$24 Million FCA Penalty Was Constitutional

The Court of Appeals for the Fourth Circuit reversed and remanded a district court’s decision declining to award a civil penalty under the False Claim Act because a $24 million judgment did not constitute an excessive fine under the Eighth Amendment. Following a jury verdict against the contractor on allegations it filed a false certificate of independent price determination in connection with its successful bid on a contract for packing and moving services, the district court determined each of the contractor’s 9,136 invoices constituted a false claim as a matter of law ( 55 CCF ¶79,677). In denying a relator’s claim for a $24 million civil penalty under 31 USC 3729, the district court determined the minimum penalty for 9,136 false claims would exceed $50 million and would contravene the Eighth Amendment’s Excessive Fines Clause ( 56 CCF ¶79,754).

Proportionate

However, the relator, as the government’s assignee, was exercising his discretion to attempt to bring the case to a suitable conclusion by accepting a remittitur to $24 million. The district court was required to permit the relator “the freedom to navigate [his] FCA claims through the uncertain waters of the Eighth Amendment.” Moreover, “an award of nothing at all because the claims were so voluminous provide[d] a perverse incentive for dishonest contractors to generate as many claims as possible.” Applying the principle of proportionality, $24 million was not an excessive fine for the contractor’s misconduct. For analogous misconduct in connection with another shipping program, the contractor was convicted of criminal offenses carrying maximum five- and ten-year prison terms. In addition, the evidence revealed a substantial short-term price increase that may have exceeded $2 million. Deterrence was also a factor in determining whether the award was “grossly” disproportionate. Under the circumstances, an award of $24 million appropriately reflected the gravity of the contractor’s offenses and provided the necessary and appropriate deterrent effect. ( U.S. ex rel. Bunk, et al. v. Gosselin World Wide Moving, N.V., et al., CA-4, 58 CCF ¶80,224)