UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA ex rel. 

Syed Rahman, M.D.,

Plaintiff-Appellee,

GFL ADVANTAGE FUND, LIMITED,

Party in InterestAppellant,

PEPPER HAMILTON LLP; MARCY L.

COLKITT & ASSOCIATES,

Parties in InterestAppellees,

and

SYED RAHMAN, M.D.,

Plaintiff,

NATIONAL UNION FIRE INSURANCE

COMPANY; STEADFAST INSURANCE  No. 02-2317

COMPANY; RELIANCE INSURANCE

COMPANY; HERBARD, LIMITED;

JOHNSON & JOHNSON FINANCE

CORPORATION; DVI FINANCIAL

SERVICES, INCORPORATED; MOBILE

DIAGNOSTECH, INCORPORATED; A.

JEROME DIGIACOBBE, JR; CALVIN

ZONTINE; TREATMENT CENTERS

LIMITED PARTNERSHIP; PFG CAPITAL

CORPORATION; REGIONAL MEDICAL

SERVICES, INCORPORATED,

Parties in Interest,

ONCOLOGY SERVICES CORPORATION,

Third Party Plaintiff,

v. 
DOUGLAS COLKITT, M.D., 

Defendant-Appellee,

and

ONCOLOGY ASSOCIATES, P.C.;

ONCOLOGY SERVICES CORPORATION;

JERRY DERDEL, M.D.; JOANNE

RUSSELL; ONCOLOGY FUNDING

CORPORATION; STONEBORO ONCOLOGY

ASSOCIATES, P.C.; WARREN

ONCOLOGY ASSOCIATES, P.C.;

PHOENIXVILLE ONCOLOGY ASSOCIATES,

P.C.; LITTLESTOWN ONCOLOGY

ASSOCIATES, P.C.; LEHIGHTON

ONCOLOGY ASSOCIATES, P.C.; EXTON

ONCOLOGY ASSOCIATES, P.C.; BUCKS

COUNTY ONCOLOGY ASSOCIATES, P.C.;

GREENBELT CANCER TREATMENT

CENTER, L.P.; ATLANTIC RADIATION 

ONCOLOGY, L.L.C.; DERDEL

RANDALLSTOWN ONCOLOGY

ASSOCIATES, P.C.; DERDEL UNION

MEMORIAL ONCOLOGY ASSOCIATES,

P.C.; DERDEL RIVERSIDE ONCOLOGY

ASSOCIATES, P.C.; DERDEL

CHESAPEAKE ONCOLOGY ASSOCIATES,

P.C.; OKEECHOBEE ONCOLOGY

ASSOCIATES, P.A.; KEY WEST

ONCOLOGY ASSOCIATES, P.A.; TAMPA

ONCOLOGY ASSOCIATES, P.A.;

TREASURE COAST ONCOLOGY

ASSOCIATES, P.A.; LAUDERDALE

LAKES ONCOLOGY; ST. LAWRENCE

ONCOLOGY, P.C.; LIBERTY ONCOLOGY

ASSOCIATES, P.C.; COMMUNITY

RADIATION THERAPY ASSOCIATE, P.C.; 

2 UNITED STATES v. COLKITT
KINGS PLAZA RADIOLOGY, P.C.;



SOUTHERN NEW JERSEY CANCER TREATMENT; WILLIAMS COUNTY ONCOLOGY ASSOCIATES, P.C.; PARK ONCOLOGY ASSOCIATES, P.C.; PARKS ONCOLOGY ASSOCIATES, INCORPORATED; GREATER HARRISBURG CANCER CENTER, INCORPORATED;

MGH CANCER TREATMENT CENTER,

L.P.; ONCOLOGY SERVICES CORPORATION OF LAWNWOOD; KEYS CANCER CENTER LIMITED PARTNERSHIP, KEY WEST HMA, INCORPORATED, for itself and on

behalf of the Lower Florida Keys

Health System, Incorporated

(collectively, "HMA/Lower Keys");

XCC, INCORPORATED; GREATER HARRISBURG CANCER CENTER,



INCORPORATED; GPCC, INCORPORATED; IRCC, INCORPORATED

;

