USA, et al v. Community Health Systems, Inc, et al

Filing

Per Curiam OPINION filed : We REVERSE the district court's order and REMAND for proceedings consistent with this opinion, decision not for publication. Danny J. Boggs, Circuit Judge; John M. Rogers, Circuit Judge and Jane Branstetter Stranch, (Concurring) Circuit Judge.

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NOT RECOMMENDED FOR PUBLICATION
File Name: 16a0620n.06

FILED

No. 15-6280

Nov 22, 2016
DEBORAH S. HUNT, Clerk
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA, ex rel. JAMES )
DOGHRAMJI, SHEREE COOK, and RACHEL )
BRYANT,
)
)
Relators-Appellees,
)
)
v.
)
)
COMMUNITY HEALTH SYSTEMS, INC., et al.,
)
)
Defendants-Appellants.
)

BEFORE:

ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE MIDDLE
DISTRICT OF TENNESSEE
OPINION

BOGGS, ROGERS, and STRANCH, Circuit Judges.

PER CURIAM. The False Claims Act (FCA) creates a civil cause of action against “any
person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for
payment” to the United States Government.

31 U.S.C. § 3729(a).

Claims for fraudulent

Medicare billing were brought against Community Health Systems, Inc. (CHS), and in 2014,
CHS, the Government, and seven “relators”—that is, private persons who bring civil actions for
violations of the FCA—reached a settlement agreement. This agreement concluded years of
investigation and litigation, during which time the relators performed thousands of hours of work
at the Government’s behest. CHS agreed to pay the Government and relators $88 million dollars
in exchange for dismissing their claims.

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This appeal centers on whether CHS failed to preserve its right to challenge the
entitlement of the seven relators to attorneys’ fees.

The district court adopted relators’

interpretation of the settlement agreement, concluding that it unambiguously restricted CHS’s
challenges to 31 U.S.C. § 3730(d), and thus limited CHS’s objections to the reasonableness of—
rather than entitlement to—appellees’ attorneys’ fees.

CHS appealed this decision, raising

various principles of contract interpretation. Because the settlement agreement is ambiguous, we
reverse the district court’s order and remand for further proceedings in the district court.
I.
Causes of action authorized by the FCA under 31 U.S.C. § 3729 have the goal of
punishing and preventing fraudulent claims for payment from the U.S. Government. See United
States v. Bornstein, 423 U.S. 303, 309 n.5 (1976). The statutory scheme includes a qui tam
provision, under which a private person—a “relator”—may bring a civil action “in the name of
the Government.”

31 U.S.C. § 3730(b)(1).

After a relator files a sealed complaint, the

Government may “proceed with the action, in which case the action shall be conducted by the
Government,” or “notify the court that it declines to take over the action, in which case the
person bringing the action shall have the right to conduct the action.” Id. § 3730(b)(4).
The qui tam provision is essential to achieving the FCA’s purpose “[b]ecause the scope
of fraud against the government is much broader than the government’s ability to detect it.”
United States v. Health Possibilities, P.S.C., 207 F.3d 335, 340 (6th Cir. 2000). The FCA thus
“provides private actors with a variety of incentives to bring qui tam actions, and significant
influence over the ensuing development of qui tam suits—including ‘the right to conduct the
action’ when the government decides not to intervene.” Id. The FCA also recognizes that
relators will not come forward (risking, in many cases, their livelihoods), and private attorneys
will not undertake the extensive work and expense necessary to represent relators, if they are not
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fairly compensated for doing so. The Act therefore provides that even if the Government takes
over the action, the relator is entitled to a share of “the proceeds of the action or settlement of the
claim” and his or her attorney is entitled to “reasonable attorneys’ fees and costs.” 31 U.S.C.
§ 3730(d)(1).
This FCA case involves seven different qui tam complaints, all of which alleged that
CHS defrauded the Government by admitting Medicare patients for medically-unnecessary
emergency room visits. The first four complaints were filed under seal between 2009 and 2011
in Illinois, Indiana, and Texas. In early 2011, the Government first told the relators in these four
cases of the similarities among their qui tam suits, which had “triggered a nationwide
investigation on the part of the U.S.” The Government encouraged these relators “to work
together on the cases and share any proceeds that might result.” At the Government’s request,
these relators then reached a sharing agreement in April 2011.
Appellees are three relators who were not involved in the original four cases. Appellees
met with officials from the U.S. Department of Justice in Washington, D.C., U.S. Attorney’s
Office for the Eastern District of Pennsylvania, and U.S. Attorney’s Office for the Middle
District of Tennessee between February 2011 and April 2011. They disclosed the results of their
investigation, begun in October 2010, which included “an original, robust statistical analysis of
CHS admission practices” and an “extensive factual investigation.” Their statistical analysis
covered 74 different hospitals. To develop the facts of CHS’s alleged fraud, they “contacted
approximately 100 current and former doctors and nurses at approximately 20 CHS facilities in
nine states.”
In May 2011, these three relators (hereinafter Tennessee Relators) filed suit under seal in
the Middle District of Tennessee. The Government then partially unsealed the four other qui tam

