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United States ex rel Rigsby v. State Farm Fire and Casualty Co.

United States District Court, S.D. Mississippi, Southern Division

September 27, 2017




         BEFORE THE COURT are the Motion [1299] to Extinguish Gilbert LLP's Lien filed by Relators Cori Rigsby and Kerri Rigsby, and the Counter-Motion [1311] to Set Value of Lien filed by Gilbert LLP (“Gilbert”). Both Motions are fully briefed. The Court has also received supplemental briefing [1327], [1329], [1330], [1331]. After consideration of the Motions, the related pleadings, the record in this case, and relevant legal authority, the Court finds that Relators' Motion [1299] should be granted, that Gilbert's Counter-Motion [1311] should be denied, and that Gilbert's lien [991] should be extinguished.

         I. BACKGROUND

         Relators/Counter-Defendants Cori Rigsby and Kerri Rigsby initiated this action by filing a Complaint [2] on April 26, 2006, in camera and under seal, pursuant to the False Claims Act (“FCA”), 31 U.S.C. §§ 3729, et seq. Relators named as a Defendant, among others, State Farm Fire and Casualty Company (“State Farm”). Compl. [2] at 1. State Farm filed a Counterclaim against Relators. On October 29, 2015, State Farm filed its Third Amended Counterclaim [1232], which remains pending.

         A. Relators' counsel

         At the time Relators filed their original Complaint [2], they were represented by counsel from the Scruggs Law Firm of Oxford, Mississippi; Bartimus, Frickleton, Robertson & Gorny, P.C. of Jefferson City, Missouri; and Bartle, Marcus & Graves, PC of Kansas City, Missouri. Compl. [2] at 32-33. Attorneys from the Scruggs Law Firm were permitted to withdraw by Text Order entered on March 20, 2008. On May 19, 2008, the Court granted State Farm's Motion [103] to Disqualify and disqualified Relators' remaining counsel from further participation in this case. Mem. Op. [177] at 5; Order [178] at 1. On June 19, 2008, the Court denied a Motion for Reconsideration [184] of the disqualification Order [178]. Order [190] at 5.

         On July 30, 2008, local counsel C. Maison Heidelberg and Ginny Y. Kennedy of Maison Heidelberg P.A. in Ridgeland, Mississippi, entered appearances on behalf of Relators. Notice [197] at 1; Notice [198] at 1. Thereafter, counsel from Gilbert sought and obtained pro hac vice (“PHV”) admission for attorneys including August J. Matteis, Jr., Craig J. Litherland, Benjamin R. Davidson, Scott D. Gilbert, Derek Yoshio Sugimura, and Lucian C. Martinez, Jr., to represent Relators. These attorneys were all with the Gilbert law firm when they sought admittance PHV. Over time the name of the firm changed from Gilbert Randolph, LLP to Gilbert Oshinsky LLP on October 17, 2008, see Notice [245] at 1, and ultimately to Gilbert LLP on August 4, 2009, see Notice [354] at 1.

         B. Gilbert's engagement letters with Relators

         Gilbert LLP has submitted a copy of an engagement letter [1311-2] between Gilbert Randolph LLP and Relators dated August 14, 2008 (the “August 2008 Engagement Letter”). Though the letter contains blanks for Relators' signatures, the copy provided to the Court is not executed. See Aug. 2008 Engagement Letter [1311-2] at 2.

         Gilbert LLP has also presented copies of December 1, 2008, engagement letters [1311-3], [1311-4] between Gilbert Oshinsky LLP and Relators, which were executed by Matteis on behalf of the firm and by each Relator (the “December 2008 Engagement Letters”). These letters provide in relevant part that