KRTC, INCORPORATED; LVCC, INCORPORATED; MGHCC, INCORPORATED, MHCC, INCORPORATED; MARYLAND GENERAL CANCER CENTER, INCORPORATED; ST. LUCIE COUNTY RADIATION ONCOLOGY

,

LIMITED; ONCOLOGY ASSOCIATES, PC

OF INDIANA; ONCOLOGY ASSOCIATES,

PC OF ALBEMARLE; ONCOLOGY ASSOCIATES, PC OF LIFE CARE; ONCOLOGY ASSOCIATES, PC OF HERITAGE HILLS; DERDEL MARYLAND GENERAL ONCOLOGY ASSOCIATES, PC; DERDEL MGH ONCOLOGY ASSOCIATES, PC;



UNITED STATES v. COLKITT3
KANKAKEE ONCOLOGY ASSOCIATES, 

PC; ONCOLOGY ASSOCIATES, PC OF

PITTSBURGH; ONCOLOGY ASSOCIATES,

PC OF HARRISBURG; PLEASANT HILLS

ONCOLOGY ASSOCIATES, PC;

ONCOLOGY ASSOCIATES, PC OF

LEBANON; ONCOLOGY ASSOCIATES,

P.C. OF SALISBURY; FLAGSTAFF

ONCOLOGY ASSOCIATES, PC; FORT

PIERCE ONCOLOGY ASSOCIATES, PC;

GREENWAY ONCOLOGY ASSOCIATES,

PC; GREATER PITTSBURGH ONCOLOGY

ASSOCIATES, PC; NORTHWEST

RADIATION TREATMENT SERVICES,

INCORPORATED; MARLTON ONCOLOGY,

PC; RANDALLSTOWN ONCOLOGY 

CENTER, INCORPORATED; WESTCHESTER

ONCOLOGY, PC; CHESAPEAKE

REGIONAL CANCER CENTER,

INCORPORATED; UNION MEMORIAL

ONCOLOGY CENTER, INCORPORATED;

CANCER CENTER OF NORTHERN

ARIZONA PARTNERSHIP; WILLIAMS

COUNTY ONCOLOGY ASSOCIATES,

INCORPORATED; TRI STATE ONCOLOGY

ASSOCIATES, INCORPORATED;

SALISBURY RADIATION ONCOLOGY

CENTER, INCORPORATED; HERITAGE

HILLS MEDICAL, LP; RIVERSIDE

ONCOLOGY; JEFFERSON RADIATION 

4 UNITED STATES v. COLKITT
ONCOLOGY CENTER, LP; ALBEMARLE



REGIONAL CANCER CENTER, LP; MEDTREND HEALTH SYSTEMS, INCORPORATED; BROWARD RADIATION THERAPY CORPORATION; LAKE OKEECHOBEE CANCER CENTER, INCORPORATED; LAWNWOOD REGIONAL CANCER CENTER, LP; ST. LAWRENCE ONCOLOGY PC OF OGDENSBURG;

PMCB, INCORPORATED; ST.

LAWRENCE ONCOLOGY, PC OF BROOKLYN; ONCOLOGY SERVICES CORPORATION OF KEY WEST, INCORPORATED; ONEONTA RADIATION ONCOLOGY, PC; ONCOLOGY SERVICES CORPORATION OF TAMPA,



INCORPORATED; GREENBELT CANCER TREATMENT CENTER, L.P.; BILLING SERVICES, INCORPORATED; NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION; COLKITT ONCOLOGY GROUP, INCORPORATED; EQUIMED, INCORPORATED, a corporation formed

under the laws of Nevis State

College, PA; SKYLINE ONCOLOGY ASSOCIATES, P.C., Pittsburgh, PA; MALONE ONCOLOGY ASSOCIATES,

P.C., State College, PA; NIXON EQUIPMENT CORPORATION, a

corporation formed under the laws

of Nevis State College, PA;



UNITED STATES v. COLKITT5
THOMAS JEFFERSON REAL ESTATE 

CORPORATION, a corporation formed

under the laws of Nevis State

College, PA; GEORGE WASHINGTON

REAL ESTATE CORPORATION, a

corporation formed under the laws

of Nevis State College, PA;

OAKTREE CANCER CARE,

INCORPORATED; KEYSTONE ONCOLOGY,

LLC, State College, PA; JMR

MEDICAL ASSOCIATES, P.C.; CAROLINA

CANCER CARE, LLC; SOUTHERN

ONCOLOGY, P.A.; EASTERN

PENNSYLVANIA ONCOLOGY, LLC;

MASSACHUSETTS RADIATION

ONCOLOGY SERVICES, P.C; CHESTER

COUNTY ONCOLOGY, LLC; ROSEWOOD

CANCER CARE, INCORPORATED; 

FLORIDA ONCOLOGY, P.A.; COASTAL

ONCOLOGY, LLC,

Defendants,

MERRILL COHEN, Chapter 7 Interim

Trustee,

Intervenor-Defendant,

v.

