The Eleventh Circuit has become the first federal court of appeals to directly address whether the Eighth Amendment’s Excessive Fines Clause applies to the monetary award in a declined False Claims Act (FCA) case. And in an opinion issued December 29, 2021, the court held that it does. See U.S. ex rel. Yates v. Pinellas Hematology & Oncology, P.A., __ F. 4th __, 2021 WL 6133175 (11th Cir. 2021).
The defendant was a clinical laboratory with multiple locations. Some had Clinical Laboratory Improvement Amendments (CLIA) certificates required to conduct lab tests; others did not. The jury found that the defendant had submitted 214 claims to Medicare in which it falsely represented that tests were performed at locations with CLIA certificates, when in fact they had been performed at locations without CLIA certificates.
The jury found that the United States had sustained $755.54 in actual damages. The district court trebled the government’s actual damages and imposed the lowest per claim civil penalty, $5,500, resulting in a total judgment of $1.179 million. The defendant challenged this award on appeal under the Excessive Fines Clause.
Eleventh Circuit Decision
Recognizing it was the first appellate court to address the issue, the Eleventh Circuit held that “the damages and statutory penalties awarded in a non-intervened FCA qui tam action are subject to the Eighth Amendment’s prohibition on excessive fines.” The Eleventh Circuit reached this conclusion by joining the Fourth, Eighth, and Ninth Circuits in reasoning “that FCA monetary awards are fines for the purposes of the Excessive Fines Clause, precisely because they are at least in part punitive.” The Eleventh Circuit also held that monetary awards in declined cases are “imposed by the United States”—such that they fall under the federal constitution—because they are required by a federal statute and arise in cases brought on behalf of the United States in which the United States exercises significant control over the ultimate disposition of the action.
Turning to the judgment against the defendant, the court found that the total award of $1.179 million passed constitutional muster. In finding this award was not excessive, the court noted that the defendant engaged in repeated fraud, that it acted with the requisite scienter, that fraud imposes considerable harm on the United States, and that the district court imposed the lowest per claim civil penalty.
The court also gave deference to Congress’s imposition of treble damages and significant per claim civil penalties, noting that defendants who submit claims to Medicare are “squarely in the FCA’s crosshairs.” On this point, two judges issued a concurrence saying that giving “great deference to Congress’s judgment about the excessiveness of the fine” “seems a bit like letting the driver set the speed limit.” Although the concurring judges sounded the alarm about this aspect of Excessive Fines jurisprudence, they joined the court’s judgment.
Viewed in total, the Eleventh Circuit’s decision is something of a mixed bag. It is significant that a circuit court has now held that the Excessive Fines Clause applies in declined qui tam cases. This holding certainly will embolden future defendants to challenge FCA judgments on Excessive Fines grounds. At the same time, the court upheld a judgment in which the ratio of total liability to actual damages was greater than 1500:1. This raises the question of what relief, if any, the Excessive Fines Clause will provide to defendants in practice. Each case, of course, turns on its facts, and it will be interesting to see how other circuits address this issue.
If you have any questions about the Excessive Fines Clause in FCA cases, please contact the author.