The False Claims Act—the United States’ primary weapon against fraud in federal programs—imposes treble damages and mandatory penalties of $13,946–$27,894 per instance of fraud. The False Claims Act applies broadly across federal programs ranging from defense contract claims worth millions of dollars to health care fraud that may not inflict any monetary harm. The Eighth Amendment of the Constitution purportedly protects against the government inflicting excessive fines. However, the current judicially created standard presumes that civil penalties are constitutional because Congress set them. This standard has led courts to affirm judgments as large as 1,558 times greater than the economic harm inflicted by the purported fraud. While the False Claims Act should account for more than mere economic harm, the government’s goals of deterrence, retribution, and incentivization remain attainable within the bounds of constitutional protection. The Supreme Court should adopt a standard that comports with the Excessive Fines Clause in the context of civil penalties—one that considers the actual economic harm inflicted. The Court should replicate its standard for excessive jury awards under the Due Process Clause and adopt a 20:1 penalties-to-damages soft-line ratio. Under this new standard, penalties that are twenty times larger than the inflicted monetary damage would no longer be presumed constitutional. The court would still consider whether the penalty was grossly disproportionate to the offense through the existing multifactor test but without the presumption of constitutionality currently afforded to all congressionally set fines. This ratio appropriately defers to Congress and grants judicial flexibility to adapt to the case at hand while providing meaningful Eighth Amendment protection.
The False Claims Act—the federal government’s primary weapon to combat fraud in federal programs—provides that any person who knowingly submits false claims to the government is liable for treble damages and a penalty of $13,946–$27,894 per instance of fraud. Congress implemented this harsh penalty to allow the government to recoup the costs of fraud, deter fraudsters from committing fraud, and incentivize private individuals to bring a claim on behalf of the government. The False Claims Act (FCA or “the Act”) is largely effective. However, it produces disproportionate effects when applied to cases where a defendant commits a large number of false claims that accumulate huge penalties but the actual harm inflicted by each claim is relatively small.
United States v. Planned Parenthood Federation of America, Inc. illustrates the potential issues of this scheme. In 2017, a district court issued an injunction that barred Texas from rescinding its Medicaid contracts with Planned Parenthood. Between 2016 and 2020, Planned Parenthood abided by the injunction and continued serving Texas Medicaid patients. In 2020, the Fifth Circuit reversed the injunction. In the pending case United States v. Planned Parenthood Federation of America, the plaintiffs allege that each Medicaid reimbursement that Planned Parenthood filed between 2016 and 2020 allegedly constitutes a new false claim. If falsity is found, the FCA requires a penalty of at least $13,946 per reimbursement filed—without considering the size of the reimbursement or the quality of the health services provided. This would require the court to impose a minimum civil penalty of $1,244,046,510, despite the parties not disputing that Planned Parenthood provided quality medical services. This case demonstrates a possible issue with the FCA scheme: the imposition of penalties per instance without regard to the harm inflicted can lead to massive minimum penalties that the underlying conduct may not justify.
The Eighth Amendment of the Constitution protects against the government imposing excessive fines. The Supreme Court has never considered the Excessive Fines Clause in the context of civil forfeitures like the FCA. In United States v. Bajakajian, the Supreme Court created the Excessive Fines analysis in the criminal forfeiture context: fines set by Congress are afforded a high presumption of constitutionality that is only rebutted with a three-factor test. Because the Supreme Court has never decided an Excessive Fines Clause argument in the civil forfeiture context, the circuits have applied the Bajakajian test in the civil forfeiture context like FCA penalties. These circuit decisions demonstrate, however, the inadequacy of applying this test to FCA cases.
For example, in United States v. Gosselin World Wide Moving, the defendant Gosselin World Wide Moving (Gosselin) defrauded the United States by engaging in a scheme that raised the prices of goods supplied to the federal government. The government did not allege any specific damages, and the plaintiff sought only civil penalties. Since the fraud was the context in which the contract was made, the entire contract was considered fraudulent. Each invoice is a new instance of fraud and thus triggers the attendant penalty. Gosselin submitted 9,136 invoices to the government. The minimum mandatory penalty amounted to $50,248,000—despite the plaintiff not alleging any economic damage. In parallel criminal proceedings, Gosselin paid $860,000 in restitution to the United States, and the Fourth Circuit relied on this amount as the maximum amount of possible damage inflicted. The $50 million penalty would be fifty-eight times larger than the restitution that Gosselin had paid. Wary that such a judgment might actually violate the Eighth Amendment, the plaintiff unilaterally requested a lower judgment of $24 million. The Fourth Circuit held that $24 million—still nearly twenty-eight times more than the restitution paid—would not violate the Eighth Amendment Excessive Fines clause under the Bajakajian test, in large part because courts afford Congress high deference in setting fines.
While courts should defer to Congress to preserve the balance of powers and respect the rational process of statutory enactment, the courts must also perform their own constitutional duty to provide meaningful constitutional protection against excessive fines. The current high deference to the legislature has led circuits to affirm judgments with huge penalties-to-damages ratios, like the 28:1 ratio in Gosselin. When the Eleventh Circuit affirmed a penalties-to-damages ratio of 1,558:1, Judge Newson warned in the concurring opinion that letting Congress set the fine that Congress will benefit from and having the courts highly defer to Congress on the fine’s constitutionality “seems a bit like letting the driver set the speed limit.”
