On May 2, the U.S. Court of Appeals for the Seventh Circuit affirmed a False Claims Act (FCA) trial verdict in part, holding that the judgment was not constitutionally excessive under the Eighth Amendment.

At the same time, the court issued a limited remand to properly calculate the damages award.

The relator in the qui tam action, Stop Illinois Healthcare Fraud, LLC v. Sayeed, alleged that Asif Sayeed and three associated healthcare companies violated the Anti-Kickback Statute (AKS) and, by extension, the FCA by engaging in an illegal patient referral scheme with a nonprofit organization to coordinate home-based medical services for low-income Medicare-eligible seniors.

After a bench trial, the U.S. District Court for the Northern District of Illinois found the defendants liable and imposed nearly $6 million in damages. The defendants appealed both the liability and damages findings. On appeal, the Seventh Circuit held that:

  • Excessive Fines Clause Not Violated. The Seventh Circuit held that the nearly $6 million damages award was not constitutionally excessive under the Eighth Amendment. In its analysis, the court reasoned that the defendants “could have fared much worse” given the potential for criminal liability under the AKS. The court also emphasized that Congress’s decision to prescribe criminal penalties reflected the gravity of the defendants’ kickback scheme. That the court justified the amount of the civil judgment by comparing it to potential criminal liability is notable given that the government did not criminally prosecute the defendants and there was no determination that the defendants’ conduct would have met the higher criminal standard.
  • Causation Standard. The court was unable to determine whether all of the Medicare claims used to calculate the damages award resulted from the defendants’ illegal kickback scheme. The court issued a limited remand to exclude from the calculation of damages claims for services provided to patients lawfully referred to the defendants. The court declined to weigh in on the circuit split interpreting “resulting from,” concluding that a clarification of the damages award was necessary under any interpretation.

Although the court did not weigh in on the circuit split here, the question remains whether the U.S. Supreme Court will intervene and resolve the conflicting FCA causation standards.

For future coverage of key False Claims Act decisions and trends, subscribe to this blog or contact a member of the Bass, Berry & Sims Healthcare Fraud & Abuse Task Force.