of settling the
dispute; (2) whether the proposed settlement was “fair, adequate, and reasonable”
under § 3730(c)(2)(B); (3) whether Relators were entitled to an evidentiary hearing
and discovery to probe the government’s reasons for settling the case; and (4)
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whether the district court abused its discretion in awarding substantially reduced
attorneys’ fees based on Relators’ limited success at trial and subsequent
opposition to the settlement. On all issues, we affirm the district court.
A. The Good-Cause Intervention Requirement
The United States originally declined to proceed with the qui tam action,
which authorized Relators to litigate the case on behalf of the government. 31
U.S.C. § 3730(c)(3) (“If the Government elects not to proceed with the action, the
person who initiated the action shall have the right to conduct the action.”).
Relators were unsatisfied with the trial outcome, however, so they appealed. But
the government was eager to avoid the risk that the Eleventh Circuit would affirm
the ruling below, so it then stepped in and, while the case was pending on appeal,
settled the case, thereby depriving Relators of their chance at reversal and a
subsequent greater recovery upon remand. Relators argue that the district court
erred in granting the government’s motion to intervene for the purpose of settling
the case.
Relators rely on 31 U.S.C. § 3730(c)(3), which provides: “When a [relator]
proceeds with the action, the court, without limiting the status and rights of the
[relator], may nevertheless permit the Government to intervene at a later date upon
a showing of good cause.” 31 U.S.C. § 3730(c)(3) (emphasis added). Relators
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insist that the United States lacked “good cause” to intervene here. We reject this
contention. We hold that, in this case, the United States did not need to satisfy the
good-cause intervention requirement for qui tam actions under 31 U.S.C.
§ 3730(c)(3) because that subsection applies only when the government intervenes
for the purpose of actually proceeding with the litigation—not when it is stepping
in only for the purpose of settling and ending the case. Because intervention was
not required, we need not concern ourselves with whether the requirements of
§ 3730(c)(3), which addresses late intervention by the government for the purpose
of continuing the litigation, have been met. 3
A straightforward reading of the text supports this conclusion. First,
subsection (b)(2) expressly links intervention to the government’s decision to
“proceed with the action.” § 3730(b)(2) (“The Government may elect to intervene
and proceed with the action . . . .” (emphasis added)). Second, in subsections
(c)(2)(A) and (B), the statute spells out the circumstances in which the government
may settle or dismiss a qui tam case, and neither subsection conditions the
government’s rights on formally intervening in the case. Instead, they provide in
3
Intervention under § 3730(c)(3) requires a showing of good cause. According to the
United States, it moved for intervention “in an abundance of caution, and to remove any
potential procedural impediment to effecting the settlement and dismissing the case over
relators’ objections.” U.S. Br. at 35. However, the government’s primary argument, with
which we agree, is that it can settle this case without resorting to formal intervention
under § 3730(c)(3).
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unequivocal terms that “the Government may settle [or dismiss] the action with the
defendant notwithstanding the objections of the person initiating the action.”
§ 3730(c)(2)(A), (B) (emphasis added). In the context of dismissals, the court need
only “provide[] the [relator] with an opportunity for a hearing,” § 3730(c)(2)(A);
and with settlements, the court must “determine[], after a hearing, that the
proposed settlement is fair, adequate, and reasonable under all the circumstances,”
§ 3730(c)(2)(B). We decline to import the good-cause intervention requirement
from subsection (c)(3) into these provisions which specifically govern dismissals
and settlements.
Our sibling circuits have reached the same conclusion. The D.C. Circuit
held in United States ex rel. Schweizer v. Oce N.V. (Schweizer) that the
government does not have to intervene before settling a qui tam action because
“intervention is necessary only if the government wishes to ‘proceed with the
action.’” 677 F.3d 1228, 1233 (D.C. Cir. 2012) (internal quotation marks omitted).
