Opposition Brief — Mackby v. United States

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No. 03-888

In the Supreme Court of the Giited States

PETER MACKBY, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

THEODORE B. OLSON

Solicitor General

Counsel of Record

PETER D. KEISLER

Assistant Attorney General

DOUGLAS N. LETTER

EDWARD HIMMELFARB

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTIONS PRESENTED

1. Whether the evidence in this case established that

the claims for payment that petitioner caused to be

submitted were “false” within the meaning of the False

Claims Act (FCA), 31 U.S.C. 3729 et seq.

2. Whether the district court’s calculation of

damages in this case was consistent with the terms of

the FCA.

3. Whether the government is required to prove

damages in order to establish liability and recover civil

penalties under the FCA.

4. Whether the court of appeals correctly held that

the civil penalties awarded in this case did not violate

the Excessive Fines Clause of the Eighth Amendment.

(I)

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Ab-Tech Constr., Inc. v. United States, 31 Fed. Cl. 429

(1994), aff’d, 57 F.3d 1084 (Fed. Cir. 1995) ......sscsseseeeeees 15

Cook County v. United States ex rel. Chandler,

EBS U.S. 119 (2O0B) ......-.rcccscvscvssscnscesssccsercsvseseconsessncsesecovces 11,19

Hays v. Hoffman, 325 F.3d 982 (8th Cir.),

cert. denied, 124 S. Ct. 277 (2008) ........csssccsrsssssessssessereesees il

Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) «0... 16

United States v. Bajakajian, 524 U.S. 321 (1998) ........... 9,17

United States v. Bornstein, 423 U.S. 303 (1976) ..........0+ 11

United States v. Cooperative Grain & Supply Co.,

re CAR, TTD) crnsecccscccscczenctovenssstnecsscccontnosnsssncone 15

United States v. McNinch, 356 U.S. 595 (1958) .......s.c0000 11

United States v. Watts, 519 U.S. 148 (1997) .........sseseseeees 19

United States v. Woodbury, 359 F.2d 370 (9th Cir.

SIT ssdchiciisitincaiehdeiiotenadsinniansddevenetanvenstucionsanscupenetienmneninsenennenesacen 13

Constitution and statutes:

U.S. Cont. Amend. VIII (Excessive Fines Clause) ........... 8, 9,

17, 18, 19

False Claims Act, 31 U.S.C. 3729 et Seq. ......sssssesseresreeereees 3,11

Be Ee IIIT pninsccenicocensvvipsesecserscneqensuccsenenbennseeseesmnnes 3, 4, 16

Be Rs SPT IIIIE ED sosncevesevesnssonrervesnvoenecvessecvcnsssetennssonese 3, 18, 17

Be A MIIIIED cciscicepecrnssssnstserteinqesonventsonevonnesnssonssoesesnenee 13

Be ees SPIIMG ED. vicsccesnesnsesrensesocsnonnseeseronseenssonsinnescese 3

IE TIT eidietnvscnieniniossansosrerusevoensenepesonensconenaninenmieneeretenense 11,12

II SDE. -<ssnsssecabsinnnnneorneesesebenonsnentenessniotannesnnnemsessnainenvtonece 11

(IIT)

Statutes—Continued: Page

42 U.S.C. 1895¢ to 189Gi-2 ......cccccerececerssseresescoesececssessessoeossessnte 2

42 U.S.C. 1895j to 1395X(8) ...........csccsresssreccsesssesssensssssessoeesees 2

BB UBC. UBGGAI .ncesesvsevsesevesecovsevsvvesesvsososennsconscocsesossonosnesonecsessese 2 |

Miscellaneous:

64 Fed. Reg. 47,104 (1999) ......cssscsssserecsessssssssrsseessssssesensessneess

nN >

66 Fed. Reg. 35,437 (2001) .vssssssssssssssssssee siaiaidanipesanliaan

Jn the Supreme Court of the Gnited States

No. 03-888

PETER MACKBY, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-15) is

reported at 339 F.3d 1013.’ A prior opinion of the court

of appeals (Pet. App. 16-33) is reported at 261 F.3d 821.

The opinion of the district court (Pet. App. 37-55) is

reported at 221 F. Supp. 2d 1106. A prior opinion of the

district court (Pet. App. 56-71) is unreported.

1 The court of appeals initially issued a memorandum opinion,

Pet. App. 34-36, but the court withdrew that opinion and replaced

it with the opinion referred to in the text. See id. at 2.

