When Expert Rules Collide

By Maggie Tamburro
Can certain expert witness discovery fees be capped by federal statutes imposing limits on such fees?

This question was recently debated by the U.S. Court of Appeals for the 7th Circuit. The August 14, 2012 opinion involved the False Claims Act, an expanding area of law experiencing record numbers of claims brought in the wake of stepped-up statutory reform and enforcement efforts aimed at reducing governmental fraud.

The expert witness issue: Whether 28 U.S.C. §1821 can be used to cap certain expert discovery fees and expenses recoverable under the discovery cost-shifting provisions of Federal Rule of Civil Procedure 26(b)(4)(E), which requires the party seeking the discovery to pay.

The 7th Circuit Opinion

The case, Halasa v. ITT Educational Services, Inc., involved claims of unlawful retaliatory discharge under the False Claims Act. Halasa, who served as one of defendant’s campus directors, claimed he was fired after he had identified and reported alleged violations of legal compliance with regulatory requirements relating to defendant’s eligibility for federally-funded aid. Defendant, however, contended that Halasa was fired for mismanagement of the campus which had undermined defendant’s confidence in his ability to lead.

In affirming the lower court’s judgment in favor of defendant, the 7th Circuit determined that, even assuming Halasa’s conduct was “protected” under the False Claims Act, Halasa failed to show that he was terminated because of the protected conduct – he was unable to show that the defendant decision-makers who terminated him had knowledge of Halasa’s assertions regarding compliance violations.

Agreeing with the lower court’s decision finding no retaliatory discharge, the circuit court stated, “Apart from narrow exceptions like the one that has come to be called the ‘cat’s paw’ theory … which does not apply here, companies are not liable under the False Claims Act for every scrap of information that someone in or outside the chain of responsibility might have.”

The Expert Fee Issue – When Rules Collide

Next, the 7th Circuit turned its attention to address a novel expert witness issue on which even the court acknowledged there was surprisingly little law: How does the court reconcile FRCP 26(b)(4)(E), which authorizes recoupment and the payment of a reasonable fee for certain expert discovery expenses, with 28 U.S.C. § 1821, which caps them?

After much deliberation, the 7th Circuit decided that § 1821 did not operate to cap certain expert fees and expenses recovered under FRCP 26, stating, “Although we consider it a close call, we conclude that the flexible authorization for a reasonable fee contained in Rule 26 supersedes the specific schedule outlined in § 1821(b). This means, as the district court held, that certain expenses and fees associated with experts are not capped by § 1821 when recovered under Rule 26.”

The 7th Circuit found the language in § 1821 particularly instructive. Noting that §1821 begins with the following phrase: “Except as otherwise provided by law…” the court reasoned that the statute’s very language acknowledges that other laws may override it - such as the fee shifting provision in FRCP 26(b)(4)(E). Thus, the court decided that the expert should be able to charge a reasonable fee for responding to discovery under FRCP 26 which shouldn’t be subject to a cap under another federal statute.

Latest Trends…

Interestingly, this expert fee civil procedure question lands smack in the middle of a case involving a growing area of law, so we can expect to see more action in this area.

Last month brought the largest False Claims Act case to date when health care giant GlaxcoSmithKline LLC agreed to pay $2 billion to settle a series of cases brought to the U.S. government by whistleblowers. According to the Department of Justice, annual recoveries in whistleblower cases reached an all-time high in 2011, bringing in $8.7 billion since January 2009, the largest three-year total in history.

Would you like to hear more about the developments in this escalating area of law?

Maggie Tamburro

Maggie Tamburro is an attorney and writer who holds a Juris Doctor from The John Marshall Law School and a Bachelor of Arts from the University of Texas. She was admitted to the Illinois Bar in 1994 and Florida Bar in 1999 and has significant experience in legal research, editing, and writing. Maggie is active her in local community, holding various publicly appointed civic board positions.

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