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Saturday, October 19, 2019

False Claims Act defendant challenges civil penalties as excessive before any amount determined

By David Hutton | Jan 18, 2018

RICHLAND, Wash. (Legal Newsline) – A False Claims Act lawsuit in Washington state could help defendants challenge excessive fine amounts early in the litigation process.

According to court documents, defendant Washington Closure Hanford LLC is seeking summary judgment on the government’s assertion that the company violated the False Claims Act when it claimed small business credits for three subcontracts, including one held by Phoenix Enterprises Northwest LLC and a pair held by Sage Tec LLC.

A hearing on the motion filed in U.S. District Court for Eastern Washington was scheduled for Jan. 12 at the federal courthouse in Richland, Wash., and a jury trial is set for June 25. 

The case could have far-reading impacts under the False Claim Act.

In a blog post on the Dorsey & Whitney LLP website, Benjamin Greenberg, an associate with the law firm, pointed out that the U.S. Supreme Court has ruled that the statutory penalty "constitutes a 'fine' subject to Eighth Amendment review if it constitutes punishment for an offense."

Greenberg also explained that, bearing that in mind, the "4th, 7th, 8th and 9th Circuit Court of Appeals have ruled that the per-claim penalty and treble damages provided for under the FCA are subject to scrutiny under the excessive fines clause of the Eighth Amendment because they have a punitive purpose, at least in part."

In an interview with Legal Newsline, Greenberg explained that such a defense has been raised early on in other proceedings, but the legal community has not seen it resolved by a court as to whether such early resolution is proper and permissible.

“One reason why this may have not come up previously for a court to definitively rule upon is that FCA damages are generally calculated by (a) trebling the damages sustained by the government, as determined by the fact-finder at trial, and (b) multiplying the per false statement penalty (between $10,781 to $21,563) against the number of false statements found by the fact-finder at trial,” he said.

As a result, Greenberg noted that it typically makes sense to wait until a finding is made on both of these issues before challenging the total damages award as being in violation of the Eighth Amendment’s excessive fines clause.

However, it is likely the judge in the case is likely to defer the issue until after a trial.

“Because the total damages award will be determined by trebling the damages award and issuing a per false statement penalty, the judge may defer this issue until a finding has been made by the fact-finder regarding the damages sustained by the government and the number of false statements made by the defendant,” Greenberg noted.

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U.S. Department of Justice U.S. District Court for the Eastern District of Washington