This article advocates for the courts to adopt a 20:1 penalties-to-harm ratio to inform judges in the civil forfeiture FCA context. This flexible ratio should parallel the soft-line ratio used to evaluate excessive jury awards under the Fifth Amendment. When setting the soft-line ratio in State Farm, the Court was “reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award” but stated that an “award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.” In the civil forfeiture context, the courts should set a similar soft-line ratio. Courts should be more deferential to Congress than to a jury. A ratio five times more deferential to Congress than a jury balances the Court’s interest in deferring to the legislature while still providing meaningful Eighth Amendment protections. Under this standard, FCA awards more than twenty times the damage inflicted should be constitutionally suspect. This allows the FCA to further its goals—retribution, deterrence, and incentivization—while still affording defendants their constitutional protection against excessive fines.
This article proceeds as follows. Part I provides an overview of the False Claims Act and the policy justifications for the penalty structure. Part II explains the Bajakajian standard and explores how circuits have attempted to apply it in the False Claims Act context. Part II also argues that the Bajakajian test gives little meaning to the Eighth Amendment when applied to large FCA penalties. Part III shifts attention to the Fifth Amendment Due Process Clause, which prohibits excessive civil jury awards. In Fifth Amendment jurisprudence, the Court has adopted a 4:1 punitive award-to-damages ratio that signals the point at which a punitive civil award becomes constitutionally suspect. Part IV proposes a solution in the Eighth Amendment context by mirroring the Due Process standard: the courts should adopt a soft line of constitutionality that once exceeded the fine is constitutionally suspect. This article ultimately proposes FCA fines exceeding a penalties-to-damages ratio of 20:1 should be considered constitutionally suspect.
The False Claims Act is the United States’ primary mechanism for fighting fraud in federally funded programs. A defendant is liable under the FCA for knowingly submitting false claims to the government. The statute mandates treble damages and a statutory penalty per instance of fraud. The statutory penalty is increased each year to adjust for inflation, and, as of 2024, the penalty range is $13,946 to $27,894. The government need not demonstrate any economic harm, and the penalty is imposed regardless of the cost of the fraud. Thus, a defense contractor who submits an invoice overcharging the government $1 million dollars is subject to the same statutory penalty range as a Medicaid provider who submits an invoice that misrepresents the clinic’s address but otherwise provides quality healthcare.
The federal government may initiate the suit or a private individual, known as a qui tam relator, may sue on behalf of the government. If a claim is brought by a qui tam relator, the government may intervene and litigate the claim itself, allow the claim to proceed without intervening, or dismiss the case. If a relator initiates the suit, the relator may recover up to thirty percent of a judgment when the government does not intervene and up to twenty-five percent if the government intervenes.
Congress designed the penalty structure to achieve three primary aims: (1) allow the government to recover for the expense of fraud; (2) deter fraudsters from committing fraud in the first place; and (3) incentivize qui tam relators to bring an action on behalf of the government. In 1863, President Lincoln enacted the FCA to combat rampant fraud during the Civil War. The initial statute imposed double damages and a $2,000 penalty per false claim. The Supreme Court found this original structure remedial, not punitive, because the primary purpose was restitution and the structure merely ensured the government was made completely whole.
In 1986, Congress amended the FCA to include the current damages and penalty structure. The harsher structure was meant to combat the rise of fraud in federally funded programs by making the government whole, deterring fraudsters, and incentivizing individuals close to the fraud to be a whistleblower.
First, Congress recognized that fraud was expensive. In the early 1980s, the General Accounting Office, Department of Justice, and Inspectors General estimated that fraud costs the United States between “hundreds of millions of dollars to more than $50 billion per year.” While the monetary loss was stark, Congress also underscored that these violations cost more than their monetary value because fraud “erodes public confidence in the Government’s ability to efficiently and effectively manage its programs.” This underlying policy remains today as fraud continues to become more expensive to the federal government.
Second, Congress wanted to deter individuals inclined to defraud the government. In its recommendation to amend the penalty scheme, the Senate subcommittee recognized the low deterrent value of the original structure because fraud is “seldom detected and rarely prosecuted.” The penalty structure was made harsher to increase deterrence: the larger award incentives more qui tam relators to identify claims, and, thus, perpetrators are more likely to face legal consequences. The statute continues to provide meaningful deterrent value in the modern day. In 2021, the Department of Justice estimated that its “vigorous pursuit of health care fraud prevent[ed] billions more in losses by deterring others who might try to cheat the system for their own gain.” As the Ninth Circuit recognized, the government has “a strong interest in preventing fraud,” because “[f]raudulent claims made the administration of Medicare more difficult, and widespread fraud would undermine public confidence in the system.”
Third, and relatedly, Congress sought to further incentivize private individuals to bring qui tam claims. Under the original statute, fraudsters rarely faced legal consequences. In order to detect fraud, the government needed individuals close to the fraud to alert the government of it. However, despite the earlier version authorizing qui tam actions, private contractors and individuals with inside knowledge were unwilling to expose the illegal activity. Qui tam relators take significant personal risks to bring forward such claims, and the risk built a “conspiracy of silence” among individuals with privileged information. Congress increased the reward for private individuals who came forward in order to break the conspiracy. The FCA includes anti-retaliation measures, but the threat of retaliation persists today.
As such, Congress amended the statute to include much harsher penalties: changing double damages to treble damages, increasing the statutory penalties, and creating a range for the amount imposed for each instance of fraud. Congress imposed the mandatory automatic penalty, because it did not want courts to impose only discretionary nominal payments. While this scheme is largely effective and fair in most FCA claims, it produces highly disproportional fines when a fraudster commits a large number of instances of fraud but each instance inflicts a relatively low—if any—cost. This article proposes the courts adopt a soft-line ratio to inform the Excessive Fines Clause analysis, such that judges are suspicious of imposing fines that are more than twenty times the inflicted damages.
The Eighth Amendment provides: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” For the purposes of the Eighth Amendment, a fine is a “payment to a sovereign as punishment for some offense” and not merely to make the government whole. The Excessive Fines Clause applies to both criminal and civil forfeitures, so long as the forfeiture is a punishment. A civil sanction is a punishment when it “cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes.” It is well established that the current FCA penalty structure’s imposition of treble damages and a statutory penalty of more than $13,000 per instance of fraud is punitive.