Costs, Expenses, and Attorneys' Fees
This is a contingent fee agreement. Accordingly, you will not be required to pay any amount to [Gilbert Oshinsky LLP] unless you receive a monetary payment through settlement and/or judgment.
Costs and Expenses
[Gilbert Oshinsky LLP] will advance all costs and expenses related to this matter. If you prevail in this matter and receive payment as a result of a judgment or settlement, you will reimburse the Firm for all costs and expenses related to this claim from the net amount received by you, not to exceed 7.5% of the net amount . . . .
If you recover nothing from the qui tam action, you will not be charged for any costs or expenses. You and [Gilbert Oshinsky LLP] also agree to seek recovery of all costs and expenses from the defendants and/or the government, to the extent that such a recovery is permitted under applicable law. If [Gilbert Oshinsky LLP] recovers all costs and expenses from defendants or the government, then [Gilbert Oshinsky LLP] will not seek recovery of such costs and expenses from you. However, if [Gilbert Oshinsky LLP] does not recover all of its costs and expenses from the defendants, you will reimburse [Gilbert Oshinsky LLP] for costs and expenses up to 7.5% of your total net recovery as provided above.
Attorneys' Fees
If you recover money through judgment, settlement or other means as the result of the qui tam action, then, in addition to reimbursing the Firm for costs and expenses as described above, you will pay the Firm a contingency fee of forty percent (40%) of the gross amount of any sum that you recover (calculated prior to the deduction of any costs and expenses enumerated above).
* * *
* * *
In the event that this representation is terminated prior to the conclusion of this matter, you agree to reimburse [Gilbert Oshinsky LLP] for costs and expenses as provided above, in the section “Costs, Expenses, and Attorneys' Fees.” In addition, [Gilbert Oshinsky LLP] will be entitled to receive payment of its attorneys' fees out of any ultimate award or settlement that you receive for the services it rendered, from the initiation of this representation to the date on which [Gilbert Oshinsky LLP] withdrew or was terminated from the representation. Such payment will be made on the basis of its customary hourly rates rather than on a contingency-fee basis. However, if [Gilbert Oshinsky LLP's] representation is terminated by you, and you eventually recover proceeds from the qui tam action through an award or settlement, [Gilbert Oshinsky LLP] reserves the right to seek a partial contingency fee award from the court, if appropriate.

         Dec. 2008 Engagement Letters [1311-3], [1311-4] at 2, 4 (footnote as to customary rates omitted) (emphasis added).

         C. Relators' termination of Gilbert

         “In or around October 2011, Matteis and Sugimura withdrew from Gilbert after Matteis formed Weisbrod Matteis & Copely [sic] PLLC (‘WMC'). Sugimura joined Matteis at WMC.” Decl. of Craig J. Litherland [1311-1] at 2. “After Matteis formed WMC, Gilbert offered to continue representing the Relators, but, ultimately, the Relators chose to engage WMC and continue with Matteis as their lead counsel.” Id. On March 30, 2012, Relators' local counsel filed a Motion [941] for an Order authorizing Gilbert LLP and its attorneys Gilbert, Litherland, and Davidson to withdraw as counsel, which the Court granted by Text Order on April 2, 2012.

         On January 25, 2013, Gilbert LLP filed a Notice of Former Counsel's Lien [991]. This Notice provided as follows:

Please take notice that the firm GILBERT LLP (“Gilbert”), former counsel to Relators Cory Rigsby and Kerri Rigsby (“Relators”) in the above captioned case, holds a lien upon any funds or other assets that Relators may recover based upon the causes of action asserted by Relators herein. Such lien is security for the fees and expenses owed to Gilbert in connection with its services rendered in relation to the causes of action asserted herein. The lienholder, Gilbert, may be contacted at:
c/o Craig J. Litherland
1100 New York Avenue, N.W.
Suite 700
Washington, D.C. 20005

         Notice [991] at 1.

         D. The Court's award of attorneys' fees and expenses to Relators

         The merits of Relators' qui tam claims as to the McIntosh property proceeded to trial from March 25, 2013, to April 8, 2013. The jury found that State Farm had submitted a false claim and a false record material to a false claim to the Government in connection with damage to the home of Thomas and Pamela McIntosh located in Biloxi, Mississippi.

         “In or around April 2013, after prevailing against State Farm in a jury trial, the Relators' current counsel contacted Gilbert and requested that Gilbert submit a fee petition in connection with separate fee petitions the Relators were making through their present counsel.” Decl. of Craig J. Litherland [1311-1] at 3. According to Litherland, Gilbert declined this request because it no longer represented Relators and believed that the “FCA's fee-shifting provision did not permit Gilbert to make such a request.” Id. “Relators' counsel then requested that Gilbert provide versions of its fee and expense invoices with such edits as Gilbert would apply if Gilbert was submitting its own fee request.” Id. Gilbert also declined to do this, as it “believed that Relators' decision as to which fees and expenses to seek from State Farm was a strategy decision for Relators and their counsel.” Id.

