On Friday, March 12, 2021, the Eleventh Circuit Court of Appeals heard oral arguments in the case of United States of America, ex. rel. Michele Yates v. Pinellas Hematology & Oncology, P.A., where the defendant argued that the judgment entered against it in a False Claims Act (FCA) case violates the Eighth Amendment’s prohibition against excessive fines. 

By way of background, the FCA imposes liability on “any person who [among other things] … knowingly presents, or causes to be presented, a false or fraudulent claim for payment” to the federal government or who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”  31 U.S.C. § 3729(a).  Those who violate the FCA are liable for civil penalties of over $23,000 per claim, plus treble damages.  Id. at §3729(a)(1)(G).  In FCA cases against healthcare providers, penalties are often astronomical due to the volume of claim submissions, even when the actual damages are disproportionately less.  FCA defendants have often argued that this disproportionate penalty-to-damage ratio violates the Eighth Amendment.  

Such was the case for Pinellas, which had only $2,266.62 in damages and penalties of $1,177,000. 

The case against Pinellas was brought under the qui tam provisions of the FCA, which allows a whistleblower (known as a “relator”) to initiate an FCA action on behalf of the government and to receive a portion of the recovery.  In Pinellas, the relator was the defendant’s billing manager, and alleged that Pinellas submitted improper claims to Medicare, in which it certified that a specific physician saw the patients when the patients were actually seen by other employees and providers.  

The government also alleged that Pinellas ran a laboratory out of its satellite office, despite the satellite office not having the certificate needed to bill Medicaid and Medicare, per the Clinical Laboratory Improvement Amendments (“CLIA”), 42 U.S.C. § 263a.  Pinellas allegedly relabeled claim forms to indicate that the submission was made from a CLIA-certified lab.  At trial, the jury found that Pinellas submitted 214 false claims for a total of $755.54.  Over the defendant’s objections, the trial judge trebled that amount and imposed damages in the amount of $2,266.62, and also imposed civil penalties totaling $1,177,000.00, which was based upon the minimum per claim penalty for each of the 214 false claims.  In. addressing the defendants’ Eighth Amendment arguments, the trial judge noted that while imposing such a high penalty ($1.17M) on such a small amount of actual damages ($2,266.22) is “quite harsh,” the court was required to do so.

On January 22, 2020, the defendants filed an appeal in the Eleventh Circuit, arguing among other things that the judgment below violated the Eighth Amendment’s Excessive Fines Clause. Although this is a matter of first impression in the Eleventh Circuit, other circuit courts throughout the country have held that FCA penalties are subject to analysis under the Eighth Amendment.  For example, in United States v. Mackby, the Ninth Circuit Court of Appeals held that “the civil sanctions provided by the False Claims Act are subject to analysis under the Excessive Fines Clause because the sanctions represent a payment to the government, at least in part, as punishment.”  261 F.3d 821, (9th Cir. 2001).  According to the Ninth Circuit in Mackby, “[i]nquiry must be made . . . to determine whether the payment required by the district court is so grossly disproportionate to the gravity of [the defendant’s] violation as to violate the Eighth Amendment.”  The court in Mackby went on to hold that the FCA’s treble damages provision is also subject to Eighth Amendment analysis.  The Fourth Circuit Court of Appeals also held that FCA penalties are subject to Eighth Amendment analysis in United States ex rel. Drakeford v. Tuomey, although it ultimately held that the judgment in that case did not violate the Eighth Amendment.  792 F.3d 364 (4th Cir. 2015).

The Eleventh Circuit heard oral arguments in Pinellas on March 12, 2021.  The Eleventh Circuit’s pending decision in that case could have a significant impact on FCA cases in the Eleventh Circuit.

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act investigations and litigation.  If you need assistance with such a matter, please contact us today.