HIGHMARK, INCORPORATED, d/b/a Xact

Medicare Services; NORIDIAN

MUTUAL INSURANCE COMPANY, d/b/a

Blue Cross/Blue Shield of North

Dakota; AETNA INCORPORATED; BLUE

CROSS/BLUE SHIELD OF FLORIDA, INC.;

HEALTH CARE SERVICE CORPORATION,

A Mutual Legal Reserve Company; 

6 UNITED STATES v. COLKITT
TRAILBLAZER HEALTH ENTERPRISES, 

LLC; BLUE CROSS & BLUE

SHIELD OF MARYLAND, INCORPORATED;

EMPIRE BLUE CROSS AND BLUE

SHIELD; GROUP HEALTH

INCORPORATED; BLUE CROSS/BLUE

SHIELD OF WESTERN NEW YORK,

INCORPORATED; CIGNA

CORPORATION; CONNECTICUT GENERAL  LIFE INSURANCE COMPANY;

NATIONWIDE MUTUAL INSURANCE

COMPANY,

Third Party Defendants.

SOVEREIGN BANK; GLORIA FELIX,

Doctor,

Movants. 

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

Alexander Harvey II, Senior District Judge.

(CA-95-2241-H)

Argued: January 23, 2004

Decided: June 7, 2004

Before NIEMEYER, SHEDD, and DUNCAN, Circuit Judges.

Affirmed by unpublished per curiam opinion. 

COUNSEL

ARGUED: Eric S. Rein, SCHWARTZ, COOPER, GREENBERGER

& KRAUSS, CHTD., Chicago, Illinois, for Appellant. Tamara Lynn

UNITED STATES v. COLKITT 7
Fine, Office of the United States Attorney, Baltimore, Maryland, for

the United States. David Richman, PEPPER, HAMILTON, L.L.P.,

Philadelphia, Pennsylvania, for Pepper, Hamilton, L.L.P.; Andrew

James Kennedy, MARCY L. COLKITT & ASSOCIATES, P.C.,

Wayne, Pennsylvania, for Marcy L. Colkitt & Associates, P.C. ON

BRIEF: Patrick T. Stanton, SCHWARTZ, COOPER, GREENBERGER & KRAUSS, CHTD., Chicago, Illinois, for Appellant. Peter

Konilege, MARCY L. COLKITT & ASSOCIATES, P.C., Wayne,

Pennsylvania, for Marcy L. Colkitt & Associates, P.C. Daniel A.

Spiro, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for the United States.

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). 

OPINION

PER CURIAM:

Appellant GFL Advantage Fund, Ltd. ("GFL") appeals the October

30, 2002 order of the District Court for the District of Maryland

(Alexander Harvey II, Judge) granting the motion of Appellees Pepper Hamilton LLP ("Pepper Hamilton"), Marcy L. Colkitt & Associates, P.C. ("MLCA") and the United States for distribution of

proceeds of a directors’ and officers’ liability insurance policy held

by National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"). Pepper Hamilton, MLCA and the United

States claim entitlement to the insurance proceeds pursuant to a settlement agreement between Dr. Douglas Colkitt,1

 the insured, and the

United States. GFL claims that the settlement agreement does not

entitle the United States to certain portions of the insurance proceeds,

and that its claim to those portions is superior to the claims of Pepper

Hamilton and MLCA. Because we find that the district court properly

interpreted the provision of the settlement agreement at issue, we

affirm its order.

1Marcy L. Colkitt of MLCA and Dr. Colkitt are siblings. 

