It’s only natural for potential whistleblowers to wonder who is responsible for a qui tam attorney’s fees. In summary:
- Most False Claims Act lawyers represent whistleblowers on a contingency basis, meaning they only get paid if they win.
- The whistleblower gets a percentage of the government’s recovery, and lawyers get a percentage of that percentage.
- The False Claims Act also permits your lawyers to recover hourly fees and costs from the defendants.
- Watch out for lawyers who ask you to cover some or all of their hourly fees from your recovery!
If you are considering filing a lawsuit under the False Claims Act, two of your primary concerns are probably who has to pay your lawyer if you win, and who has to pay your lawyer if you lose?
Let our Atlanta whistleblower attorneys explore these questions in more depth.
Most False Claims Act law firms operate on a contingency fee basis.
False Claims Act cases are high risk, high reward. Many whistleblowers can’t afford to pay hourly fees to their attorneys to litigate against defendants such as medical practices, hospitals, defense contractors, and pharmaceutical companies.
For this reason, most False Claims Act law firms, including ours, operate on a contingency fee basis, meaning they only get paid if they win the case.
As we explain in more detail here, when a False Claims Act case results in a settlement or judgment, the government keeps most of the recovery. However, it pays the whistleblower a “relator’s share,” meaning a percentage of the recovery, as a reward for bringing the case. If the government intervenes in the case, the whistleblower gets between 15% and 25% of the recovery. If the government declines to intervene, so that the whistleblower has to litigate the case without government support, the whistleblower gets between 25% and 30% of the recovery.
For example, if the government were to intervene and settle a qui tam case for $1 million, and it agreed to pay out a 20% relator’s share, the whistleblower would receive $200,000 of the $1 million settlement. As part of the engagement process, the lawyers and client will have agreed upon a percentage of the relator’s share that will be paid to the lawyer as its contingency fee.
The False Claims Act also permits a lawyer to seek statutory fees from the defendant.
In addition to the contingency fee paid from the client’s recovery, the lawyers representing the whistleblower may also request that the losing defendants pay their hourly fees and costs.
Normally, under the “American Rule,” parties pay their own legal fees no matter who wins the case. However, the winning party may ask the losing party to pay its “costs,” meaning actual out-of-pocket expenses such as filing fees and costs of litigations such as photocopying and depositions.
The False Claims Act is one of several “fee-shifting statutes,” which means that it includes a provision that says a successful whistleblower is entitled to be paid reasonable fees, costs, and expenses from the losing defendant. Both the qui tam (fraud) provision and the anti-retaliation provision of the FCA include this fee-shift.
In some instances, attorneys charge their client on an hourly basis and, if the case is successful, the client recovers the money from the defendants at the end. However, FCA litigation is both risky and expensive (more on this below), and most whistleblowers cannot afford to “front” the cost of the litigation.
Accordingly, many whistleblower lawyers—including Bracker & Marcus LLC—choose to advance their time and recover the money directly from the defendants at the conclusion of a successful case. The Supreme Court blessed this type of agreement in Venegas v. Mitchell, 495 U.S. 82, 110 S. Ct. 1679, 109 L. Ed. 2d 74 (1990).
More lawyers won’t necessarily mean you pay more money.
When we sue billion-dollar companies such as defense contractors, pharmaceutical manufacturers, and hospital systems, they hire teams of lawyers from the biggest law firms in America and spend vast amounts of money for defense. Our firm is very good at what we do, which is preparing, filing, and litigating your claims of fraud against the government. But we know our limitations, and it would be foolish of us to think our little firm can keep up with the Joneses. So, in these circumstances, we often bring in co-counsel to assist with the case.
Generally, this should not cost you anything. If your lawyers need additional help, they should be subject to the same terms as your original team: they will receive part of our contingency fee, and they will be able to ask the defendant for their statutory hourly fees.
Therefore, even if an army of lawyers is necessary to litigate a case, the whistleblower’s share is typically unaffected.
Some whistleblower firms may agree to a hybrid arrangement, but we don’t recommend them.
Although most agreements fall into the template described above, sometimes it is advantageous for the whistleblower to pay the hourly fees out of pocket in exchange for a reduced contingency fee.
This can be beneficial to the lawyer, whose hourly fee is now guaranteed by the client, regardless of the outcome of the case. And this can be beneficial to the client, who could recover more of the resulting award. Moreover, if they are successful, they, rather than the lawyers, would recover the fees and costs from the defendant.
This type of arrangement is atypical for a reason. Taking a False Claims Act case through trial can easily run up millions of dollars in attorney’s fees and costs. Proving fraud is notoriously difficult. Moreover, no matter how much you believe in your case, many uncontrollable issues can sink your reward.
