PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 13-2219

UNITED STATES ex rel. MICHAEL K. DRAKEFORD, M.D.,

Plaintiff – Appellee,

v.

TUOMEY, d/b/a Tuomey Healthcare System, Inc.,

Defendant – Appellant.

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AMERICAN HOSPITAL ASSOCIATION; SOUTH CAROLINA HOSPITAL 

ASSOCIATION,

Amici Supporting Appellant.

Appeal from the United States District Court for the District of

South Carolina, at Columbia. Matthew J. Perry, Jr., Senior 

District Judge; Margaret B. Seymour, Senior District Judge. 

(3:05-cv-02858-MBS)

Argued: October 31, 2014 Decided: July 2, 2015

Before DUNCAN, WYNN, and DIAZ, Circuit Judges.

Affirmed by published opinion. Judge Diaz wrote the majority 

opinion, in which Judge Duncan joined. Judge Wynn wrote a

separate opinion concurring in the judgment.

ARGUED: Helgi C. Walker, GIBSON, DUNN & CRUTCHER, LLP, 

Washington, D.C., for Appellant. Tracy Lyle Hilmer, UNITED 
2

STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. 

ON BRIEF: James M. Griffin, Margaret N. Fox, A. Camden Lewis, 

LEWIS, BABCOCK & GRIFFIN, LLP, Columbia, South Carolina; Daniel 

M. Mulholland III, HORTY SPRINGER & MATTERN, Pittsburgh, 

Pennsylvania; E. Bart Daniel, Charleston, South Carolina, for 

Appellant. Stuart F. Delery, Assistant Attorney General, 

Michael D. Granston, Michael S. Raab, Civil Division, UNITED 

STATES DEPARTMENT OF JUSTICE, Washington, D.C.; G. Norman Acker, 

III, Assistant United States Attorney, OFFICE OF THE UNITED 

STATES ATTORNEY, Raleigh, North Carolina, for Appellee. Melinda 

R. Hatton, Maureen D. Mudron, AMERICAN HOSPITAL ASSOCIATION, 

Washington, D.C.; Jessica L. Ellsworth, Amanda K. Rice, HOGAN 

LOVELLS US LLP, Washington, D.C., for Amici Curiae.
3

DIAZ, Circuit Judge:

In a qui tam action in which the government intervened, a

jury determined that Tuomey Healthcare System, Inc., did not 

violate the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-33

(2012).1 The district court, however, vacated the jury’s verdict

and granted the government a new trial after concluding that it 

had erroneously excluded excerpts of a Tuomey executive’s 

deposition testimony. The jury in the second trial found that

Tuomey knowingly submitted 21,730 false claims to Medicare for 

reimbursement. The district court then entered final judgment 

for the government and awarded damages and civil penalties 

totaling $237,454,195. 

Tuomey contends that the district court erred in granting 

the government’s motion for a new trial. Tuomey also lodges 

numerous other challenges to the judgment entered against it 

following the second trial. It argues that it is entitled to 

judgment as a matter of law (or, in the alternative, yet another 

new trial) because it did not violate the FCA. In the 

alternative, Tuomey asks for a new trial because the district 

court failed to properly instruct the jury. Finally, Tuomey 

 1 Under the qui tam provisions of the FCA, a whistleblower 

(known as the relator) can file an action on behalf of the 

federal government for alleged fraud committed against the 

government. If the action is successful, the relator shares in 

the recovery. 
4

asks us to strike the damages and civil penalties award as 

either improperly calculated or unconstitutional.

We conclude that the district court correctly granted the

government’s motion for a new trial, albeit for a reason 

different than that relied upon by the district court. We also 

reject Tuomey’s claims of error following the second trial. 

Accordingly, we affirm the district court’s judgment. 

 

I. 

A. 

Tuomey is a nonprofit hospital located in Sumter, South 

Carolina, a small, largely rural community that is a federallydesignated medically underserved area. At the time of the 

events leading up to this lawsuit, most of the physicians that 

practiced at Tuomey were not directly employed by the hospital, 

but instead were members of independent specialty practices. 

Beginning around 2000, doctors who previously performed 

outpatient surgery at Tuomey began doing so in their own offices 

or at off-site surgery centers. The loss of this revenue stream 

was a source of grave concern for Tuomey because it collected 

substantial facility fees from patients who underwent surgery at 

the hospital’s outpatient center. Tuomey estimated that it 

stood to lose $8 to $12 million over a thirteen-year period from 

the loss of fees associated with gastrointestinal procedures 
5

alone. To stem this loss, Tuomey sought to negotiate part-time 

employment contracts with a number of local physicians. 

In drafting the contracts, Tuomey was well aware of the 

constraints imposed by the Stark Law. While we discuss the 

provisions of that law in greater detail below, in broad terms, 

the statute, 42 U.S.C. § 1395nn, prohibits physicians from 

making referrals to entities where “[t]he referring 

physician . . . receives aggregate compensation . . . that 

varies with, or takes into account, the volume or value of 

referrals or other business generated by the referring physician 

for the entity furnishing” the designated health services. 42 

C.F.R. § 411.354(c)(2)(ii) (2014). Pursuant to the Stark Law, 

“[a] hospital may not submit for payment a Medicare claim for 

services rendered pursuant to a prohibited referral.” United 

States ex rel. Drakeford v. Tuomey Healthcare Sys., Inc., 675 

F.3d 394, 397–98 (4th Cir. 2012). 

Beginning in 2003, Tuomey sought the advice of its longtime 

counsel, Nexsen Pruet, on the Stark Law implications arising 

from the proposed employment contracts. Nexsen Pruet in turn 

engaged Cejka Consulting, a national consulting firm that 

specialized in physician compensation, to provide an opinion 

concerning the commercial reasonableness and fair market value 

of the contracts. Tuomey also conferred with Richard Kusserow, 

a former Inspector General for the United States Department of 
6

Health and Human Services, and later, with Steve Pratt, an 

attorney at Hall Render, a prominent healthcare law firm. 

The part-time employment contracts had substantially

similar terms. Each physician was paid an annual guaranteed 

base salary. That salary was adjusted from year to year based 

on the amount the physician collected from all services rendered 

the previous year. The bulk of the physicians’ compensation was 

earned in the form of a productivity bonus, which paid the 

physicians eighty percent of the amount of their collections for 

that year. The physicians were also eligible for an incentive 

bonus of up to seven percent of their earned productivity bonus. 

In addition, Tuomey agreed to pay for the physicians’ medical 

malpractice liability insurance as well as their practice 

group’s share of employment taxes. The physicians were also

allowed to participate in Tuomey’s health insurance plan. 

Finally, Tuomey agreed to absorb each practice group’s billing 

and collections costs.

The contracts had ten-year terms, during which physicians

could maintain their private practices, but were required to 

perform outpatient surgical procedures exclusively at the 

hospital. Physicians could not own any interest in a facility 

located in Sumter that provided ambulatory surgery services, 

save for a less-than-two-percent interest in a publicly traded 

company that provided such services. The physicians also agreed 
7

not to perform outpatient surgical procedures within a thirtymile radius of the hospital for two years after the expiration 

or termination of the contracts.

Tuomey ultimately entered into part-time employment 

contracts with nineteen physicians. Tuomey, however, was unable 

to reach an agreement with Dr. Michael Drakeford, an orthopedic 

surgeon. Drakeford believed that the proposed contracts

violated the Stark Law because the physicians were being paid in 

excess of their collections. He contended that the compensation 

package did not reflect fair market value, and thus the

government would view it as an unlawful payment for the doctor’s 

facility-fee-generating referrals.

To address Drakeford’s concerns, Tuomey suggested a joint 

venture as an alternative business arrangement, whereby “doctors 

would become investors . . . in . . . a management company that 

would provide day-to-day management of the outpatient surgery 

center,” J.A. 3268, and both Tuomey and its co-investors would 

“receive payments based on that management [structure].” J.A. 

2036. Drakeford, however, declined that option.

Unable to break the stalemate in their negotiations, in May 

2005, Tuomey and Drakeford sought the advice of Kevin McAnaney, 

an attorney in private practice with expertise in the Stark Law. 

McAnaney had formerly served as the Chief of the Industry 

Guidance Branch of the United States Department of Health and 
8

Human Services Office of Counsel to the Inspector General. In 

that position, McAnaney wrote a “substantial portion” of the 

regulations implementing the Stark Law. J.A. 2026.

McAnaney advised the parties that the proposed employment 

contracts raised significant “red flags” under the Stark Law.2

J.A. 2054. In particular, Tuomey would have serious difficulty 

persuading the government that the contracts did not compensate 

the physicians in excess of fair market value. Such a 

contention, said McAnaney, would not pass the “red face test.” 

J.A. 2055. McAnaney also warned Tuomey that the contracts 

presented “an easy case to prosecute” for the government. J.A. 

2078. 

Drakeford ultimately declined to enter into a contract with 

Tuomey. He later sued the hospital under the qui tam provisions 

of the FCA, alleging that because the part-time employment 

contracts violated the Stark Law, Tuomey had knowingly submitted 

false claims for payment to Medicare. As was its right, the 

government intervened in the action and filed additional claims 

 2 According to McAnaney, the joint venture alternative 

raised separate concerns under the Anti-Kickback Statute, 42 

U.S.C. § 1320a-7b(b), which bars “the payment of remuneration 

for the purpose of inducing the purchase of health care covered 

by any federal health care insurance program.” Michael K. 

Loucks & Carol C. Lam, Prosecuting and Defending Health Care 

Fraud Cases 233 (2d ed. 2010). 
9

seeking equitable relief for payments made under mistake of fact 

and unjust enrichment theories. 

B. 

At the first trial, Tuomey argued that McAnaney’s testimony 

and related opinions regarding the contracts should be excluded

as an offer to compromise or settle under Federal Rule of 

Evidence 408 because McAnaney was mediating a dispute between 

Tuomey and Drakeford. Alternatively, Tuomey contended that 

because McAnaney was hired jointly by Tuomey and Drakeford, he 

owed a duty of loyalty to both clients that precluded him from 

testifying. The district court sustained Tuomey’s objection, 

although it did not articulate the ground for its ruling.