8 UNITED STATES v. COLKITT
I.

This appeal arises from a collateral order entered in a qui tam

action originally filed in 1995 by Syed Rahman (the "Rahman

action"). In August of 1998, the United States filed its complaint in

the Rahman action naming as defendants Dr. Douglas Colkitt, his

wife, his business partner, and over eighty health care facilities

owned, controlled or operated by Dr. Colkitt. The defendants allegedly engaged in a fraudulent billing scheme, defrauding the Medicare

and Civilian Health and Medical Program of the Uniformed Services

("CHAMPUS") programs of more than $12 million. See United States

ex. rel. Rahman v. Oncology Assocs., P.C., 269 B.R. 139, 143-44 (D.

Md. 2001). After extensive pretrial proceedings, the parties entered

into a Settlement Agreement (the "Rahman Agreement").2 The district

court approved the Rahman Agreement on September 8, 2000. See id.

at 144.

As part of this settlement, the defendants agreed to pay the United

States $9,885,000. To secure payment in full, the defendants assigned

their rights to, inter alia, "any proceeds" of liability insurance policies

under which one or more defendants, or their officers or directors,

were insured. Rahman Agreement ¶ 13.b. However, a proviso to

¶ 13.b stated, "Notwithstanding any other provision of this Paragraph,

the United States shall not be entitled to recover from Defendants or

Defendants’ counsel any amounts paid or owed by insurers for legal

fees and expenses actually incurred." Id.

Dr. Colkitt was an officer and director of National Medical Financial Services, Inc. ("National Medical"), another defendant in the

Rahman action. As such, Dr. Colkitt sought coverage for his defense

costs under National Medical’s directors’ and officers’ liability insurance policy (the "D&O policy") with National Union. In 1999, he

requested that National Union accept Pepper Hamilton as his legal

counsel. National Union agreed to provide his defense under a reser2The Rahman Agreement was one of four settlement agreements

entered into by the United States, Dr. Colkitt and other parties to resolve

the claims resulting from the practices of Dr. Colkitt’s various business

enterprises. The other settlement agreements are not relevant to the

issues on appeal. 

UNITED STATES v. COLKITT 9
vation of rights, and accepted Pepper Hamilton as counsel for Dr.

Colkitt.

Pepper Hamilton represented Dr. Colkitt in the Rahman action

from 1999 through approval of the Rahman agreement. National

Union paid Pepper Hamilton directly for its services for most of this

time. But in November of 2000, it notified Pepper Hamilton that

defense costs incurred after April 30, 2000 were not covered by the

D&O policy and would not be paid. Consequently, Dr. Colkitt opened

arbitration proceedings against National Union.

After one law firm refused to represent Dr. Colkitt in this insurance

coverage dispute on a contingency fee basis, he engaged MLCA.

MLCA agreed to accept as payment for its services forty percent of

any "payments made by National Union as a result of" a favorable

judgment in the arbitration proceeding. (J.A. 227). A tribunal of the

American Arbitration Association held a ten-day hearing between

October 24, 2001 and March 26, 2002. On April 24, 2002, the arbitrators found in favor of Dr. Colkitt and directed National Union to pay

him $1,791,450. On September 6, 2002, Pepper Hamilton and MLCA

moved the district court to order distribution of the arbitration award

to them and the United States pursuant to ¶ 13.b of the Rahman

Agreement. Pepper Hamilton, MLCA and the United States had

agreed to a division of the arbitration award as follows: $700,000 to

the United States, $500,000 to Pepper Hamilton, and $591,450 to

MLCA.

On October 7, 2002, the district court permitted GFL to intervene.

In July of 2000, GFL had obtained a judgment against Dr. Colkitt for

more than $21 million in federal court in Pennsylvania. See GFL

Advantage Fund, Ltd. v. Colkitt, No. 4:CV-97-0526, 2000 U.S. Dist.

LEXIS 21747 (M.D. Pa. July 17, 2000). In an effort to enforce this

judgment, GFL had garnished purported assets of Dr. Colkitt and of

entities in which Dr. Colkitt had an interest.

