United States: Sneak Peek At Upcoming FCA Penalty Adjustments

The Department of Commerce and the Nuclear Regulatory Commission published final rules today implementing an adjustment for inflation to False Claims Act civil penalties (84 FR 2445-01 and 84 FR 2433-01, respectively). Such increases are ostensibly required to be made on an annual basis across agencies, as set out by the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410), as amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74)—try saying that five times fast. In reality, the increases are made in a somewhat spotty fashion, and rarely on time.

Notably absent from today's final rules was the Department of Justice. Historically, DOJ has been a little slower on the uptake for penalty increases than has the DOC (last year, DOJ's final rule issued more than two weeks after Commerce). The agencies' deadline to make these increases was supposed to be January 15, but given the recent government shut-down, some tardiness is no surprise. Yet, even without that excuse, penalty increases never seem to be at the top of DOJ's priority list. Last year, DOJ's rule issued on January 29, two weeks after the deadline. At any rate, we expect to see a similar rule coming out of DOJ in the near future.

Assuming DOJ again follows the model set by Commerce, we can expect to see just over a 2 percent increase in FCA penalties as follows:

DOJ will likely specify as it has done in prior years that these penalty increases shall be applied retroactively to all new penalties assessed for conduct after November 2, 2015. Here at Qui Notes, we believe there would be a valid challenge to the retroactivity of penalties in this manner—but thus far we have not seen a defendant willing to pick this fight. We will continue to monitor the Federal Register and provide a full update once DOJ releases its anticipated final rule.

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