Tuomey also objected to the government’s attempt to admit

excerpts from the deposition testimony of Gregg Martin, Tuomey’s 

Senior Vice President and Chief Operating Officer. Tuomey 

argued that the deposition testimony should be excluded because 

it contained Martin’s recollections of a discussion he had with

Tuomey’s counsel concerning McAnaney’s opinions regarding the 

employment contracts. According to Tuomey, the testimony was 

merely a “back doorway to get in Mr. McAnaney’s opinions.” J.A. 

808. The government countered that the deposition testimony was 

admissible to show Tuomey’s state of mind and intent to violate 

the Stark Law. The district court again sustained Tuomey’s 

objection.
10

The jury returned a verdict finding that, while Tuomey had 

violated the Stark Law, it had not violated the FCA. The 

government filed a post-verdict motion for judgment on its 

equitable claims. It also moved for judgment as a matter of law 

under Federal Rule of Civil Procedure 50 on the FCA claim, or 

alternatively for a new trial under Rule 59 because of the 

district court’s decision to exclude McAnaney’s testimony and 

opinions, as well as the Martin deposition excerpts. 

The district court denied the government’s motion for 

judgment as a matter of law. But the court agreed that it had 

committed “a substantial error” by excluding the Martin 

deposition excerpts. J.A. 1296. It therefore granted the 

government’s motion for a new trial. Notably, the district 

court’s decision was based solely on its error in excluding the 

Martin deposition excerpts. 

While the government asked for a new trial only on the 

knowledge element of the FCA claim, the district court granted a 

new trial as to the entirety of the claim. Notwithstanding the 

court’s decision to grant a new trial on the FCA claim, the 

district court entered judgment for the government on its 

equitable claims based on the jury’s finding of a Stark Law 

violation, and ordered Tuomey to pay damages in the amount of 

$44,888,651 plus pre- and post-judgment interest. 
11

On appeal, we vacated the judgment, concluding that the 

jury’s finding of a Stark Law violation was a common factual 

issue necessary to the resolution of both the equitable claims 

and the FCA claim.3 Yet, because the district court rendered the 

jury’s verdict finding a Stark Law violation a “legal nullity” 

when it granted the government’s motion for a new trial, we held 

that the court deprived Tuomey of its Seventh Amendment right to 

a jury trial by entering judgment on the equitable claims. 

Drakeford, 675 F.3d at 405. We remanded the case for a new 

trial as to all claims. 

While the case was on appeal, the presiding judge passed 

away. At the second trial, the new presiding judge allowed the 

government to introduce the previously excluded Martin

deposition testimony, and also allowed McAnaney to testify. The 

jury found that Tuomey violated both the Stark Law and the FCA. 

It further found that Tuomey had submitted 21,730 false claims 

to Medicare with a total value of $39,313,065. The district 

court trebled the actual damages and assessed an additional 

civil penalty, both actions required by the FCA. 31 U.S.C. 

§ 3729(a)(1). From the resulting judgment of $237,454,195, 

Tuomey appeals.

 3 Tuomey also sought leave to pursue an interlocutory appeal 

of the district court’s order granting a new trial on the FCA 

claim. We denied that motion. 
12

II.

A.

Tuomey’s appeal presents these issues: First, did the 

district court err in granting the government’s motion for a new 

trial on the FCA claim? If not, did the district court err in 

(1) denying Tuomey’s motion for judgment as a matter of law (or, 

in the alternative, for yet another new trial) following the 

second trial; and (2) awarding damages and penalties against 

Tuomey based on the jury’s finding of an FCA violation? We 

address each issue in turn, but first provide a general overview 

of the Stark Law.

B.

The Stark Law is intended to prevent “overutilization of 

services by physicians who [stand] to profit from referring 

patients to facilities or entities in which they [have] a 

financial interest.” Drakeford, 675 F.3d at 397. The statute 

prohibits a physician from making a referral to an entity, such 

as a hospital, with which he or she has a financial 

relationship, for the furnishing of designated health services. 

42 U.S.C. § 1395nn(a)(1). If the physician makes such a 

referral, the hospital may not submit a bill for reimbursement 

to Medicare. Id. § 1395nn(a)(1)(B). Similarly, the government 

may not make any payment for a designated health service 

provided in violation of the Stark Law. Id. § 1395nn(g)(1). If 
13

a person collects any payment for a service billed in violation 

of the Stark Law, “the person shall be liable to the individual 

for, and shall refund on a timely basis to the individual, any 

amounts so collected.” Id. § 1395nn(g)(2).4

Inpatient and outpatient hospital services are considered 

designated health services under the law. Id. § 1395nn(h)(6). 

A referral includes “the request by a physician for the item or 

service.” Id. § 1395nn(h)(5)(A). A referral does not include 

“any designated health service personally performed or provided

by the referring physician.” 42 C.F.R. § 411.351. However, 

there is a referral when the hospital bills a “facility fee” 

(also known as a “facility component” or “technical component”) 

“in connection with the personally performed service.” Medicare 

and Medicaid Programs; Physicians’ Referrals to Health Care 

Entities With Which They Have Financial Relationships, 66 Fed. 

Reg. 856, 941 (Jan. 4, 2001); see also Medicare Program; 

Physicians’ Referrals to Health Care Entities With Which They 

Have Financial Relationships (Phase II), 69 Fed. Reg. 16054, 

16063 (Mar. 26, 2004). 

 4 Because the Stark Law does not create its own right of 

action, the government in this case sought relief under the FCA,

which provides a right of action with respect to false claims 

submitted for Medicare reimbursement. See Drakeford, 675 F.3d 

at 396 & n.2. 
14

A financial relationship constitutes a prohibited “indirect 

compensation arrangement,” if (1) “there exists an unbroken 

chain of any number . . . of persons or entities that have 

financial relationships . . . between them,” (2) “[t]he 

referring physician . . . receives aggregate compensation . . . 

that varies with, or takes into account, the volume or value of 

referrals or other business generated by the referring physician 

for the entity furnishing” the designated health services, and 

(3) the entity has knowledge that the compensation so varies. 

42 C.F.R. § 411.354(c)(2); see also Drakeford, 675 F.3d at 408 

(“[C]ompensation arrangements that take into account anticipated 

referrals . . . implicate the volume or value standard.”). The 

statute, however, does not bar indirect compensation 

arrangements where: (1) the referring physician is compensated 

at fair market value for “services and items actually provided”;

(2) the compensation arrangement is “not determined in any 

manner that takes into account the volume or value of 

referrals”; (3) the compensation arrangement is “commercially 

reasonable”; and (4) the compensation arrangement does not run 

afoul of any other federal or state law. 42 C.F.R. 

§ 411.357(p); Drakeford, 675 F.3d at 398.

Once a relator or the government has established the 

elements of a Stark Law violation, it becomes the defendant’s 

burden to show that the indirect compensation arrangement 
15

exception shields it from liability. See United States ex rel. 

Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir. 2009). 

C.

We first address the district court’s decision to grant the 

government a new trial on the FCA claim. The government pressed 

two grounds in support of its motion. First, it argued that the 

district court erred by excluding McAnaney’s testimony, along 

with all evidence containing the views he expressed to the 

parties on the potential Stark Law liability surrounding the 

contracts. Second, the government argued that the district 

court erroneously excluded the Martin deposition excerpts. 

While the district court granted a new trial on the latter 

ground, we instead affirm the district court on the basis of its 

more glaring error, the exclusion of McAnaney’s testimony and 

related evidence. 

1.

We review a district court’s decision to grant a new trial 

for abuse of discretion. Cline v. Wal-Mart Stores, Inc., 144 

F.3d 294, 301 (4th Cir. 1998). We apply the same standard to 

the district court’s decision to exclude evidence. Buckley v. 

Mukasey, 538 F.3d 306, 317 (4th Cir. 2008). “By definition, a 

district court abuses its discretion when it makes an error of 

law.” RZS Holdings AVV v. PDVSA Petroleo S.A., 506 F.3d 350, 

356 (4th Cir. 2007). Even so, we may reverse a district court 
16

only if its evidentiary error affects a party’s substantial 

rights. Buckley, 538 F.3d at 317. And, of course, we may 

affirm a district court’s ruling on any ground apparent in the 

record. Republican Party of N.C. v. Martin, 980 F.2d 943, 952

(4th Cir. 1992). 

2.

We believe that the district court abused its discretion in 

granting a new trial on the ground that it had improperly 

excluded the Martin deposition excerpts. Even if the district 

court should not have excluded this evidence in the first 

instance, an evidentiary error is harmless when it does not 

affect a party’s substantial rights--in this case, whether it 

can be said with a high probability that the error did not 

affect the judgment. Taylor v. Va. Union Univ., 193 F.3d 219, 

235 (4th Cir. 1999) (en banc), abrogated on other grounds by

Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003); Daskarolis v. 

Firestone Tire & Rubber Co., 651 F.2d 937, 942 (4th Cir. 1981) 

(noting that even if the district court believed that it had 

excluded admissible evidence, the erroneous exclusion could not 

be grounds for a new trial because it did not affect the 

substantial rights of the parties). The district court made no 

effort to assess the alleged error under this stringent harmless 

error standard. Furthermore, because the exclusion of the 

Martin deposition testimony was, in fact, a harmless error, the 
17

district court abused its discretion in granting a new trial on 

this ground. 

In its motion for a new trial, the government argued that 

Martin’s testimony was necessary evidence supporting the 

scienter element of its FCA claim. Specifically, the government 

contended that Martin, Tuomey’s agent, received and ignored 

McAnaney’s warnings that the part-time employment contracts 

raised significant Stark Law compliance issues. Thus, says the 

government, the evidence would have demonstrated Tuomey’s 

reckless disregard of the legal minefield that it was 

traversing. We think, however, that the probative value of this 

particular evidence is weak at best, and excluding it did not 

negatively affect the government’s substantial rights. 

The deposition excerpts predominantly focus on Martin’s 

recollection of a discussion he had with Tuomey’s lawyer, Tim 

Hewson. Hewson recounted to Martin the details of a conference 

call between Hewson, McAnaney, and Drakeford’s lawyer, Greg 

Smith.5 Specifically, Hewson told Martin that McAnaney had Stark 

Law compliance concerns with both the proposed part-time 

 5 Hewson was likely recounting the details of two separate 

conference calls. The first call was between McAnaney, Smith, 

and Hewson and covered the part-time employment contracts. The 

following day, Steve Pratt joined those three for a second call 

focusing on the joint venture arrangement. When asked if he was 

aware that there were two separate conference calls, Martin 

responded that he did not “remember for sure.” J.A. 105. 
18

employment contracts as well as the joint venture arrangement 

(which Martin referred to as the “under arrangement”). However, 

Martin was unable to remember specifics about the conversation, 

and often confused McAnaney’s concerns with issues raised by 

Steve Pratt. 

