The end result for the defendant (a “distributor of ophthalmologic provides”) within the False Claims Act choice, United States ex rel. Fesenmaier v. Cameron-Ehlen Group, Inc., ___ F. Supp.3d ___, 2024 WL 489708 (D. Minn. Feb. 8, 2024), was so horrible that one thing good ended up taking place.
The overall judgment was over $487 million “not together with post-judgment curiosity, statutory attorneys’ charges or different taxable prices.” Id. at *1. Listed below are that judgment’s elements:
Of that quantity, lower than one tenth ($43,694,641.71) represented precise damages to the USA. That actual-damages quantity was then trebled . . ., leading to roughly $131 million in trebled damages. The remaining three quarters of the judgment quantity, or roughly $358 million, represented statutory penalties assessed for every of the 64,575 requests for Medicare reimbursement discovered by the jury to be false claims.
Id. at *2 (quotation omitted) (emphasis added). The “statutory penalties” consisted of 410 claims “made on or after December 1, 2015” that had been “topic to a minimal penalty of $13,508,” and 64,165 older claims “topic to the $5,500 minimal penalty.” Id. at *14 n.12.
We’ve criticized earlier than the rote multiplication of “statutory penalties” that bear no resemblance to actuality in order that defendants are focused with fits demanding absurdly excessive “damages.” We mentioned Decide Weinstein’s conclusion (in dictum) in In re Zyprexa Merchandise Legal responsibility Litigation, 671 F. Supp.second 397 (E.D.N.Y. 2009), {that a} governmental plaintiff’s demand “for statutory penalties on a per-violation foundation, along with precise damages sought, would lead to a . . . cumulative penalty grossly disproportionate to each the damage [plaintiff] has suffered and the seriousness of [defendant’s] alleged misconduct.” Id. at 463. That “slash-and-burn-style of litigation” would “arguably” violate the Extreme Fines Clause of the structure, id., which (as we additionally reported) has been held relevant to the states.
However till Fesenmaier, all we had was dictum. For the primary that we’re conscious of, within the a number of statutory penalty context, an award has really been declared unconstitutional as an “extreme effective.” The $400 million+ award in Fesenmaier was “grossly disproportional to the gravity of a defendant’s offense.” 2024 WL 489708, at *15 (quotation and citation marks omitted). The penalty multiplication produced a judgment that “vastly overstate[d] the profit that defendants derived personally from the misconduct.” Id. at *16. “For one instance”:
a health care provider was provided a salad and soda at a Christmas celebration [that] quantity[ed] to remuneration. Whereas the jury might moderately conclude that violation of the FCA resulted from that remuneration, however it’s tough to categorize that specific occasion of conduct as reprehensible.
Id. No affected person had “undergone a process that will not in any other case have occurred.” The merchandise weren’t faulty. Id. at *17. Additional, between trebling and penalty multiplication, the award was additionally “grossly disproportional” to the $43 million awarded as compensatory damages. Id. “If the trebled damages on this matter had been to be thought to be purely punitive, the ratio of punitive damages to compensatory damages would exceed 10-to-1.” Id. As well as, the multiplication of the civil penalties produced a quantity that far exceeded any attainable felony effective that would have been imposed. Id. at *18 (making calculations). That disparity was an “indication from Congress itself that the penalties ensuing from defendants’ misconduct is perhaps overly extreme.” Id.
Thus, although Fesenmaier acknowledged that “few courts have concluded that [statutory] penalties imposed exceed the constitutional barrier,” id., it reached the conclusion that this award went too far:
After consideration of the suitable elements − the reprehensibility of defendants’ conduct, the hurt to the sufferer, the ratio of punitive damages to precise damages, legislative intent, the monetary standing of the defendants, and the penalties imposed in comparable circumstances − the Courtroom concludes that the Extreme Fines Clause permits restoration of not more than $216,675,248.55 on this matter. This quantity consists of $43,335,049.71 of precise damages, $86,670,099.42 in trebled damages, and $86,670,099.42 in penalties.
2024 WL 489708, at *20. “The quantity of the judgment represents 5 instances the precise damages imposed on this case.” Id. at *21.
Thus, whereas Fesenmaier was – and stays – an objectively horrible end result for these explicit defendants, it was dangerous sufficient that it’d even have some authorized profit for the remainder of us. The multiplication of statutory penalties that bear no resemblance to actuality has turn into an all-too-frequent risk to our shoppers, notably in litigation the place governmental enforcement authority has been subcontracted to non-public, contingent price legal professionals. Precedent that such an award does certainly (as a substitute of theoretically would possibly) violate the Extreme Fines Clause thus is kind of welcome.
Lastly, we notice that Fesenmaier has been appealed by each side (Eighth Circuit Nos. 24-1467, and 24-1755), and we assume that the constitutional Eighth Modification situation is the premise of the cross-appeal. So keep tuned.