2 An earlier opinion of the court of appeals, reported at 243

F.3d 1159, was withdrawn. It is not included in the appendix to

petition for a writ of certiorari.

(1)

2 |

JURISDICTION

The judgment of the court of appeals was entered on

August 12, 2003. A petition for rehearing was denied

on September 12, 2003 (Pet. App. 73). The petition for a

writ of certiorari was filed on November 13, 2003. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

STATEMENT

1. At all times relevant to this case, the Medicare

Program was administered by the Health Care Financ-

ing Administration (HCFA), a component agency of the

Department of Health and Human Services. See 42 |

U.S.C. 1395u.2 Medicare Part A generally provides

hospital insurance benefits to the elderly and disabled.

See 42 U.S.C. 1395c to 1395i-2. Medicare Part B is a

federally subsidized, voluntary insurance program that

pays a portion (typically 80%) of the cost of certain

medical and other health services, including physician

and laboratory services, not covered by the Part A

program. See 42 U.S.C. 1395j to 1395x(s). Part B

claims were paid by HCFA from the Medicare Trust

Fund through private insurance carriers with which

HCFA contracted. See 42 U.S.C. 1395u. The carrier

involved in this matter was Blue Shield of California.

Pet. App. 66. |

Physical therapy services were reimbursed through |

Medicare Part B only under two circumstances:

(1) when provided by a physical therapist in indepen- |

dent practice (PTIP); and (2) when provided by a physi- |

cian or by appropriately licensed and qualified |

3 After the events at issue in this case, HCFA became known

as the Centers for Medicare and Medicaid Services. See 66 Fed.

Reg. 35,437 (2001).

— tC

professional employees whose services were “incident

to” a physician’s care. Pet. App. 66. In order to receive

reimbursement, a PTIP or physician was required to a

have in effect an agreement to participate in Medicare.

Ibid.

The governing law placed limits on the amount that a

PTIP could bill on behalf of any one Medicare bene-

ficiary (patient) in any calendar year. In 1992 and 1993,

the limit was $750 per year; from 1994 through 1996, it

was $900 per year. During the relevant time period, no

such limit was imposed on physical therapy services

provided by or under the supervision of physicians.

Pet. App. 67.

At the time, bills to Medicare Part B were submitted

on a HCFA 1500 claim form, the general form used for

outpatient services. See Pet. App. 82 (sample of rele-

vant form). Box 24K of the form was used to identify

the provider identification number (PIN) for the

individual providing the services, a carrier-assigned

9-digit number for the performing physician or PTIP.

Id. at 58. Box 33 was used to identify the name,

address, telephone number, and carrier-issued PIN of

the physician or PTIP who was seeking payment. Ibid.

2. The False Claims Act (FCA), 31 U.S.C. 3729 et

seq., prohibits any person from “knowingly pre-

sent[ing], or caus[ing] to be presented, to an officer or

employee of the United States Government or a mem-

ber of the Armed Forces of the United States a false or

fraudulent claim for payment or approval.” 31 U.S.C.

3729(a)(1). The FCA also prohibits a variety of related

deceptive practices involving government funds and

property. 31 U.S.C. 3729(a)(2)-(7). A person who vio-

lates the FCA is liable to the United States for civil

penalties and for three times the amount of the gov-

ernment’s damages. 31 U.S.C. 3729(a). At the time of

incitement imaaalatimamaaeaaaiieiiciiiilaliiiaciite di eiiaa

the events at issue in this case, the Act provided for

civil penalties of “not less than $5,000 and not more

than $10,000” for each false claim. 31 U.S.C. 3729(a).*

3. In 1982, Michael Leary, a licensed physical thera-

pist, and petitioner Peter Mackby entered into a part-

nership to own and operate Asher Clinic in Larkspur,

California. Pet. App. 57. During the partnership,

Asher Clinic billed Medicare using Leary’s PIN, and

the Medicare checks were made out to Leary and sent

to him at the Clinic. Jbid. In June 1988, Leary and

petitioner dissolved their partnership pursuant to a

court settlement. Jbid. Petitioner purchased Leary’s

interest in the Clinic on June 20, 1988. Jbid. Once

Leary terminated his relationship with Asher Clinic,

the Clinic was not eligible for reimbursement under

Medicare Part B, since petitioner did not qualify as a

PTIP. See zd. at 8-9.

