DOJ announces near doubling of FCA penalties - Norton Rose Fulbright

DOJ announces near doubling of FCA penalties

Publication June 2016

On Wednesday, the Department of Justice (DOJ) issued an anticipated interim final rule that substantially increases the amount of False Claims Act (FCA) civil penalties. The minimum penalties per claim virtually double under the interim final rule from the current $5,500 to $10,781, while the maximum per claim penalties increase from $11,000 to $21,536. As discussed in our post “FCA civil penalties to increase substantially under proposed rule,” the Railroad Retirement Board (RRB) issued a similar interim final rule implementing provisions of the Bipartisan Budget Act of 2015 intended to index civil penalties assessed under certain statutes to inflation. The DOJ followed the amounts set forth for civil penalties in the RRB’s interim final rule. The increase is set to take effect on August 1 and will apply to false claims submitted after November 2, 2015. 

In 2015 Congress amended the Federal Civil Penalties Inflation Adjustment Act, requiring agencies to increase civil penalties for a number of statutes, including the FCA. The near doubling of penalties by the RRB and now the DOJ gives rise to arguments that these penalties may violate the Eighth Amendment’s Excessive Fines Clause. It remains to be seen whether courts will find any merit to these arguments.

Looking forward, companies should be aware of this significant increase in penalties and concentrate their efforts on creating and maintaining comprehensive compliance programs. Companies with pending FCA investigations or litigation should be aware of the retroactive nature of these penalties and consider the potential impact that they may have on their bottom lines. The increased FCA penalties may result in due process and Eighth Amendment constitutional challenges as defendants face astronomical punitive recoveries that are significantly out of proportion to the amount of actual damages incurred.

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