Supreme Court decision could spell FCA relief

Last week, the Supreme Court issued a decision that could spell relief for defendants facing the possible imposition of "punitive" False Claims Act (FCA) damages, says FCA expert John Boese. Basically, the Court held that courts of appeals must make an independent review when assessing the constitutionality of punitive damages imposed by the lower court.

By contrast, under the "abuse of discretion" standard of review, an appellate court may reverse a district court’s findings only if it concludes that the court has committed a clear error of law, explains Boese, a former federal prosecutor now with Fried Frank in Washington, DC.

When the Supreme Court ruled last summer that civil FCA damages are "essentially punitive in nature" rather than "remedial," it launched what is proving to be "a monumental shift" in the way the FCA is viewed, Boese says.

Since then, at least three courts have held that local governmental entities are immune from FCA damages and penalties because of the punitive nature of the FCA, he notes. In addition, the Ninth Circuit recently held that because FCA damages are punitive, an inquiry must be made as to whether they are unconstitutionally excessive.