On June 22, 1988, petitioner instructed Medicom, the

billing service for the Clinic, to substitute the PIN of

his father, Dr. M. Judson Mackby, for Leary’s PIN on

Asher Clinic’s Medicare claims. Petitioner also told

Maridy Barnett, Asher Clinic’s office manager, to use

Dr. Mackby’s medical license number in billing Medi-

care and other third parties. Petitioner gave Barnett

his father’s PIN to substitute for Leary’s. Accordingly,

Asher Clinic’s HCFA 1500 claim forms began to include

Dr. Mackby’s PIN in Boxes 24K and 33. Use of Dr.

Mackby’s PIN in that manner indicated either that Dr.

Mackby had performed the physical therapy services or

4 The civil penalty range under the FCA was recently adjusted

upward to a minimum penalty of $5500 and a maximum penalty of

$11,000, pursuant to a statutory mandate applicable to civil penal-

ties enforced by all federal agencies. See 64 Fed. Reg. 47,104

(1999).

that the therapy had been performed incident to his

care. Pet. App. 58-59.

Thereafter, the Medicare reimbursement checks

were made payable to “M. Judson Mackby, M.D.,” and

were sent to Asher Clinic’s address. Asher Clinic used

a rubber endorsement stamp with Dr. Mackby’s name

to endorse and deposit the checks. The Explanation of

Medicare Benefits (EOMBs), which Blue Shield sent to

Asher Clinic and to Medicare beneficiaries, identified

Dr. Mackby as the provider of services at the Clinic.

The EOMBs that were sent to Asher Clinic were ad-

dressed to “M. Judson Mackby.” All Medicare audit

inquiries and Medicare Bulletins were addressed to Dr.

Mackby at the Clinic’s address. Trial testimony showed

that the administrators of the Medicare program be-

lieved that the inclusion of Dr. Mackby’s PIN in Boxes

24K and 33 on the HCFA 1500 meant either that Dr.

Mackby was performing the billed services or that the

billed services were performed incident to his care.

Pet. App. 59.

In fact, Dr. Mackby played no role in the Clinic’s

provision of services. From 1986 until 1994, Dr.

Mackby lived in Connecticut; he moved to Kentucky in

1994. Dr. Mackby never provided medical services or

physical therapy at Asher Clinic, never referred pa-

tients to Asher Clinic, was never involved in the

treatment or care of patients at Asher Clinic, and was

unaware that his name and PIN were being used by his

son and Asher Clinic to obtain Medicare reimburse-

ment. Pet. App. 60.°

5 Petitioner could have sought certification of the Clinic as a

rehabilitation agency to receive reimbursement under Medicare

Part A, but that course of action would have required compliance

with regulatory requirements that petitioner regarded as bur-

eaeiltenisneeassiinomiliimmeniaanciieiaiiil sinter a ae ee

sant GD NT SL) EE RE ee

4. The United States filed suit against petitioner

under the FCA, seeking treble damages and civil

penalties. After a bench trial, the district court ruled in

favor of the government and issued findings of fact and

conclusions of law. Pet. App. 56-71. The court held that

petitioner had knowingly caused Asher Clinic to pre-

sent false claims for payment to the Medicare carrier,

Blue Shield of California, between 1992 and 1996. Id. at

68-69.

The parties had stipulated to the fact that, during the

years 1992-1996, Asher Clinic had submitted 8499 Medi-

care claims totaling $331,078 for physical therapy

services, which were paid to the Clinic through checks

made payable to M. Judson Mackby, M.D. See Pet.

App. 64-65 (956 claims for $31,735 in 1992, 1387 claims

for $52,608 in 1993, 2258 claims for $93,695 in 1994, 2326

claims for $96,482 in 1995, and 1572 claims for $56,558 in

1996). In calculating the government’s damages under

the FCA, however, the district court explained that

“the United States is seeking treble damages for only

the 1459 claims that Asher Clinic submitted to Medi-

care between 1992 and July 1996 which exceeded Medi-

care’s annual payment limit per beneficiary for PTIPs,

densome. The Clinic would have been required to develop an

institutional or administrative structure and to provide additional

services. Petitioner avoided those burdens by using Dr. Mackby’s

PIN. In March 1996, however, Medicare administrators wrote to

Dr. Mackby at Asher Clinic’s address and requested medical re-

cords for an audit. Shortly thereafter, petitioner expended con-

siderable resources to have Asher Clinic certified as a Medicare

Part A rehabilitation agency. Asher Clinic’s application for certi-

fication as a rehabilitation agency was dated June 4, 1996; the

Clinic was surveyed on July 10, 1996; and Medicare administrators

granted certification on September 13, 1996. The Clinic then

stepped billing for Medicare services under Part B. Pet. App. 63-

64.

