The Penalty is Fine: Eleventh Circuit Holds Eighth Amendment’s Excessive Fines Clause Applies, But Isn’t Violated, in Non-Intervened FCA Case
To close out 2021, the Eleventh Circuit handed down a lengthy decision on an interesting matter of first impression in the federal courts of appeals—whether, and how, the Eighth Amendment’s Excessive Fines Clause applies to non-intervened FCA cases. See Yates v. Pinellas Hematology & Oncology, P.A., No. 20-10276, 2021 WL 6133175 (11th Cir. Dec. 29, 2021). While the Eleventh Circuit easily held that the Excessive Fines Clause applies in such cases, it determined that because the district court assessed a fine within the FCA’s statutorily-prescribed range, Pinellas’ nearly $1.2 million penalty for damages of less than $800 did not violate the Eighth Amendment. Notably, the holding inspired all three judges on the panel to join separate opinions regarding the appropriate level of deference that judges should give to the FCA’s statutory-minimum schema.
The case centered on Pinellas Hematology & Oncology (Pinellas), a Florida medical practice that also owned multiple clinical laboratories. In April 2016, Pinellas’ billing manager filed a qui tam action alleging that Pinellas had violated the FCA by repeatedly billing Medicare for lab tests that it claimed were performed at a lab with the necessary federal certification, when a different, unapproved lab had actually performed the tests. The jury agreed, finding that Pinellas’ actions resulted in the United States paying $755.54 for 214 claims that it would have rejected absent Pinellas’ misrepresentations. Following the FCA’s requirements, the court then trebled damages and assessed the then-applicable minimum statutory penalty of $5,500 per false claim, bringing Pinellas’ liability to an eye-popping fine of nearly $1.18 million. Pinellas squawked that this penalty was so disproportionate as to violate the Eighth Amendment. The district court reluctantly determined that it was bound by precedent to impose the “very harsh penalty,” and finalized its judgment. United States ex rel. Yates v. Pinellas Hematology & Oncology, P.A., No. 8:16-cv-799-T-02TGW, 2019 U.S. Dist. LEXIS 188081, at *4 (M.D. Fla. Oct. 30, 2019) (emphasis added).
An appeal ensued, presenting the Eleventh Circuit with a novel question: whether the Eighth Amendment even applies in non-intervened FCA litigation. Such cases fall in a gray zone between cases where the government is formally a party (such as intervened FCA cases and criminal prosecutions), and litigation wholly between private parties where the Eighth Amendment is clearly irrelevant (such as garden-variety tort suits). Unsurprisingly, the relator argued on appeal that non-intervened cases fall squarely in the latter camp.
The Eleventh Circuit soundly rejected the relator’s argument, reasoning that all FCA monetary awards are fines imposed by the United States because the judgments are, at least in part, statutorily-mandated “punishment” for the defendant’s conduct. Pinellas, 2021 WL 6133175 at *13. Regardless of whether the government intervenes in a qui tam, it (by law) receives a substantial portion of any recovery. Therefore, the court explained, a relator is “merely acting as a stand-in for the government” and only a partial assignee for the government’s damages claim. Id. at *14. Further, unlike other civil litigation, the court stressed that FCA actions can be initiated regardless of whether a plaintiff personally suffered any injury. The relator is filing suit, rather, on behalf of the United States, and the government retains substantial control over non-intervened litigation, including the authority to stay discovery, veto a relator’s dismissal of a qui tam action, and reach court-approved settlements over a relator’s objection. Id. at *14-*15.
Having resolved whether the Eighth Amendment applied, the court turned to the fine at issue. Based on existing case law—later pointedly questioned in the concurrences—the court applied a strong presumption of constitutionality to the penalty because it was at the bottom of the FCA’s statutory range. The court stressed that Congress, as the people’s representatives, is unlikely to pick a range that is wholly excessive. The court also noted that punitive fines are less likely to violate the Eighth Amendment when, as here, a defendant was not simply incidentally involved in unlawful conduct, but rather engaged in it repeatedly. Further, while the Eleventh Circuit acknowledged the minimal monetary harm of Pinellas’ fraud, it reasoned that fraud of this type had other costs, including administrative headaches for the government and decreased public confidence.
Not satisfied with this reasoning, Judge Newsom penned a concurrence (joined by Judge Jordan—the author of the majority opinion). Judge Newsom posited that courts are far too deferential to fine ranges set by Congress due to a misreading of the Supreme Court’s seminal Excessive Fines Clause decision, United States v. Bajakajian, 524 U.S. 321 (1998). In particular, Judge Newsom argued that courts should not hesitate to consider a defendant’s ability to pay when imposing statutory fines. Pinellas, at *24.
Separately, Judge Tjoflat concurred in part and dissented in part, focusing on what he characterized as significant flaws in the FCA—its lack of standards for courts to determine statutory penalties and, more generally, the disconnect between the vast range of conduct subject to the FCA, prescribed fine ranges, and the statute’s implied goal of deterrence. Judge Tjoflat argued that Bajakajian was thus inapplicable and “the strong presumption of constitutionality” for penalties within a statutory range is “unwarranted in the FCA context.” Id. at *32. Instead, Judge Tjoflat would have remanded for a holistic evaluation of the penalty’s “proportionality,” after which the district court could impose a penalty below the statutory minimum if necessary.
Multiple aspects of Pinellas stand out for future FCA disputes. As the only court of appeals to have squarely addressed this question, the Eleventh Circuit’s thoughtful determination that the Excessive Fines Clause applies to all FCA litigation will likely be persuasive to other courts. Yet, despite this seeming victory for FCA defendants, the court’s deference to Congress compelled its finding of no Eighth Amendment violation, even where a loss of under $800 resulted in a penalty of well over $1 million. It’s hard to imagine a scenario where a court, using the same reasoning, could find a FCA penalty excessive so long as it is within the statutory range—no matter how disproportionate that fine may be to the government’s actual damages. However, it’s possible that a future court will carve out exceptions in which FCA penalties can violate the Constitution, particularly given that all three panel judges signed onto opinions endorsing a less-deferential approach to the FCA’s statutory range (but could not agree on what such an approach should look like). We’ll be keeping a close eye on the dockets to see when and how this issue is raised again.
© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.