This section begins by discussing the Bajakajian factor test that the Supreme Court created when applying the Eighth Amendment to criminal forfeitures. It proceeds by distinguishing criminal forfeitures from civil forfeitures like the FCA. Then it discusses how Bajakajian fails to afford proper protection in FCA cases. It uses the recent Eleventh Circuit Yates case to illustrate just how disproportionate the penalties-to-damages ratio might be. Finally, it considers the current alternatives and their shortcomings for providing sufficient constitutional protection.
A. Bajakajian: The Excessive Fines Clause in the Criminal Forfeiture Context
In United States v. Bajakajian, the Supreme Court created a factor test to determine when the Excessive Fines Clause is violated. In Bajakajian, the Court held that a criminal forfeiture of $357,144 violated the Excessive Fines Clause when the defendant violated a federal reporting statute that required international travelers to inform authorities when they carry more than $10,000 out of the country. In doing so, the Court held,
The touchstone of the constitutional inquiry under Excessive Fines Clause is the principle of proportionality: The amount of the forfeiture must bear some relationship to the gravity of the offense that it is designed to punish . . . . A punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of the defendant’s offense.
The Court found no sources suggesting just how disproportional the gravity of the offense to the fine must be in order to be unconstitutionally excessive. Drawing from the more established Cruel and Unusual Punishment jurisprudence, the Court held that “judgments about appropriate punishment for an offense belong in the first instance to the legislature” and “any judicial determination regarding the gravity of a particular criminal offense will be inherently imprecise.”
This deference sets up a strong presumption of constitutionality that may only be rebutted if the defendant can show the punishment is “grossly disproportional to the gravity of a defendant’s offense.” The Court found that the forfeiture of the entire $357,144 that the defendant was carrying was grossly disproportional by emphasizing that the money was proceeds from a legal activity and that the crime was a mere reporting requirement. Much to the dismay of lower courts and legal scholars, the Court did not outline a clear test for where the line for grossly disproportionate is. The circuits have derived a list of factors from Bajakajian to determine excessiveness. While the factors vary between circuits, the majority of circuits evaluate the following to determine if a fine violates the Eighth Amendment:
(1) the essence of the defendant’s crime and its relationship to other criminal activity; (2) whether the defendant fits into the class of persons for whom the statute of conviction was principally designed; (3) the maximum sentence, including the fine that could have been imposed; and (4) the nature of the harm resulting from the defendant’s conduct.
Since the Supreme Court has yet to consider the Excessive Fines Clause protections in a civil forfeiture case, the circuits have applied Bajakajian to determine whether an FCA award violates the Eighth Amendment. Applying this lenient standard, courts have rarely found a fine unconstitutionally excessive, even when judgments are more than a hundred times larger than the cost of the harm inflicted. While fraud costs the United States more than mere economic damage, monetary damage is a starting point for seeing just how disparate the inflicted harm is from the statutory minimum.
This section begins by establishing that Bajakajian fails to afford adequate Eighth Amendment protection because the FCA attaches a penalty per instance of fraud, regardless of the harm imposed by the fraud. It illustrates this weakness with the recent Yates case, where the Eleventh Circuit held a penalties-to-damages ratio of 1,553:1 did not violate the Excessive Fines Clause under Bajakajian. It then considers and finds insufficient the alternatives that judges and lawyers have used to protect defendants from large FCA penalties.
In amending the FCA to the current penalty structure, Congress recognized that the FCA should “reach all types of fraud, without qualification, that might result in financial loss to the Government.” Because of the breadth of claims, the fraud may cost millions, thousands, hundreds, or nothing. However, despite the large discrepancy in the harm inflicted, every defendant in an FCA case faces the same statutory penalty range for each instance of fraud. Sutter Health, which settled with the Department of Justice for $90 million in 2022 for alleged FCA violations, faced the same penalty range as Pinellas Hematology & Oncology, P.A., the defendant in Yates that inflicted a mere $755.54 in damage. This penalty structure is equitable to the harm in most FCA cases. The ratios between the damage inflicted and the judgment imposed are often within 10:1. Some larger judgments are higher but still within 20:1. This article addresses—and its solution only applies to—cases where the ratio is substantially larger: cases like Yates, where the penalties-to-damages ratio was 1,558:1; and Gosselin, where the ratio was 28:1. These ratios and their associated facts illustrate the disproportionate penalties imposed when there are many instances of fraud that cost a relatively small amount. The breadth and inflexibility of the FCA penalty structure in these cases is the constitutional problem that this article addresses. While these cases might be fewer in number than the typical FCA case, they are important because the FCA is a highly litigated statute, and this issue is an underdeveloped area of constitutional law that has failed to provide meaningful protection because the courts so heavily defer to Congress to determine constitutionality.
Yates serves as an illustrative example of how a defendant might submit a large number of false claims but the accumulated cost be relatively low. Pinellas Hematology & Oncology, P.A. (Pinellas) was a medical practice covered by Medicare that purchased a second practice. Medicare requires each practice to obtain its own certification, and the certification of Pinellas’s second practice took almost a year. During the period that the second practice was not certified, Pinella served Medicare patients at both practice locations. Pinellas first submitted Medicare reimbursements for the second practice without listing a certification number. Medicare denied the claim. Pinellas resubmitted the claim but listed the first practice’s certification number and the address of the second practice but was again denied. Submitting a third time, Pinellas listed the certification number and address of the first practice for reimbursement of care given at the second practice, and Medicare approved the reimbursement. Each resubmission is a new claim under the FCA. At trial, the jury found Pinellas submitted a total of 214 false claims to the United States and inflicted $755.54 in damages. The district court imposed the minimum statutory penalty per violation: $1,177,000. The penalties-to-damages ratio thus was 1,558:1.