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totaling $58,151.64. Treble damages are, therefore,

awarded in the amount of $174,454.92.” Pet. App. 70.

In assessing the appropriate civil penalty under the

Act, the court explained that “(t]he United States is

also seeking the minimum penalty under the FCA of

$5,000 for only one claim, submitted by Asher Clinic per

beneficiary each year, that exceeded Medicare’s annual

payment limit for PTIPs, z.e., 111 claims. Accordingly,

the United States is awarded penalties in the amount of

$550,000.” Ibid. .

5. The court of appeals affirmed in part and re-

manded in part. Pet. App. 16-33.

a. The court of appeals affirmed the judgment as to

liability, agreeing with the district court that petitioner

had knowingly caused false Medicare claims to be

submitted to the government. Pet. App. 21-28. Peti-

tioner argued that the Medicare claims were not “false”

within the meaning of the FCA “because the claims

accurately describe physical therapy services that were

actually rendered.” Jd. at 23. The court explained that

“the fact that physical therapy services were actually

rendered does not negate Asher Clinic’s false repre-

sentation that Dr. Mackby performed the services

described on the claim forms or that those services

were rendered incident to Dr. Mackby’s supervision. It

is the representation of Dr. Mackby’s involvement that

is ‘false.’” Ibid. The court also held that petitioner had

caused the false claims to be presented, zd. at 24-25, and

that he had acted with the requisite scienter, id. at 25-

28.

b. The court of appeals remanded the case to the

district court to determine whether the civil penalties

and treble damages awarded by the district court, alone

or in combination, were so grossly disproportional to

the gravity of petitioner’s offenses that they violated

the Excessive Fines Clause of the Eighth Amendment.

Pet. App. 28-32. The court explained that both the

civil-penalty and treble-damages components of the

monetary relief authorized by the FCA are intended, at

least in part, to serve punitive purposes, and are

therefore subject to Excessive Fines analysis. See id.

at 30-32.

6. On remand, the district court concluded that the

judgment previously entered did not violate the Exces-

sive Fines Clause. Pet. App. 37-55. The court noted

that petitioner had “caused 8,499 false claims to have

been submitted,” and that his conduct had resulted in

the improper payment of $331,078 in federal Medicare

funds. Id. at 42-43. Because petitioner’s “maximum

exposure” under the False Claims Act was “almost $86

million,” the court explained, the judgment against him

was “but a fraction of what could have been imposed”

under the plain terms of the FCA. Id. at 48-44. In the

court’s view, the fact that the judgment awarded was

“far below the amounts which could have been imposed

supports the conclusion that the judgment is not

grossly disproportionate to the gravity of [petitioner’s]

conduct.” Id. at 44.

Petitioner contended that his false claims resulted in

no_harm to the government, on the theory that if

Medicare had not paid Asher Clinic, it would have paid

to have the same services performed by another pro-

vider. Pet. App. 46. The district court rejected that

argument, explaining that the proper measure of the

government’s damages under the FCA was the amount

paid in response to the false claims. Jd. at 47. The court

also rejected petitioner’s suggestion that his conduct at

most amounted to a minor or technical violation of the

Act. See id. at 50-51. Finding that petitioner’s “sub-

mission of false claims to the United States is a serious

matter,” id. at 51, and that petitioner had “engaged in a

course of deceit which involved the submission of

thousands of false claims over the course of four years,”

id. at 52, the court concluded that the full amount of the

judgment it had previously imposed was “necessary

and appropriate for purposes of deterrence,” bid.

7. The court of appeals affirmed. Pet. App. 1-15.

The court noted that, under this Court’s decision in

United States v. Bajyakajian, 524 U.S. 321 (1998), a

“punitive forfeiture violates the Excessive Fines Clause

if it is grossly disproportional to the gravity of a

defendant’s offense.” Pet. App. 6 (quoting Bajakajian,

524 US. at 334). Applying that standard, the court held

that the monetary award in this case did not violate the

Excessive Fines Clause. /d. at 8-14.

The court of appeals explained that petitioner had

“used a false Medicare PIN number to procure Medi-

care payments for which he was not eligible,” and that

each of the 8499 Medicare claims that petitioner had

submitted using Dr. Mackby’s PIN number constituted

a distinct violation of the FCA. Pet. App. 8. “[All-

though the government sought damages only for the

claims that exceeded the PTIP cap, [petitioner] did not

actually qualify as a PTIP after the departure of Leary

in 1988 and thus was not eligible to receive any Medi-

care funds, let alone funds that exceeded the cap.” Id.

at 8-9. The court also found that, unlike the defendant

in Bajakajian, petitioner was “among the class of

persons targeted by the” statute under which penalties

were imposed, because the FCA “targets those who

knowingly make a false claim for payment to the gov-

ernment.” Id. at 9.

