Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_03-cv-00907/USCOURTS-casd-3_03-cv-00907-3/pdf.json

Nature of Suit Code: 690
Nature of Suit: Other Forfeiture and Penalty Suits
Cause of Action: 31:3729 False Claims Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

CASE NO. 03cv907 BEN (WMc)

ORDER GRANTING 

PLAINTIFF’S AND

DEFENDANTS’ RULE 59(e)

MOTIONS TO ALTER OR

AMEND THE JUDGMENT

vs.

ROBERT I. BOURSEAU, et al.,

Defendants.

Now before the Court are motions by both Plaintiff and Defendants to alter or amend the 

Judgment pursuant to Federal Rules of Civil Procedure Rule 59(e). The motions are timely filed

and this Court has jurisdiction. The motions are granted as follows.

I. PLAINTIFF’S MOTION

The Government moves to amend the Judgment to correct and reduce the amount of

damages, reducing the amount of the Judgment from $23,776,332 to $15,657,585. Defendants do

not oppose the reduction. Therefore, the Motion is Granted. The Damages are reduced as follows:

Original Amended

Year False Claim Submitted Damages Damages

1997 Interest Claimed But Never Paid $2,550,722 $1,494,753

Unrelated Bankruptcy Legal Fees $860,144 $ 421,470

1998 Interest Claimed But Never Paid $2,761,803 $1,807,880

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Unrelated Bankruptcy Legal Fees $112,303 $ 112,303

Management Fees to NCFE $180,000 $ 189,847

Non-Existent Lease Expense $414,618 $ 414,618

Inflated Square Footage Effect on Reimbursement $279,899 $ 279,899

1999 Unrelated Bankruptcy Legal Fees $ 53,535 $ 53,535

Management Fees to NCFE $240,000 $ 118,798

Inflated Square Footage Effect on Reimbursement $135,521 $ 135,521

Program Costs (Interest Claimed But Never Paid) $336,899 $ 190,571

Total $7,925,444 $5,219,195

The total single damages is reduced from $7,925,444 to $5,219,195. At the same time, the

total trebled damages is reduced from $23,776,332 to $15,657,585. The $31,000 of civil penalties

remains unchanged.

II. DEFENDANTS’ MOTION

Defendants also move to alter or amend seeking amended findings and challenging the

damages as an excessive fine under the Eighth Amendment and a violation of the Due Process

Clause of the Fifth Amendment. 

A. Amended Findings

The motion is granted insofar as the Judgment will be altered to make explicit what was 

implicit previously: the false claims of the 1997, 1998, and 1999 Medicare Cost Reports for

California Psychiatric Management Services (“CPMS”) doing business as Bayview Hospital &

Mental Health Systems (“Bayview”) actually damaged the Government and are actionable both as

affirmative false claims under 31 U.S.C. § 3729(a)(1), §3729(a)(2) or §3729(a)(3), and as reverse

false claims under § 3729(a)(7) adopting the reasoning of United States, ex rel. A+ Homecare, Inc.

v. Medshares Management Group, Inc., 400 F.3d 428 (6th Cir. 2005), cert. denied, 126 S.Ct. 797

(2005).

B. Eighth Amendment

The motion is granted insofar as the Court now considers whether the fines and trebled

damages imposed here violate either the Eighth Amendment or the Due Process Clause. The

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1

Defendants discuss Mackby I, but do not mention the Ninth Circuit opinion following remand

known as “Mackby II”– which is odd since the excellent defense counsel in the present case was also

Peter Mackby’s counsel in the two Mackby appeals.

2

Prejudgment interest could be significant in this case because the three fraudulent Cost

Reports were delivered six, seven, and eight years ago. 

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Court finds they do not. 

The trebled damages awarded do not violate the Eighth Amendment. In United States v.