The Fifth Circuit also reasoned that, even when the government does not intervene,
it “may settle a case over a relator’s objections if the relator receives notice and [a]
hearing of the settlement.” Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749, 754
(5th Cir. 2001) (en banc).
And in the closely related context of dismissals, other circuits have also
declined to require good cause or formal intervention. For instance, the Tenth
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Circuit in Ridenour v. Kaiser-Hill Co. focused on the plain statutory language,
noting that it could “identify nothing in the language of [the subsection on
dismissals] to suggest the authority of the Government to dismiss a qui tam action
is dependent upon prior intervention in the case.” 397 F.3d 925, 933 (10th Cir.
2005); see also Swift v. United States, 318 F.3d 250, 251-52 (D.C. Cir. 2003)
(finding intervention necessary “only if the government wishes to ‘proceed with
the action’” and “[e]nding the case by dismissing it is not proceeding with the
action”); Riley, 252 F.3d at 753 (5th Cir.) (noting that “the government retains the
unilateral power to dismiss an action ‘notwithstanding the objections of the
person’” (quoting Searcy v. Philips Elecs. N. Am. Corp., 117 F.3d 154, 160 (5th
Cir. 1997))).
Thus, consistent with the holdings of other circuits, we hold that the United
States is not required to satisfy the good-cause intervention standard in
§ 3730(c)(3) when settling a qui tam action brought under the FCA.
B. Whether the Proposed Settlement Was “fair, adequate, and reasonable”
The United States “may settle the action with the defendant . . . if the court
determines, after a hearing, that the proposed settlement is fair, adequate, and
reasonable under all the circumstances.” 31 U.S.C. § 3730(c)(2)(B) (emphasis
added). The United States and Keiser struck a deal providing that Keiser would
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pay the government $335,000 and the government would release Keiser from any
further claims and preserve Keiser’s eligibility for future Title IV funds. The
district court, after a hearing, determined this proposed agreement was “fair,
adequate, and reasonable” under the statute. Relators argue that the settlement was
unreasonable because they were likely to win appellate reversal and thereafter
secure a potentially enormous monetary recovery. 4
In evaluating the fairness and reasonableness of the settlement, we first
decide the proper standard for reviewing proposed settlements between the United
States and an FCA defendant. We then turn to the substance of this particular
agreement and conclude that it was “fair, adequate, and reasonable.”
1. The proper standard for evaluating FCA settlements
Relators ask us to review the proposed FCA settlement under the same
rubric used to evaluate proposed class settlement between private parties under
Fed. R. Civ. P. 23. Some district courts have done just that. See United States ex
rel. Schweizer v. Oce N. Am., Inc., 956 F. Supp. 2d 1, 10-11 (D.D.C. 2013);
United States ex rel. Resnick v. Weill Med. Coll. of Cornell Univ., No. 04 CIV.
4
Relators believe Keiser is liable for the submission of more than 230,000 false claims, each
receiving a statutory penalty of up to $11,000. 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9).
That results in a total of around $2.53 billion. Add to that $1.2 billion in damages allegedly
suffered by the government (according to Relators), which gets trebled under the FCA,
§ 3729(a)(1), for a total of $3.6 billion. All of that together amounts to about $6.13 billion. That
amount is significant by any standards, although Relators did suggest before settlement that they
would not ultimately seek that full amount of damages and penalties.
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3088 (WHP), 2009 WL 637137, at *2 (S.D.N.Y. Mar. 5, 2009) (unreported);
United States ex rel. Nudelman v. Int’l Rehab. Assocs., Inc., No. Civ.A. 00-1837,
2004 WL 1091032, at *1 n.1 (E.D. Pa. May 14, 2004) (unreported). Rule 23(e)(2)
uses almost the identical language found in 31 U.S.C. § 3730(c)(2)(B). It provides
that a class settlement must be “fair, reasonable, and adequate” to protect the
interests of absent class members. Fed. R. Civ. P. 23(e)(2). In reviewing the
fairness of class settlements in the Eleventh Circuit, a court considers the
likelihood of success at trial and the range of possible recovery, as well as the
complexity and expense of the litigation and the stage of the proceedings at which
the settlement is reached, among other factors. See, e.g., Day v. Persels & Assocs.,
LLC, 729 F.3d 1309, 1326 (11th Cir. 2013). In general, we analyze these factors
without deference to the parties settling the dispute because the purpose of our
judicial review is to protect absent class members from an unfair bargain. See
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997) (noting the review of
class settlements “protects unnamed class members ‘from unjust or unfair
settlements’ . . .” (quoting 7B Charles Alan Wright et al., Federal Practice and
Procedure § 1797 (2d ed. 1986))).