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complaints to the Tennessee Relators for their review and requested that they “actively
participate in its investigation, which was led by the U.S. Attorney’s Office in Nashville, on an
on-going basis.” Counsel for relators thereafter engaged in a “collaborative effort” involving
“bi-monthly calls with the Government.”

“The Government lawyers mapped out the

investigation and assigned work to all relators’ counsel in an organized manner,” with “the
majority of the assignments [being] made without regard to the individual complaint.” At the
Government’s request, from 2011 to 2014 the Tennessee Relators’ counsel organized and
analyzed thousands of documents produced by CHS, drafted letters and memoranda related to
these documents, created lists of witnesses, drafted outlines for questioning witnesses, and
conducted extensive legal and factual research. All told, they calculated their work on the case at
nearly 7,000 billable hours.
Three years later, in the spring of 2014, the Government informed relators of a
“handshake” deal with CHS. Because CHS required that, as part of settlement, all of the qui tam
complaints—now seven in total—be dismissed with prejudice, the Government urged the
Tennessee Relators to join the original relators’ sharing agreement. After private mediation in
early May 2014, relators in all seven cases reached a sharing agreement.
The Government intervened in each of the relators’ actions on July 24, 2014. The
Government filed a notice of settlement on August 4, 2014, and the district court unsealed the
case. The settlement agreement provided that the Government and the seven relators would
dismiss their claims upon payment by CHS of $88 million. As provided in § 3730(d), the
Government awarded 19 percent of the total recovery to the relators, or about $16.4 million. See
31 U.S. § 3730(d) (“If the Government proceeds with an action brought by a person under
subsection (b), such person shall . . . receive at least 15 percent but not more than 25 percent of

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the proceeds of the action or settlement of the claim . . . .”). This sum was split among all the
individual relators in the various cases according to the sharing agreement that relators had
reached before the settlement was finalized. The Tennessee Relators collectively received a
14 percent share, or about $2.3 million.
Pursuant to the settlement agreement, the district court dismissed the claims in October
2014, but retained jurisdiction to decide “statutory attorneys’ fees and costs pursuant to
31 U.S.C. § 3730(d).” Between October 2014 and January 2015, three district courts in Texas
and Indiana transferred their cases to the Middle District of Tennessee for resolution of fee
disputes. In February 2015, the court consolidated the fee disputes in the four cases before it.
The court subsequently ordered the parties to brief “whether all or some of the relators are
precluded from recovery of attorneys’ fees and costs by the first-to-file rule provided in
31 U.S.C. § 3730(b)(5) and/or by the public disclosure bar.”
CHS argued that Term 8 of the agreement preserved its right to make first-to-file and
public-disclosure challenges. The relevant sentence in Term 8 reads as follows: “All Parties
agree that nothing in this Paragraph or this Agreement shall be construed in any way to release,
waive or otherwise affect the ability of CHS to challenge or object to Relators’ claims for
attorneys’ fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d).” Tennessee Relators
argued that the phrase “pursuant to 31 U.S.C. § 3730(d)” limited the scope of CHS’s objections
to those listed in that provision. Because first-to-file and public-disclosure challenges are located
in § 3730(b)(5) and § 3730(e)(4) respectively, not § 3730(d), Tennessee Relators reasoned that
CHS failed to preserve those challenges with the relevant language in Term 8.