For one, under the first-to-file rule, only one whistleblower may bring a lawsuit, and subsequent filers are not entitled to a reward. Because these cases are filed under seal, you cannot find out if such cases exist, and so you could be unintentionally bankrolling an investigation and litigation that benefits someone who filed their case before you.
Similarly, your case could be dismissed under the public disclosure bar. You don’t even have to be aware of the public disclosure for it to keep your claim from proceeding. An SEC filing, a blog, or a confidential federal report could sink your case.
Another reason is that the government has the right to dismiss or settle your case. It might decide that the case you think is worth a hundred million dollars is really worth one million dollars, or worth nothing at all, and there is essentially nothing you can do about it because the case belongs to the government.
With so much on the line, lawyers generally don’t want their clients’ ability to pay to be a barrier to litigating these cases. So, it is pretty rare that most firms would recommend such an agreement or accept such an agreement.
Be wary of whistleblower law firms that want you to cover their attorney’s fees from your contingency fee.
It is important to understand that the contingency fee and the statutory fees are two separate, unrelated items. The contingency fee is what the whistleblower, our client, pays us for our services. It is a percentage of the award from the government and/or any recovery we obtain for anti-retaliation claims.
The statutory hourly fees are paid by the defendant. They are based on the number of hours we have expended working on the case. Whether the lawyers have one thousand dollars in fees or one million dollars in fees, the client’s recovery stays the same.
When there is an intervention, the lines are pretty clearly drawn: the government will ultimately control how much the case will settle for, which in turn triggers the lawyer’s ability to collect fees from the defendant. The lawyer could never divert part of the government’s settlement amount to pay fees, of course.
When the case is declined, however, situations often present themselves where the lines start to get a little fuzzy. The defendant only really cares how much in total it will have to pay—it doesn’t care how much of a settlement payment goes to the qui tam claim, how much goes to the retaliation claim, and how much goes to the lawyer’s fees.
Accordingly, it is important to have a frank conversation with your lawyer before the parties start discussing a settlement, to determine how much of a recovery should pay for the lawyer’s fees versus how much should go towards settling the various claims.
Some whistleblower law firms may prioritize their hourly fees in their representation agreement, which puts the whistleblower in a bind. It is not hard to imagine a scenario where a lawyer has, for example, a million dollars in fees and the defendant offers a million dollars to settle the case. The engagement agreement might give priority to the lawyer’s fees in such a situation, or state that the lawyer’s fees are “covered” by the relator’s recovery (i.e., any unpaid attorneys’ fees can be paid off the top).
Would-be whistleblowers should be careful about agreeing to such a provision. Under such an arrangement, if fees exceed recovery, the whistleblower could wind up receiving nothing. We understand the lawyer’s dilemma—they have spent their time and money on this case, and they want to be compensated for their efforts.
But such language can be toxic to the relationship between client and attorney. Whistleblowers should always have faith that their attorneys have their best interests in mind and at heart. It is not conducive to the lawyer-client relationship for a lawyer to announce, out of the blue, after years of representation, that their fees outstrip the potential recovery and so the whistleblower should be grateful for anything they can get.
Filing a False Claims Act case is a long and difficult process for both whistleblowers and their counsel. It is a partnership that lasts for many years. We want to see our clients rewarded for their bravery. Our clients want to see us get paid for our work. Agreements that tilt the balance toward a lawyer or client can quickly and irreversibly damage that relationship.
What about other whistleblower statutes?
While other whistleblower statutes are also fee-shifting, the IRS and SEC whistleblower statutes are not. They also don’t require the same expertise as the False Claims Act because complaints filed under those statutes, unlike the FCA, cannot be litigated in court if the government declines to intervene. Only the government can litigate and settle these types of complaints.
Legal representation is still important, however, as whistleblowers need someone to package their reports with the correct legal standards and analysis, and perhaps most importantly, to fight on their behalf to recover a share if the case does settle.
However, since these types of whistleblower complaints can never be litigated and end up in trial, lawyers should receive either a contingency fee or an hourly fee (or, like explained above, a hybrid that reduces the former in favor of the latter).
Get an attorney you can trust – with a crystal-clear payment arrangement.
If you’re a whistleblower with a promising case, there shouldn’t be any question as to how your attorneys will be paid – if they get paid at all.
If you have questions about filing or are ready to secure trustworthy representation, call the False Claims Act attorneys at Bracker & Marcus LLC. We can discuss your case and our contingency fee agreement during your free evaluation.