Court Rejects Argument That The FCA Imposes A Higher Standard for Award of Costs Against Unsuccessful Relators

Posted by Scott Stein and Emily Van Wyck

Last week, a district court judge rejected a relator’s argument that the FCA restricts the award of costs against unsuccessful relators to only those cases where the suit was found to be frivolous, vexatious, or harassment, a bar significantly higher than that imposed on all other unsuccessful litigants under Federal Rule of Civil Procedure 54. See United States ex rel. Assocs. Against Outlier Fraud v. Huron Consulting Grp., Inc., No. 09-cv-01800-JSR (S.D.N.Y. Feb. 2, 2015). This decision confirms that relators are liable for costs on the same terms as any other unsuccessful litigant.

After summary judgment was granted against the relator, the clerk of the court awarded over $13,000 in costs to the defendants. Relator appealed the award. At issue was the FCA’s distinction between fees, expenses, and costs. Federal Rule of Civil Procedure 54(d)(1) states that “costs” should be awarded to the prevailing party “[u]nless a federal statute . . . provides otherwise.” The relator argued that the FCA “provides otherwise” because it includes a provision that requires a showing that the relator’s claims were “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment” before awarding “reasonable attorneys’ fees and expenses.” 31 U.S.C. § 3730(d)(4). Relator argued that the term “fees and expenses” under the FCA is synonymous with “costs” under FRCP 54, and therefore a court must first find that the lawsuit was frivolous, vexatious, or harassment. Given that defendants did not assert that the claims were frivolous, relator argued, the court erred in awarding costs.

The district court disagreed, finding that the language of the FCA “foreclose[d]” this argument. In doing so, the court noted that the FCA treats fees, expenses, and costs as distinct categories. For example, if a relator prevails in a case where the United States declined to intervene, the FCA provides that the defendant must pay the relator “for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs.” 31 U.S.C. § 3730(d)(2). The court upheld the award of costs concluding that any dicta “loosely suggesting” that these terms are interchangeable “cannot overcome the FCA’s conscious distinction between ‘costs’ and ‘expenses.'”

A copy of the district court’s order can be found here.