Jan 4, 2022

Good News and Bad News Regarding Excessive Fines Clause in DOJ-declined FCA Cases

The Eleventh Circuit recently ruled that the Excessive Fines Clause applies in declined qui tam cases.  That is the good news.  However, the Eleventh Circuit also upheld a judgment where the ratio of total liability to actual damages was greater than 1500:1.  That is the bad news.  See U.S. ex rel. Yates v. Pinellas Hematology & Oncology, P.A., __ F. 4th __, 2021 WL 6133175 (11th Cir. 2021).

In Yates, the defendant submitted 214 claims to Medicare. It falsely represented that tests were performed at locations with CLIA certificates, when in fact, they had been performed at locations without CLIA certificates.  Actual damages were $755.54.

The district court imposed a civil penalty of $5,500 per claim, resulting in a total judgment of $1.179 million  (214 times $5,500 equals $1,177,000).

The Eleventh Circuit reasoned that the total judgment did not violate the Excessive Fines Clause even though “[a] fine ‘violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant’s offense.’”  According to the Eleventh Circuit, “[s]eeing a judgment of $1.179 million based on $755.54 in actual damages may raise an eyebrow,” but there were 214 repeated instances of fraud and the district court imposed the lowest-possible statutory penalty of $5,500 for all 214 violations.  Moreover, “[f]raud harms the United States in ways untethered to the value of any ultimate payment.”  Finally, “[i]n the context of the FCA, we also consider the deterrent effect of a monetary award.”

The Eleventh Circuit was the first Circuit Court to address the Excessive Fines Clause in a declined qui tam case; there were two lengthy concurring and one dissenting opinions, so this may not be the last word on how to apply the Excessive Fines Clause.  As Judge Tjoflat wrote, “I disagree with the Court’s new test for the Excessive Fines Clause as it applies to civil fines.”  A concurrence wrote, “I’ve written separately to question the degree of deference we give Congress’s judgments on the constitutionality of fines it sets.”  Stay tuned.

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