Healthcare Fraud Case Results in $90M Settlement and $32M Legal Fee Award
Justice Department Defends Whistleblower Law as Business Groups Push Back
Humana Inc. has been ordered to pay over $32 million in attorney fees and costs to law firms representing a whistleblower who successfully pursued a $90 million settlement on behalf of the U.S. government. The ruling, issued by Chief U.S. District Judge Greg Stivers in Louisville, Kentucky, affirms the rights of whistleblowers under the False Claims Act, even as the law itself faces growing legal scrutiny.
The whistleblower, Steven Scott, a former actuary at Humana, alleged that the company fraudulently overcharged the federal government for prescription drugs. Though Humana ultimately agreed to settle the case in 2023, it denied all allegations of wrongdoing. Scott was represented by the law firms Kellogg Hansen and Phillips & Cohen.
Legal Fees and Compensation Dispute
Scott received 29% of the $90 million settlement, amounting to approximately $26.1 million, as allowed under FCA guidelines when the U.S. government declines to intervene in the case. As per his contingency fee arrangement, he paid his lawyers around $10.44 million.
However, Scott’s legal team sought additional compensation under the fee-shifting provision of the FCA, requesting more than $41 million in total fees and costs. Humana opposed the request, arguing that the rates charged by Scott’s attorneys—based in Washington and San Francisco—were excessively high for work done in Kentucky.
Judge Stivers acknowledged that the complexity and scope of the case justified higher-than-local billing rates but ultimately approved a lower award than the requested amount, settling at just over $32 million. Billing records show hourly rates as high as $1,600 for lead attorneys, such as Andrew Shen and Claire Sylvia.
Constitutional Challenge to FCA Whistleblower Provision
Despite this recent legal victory, the broader legal framework supporting whistleblower actions is under threat. In a controversial ruling, U.S. District Judge Kathryn Mizelle in Florida declared the FCA’s whistleblower provision unconstitutional, arguing it grants private citizens the ability to exercise executive powers without proper oversight from the presidency.
The case is expected to be reviewed by the 11th U.S. Circuit Court of Appeals in December. The U.S. Chamber of Commerce and other business groups have backed Mizelle’s ruling, while the U.S. Department of Justice is defending the constitutionality of the law. High-profile attorneys are scheduled to argue the case, including Kannon Shanmugam of Paul Weiss and Tejinder Singh of Sparacino.
While the outcome of the 11th Circuit case will not impact Scott’s litigation retroactively, it may have far-reaching implications for future whistleblower actions filed under the FCA.
False Claims Act Continues to Drive Settlements
The False Claims Act, particularly its “qui tam” or whistleblower provisions, remains a critical tool for uncovering fraud against the U.S. government. In 2024 alone, 979 FCA lawsuits were filed, setting a new annual record. The law has been instrumental in recovering more than $2.4 billion in settlements and judgments in the past year, according to the Department of Justice.
Enacted during the Civil War and strengthened in 1986, the FCA incentivizes whistleblowers by granting them a 15–30% share of any recovered funds, depending on government involvement in the litigation.
Other Legal Fee Disputes in Federal Courts
The Humana whistleblower case is not the only legal matter drawing attention to attorney compensation in complex litigation:
In Washington, law firm White & Case is seeking $510,000 in legal fees from the U.S. Department of Justice following a Freedom of Information Act (FOIA) lawsuit. The firm represented Richard Usher, a former JPMorgan trader acquitted of antitrust charges in 2018, who sued the DOJ for allegedly withholding key documents. Usher’s lawyers criticized the DOJ’s handling of the case, describing it as “stonewalling litigation tactics.”
Meanwhile, in Manhattan, law firm Kasowitz LLP has settled a fee dispute with Julio Martin Herrera-Velutini, the billionaire founder of Britannia Financial Group. Kasowitz had sued Herrera for nearly $500,000 in unpaid legal fees, arising from representation during a U.S. criminal investigation into alleged illegal campaign contributions. Herrera pleaded guilty to a misdemeanour in August, and his sentencing is scheduled for December.
The Humana case underscores both the power and controversy surrounding the False Claims Act’s whistleblower provisions. While the law continues to serve as a major enforcement tool in combating fraud against the federal government, its future now hinges on a pivotal constitutional challenge. At the same time, disputes over legal fees highlight the increasing financial and ethical complexities in high-stakes federal litigation.