LawFlash

False Claims Act Update

July 01, 2016

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.[1]

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.[2] 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.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Miami
Alison Tanchyk

Philadelphia
Meredith S. Auten
Rebecca J. Hillyer
Eric W. Sitarchuk

Washington, DC
Holly C. Barker



[1] 81 Fed. Reg. 42,491 (June 30, 2016).

[2] 81 Fed. Reg. 26,127 (May 2, 2016).