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After briefing and oral argument, the district court adopted relators’ interpretation of the
agreement. It observed that the Government’s reservation of FCA challenges in Term 7 included
specific statutory references:
Defendants could easily have specified that they intended to raise a challenge to
Plaintiffs’ entitlement to fees under the first-to-file or public disclosure
provisions, or, at a minimum, simply cited Section 3730(b)(5) and (e)(4), much
like the Government reserved specific statutory rights and negotiated a carve-out
for those provisions.
“Given the stakes,” the court reasoned, “it is difficult to believe that failure to mention the FCA’s
first-to-file provision . . . anywhere in the 16-page Settlement Agreement was unintentional.”
Indeed, the court added, § 3730(d) is referenced “at least six times,”1 but not once is “either the
first-to-file rule or the public disclosure bar” so much as mentioned. This was telling, in the
court’s view, because “the fact remains that the government did proceed with all seven of the
underlying cases[,] . . . intervened in all, and settled each case,” and under a “straight forward
reading of [§ 3730(d)],” the Government’s conduct would entitle relators to attorneys’ fees.
After the district court ruled that CHS had failed to preserve its right to make first-to-file
and public-disclosure challenges, CHS and the Tennessee Relators jointly moved for a stipulated
award of $2,650,000 in fees, which the court granted. CHS then appealed.
II.
We review the district court’s interpretation of the settlement agreement de novo. See
Orrand v. Scassa Asphalt, Inc., 794 F.3d 556, 560-61 (6th Cir. 2015). The settlement agreement
provides that it is “governed by the laws of the United States.” We thus “apply ‘general rules’ of
contract law as part of the federal common law.” Cassidy v. Akzo Nobel Salt, Inc., 308 F.3d 613,
615 (6th Cir. 2002). “The federal common law may draw upon state law principles, but state law
is not controlling authority.” Id.
1

Eight times, by our count, and nine if one counts the reference to § 3730(d)(3).
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“Where a contract’s meaning is clear on its face, that meaning controls.” In re AmTrust
Fin. Corp., 694 F.3d 741, 750 (6th Cir. 2012). To determine whether a contract’s meaning is
clear on its face, we “consider the language of the agreement, the context in which that language
appears and other traditional canons of construction.” Prater v. Ohio Educ. Ass’n, 505 F.3d 437,
441 (6th Cir. 2007); see also Gallo v. Moen Inc., 813 F.3d 265, 273-74 (6th Cir. 2016)
(“The first and best way to divine the intent of the parties is from the four corners of their
contract and from traditional canons of contract interpretation.”). “If, after applying these rules
of interpretation, the contract remains ambiguous,” then the parties’ original understanding of the
contract’s terms may be ascertained through extrinsic evidence.

Prater, 505 F.3d at 441.

A contractual provision is ambiguous if it “is subject to two reasonable interpretations.” In re
AmTrust Fin. Corp., 694 F.3d at 750 (citation omitted).
This appeal centers on Term 8 of the settlement agreement. The relevant sentence of
Term 8 provides that “nothing in this paragraph or this Agreement shall be construed in any way
to release, waive or otherwise affect the ability of CHS to challenge or object to Relators’ claims
for attorneys’ fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d).” CHS argues that this
sentence preserves its ability to challenge or object to the relators’ claims for attorneys’ fees on
any basis.

Tennessee Relators contend that this sentence restricts CHS’s challenges and

objections to those grounded in 31 U.S.C. § 3730(d). If both interpretations are reasonable, then
Term 8 is ambiguous and the parties’ original understanding may be ascertained by also
considering extrinsic evidence.
A.

Interpretation of CHS.