GFL’s attempts to secure its judgment against Dr. Colkitt threatened to draw it into litigation with the United States because of the

government’s interests secured in the Rahman Agreement. Consequently, GFL and the United States entered into an agreement on January 18, 2002 ("January 2002 Agreement") whereby GFL agreed that

10 UNITED STATES v. COLKITT
it would not "suffer or permit existing or future charging orders or

garnishments to be placed against . . . any entity which is among the

Protected Assets."3 January 2002 Agreement ¶ I.B.4. "Protected

Assets" included the insurance proceeds assigned to the United States

in ¶ 13.b of the Rahman Agreement. See January 2002 Agreement

¶ I.A & Ex. F, ¶ 16. 

Despite the January 2002 Agreement, on March 26, 2002, GFL

sought and obtained a writ of execution attaching the property of Dr.

Colkitt in the possession of National Union. GFL Advantage Fund,

Ltd. v. Colkitt, No. 4:97-CV-526 (M.D. Pa. Mar. 26, 2002). It was

based on this writ that GFL sought to intervene as a party-in-interest

in the proceedings below.

The court below determined that the issues involved in the motion

for distribution of the arbitration award did not require a hearing.

Based on the papers submitted to it, the district court held that GFL

had no right to any portion of the insurance proceeds obtained as a

result of the arbitration:

The right to receive funds payable by National Union to

Colkitt have [sic] been assigned to the United States pursuant to the Rahman Agreement approved by this Court. The

insurance proceeds are under the January 2002 Agreement

"Protected Assets" to be disbursed to the United States by

an entity. GFL has specifically agreed that such assets distributable to the United States "will remain free of any claim

of GFL . . . ." Moreover, Colkitt has no remaining ownership interest in the insurance proceeds which might be subject to garnishment by GFL. Under the Rahman Agreement,

the proceeds of a Policy like the one issued by National

Union were to be paid to the United States to satisfy the

amount which Colkitt had agreed to pay.

3The January 2002 Agreement vested the District Court for the District

of Maryland and the Bankruptcy Court for the District of Maryland with

exclusive jurisdiction over any dispute arising from it. January 2002

Agreement ¶ II.A. 

UNITED STATES v. COLKITT 11
United States ex rel. Rahman v. Oncology Assocs., P.C., 229 F. Supp.

2d 458, 463-64 (D. Md. 2002) (footnote omitted). Thus, even if Pepper Hamilton and MLCA were not entitled to a portion of the arbitration award, "the United States would be entitled to receive the entire

sum." Id. And because the United States agreed to a particular division of the arbitration award, Pepper Hamilton and MLCA were entitled to their portions of the award in any event. Id. at 464.

Both the district court and this Court denied GFL’s subsequent

applications for a stay of distribution pending appeal. The district

court then distributed the arbitration award to the United States, Pepper Hamilton and MLCA according to their agreed-upon apportionment, and this appeal followed.

II.

On appeal, GFL concedes that its claim to the arbitration award is

subrogated to that of the United States under the January 2002 Agreement. It also concedes that the arbitration award constitutes "proceeds" within the meaning of ¶ 13.b, nor could it argue otherwise. The

award represents insurance proceeds that National Union should have

paid under the D&O policy — an insurance policy that falls within

the assignment of rights in ¶ 13.b. Rather, GFL argues that the monies

owed under the D&O policy to Pepper Hamilton and MLCA’s contingency fee are "Non-US proceeds" — proceeds in which the United

States has no interest. Under GFL’s interpretation, these monies are

thus not "Protected Assets" and the January 2002 Agreement does not

bar it from attaching these amounts. GFL then argues that its judgment lien takes priority over any interest Pepper Hamilton or MLCA

might have in these amounts. 

The first question we must answer, then, is whether the United

States has any interest, under ¶ 13.b, in "amounts paid or owed by

insurers for legal fees and expenses actually incurred." The proper

interpretation of a settlement agreement, as with any contract, is a

question of law that we review de novo. Nehi Bottling Co. v. All-Am.

Bottling Corp., 8 F.3d 157, 161-62 (4th Cir. 1993). When construing

a provision of a contract, we must "give meaning and effect to every

part of the contract, rather than leave a portion of the contract meaningless or reduced to mere surplusage." Goodman v. Resolution Trust

12 UNITED STATES v. COLKITT
Corp., 7 F.3d 1123, 1127 (4th Cir. 1993). With this rule in mind, we

address GFL’s claims to the portions of the arbitration award claimed

by Pepper Hamilton and MLCA in turn. 