In determining whether the monetary relief awarded

by the district court was grossly disproportional to the

seriousness of petitioner’s offenses, the court of appeals

found it appropriate to consider the maximum penalty

provided for by Congress, which the court deemed

“instructive but not dispositive of the constitutional

question.” Pet. App. 9. The court explained that, if the

government had sought treble damages and civil

penalties for all 8499 false claims, petitioner could have

been subject to a civil penalty of up to $84,990,000 and

treble damages of up to $993,234. Jd. at 10. The court

found that “(t]he substantial difference between the

actual judgment against [petitioner]—treble damages

of $174,454.92 and a civil penalty of $555,000—and the

maximum available penalties weighs against a finding

of gross disproportionality.” Jbid. The court also noted

that, under the Sentencing Guidelines, petitioner might

have been subjected to “a term of imprisonment of 37-

46 months, as well as restitution for the full amount of

the loss,” in a criminal prosecution based on the same

conduct. Jd. at 11. Finally, the court found that some

part of the judgment against petitioner was properly

viewed as remedial in character. /d. at 13. The court of

appeals concluded that, “[clonsidering both [peti-

tioner’s] culpability and the harm caused by his offense,

* * * the full $729,454.92 judgment against [petitioner]

is not grossly disproportional to the gravity of his

offense.” Jd. at 13-14.

ARGUMENT

The decision of the court of appeals is correct and

does not conflict with any decision of this Court or of

another court of appeals. Further review is not

warranted.

1. Petitioner contends (Pet. 15-19) that the govern-

ment failed to prove in this case that the Medicare

claims submitted by Asher Clinic were “false” within

the meaning of the FCA. Petitioner relies (see Pet. 17-

18) on decisions issued in criminal false claim and false

statement prosecutions under 18 U.S.C. 287 and 1001,

in which courts of appeals have held that, because the

government must prove falsity beyond a reasonable

doubt, a defendant cannot be found guilty if his conduct

rests on a reasonable interpretation of governing law.

Petitioner’s argument fails for two reasons.

First, the instant case involves a civil FCA action,

not a criminal prosecution. The fact that the civil mone-

tary remedies available under the Act may serve in

part to punish the offender, see Cook County v. United

States ex rel. Chandler, 538 U.S. 119, 129-130 (2003),

does not mean that all of the rules governing criminal

prosecutions—including the requirement of proof be-

yond a reasonable doubt—are applicable to FCA civil

suits. Petitioner’s reliance (Pet. 15) on Hays v. Hoff-

man, 325 F.3d 982 (8th Cir.), cert. denied, 124 S. Ct. 277

(2003), is misplaced. Although the Eighth Circuit in

Hays held that the district court had attributed to the

defendant an unduly large number of false claims, see -

id. at 992-994, the court did not announce any overarch-

ing principle that civil suits under the Act must

conform to the rules governing criminal prosecutions.°

6 In United States v. Bornstein, 423 U.S. 303 (1976), this Court

stated that, in construing the FCA provisions governing civil lia-

bility, it was “actually construing the provisions of a criminal sta-

tute.” Jd. at 313 n.8 (quoting United States v. McNinch, 356 U.S.

595, 598 (1958)). That statement © »rrect in 1976, but it is no

longer an accurate characterization ot the relationship between the

applicable civil and criminal false claims provisions. As the Court

explained in Bornstein, the civil provisions of the False Claims Act

in effect at that time relied on a repealed criminal provision for

specification of the acts giving rise to civil liability. 423 U.S. at 307

n.l. The current civil provisions of the False Claims Act, however,

are entirely self-contained, see 31 U.S.C. 3729 et seq., and are

In any event, petitioner is wrong in suggesting (see

Pet. 16-17) that the falsity of Asher Clinic’s Medicare

claims turned on the interpretation of ambiguous regu-

latory provisions. The courts below found those claims

to be “false,” not because they rested on a misinter-

pretation of arcane Medicare regulations (see Pet. 16),

but because the claim forms represented that the

relevant physical therapy services had been performed

by Dr. Mackby or under his direction, when in fact Dr.