On appeal, the Eleventh Circuit considered whether the fine was unconstitutionally excessive and applied Bajakajian. It held that judgments below a statutory maximum are given a strong presumption of constitutionality because “[j]udgments about the appropriate punishment for an offense belong in the first instance to the legislature.” The legislature, not the judiciary, determines the value of harm so “penalties falling below the maximum statutory fines for a given offense . . . receive a strong presumption of [validity].” The presumption is only overcome if the award is grossly disproportionate to the offense. To evaluate proportionality, the Eleventh Circuit considered the Bajakajian factors: Pinellas, as a Medicare provider, is “in the class of defendants at whom the FCA is principally directed”; the imposed penalties are “lower than the potential maximum penalties under the FCA and other statutes”; and the harm inflicted was $755.54 in addition to the administrative costs of Treasury vigilance and the deterrent effect of the award. The Circuit found these factors did not overcome the deference given to the legislature and affirmed the judgment.
Congress is afforded high deference in two of the three factors that the Eleventh Circuit considered. First, whether the defendant is in the class of defendants that the statute is aimed at is a decision made by Congress that the Court is simply respecting. Second, whether additional penalties are available is determined by the statutory scheme set up by Congress. The Eleventh Circuit underscores that the imposed penalties “were half the potential maximum.” However, the Eighth Amendment protects against “excessive fines,” not whether fines even more excessive were available. Excessiveness should be a threshold itself—and not determined relative to the statutory maximum. Even the minimum penalty can be excessive and thus amount to a constitutional violation.
This case begs the question that if an FCA award, abiding by the minimum statutory requirement, inflicts a penalty 1,558 times the size of the economic harm imposed, what is “grossly disproportionate” such that the Excessive Fines clause would limit a penalty? This question is even further underscored by the fact that the statutory penalty range at the time for Yates was $5,500–$11,000. If the same Yates facts were before the court in 2024, the minimum penalty available to be imposed would be $2.98 million. This penalty would create a penalties-to-damages ratio of 3,950:1. Under the current Eighth Amendment Bajakajian analysis, this ratio would likely still be constitutional. The court would give the judgment a presumption of constitutionality because Congress set the range. Then, the court would analyze the same factor test: Pinellas is still a defendant that Congress targeted when enacted the FCA; the imposition is still the minimum available based on the range that Congress set; and the harm would be the administrative cost, the deterrent value, and the damages of $755.54. While the proportion between the damages and penalty continues to starkly differ, that is only a sub-element within this multifactor test that must overcome a strong presumption of constitutionality. If 1,558 times larger than the economic damage in Yates was insufficient for the third factor to overcome the presumption of constitutionality, there is no reason to believe that 3,826 times larger would somehow overcome the strong presumption.
The current test does not afford the courts the ability to impose an actual constitutional ceiling and requires massive penalties-to-harm ratios be upheld as not “grossly disproportionate” despite these huge economic differences. Unsatisfied with this result, judges and attorneys have been creative to circumvent the statutory mandate. However, these alternatives are insufficient replacements for an explicit right safeguarded by the Eighth Amendment.
Some defendants have been protected from massive fines by discretion exercised by judges and government attorneys. For example, in United States v. Mackby, the government proved 1,459 false claims but requested a statutory penalty for only 111 of those claims. In Mackby, the Northern District of California imposed the minimum statutory penalty for the 111 claims—$550,000—and trebled the proven damages of $58,151.64. Even with the government reducing the amount of claims to a tenth of the claims proven, the penalties-to-damages ratio is larger than 11:1. Had the statutory minimum been imposed for each of the 1,459 false claims proven, the defendant would have been required to pay $7,295,000 in statutory penalties. Such a penalty would impose a penalties-to-damages ratio of 125:1. Under the current strong presumption granted to penalties imposed within a statutory range; this judgment would likely be upheld just as the 155:1 ratio in Yates was. However, the government attorneys sought a smaller penalty. Government discretion led to protecting the defendant here from an excessive fine when the constitutional analysis would not have afforded protection.
The Fifth Circuit has used judicial discretion to lower a forfeiture below the statutory mandate. In Peterson v. Weinberger, the jury found the defendant submitted 120 false claims to the United States, but the district court limited the penalty calculation to only account for 50 false claims. In affirming this decision, the Fifth Circuit recognized that “the court may exercise discretion where the imposition of forfeitures might prove excessive and out of proportion to the damages sustained by the Government.”
Constitutional protections should not depend on an individual lawyer or judge exercising discretion. While the Mackby and Peterson defendants may have benefitted from its use, the Court must adopt a standard that adequately protects defendants against unconstitutionally excessive fines.
In addition to the Eighth Amendment protection against Excessive Fines, the Fifth Amendment Due Process Clause provides protection against disproportionately large civil jury awards. The Fifth Amendment provides that “[n]o person shall . . . be deprived of life, liberty, or property, without due process of law.” Due process of law has been interpreted to substantively limit civil jury awards. Specifically, the Court has held, “The Due Process Clause . . . prohibits a State from imposing a ‘grossly excessive’ punishment on a tortfeasor.” This section proceeds by explaining the protections afforded to defendants against excessive judgments under the Fifth Amendment and exploring the similarities and key difference between the excessive inquiries of the Fifth Amendment, which considers punitive awards-to-damages ratio larger than 4:1 constitutionally suspect, and the Eighth Amendment, which offers no similar guidance. The section concludes by addressing the feasibility and appropriateness of applying a ratio in the FCA context.
