Justice Department Nearly Doubles FCA Penalties; May Raise Constitutional Concerns
On June 29, 2016, the US Department of Justice (DOJ) issued an anticipated interim final rule that substantially increases penalties under the False Claims Act (FCA). Under the interim final rule, minimum penalties per claim will dramatically spike from the current $5,500 to $10,781, and the maximum penalties per claim will jump from $11,000 to $21,563. As we previously reported, the substantial increase in FCA penalties has been expected since the Railroad Retirement Board (RRB) issued a similar interim final rule in May 2016. The massive increase in FCA penalties comes in response to the Bipartisan Budget Act of 2015, which requires agencies to adjust penalties for inflation over the past 30 years.
The increased FCA penalties are set to go into effect on August 1, 2016 and will apply to claims after November 2, 2015. As we have observed, the increased FCA penalties may raise constitutional concerns regarding defendants’ due process rights and under the Eighth Amendment’s bar on excessive fines. With FCA cases increasingly involving tens of thousands of claims, the application of these increased penalties could easily result in circumstances where punitive recoveries are dramatically out of proportion with single damages.