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Last week, a panel of the Ninth Circuit upheld a ruling that stated False Claims Act (FCA) penalties must be analyzed under the Eighth Amendment’s prohibition against excessive fines and penalties. The ruling puts "a major weapon" in the hands of providers dealing with the Ninth Circuit, with the potential for similar action in other circuits, says health care attorney William Sarraille of Arent Fox in Washington, DC.
Sarraille says the decision opens the door for similar challenges by health care providers that feel the weight of draconian FCA fines and penalties. "It has already had a significant effect on the course of negotiations with [the Office of Inspector General and the Department of Justice] in some of our matters," he reports. "It could begin to address the tremendous disparity in power in negotiations under the FCA."
In U.S. v. Mackby, the court held that civil FCA penalties are subject to review under the Excessive Fines Clause because they serve punitive and deterrent purposes as well as remedial. The decision marks the first time that an appeals court ruled that FCA damages also are subject to analysis under the Eighth Amendment, says FCA expert John Boese.
In the Mackby case, a district court entered a judgment of nearly $730,000 for 111 false claims worth $58,000. Boese says the appellate court asked the district court to determine whether the penalties imposed and the treble damages awarded were "grossly disproportionate to the gravity of violation" while the government argued that it should not be compelled to defend such awards under the FCA on a case-by-case basis.
The Ninth Circuit panel granted the government’s motion for rehearing but defended its position. "Nothing in the revised panel decision eliminates the need for case-by-case analysis of FCA damages and penalties under the Excessive Fines Clause," says Boese.