In State Farm Mutual Automobile Insurance Co. v. Campbell, the Supreme Court set the standard for when excessive punitive jury awards violate the Fifth Amendment Due Process Clause. Campbell sued his insurer State Farm for bad faith after State Farm refused to settle a case that then went to trial and returned a substantially higher verdict that Campbell would have to personally pay. A jury awarded Campbell $2.6 million in compensatory damages and $145 million in punitive damages. State Farm appealed the punitive damages award, arguing that the punitive damages were so disproportionate to the damage caused that the award violated its Fifth Amendment Due Process rights. The Supreme Court agreed and created a three-factor test to review civil punitive damages under the Fifth Amendment: “(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” Reprehensibility is determined by whether the harm was economic or physical, whether it demonstrated indifference or reckless disregard for other person’s health and safety, whether the harm targeted a vulnerable victim, and whether the harm was caused by intentional malice, trickery, or mere accident.
In reducing the punitive damages to $5 million, the Supreme Court set a soft-line rule for when a punitive award might be constitutionally suspect. Although “reluctant to identify concrete constitutional limits on the ratio between harm, or potential harm, to the plaintiff and the punitive damages award,” the Supreme Court stated a punitive damages-to-compensatory damage ratio of 4:1 “might be close to the line of constitutional impropriety,” and award ratios larger than 10:1 will rarely be constitutional. These ratios should adjust to a specific case’s facts. When the defendant performs a particularly egregious act but inflicts minimal economic damage, the ratio may be greater, and conversely, when the conduct leads to substantial compensatory damages, a smaller ratio may be more appropriate. These ratios thus provide guidance to the judge without creating an absolute bar.
The question then is what is the difference between the two constitutional protections against excessive judgments. The answer is unclear. In its first decision regarding both Excessive Fines Clause and punitive jury awards, the Court explicitly rejected that the Excessive Fines Clause applies to punitive jury awards, which seemed to initially set up a distinct path and inquiry for the two protections. However, since this initial dichotomy, the Court has drawn on Excessive Fines doctrine to support Fifth Amendment Due Process and recognized the blurry line between the two Amendments that both protect against “excessiveness.” In deciding whether a $4.5 million punitive damage award in Cooper Industries, Inc. v. Leatherman Tool Group, Inc. violated the Fifth Amendment Due Process clause, the Court explicitly drew upon both Bajakajian, an Eighth Amendment decision, and Gore, a Due Process decision and the predecessor to State Farm. The blurred lines have left scholars mixed on the relationship between the two clauses. Some scholars have argued that the two clauses with their respective tests lead to the same result, such that it does not matter which clause applies. Similarly, scholars have argued that the tests themselves are the same. Others have argued that applying Fifth Amendment Due Process substantive limits in cases where the Eighth Amendment applies “would make the Eighth Amendment superfluous.”
There is, however, a serious difference when the two tests are looked at in the civil forfeiture outcomes: the Eighth Amendment affords a high presumption of constitutionality, while State Farm imposes an effective constitutional ceiling in Fifth Amendment cases. Some scholars find this difference trivial and “only a matter of degree, not kind.” In United States ex rel. Drakeford v. Tuomey, the Fourth Circuit stated, “There is no reason to believe that the Court’s ‘approach to punitive damages under the Fifth Amendment would differ dramatically from analysis under the Excessive Fines Clause.’” The FCA penalty in Tuomey, however, was within the State Farm soft-line ratio. The discrepancy between tests comes to light only when the Excessive Fines Clause permits a fine that is much larger than the 4:1 constitutional suspect and 10:1 near bar on constitutionality. FCA cases exceed these ratios, largely, because the FCA imposes a penalty for each instance of fraud without accounting for the cost of each instance. In the Excessive Fines Clause context, courts have affirmed FCA awards as constitutional with ratios as high as 1,558:1 and 28:1. The Court should mirror its Fifth Amendment jurisprudence’s 4:1 punitive damages-to-damages penalty and adopt a 20:1 penalties-to-damages ratio in the Excessive Fines Clause context such that penalties larger than this ratio are presumed constitutionally suspect.
This article presumes that only the Eighth Amendment—and not the Fifth Amendment—applies to FCA cases and that the court should draw upon its Fifth Amendment jurisprudence to adopt a similar standard. While one circuit has expressly applied Fifth Amendment Due Process protections to determine the constitutionality of an FCA award, this is the exception, not the rule. Most circuits that have considered the excessiveness of an FCA fine do so without considering whether it implicates the Fifth Amendment Due Process Cause. Both circuits that have invoked the State Farm ratio to FCA penalties have done so when the penalties-to-damages ratio was within the 4:1 guideline. It is outside the scope of this article to fully explore whether the Fifth Amendment should apply, and this article presumes the approach taken by most circuits is adequate: only the Eighth Amendment applies to FCA cases. The next section discusses the two circuit cases that invoke the Fifth Amendment in order to provide support that the court can use a soft-line ratio in FCA jurisprudence, because these circuits already did.
While most circuits consider the excessiveness of FCA fines without considering Due Process, this section considers the two circuit decisions that have invoked the Fifth Amendment to determine the constitutionality of an FCA penalty: United States ex rel. Drakeford v. Tuomey performed a Due Process analysis distinct from the Eighth Amendment analysis, which shows that its feasible for a court to apply a soft-line ratio to an FCA penalty; and United States v. Rogan invoked the Fifth Amendment 4:1 ratio as further support that the Eighth Amendment ratio was not violated, which supports adopting a soft-line constitutional ratio that is more deferential to Congress than the 4:1 punitive damages-to-damages ratio is to a jury.