Martin did vaguely recall that Hewson had told him that 

McAnaney said the proposed arrangements would raise “red flags” 

with the government. J.A. 104-05. Yet, Martin could not 

remember whether McAnaney’s warnings were particular to the 

part-time employment contracts, the joint venture arrangement, 

or both. Indeed, in Martin’s recollection it was hard to 

“separate the two.” J.A. 107. To the extent that Martin could 

distinguish the two proposed arrangements, he recalled being 

warned of greater problems with the joint venture arrangement. 

With respect to McAnaney’s concerns about the employment 

contracts, Martin had a vague recollection of some issues 

related to fair market value, but was unable to offer more 

detail. Ultimately, Martin acknowledged that there was a 

“difference of opinion” between McAnaney and Hewson, but decided 

to trust Hewson’s opinion that the contracts posed no Stark Law 

concerns. J.A. 111.

That Martin’s deposition testimony was hazy is not at all 

surprising, given that he was being asked to recall--nearly four 

years after the fact--the substance of a conversation with 
19

Tuomey’s lawyer, who himself was recalling an earlier conference 

call with McAnaney. Standing alone, we fail to see how the 

government was substantially prejudiced by the district court’s 

decision to exclude this evidence. Thus, we hold that the 

district court abused its discretion in relying on this ground 

to grant the government’s motion for a new trial. 

3.

Nonetheless, we affirm the district court’s order granting 

a new trial on the alternative ground urged by the government--

that it was prejudiced by the exclusion of McAnaney’s testimony 

and other related evidence of his warnings to Tuomey regarding 

the legal peril that the employment contracts posed.6 To make 

its case that Tuomey “knowingly” submitted false claims under 

the FCA, the government needed to show that Tuomey knew that 

there was a substantial risk that the contracts violated the 

Stark Law, and was nonetheless deliberately ignorant of, or 

recklessly disregarded that risk. In our view, McAnaney’s 

 6 Tuomey says that we may not affirm on this alternative 

ground because the government’s brief never asked us to do so. 

But this assertion splits the thinnest of hairs. While perhaps 

the government could have been more direct in its brief, it 

clearly alerted us (and Tuomey) that there was an alternate 

ground for affirming the district court. See Appellee’s Br. at 

82 (“[The] new trial ruling was correct not only because of the 

exclusion of Martin’s testimony, but also because the exclusion 

of McAnaney’s testimony and related evidence was clearly 

erroneous and affected the substantial rights of the 

government.”). 
20

testimony was a relevant, and indeed essential, component of the 

government’s evidence on that element, and Tuomey offered no 

good reason why the jury should not hear it. 

The district court has now presided over two trials in this 

case, with strikingly disparate results. In the first trial, 

the jury did not hear from McAnaney and found for Tuomey on the 

FCA claim. When the case was retried, McAnaney was allowed to 

testify and the jury found for the government. Coincidence? We 

think not. Rather, we believe that these results bespeak the 

importance of what the jury in the first trial was not allowed 

to consider.

And this is so even while acknowledging that McAnaney was a 

looming presence throughout the first trial. For example, the 

jury heard audio of a Tuomey board meeting, where a board member

mentioned that McAnaney had voiced concerns with the part-time 

employment contracts. Left unsaid, however, was the precise 

nature of those concerns or the weight and seriousness that 

McAnaney attached to them. The jury also knew that Hewson 

(Tuomey’s counsel at Nexson Pruet) was generally aware of 

McAnaney’s views on the employment contracts, but that he 

dismissed them as not credible because, in his view, Drakeford 

was deliberately seeking to cherry pick a legal opinion that 

would undermine the entire deal. 
21

The jury was also aware that Drakeford7 wrote to Tuomey’s 

board summarizing McAnaney’s opinions. The district court, 

however, excluded Drakeford’s letter, although it did allow the 

jury to consider the board’s response wherein it summarily 

rejected Drakeford’s unspecified objections. Finally, the jury 

heard that Tuomey refused to allow McAnaney to prepare a written 

opinion discussing his concerns regarding the contracts, and 

subsequently terminated McAnaney’s engagement altogether on 

September 2, 2005. 

While certainly not insubstantial, the sum of the evidence 

at the first trial regarding McAnaney was that Tuomey (1) was 

aware that McAnaney had unspecified concerns about the 

employment contracts; (2) refused to allow McAnaney to relay his 

concerns in writing; and (3) later terminated McAnaney’s joint 

representation. Yet, under the FCA, the government had to prove 

that Tuomey knew of, was deliberately ignorant of, or recklessly 

disregarded the falsity of its claims (i.e. that its claims 

violated the Stark Law). We think that McAnaney’s specific 

warnings to Tuomey regarding the dangers posed by the contracts 

were critical to making this showing.

McAnaney warned Tuomey that procuring fair market 

valuations, by itself, was not conclusive of the accuracy of the 

 7 Drakeford was not called as a witness at either trial.
22

valuation. He emphasized that it would be very hard to convince 

the government that a contract that paid physicians 

“substantially above even their collections, much less their 

collections minus expenses,” would constitute fair market value. 

J.A. 2053. According to McAnaney, compensation arrangements 

under which the contracting physicians are paid in excess of 

their collections were “basically a red flag to the government.” 

Id. He noted that similar cases had previously been prosecuted 

before, although all of them ultimately settled.

McAnaney also pointed out that the ten-year term of the 

contracts, combined with the thirty-mile, two-year noncompete 

provision would reinforce the government’s view that Tuomey was 

“paying [the physicians] above fair market value for referrals.” 

J.A. 2055. He concluded that the contracts did not pass the 

“red face test,” and warned that the government would find this 

“an easy case to prosecute.” J.A. 2055, 2078. 

We think the importance of McAnaney’s testimony to the 

government’s case is self-evident. Indeed, it is difficult to 

imagine any more probative and compelling evidence regarding 

Tuomey’s intent than the testimony of a lawyer hired by Tuomey, 

who was an undisputed subject matter expert on the intricacies 

of the Stark Law, and who warned Tuomey in graphic detail of the 
23

thin legal ice on which it was treading with respect to the 

employment contracts.8

4.

Tuomey urges, however, that McAnaney’s testimony and other 

evidence containing his views were properly excluded under 

Federal Rule of Evidence 408. That rule, however, mandates the 

exclusion of evidence relating to offers to compromise or settle 

disputed claims if the evidence is being offered to prove 

liability on the claim. Bituminous Constr., Inc. v. Rucker 

Enters., Inc., 816 F.2d 965, 968 (4th Cir. 1987). We are not 

persuaded that McAnaney was retained to help Drakeford and 

Tuomey compromise or settle a disputed claim. Rather, the 

record unambiguously shows that Drakeford and Tuomey hired 

McAnaney to advise them of the Stark Law risks posed by the 

employment contracts. As a result, Rule 408 does not support 

the district court’s decision to exclude McAnaney’s testimony.9

 8 We note that Tuomey waived the attorney-client privilege 

with respect to its communications with McAnaney when it 

asserted the advice-of-counsel defense. See Rhone-Poulenc Rorer 

Inc. v. Home Indem. Co., 32 F.3d 851, 863 (3d Cir. 1994) (“A 

defendant may . . . waive [attorney-client] privilege by 

asserting reliance on the advice of counsel as an affirmative 

defense.”). 

9 In any event, as our concurring colleague ably explains, 

even assuming that McAnaney’s testimony would ordinarily be

excludable under Rule 408, Tuomey nonetheless opened the door to 

its admission by raising the advice-of-counsel defense. 
24

See ICAP, Inc. v. Global Digital Satellite Sys., Inc., 225 F.3d 

654, 2000 WL 1049854, at *3 (4th Cir. 2000) (unpublished table 

opinion) (finding Rule 408 inapplicable where the parties’ 

communications involved contract negotiations rather than 

settlement negotiations). 

Nor do we find merit in Tuomey’s objection based on 

McAnaney’s supposed duty of loyalty to his clients. At trial, 

Tuomey never suggested which evidentiary rule supported 

exclusion on this ground, although it now characterizes this 

argument as a claim for exclusion under Rule 403. That rule of 

course allows a district court to exclude relevant evidence, but 

only “if its probative value is substantially outweighed by a 

danger of one or more of the following: unfair prejudice, 

confusing the issues, misleading the jury, undue delay, wasting 

time, or needlessly presenting cumulative evidence.” Fed. R. 

Evid. 403. Left unsaid by Tuomey is precisely how the probative 

value of McAnaney’s compelling testimony was substantially 

outweighed by the countervailing factors set out in Rule 403. 

In sum, Tuomey has offered no good reason why the jury in 

the first trial was not allowed to hear from McAnaney. And we 

agree with the government that this evidence was critical to its 

ability to satisfy its burden to prove that Tuomey acted with 

the requisite intent under the FCA. We therefore affirm the 

district court’s order granting a new trial on the FCA claim.
25

III.

We turn now to Tuomey’s challenges to the judgment entered 

following the second trial. Tuomey asks for judgment as a 

matter of law because a reasonable jury could not have found

that (1) the part-time employment contracts violated the Stark 

Law, or (2) Tuomey knowingly submitted false claims. 

Alternatively, Tuomey asks for a new trial because of the 

district court’s refusal to tender certain jury instructions. 

A.

We review the district court’s denial of Tuomey’s motion

for judgment as a matter of law de novo. Austin v. Paramount 

Parks, Inc., 195 F.3d 715, 727 (4th Cir. 1999). We “view all 

the evidence in the light most favorable to the prevailing party 

and draw all reasonable inferences in [its] favor.” Konkel v. 

Bob Evans Farms Inc., 165 F.3d 275, 279 (4th Cir. 1999). We 

will reverse the district court if a reasonable jury could rule 

only in favor of the moving party. Dennis v. Columbia Colleton 

Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002) (“[I]f 

reasonable minds could differ, we must affirm.”). 

1.

Tuomey argues that it is entitled to judgment as a matter 

of law because the contracts between it and the physicians did 

not run afoul of the Stark Law. As we explain, however, a

reasonable jury could find that Tuomey violated the Stark Law 
26

when it paid aggregate compensation to physicians that varied 

with or took into account the volume or value of actual or

anticipated referrals to Tuomey. 

