Hunter Labs Loses Its Bid to Keep Entire $241 Million FCA Settlement
Chris Riedel and Hunter Laboratories LLC have lost a motion to dismiss a lawsuit over a breach of contract filed by two former partners in a litigation-sharing agreement that called for a 15 percent share in proceeds from lawsuits filed against various clinical laboratories. The plaintiffs in the case, Fair Laboratory Practices Associates and NPT […]
Chris Riedel and Hunter Laboratories LLC have lost a motion to dismiss a lawsuit over a breach of contract filed by two former partners in a litigation-sharing agreement that called for a 15 percent share in proceeds from lawsuits filed against various clinical laboratories. The plaintiffs in the case, Fair Laboratory Practices Associates and NPT Associates (referred to as FLPA), were partners with Hunter in the agreement in pending and future lawsuits. The first settlement was with Quest Diagnostics in California for which the plaintiff Hunter received a $241 million settlement of a False Claims Act case. According to the agreement, FLPA was entitled to 15 percent of that settlement. The next case was a settlement with Laboratory Corporation of America for which Hunter received $49.5 million and subsequently paid FLPA $1,292,301 under the shared litigation agreement. The next case was filed by FLPA in the Southern District of New York. That case was dismissed because one of the members of FLPA had served as general counsel for one of the defendant labs in the case and therefore would be in breach of his ethical obligations as an attorney. After the New York case, Hunter informed FLPA that it would not be paying the 15 percent share of the Quest case because the New York court’s action prohibits the payment in the Quest case. However, Hunter does not cite any specific language in the court’s order to substantiate that assertion. Hunter has refused to pay the partners per the shared litigation agreement until and unless a court authorizes the payment. The money, approximately $6.29 million, has been held in escrow since July 5, 2011. The Plaintiffs’ Claims for Relief FLPA asserts a breach of contract because it has performed, or offered to perform, all of the acts required of it under the shared litigation agreement. Further, FLPA asserts the breach of the agreement is substantial and the plaintiffs have been damaged and continue to be damaged as a result. FLPA also asserts conversion because it has legal and equitable title to the $6.29 million, which constitutes its 15 percent share of the Quest settlement. Hunter has converted the funds to an escrow account that it controls, depriving FLPA of its possession and use. Finally, FLPA asserts that Hunter unjustly enriched itself in the amount of $6.29 million by depriving FLPA of the funds owed to it as a result of the Quest settlement. The plaintiffs are seeking judgment in their favor on all three counts in the lawsuit and seek all damages that have resulted from the defendant’s actions. Plaintiffs also seek reasonable attorneys’ fees and court costs and any other relief under the law considered appropriate for this case. Finally, the defendants filed a motion to dismiss for improper venue or to move the case to another venue, specifically the Southern District of New York. The court ruled that the venue was proper and that there is no basis for moving the venue to New York. As a result, the court dismissed the motion, leaving the path open for FLPA to receive its share of the Quest settlement. Takeaway: Whistleblowers often have to fight for years through complex legal maneuverings and other hardships before they receive their reward. This case illustrates the downside of joining with other whistleblowers in a case.