The Penalty Is Fine: Eleventh Circuit Holds Eighth Amendment's Excessive Fines Clause Applies, But Isn't Violated, In Non-Intervened FCA Case

• Published date: 21 April 2022
• Subject Matter: Litigation, Mediation & Arbitration, Food, Drugs, Healthcare, Life Sciences, Trials & Appeals & Compensation
• Law Firm: Arnold & Porter
• Author: Ms Emily Reeder-Ricchetti and Elliot S. Rosenwald

To close out 2021, the Eleventh Circuit handed down a lengthy decision on an interesting matter of first impression in the federal courts of appeals'whether, and how, the Eighth Amendment's Excessive Fines Clause applies to non-intervened FCA cases. See Yates v. Pinellas Hematology & Oncology, P.A., No. 20-10276, 2021 WL 6133175 (11th Cir. Dec. 29, 2021). While the Eleventh Circuit easily held that the Excessive Fines Clause applies in such cases, it determined that because the district court assessed a fine within the FCA's statutorily-prescribed range, Pinellas' nearly $1.2 million penalty for damages of less than $800 did not violate the Eighth Amendment. Notably, the holding inspired all three judges on the panel to join separate opinions regarding the appropriate level of deference that judges should give to the FCA's statutory-minimum schema.

The case centered on Pinellas Hematology & Oncology (Pinellas), a Florida medical practice that also owned multiple clinical laboratories. In April 2016, Pinellas' billing manager filed a qui tam action alleging that Pinellas had violated the FCA by repeatedly billing Medicare for lab tests that it claimed were performed at a lab with the necessary federal certification, when a different, unapproved lab had actually performed the tests. The jury agreed, finding that Pinellas' actions resulted in the United States paying $755.54 for 214 claims that it would have rejected absent Pinellas' misrepresentations. Following the FCA's requirements, the court then trebled damages and assessed the then-applicable minimum statutory penalty of $5,500 per false claim, bringing Pinellas' liability to an eye-popping fine of nearly $1.18 million. Pinellas squawked that this penalty was so disproportionate as to violate the Eighth Amendment. The district court reluctantly determined that it was bound by precedent to impose the 'very harsh penalty,' and finalized its judgment. United States ex rel. Yates v. Pinellas Hematology & Oncology, P.A., No. 8:16-cv-799-T-02TGW, 2019 U.S. Dist. LEXIS 188081, at *4 (M.D. Fla. Oct. 30, 2019) (emphasis added).

An appeal ensued, presenting the Eleventh Circuit with a novel question: whether the Eighth Amendment even applies in non-intervened FCA litigation. Such cases fall in a gray zone between cases where the government is formally a party (such as intervened FCA cases and criminal prosecutions), and litigation wholly between private parties where the Eighth Amendment is clearly irrelevant...