To begin with, we note that the Stark Law’s “volume or 

value” standard can be implicated when aggregate compensation 

varies with the volume or value of referrals, or otherwise takes 

into account the volume or value of referrals. 42 C.F.R. 

§ 411.354(c)(2)(ii). That is precisely what the district court 

directed the jury in the second trial to assess. Tuomey 

insists, however, that our earlier opinion in this case 

foreclosed the jury’s consideration of whether the contracts 

varied with the volume or value of referrals. Instead, says 

Tuomey, the only question that should have been put to the jury 

was “whether the contracts, on their face, took into account the 

value or volume of anticipated referrals.” Drakeford, 675 F.3d 

at 409.

We disagree. The district court properly understood that 

the jury was entitled to pass on the contracts as they were 

actually implemented by the parties. We said as much in our 

earlier opinion, where

we emphasize[d] that our holding . . . [was] limited 

to the issues we specifically address[ed]. On remand, 

a jury must determine, in light of our holding, 

whether the aggregate compensation received by the 

physicians under the contracts varied with, or took 

into account, the volume or value of the facility 

component referrals. 
27

Id. at 409 n.26 (emphasis added). 

A reasonable jury could have found that Tuomey’s contracts 

in fact compensated the physicians in a manner that varied with 

the volume or value of referrals. There are two different 

components of the physicians’ compensation that we believe so 

varied. First, each year, the physicians were paid a base 

salary that was adjusted upward or downward depending on their

collections from the prior year. In addition, the physicians

received the bulk of their compensation in the form of a 

productivity bonus, pegged at eighty percent of the amount of 

their collections. 

As Tuomey concedes, “the aggregate compensation received by 

the physicians under the Contracts was based solely on 

collections for personally performed professional services.” 

Appellant’s Br. at 42. And as we noted in our earlier opinion, 

there are referrals here, “consisting of the facility component 

of the physicians’ personally performed services, and the 

resulting facility fee billed by Tuomey based upon that 

component.” Drakeford, 675 F.3d at 407. In sum, the more 

procedures the physicians performed at the hospital, the more 

facility fees Tuomey collected, and the more compensation the

physicians received in the form of increased base salaries and 

productivity bonuses.
28

The nature of this arrangement was confirmed by Tuomey’s 

former Chief Financial Officer, William Paul Johnson, who 

admitted “that every time one of the 19 physicians . . . did a 

legitimate procedure on a Medicare patient at the hospital 

pursuant to the part-time agreement[,] the doctor [got] more 

money,” and “the hospital also got more money.” J.A. 2012. We 

thus think it plain that a reasonable jury could find that the 

physicians’ compensation varied with the volume or value of 

actual referrals. The district court did not err in denying 

Tuomey’s motion for judgment as a matter of law on this ground.10

 10 We are not persuaded by Tuomey’s reliance on commentary 

promulgated by the Centers for Medicare & Medicaid Services as 

it developed implementing regulations for the Stark Law. Tuomey 

points to a portion of the commentary wherein the agency states 

that the “fact that corresponding hospital services are billed 

would not invalidate an employed physician’s personally 

performed work, for which the physician may be paid a 

productivity bonus (subject to the fair market value 

requirement).” 69 Fed. Reg. at 16089. But this statement deals 

only with a productivity bonus based on the fair market value of 

the work personally performed by a physician--it says nothing 

about the propriety of varying a physician’s base salary based 

on the volume or value of referrals.

In any case, the commentary regarding productivity bonuses 

appears under a section of the regulations that specifically 

addresses comments related to the exception for bona fide 

employment relationships. This exception covers circumstances 

where there is a meaningful administrative relationship between 

the physician and the hospital. The jury was instructed on this 

exception at trial, and rejected it. Tuomey does not quarrel 

with that aspect of the jury’s verdict; rather it contends that 

the commentary applies irrespective of whether a bona fide 

employment relationship actually exists. Nothing in the statute 

or the regulations, however, supports this notion.
29

2.

Tuomey next argues that the district court erred in not 

granting its motion for judgment as a matter of law because it 

did not knowingly violate the FCA. Specifically, Tuomey claims 

that because it reasonably relied on the advice of counsel, no 

reasonable jury could find that Tuomey possessed the requisite 

intent to violate the FCA. Because the record here is replete 

with evidence indicating that Tuomey shopped for legal opinions 

approving of the employment contracts, while ignoring negative 

assessments, we disagree.

The FCA imposes civil liability on any person who 

“knowingly presents, or causes to be presented, a false or 

fraudulent claim for payment or approval” to an officer or 

employee of the United States Government. 31 U.S.C. 

§ 3729(a)(1)(A), (b)(2)(A)(i). Under the Act, the term 

“knowingly” means that a person, with respect to information

contained in a claim, (1) “has actual knowledge of the 

information;” (2) “acts in deliberate ignorance of the truth or 

falsity of the information;” or (3) “acts in reckless disregard 

of the truth or falsity of the information.” Id. § 3729(b)(1). 

The purpose of the FCA’s scienter requirement is to avoid 

punishing “honest mistakes or incorrect claims submitted through 

mere negligence.” United States ex rel. Owens v. First Kuwaiti 
30

Gen. Trading & Contracting Co., 612 F.3d 724, 728 (4th Cir. 

2010) (internal quotation marks omitted). 

The record evidence provides ample support for the jury’s 

verdict as to Tuomey’s intent. Indeed, McAnaney’s testimony, 

summarized above, is alone sufficient to sweep aside Tuomey’s 

claim of error.11 We agree with the district court’s conclusion

that “a reasonable jury could have found that Tuomey possessed 

the requisite scienter once it determined to disregard 

McAnaney’s remarks.” J.A. 4055-56. A reasonable jury could 

indeed be troubled by Tuomey’s seeming inaction in the face of 

McAnaney’s warnings, particularly given Tuomey’s aggressive 

efforts to avoid hearing precisely what McAnaney had to say 

regarding the contracts. 

Nonetheless, a defendant may avoid liability under the FCA 

if it can show that it acted in good faith on the advice of 

counsel. Cf. United States v. Painter, 314 F.2d 939, 943 (4th 

Cir. 1963) (holding, in a case involving fraud, that “[i]f in 

good faith reliance upon legal advice given him by a lawyer to 

whom he has made full disclosure of the facts, one engages in a 

 11 We note also that the jury at the second trial considered 

the deposition testimony of Tuomey executive Gregg Martin. 

While this evidence is (for reasons we have explained) not 

overly compelling in isolation, it is not without some value in 

showing that Tuomey was aware that its proposed contracts raised 

Stark Law concerns.
31

course of conduct later found to be illegal, the trier of fact 

may in appropriate circumstances conclude the conduct was 

innocent because ‘the guilty mind’ was absent”). However,

“consultation with a lawyer confers no automatic immunity from 

the legal consequences of conscious fraud.” Id. at 943. 

Rather, to establish the advice-of-counsel defense, the 

defendant must show the “(a) full disclosure of all pertinent

facts to [counsel], and (b) good faith reliance on [counsel’s]

advice.” United States v. Butler, 211 F.3d 826, 833 (4th Cir. 

2000) (internal quotation marks omitted). 

Tuomey contends that it provided full and accurate 

information regarding the proposed employment contracts to 

Hewson, who in turn advised Tuomey that the contracts did not 

run afoul of the Stark Law. But as the government aptly notes, 

“[i]n determining whether Tuomey reasonably relied on the advice 

of its counsel, the jury was entitled to consider all the advice 

given to it by any source.” Appellee’s Br. at 53.

In denying Tuomey’s post-trial motions, the district court 

noted--and we agree--that a reasonable jury could have concluded 

that Tuomey was, after September 2005, no longer acting in good 

faith reliance on the advice of its counsel when it refused to 

give full consideration to McAnaney’s negative assessment of the 

part-time employment contracts and terminated his 
32

representation.12 Tuomey defends its dismissal of McAnaney’s 

warnings by claiming that his opinion was tainted by undue 

influence exerted by Drakeford and his counsel. But there was

evidence before the jury suggesting that Tuomey also tried to 

procure a favorable opinion from McAnaney. Indeed, Tuomey’s 

counsel admitted that he was trying “to steer McAnaney towards 

[Tuomey’s] desired outcome” and that Tuomey needed to “continue 

playing along and influence the outcome of the game as best we 

can.” J.A. 4482. Thus, a reasonable jury could conclude that 

Tuomey ignored McAnaney because it simply did not like what he 

had to say. 

Tuomey points to the fact that it retained Steve Pratt, a 

prominent healthcare lawyer, and Richard Kusserow, former 

Inspector General at the United States Department of Health and 

Human Services, as further evidence that it acted in good faith 

and did not ignore McAnaney’s warnings. Pratt rendered two 

 12 The government contended that Tuomey submitted 25,973 

total claims for payment to Medicare between fiscal years 2005 

and 2009. The government’s evidence on this point consisted of 

a summary chart detailing the number of claims filed by Tuomey 

in each fiscal year. It appears, however, that the jury 

subtracted the 4,243 claims that Tuomey submitted in fiscal year 

2005 (running from October 1, 2004 to September 30, 2005) from 

the government’s number. From this, the district court surmised 

that the jury resolved to hold Tuomey responsible for those 

claims filed beginning in fiscal year 2006 (that is, on or after 

October 1, 2005) given that they were filed after Tuomey 

terminated McAnaney’s joint representation on September 2, 2005. 

We think this is an entirely reasonable view of the evidence. 
33

opinions that generally approved of the employment contracts. 

But he did so without being told of McAnaney’s unfavorable 

assessment, even though Tuomey had that information available to 

it at the time. In addition, Pratt reviewed and relied on the 

view of Tuomey’s fair-market-value consultant that the 

employment contracts would compensate the physicians at fair 

market value, but he did not consider how the consultant arrived 

at its opinion. Nor did he know how much the doctors earned 

prior to entering into the contracts, or that the hospital stood 

to lose $1.5-2 million a year, not taking into account facility 

fees, by compensating the physicians above their collections. 

We thus think it entirely reasonable for a jury to look 

skeptically on Pratt’s favorable advice regarding the contracts.

