As False Claims Act cases have grown prevalent, especially cases alleging violations of the Anti-Kickback Statute or Stark law by Medicare providers, courts are frequently seeing cases in which the government suffered very small, if any, damages, but the defendants are facing millions of dollars in fines and penalties. The False Claims Act imposes a minimum penalty of $5,500 and treble damages for each false claim submitted to the government. In cases in which defendants submitted many improper claims to the government, but caused very little actual damages, the penalties for which the defendants are liable are often many multiples of the actual damages. In these cases, many defendants have argued that the massive penalties are a violation of the Eighth Amendment, which prohibits excessive fines.
Consequently, courts around the country have faced the question of what they should do when they have a case in which imposing even the minimum penalty of $5,500 per claim would create total penalties unfairly disproportionate to the actual harm to the government. Defendants have argued in these cases that courts should refuse to enter any fines against them. The defendants claim that complete dismissal of the fines is the courts’ only option because the courts do not have authority to reduce the fines below the minimum set out by the statute, but also cannot violate the Eighth Amendment.
The government has argued that if the minimum penalties would violate the Eighth Amendment, courts should reduce the fines to a reasonable level rather than dismiss the penalties entirely. In United States v. Gosselin earlier this year, the Fourth Circuit agreed with the government. In the case, the defendant faced over $50 million in penalties on less than $1 million in actual damages to the government. The Fourth Circuit ruled that it could take the recommendation of the government and reduce the fines to $24 million rather than dismiss the fines entirely. The Fourth Circuit reasoned that because the False Claims Act gives the government discretion to prosecute violations of the False Claims Act, the government has discretion to decide not to seek any penalty for some of the false claims submitted by a defendant, and therefore, reduce the total penalty to the defendants.
This decision could be good or bad for defendants that are facing False Claims Act lawsuits. If the defendant is facing harsh fines, but not fines so excessive as to violate the Eighth Amendment, the decision is good news in that it holds that not every claim found to be false must result in a minimum penalty of $5,500 plus treble damages. On the other hand, defendants will not be able to escape all fines by using the Eighth Amendment. It’s important to note that this is the decision of only one federal circuit court, and that other courts may disagree, or that the issue might be decided by the U.S. Supreme Court in the future.
David Dirr is an attorney at the Northern Kentucky office of Dressman Benzinger LaVelle and is a member of the firm’s healthcare and litigation practice groups. He is licensed to practice in Ohio, Kentucky, and Indiana. David concentrates his practice on the areas of Medicare and Medicaid reimbursement, anti-kickback law, the Stark law, and HIPAA.
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