Mackby had no involvement in the provision of those

services. See, e.g., Pet. App. 23 (court of appeals states

that “[i]Jt is the representation of Dr. Mackby’s

involvement that is ‘false,’ and that falsity is sufficient

to satisfy the first element of an FCA claim”); id. at 67-

68 (district court finds that “[t]he ‘lie’ on the [claim]

forms * * * is Dr. Mackby’s PIN,” which “indicated to

Medicare that the physical therapy provided [was]

performed by Dr. Mackby or ‘incident to’ his services”).

The district court considered petitioner’s asserted justi-

fications for using Dr. Mackby’s PIN on the Medicare

claim forms and found that those justifications lacked

credibility. See id. at 60-68. The Medicare claims that

petitioner caused to be submitted were therefore

“false” because they misrepresented facts bearing on

the Clinic’s entitlement to payment, not because they

reflected a misunderstanding of applicable law.

Petitioner further contends (Pet. 17) that Asher

Clinic could reasonably have interpreted the applicable

Medicare requirements as permitting it to be paid for

its services as a “supplier” of independent physical

therapists. The court of appeals found that petitioner

“did not actually qualify as a PTIP after the departure

codified separately from the criminal prohibition contained in 18

U.S.C. 287.

of Leary in 1988 and thus was not eligible to receive

any Medicare funds.” Pet. App. 9. In any event, Asher

Clinic did not seek Medicare payments as a PTIP

during the time period relevant here; rather, it billed as

a provider of physical therapy provided by or under the

supervision of Dr. Mackby. See pp. 4-5, supra.

2. Petitioner contends (Pet. 20-23), that the govern-

ment suffered no damages as a result of the false claims

submitted by Asher Clinic because (a) the Clinic in fact

provided the physical therapy services for which Medi-

care payments were made, and (b) the relevant patients

would likely have obtained equivalent services from

other providers at federal expense if Asher Clinic had

been found to be ineligible for Medicare reimburse-

ment. Those claims lack merit.

The False Claims Act imposes liability on any person

who “knowingly presents, or causes to be presented,

* * * a false or fraudulent claim for payment or

approval,” 31 U.S.C. 3729(a)(1), or who “knowingly

makes, uses, or causes to be made or used, a false

record or statement to get a false or fraudulent claim

paid or approved by the Government,” 31 U.S.C.

3729(a)(2). The Act thus focuses on the defendant’s

improper attempts to obtain money from the public fisc;

and, under established principles, the appropriate

measure of damages under the FCA is “the amount

that [the government] paid out by reason of the false

statements over and above what it would have paid if

the claims had been truthful.” United States v.

Woodbury, 359 F.2d 370, 379 (9th Cir. 1966). Here, if

Asher Clinic had truthfully informed the government

that Dr. Mackby was neither providing nor supervising

the provision of the physical therapy services per-

formed at the Clinic, the Clinic would have received no

Medicare funds at all (because it was ineligible to

ea eS a ee eo eo se

receive such funds as a PTIP). See p. 4, supra. The

fact that the government might have lawfully reim-

bursed qualified suppliers for providing physical ther-

apy to some of the same patients does not alter that

reality.

Petitioner’s challenge to the district court’s computa-

tion of damages in this case is particularly misguided in

light of the discretion shown by the government in its

assertion of damages claims. During the period from

1992-1996, Asher Clinic submitted 8499 Medicare

claims, for which it received a total of $331,078, see p. 6,

supra, even though the Clinic was ineligible to receive

any Medicare reimbursement during the years in

question. See Pet. App. 8-9. The United States sought

damages, however, “for only the 1459 claims that Asher

Clinic submitted to Medicare between 1992 and July

1996 which exceeded Medicare’s annual payment limit

per beneficiary for PTIPs.” Jd. at 70; see id. at 8-9.

(Those claims totaled $58,151.64, and the district court

awarded treble damages in the amount of $174,454.92.

Id. at 70.) The government thus sought damages only

for those Medicare claims as to which the participation

of a physician in rendering the underlying services was

a legal prerequisite to payment. Since it is undisputed

that the Clinic’s services were not performed by or

under the direction of a physician, there is no basis for

petitioner’s contention (Pet. 21) that the government

received in substance the services for which it paid.