The same can be said of the Kusserow’s advice. Kusserow--

who was called by the government to rebut Tuomey’s advice-ofcounsel defense--advised Tuomey regarding the employment

contracts about eighteen months before the parties retained 

McAnaney. As was the case with Pratt, he received no 

information regarding the fair market value of the employment 

contracts, information that Kusserow considered vital “to be 

able to do a full Stark analysis of [the proposed contracts].” 

J.A. 1676. And although Kusserow did say in a letter to 

Tuomey’s counsel that he did not believe the contracts presented 

“significant Stark issues,” J.A. 1675, he hedged considerably on 
34

that view because of “potentially troubling issues related to 

the productivity and [incentive bonus provisions in the 

contracts] that have not been fully addressed.” J.A. 1677.

As the district court observed, “the jury evidently 

rejected Tuomey’s advice of counsel defense” as of the date that 

Tuomey received McAnaney’s warnings, “grounded on the fact that 

the jury excluded damages from [before the termination of 

McAnaney’s engagement] in making its determination” of the civil 

penalty and damages. J.A. 4055. Thus, while Kusserow’s advice 

was certainly relevant to Tuomey’s advice-of-counsel defense, a 

reasonable jury could have determined that McAnaney’s warnings 

(and Tuomey’s subsequent inaction) were far more probative on 

the issue.

In sum, viewing the evidence in the light most favorable to 

the government, we have no cause to upset the jury’s reasoned 

verdict that Tuomey violated the FCA. 

B.

Next, Tuomey raises several challenges to the district 

court’s jury instructions. We review a district court’s 

“decision to give (or not give) a jury instruction and the 

content of an instruction . . . for abuse of discretion.” 

United States v. Russell, 971 F.2d 1098, 1107 (4th Cir. 1992). 

Our task is to determine “whether the instructions[,] construed 

as a whole, and in light of the whole record, adequately 
35

informed the jury of the controlling legal principles without 

misleading or confusing the jury to the prejudice of the 

objecting party.” Spell v. McDaniel, 824 F.2d 1380, 1395 (4th 

Cir. 1987). We will reverse the district court’s decision not 

to give a party’s proposed instruction “only when the requested 

instruction (1) was correct; (2) was not substantially covered 

by the court’s charge to the jury; and (3) dealt with some point 

in the trial so important, that failure to give the requested 

instruction seriously impaired that party’s ability to make its 

case.” Noel v. Artson, 641 F.3d 580, 586 (4th Cir. 2011)

(internal quotation marks omitted).13 

1.

First, Tuomey urges us to grant it a new trial because the

district court failed to give jury instructions consistent with 

our analysis in the first appeal. Specifically, Tuomey claims 

that the district court ignored our admonition that “the 

question, which should properly be put to a jury, is whether the 

contracts, on their face, took into account the value or volume 

of anticipated referrals.” Drakeford, 675 F.3d at 409. 

According to Tuomey, the district court’s failure to so instruct 

the jury erroneously permitted the jury to consider extrinsic 

 13 Because two of Tuomey’s challenges to the instructions 

address the proper calculation of damages, we address them 

separately infra at Sections IV.A.1, and IV.B. 
36

evidence of intent in determining whether the physicians’ 

compensation took into account the volume or value of referrals. 

As the district court correctly determined, however, we did 

not mean to limit the government’s ability to present evidence 

as to Tuomey’s intent to violate the FCA. Rather, we sought to 

emphasize that the government could not rely on such evidence 

alone to show a violation. See id. at 409 n.25 (“We agree with 

[United States ex rel. Villafane v. Solinger, 543 F. Supp. 2d 

678, 693 (W.D. Ky. 2008)] that intent alone does not create a 

violation. However, that does not aid Tuomey if the jury 

determines that the contracts took into account the volume or 

value of anticipated referrals.”). Thus, the district court did 

not err in declining to give this instruction. 

2.

Tuomey next argues that the district court erred in not 

separately instructing the jury on the knowledge element in the 

Stark Law regulations’ definition of an indirect compensation 

arrangement. As Tuomey correctly notes, the Stark Law requires 

that “[t]he entity furnishing [designated health services must] 

ha[ve] actual knowledge of, or act[] in reckless disregard or 

deliberate ignorance of, the fact that the referring 

physician . . . receives aggregate compensation that varies 

with, or takes into account, the volume or value of referrals.” 

42 C.F.R. § 411.354(c)(2)(iii). 
37

Here, however, the district court instructed the jury that 

Tuomey would have acted knowingly under the FCA if it “realized 

what it was doing and was aware of the nature of its conduct and 

did not act through ignorance, mistake or accident.” J.A. 3942–

43. Given that a jury found Tuomey possessed the requisite

scienter under the FCA, it necessarily also found Tuomey knew 

that its contracts varied with or took into account referrals. 

Therefore, the district court’s error (if any) in not separately 

instructing the jury as to the knowledge component of the Stark 

Law was harmless. 

3.

Third, Tuomey argues that the district court erred by 

refusing to charge the jury that claims based upon differences 

of interpretation of disputed legal questions are not false 

under the FCA. For this proposition, it cites to our decision 

in United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 

525 F.3d 370, 377 (4th Cir. 2008), in which we said as much. 

However, we also held there that for a claim to be “false” under 

the FCA, “the statement or conduct alleged must represent an 

objective falsehood.” Id. at 376. 

When submitting its claims to the government, Tuomey was 

required to certify its compliance with the Stark Law. See

United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 

125 F.3d 899, 902 (5th Cir. 1997) (“[W]here the government has 
38

conditioned payment of a claim upon a claimant’s certification 

of compliance with . . . a statute or regulation, a claimant 

submits a false or fraudulent claim when he or she falsely 

certifies compliance with that statute or regulation.”); United 

States ex rel. Pogue v. Diabetes Treatment Ctrs. of Am., 565 F. 

Supp. 2d 153, 158–59 (D.D.C. 2008). Here, Tuomey either 

complied with the Stark Law or it didn’t. This is an objective 

inquiry. And the jury found that Tuomey, in fact, violated the 

Stark Law. As a result, Tuomey’s certification that it complied 

with the Stark Law was false. The subjective inquiry--whether 

Tuomey knew that its claims were in violation of the Stark Law--

is covered under the knowledge element.14 Therefore, the 

district court did not err in refusing to give this instruction. 

4.

For their last jury instruction challenge, Tuomey contends 

that the district court erred by failing to instruct the jury 

that Tuomey was entitled to rely on legal advice even if it 

turned out to be wrong. However, the district court instructed 

 14 In Wilson, there was no either/or proposition of the kind 

present here. Rather, in that case, the relators contended that 

the disputed statement was false because the defendant “agreed 

to [certain conditions] in the contract even though it knew it 

would not, and later did not, abide by those terms.” Wilson, 

525 F.3d at 377. As we explained, the relators’ assertion did 

not rest on an objective falsehood, “but rather on Relators’ 

subjective interpretation of [the defendant’s] contractual 

duties.” Id.
39

the jury that knowledge does not include actions taken “through 

ignorance, mistake or accident.” J.A. 3943. It later 

emphasized that the jury could not conclude that Tuomey had 

knowledge “from proof of mistake, negligence, carelessness or a 

belief in an inaccurate proposition.” Id. (emphasis added). 

Because the import of Tuomey’s proposed charge was covered by 

the district court’s instructions, we reject Tuomey’s claim of 

error.

IV.

Finally, Tuomey makes several challenges to the 

$237,454,195 judgment entered against it. First, it argues that 

the district court improperly calculated the civil penalty. 

Next, it claims that the district court used the incorrect 

measure of actual damages. Finally, it brings constitutional 

challenges to the award under the Fifth and Eighth Amendments. 

A defendant found liable under the FCA must pay the 

government “a civil penalty of” not less than $5,500 and not 

more than $11,000 “plus 3 times the amount of damages which the 

Government sustains because of that person.” 31 U.S.C. 

§ 3729(a)(1); 28 C.F.R. § 85.3(a)(9).15 In this case, the jury 

 15 The FCA sets the civil penalty range at $5,000 to 

$10,000, but includes a provision that adjusts the range for 

inflation. 
40

found that Tuomey had submitted 21,730 false claims, for which 

it awarded actual damages of $39,313,065, which the district 

court trebled. The district court then added a civil penalty of 

$119,515,000 to that sum, which it calculated by multiplying the 

number of false claims by the $5,500 statutory minimum penalty. 

Ordinary, we review a court’s calculation of damages for 

clear error. Universal Furniture Int’l, Inc. v. Collezione 

Europa USA, Inc., 618 F.3d 417, 427 (4th Cir. 2010). However, 

to the extent the claim is that the calculations are influenced 

by legal error, our review is de novo. Id. Likewise, the 

constitutionality of a damages award is a legal question that we 

review de novo. See Cooper Indus., Inc. v. Leatherman Tool 

Grp., Inc., 532 U.S. 424, 436 (2001). 

A.

1.

According to Tuomey, the civil penalty assessed was 

improperly inflated because the jury was permitted to take into

account both inpatient and outpatient procedures performed by 

the contracting physicians. Instead, relying on our earlier 

opinion in this case, Tuomey claims that the only relevant 

claims “were those Tuomey ‘presented, or caused to be presented, 

to Medicare and Medicaid for payment of facility fees generated 

as a result of outpatient procedures performed pursuant to the 
41

contracts.’” Appellant’s Br. at 54 (alterations omitted) 

(quoting Drakeford, 675 F.3d at 399). Tuomey is incorrect. 

It is true that the contracts solely addressed compensation 

for outpatient procedures. That is, the physicians’ collections 

(which form the basis for both their base salaries and their 

productivity bonuses) do not account for the volume or value of 

inpatient procedures performed. Tuomey, however, takes out of 

context language from our earlier opinion recognizing this fact 

to suggest that we commanded that the relevant claims be limited 

to those seeking payment for outpatient procedures. We said 

nothing of the sort. 

If a physician has a financial relationship with a 

hospital, then the Stark Law prohibits the physician from making 

any referral to that hospital for the furnishing of designated 

health services. E.g., United States ex rel. Bartlett v. 

Ashcroft, 39 F. Supp. 3d 656, 669 (W.D. Pa. 2014) (“Because a 

‘compensation arrangement’ existed between Physician Defendants 

and [the] Hospital, the Stark [Law] prohibited Physician 

Defendants from making any patient referrals to [the] Hospital 

for designated health services.” (emphasis added)). Inpatient 

hospital services are designated health services. 42 U.S.C. §

1395nn(h)(6). And a referral includes “the request or 

establishment of a plan of care by a physician which includes 

the provision of the designated health service.” Id.
42

§ 1395nn(h)(5). Plainly, then, inpatient services constitute a 

prohibited referral for the furnishing of designated health 

services, and the district court properly instructed the jury to

factor them into the damages calculation. 