Two principles of contract interpretation, the last-antecedent presumption and the
consistent-usage presumption, underlie CHS’s interpretation of Term 8. The last-antecedent
presumption instructs that “a limiting clause or phrase . . . should ordinarily be read as modifying
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only the noun or phrase that it immediately follows.” United States v. Hayes, 555 U.S. 415, 425
(2009) (omissions in original) (quoting Barnhart v. Thomas, 540 U.S. 20, 26 (2003)); see also
Lockhart v. United States, 136 S. Ct. 958, 963 (2016) (observing that the Supreme Court “has
applied the rule from our earliest decisions to our more recent”).2 The district court read the
limiting phrase in Term 8—“pursuant to 31 U.S.C. § 3730(d)”—as applying to “the ability of
CHS to challenge or object” to the attorneys’ fees. The last-antecedent presumption, CHS
argues, supports a reading that applies the limiting phrase to the phrase that immediately
precedes it—“[r]elators’ claims for attorneys’ fees, expenses, and costs.” Accordingly, CHS
concludes, the last-antecedent presumption supports its assertion that the settlement agreement
preserves CHS’s right to challenge the relators’ claims for attorneys’ fees under the first-to-file
and public disclosure rules.
CHS also relies on the consistent-usage presumption, which is the presumption that
words and phrases have the same meaning throughout a contract. See U.S. Nat’l Bank of Or. v.
Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 460 (1993) (applying the presumption of consistent
usage to a statute); 11 Williston on Contracts § 32:6 (4th ed. 2015) (“Generally, a word used by
the parties in one sense will be given the same meaning throughout the contract in the absence of
countervailing reasons.”); Thompson v. Amoco Oil Co., 903 F.2d 1118, 1121 (7th Cir. 1990)
(applying Illinois law); McLane & McLane v. Prudential Ins. Co. of Am., 735 F.2d 1194, 119596 (9th Cir. 1984) (applying Arizona law). Here, the relevant phrase in Term 8 is “pursuant to
31 U.S.C. § 3730(d).” Two other provisions in the settlement agreement, Term 3 and Term
2

Although the last-antecedent presumption is often used for statutory interpretation, we have
also employed the presumption in contract interpretation. See Crestwood Farm Bloodstock v.
Everest Stables, Inc., 751 F.3d 434, 446 (6th Cir. 2014); see also Lloyd v. J.P. Morgan Chase &
Co., 791 F.3d 265, 271 (2d Cir. 2015); WPP Lux. Gamma Three Sarl v. Spot Runner, Inc., 655
F.3d 1039, 1051 n.3 (9th Cir. 2011); Viera v. Life Ins. Co. of N. Am., 642 F.3d 407, 418 (3d Cir.
2011); In re Airadigm Commc’ns, Inc., 616 F.3d 642, 655 (7th Cir. 2010).
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15(c)(1), also use this phrase after the phrase “claims Relators may have for reasonable
attorneys’ fees, expenses, and costs.” What distinguishes Term 3 and Term 15(c)(1) from Term
8, CHS argues, is the absence of other language to which the limiting phrase could attach; the
only language to which the limiting phrase can attach in Term 3 and Term 15(c)(1) is “claims
Relators may have for reasonable attorneys’ fees, expenses, and costs.” Term 3 provides that
“[a]ll Parties agree that nothing in this Paragraph or this Agreement shall be construed in any
way to release . . . any claims Relators may have for reasonable attorneys’ fees, expenses, and
costs pursuant to 31 U.S.C. § 3730(d) . . . .” Likewise, Term 15(c) provides
that the following claims shall not be dismissed, unless they are settled,
adjudicated, or otherwise resolved, and any required consent by the United States
is obtained, and the Courts are so informed: (1) Any claims Relators may have
for reasonable attorneys’ fees, expenses, and costs pursuant to 31 U.S.C.
§ 3730(d) . . . .3
Thus, CHS reasons, given that the limiting phrase must attach to “claims Relators may have for
reasonable attorneys’ fees, expenses, and costs” in Term 3 and Term 15(c)(1), the consistentusage presumption supports a reading of Term 8 that attaches the limiting phrase to that language
as well. That is to say, CHS’s reading.
B.

Interpretation of the Tennessee Relators.

We now turn to the Tennessee Relators’ interpretation of the settlement agreement.
Tennessee Relators read Term 8 as limiting CHS’s ability to challenge or object to relators’
claims for attorneys’ fees to arguments grounded in § 3730(d). They argue that the settlement
agreement contains two indicia of meaning that support this interpretation.
First, Term 7 of the agreement explicitly states that the Government retains the ability “to
contend that provisions in the False Claims Act, including 31 U.S.C. §§ 3730(d)(3) and 3730(e),
3