But a qui tam FCA suit materially differs from class-action litigation
between private parties for two reasons. First, unlike members of a plaintiff class,
a qui tam relator has suffered no invasion of his own rights. See Vt. Agency of
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Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 772-73 (2000) (analyzing
whether FCA relators have Article III standing when they have suffered no legally
cognizable injury themselves). The relator instead brings the qui tam claim as the
assignee of the United States’ claim, with the government being the real party in
interest to FCA actions. See id. at 773-74; see also United States ex rel. Eisenstein
v. City of New York, 556 U.S. 928, 934-35 (2009); Timson v. Sampson, 518 F.3d
870, 873 (11th Cir. 2008) (per curiam). So, unlike with class-action settlements,
when the government settles a qui tam case, it is agreeing to compromise with
respect to its own injuries only, not those of the relator or other absent parties.
Second, also unlike with private plaintiffs, the government’s interests are not
confined to maximizing recovery against the defendant. The United States may
want to consider whether the maximum recovery is proportional to the seriousness
of the misconduct. It may also wish to consider public policy consequences or
political ramifications. Moreover, it could conclude that limited prosecutorial
resources are not worth spending on continued monitoring of the case, which it
often must do even when the relator is proceeding with the action. These
considerations are entirely absent when evaluating a proposed class settlement
between private parties. Thus, we conclude that the Rule 23 standard for class
settlements between private parties is not the proper framework for evaluating
FCA settlements between the government and the defendant.
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Unlike reviewing class-action settlements, in the FCA context there must be
considerable deference to the settlement rationale offered by the government. The
need for deference arises out of the loose similarity between government-obtained
FCA settlements and decisions by the government not to prosecute or enforce an
administrative remedy, which are presumptively unreviewable. See, e.g., Heckler
v. Chaney, 470 U.S. 821, 832 (1985). For that reason, some circuits have said the
government may dismiss a relator’s claim so long as dismissal is rationally related
to a valid government purpose. See Ridenour v. Kaiser-Hill Co., 397 F.3d 925,
936 (10th Cir. 2005); United States ex rel. Sequoia Orange Co. v. Baird-Neece
Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998).
Relators are correct, however, to point out that settlement under the FCA is
treated differently than dismissal. When the government seeks to dismiss the FCA
action, the statute does not prescribe a judicial determination of reasonableness, see
31 U.S.C. § 3730(c)(2)(A); whereas when the government wants to settle a qui tam
claim, the court must find the settlement is “fair, adequate, and reasonable,”
§ 3730(c)(2)(B). See United States ex rel. Schweizer v. Oce N.V., 677 F.3d 1228,
1233-34 (D.C. Cir. 2012) (offering a thorough analysis of why FCA settlements
warrant more rigorous judicial review than dismissals). Because of this differential
statutory treatment, government-obtained FCA settlements do not receive the same
level of deference that applies to dismissals.
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That being said, some limited deference is still warranted. The United
States’ decision to end a case through settlement is similar enough to a decision to
dismiss the case—a choice committed to the discretion of the Executive Branch—
that this Court must afford some degree of respect to the government’s settlement
rationale. At the same time, given the FCA’s mandate that we review settlements
for fairness, we cannot just rubber stamp the government’s justifications. In light
of these principles, our review of proposed settlements must account for the
reasonableness of the rationale offered by the government as well as the potentially
prejudicial effect on the relator. Thus, we ask whether the government has
advanced a reasonable basis for concluding the settlement is in the best interests of
the United States, and whether the settlement unfairly reduces the relator’s
potential qui tam recovery.