2.

Tuomey also asserts that the jury’s damage award is flawed 

because the government failed to present sufficient evidence of 

referrals. Specifically, Tuomey contends that the government

did not identify the “referring physician,” and thus failed to 

prove that the alleged false claims came about through a 

prohibited referral.

The government’s proof on this point came in the form of 

summary evidence and testimony detailing the claims submitted by 

Tuomey. We agree with the district court that the government’s 

evidence was sufficient to support the jury’s verdict. We note 

also, as did the district court, that “Tuomey was entitled to 

offer its own expert and its own alternate damages calculations, 

but elected not to do so.” J.A. 4061. 

In any case, Tuomey offers no authority to support its 

argument that the claims must explicitly identify the referring 

provider. Conversely, several courts have accepted that the 

“‘attending/operating’ physician identified in Form UB-92 
43

qualifies as a referring physician.”16 United States v. Rogan, 

459 F. Supp. 2d 692, 713 (N.D. Ill. 2006); see also United 

States v. Halifax Hosp. Med. Ctr., No. 6:09-cv-1002-Orl-31TBS, 

2013 WL 6017329, at *10-11 (M.D. Fla. Nov. 13, 2013) (finding 

that the fact that one of the physicians with whom the hospital 

has a financial relationship is identified as an “operating” or 

“attending” physician is sufficient evidence that the physician 

was also the “referring physician” absent evidence to the 

contrary). Given the lack of support for Tuomey’s position, we 

conclude that the jury had sufficient evidence to identify the 

prohibited referrals. 

3.

Tuomey next argues that the district court erroneously 

assessed the penalty based on the 21,730 UB-92/04 forms Tuomey 

submitted to Medicare for reimbursement. Instead, Tuomey 

asserts that the number of false claims should be limited to 

four Medicare cost reports that it submitted.17

 16 Form UB-92 (later replaced by Form UB-04) is used by 

hospitals to submit a claim for reimbursement to Medicare. 

17 Cost reports (CMS-2552) “are the final claim that a 

provider submits to the fiscal intermediary for items and 

services rendered to Medicare beneficiaries. . . . Medicare 

relies upon the hospital cost report to determine whether the 

provider is entitled to more reimbursement than already received 

through interim payments, or whether the provider has been 

overpaid and must reimburse Medicare.” J.A. 68-69 (citing 42 

C.F.R. §§ 405.1803, 413.60, 413.64(f)(1)). 
44

Tuomey provides no Stark Law case to support its argument. 

Rather, it cites to FCA cases where the UB-92/04 forms 

themselves were not fraudulent, but were submitted as part of an 

ongoing fraudulent scheme. In those cases, the fraud was 

consummated only when the cost report was submitted. See United 

States ex rel. Hockett v. Columbia/HCA Healthcare Corp., 498 F. 

Supp. 2d 25, 70-71 (D.D.C. 2007); Visiting Nurse Ass’n of 

Brooklyn v. Thompson, 378 F. Supp. 2d 75, 99 (E.D.N.Y. 2004).

But even those cases suggest that a UB-92/04 form can 

constitute a discrete fraudulent claim under the FCA when the 

government proves that the forms were, in fact, false or 

fraudulent. See Hockett, 498 F. Supp. 2d at 70-71; Visiting 

Nurse Ass’n, 378 F. Supp. 2d at 99. This occurs when “the 

provider knowingly asks the Government to pay amounts it does 

not owe.” United States ex rel. Clausen v. Lab. Corp. of Am., 

Inc., 290 F.3d 1301, 1311 (11th Cir. 2002).

Here, each time Tuomey submitted to Medicare a UB-92/04 

form asking for reimbursement for a prohibited referral, it was 

knowingly asking the government to pay an amount that, by law, 

it could not pay. Consequently, we find the district court did 

not err in finding that each UB-92/04 form constituted a 

separate claim. 
45

B.

Tuomey also challenges the district court’s measure of 

actual damages. It argues that the true measure is not the sum 

total of all claims the government paid (as the court instructed

the jury), but rather the difference (if any) between the true

value of the services provided by Tuomey and what the government 

actually paid. According to Tuomey, since “there was no 

evidence that the Government did not get what it paid 

for[,] . . . there were no actual damages under the FCA.” 

Appellant’s Br. at 87. Here again, Tuomey’s view of the law is 

incorrect. 

The Stark Law prohibits the government from paying any

amount of money for claims submitted in violation of the law. 

42 U.S.C. § 1395nn(g)(1). Compliance with the Stark Law is a 

condition precedent to reimbursement of claims submitted to 

Medicare. When Tuomey failed to satisfy that condition, the 

government owed it nothing. United States v. Rogan, 517 F.3d 

449, 453 (7th Cir. 2008). 

The Stark Law expresses Congress’s judgment that all 

services provided in violation of that law are medically 

unnecessary. By reimbursing Tuomey for services that it was 

legally prohibited from paying, the government has suffered 

injury equivalent to the full amount of the payments. Cf.

United States v. Mackby (Mackby II), 339 F.3d 1013, 1018-19 (9th 
46

Cir. 2003) (finding that the fact that the defendant actually 

rendered the service billed did not negate the government’s 

injury, as “[d]amages under the FCA flow from the false 

statement”). In this case, the damage from the false statement 

came from the payment to an entity that was not entitled to any 

payment at all. Accordingly, we reject Tuomey’s claim of 

error.18

C.

Finally, Tuomey argues that the district court’s award of 

$237,454,195, consisting of damages and a civil penalty, is 

unconstitutional under the Excessive Fines Clause of the Eighth 

Amendment and the Due Process Clause of the Fifth Amendment. 

While the award is substantial, we cannot say that it is 

unconstitutional. 

“The Excessive Fines Clause of the Eighth Amendment 

prohibits the government from imposing excessive fines as 

punishment.” Korangy v. FDA, 498 F.3d 272, 277 (4th Cir. 2007). 

“Civil fines serving remedial purposes do not fall within the 

reach of the Eighth Amendment.” Id. But where “a civil 

sanction ‘can only be explained as serving in part to punish," 

 18 For the same reason, we also reject Tuomey’s contention 

that the district court erred in failing to instruct the jury 

that the government had to prove that the services received were 

worth less than what the government paid. 
47

then the fine is subject to the Eighth Amendment.” Id. (quoting 

Austin v. United States, 509 U.S. 602, 610 (1993)). In such a 

case, the fine “will be found constitutionally excessive only if 

it is ‘grossly disproportional to the gravity of [the] 

offense.’” Id. (alteration in original) (quoting United States 

v. Bajakajian, 524 U.S. 321, 334, (1998)). We have said, 

however, that instances in which the penalty prescribed under 

the FCA is unconstitutionally excessive will be “infrequent.” 

United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., 

741 F.3d 390, 408 (4th Cir. 2013).

By contrast, the Due Process Clause “imposes substantive 

limits beyond which penalties may not go.” TXO Prod. Corp. v. 

Alliance Res. Corp., 509 U.S. 443, 453-54 (1993) (internal 

quotation marks omitted) (Fourteenth Amendment case); Morgan v. 

Woessner, 997 F.2d 1244, 1255 (9th Cir. 1993) (finding that the 

Supreme Court’s analysis under the Due Process Clause of the 

Fourteenth Amendment applies equally under the Fifth Amendment), 

cited with approval in EEOC v. Fed. Express Corp., 513 F.3d 360, 

376 (4th Cir. 2008). Like the Eighth Amendment, the Due Process 

Clause does not apply to compensatory damage awards. This is 

because compensatory damages “redress the concrete loss the 

plaintiff has suffered by reason of the defendant’s wrongful 

conduct,” and the assessment of the plaintiff’s injury is 

“essentially a factual determination.” Cooper Indus., 532 U.S. 
48

at 432. On the other hand, punitive damages are “essentially 

‘private fines’ intended to punish the defendant and to deter 

future wrongdoing.” Id. Consequently, there must be 

“procedural and substantive constitutional limitations on these 

awards.” See State Farm Mut. Auto Ins. Co. v. Campbell, 538 

U.S. 408, 416 (2003). Thus, the Due Process Clause imposes 

limits on “grossly excessive” monetary penalties that go beyond 

what is necessary to vindicate the government’s “legitimate 

interests in punishment and deterrence.” BMW of N. Am., Inc. v. 

Gore, 517 U.S. 559, 562 (1996). 

The “FCA imposes damages that are essentially punitive in 

nature.” Vt. Agency of Natural Res. v. United States ex rel. 

Stevens, 529 U.S. 765, 784 (2000). But the Supreme Court has 

also noted that the treble damages provision of the statute has

a compensatory aspect, in that they account for the fact that 

some amount of money beyond actual damages is “necessary to 

compensate the Government completely for the costs, delays, and 

inconveniences occasioned by fraudulent claims.” Cook Cnty., 

Ill. v. United States ex rel. Chandler, 538 U.S. 119, 130 

(2003). Additionally, the provision allows the government to 

recover some measure of the amount it must pay to compensate 

relators in qui tam actions. Id.; see also 31 U.S.C. § 3730(d) 

(“If the Government proceeds with an action brought by [a 

relator, the relator] shall . . . receive at least 15 percent 
49

but not more than 25 percent of the proceeds of the action or 

settlement of the claim . . . .”). On the other hand, the civil 

penalty is completely punitive. United States v. Mackby (Mackby

I), 261 F.3d 821, 830 (9th Cir. 2001). 

The Supreme Court has instructed courts to consider three 

guideposts when reviewing punitive damages awards under the Due 

Process Clause: “(1) the degree of reprehensibility of the 

defendant’s misconduct; (2) the disparity between the actual or 

potential harm suffered by the plaintiff and the punitive 

damages award; and (3) the difference between the punitive 

damages awarded by the jury and the civil penalties authorized 

or imposed in comparable cases.” 19 State Farm, 538 U.S. at 418. 

There is no reason to believe that the Court’s “approach to 

punitive damages under the Fifth Amendment would differ 

dramatically from analysis under the Excessive Fines Clause.” 

Rogan, 517 F.3d at 454. 