In addressing the relator’s share, furthermore, the settlement agreement uses the limiting phrase
“under § 3730(d)” in a similar manner.
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bar Relators from sharing in the proceeds of [the] [a]greement.” In contrast, Term 8 does not
explicitly state that CHS can challenge the relators’ claims for attorneys’ fees under the first-tofile rule set forth in § 3730(b)(5) or the public disclosure bar set forth in § 3730(e)(4). Tennessee
Relators argue that “when one party specifically reserves certain rights and another party does
not, the natural, proper reading of that agreement is to conclude that the party that did not make
its reservation explicit has in fact made no reservation at all.” Unlike the Government, CHS did
not include the statutory references for the challenges it wished to preserve. Accordingly,
Tennessee Relators contend, CHS’s failure to expressly preserve its right to challenge the
relators’ claims for attorneys’ fees under § 3730(b)(5) and § 3730(e)(4) supports reading the
settlement agreement to limit CHS’s objections to those listed in § 3730(d).
The Tennessee Relators also point to Recital G. Recital G provides that “Relators and
their counsel claim entitlement under 31 U.S.C. § 3730(d) . . . to Relators’ reasonable expenses,
attorneys’ fees and costs.” This expectation arises from § 3730(d), which requires the payment
of reasonable attorneys’ fees whenever the Government proceeds with a qui tam action. Here,
Tennessee Relators argue, the Government not only proceeded with the Tennessee Relators’ qui
tam actions, but assigned their attorneys thousands of hours of work, yielding an $88 million
recovery for the United States. Because CHS would agree to a settlement only if it included all
seven relators, the Government asked the Tennessee Relators to dismiss their claims, suggesting
that they reach a separate agreement with the other relators, which they did, for a portion of the
proceeds. The Tennessee Relators infer from this that, in light of their contributions to the case,
they at least claimed that settlement would entitle them to attorneys’ fees.
The Tennessee Relators also refer to the contrast between Recital G and other recitals in
the settlement agreement; for instance, Recitals C and D set forth the Government’s allegations

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regarding CHS’s conduct, and Recital F sets forth CHS’s denial of these allegations.

By

contrast, CHS does not set forth a counter-recital denying Recital G, which relators argue
indicates tacit acceptance of the recital. It would be strange, however, for CHS to tacitly accept
Recital G if it intended to raise first-to-file and public-disclosure challenges. Thus, Tennessee
Relators conclude, CHS’s silence in response to Recital G supports an inference that it did not
intend to raise such challenges.4
C.

CHS’s responsive arguments.

CHS makes a number of arguments against Tennessee Relators’ interpretation of the
settlement agreement. Even if the Tennessee Relators’ interpretation of Term 8 is correct, CHS
argues, their interpretation of the agreement permits first-to-file challenges, and CHS is therefore
permitted to make this challenge. We address these arguments separately.
1.

Arguments related to Term 8.

CHS first argues that it is anomalous to interpret the reservation of rights in Term 8 as a
waiver of rights. Earlier in Term 8, however, there is a broad waiver of rights, from which the
last sentence of Term 8 is an exception. In pertinent part, Term 8 provides that
CHS . . . fully and finally release[s], waive[s], and forever discharge[s] each of
the Relators . . . from any and all manner of claims, controversies, actions, causes
of actions, demands, torts, damages, costs, attorneys’ fees, moneys due on
account, obligations, judgments or liabilities of any kind whatsoever in law or
equity, arising out of agreement or imposed by statute, common law or otherwise,
from the beginning of time to the date this Agreement is signed, whether or not
known now, anticipated, unanticipated, suspected or claimed, fixed or contingent,
whether yet accrued or not and whether damage has resulted from such or not.
All Parties agree that nothing in this Paragraph or this Agreement shall be
construed in any way to release, waive or otherwise affect the ability of CHS to
challenge or object to Relators’ claims for attorneys’ fees, expenses, and costs
pursuant to 31 U.S.C. § 3730(d).
4

