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False Claims Act Update: As anticipated, the DOJ follows the RRB’s lead, nearly doubling FCA penalties

In accordance with Section 701 of the Bipartisan Budget Act of 2015 (BBA), Public Law 114-74, the US Department of Justice (DOJ) published an Interim Final Rule on June 30 that doubles the mandatory False Claims Act (FCA) penalties range. The mandatory minimum penalty has increased from $5,500 to $10,781, and the mandatory maximum penalty has increased from $11,000 to $21,563.

This “catch-up” adjustment, which is commensurate with the change in the Consumer Price Index since FCA penalties were last adjusted in 1996, has been expected since May. As we reported, this is when the Railroad Retirement Board (RRB) published its increased FCA penalties in accordance with the statutorily mandated calculation under the BBA. Although the DOJ has the authority to implement less than the full statutory amount increase if it would produce a “negative economic impact,” the DOJ stated without explanation that it will not invoke that authority.

The DOJ’s Interim Final Rule, which invites public comment, specifies that the increased penalties will take effect on August 1, 2016, and will apply to violations that occurred after November 2, 2015. This effective date varies from the effective date for penalties under the RRB rule, which provides that increased penalties will apply for claims or statements made to the RRB on or after August 1, 2016, and before January 1, 2017.

As we previously noted, this substantial increase in FCA penalties could give rise to incredibly large judgments. These judgments, however, may very likely be ripe for challenge under the Eighth Amendment’s Excessive Fines Clause because the application of the penalties could result in punitive recoveries completely out of proportion to the gravity of a violation.

Like the RRB’s Interim Final Rule, the DOJ’s Interim Final Rule takes effect on August 1, 2016. Written comments must be submitted on or before August 29, 2016.

Copyright © 2019 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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About this Author

Meredith Auten, White Collar Investigations, Morgan Lewis Law Firm, Corporate Attorney
Partner

As part of her comprehensive white collar litigation practice, trial lawyer Meredith S. Auten concentrates on Civil False Claims Act (CFCA) and qui tam actions involving a range of corporate clients, including those in the pharmaceutical, healthcare, and defense contracting industries. Meredith regularly defends corporations and their employees against government charges involving alleged trade secret, intellectual property, and antitrust violations, as well as healthcare, procurement, tax, bank, and securities fraud. She also defends clients in complex government...

215-963-5860
Alison Tanchyk, Morgan Lewis, life sciences lawyer
Partner

Alison Tanchyk handles government and internal investigations, complex civil litigation, and compliance and regulatory cases, with an emphasis on Foreign Corrupt Practices Act (FCPA), Anti-Kickback Statute (AKS), and False Claims Act (FCA) matters. Companies and individuals rely on Alison to defend against investigations alleging violations of the FCPA, AKS, and FCA, and involving allegations of healthcare, tax, and securities fraud, and other business frauds. Corporate leaders and Boards also seek Alison’s counsel on matters related to developing, implementing, evaluating, and auditing internal compliance and ethics programs. ​

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Holly Barker, Healthcare Attorney, Morgan Lewis
Associate

Holly C. Barker counsels clients on US federal and state healthcare fraud and abuse enforcement and regulatory matters, primarily defending companies in False Claims Act (FCA) actions. Holly represents pharmaceutical and medical device manufacturers, hospital systems, long–term care facilities, clinical laboratories, physicians, and senior healthcare executives in complex criminal, civil and administrative fraud and abuse matters before US Attorneys’ Offices, the HHS Office of Inspector General, and state MFCUs.

202-739-5787