Takeaway: The Eastern District of New York rules that tax code gives relator’s counsel superpriority to False Claims settlement proceeds.
On Wednesday, November 9th, the Eastern District of New York ruled that fees owed to relator’s counsel must be paid before the relator’s tax lien, resolving a dispute over settlement funds from a fifteen-year-old False Claims Act (FCA) case against Amgen, Inc.
In a matter of first impression, District Judge Brian M. Cogan held that 26 U.S.C. § 6323(b)(8)—which gives superpriority to attorney compensation—applies to FCA recoveries.
In 2008, Don Hanks filed a qui tam action under the FCA against Amgen and several oncology practices. The former Amgen representative accused the manufacturer of boosting sales by underreporting discounts to providers, leading to inflated Medicare reimbursements.
The United States partially intervened in the action and settled with Amgen in 2012.
Hanks’ share of the settlement as the relator was $220,411.04. But the government refused to pay Hanks.
In 2013, the government obtained a tax judgment against Hanks for $980,320.26. After the government executed against real estate that Hanks owned, the lien amount was brought down to $249,534.72.
The government wanted Hanks’ relator share to offset his leftover tax liability.
Hanks’ FCA attorney, Rob Hennig, Esq., had a competing claim—he was owed a 45% contingent fee from the Amgen settlement.
The district court ruled that the attorney’s charging lien was superior...
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