CHS argues that Term 8 functions as a response to Recital G. But that assumes the conclusion.
That is, Term 8 can function as a counter-recital only if we assume that Term 8 reserves
challenges to relators’ entitlement to attorneys’ fees—the very issue in dispute. We reject this
circular reasoning.
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The first sentence in Term 8 effectuates a broad waiver of CHS’s ability to raise “any and all
manner of claims, controversies, actions, [and] causes of actions . . . arising out of agreement or
imposed by statute.” The second sentence in Term 8 then limits the scope of that waiver by
providing that CHS reserves the right to “challenge or object to Relators’ claims for attorneys’
fees, expenses, and costs pursuant to 31 U.S.C. § 3730(d).” The Tennessee Relators claim
entitlement to attorneys’ fees pursuant to § 3730(d) in Recital G of the settlement agreement.
CHS’s attempts to challenge the Tennessee Relators’ entitlement to attorneys’ fees under the
first-to-file and public disclosure rules are therefore “claims, controversies, actions, [or] causes
of action” that “aris[e] out of agreement or [are] imposed by statute.” Accordingly, the first
sentence in Term 8 operates to waive CHS’s ability to challenge the Tennessee Relators’
entitlement to attorneys’ fees under the first-to-file and public disclosure rules unless the second
sentence in Term 8 preserves CHS’s ability to raise these challenges.
Second, CHS argues that Tennessee Relators’ interpretation is unreasonable because it
“needlessly brings Term 8 into conflict with Term 15(c)(1).” Term 15(c)(1), CHS observes, says
that “[a]ny claims Relators may have for reasonable attorneys’ fees, expenses, and costs pursuant
to 31 U.S.C. § 3730(d)” shall not be dismissed “unless they are settled, adjudicated, or otherwise
resolved.”

CHS contends that this provision “contemplates that, even if a relator seeks

reasonable fees, his or her claim may be challenged,” including with regard to “the issue of
entitlement.” We disagree. A term that reserves a right to bring a claim and a term that
circumscribes the types of challenges that may be brought against the claim are not mutually
exclusive. Term 15(c)(1) simply excludes relators’ claims for attorneys’ fees from the set of
claims being dismissed under the settlement agreement; it does not set forth the challenges
available to CHS.
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2.

Arguments related to Recital G.

CHS first argues that reliance on Recital G is “misplaced” because “many authorities
hold that recitals cannot create legal obligations and are entitled to little weight in interpreting
the operative provisions of a contract.” It is true that recitals “generally do not create binding
obligations.”

17A C.J.S. Contracts § 403 (updated 2016).

But recitals can establish “the

background of a contract, that is, the purposes and motives of the parties.” 17A Am. Jur. 2d
Contracts § 373 (updated 2016). They also “may have a material influence in construing the
contract and determining the intent of the parties,” for if an operative section of a contract is
ambiguous, “the recitals govern the construction.” Id.; see also 17A C.J.S. Contracts § 403
(observing that although recitals “do not control over the express provisions of a contract, they
may be read in conjunction with the contract’s operative portions to ascertain the parties’
intention, where the operative clauses are ambiguous” (footnote omitted)); McKissick v. Yuen,
618 F.3d 1177, 1186 (10th Cir. 2010) (observing that recitals “may be looked to in determining
the proper construction of the contract and the parties’ intention” (quoting Ferrell Constr. Co. v.
Russell Creek Coal Co., 645 P.2d 1005, 1009 (Okla.1982))). Thus, even though Recital G does
not itself create a binding obligation, it may guide interpretation of the binding obligation in
Term 8, but only if that term is ambiguous in the first place.
CHS is correct that Recital G does not expressly bar CHS from challenging relators’
entitlement to fees and, accordingly, does not render Term 8 unambiguous. But CHS’s silence in
response to Recital G still supports Tennessee Relators’ interpretation, even if it does not
conclusively establish this interpretation. Had CHS intended to raise first-to-file and publicdisclosure challenges, one might have expected CHS to deny Recital G and to record its belief
that relators are not entitled to attorneys’ fees, just as relators’ recorded their belief that they are
entitled to fees.
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3.

The impact of Tennessee Relators’ interpretation on first-to-file
challenges.

CHS argues that even if the settlement agreement restricts its challenges and objections to
those in § 3730(d), because § 3730(d) refers to § 3730(b)—for the purpose of identifying the
FCA claim to which § 3730(d) applies (i.e., qui-tam claims rather than Attorney-Generalinitiated claims)—§ 3730(d) incorporates the first-to-file rule. We are unpersuaded.

If the

preserved fee challenges are restricted to the limits contained in § 3730(d), it would be
anomalous to interpret that section to incorporate limits that engulf the restriction. Accordingly,
if Tennessee Relators’ interpretation is correct, then CHS is precluded from making a first-to-file
challenge.
D.

Evaluation of the Parties’ Interpretations.

CHS and the Tennessee Relators have each advanced a reasonable interpretation of the
settlement agreement. CHS’s interpretation is supported by the last-antecedent rule and the
presumption of consistent usage.