With this in mind, we proceed to evaluate the proposed settlement in this
case.
2. The proposed settlement is “fair, adequate, and reasonable”
We conclude that the proposed settlement is “fair, adequate, and
reasonable.” It secures for the United States a recovery that is thirty times larger
than the district court’s award at trial—that means higher recovery for both the
United States and Relators. See 31 U.S.C. § 3730(d) (establishing a qui tam
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relator’s share as a variable percentage of the proceeds). From Relators’ point of
view, however, that is cold comfort. In their view, the potential recovery of
billions of dollars is so large that the “expected value”—potential recovery
multiplied by the odds of obtaining it—dwarfs the $335,000 settlement figure,
rendering the government’s settlement decision unreasonable.
But unlike with private actors, the government’s decision to settle a case
does not turn solely on whether settlement is most likely to maximize the monetary
recovery. As discussed earlier, the government may conclude that settling the case
imposes liability reasonably proportionate to the gravity of the misconduct. Or it
might wish to avoid expending further resources in monitoring the case as it
proceeds through the appellate and (if remanded) trial process. And most
importantly for the United States here, the government must be wary of the
precedential impact of a potentially adverse appellate decision. If the Eleventh
Circuit affirmed the district court’s restrictive reading of the FCA here, the
government would be limited in its enforcement efforts all around the Circuit.
That enforcement burden would ultimately translate into lower recoveries across
the board.
The government was not unreasonable in hedging its bets in this regard.
Much is made in the parties’ briefs about whether Relators would have succeeded
on appeal, and we offer no comment on the merits of that debate. But it is evident
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that, at the very least, Relators’ case hinged on a proposition that is not settled in
this Circuit: whether an educational institution that has falsely certified compliance
with federal payment conditions can be liable under the FCA for financial-aid
requests submitted by its students. Winning the bulk of Relators’ claimed penalties
and alleged damages relied crucially on being able to attribute the 230,000 student-
submitted claims to Keiser, even though Keiser did not control the content or
submission of those claims. But that is an open question in this Circuit, so the
United States did not act unreasonably in preferring the certainty of a settlement to
the uncertainty of an appeal.
The United States has thus advanced a reasonable basis for concluding this
proposed settlement furthers its best interests without unfairly reducing Relators’
qui tam recovery (in fact, it guarantees a higher recovery for them). It is thus “fair,
adequate, and reasonable.” We therefore find the proposed settlement satisfies
§ 3730(c)(2)(B).
C. Entitlement to an Evidentiary Hearing and Discovery
The FCA entitles a qui tam relator to a fairness hearing as of right when the
United States proposes a settlement with an FCA defendant. 31 U.S.C.
§ 3730(c)(2)(B). That statutory entitlement, however, does not include the right to
unearth new evidence at the hearing to attack the proposed settlement. Instead, the
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statutory hearing provision “serves a more limited purpose of forcing the
government to provide some reasoning behind its decision to settle the case and
giving the plaintiff-relators an opportunity to direct the court’s attention to facts or
allegations that would suggest the settlement was” unreasonable. United States ex
rel. Schweizer v. Oce N. Am., Inc., 956 F. Supp. 2d 1, 11 (D.D.C. 2013). In other
words, the relator is afforded an opportunity to highlight existing evidence of
impropriety or unreasonableness.
To conclude that the statute mandates the right to develop new evidence
would risk ballooning the FCA settlement hearing into a mini-trial on the merits.
The government would have to explain why it considered an appellate defeat
possible in light of the facts and law governing the case at hand, the relator would
then dispute that assessment, and a fight over the merits would ensue. But the
United States often settles a case precisely to avoid such a fight. That “would put
the cart before the horse, in essence making trial a precondition of settlement.” Id.