United States ex rel. Drakeford v. Tuomey demonstrates that it is feasible and reasonable for a court to apply a soft-line ratio to an FCA penalty. There, the Fourth Circuit considered whether the FCA treble damages and penalty scheme violated either the Excessive Fines Clause or the Due Process Clause. The defendant hospital created a payment structure to incentivize doctors to contract with it, in violation of a federal statute. The violation led to 21,730 Medicare claims being submitted—each considered a distinct instance of fraud—and the jury determined the damage totaled $39,313,065. The district court awarded damages and penalties of $237,454,195.
In the Eighth Amendment analysis, the Fourth Circuit applied the Bajakajian standard. The Excessive Fines Clause is only violated if the fine is grossly disproportional to the offense’s gravity. This circuit referred to its earlier decision in Gosselin that “instances in which the penalty prescribed under the FCA is unconstitutionally excessive will be ‘infrequent.’” As such, it easily decided the Excessive Fines Clause was not violated. The court spent longer analyzing the constitutionality of the judgment under the Due Process analysis.
The court considered if there was a Fifth Amendment violation by applying the State Farm factors and calculating the ratio of punitive damages to compensation damages. The district court imposed a total judgment of $237,454,195. The Circuit Court determined that $51,106,985 was compensatory and $186,347,210 was punitive. The Fourth Circuit recognized that while State Farm found no bright line rule exists, a penalty “four times the compensatory damages might be close to the line of constitutional impropriety.” The Fourth Circuit reasoned that the ratio here—3.6:1—is within the Supreme Court’s cautionary zone. As such, the award did not violate the Fifth Amendment of the Constitution. Tuomey serves as an example of how courts can calculate the damage inflicted by the FCA violating conduct and compare it to the minimum punitive penalty. This case demonstrates the feasibility of this article’s proposal: courts are capable of calculating the damages and penalty to determine whether the award falls within the constitutional guidelines. Rather than applying the 4:1 ratio of State Farm, however, courts should be more deferential to Congress than a jury.
In the only other circuit decision that refers to the Fifth Amendment when determining the constitutionality of a large FCA fine, the Fourth Circuit in United States v. Rogan used the 4:1 ratio to further support that the Eighth Amendment was not violated. There, the defendant defrauded the United States when it violated a federal statute that prohibited soliciting patients through referrals. The illegal referral program led to defendant’s hospital receiving $17 million for providing care to these patients, which the Court trebled to $50,594,032. The district court imposed the minimum penalty of $7,500 for each of the 1,822 false claims, which amounted to $13,665,000. On appeal, the Seventh Circuit was asked whether the nearly $64 million judgment violated the Excessive Fines Clause. The court did not perform an entire Bajakajian factor test, in part, because the ratio between the total award and damages was 3.76:1. The court reasoned:
The total is less than four times actual damages, well within the single-digit level that State Farm . . . thinks not “grossly excessive” for punitive damages. It’s hard to see what the Court’s approach to punitive damages under the Fifth Amendment would differ dramatically from analysis under the Excessive Fines Clause. (If there is to be a difference, one would think that a fine expressly authorized by statute could be higher than a penalty selected ad hoc by a jury.)
While Tuomey shows its feasible to apply a ratio to an FCA case, Rogan explains why adopting the 4:1 ratio such that the Fifth Amendment test is equivalent to the Eighth Amendment test would be wrong: Congress deserves more deference than a “penalty selected ad hoc by a jury.” As the Court recognizes, “judgments about the appropriate punishment for an offense belong in the first instance to the legislature.” Thus, incorporating the State Farm 4:1 ratio fails to adequately respect the separation of powers at work. However, constitutional rights need a standard to be applied, and the current Bajakajian standard in practice defers too much to Congress such that no meaningful Eighth Amendment protection is afforded to FCA defendants. The Court should adopt a new ratio specifically for the Excessive Fines Clause in the civil forfeiture context that affords Congress appropriate deference while providing meaningful Eighth Amendment protection. This article proposes adopting a 20:1 penalties-to-damages ratio such that cases with larger ratios are constitutionally suspect and not afforded the high presumption of constitutionality typically available under Bajakajian.
The Court should adopt a 20:1 penalties-to-harm ratio such that judgments with greater ratios are considered constitutionally suspect. When an FCA judgment imposes a penalties-to-harm ratio that exceeds this ratio, the court would not afford the judgment the preliminary presumption of constitutionality that Bajakajian creates. The court would apply the same factors to evaluate the judgment for gross excessiveness, but the inquiry would be aimed at evaluating for gross excessiveness—not rebutting the presumption of constitutionality. The ratio of 20:1 seems appropriate because it is high enough to only limit outlier judgments and gives Congress an appropriate level of deference. This standard would protect defendant’s constitutional rights while still effectuating the FCA’s goals of retribution, deterrence, and incentivization.
The 20:1 ratio would be a soft-line rule that mirrors the Fifth Amendment Due Process standard. In State Farm, the Supreme Court was cautious to not set a bright line rule for Fifth Amendment Due Process but suggested that an “award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.” Moreover, the Court stated that “few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” These ratios serve as guideposts that are not determinative to the constitutionality of any specific award but merely inform judicial review, allowing for a flexible, fact-specific inquiry that adjusts to the case at hand.
Courts should adopt a similar flexible, soft-line ratio in the civil forfeiture context. Like in the Due Process context, this ratio would inform judicial review of large judgments. While the Supreme Court should not create a bright-line rule for civil forfeiture, an acknowledgment of the disparity with a guidepost like that of State Farm would give meaning to the Eighth Amendment in the FCA context.
