Rasvinder Dhaliwal v. Salix Pharmaceuticals, Ltd.

Filing 29

OPINION & ORDER.....The Intervenors June 23, 2016 motion to intervene is granted. A scheduling order refers the parties to Magistrate Judge Peck for settlement discussions under his supervision concerning statutory attorneys fees and contingency fees, and sets a briefing schedule in the event those discussions fail. (Signed by Judge Denise L. Cote on 8/18/2016) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
:
UNITED STATES OF AMERICA, ex rel.
:
RASVINDER DHALIWAL,
:
:
Plaintiffs,
:
:
-v:
:
SALIX PHARMACEUTICALS, LTD.,
:
:
Defendant.
:
:
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APPEARANCES
For the intervenors:
Robert W. Sadowski
Sadowski Katz LLP
11 Broadway, Suite 615
New York, New York 10006
For the relator:
John C. Gallagher III
Gallagher Law Offices PLLC
175 Huguenot Street, Suite 200
New Rochelle, NY 10801
For the Government:
Jeffrey Kenneth Powell
US Attorney's Office, SDNY
86 Chambers Street, Room 620
New York, NY 10007
For the defendant:
Nancy Lynn Kestenbaum
Covington & Burling LLP
620 Eighth Avenue
New York, NY 10018-1405

15cv706 (DLC)
OPINION & ORDER

DENISE COTE, District Judge:
Several law firms who seek to protect their right to
statutory attorney’s fees and their share of a qui tam award as
a contingency fee have moved to intervene under Federal Rule of
Civil Procedure 24(a).

For the reasons that follow, the motion

to intervene is granted.
Background
This is a qui tam action brought under the False Claims
Act, 31 U.S.C. § 3729 et seq., and various state false claims
acts by Rasvinder Dhaliwal (the “Relator”).

The Relator

alleges, inter alia, that Salix Pharmaceuticals, Ltd. (“Salix”)
provided kickbacks to healthcare providers to prescribe Salix
products.
The Relator has retained several different law firms in
connection with this action.

In September 2014, the Relator

entered into a retainer agreement (the “Gage Spencer Retainer”)
with three law firms: Gage Spencer & Fleming LLP; Durrell Law
Office; and Thomas & Associates (the “Original Counsel”).

The

agreement stated that the Original Counsel would represent the
Relator in investigating and possibly filing a qui tam action
against Salix.

The Gage Spencer Retainer provided that the

Original Counsel would receive, as a contingency fee, 40% of any
qui tam award obtained by the Relator, that the Original Counsel

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were entitled to obtain statutory attorney’s fees and costs if
an award were obtained by the Relator, and that the Relator
assigned her interest in statutory attorney’s fees and costs to
the Original Counsel.

Finally, the Gage Spencer Retainer

provided that the Original Counsel were granted a lien on the
Relator’s claims and on any money or property recovered by the
Relator in connection with this qui tam action.
On January 28, 2015, the Relator substituted the Original
Counsel for Sadowski Fisher PLCC (“Sadowski Fisher”).

An

agreement between the Relator, the Original Counsel, and
Sadowski Fisher (the “Substitution Agreement”) superseded the
Gage Spencer Retainer.

The Substitution Agreement provided,

inter alia, that (1) the Original Counsel retained their right
to statutory fees in the event the Relator was awarded
attorney’s fees, (2) Sadowski Fisher and the Original Counsel
“agreed that it is in the best interests of the [Relator] for
Sadowski Fisher and the Original Counsel to share in the
contingency portion of any Qui Tam Award received by [the
Relator],” (3) Sadowski Fisher is entitled to a contingency fee
equal to 25% of any qui tam award obtained by the Relator that
is less than $4 million, and (4) Sadowski Fisher and the
Original Counsel would share the contingency on a pro-rata
basis.

The Relator also entered into a retainer agreement with

Sadowski Fisher (the “Sadowski Fisher Retainer”), which

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provides, inter alia, that (1) Sadowski Fisher would represent
the Relator in investigating and litigating the qui tam action
against Salix, (2) Sadowski Fisher is entitled to a contingency
fee as described in the Substitution Agreement, (3) to the
extent the Relator obtains an award of statutory attorney’s
fees, such fees will be a payment to Sadowski Fisher, (4) that
the Relator assigns her interest in the qui tam award and
statutory fees to Sadowski Fisher up to the amount owed to
Sadowski Fisher, and (5) if the Relator elects to waive
statutory fees, the Relator will reimburse Sadowski Fisher for
the amount waived.1
On January 30, 2015, the Relator filed a complaint signed
by Robert Sadowski to commence this action.

The case was filed

under seal and the complaint was served on the Government.
August 3, 2015, the case was transferred to this Court.2

On

At some

point after the filing of the complaint, the Relator replaced as
counsel Sadowski Fisher with John C. Gallagher of Gallagher
PLLC, who now represents the Relator in this matter.

