Humana whistleblower lawyers win $32 million as False Claims Act faces challenge

By Mike Scarcella and David Thomas

Sept 25 (Reuters) - (Billable Hours is Reuters' weekly report on lawyers and money. Please send tips or suggestions to D.Thomas@thomsonreuters.com.)

Humana HUM.N is on the hook to pay more than $32 million to attorneys for a tipster who won a $90 million settlement from the insurance giant on behalf of the U.S. government, even as another case threatens to wipe out the federal whistleblower provision that allowed for the payouts.

Chief U.S. District Judge Greg Stivers in Louisville, Kentucky, last week ordered Humana to cover legal fees and costs for the whistleblower, former company actuary Steven Scott, as the prevailing party in the litigation.

Scott, represented by law firms Kellogg Hansen and Phillips & Cohen, accused Humana of overcharging the U.S. government for prescription drugs. Humana settled last year while continuing to deny the claims.

Humana did not immediately respond to a request for comment, and its lawyers at O'Melveny & Myers declined to comment.

Scott sued Humana in 2016 under the False Claims Act, which includes a provision allowing whistleblowers to pursue fraud claims on behalf of the United States.

That provision is facing a major court challenge, after a federal judge in Florida ruled last year that it is unconstitutional. U.S. District Judge Kathryn Mizelle said the provision unfairly allows whistleblowers to exercise federal executive power without accountability to the president.

Most False Claims Act lawsuits are filed under the law's "qui tam," or whistleblower, provisions, according to the U.S. Justice Department. Whistleblowers last year filed 979 such lawsuits, marking a new high for a single year.

The law's whistleblower provisions, which Congress strengthened in 1986, helped to fuel more than $2.4 billion in settlements and judgments last year.

The Atlanta-based 11th U.S. Circuit Court of Appeals is expected to take up the Florida case in December. The U.S. Chamber of Commerce and other groups have urged the court to uphold Mizelle's ruling, while the U.S. Justice Department has backed the lawfulness of the whistleblower provision.

Longtime appellate attorney Kannon Shanmugam of Paul Weiss is set to argue the challenge to the whistleblower provision at the appeals court, facing off against consumer advocate Tejinder Singh of law firm Sparacino. The 11th Circuit case would not affect the Humana litigation.

Whistleblowers are entitled to a 15% to 25% cut of proceeds when the government intervenes in a False Claims Act case and helps to litigate it. When the government does not intervene, as in Scott's lawsuit, the amount is 25% to 30%.

Scott received 29% of the $90 million Humana settlement, or $26.1 million, according to court records. He paid his lawyers $10.44 million based on his contingency fee arrangement with them, a filing showed.

Scott's lawyers argued that they were entitled to tens of millions of dollars more under a fee-shifting provision of the False Claims Act.

Humana contested the amount, saying Scott's Washington and San Francisco-based lawyers were claiming "shockingly high" rates for litigating in Kentucky.

Stivers in an order on September 9 found Scott's case justified rates higher than those in Kentucky. Still, the court agreed with a magistrate judge who earlier declined to back a larger request for $41 million in fees and costs.

Scott's lawyers included Andrew Shen of Kellogg Hansen and Claire Sylvia of Phillips & Cohen. They had no immediate comment.

Shen, in a court filing, said he billed last year at $1,470 and is billing this year at $1,600. Sylvia's 2024 rate was $1,075, and she is billing now at $1,160, court records show.

– White & Case has asked a U.S. judge in Washington to award the firm $510,000 for its work in a public records lawsuit against the U.S. Justice Department.

The firm's request on Tuesday criticized what it called the DOJ's "stonewalling litigation tactics" in the Freedom of Information Act case. It also said the requested amount was less than half of the fees the plaintiff, Richard Usher, incurred during the litigation.

Usher was a former top London-based currency trader for JPMorgan who was acquitted in a 2018 federal criminal antitrust trial. In 2023, he sued the DOJ over its alleged refusal to turn over U.S. records that were part of his prosecution.

Usher's attorneys said the DOJ withdrew legal arguments it made to justify withholding documents, "a tacit acknowledgement that Mr. Usher never should have had to expend so much time and effort to get the relief he did."

The Justice Department and a top lawyer for Usher declined to comment.

– Two months after suing the billionaire founder of Britannia Financial Group over nearly $500,000 in allegedly unpaid legal fees, U.S. law firm Kasowitz LLP said it had resolved its dispute.

The Kasowitz firm had represented Julio Martin Herrera-Velutini as he faced U.S. criminal charges for allegedly paying $300,000 to political consultants supporting Puerto Rico Governor Wanda Vazquez during her 2020 election campaign. The firm said in May 2024 it was withdrawing from Herrera's legal team, but did not say why.

Herrera pleaded guilty to a misdemeanor charge for violating the Federal Electoral Campaign Act in August. His sentencing is set for December.

Kasowitz had sued Herrera in Manhattan federal court in July, alleging he failed to pay the firm's legal fees.

"The matter has been resolved, and we look forward to continuing the relationship with Mr. Herrera-Velutini," a Kasowitz spokesperson said in a statement Wednesday. The spokesperson declined to provide additional details.

Attorneys for Herrera-Velutini did not immediately respond to a request for comment.

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