Mackby, 261 F.3d 821, 831 (9th Cir. 2001) (“Mackby I”), which the Defendants rely on1

, the Ninth

Circuit concluded that the False Claims Act treble damages provision had a punitive element and

was, therefore, subject to an Excessive Fines analysis under the Eighth Amendment. Two years

later, the Supreme Court determined that the treble damages provision of the False Claims Act also

has “a compensatory side, serving remedial purposes in addition to punitive objectives.” Cook

County, Illinois v. United States, 538 U.S. 119, 130 (2003). In fact, Cook County suggests that in a

False Claims Act case much of the trebled damages award serves a compensatory purpose. The

Supreme Court observes that there is “no question that some liability beyond the amount of the

fraud is usually necessary to compensate the Government completely for the costs, delays, and

inconveniences occasioned by fraudulent claims.” Id. Earlier, in United States v. Halper, 490

U.S. 435, 445 (1989), the Supreme Court found that the injury from the presentment of a false

claim is “not merely the amount of the fraud itself, but also ancillary costs, such as the costs of

detection and investigation, that routinely attend the Government’s efforts to root out deceptive

practices directed at the public purse.” Moreover, the Cook County decision notes that trebled

damages help compensate the Government in the absence of a separate provision for consequential

damages and prejudgment interest.2

 Id. at 131 and n.9 (“The treble damages provision was, in a

way, adopted by Congress as a substitute for consequential damages.”). 

In the Mackby litigation following remand and coming after the Cook County decision, the

Ninth Circuit held that treble damages and fines awarded under the False Claims Act in that case

did not violate the Excessive Fines Clause where the size of the penalty was “not grossly

disproportional to [defendant’s] level of culpability and the harm he caused.” United States v.

Mackby, 339 F.3d 1013, 1017 (9th Cir. 2003), cert. denied, 124 S.Ct. 1657 (2004) (“Mackby II”).

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3

 Commentators note that State Farm suggests punitive damages awards that exceed a multiple

of nine times compensatory damages could be, but are not necessarily, arbitrary and may run afoul

of the Due Process Clause. Cf. Phillip Morris USA v. Williams, U.S. Supreme Court Case No. 05-

1256 (oral arguments on October 31, 2006 regarding constitutionality of large punitive damages award

exceeding 9 to 1 ratio). 

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Here, a large portion of the trebled damages award of $15,657,585 is compensatory in

nature. The remaining smaller portion which may be punitive and the fines of $31,000 are not

grossly disproportional to the Defendants’ level of culpability and the harm that the Defendants

caused. As in Mackby II, the false claims here harmed the Government “in the form of both

monetary damages and harm to the administration and integrity of Medicare.” Id. at 1018. In

Mackby II, the Ninth Circuit explains that, “[t]he government has a strong interest in preventing

fraud, and the harm of such false claims extends beyond the money paid out of the treasury.” Id.

at 1019. Mackby II continues, “[f]raudulent claims make the administration of Medicare more

difficult, and widespread fraud would undermine public confidence in the system.” Id. Finally,

dollars fraudulently obtained from the public fisc by unscrupulous or reckless medical services

providers, exhaust the Medicare resources which are set aside for deserving Medicare patients. 

For all of these reasons, this Court concludes that the amount of damages and penalties

found in this case does not violate the Excessive Fines Clause.

C. Due Process Clause

Defendants also argue that the trebled damages are punitive damages that violate the Due

Process Clause of the Fifth Amendment. In State Farm Mutual Automobile Insurance Company v.

Campbell, 538 U.S. 408 (2003), which Defendants rely on, the Supreme Court held that punitive

damages awarded by a jury may implicate the Due Process Clause.3

 The damages award here,

however, is not the product of a jury verdict and does not have the potentially arbitrary quality of a

classic punitive damages award. Cook County, Illinois, 538 U.S. at 132 (“Treble damages

certainly do not equate with classic punitive damages, which leave the jury with open-ended

discretion over the amount....”). Defendants do not cite, and this Court has not found, a decision

holding that a trebled damage award imposed under the False Claims Act violates the Due Process

Clause. In view of the mixed compensatory and punitive nature of False Claims Act trebled

damages, the Court finds that the damages imposed against the Defendants in this case do not

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offend the Due Process Clause.

III. CONCLUSION

Both motions are granted. The Findings of Fact and Conclusions of Law and Judgment

are, hereby, amended. The Medicare Cost Reports are actionable as false claims under 31 U.S.C.

§ 3729(a)(1), §3729(a)(2) or §3729(a)(3), and as reverse false claims under § 3729(a)(7). The

amount of actual damages is reduced to $5,219,195. The amount of trebled damages is reduced to

$15,657,585. The fines and trebled damages imposed here do not violate either the Excessive

Fines Clause of the Eighth Amendment or the Due Process Clause of the Fifth Amendment. 

IT IS SO ORDERED.

DATED: December 1, 2006

Hon. Roger T. Benitez

United States District Judge

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