         Copies of e-mails dated May 2 and 3, 2013, reflect that there was more discussion between Relators' current counsel at WMC and former counsel at Gilbert as to whether Gilbert would submit a declaration, affidavit, or any other support for an award of Gilbert's fees and expenses. See E-Mails [1299-1] at 2-5. In the last email, a Gilbert attorney informed Relators' counsel that he would be sending an updated spreadsheet, but “[w]e will not be submitting an affidavit regarding our fees and expenses.” Id. at 2. In connection with the present Motions, Litherland now informs the Court that

[a]s a means of cooperating with the Relators, Gilbert did provide the Relators with spreadsheets containing a listing of Gilbert's attorneys' fees and expenses incurred during the course of Gilbert's representation of the Relators. These largely unedited materials were ultimately submitted as part of the Relators' fee petition, but without any explanatory documentation or any declarations from Mr. Matteis (who supervised the work giving rise to these fees and expenses) attesting to their reasonableness.

         Decl. of Craig J. Litherland [1311-1] at 3. What authority or obligation Mr. Matteis would have had to attest to the reasonableness of Gilbert's fees, other than his own, is unclear.

         On May 6, 2013, Relators filed a Motion to Initiate Discovery, Impose Maximum Penalty, Award Maximum Relators' Share, and Award Relators Their Attorneys' Fees, Expenses, and Costs [1104]. Pursuant to 31 U.S.C. § 3730(d)(2), Relators sought compensation for work performed by the two law firms that currently represent them, Weisbrod Matteis & Copley, PLLC (“WMC”) and Heidelberg Harmon PLLC (“HH”), specifically attorneys' fees in the amount of $1, 232, 735.0 and costs and expenses in the amount of $287, 346.34. Relators also submitted a request for the fees, costs, and expenses of Gilbert LLP in the amount of $5, 225, 303.67. Relators supplied declarations and affidavits supporting the billings by WMC and HH, but submitted only the spreadsheets of fees and costs Gilbert had supplied.

         On February 21, 2014, the Court entered an Order [1128] granting in part and denying in part Relators' Motion [1104]. As for Gilbert's attorneys' fees, the Court awarded Relators $1, 080, 800.00 for work performed by Matteis while at Gilbert and $421, 138.80 for work performed by Sugimura at Gilbert, for a total of $1, 501, 938.80. Order [1128] at 39. The Court found that Relators sought “attorneys' fees in the amount of $5, 225, 303.67 for work performed by the Gilbert law firm and have submitted spreadsheets of fees billed by Gilbert. The timekeepers [were] identified only by their initials.” Id. at 29. Because the Court was “unable to ascertain whether the hourly rates listed or the amount of time expended is reasonable for these unknown timekeepers, ” other than Matteis and Sugimura, the Court disallowed these time entries. Id.

         With respect to Gilbert's expense request of $649, 843.67, “[d]ue to the sparse detail contained in the Gilbert expense spreadsheet, the Court [found] that the majority of the expenses sought lack[ed] adequate support and should be excluded.” Id. at 43. The Court also excluded all overhead expenses normally absorbed into the attorney's hourly rate and fees for expert witnesses who were not called as witnesses at trial or even listed on the witness list in the Second Amended Pretrial Order [1071], including one who was excluded from testifying by the Court. Id. Professional service fees paid by Gilbert to HH for serving as local counsel were also declined, as the Court had not been “provided the billing records supporting HH's charges to Gilbert.” Id. at 44. The Court ultimately found that expenses totaling $180, 756.78 from Gilbert were recoverable from State Farm. Id. at 44-59.

         The Court awarded the United States Government

treble damages in the amount of $750, 000.00, plus a civil penalty in the amount of $8, 250.00, for a total sum of $758, 250.00. Relators will be awarded 30 percent of the foregoing amount in accordance with 31 U.S.C. ยง 3730(d)(2), with 15 percent awarded to Relator Cori Rigsby and 15 percent awarded to Relator Kerri Rigsby. Relators are also entitled to recover reasonable attorneys' fees in the amount of $2, 610, 149.80 and expenses in the amount of $303, 078.89, for a total ...

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