However, they are just that—presumptions—and, as the

Supreme Court has observed with regard to the last-antecedent rule, “can assuredly be overcome
by other indicia of meaning.” Hayes, 555 U.S. at 425 (quoting Barnhart, 540 U.S. at 26). The
Tennessee Relators have pointed to two “indicia of meaning” that support their interpretation:
CHS’s failure to expressly preserve the first-to-file and public-disclosure challenges in Term 8,
and CHS’s silence in response to Recital G.

Term 8 is thus “subject to two reasonable

interpretations,” rendering it ambiguous. In re AmTrust Fin. Corp., 694 F.3d at 750 (citation
omitted).
Accordingly, extrinsic evidence may be used to ascertain the parties’ original
understanding of its terms. Prater, 505 F.3d at 441. “It is not within [the panel’s] purview to
resolve these ambiguities.”

Lemley v. Ford Motor Co., 36 F.3d 1097 (6th Cir. 1994)
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(unpublished table decision (per curiam), 1994 WL 483901 at *4. Where the district court holds
that a contract is unambiguous and thus does not reach the extrinsic evidence, as here, remand is
appropriate. See Sault Ste. Marie Tribe of Chippewa Indians v. Granholm, 475 F.3d 805, 816
(6th Cir. 2007) (observing that although “[t]he admissibility of extrinsic evidence is a question of
law and is properly within [the court’s] province to determine . . . [,] the amount of weight to
accord extrinsic evidence is a question of fact and must be determined by a trier of fact”); Fed.
Sav. & Loan Ins. Corp. v. Fed. Deposit Ins. Corp., 780 F.2d 1020 (6th Cir. 1985) (unpublished
table opinion) (per curiam), 1985 WL 13960 (concluding that “the magistrate erred in failing to
consider extrinsic evidence of such intent” and “remand[ing] for the consideration of such
evidence”).
III.
For the foregoing reasons, we reverse the district court’s order and remand for
proceedings consistent with this opinion.

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STRANCH, Circuit Judge, concurring. I find it a close call whether Term 8 of the
Settlement Agreement is ambiguous or, as determined below, unambiguous. Nevertheless, I
concur with the lead opinion. I agree that it is appropriate to remand the case for consideration
of the extrinsic evidence, including those parts of the Agreement itself, such as recitals, that aid
in construing the contract and determining the parties’ intentions.
This appeal grows out of the Agreement governing the global settlement that required
dismissal of all seven qui tam cases, including Appellees’ cases. At issue is whether CHS must
pay attorney fees for the nearly 7,000 billable hours of work performed by counsel for these
relators, primarily work that the Government assigned them to do. I write separately to address
the purposes and goals of the False Claims Act, which set the perspective through which the
courts (and the government) should view all FCA litigation.
Health care fraud is rampant in the United States. Some estimate that fraud costs
Medicare and Medicaid between $30 billion and $98 billion annually. See Donald M. Berwick
& Andrew D. Hackbarth, Eliminating Waste in U.S. Health Care, 307 J. Am. Med. Ass’n 1513,
1514 (2012). In one way or another, we all pay for this fraud through higher health insurance
premiums, co-payments, and taxes.
The FCA is one of the Government’s most effective tools for combatting health care
fraud. “To date, the FCA has helped the government recover more fraudulently spent Medicare
dollars than any other mechanism within the federal government.” Joshua A. Levy, Lessons
from the Private Enforcement of Health Care Fraud, 53 Am. Crim. L. Rev. 117, 135 (2016). In
2014, for instance, while the Government recovered only $454 million through the Department
of Health and Human Services’ fraud prevention system, id. at 124, it recovered $2.3 billion