The Sadowski Fisher Retainer contains an arbitration clause to
cover disputes arising out of the agreement. No party has
invoked the arbitration clause at this point.
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2

The case was reassigned to this Court as related to United
States of America ex rel. Steven R. Peikin, M.D., et al. v.
Salix Pharmaceuticals, Inc., 12cv3870 (DLC), another qui tam
action against a Salix entity.

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On June 9, 2016, the Government elected to intervene in
this action.

Also on June 9, the Court unsealed this action and

entered stipulations of settlement and dismissal between the
Relator, Salix, and the Government.

The Government received

Salix’s settlement payment on June 20, of which $310,670.36 is
owed to the Relator but is being held by the Government pending
the resolution of this motion.

A separate settlement is being

finalized between the state governments and Salix, and some
additional claims not covered by the settlements may proceed
between the Relator and Salix.
On June 23, the Original Counsel, Sadowski Fisher, and
Sadowski Katz3 (collectively, the “Intervenors”) filed a motion
under Federal of Civil Procedure 24(a) to intervene for the
purpose of seeking statutory attorney’s fees and to enforce a
charging lien4 against the Relator’s cause of action.

The

Sadowksi Katz LLP asserts that it is the successor in interest
to Sadowksi Fischer PLLC. For purposes of this opinion, both
firms will be referred to as Sadowski Fisher.
3

Under New York law, an “attorney who appears for a party has a
lien upon his or her client’s cause of action . . . which
attaches to a verdict . . . award, settlement, judgment or final
order in his or her client's favor.” N.Y. Judiciary Law § 475.
“The lien is predicated on the idea that the attorney has by his
skill and effort obtained the judgment, and hence should have a
lien thereon for his compensation.” Butler, Fitzgerald & Potter
v. Sequa Corp., 250 F.3d 171, 177 (2d Cir. 2001) (citation
omitted). To obtain a charging lien, an attorney must be an
“attorney of record” for the client, which can include
submitting papers to a court or appearing at trial. Itar-Tass
Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 450
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Intervenors contend that intervention is necessary to protect
their entitlement to statutory attorney’s fees and their share
of a contingency fee owed to them by the Relator.

The

Intervenors submitted invoices indicating that they each
performed work for the Relator for periods of time between June
10, 2014 and July 31, 2015.
The Court required any opposition to the motion to be
submitted by July 15.

The Relator has submitted an opposition.

Salix takes no position on the pending motion, but notified the
Court that it is currently in discussions with the Intervenors
to resolve their statutory attorney’s fees request.

The

Government notified the Court that it takes no position as to
the pending motion, but has deferred payment of the Relator’s
share of the settlement pending the Court’s disposition of the
motion to intervene.
Discussion
A party may intervene under Rule 24(a) if, “[o]n timely
motion,” it “claims an interest relating to the property or
transaction that is the subject of the action, and is so
situated that disposing of the action may as a practical matter
impair or impede the movant’s ability to protect its interest,

(2d Cir. 1998). Of the Intervenors, only Sadowski Fisher
appears to have filed any documents in this action on behalf of
the Relator.

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unless existing parties adequately represent that interest.”
Fed. R. Civ. P. 24(a)(2).

Accordingly, a party moving under

Rule 24(a) must “(1) timely file an application, (2) show an
interest in the action, (3) demonstrate that the interest may be
impaired by the disposition of the action, and (4) show that the
interest is not protected adequately by the parties to the
action.”

Floyd v. City of New York, 770 F.3d 1051, 1057 (2d

Cir. 2014) (citation omitted).

Whether to grant a motion for

intervention is within the discretion of the district court.
See id. at 1058.

Only the second and fourth elements are in

dispute.
A. Interest in the Subject Matter of this Action
Rule 24(a) requires the movant to assert “an interest
relating to the property or transaction that is the subject of
the action,” and “[t]hat interest must be direct, substantial,
and legally protectable.”

Laroe Estates, Inc. v. Town of

Chester, No. 15-1086-CV, 2016 WL 3615777, at *6 (2d Cir. July 6,
2016) (citation omitted).

An interest is neither direct nor

substantial “if it is remote from the subject matter of the
proceeding, or contingent upon the occurrence of a sequence of
events.”

Id. at *7 (citation omitted).

The Intervenors claim

two distinct interests: (1) an interest in the statutory
attorney’s fees which are awarded to a successful plaintiff

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under the False Claims Act, and (2) a contractual entitlement to
a portion of the Relator’s qui tam award as a contingency fee.
1. Statutory Attorney’s Fees
Under the False Claims Act, “a successful qui tam plaintiff
shall receive reasonable attorneys' fees and costs.”