In State Farm, the Supreme Court repeatedly acknowledged that it was not setting a simple mathematical formula and that the 4:1 ratio was meant to be instructive, not binding. The Court noted that “the relevant constitutional line [for excessiveness] is inherently imprecise rather than one marked by a simple mathematical formula.” The 4:1 ratio and 10:1 ratio thus were drawn from precedent and were meant to inform courts on when to be especially suspicious of constitutional violations. Adopting a 20:1 ratio in the civil forfeiture context would play a similar role. Selecting any specific number is inherently imprecise. Scholars have continued to critique State Farm for seemingly creating an arbitrary line between constitutional and unconstitutional jury awards. This proposal is susceptible to the same critique. However, it is better than the current system, which fails to provide protection to FCA defendants. Setting a threshold for excessive civil fines invites further scrutiny when the award exceeds it. The impreciseness of setting the threshold is ameliorated by the factor test. The presumption of constitutionality is removed but the award may still be found constitutional. The Eighth Amendment must provide meaningful protection to defendants in FCA cases, which a 20:1 ratio does.
A 20:1 penalties-to-harm ratio appropriates balances the competing interests of creating an instructive constitutional ceiling for outlier cases, giving the legislature an appropriate amount of deference, and providing adequate flexibility to ensure that the qui tam relator is compensated and the government is made whole. Imposing a 20:1 ratio would only impact the outlier cases that have an especially disproportionate effect. In the cases that the Eighth Amendment argument was appealed and answered by an appellate court, the circuits have found FCA judgments constitutional under the Excessive Fines Clause when the judgment to punishment ratio was 3.06:1, 3.6:1, 3.76:1, 12:1, 28:1, and 1,558:1. District courts have found FCA claims constitutional under the Excessive Fines Clause where the ratio of the award to the damage is 2:1, 7:1, 8:1, 18:1. These are the ratios in cases where the Excessive Fines argument was raised, but most FCA cases do not raise this argument because the ratio is substantially lower or the award is fairly proportionate to the conduct. Thus, most FCA judgments are within a ratio of 10:1. The vast majority of FCA cases, these included, would remain untouched under this new standard. Only the outlier cases like Yates, Gosselin, and similar cases would be subject to this new instructive ceiling.
The ratio of 20:1 gives adequate deference to Congress. Because Congress—a representative body elected to be the voice of the people—created the FCA and its penalty scheme, the courts should be more deferential to Congress than to a jury, which awarded the large punitive damages in State Farm. In Bajakajian, the Supreme Court pushed against a “strict proportionality between the amount of a punitive forfeiture and the gravity of a criminal offense” for two reasons: (1) “judgments about the appropriate punishment for an offense belong in the first instance to the legislature” and (2) “any judicial determination regarding the gravity of a particular criminal offense will be inherently imprecise.” Bajakajian was decided four years before State Farm, and State Farm was the first time that the Court created a soft-line constitutional ceiling. Neither reason cited by the Supreme Court in Bajakajian is undermined by adopting a soft-line ceiling in the FCA civil forfeiture context. The punishment still belongs to the legislature. A 20:1 ratio allows a fine to be twenty times larger than the cost of damage inflicted by the defendant. This ratio is five times larger than the constitutional impropriety threshold and two times larger than the 10:1 ratio of the State Farm Due Process standard. The number 20 is an appropriate multiple because the courts should defer more to a “fine expressly authorized by statute . . . than a penalty selected ad hoc by a jury.” Selecting any number is inherently imprecise. The 20:1 ratio would be a flexible guideline that merely informs judges. The judge’s role, under the State Farm test and this one, is to apply this general standard to the facts at hand and ensure the case before them is adjudicated fairly within constitutional bounds.
Furthermore, Congress’s purpose in imposing a mandatory penalty is still effectuated with adopting a 20:1 penalties-to-damages ratio. In amending the statute, the Judiciary Committee stated it “reaffirms the apparent belief of the act’s initial drafters that defrauding the Government is serious enough to warrant an automatic forfeiture rather than leaving fine determinations with district courts, possibly resulting in discretionary nominal payments.” Adopting the 20:1 ratio is not allowing nominal payments or giving district courts wide discretion that undermines the FCA’s purpose. Black’s Law Dictionary defines nominal damages as “a trifling sum awarded to a plaintiff in an action, where there is no substantial loss or injury to be compensated.” Restricting a fine to the 20:1 ratio would still impose a fine twenty times larger than the harm incurred. There has been a loss, but the government has been compensated fully in the form of treble damages. The penalty is punitive, and twenty times larger than the economic harm is sufficiently punitive to ensure fraudsters are adequately deterred and punished.
While the courts should defer more to Congress than to a jury, courts still must provide meaningful Eighth Amendment protection over statutory penalties. Unlike juries, which are uninterested parties selecting the damages in a case, the legislature benefits from imposing larger fines. Because the Bill of Rights expressly “protects citizens from any abuse of government power” and “the Eighth Amendment expressly prohibits the government from imposing excessive fines,” it is the judiciary’s responsibility to provide legitimate overview of government power in this space. The Supreme Court has warned against the government imposing fines, because “fines, uniquely of all punishment, will be imposed in a measure out of accord with the penal goals of retribution and deterrence.” Unlike imprisonment and other punishments that cost the government money, “fines are a source of revenue,” and “it makes sense to scrutinize governmental action more closely when the State stands to benefit.” The current Bajakajian standard affords Congress a high presumption of constitutionality, regardless of the penalties-to-damages ratio, and continues deferring to Congress in the multifactor test to determine whether the fine is grossly disproportionate. The court should adopt a 20:1 ratio, at which point the judgment is no longer afforded the high presumption of constitutionality. This standard appropriately defers to Congress while simultaneously providing protection against inflicting massively disproportionate claims.
The proposed standard requires the court to calculate penalties and harms to create the ratio. This calculation should be analogous to the court’s process in the Due Process State Farm context: the court should aim to calculate a numerator—the penalty—that equals the punitive portion of the award and a denominator—the harm inflicted by the defendant’s conduct—that equals the compensatory portion of the award.
