On February 8, the U.S. District Court for the District of Minnesota ruled that a $487 million False Claims Act (FCA) damages award entered last year against Precision Lens and its co-founder violated the Eighth Amendment's prohibition on excessive fines and ordered the judgment reduced by more than half.
A defendant found to have violated the False Claims Act is liable for three times the amount of the government's damages plus statutory penalties of between approximately $13,000 to $27,000 per false claim. Despite this potentially staggering liability, few courts have found False Claims Act damage awards to violate the Eighth Amendment. Precision Lens adds an important data point to that analysis.
Background
The case arose from allegations that Precision Lens and its owner paid kickbacks to ophthalmic surgeons to use Precision Lens products in cataract surgeries. The allegations included taking physicians on private planes to high-end hunting, sporting, and entertainment events.
In May 2023, the district court entered the staggering judgment after a jury found that the defendants' conduct resulted in roughly $43 million in single damages. The $487 million judgment consisted of treble damages and more than $350 million in statutory penalties, assessed for each of the 64,575 requests for Medicare reimbursement that the jury found to be false claims. In its decision imposing that judgment, the district court opened the door to arguments that the judgment amount violated the Eighth Amendment.
Court Analysis
Ruling that the original judgment violated the Excessive Fines Clause, the district court reduced the award to $216.7 million. The reduced award amount consists of treble damages and $86.7 million in penalties. The district court highlighted that, even under the lower judgment, penalties well exceeding the compensatory damages remain imposed. The district court concluded its decision by noting that it “is mindful, however, that an amount greater than the amount imposed here threatens to become grossly disproportional to the gravity of the offense.”
Takeaways
The potential application of the Eighth Amendment more often arises in FCA cases involving lower actual damages but in which penalties could be assessed to great effect. The District of Minnesota's decision is important as it analyzes the application of the Excessive Fines Clause in an FCA case where the actual damages are substantial. The district court highlighted in its decision that it found the defendants' conduct warranted a hefty judgment, but even so, there are outer limits to what the constitution permits.
We have previously described the damages provided by the FCA statute and their potential limitation by the Eighth Amendment in our FCA Fundamentals Series.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
