True Damages for False Claims: Why Gross Trebling Should Be Adopted

• Author: Paden M. Hanson
• Position: J.D. Candidate, The University of Iowa College of Law, 2019; B.A., Brigham Young University, 2014
• Pages: 2093-2121

2093

True Damages for False Claims:

Why Gross Trebling Should Be Adopted

Paden M. Hanson*

ABSTRACT: The False Claims Act aids the government in combating fraud

by imposing heavy penalties for parties attempting to defraud the government.

The False Claims Act specifies that damages assessed for violating the Act are

trebled but does not make it clear how a court should calculate damages.

Under gross trebling, damages are tripled before subtracting any benefits a

defrauding party may have conferred on the government. Under net trebling,

benefits are subtracted prior to trebling. This Note discusses the differences in

damage calculation and how it impacts parties under the False Claims Act.

It concludes by arguing that gross trebling should be adopted either by

legislation or by the Supreme Court in order to best protect the public interest

and further the purpose of the False Claims Act.

I.INTRODUCTION ........................................................................... 2094

II.BACKGROUND: THE FALSE CLAIMS ACT FOUNDATIONS

AND KEY COURT CASES ............................................................... 2096

A.THE FALSE CLAIMS ACT ........................................................ 2096

1.History and Overview of the FCA ............................... 2096

2.Qui Tam Actions ......................................................... 2099

3.Damages Under the False Claims Act ........................ 2100

B.COURT CASES ADDRESSING DAMAGES QUESTION ..................... 2102

1.United States v. Bornstein: A Seemingly Settled

Matter ........................................................................... 2103

2.United States v. Eghbal: Interpreting Bornstein as

Requiring Gross Trebling ........................................... 2104

3.United States v. Anchor Mortgage Corp.: Does

Bornstein Actually Demand Net Trebling? ................. 2105

III.UNCERTAINTY REGARDING TREBLING RESULTS IN DAMAGE

DISPARITIES, CREATES UNCERTAINTY FOR LITIGANTS, AND

WASTES RESOURCES .................................................................... 2107

*

J.D. Candidate, The University of Iowa College of Law, 2019; B.A., Brigham Young

University, 2014.

2094 IOWA LAW REVIEW [Vol. 104:2093

A.THE TREBLING AMBIGUITY RESULTS IN DAMAGE

DISPARITIES THAT UNDERMINE THE FAIRNESS OF THE

JUSTICE SYSTEM .................................................................... 2108

B.RELATORS, DEFENDANTS, AND PROSECUTORS ARE ALL

NEGATIVELY AFFECTED BY THE AMBIGUITY ............................ 2110

1.Qui Tam Relators May Choose to Not Investigate

Fraud Because the Expected Award Is Uncertain

Without a Definite Trebling Method ......................... 2110

2.Damage Uncertainty May Lead to the

Government Prosecuting Fewer FCA Violations....... 2111

3.Uncertainty May Result in Defendants Making

the Wrong Decision When It Comes to Choosing

Whether to Settle or Litigate ...................................... 2112

C.UNCERTAINTY REGARDING DAMAGES RESULTS IN PARTIES

UNNECESSARILY EXPENDING TIME AND MONEY LITIGATING

WHICH TREBLING METHOD SHOULD BE USED ........................ 2113

IV.WHETHER BY CONGRESSIONAL INTERVENTION OR SUPREME

COURT INTERPRETATION, GROSS TREBLING SHOULD BE

ADOPTED ..................................................................................... 2115

A.GROSS TREBLING PROTECTS QUI TAM RELATORS AND

GOVERNMENT INTERESTS AND BEST COMPORTS TO THE

INTENT OF THE STATUTE ....................................................... 2115

B.CONGRESS SHOULD INTERVENE AND AMEND THE FCA TO

ADOPT GROSS TREBLING ....................................................... 2118

C.IN THE ABSENCE OF CONGRESSIONAL ACTION, THE

SUPREME COURT COULD ADOPT GROSS TREBLING .................. 2119

V.CONCLUSION .............................................................................. 2120

I. INTRODUCTION

Fraud has been a plague on the government since our nation’s founding.

Commentators have suggested that as much as ten percent of the

government’s spending is procured fraudulently.1 Since its enactment, the

False Claims Act (“FCA”) has served as a useful tool for government

prosecutors and private plaintiffs to combat fraud. The FCA provides for hefty

monetary penalties for parties who fraudulently obtain government funds.2

The FCA is particularly effective at combating fraud because it allows private

1. False Claims Act Whistleblower Rewar ds Statistics Through FY 2017, HESCH FIRM LLC,

http://www.howtoreportfraud.com/false-claims-act-general-information-and-statistics (last visited

Feb. 28, 2019).

2. 31 U.S.C. § 3729(a)(1) (2012) (providing for penalties between $5,000 and $10,000

“plus 3 times the amount of damages which the Government sustains”).