Petitioner also contends (Pet. 21) that, if the Medi-

care carrier had been aware that Asher Clinic’s services

were performed by physical therapists rather than by

doctors, and if it had therefore denied reimbursement

in excess of the annual PTIP cap, its action “would

likely have caused the patients to go elsewhere to

receive their services, causing Medicare to have paid

the same amounts it paid Asher Clinic.” Petitioner

cites no case, however, in which a court has relied on

speculation of that character as a basis for denying the

government’s claim for damages for payments wrong-

fully obtained by the recipient. Absent any conflict in

authority, petitioner’s statutory challenge to the dam-

age calculation in this case does not warrant further

review.’

3. Petitioner contends (Pet. 24-26) that the circuits

are divided on the question whether False Claims Act

liability can exist without proof of damages by the gov-

ernment. Even if that question otherwise warranted

this Court’s review, it is not presented in this case,

since both of the courts below held that the government

7 The criminal cases on which petitioner relies (see Pet. 23) in-

volved either the loss calculations used in applying the Sentencing

Guidelines, or the determination whether restitution is owed,

rather than the issue of damages in a civil False Claims Act case.

Petitioner’s reliance (see Pet. 21-22) on United States v. Coopera-

tive Grain & Supply Co., 476 F.2d 47 (8th Cir. 1973), and Ab-Tech

Construction, Inc. v. United States, 31 Fed. Cl. 429 (1994), aff’d, 57

F.3d 1084 (Fed. Cir. 1995), is also misplaced. The decision in Coop-

erative Grain predates the comprehensive changes Congress made

to the False Claims Act in 1986. In any event, because the mis-

representation that Dr. Mackby was responsible for the relevant

services caused the government to pay money to which Asher

Clinic was not entitled, petitioner’s proposed rule that “the govern-

ment should only be allowed to recover damages that it has

actually suffered as a result of a claim being submitted” (Pet. 21)

would provide no basis for reducing or setting aside the damage

award in this case. The court in Ab-Tech Construction held that

the government was not entitled to damages because it “got

essentially what it paid for.” 31 Fed. Cl. at 484. Here, by contrast,

the government paid for services performed by a physician or

under his supervision, when in fact Dr. Mackby had no role in the

provision of the services for which the Clinic sought and received

Medicare funds.

16 ‘

had proved damages. In any event, the text of the FCA

makes clear that a defendant may be held liable under

the Act without proof of actual harm to the govern-

ment, and no court of appeals has adopted a contrary

rule.

The FCA provides that any person who “knowingly

presents, or causes to be presented” a false claim to the

government “is liable to the United States Government

for a civil penalty of not less than $5,000 and not more

than $10,000, plus 3 times the amount of damages which

the Government sustains.” 31 U.S.C. 3729(a) (emphasis

added). By its terms, the FCA forbids the presentment

of a false claim, without regard to whether the claimant

succeeds in obtaining government funds, and the Act

establishes civil penalties and treble damages as sepa-

rate elements of relief. When a false claim for payment

is “knowingly * * * presented,” the plain terms of the

Act make the claimant liable for civil penalties, even if

the government suffers no resulting harm (as, for

example, when the federal officials to whom the claim is

submitted recognize its falsity and therefore decline to

pay it).

Contrary to petitioner’s suggestion, no circuit conflict

exists on this question. The cases on which petitioner

relies simply recognize that the FCA does not broadly

prohibit all false statements made to the government;

rather, the Act applies only to those misrepresentations

having a potential effect on the disbursement of federal

funds. See, e.g., Mikes v. Straus, 274 F.3d 687, 696 (2d

Cir. 2001) (FCA addresses misrepresentations that are

“aimed at extracting money the government otherwise

would not have paid”); ibid. (statute “reaches only those

claims with the potential wrongfully to cause the gov-

ernment to disburse money”); id. at 697 (no liability

when false statement “would not have influenced the

government’s decision to pay”). That requirement of a

potential fiscal impact—a requirement that is implicit

in the Act’s focus on the presentation of “claim[s] for

payment or approval,” 31 U.S.C. 3729(a)(1)—does not

mean that the government must prove that it actually

disbursed funds or suffered pecuniary harm as a result

of the defendant’s conduct. The cases on which peti-

tioner relies are consistent with the foregoing analysis

—as petitioner himself ultimately acknowledges. See

Pet. 25 (characterizing various court of appeals deci-

sions as “holding that some damage or at least some.

potential effect on the treasury is a required element of

an FCA cause of action”) (emphasis added).

4. Petitioner contends (Pet. 26-29) that the imposi-

tion of $555,000 in civil penalties in this case violated

the Excessive Fines Clause. That argument ignores

the discretion exercised by the government in seeking

penalties substantially less than those statutorily-

authorized for the full scope of petitioner’s misconduct.