Calculating the harm is the trickier determination. The court must determine what portion of the award is “compensatory,” which will be the ratio denominator. The actual damages are compensatory but may not make the government entirely whole. For example, if a qui tam relator is involved, thirty percent of the final judgment may go to the relator. Whatever will go to the relator should be taken from the treble damages and be considered compensatory. The treble damages may then partially serve a remedial function. Calculating the penalties will be an easier task since courts largely already do this. The calculation should include the portion of the judgment that is punitive, including the penalties imposed and the remainder of the treble damages after the qui tam award has been subtracted. This number becomes the numerator of the ratio.
The Tuomey court demonstrated this calculation. The total judgment was $237 million: $39 million in actual damages, trebled, and $119 million in civil penalties. The actual damages were entirely compensatory. Damages were trebled to include an additional $78 million, which was “a hybrid of compensatory and punitive damages.” The relator was entitled to $12 million, which would be the compensatory portion of the treble damages. The remaining treble damages, $67 million, were punitive. The entire $119 million in penalties were punitive. The compensatory damages were thus $51 million, and the punitive damages were $186 million. The penalties ratio thus is $186 million to $51 million, or 3.6:1.
The calculation should create a ratio reflective of the punitive portion of the award-to-the compensatory portion of the award and thus adjust depending on the facts present. Some cases might be difficult to calculate the compensatory portion because no economic damage was inflicted or proven. When this occurs, then court must analyze the conduct and determine what portion of the penalty imposed will make the government whole. In Gosselin, the court did this by looking to a parallel proceeding that had ordered Gosselin pay restitution for its conduct. The court used the restitution amount to indicate what portion of the penalties was compensatory and used that as the ratio denominator. If no parallel proceeding exists, the court could look to how similarly situated defendants are treated. The FCA is a highly litigated statute, and the court can look to how compensatory damages are calculated in cases involving similar fraudulent conduct.
When no economic harm is truly inflicted, that itself should inform the constitutional ceiling for an excessive fine. For example, in United States ex rel. Davis v. District of Columbia, the defendant contracted with Medicare to provide healthcare, provided adequate healthcare to eligible recipients, and received federal funding for compensation: “The government got what it paid for and there [was] no damages.” The claims were allegedly false because the defendant failed to maintain adequate supporting documents for the payments. This case eventually failed on knowledge grounds. Had knowledge been met, the relator would be entitled to the statutory penalty scheme. In that event, every invoice to Medicare would be another instance of fraud and incur the attendant penalty. These penalties could swiftly compound to a very large punitive number when there was no economic harm. Under the proposed standard, a court reviewing these facts must consider the absence of economic damage in determining the numerator of the ratio. The court should still look for other damages incurred and the amount of compensatory damages that similar cases have imposed.
Like the State Farm standard, the proposed ratio is flexible and should be adjusted to the case at hand. Adopting a 20:1 ratio would remove the presumption of constitutionality but still allow judicial discretion in calculating the compensatory damages and applying the Bajakajian factors. This option allows for a balanced approach that appropriately adapts to the facts while still providing meaningful Eighth Amendment protection.
Adopting a 20:1 soft-line constitutional ceiling would not disrupt the goals of the FCA. The purpose of the current penalty structure is threefold: (1) allow the government to recover for the expense of fraud, (2) deter fraudsters from committing fraud in the first place, and (3) incentivize qui tam relators to bring an action on behalf of the government. The new standard would not apply in the vast majority of FCA cases because only the outlier cases would become constitutionally suspect. These goals would remain untouched in the vast majority of FCA litigation.
For the cases that impose judgments exceeding the 20:1 ratio, the government would fully recover for the expense of fraud, even after if the fine is reduced. The treble damages “compensate the Government completely for the costs, delays, and inconveniences occasioned by fraudulent claims.” This compensatory element is included in the ratio’s numerator and would not be reduced. The civil penalty, though, is completely punitive. Thus, lowering the punishment does not inhibit the government from being compensated for the cost of fraud.
The 20:1 ratio would still deter fraudsters from committing fraud. Punitive damages and fines payable to the state share common goals: deterrence and punishment. In adopting the soft-line ceiling in State Farm, the Supreme Court expressly recognized that deterrence was still effective despite imposing a ceiling. Here, too, fraudsters will be similarly deterred. The ceiling would only apply to the most disproportionate cases. Most FCA cases would be untouched by this new standard. In the few cases where the fine is reduced, the defendant will still be paying a multiple of twenty times the damage inflicted. The risk of such a large penalty—in addition to treble damages—will serve the same deterrence mechanisms that currently exist. Similarly, qui tam relators would still be incentivized to bring suits. Relators are entitled to up to thirty percent of the final judgment. The FCA final judgment includes treble damages and these massive statutory penalties. Relators stand to make a huge amount of money, even if the penalties are reduced. Therefore, relators are still incentivized to bring these actions.
The Excessive Fines Clause guarantees the right to be free from the government imposing excessive fines from which the state benefits. The current Bajakajian test defers so substantially to Congress that this constitutional right has become subsidiary to a statutory minimum penalty. This article proposes a solution by looking to Fifth Amendment jurisprudence: judgments where the penalties-to-damages ratio exceeds 20:1 should be considered constitutionally suspect, such that the court would no longer presume the judgment is constitutional. This solution balances affording Congress an appropriate amount of deference while providing meaning to the Eighth Amendment’s explicit right. The False Claims Act has been largely successful in combatting fraud, and this solution would not hinder that success. Adopting a 20:1 ratio would still ensure the United States is compensated for the cost of fraud and, by leaving most FCA judgments untouched, fraudsters would still be deterred and qui tam relators would still be incentivized to bring FCA claims on the United States’ behalf.