United

States v. Keshner v. Nursing Pers. Home Care, 794 F.3d 232, 237
(2d Cir. 2015) (citation omitted); see also 31 U.S.C. § 3730
(“If the Government proceeds with [a qui tam] action brought by
a person . . . such person shall also receive an amount for
reasonable expenses which the court finds to have been
necessarily incurred, plus reasonable attorneys' fees and
costs.”).

Although the right to statutory attorney’s fees

belongs to the plaintiff -– i.e., the Relator -– the three
retainer agreements between the Relator and the Intervenors
grant the Intervenors an interest in the statutory attorney’s
fees.

First, the Gage Spencer Retainer provided that the

Original Counsel were entitled to receive statutory attorney’s
fees in the event the Relator obtained a qui tam award against
Salix.

Second, the Substitution Agreement affirmed the Original

Counsel’s right to those fees even though the Relator had
replaced them with Sadowski Fisher.

Third, the Sadowski Fisher

Retainer provided that Sadowski Fisher was entitled to statutory
attorney’s fees in the event the Relator obtained a qui tam
award and that the Relator assigned her interest in those

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statutory fees to Sadowski Fisher.

Accordingly, each of the

Intervenors has a contractual interest in the statutory fees
which the Relator is entitled to receive from Salix.
2. Contingency Fees
Unlike the statutory attorney’s fees, the Intervenors’
entitlement to a contingency fees arises solely under the three
retainer agreements between them and the Relator, and are not
required by statute.

The Second Circuit has not decided whether

attorneys may intervene solely for the purpose of protecting
their contractual rights to fees or to enforce a charging lien.
See Butler, 250 F.3d at 178 (affirming denial of intervention of
other grounds).

In Butler the Second Circuit noted, in dicta,

that a law firm that had a legal interest in a plaintiff’s cause
of action by way of a charging lien “at least arguably [has] an
equitable interest in the underlying cause of action,” that
would be sufficient to satisfy the requirements of Rule
24(a)(2).

Id.

Here, Sadowski Fisher may have a valid charging lien
because it submitted pleadings to this Court on behalf of the
Relator.

The Original Counsel, while they may not have a

charging lien, appear to have a contractual right to share in
any contingency fee owed to Sadowski Fisher.

Allowing

intervention to determine the Intervenors’ contingency fees will
conserve judicial resources and permit all of the issues

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concerning attorney’s fees to be determined in a single
proceeding.

Because the award of statutory fees must be

rendered by this Court, it is unnecessary to determine in this
case whether intervention would be appropriate if it were sought
solely to enforce a purported contractual right to a contingency
fee.

For these reasons, the Intervenors’ interest in their

contingency fees is sufficiently related to the Relator’s claims
in this action.
B. Whether the Intervenors’ Interests are Adequately
Represented by the Relator
Rule 24(a) requires a movant to show “that its interest is
not adequately represented by the other parties.”
WL 3615777, at *7.

Laroe, 2016

“The burden to demonstrate inadequacy of

representation is generally speaking ‘minimal.’”

Id.

The Intervenors identify two reasons why they believe the
Relator will not adequately represent their interests in
obtaining statutory attorney’s fees and their contingency fee.
First, the Intervenors claim that the Relator and her current
counsel, Mr. Gallagher, believe that at least some of the
Intervenors are entitled to no payments for their work and that
some of the Intervenors’ fees are unreasonable.

Second, the

Intervenors argue that the Relator has failed to timely file an

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application for statutory attorney’s fees,5 which risks waiving
the right to the fees that should be paid to the Intervenors.
Considering the totality of the circumstances, the
Intervenors have met their “minimal” burden of showing that the
Relator will not adequately represent their interests.

Id.

It

is appropriate to allow intervention so that the Intervenors may
protect any interest they may have in statutory attorney’s fees
and contingency fees themselves.

Federal Rule of Civil Procedure 54(d)(2)(B) requires
applications for attorney’s fees to be made within 14 days of
entry of judgment. The Relator has not waived her right to make
an application under Rule 54(d)(2)(B) because a final judgment
has not been entered. Settlement of claims under state false
claims acts are still being finalized and, with respect to the
federal claim, the stipulation of dismissal entered by the Court
on June 9, 2016 provides that the Relator shall file a Rule
41(a)(1) Notice of Dismissal upon receipt of the qui tam award
from the Government.
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Conclusion
The Intervenors’ June 23, 2016 motion to intervene is
granted.

A scheduling order refers the parties to Magistrate

Judge Peck6 for settlement discussions under his supervision
concerning statutory attorney’s fees and contingency fees, and
sets a briefing schedule in the event those discussions fail.
Dated:

New York, New York
August 18, 2016
__________________________________
DENISE COTE
United States District Judge

This action was previously assigned to Magistrate Judge
Dolinger, who has since retired from the bench.
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