Historically, in 1986, the False Claims Act (“FCA”) was amended so that the penalties increased from $2,000 to between $5,000 and $10,000 per false claim. In 1999, the penalties were elevated to their present level of between $5,500 and $11,000 per false claims. Now they are slated to become even higher.
More specifically, Congress recently passed the “Bipartisan Budget Act of 2015,” which will require federal agencies to impose significant increases in civil monetary penalties, including the statutory penalties mandated by the FCA, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), and the Program Fraud Civil Remedies Act (“PFCRA”). Tied to adjustments to the Consumer Price Index (“CPI”) (i.e., inflation), the amendment’s potential impact on FCA defendants is considerable. See H.R. 1314, 114th Cong. § 701 (amending the Federal Civil Penalties Inflation Adjustment Act of 1990). The “catch up adjustment” – which applies a cost-of-living adjustment percentage derived from the amount by which the CPI in October 2015 exceeds the CPI in October of the year in which the penalty amount was established or adjusted – would be implemented through “interim final rulemaking” that must take effect no later than August 1, 2016. After that, it appears the penalties will be automatically adjusted on an annual basis.
Given that False Claims Act penalties are assessed on a per claim basis, and given that this aspect of False Claims Act liability can be astronomical in cases involving the submissions of large numbers of false claims, this is a significant development in False Claims Act jurisprudence. In fact, it is likely that FCA defendants will redouble their efforts to declare the penalties as excessive and unconstitutional in violation of the Eighth Amendment, which they have to date occasionally argued with limited success.