The degree of reprehensibility of the defendant’s conduct 

is “[p]erhaps the most important indicium of the reasonableness 

of a punitive damages award.” Gore, 517 U.S. at 575. Of 

 19 Because the FCA’s civil penalty and treble damages 

provisions are Congressional mandates, we believe this final 

factor is not instructive here. Indeed, to the extent that the 

district court exercised any discretion at all, it did so by 

imposing the statutory minimum civil penalty for each fraudulent 

claim. 
50

course, in this case the damages and penalties assessed against 

Tuomey are congressionally prescribed. 31 U.S.C. § 3729(a)(1). 

As we have previously stated, the Stark Law expresses Congress’s 

judgment of the reprehensibility of the conduct at issue by 

deeming services provided in violation of the law worthless. 

And “[t]he fact . . . that Congress provided for treble damages 

and an automatic civil monetary penalty per false claim shows 

that Congress believed that making a false claim to the 

government is a serious offense.” Mackby II, 339 F.3d at 1018;

cf. Rogan, 517 F.3d 454 (“[O]ne would think that a fine 

expressly authorized by statute could be higher than a penalty 

selected ad hoc by a jury.”). 

In addition, the Supreme Court has directed courts to 

evaluate the degree of reprehensibility of the defendant’s 

conduct by considering whether:

the harm caused was physical as opposed to economic; 

the tortious conduct evinced an indifference or a 

reckless disregard of the health or safety of others; 

the target of the conduct had financial vulnerability; 

the conduct involved repeated actions or was an 

isolated incident; and the harm was the result of 

intentional malice, trickery, or deceit, or mere 

accident. 

State Farm, 538 U.S. at 419. While Tuomey’s conduct in this 

case does not implicate the first three factors, we think the 

last two are relevant here. See Saunders v. Branch Banking & 

Trust Co. of Va., 526 F.3d 142, 153 (4th Cir. 2008) (finding 
51

that even the presence of a single State Farm factor “can 

provide justification for a substantial award of punitive 

damages”). 

Clearly, Tuomey’s conduct “involved repeated actions,” 

State Farm, 538 U.S. at 419, as it submitted 21,730 false 

claims. Thus, while the penalty is certainly severe, it is 

meant to reflect the sheer breadth of the fraud Tuomey 

perpetrated upon the federal government. Bunk, 741 F.3d at 407-

08 (explaining that the court was comfortable assessing high 

civil penalties in FCA actions involving a large number of 

claims). As we have said, “[w]hen an enormous public 

undertaking spawns a fraud of comparable breadth [high 

penalties] help[] to ensure what we reiterate is the primary 

purpose of the FCA: making the government completely whole.” 

Id. Substantial penalties also serve as a powerful mechanism to 

dissuade such a massive course of fraudulent conduct. See id.

at 408. And the government has “a strong interest in preventing 

fraud” because “[f]raudulent claims make the administration of 

Medicare more difficult, and widespread fraud would undermine 

public confidence in the system.” Mackby II, 339 F.3d at 1019. 

Nor were Tuomey’s actions in this case the result of a 

“mere accident.” State Farm, 538 U.S. at 419. Rather, the jury 

determined that Tuomey submitted false claims for Medicare 

reimbursement “knowingly,” that is, with actual knowledge, in 
52

deliberate ignorance, or with reckless disregard that the claims 

violated the Stark Law. Under the circumstances, we agree with 

the government that “strong medicine is required to cure the 

defendant’s disrespect for the law.” Gore, 517 U.S. at 577. 

Next, we consider the disparity between actual harm and the 

punitive damages award. Specifically, we compare the actual 

damages assessed against Tuomey to the civil penalty and the 

portion of treble damages that can be considered punitive. 

Here, we can properly regard the entire civil penalty, 

$119,515,000, as punitive. On the other hand, the actual 

damages of $39,313,065 are entirely compensatory. As discussed 

above, the additional sum of $78,626,130 resulting from the 

trebling of actual damages is a hybrid of compensatory and 

punitive damages.

Although the Supreme Court has not told us where to draw 

the line, see Chandler, 538 U.S. at 131, we may safely assume 

that the portion of the trebled award allocated to the relator 

is compensatory. See id. Assuming further that Drakeford 

receives the minimum amount allotted by the statute--that is 

fifteen percent of the total recovery--the relator would be 

entitled to $11,793,920 of the trebled award, leaving 

$66,832,210 to be allocated to punitive damages. By this 

calculation, the portion of damages that is compensatory is 

$51,106,985 and the $186,347,210 balance is punitive.
53

While the Court has been reluctant to fix a bright-line 

ratio that punitive damages cannot exceed for purposes of the 

Due Process Clause, it has suggested that “an award of more than 

four times the amount of compensatory damages might be close to 

the line of constitutional impropriety.” State Farm, 538 U.S. 

at 425. Here, the ratio of punitive damages to compensatory 

damages is approximately 3.6-to-1, which falls just under the 

ratio the Court deems constitutionally suspect.20 We therefore 

conclude that the damages award is constitutional under the 

Fifth and Eighth Amendments.

 

V. 

Finally, we do not discount the concerns raised by our 

concurring colleague regarding the result in this case. But 

having no found no cause to upset the jury’s verdict in this 

case and no constitutional error, it is for Congress to consider 

whether changes to the Stark Law’s reach are in order. 

AFFIRMED

 20 The government contends that the ratio between the 

penalty awarded and the actual damages (after accounting for the 

relator’s recovery) may be as low as 2-to-1 or even 1-to-1. 

This calculation, however, ignores the treble damages award, a 

portion of which we consider to be punitive. 
WYNN, Circuit Judge, concurring:

Because Tuomey opened the door to the admission of Kevin 

McAnaney’s testimony by asserting an advice of counsel defense, 

and because I cannot say, based on the record before me, that no 

rational jury could have determined that Tuomey violated both 

the Stark Law and the False Claims Act, I concur in the outcome 

today. 

But I write separately to emphasize the troubling picture 

this case paints: An impenetrably complex set of laws and 

regulations that will result in a likely death sentence for a 

community hospital in an already medically underserved area.

I.

Regarding the issue of whether the district court correctly 

granted a new trial, we review such a decision for abuse of 

discretion. Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 301 

(4th Cir. 1998). Similarly, we “review a trial court’s rulings 

on the admissibility of evidence for abuse of discretion,” and 

we will overturn such a ruling only if it is “arbitrary and 

irrational.” United States v. Cole, 631 F.3d 146, 153 (4th Cir. 

2011) (quotation marks and citation omitted). 

A.

Judge Perry, who presided over the first trial, excluded 

McAnaney’s testimony pursuant to Evidence Rule 408, which can be 
55

used to exclude evidence of settlement negotiations. Under Rule 

408, “conduct or a statement made during compromise negotiations 

about [a disputed] claim” is generally inadmissible when used to 

“prove or disprove the validity or amount of a disputed claim.” 

Fed. R. Evid. 408(a).

It is unclear to me that the district court abused its 

discretion in determining that McAnaney’s testimony could be 

excluded under Rule 408. In his deposition testimony, McAnaney 

described himself as “a tie breaker” who was jointly hired by 

Drakeford and Tuomey when they could not agree about whether the 

contracts violated the Stark Law—arguably a disputed claim. 

J.A. 139-41. Tuomey’s and Drakeford’s dispute about the 

legality of the contracts reached impasse and ended in Drakeford 

acting as a relator of this qui tam action only three months 

later. Had Drakeford and Tuomey been able to reach an 

agreement, Drakeford presumably would not have filed this suit, 

in which the government, having intervened, now stands in 

Drakeford’s shoes.

Rule 408’s exclusionary provision applies where a “dispute 

or a difference of opinion exists,” not just “when discussions 

crystallize to the point of threatened litigation.” Affiliated 

Mfrs., Inc. v. Aluminum Co. of Am., 56 F.3d 521, 527 (3d Cir. 

1995). When viewed thusly, it is hard to say that Judge Perry 
56

acted either arbitrarily or irrationally in deeming McAnaney’s 

testimony excludable.

Crucially, however, evidence subject to exclusion under 

Rule 408 is so excludable “only if the evidence is offered to 

prove either liability for or invalidity of a claim or its 

amount;” otherwise, it may come in. Bituminous Const., Inc. v. 

Rucker Enterprises, Inc., 816 F.2d 965, 968 (4th Cir. 1987) 

(emphasis added); Fed. R. Evid. 408(b) (“The court may admit 

this evidence for another purpose.”). Stated differently, 

“[s]ince the rule excludes only when the purpose is proving the 

validity or invalidity of the claim or its amount, an offer for 

another purpose is not within the rule.” 2-408 Weinstein’s Fed. 

Evid. § 408.08 (quotation marks and citation omitted). 

Therefore, if the McAnaney evidence was admissible for a purpose 

beyond the validity or amount of a disputed claim, Rule 408 

would provide no basis for barring it wholesale from the first 

trial. 

B.

The government argues, among other things, that the 

McAnaney evidence went to the heart of an issue wholly beyond 

the scope of Rule 408’s limited exclusionary ambit—namely, 

Tuomey’s advice of counsel defense. With this, I must agree.

As explained by a district court in this Circuit in the 

context of a False Claims Act fraud claim, “good faith reliance 
57

on the advice of counsel may contradict any suggestion that a 

[defendant] ‘knowingly’ submitted a false claim.” United States 

v. Newport News Shipbuilding, Inc., 276 F. Supp. 2d 539, 565 

(E.D. Va. 2003). “[I]f a [defendant] seeks the advice of 

counsel in good faith, provides full and accurate information, 

receives advice which can be reasonably relied upon, and, in 

turn, faithfully follows that advice, it cannot be said that the 

defendant ‘knowingly’ submitted false information or acted with 

deliberate ignorance or reckless disregard of its falsity, even 

if that advice turns out in fact to be false.” Id. See also, 

e.g., United States v. Butler, 211 F.3d 826, 833 (4th Cir. 2000) 

(identifying the elements of the advice of counsel defense as 

“(a) full disclosure of all pertinent facts to [a lawyer], and 

(b) good faith reliance on the [lawyer]’s advice”). 

When a party raises an advice of counsel defense, however, 

all advice on the pertinent topic becomes fair game. “It has . 