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from health care FCA cases, id. at 127. In addition, evidence provided by FCA whistleblowers
“has resulted in dozens of criminal convictions and administrative exclusions that otherwise may
not have occurred.” Id. at 127.
Most of these recoveries would not be possible without the FCA’s qui tam provision.
“Of the $21 billion recovered by the government between 1986 and 2008 under the Act, over 63
percent, or $13.7 billion, was recovered in cases filed under the FCA’s qui tam provisions.”
Matthew S. Brockmeier, Pulling the Plug on Health Care Fraud: The False Claims Act After
Rockwell and Allison Engine, 12 DePaul J. Health Care L. 277, 278–80 (2009). Brockmeier
explains that if courts lose sight of the legislative intent behind the FCA and restrict
opportunities for qui tam plaintiffs to succeed under the FCA, “the incidence of health care fraud
against the government can only be expected to increase” and thereby increase health care costs
“to a public already struggling to pay some of the highest health care prices in the industrialized
world.” Id. at 302–03. He concludes that it is crucial to approach the Act “with its primary goal
of preventing fraud in mind,” id., which underscores the need to support and encourage qui tam
plaintiffs in their use of the FCA.
Without a doubt, relators and their attorneys play a vital role in rooting out health care
fraud and obtaining recovery of the public monies that were intended to be spent for providing
health care to veterans and poor, elderly, and disabled citizens. Fostering such recoveries under
the FCA must include recognition that these actions are not without economic risks and other
dangers to relators and their counsel. A relator takes very real risks in coming forward to report
fraud—an action that often includes obtaining and providing evidence against his/her employer
that involves substantial sums of money and potential criminal liability. And providing that
evidence is just the beginning. Attorneys then must undertake the substantial investigative work
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and expense of putting together a case for their relators then present it to government officials to
determine if the government is willing to proceed with the litigation.

Counsel routinely

undertake this work without knowing whether other qui tam complaints have been filed under
seal elsewhere. If the government decides that the information provided would be useful to it in
vindicating society’s interests, it may share information about other qui tam cases and create a
group of counsel to do the work that is necessary to prosecute the case. This work often takes
years during which the government runs the sealed case, including assigning tasks to various
counsel and approaching the defendant about the claims and monetary settlement.

To

consummate any settlement it negotiates, the government intervenes in and unseals the qui tam
complaints filed by relators on its behalf. Though the government’s bargain sets the basic terms
of the settlement agreement, the timetable, and resolves payment to the relators; counsel are
often left to negotiate the terms governing payment of attorney fees—even for the considerable
work accomplished by counsel at the government’s behest. Much is at stake because these
negotiations may determine whether a defendant—which took public money through health care
fraud—must pay a relator’s counsel for their work in forcing the return of that money. There are
practical reasons for this framework but it also entails practical problems: negotiations are often
rushed, counsel for the various relators may have differing opportunity to draft agreement terms,
and they do not have the leverage that the government has.
The goal of the FCA to use qui tam complaints to increase the recovery of public monies
will be impacted if relators’ counsel are assigned work and not paid for doing it. As scholarly
literature argues and legislative amendments confirm, the courts and government should
approach FCA cases in ways that support and do not stifle the Act’s goals and purposes. To
achieve those, it seems to me that the government’s litigation activity should encourage citizens
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to come forward and report fraud and attorneys to take their claims and put in the time and
money it takes to make the case against those who defraud the public. If both parties are not
fairly compensated, there is no incentive for relators to run the risks of blowing the whistle or for
attorneys to put in the significant time and make the large expenditures necessary to prove a
case. This is especially true (and particularly complicated) in the massive fraud cases that
frequently include a number of relators and their separate counsel. But that is the nature of
finding and proving frauds that operate on a large or national scale, a goal of the FCA. Those are
the cases that should be nurtured because they are the type of suits that have returned billions of
dollars to the public coffers and have served to deter future fraud.
The facts before us are well set out in the lead opinion and the case is appropriately
remanded to the district court for resolution, which begins with contract construction. On
remand, “[t]he admissibility of extrinsic evidence is a question of law and is properly within [the
court’s] province to determine . . . [,] the amount of weight to accord extrinsic evidence is a
question of fact and must be determined by a trier of fact.” Sault Ste. Marie Tribe of Chippewa
Indians v. Granholm, 475 F.3d 805, 816 (6th Cir. 2007). “If a contract contains ambiguities, it
generally becomes the task of the fact-finder to use extrinsic evidence to determine the intent of
the parties. . . . it is for the jury to determine the meaning of the terms” Royal Ins. Co. of Am. v.
Orient Overseas Container Line Ltd., 525 F.3d 409, 422 (6th Cir. 2008) (applying federal
common law). “Where there is no genuine issue of material fact appropriate for resolution by a
fact-finder, however, a court may rely on extrinsic evidence to aid in contract interpretation.” Id.

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