Paragraph 13.b provides, in pertinent part:

Subject to the condition that all rights to insurance are

retained to defend any claim (including third party claims or

cross claims) relating to the Covered Conduct that has or

may be made by any party other than the United States, all

Parties other than NRTS agree that any proceeds from insurance policies that provide coverage for some or all of the

Covered Conduct in which any of the Defendants, or their

officers or directors, are insured parties will be paid to the

United States to satisfy the Settlement Amount up to Payment in Full. . . . Notwithstanding any other provision of

this Paragraph, the United States shall not be entitled to

recover from Defendants or Defendants’ counsel any

amounts paid or owed by insurers for legal fees and

expenses actually incurred.

Rahman Agreement ¶ 13.b (emphasis added).

Through ¶ 13.b, Dr. Colkitt has assigned his rights to "any proceeds" from the D&O policy to the United States. The Rahman

Agreement does not define the term "proceeds." In the absence of a

contractual definition, we give contract terms their ordinary meaning.

See Bynum v. CIGNA Healthcare of N.C., Inc., 287 F.3d 305, 313 (4th

Cir. 2002) (applying dictionary definition to undefined term in insurance contract). In ordinary usage, "proceeds" means "something that

results or accrues," RANDOM HOUSE WEBSTER’S UNABRIDGED DICTIONARY 1542 (1998); "the net sum received (as for a check, a negotiable note, an insurance policy) after deduction of any discount or

charges," WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1807

(1986).4 "Any proceeds" is therefore an all-encompassing phrase. Any

4

In the context of an insurance policy, "after deduction of any . . .

charges" would mean the total amount payable under the policy less the

deductible and any other sums the insurer would require the insured to

pay. 

UNITED STATES v. COLKITT 13
monies resulting from Dr. Colkitt’s coverage under the D&O policy

for the Rahman action are "proceeds" of that policy, and the United

States retains a priority interest in them until the Settlement Amount

is paid in full. Because "amounts paid or owed by insurers for legal

fees and expenses" result from Dr. Colkitt’s coverage under the D&O

policy, amounts owed to Pepper Hamilton are "proceeds" of the D&O

policy and the United States has a security interest in them.

The proviso, when read in full, reinforces this conclusion. It states,

"Notwithstanding any other provision of this Paragraph, the United

States shall not be entitled to recover from Defendants or Defendants’

counsel any amounts paid or owed by insurers for legal fees and

expenses actually incurred." Rahman Agreement ¶ 13.b. Contrary to

GFL’s reasoning, the paragraph does not state that the United States

shall not be entitled to any amounts owed for legal fees; it provides

that the United States "shall not be entitled to recover from Defendants or Defendants’ counsel" such amounts. Id. (emphasis added).

GFL’s contention that the United States has no interest in amounts

paid or owed for legal fees reduces the emphasized language to surplusage, a result we cannot accept. See Goodman, 7 F.3d at 1127. 

The limitation imposed on the United States by the terms of ¶ 13.b

is both specific and narrow. Although the United States is barred from

recovering from Dr. Colkitt or Pepper Hamilton legal fees and

expenses paid or owed to them, it is not barred from seeking to

recover such amounts from another entity. Contrary to GFL’s argument, ¶ 13.b creates no "non-US" category of proceeds. The proviso

grants the United States a reversionary interest in any "amounts paid

or owed by insurers for legal fees and expenses actually incurred."

The district court was thus correct to conclude that, if any such

amounts were paid to someone other than "Defendants or Defendants’

counsel," the United States would be entitled to recover those

amounts from that person or entity. Were GFL that other entity, the

United States would be entitled to recover those sums; in fact, GFL

has conceded that the United States’ interest supercedes its own. 

But, GFL argues, this interpretation of ¶ 13.b translates a promise

by Dr. Colkitt to pay insurance proceeds to the United States into a

promise by the United States to pay Dr. Colkitt’s attorneys. GFL is

mistaken. First, ¶ 13.b is not a mere promise by Dr. Colkitt to pay the

14 UNITED STATES v. COLKITT
United States; it is an assignment of Dr. Colkitt’s right to any proceeds to the United States. Dr. Colkitt no longer has an interest in

insurance proceeds to which the United States is entitled; it follows

that Dr. Colkitt retains no interest to which GFL’s claim can attach.5

Second, the proviso is not a promise by the United States to pay legal

fees to defendant’s counsel; it is a promise not to challenge an insurer’s determination as to what constitutes legal fees and expenses payable under the policy. The only reason the proviso might appear to be

a promise by the United States to pay Pepper Hamilton is that the

arbitration award was a lump sum, combining amounts due for legal

fees and expenses with the indemnification amount. If National Union

had not failed to abide by the terms of the D&O policy, it would have

paid Pepper Hamilton as its fees became due. It was these payments

that the United States agreed not to seek to recover from Dr. Colkitt

or his counsel.