To avoid that result, we construe the statutory right to a hearing to include no more
than a right to highlight existing evidence and make arguments, based on that
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evidence, that the proposed settlement is unreasonable or improper.5 That is all the
statute compels.
A court still retains, however, the inherent equitable power to give more than
the FCA minimally commands. A district court could give a qui tam relator the
opportunity to present and develop new evidence when he shows a substantial and
particularized need for such a hearing. A relator could, for example, potentially
make that showing by presenting a colorable and non-speculative claim that the
United States has neglected to investigate the allegations, or that its settlement
decision was motivated by improper considerations, such as collusion or bribery. 6
We stress that it is the relator’s burden to demonstrate this substantial and
particularized need—and absent such a showing the district court ordinarily will
not afford an evidentiary hearing.
In this case, the district court denied Relators’ request for an evidentiary
hearing. We affirm that denial. Relators have not demonstrated a substantial or
particularized need to develop new evidence because there is no colorable and non-
5
United States ex rel. McCoy v. Cal. Med. Review, Inc., 133 F.R.D. 143 (N.D. Cal. 1990) does
not hold to the contrary. The district court in McCoy questioned how a relator could challenge
an FCA settlement’s fairness without the opportunity to probe the government’s rationale. Id. at
149. But as we explain below, we do not foreclose every effort to present evidence at a
hearing—or even to obtain limited discovery. As we hereafter explain, a district court may order
such measures when the relator demonstrates a substantial and particularized need for them.
6
A variant of this test was articulated by the Judiciary Committee of the U.S. Senate in its
committee report on the proposed 1986 amendments to the FCA, which included this fairness
hearing provision. See S. Rep. 99-345, at 26 (1986), reprinted in 1986 U.S.C.C.A.N. 5266,
5291.
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speculative claim that the United States failed to investigate the allegations or
acted with improper motives. Relators did offer several reasons why they have
met that burden, but we reject those arguments as insufficient.
First, Relators repeat their contention that the government’s settlement
rationale was patently unreasonable. Therefore, in their view, the offered reason
for the settlement must be a pretext for some ulterior motive. But that cannot be
so. As we have already explained, the government’s rationale was reasonable. So
we decline to infer a nefarious motive from the facial reasonableness of the
government’s settlement rationale.
Second, Relators take issue with their exclusion from the settlement
negotiations. Why would the United States have kept them in the dark about the
ongoing settlement talks, Relators argue, if it were not hiding something? This
allegation goes too far. The government explained that it excluded Relators from
its direct negotiations with Keiser because Relators’ confidence of appellate
reversal and adamant demand for billions of dollars would have impeded
productive settlement negotiations. In any event, the United States did invite
Relators’ counsel to meet and discuss the proposed settlement after a tentative deal
was reached with Keiser. Relators’ counsel accepted the invitation and explained
his objection to the notion of settling the case while on appeal. Nevertheless, the
United States decided to go forward with its settlement with Keiser. Relators were
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thus hardly kept in the dark such that we could plausibly infer improper motives by
the government.
Third, Relators allege that the United States did not read their opening brief
on appeal before settling the case. Thus, in their view, the government could not
have been adequately informed about the likelihood of success on appeal. But the
United States had been monitoring the case closely while it proceeded through
trial—it knew the facts and made its own informed conclusion about the law. In
any event, before the government submitted the proposed settlement to the district
court, the government lawyer responsible for the final settlement decision did read
Relators’ opening appellate brief. It thus stretches credulity to believe that the
United States made so uninformed a decision that Relators are entitled to probe
further with an evidentiary hearing. 7
In addition to the opportunity to develop evidence at a hearing, Relators
requested discovery into the government’s settlement rationale. They propounded
interrogatories inquiring about each demand and offer made during negotiation of
the proposed settlement, the government’s evaluation of Relators’ likelihood of
success on appeal, the reasons the United States filed Statements of Interest after
trial, and the identities of the government lawyers who participated in various
7
Relators make additional arguments about why the government’s argument is pretextual and
the need for further evidence. We reject these as meritless.