The court of appeals correctly rejected petitioner’s Ex-

cessive Fines Clause challenge to the penalty award

(Pet. App. 8-14), and that constitutional claim does not

warrant further review. Te

This Court has held that “a punitive forfeiture vio-

lates the Excessive Fines Clause if it is grossly dis-

proportional to the gravity of a defendant’s offense.”

Bajakajian, 524 U.S. at 334. The court of appeals

properly relied on several factors in affirming the dis-

trict court’s award of monetary relief in this case. The

court explained that petitioner had “submitted 8499

claims using Dr. Mackby’s PIN” and that each of those

claims constituted a distinct violation of the FCA. Pet.

App. 8. It noted that, if petitioner had been subjected

to the maximum civil sanctions available under the

FCA, he could have been ordered to pay $84,990,000 in

civil penalties and treble damages of $993,234. Id. at 10.

The court of appeals observed as well that petitioner’s

conduct could also have formed the basis for criminal

prosecution, with a potential Guidelines sentencing

range of 37-46 months of imprisonment. Jd. at 11.

Finally, the court concluded that some portion of the

judgment was remedial rather than punitive. Jd. at 13.

Those facts amply justify the court of appeals’ conclu-

sion that the monetary award in this case was not

“srossly disproportional” to the gravity of petitioner’s

offense.

Although the district court found that petitioner had

caused 8499 separate false claims to be submitted,

thereby obtaining $331,078 in Medicare funds to which

it was not entitled, see Pet. App. 42-43, 45, the govern-

ment sought civil penalties “for only 111 claims, reflect-

ing one claim per beneficiary per year that exceeded

the PTIP payment limit,” id. at 43.° Petitioner

contends (Pet. 27) that the court of appeals, by deciding

the Excessive Fines Clause issue on the premise that

petitioner had actually submitted 8499 false claims to

the government, has improperly condoned a civil pen-

alty that is lower than the per-claim minimum

authorized by the FCA. That argument lacks merit.

The courts below did not purport to impose liability or

8499 false claims; they simply recognized that the full

extent of petitioner’s misrepresentations should be

considered in determining whether the monetary relief

in this case was “grossly disproportional” to the gravity

8 The government’s request for civil penalties was thus even

more limited than its request for treble damages. The government

sought and received treble damages for each of the 1459 claims

“that exceeded Medicare’s annual payment limit per beneficiary

for PTIPs.” Pet. App. 4-5.

of petitioner’s misconduct. Petitioner cites no decision

suggesting that a court, in considering an Excessive

Fines Clause challenge to a civil monetary sanction,

must effectively disregard the government’s discretion-

ary judgment to limit the fines it seeks and is foreclosed

from taking into account wrongful conduct by the

defendant that is closely related to the offense(s) for

which the sanction is imposed. Cf. United States v.

Watts, 519 U.S. 148, 151-157 (1997) (per curiam) (sen-

tencing court in criminal case may rely on evidence

indicating that defendant committed additional criminal

acts).

Petitioner contends (Pet. 28) that “the FCA will

always produce an unconstitutional result in a case,

such as [petitioner’s], involving hundreds or thousands

of relatively small claims, because the penalties re-

quired by the statute are always disproportional to any

possible harm or loss the government could suffer.”

That sweeping assertion is substantially overbroad,

particularly in light of the fact that the government

may incur significant costs of detection and investiga-

tion, see Chandler, 538 U.S. at 180-131, even when the

dollar amounts of individual false claims are relatively

small. But even assuming, arguendo, that a civil

penalty of $5000-$10,000 for each of the 8499 false

claims that petitioner caused to be submitted (i.e.,

$42,495 ,000-$84,990,000) would have been constitution-

ally excessive, it does not follow that the government is

foreclosed from collecting any civil penalty at all. To

the contrary, the government’s exercise of discretion in

seeking recovery only for a subset of the most proble-

matic claims avoids any potential Excessive Fines

difficulties, yet can still yield a meaningful civil penalty

consistent with the defendant’s misconduct. Consistent

with the government’s litigating position, the district

——————— ————

court awarded civil penalties for a small percentage of

petitioner’s false claims, while recognizing that evi-

dence of larger-scale misconduct (and the resulting

substantial statutorily-authorized potential fines) was

relevant to the question whether the penalties imposed

were “grossly disproportional” to the gravity of peti-

tioner’s wrongdoing. Neither the FCA nor the Eighth

Amendment precludes that approach.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.