We hold that ¶ 13.b of the Rahman Agreement includes in the term

"proceeds" amounts payable to Pepper Hamilton for its legal fees and

expenses actually incurred during the course of its representation of

Dr. Colkitt under the D&O policy. Because ¶ 13.b grants the United

States a security interest in "any proceeds" of the D&O policy,

amounts owed to Pepper Hamilton are "Protected Assets" to which

GFL is not entitled. 

Our interpretation of ¶ 13.b does not resolve GFL’s claim to

MLCA’s contingency fee. The proviso applies only to "amounts paid

or owed by insurers for legal fees and expenses actually incurred."

Rahman Agreement ¶ 13.b. In context, this language can only refer to

legal fees and expenses paid or owed by insurers under an insurance

policy "that provide[s] coverage for some or all of the Covered Conduct in which any of the Defendants, or their officers or directors, are

insured parties," such as Dr. Colkitt’s D&O policy. Id. National

Union does not owe any legal fees or expenses to MLCA under such

a policy. Rather, Dr. Colkitt owes MLCA a portion of the arbitration

award pursuant to their contingency fee agreement. Its fee would be

5We note that Dr. Colkitt theoretically retains a reversionary interest

in the proceeds of the D&O policy to the extent any proceeds remain

after the United States has been paid in full under the Rahman Agreement. 

UNITED STATES v. COLKITT 15
paid out of monies otherwise payable to the United States or Pepper

Hamilton. Hence, any interpretation of the proviso would not affect

GFL’s claim against MLCA. 

The analysis, however, does not end there. Dr. Colkitt agreed to

pay MLCA’s contingency fee out of the arbitration award, i.e., the

proceeds of the D&O policy. As we have noted, as a result of his

assignment, Dr. Colkitt retained no interest in those proceeds out of

which he could agree to pay MLCA. The United States would be entitled to this portion of the arbitration award. As such, MLCA’s fee is

a "Protected Asset" under the January 2002 Agreement. That agreement therefore precludes GFL from seeking to attach MLCA’s contingency fee.6

The January 2002 Agreement precludes GFL from seeking to

attach the portions of the arbitration award representing Pepper Hamilton’s legal fees and expenses and MLCA’s contingency fee. We

need not determine therefore the priority of GFL’s claims relative to

those of Pepper Hamilton or MLCA. The remaining issues raised by

the parties are thus moot.

III.

Because we believe, based on the foregoing analysis, that the district court reached the conclusion to which ¶ 13.b is most reasonably

amenable, its order is 

AFFIRMED.

6The only party that could arguably challenge the United States’ right

to these proceeds is MLCA. MLCA might be able to establish a charging

lien against the arbitration award that would supercede the United States’

secured interest. But as the district court noted, "the United States, which

has been substantially benefited by the award, [quite reasonably] has recognized the right of these attorneys to be compensated for the substantial

legal services rendered by them." Rahman, 229 F. Supp. 2d at 464.

Because the United States and MLCA have agreed to a particular division of the award between them, we need not address this issue. 

16 UNITED STATES v. COLKITT
SHEDD, Circuit Judge, concurring in the result: 

Pepper Hamilton LLP and Marcy L. Colkitt & Associates, P.C.