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aspects of the case. The district court shielded the United States from these
requests, and we affirm that decision.
The FCA does not expressly entitle the objecting qui tam relator to
discovery at all. See 31 U.S.C. § 3730(c)(2)(B). Further, much like an evidentiary
hearing, discovery into the government’s settlement rationale risks converting the
court’s evaluation of the settlement’s reasonableness into a mini-trial on the
merits. See Schweizer, 956 F. Supp. 2d at 11. That is generally antithetical to the
government’s prerogative to end a qui tam case brought in its own name.
That being said, as with the evidentiary hearing, a district court has the
equitable power to compel discovery when the relator demonstrates a substantial
and particularized need for it. It is the relator’s burden to come forward with a
colorable and non-speculative claim that the government’s settlement rationale is
improper and that further disclosures are needed.8 But as earlier explained,
Relators have come forward with no colorable and non-speculative claim of
improper motive or inadequate investigation by the United States. Thus, the
district court did not err in declining to compel discovery in this case.
D. Attorneys’ Fees and Costs
8
When a relator meets that burden, he may be afforded limited discovery to “effectuate the goal
of allowing [him] meaningful participation in the fairness hearing without unduly burdening the
United States or the defendants or causing unnecessary delay.” McCoy, 133 F.R.D. at 149.
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After trial, Relators sought over $1 million in attorneys’ fees and almost
$76,000 in litigation expenses. The district court determined, however, that
Relators’ limited trial victory warranted an across-the-board reduction in their total
fee award to $60,000. Relators now object to that reduction.9 Reviewing the
award for abuse of discretion, see Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1351
(11th Cir. 2008), we reject most of Relators’ arguments for reversal as meritless.
But one particular contention warrants further discussion. They argue that the
amount of recovery is not an appropriate consideration—or at least not a
significant consideration—in awarding attorneys’ fees for qui tam FCA cases. We
disagree.
In Hensley v. Eckerhart, a civil-rights case involving attorneys’ fees
awarded under 42 U.S.C. § 1988, the Supreme Court held that the lodestar
amount—which is “[t]he product of reasonable hours times a reasonable rate”—
may be adjusted downward depending on the “results obtained.” 461 U.S. 424,
434, (1983) (internal quotation marks omitted). When the prevailing party
achieved only a “partial or limited success,” the lodestar figure “may be an
excessive amount” because “the most critical factor is the degree of success
obtained.” Id. at 436 (emphasis added). Moreover, when the district court
9
The district court also reduced the litigation expenses to $27,000, which Relators challenge.
Finding no error in that regard, we also affirm the district court on that issue.
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“reduce[s] the award to account for the limited success[,] [t]he court necessarily
has discretion in making this equitable judgment.” Id. at 436-37.
The Supreme Court then decided Farrar v. Hobby, which relied on Hensley
in holding that a court may reduce the lodestar amount when the plaintiff won only
nominal damages, i.e., when the plaintiff secured only a “technical” victory by
proving a legal violation but suffered no actual damages. 506 U.S. 103, 114
(1992). “In a civil rights suit for damages,” the court reasoned, “the awarding of
nominal damages also highlights the plaintiff’s failure to prove actual,
compensable injury.” Id. at 115. In light of this rationale, Farrar seems especially
applicable to Relators’ case here because Relators were not able to prove Keiser
caused any actual damages—instead they proved that Keiser knowingly submitted
two false claims, which entitled them to an award of only statutory penalties.
