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The plaintiffs’ motion to review and reverse a clerk’s order granting the defendants in a qui tam case their taxable costs is denied in part, where the FCA does not preclude a prevailing defendant from recovering certain costs. The plaintiff’s argued the FCA allows a prevailing defendant to recover attorneys’ fees and costs only when a case is deemed frivolous or vexatious. However, the court disagreed, finding that minor taxable costs are distinct from nontaxable costs and that the FCA made no prohibition on a defendant recovering after a successful defense. The court did agree that some of the defendant’s claimed costs were insufficiently supported and therefore excluded them from the clerk’s order.

The relators in a qui tam case against hospice services provider Care Alternatives filed a motion to stay proceedings and to review the clerk’s order granting in part and denying in part the defendant’s bill of costs.

The relators—four former employees of the defendant—alleged that Care Alternatives submitted false claims for hospice services in violation of the False Claims Act. The United States declined to intervene. The remaining claims in dispute allege inappropriate patient admissions and re-certifications for hospice care in violation of the FCA.

Previously, the court granted summary judgment in favor of the defendants, finding the relators failed to present evidence of “objective falsehoods” or knowingly false certifications. An appeal of that decision is pending in the Third Circuit.

Concurrently, the defendants filed a motion for attorneys’ fees, which was denied, as well as a motion for a bill of costs, which was granted in part for $11,039.35 in costs. The plaintiffs filed this motion to stay and review that clerk’s order.

First, the plaintiffs argued that the defendant’s application to tax costs must be stayed pending the outcome of their appeal of summary judgment. Second, they argued that the FCA preempts Rule 54 and therefore the motion for bill of costs must be denied. Third, the plaintiffs argued that the defendant failed to submit precise costs and therefore waived its rights to taxable costs.

First, the court considered the motion for a stay. First, the court found the plaintiffs would not suffer irreparable harm should the stay be denied. The court reasoned that each plaintiff would have to pay approximately $3,000 to the defendants for their costs, and explained that a purely monetary consideration cannot constitute irreparable harm. Further, regardless of the success of the appeal, the court found the plaintiffs’ failure to show irreparable harm precluded the court from staying the motion for bill of costs. Therefore, the court declined to consider whether the plaintiffs might be successful and denied the motion to stay.

However, the court found it practical to limit the amount of times money must exchanges hands. The court wished to avoid a scenario where the plaintiffs paid the defendants and then would be due a refund if their appeal were successful. Accordingly, the court extended the automatic stay of the execution of this decision until the appeal is decided.

Next, the court considered whether it should vacate the clerk’s order granting some of the defendant’s costs. The relators argued that the FCA preempts Rule 54, which moots the defendant’s right to taxable costs. The plaintiffs noted that Rule 54(d) states that costs should be allowed to the prevailing party unless a federal statute provides otherwise. They then argue that the FCA provides otherwise, as it states that courts may award a defendant reasonable attorneys’ fees and expenses if the defendant prevails and if the court finds the qui tam case was frivolous or vexatious. In short, the plaintiffs argued the defendant must meet both conditions. Because the case was not clearly frivolous, the plaintiffs argued the defendant cannot recover any costs.

The court then reasoned that the core of the issue was whether “reasonable attorneys’ fees and expenses,” as described in the FCA, includes “costs,” as described in Rule 54. If so, then the FCA would apply. If not, then Rule 54 would apply.

The plaintiffs argued that the FCA language included costs, citing the purpose of the statute. They argued that the FCA was broadly written to encourage whistleblowers to bright to light allegations of many types of fraud that might result in financial loss to the government. In that light, the plaintiffs argued that the draconian punishment of taxable costs could not possibly be permitted by the FCA, absent a showing that the lawsuit amounted to harassment.

The plaintiffs noted that no case exists in the Third Circuit of a party to an FCA case being awarded both fees and expenses. Next, they argue that the defendant’s motion is a nefarious attempt to get around the FCA’s high bar for awarding costs, which the defendant knows it cannot meet. They also argued that allowing for costs would have a chilling effect on whistleblowers. Finally, they note that, per another subsection of the FCA that applies when the United States is a plaintiff, a prevailing defendant must obtain its taxable costs via 28 U.S.C. § 1920, separate from other costs, which are obtained via 28 U.S.C. § 2412.

However, while the Third Circuit has not addressed this issue, the court found other courts had shown the arguments untenable. For example, the Second Circuit found that costs and expenses are distinct, with taxable costs limited to relatively minor expenses that are separate from costs for attorneys, experts, and investigators. The Second Circuit found this distinction reflected in the FCA. While not binding on this court, the judge nonetheless found the Second Circuit’s reasoning compelling and found the defendant was not precluded from seeking its taxable costs.

Next, the court examined the amount of costs, if any, that should be awarded. The court noted that the statutory language and Rule 54.1(b) require that requests for costs be sufficiently detailed to demonstrate the nature of the charge and be verified by the applicant’s attorney. Rule 54.1(b) states that if the prevailing party fails to comply with the rest of Local Rule 54.1, then all costs shall be waived. The plaintiffs argued this was the case.

First, they argued that the defendant’s request for deposition costs was not precise, failed to break out nontaxable costs, and failed to precisely divide taxable and nontaxable costs. The defendant sought costs for eleven deposition transcripts. The clerk held that all eleven were taxable, and the plaintiffs did not dispute that ruling. Instead, they took issue with the defendant’s alleged failure to differentiate taxable and non-taxable costs that resulted from the depositions. In essence, they argued that the clerk’s order properly excluded some non-taxable costs, but not all.

The court suggested the argument stemmed from the fact that some of the defendant’s deposition invoices were more detailed than others. One firm’s invoices listed only three items: deposition, exhibits, and delivery/handing. In contrast, a second firm’s invoices were more detailed, separately listing the fees for the deposition itself, rough drafts, exhibits, attendance fees, shipping, and other items. The plaintiffs argued that none of the invoices break out nontaxable costs, which they listed.

The court disagreed with the plaintiffs regarding the more detailed invoices, finding the clerk awarded costs for only a portion of the total invoices. The court agreed with the clerk’s overall judgment on which portions of those invoices were recoverable and found that the defendants had rightly been awarded $5,500.65 in relation to those costs.

However, the court found the invoices from the other firm less clear. The clerk correctly did not award costs for the exhibit and delivery/handling line items, and focused solely on the fee associated with the deposition. Four of those depositions were not expedited, so the fee associated with just the deposition line item is the correct amount to award as costs.

However, the remaining two depositions were marked as having been expedited, but the invoice does not distinguish the cost of the deposition itself from the cost of expedition. The clerk attempted to calculate the cost of the depositions by comparing the price of the expedited depositions and non-expedited depositions, and making a calculation based on the per-page cost.

While this solution was creative, the court found it inappropriate. Rule 54.1 places the burden on the party seeking costs to set them for precisely so they can be easily understood. Where the defendant failed to meet this burden, it was not the responsibility of the clerk to guess. The court also declined to do any heavy lifting. Therefore, the court deducted the amount awarded for these depositions from the total.

Next, the plaintiffs challenged the defendant’s costs for copies and exemplification for electronic discovery, for which the clerk granted $274.80 of a requested $10,392.40. In reaching that decision, the clerk determined that most of the costs did not meet the definition of taxable costs. The plaintiffs argued that these costs too were insufficiently detailed. However, the court disagreed, finding the defendant had spelled out its costs.