("MLCA") moved the district court (primarily pursuant to Paragraph

13(b) of the Rahman Agreement) for distribution of the $1,791,450

National Union Insurance Company arbitration award, and these law

firms — along with the United States — agreed that the award should

be divided as follows: $700,000 to the United States; $500,000 to

Pepper Hamilton; and $591,450 to MLCA. United States ex rel. Rahman v. Oncology Assocs., 229 F. Supp. 2d 458 (D. Md. 2002). The

district court — which had expressly approved the Rahman Agreement — granted the motion and ordered the money to be distributed

in the manner proposed by the law firms and the United States: 

[T]he United States is . . . entitled to all of the proceeds of

the insurance coverage arbitration. That the United States

has agreed to pay from these proceeds the legal fees and

expenses of the movants does not alter its right to receive

the entire amount. Both Pepper Hamilton and MLCA have

claimed that a part of the award should be paid to them, and

the United States has not opposed these claims. The legal

services rendered by Pepper Hamilton were covered by the

Policy under which National Union agreed to pay compensation for such services rendered to its insured. Moreover,

the legal services rendered by MLCA resulted in the award

made by the arbitrators. Quite reasonably, the United States,

which has been substantially benefitted by the award, has

recognized the right of these attorneys to be compensated

for the substantial legal services rendered by them. 

If this Court were to accept the position of GFL that its lien

on the proceeds is superior to the equitable lien of Pepper

Hamilton and to the charging lien of MLCA, the entire sum

would then be paid to the United States which in turn has

agreed to compensate these attorneys for the legal services

rendered by them. Rather than permitting the claims of Pepper Hamilton and MLCA to be paid in such a roundabout

manner, the Order entered herein by the Court will approve

the movants’ request to receive amounts sought by them

directly from National Union.

UNITED STATES v. COLKITT 17
Id. at 464 (footnote omitted). 

The district court’s resolution of the matter before us is based primarily on its interpretation of the Rahman Agreement. Because the

district court presided over the settlement of the Rahman litigation

and approved the Rahman Agreement, its interpretation of that settlement agreement is entitled to our deference. See Simmons v. South

Carolina State Ports Auth., 694 F.2d 63, 66 (4th Cir. 1982).1 If I were

left to my own devices, I may have reached a different result than the

district court. However, based on the arguments presented and the

deference due to the district court, I am not convinced that the district

court erred. Therefore, I concur in the result reached by the majority.

Despite my concurrence, one matter concerning this litigation that

appears in the record is left unclear. The Rahman Agreement, which

is the heart of the controversy before us, provided the United States

with a monetary judgment in the amount of $9,885,000 plus interest

against Douglas Colkitt and his co-defendants in that case. At the time

of the district court’s order distributing the arbitration award, the

United States had not been paid in full under the Rahman Agreement.

Subsequent to that order, on July 31, 2003, the United States informed

the district court that it had received the full amount owed under the

Rahman Agreement, and it set forth the sources from which the payments came. See Joint Status Report And Request For Declaration Of

Payment In Full And Other Relief ("Joint Status Report"), at 3, 12-13.

In doing so, the United States represented that it had received from

National Medical Financial Services a payment of $700,000, and it

specified that this payment relates to "National Union Insurance."

Joint Status Report, at 13. Nowhere in that document does it appear

that the United States accounted for the additional $1,091,450 of the

arbitration award that was paid to Pepper Hamilton and MLCA.

It seems to me that in light of the fact that (1) the United States is

"entitled to all of the proceeds of the insurance coverage arbitration,"

and (2) the United States’ agreement to pay from these proceeds the

law firms’ legal fees and expenses "does not alter its right to receive

the entire amount," 229 F. Supp. 2d at 464, the United States should

be required to credit Colkitt with the entire $1,791,450 of the arbitra1

I note that neither GFL nor the law firms were parties to the Rahman

Agreement. 

18 UNITED STATES v. COLKITT
tion proceeds — rather than only $700,000 — in satisfaction of the

judgment created by the Rahman Agreement. The United States’ gratuitous (though perhaps understandable) decision to pay some of this

money to the law firms does not negate the fact that all of the money

was assigned to the United States by Colkitt under the Rahman

Agreement for the purpose of satisfying the judgment. A proper

accounting of that money would (everything else being equal) free up

$1,091,450 for Colkitt’s creditors (such as GFL) to pursue. Although

the district court is entitled to deference in construing the Rahman

Agreement, the United States’ final accounting appears to be inconsistent with the district court’s construction of that agreement.2

2While this issue appears in the record and is worthy of note, the

accounting was not appealed, and GFL did not argue that this inconsistency undermines the district court’s order distributing the arbitration

proceeds. 

UNITED STATES v. COLKITT 19