In spite of this direction from the Supreme Court, Relators ask us to limit
Hensley and Farrar to claims for private damages—not FCA claims which involve
a suit to recover from fraud on the public fisc. See Hensley, 461 U.S. at 440
(“[P]laintiff’s success is a crucial factor in determining the proper amount of an
award of attorney’s fees under 42 U.S.C. § 1988.” (emphasis added)); Farrar, 506
U.S. at 114 (“Where recovery of private damages is the purpose of civil rights
litigation, a district court, in fixing fees, is obligated to give primary consideration
to the amount of damages awarded as compared to the amount sought.” (emphasis
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added) (internal quotation marks omitted)). And Relators say there is a good
public-policy reason not to extend the Hensley-Farrar principle to FCA cases
because that would deter potential whistleblowers and their attorneys from
bringing qui tam cases that might result in only nominal or a small amount of
damages. See S. Rep. 99-345, at 29 (1986), reprinted in 1986 U.S.C.C.A.N. 5266,
5294 (explaining the importance of attorneys’ fees in FCA qui tam actions).
But Relators offer no authority that declines to apply Hensley and Farrar to
FCA claims. In fact, although we are not bound by it, we have already held that
the amount of recovery is relevant to the fee award in FCA cases. See United
States v. Patrol Servs., Inc., 202 F. App’x 357, 359 (11th Cir. 2006) (unpublished)
(“The district court may adjust the amount depending on a number of factors,
including the quality of the result and representation of the litigation.”). We reject
Relators’ plea to carve out an exception to the Hensley-Farrar principle for FCA
cases. Relators contend that qui tam FCA claims are different because such claims
serve a substantial public interest, but it is not clear why that makes them different
from civil-rights cases which also serve an important public need—or even why
that alleged difference should matter for the award of attorneys’ fees.
Accordingly, we affirm the district court’s reliance on the degree of success in
awarding attorneys’ fees in this case.
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That brings us to one final issue. Relators contend that the district court
abused its discretion in reducing the lodestar amount by over ninety-five percent to
reach $60,000. That reduction, Relators insist, was outside the district court’s
admittedly broad range of discretion under our recent case, Yellow Pages Photos,
Inc. v. Ziplocal, LP (Yellow Pages), 846 F.3d 1159 (11th Cir. 2017) (per curiam).
In that case, we reversed a fee award when the district court reduced the lodestar
amount by more than ninety percent based on the plaintiff’s limited success at trial.
Id. at 1164. But we did so for a reason that does not apply in our case today.
In Yellow Pages, the district court adopted a “strictly mathematical
approach” in arriving at its over ninety-percent reduction figure, which the
Supreme Court has disfavored. Id. (citing Hensley, 461 U.S. at 435 n.11; City of
Riverside v. Rivera, 477 U.S. 561, 574 (1986)). The district court there merely
divided the damages awarded at trial by the maximum damages sought, and then
mechanically applied that fraction to the lodestar amount. Id. at 1164-65. That did
not happen here. The district court expressly considered the “policy considerations
on all sides (including the encouragement of whistle-blowers, the costs incurred by
[Keiser] of defending the lawsuit and considerations of judicial economy), and the
fact that the suit may have had a positive impact on [Keiser’s] conduct.” This
approach was consistent with this Court’s opinion in Yellow Pages, which made
clear that a reduction from a rote application of an arithmetic formula is not
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permissible. The district court considered all of the circumstances, including the
public benefit Relators served. And under our precedent, a public benefit does not
“foreclose a reduction in the lodestar amount.” Popham v. City of Kennesaw, 820
F.2d 1579, 1580 (11th Cir. 1987). If it did, then “Hensley would be
incomprehensible because a reduction is attorney’s fees . . . would never be
warranted.” Id. On this record, we hold the district court did not abuse its
discretion in awarding fees and costs. 10
III. CONCLUSION
We AFFIRM the district court on all issues.
10
When Relators’ appeal of the merits decision prompted the government’s intervention and
settlement, Relators sought a renewed award that incorporated their additional fees and costs
incurred on appeal. But the district court declined, reasoning that Relators should not be able to
reap the benefit of an outcome (the settlement) they so vigorously opposed. Relators challenge
that denial, but based on our precedent we cannot say the district court abused its discretion in
reaching its conclusion. We therefore affirm on that issue.
30