. . become established that if a party interjects the ‘advice of 

counsel’ as an essential element of a claim or defense,” then 

“all advice received concerning the same subject matter” is 

discoverable, not subject to protection by the attorney-client 

privilege, and, by logical extension, admissible at trial. 1 

McCormick On Evid. § 93 (7th ed. 2013). See also, e.g., In re 

EchoStar Commc’ns Corp., 448 F.3d 1294, 1299 (Fed. Cir. 2006) 

(“Once a party announces that it will rely on advice of counsel 
58

. . . the attorney-client privilege is waived. The widely 

applied standard for determining the scope . . . is that the 

waiver applies to all other communications relating to the same 

subject matter. . . . Thus, when EchoStar chose to rely on the 

advice of in-house counsel, it waived the attorney-client 

privilege with regard to any attorney-client communications 

relating to the same subject matter, including communications 

with counsel other than in-house counsel, which would include” 

the advice of outside counsel.) (quotation marks and citation 

omitted).

Here, there can be no doubt that Tuomey pressed an advice 

of counsel defense. Tuomey argued to the first jury, for 

example, that “[t]he lawyers were the ones running the show . . 

. . All Tuomey did was accept their recommendations and vote on 

them if they thought that it was something that would be good 

for the hospital. Advice of counsel is a very, very good 

defense. It is one that the law recognizes, and it is one that 

. . . fits perfectly in this situation.” Trial I, Transcript 

for Mar. 25, 2010, at 1986.

Further, the district court instructed the jury on the 

advice of counsel defense, making clear that it provided a 

vehicle for absolving Tuomey of False Claims Act liability. The 

court instructed, among other things, that “the defendant has 

asserted an affirmative defense of advice of counsel to the 
59

United States’ allegation that it acted in violation of the 

False Claims Act. An affirmative defense is an argument that, 

if true, will defeat the government’s claim.” Trial I, 

Transcript for Mar. 26, 2010, at 2098-99. Regarding what Tuomey 

needed to show to succeed with that defense, Judge Perry 

instructed that “in order for the defendant to prevail on its 

affirmative defense of advice of counsel, Tuomey must prove the 

following: One, that the advice was sought in good faith; two, 

that Tuomey provided full and accurate information to the 

attorney; three, the advice could be reasonably relied upon; 

and, four, Tuomey faithfully followed the attorney’s advice.” 

Id. 

Having put the advice it got from its lawyers squarely at 

issue, Tuomey should not have been permitted to cherry-pick 

which advice of counsel the jury was permitted to hear. 

Instead, the jury should have been allowed to consider all the 

advice of all Tuomey’s counsel—including McAnaney. 

The record makes clear that, whatever else McAnaney’s 

assessment was, it was also advice of counsel. McAnaney’s 

engagement letter to Tuomey and Drakeford, who had hired him 

jointly, stated that McAnaney, a lawyer, had been “retained” to 

“review and advise” the parties “with respect to a proposed 

business relationship.” J.A. 145. McAnaney committed to being 

guided by the parties’ “instructions in carrying out the 
60

representation” and reporting to the parties his “conclusions” 

and “any potential compliance issues.” Id. In other words, 

McAnaney was Tuomey’s counsel, and he advised Tuomey about the 

contracts at the heart of this case. 

The record makes similarly clear that Tuomey did not follow 

McAnaney’s advice. McAnaney advised Tuomey that the proposed 

contracts raised significant “red flags” under the Stark Law.

J.A. 2054. McAnaney advised that Tuomey would have difficulty 

persuading the government that the contracts did not compensate 

the physicians in excess of fair market value. And McAnaney 

warned Tuomey that the contracts presented “an easy case to 

prosecute” for the government. J.A. 2078. Rather than heed 

this advice and back away from the contracts, however, Tuomey 

told McAnaney not to put his conclusions in writing and ended 

his engagement. 

Allowing McAnaney’s testimony into evidence to show the 

advice he gave in light of Tuomey’s advice of counsel defense 

would have been outside of Rule 408’s limited exclusionary 

ambit. In other words, by pressing an advice of counsel 

defense, Tuomey itself opened the door for McAnaney’s testimony 

to come in, even if it otherwise might have been excludable 

under Rule 408. See Fed. R. Evid. 408(b). Despite this, the 

district court barred McAnaney’s testimony wholesale.
61

In keeping McAnaney out of the first trial, the district 

court prevented the jury from getting the full picture of what 

advice Tuomey had gotten from counsel. Tuomey told the jury 

that “[t]he lawyers were the ones running the show . . . All 

Tuomey did was accept their recommendations.” Trial I, 

Transcript for Mar. 25, 2010, at 1986. But the government was 

effectively prevented from showing that Tuomey had gotten 

conflicting recommendations from its different counsel, picked 

its preferred advice, and discarded the rest. It is hard to 

imagine that this constituted anything other than a prejudicial 

abuse of discretion. Cf. Rodriguez-Garcia v. Municipality of 

Caguas, 495 F.3d 1 (1st Cir. 2007) (reversing because erroneous 

Rule 408 ruling hamstrung plaintiff’s ability to show elements 

of claim). 

In sum, in allowing Tuomey to press its advice of counsel 

defense and giving the jury an advice of counsel instruction yet 

preventing the jury from hearing all the advice that Tuomey got, 

the district court abused its discretion and prejudiced the 

government. This error alone was grave enough to warrant a new 

trial. Accordingly, I, too, conclude that Judge Perry’s 

decision to grant a new trial must be upheld. 
62

II.

Moving beyond the district court’s decision to grant a new 

trial, I agree with the majority that the jury’s determination 

that Tuomey violated both the Stark Law and the False Claims Act 

must stand. Our standard of review at this juncture is a highly 

deferential one, “accord[ing] the utmost respect to jury 

verdicts” and “constraining” us to affirm so long as the record 

contains “sufficient evidence for a reasonable jury” to have 

returned the verdict it did. Lack v. Wal-Mart Stores, Inc., 240 

F.3d 255, 259 (4th Cir. 2001). After careful review of the 

record, I cannot conclude that no reasonable jury could have 

reached the verdict before us. 

Nevertheless, I am troubled by the picture this case 

paints: An impenetrably complex set of laws and regulations 

that will result in a likely death sentence for a community 

hospital in an already medically underserved area.

A.

The Stark Law is, at its core, a prohibition on selfreferrals, barring doctors from referring patients for certain

services to entities in which the doctors (or their immediate 

family members) have a financial interest, unless an exception 

applies. Patrick A. Sutton, The Stark Law in Retrospect, 20 

Annals Health L. 15, 25-26 (2011). Further, entities providing 
63

the pertinent services are prohibited from billing Medicare or 

Medicaid pursuant to such a prohibited referral. Id.

“The Stark Law is a strict liability statute so it is 

immaterial whether one intended to violate the law; an 

inadvertent violation can trigger liability.” Paula Tironi, The 

“Stark” Reality: Is the Federal Physician Self-Referral Law Bad 

for the Health Care Industry?, 19 Annals Health L. 235, 237-38 

(2010). Individuals and entities that violate the Stark Law can 

be subject to severe monetary penalties and exclusion from 

federal health care programs. Id. These “steep civil sanctions 

and program exclusions may be ruinous. Health care providers 

are open to extensive liability, their financial security 

resting uneasily upon a combination of their attorneys’ wits 

[and] prosecutorial discretion.” Jo-Ellyn Sakowitz Klein, The 

Stark Laws: Conquering Physician Conflicts of Interest?, 87 Geo. 

L.J. 499, 503-04 (1998). 

Despite attempts to establish “bright line” rules so that 

physicians and healthcare entities could “ensure compliance and 

minimize . . . costs,” 66 Fed. Reg. 856, 860 (Jan. 4, 2001), the 

Stark Law has proved challenging to understand and comply with. 

Indeed, “[t]he Stark law is infamous among health care lawyers 

and their clients for being complicated, confusing and counterintuitive; for producing results that defy common sense, and 

sometimes elevating form over substance. Ironically, the Stark 
64

law was actually intended to simplify life by creating ‘bright 

lines’ between what would be permitted and what would be 

disallowed, and creating certainty by removing intent from the 

equation.” Charles B. Oppenheim, The Stark Law: Comprehensive 

Analysis + Practical Guide 1 (AHLA 5th ed. 2014). Some of the 

invective used to describe the Stark law even borders on 

lyrical: “ambiguous[,] arcane[,] and very vague;” and “heaps of 

words in barely decipherable bureaucratese.” Steven D. Wales, 

The Stark Law: Boon or Boondoggle? An Analysis of the 

Prohibition on Physician Self-Referrals, 27 Law & Psychol. Rev. 

1, 22-23 (2003) (quotation marks and citations omitted).

Given this complexity and the strict liability nature of 

the statute, a Stark Law “compliance program can help a 

physician or [] entity prove good faith and obtain leniency in 

the event of a violation; however, the Stark Law’s complexity 

and frequent revisions make it difficult for physicians and 

entities to develop and implement such programs.” Tironi, supra

at 238. Against this problematic backdrop, the availability of 

an advice of counsel defense should perhaps be especially robust 

in Stark Law cases prosecuted under the False Claims Act.

B.

The False Claims Act discourages fraud against the federal 

government by imposing liability on “any person who . . . 

knowingly presents, or causes to be presented, a false or 
65

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

3729(a)(1)(A) (emphasis added). The False Claims Act is meant

“to indemnify the government . . . against losses caused by a 

defendant’s fraud,” Mikes v. Straus, 274 F.3d 687, 696 (2d Cir. 

2001) (citing United States. ex rel. Marcus v. Hess, 317 U.S. 

537, 549, 551–52 (1943)), as opposed to a defendant’s mistake. 

Accordingly, a defendant may skirt False Claims Act 

liability by showing good faith reliance on the advice of 

counsel. As the majority opinion recognizes, in fraud cases, 

“‘[i]f in good faith reliance upon legal advice given him by a 

lawyer to whom he has made full disclosure of the facts, one 

engages in a course of conduct later found to be illegal,” the 

trier of fact may conclude that the conduct was innocent because 

“‘the guilty mind’ was absent.” Ante at 30-31 (quoting United 

States v. Painter, 314 F.2d 939, 943 (4th Cir. 1963)).

In the context of the Stark Law, it is easy to see how even 

diligent counsel could wind up giving clients incorrect advice. 

Between the law’s being amended to have a broader scope but then 

narrowed with various exceptions, along with the promulgation 

and amendment of copious associated rules and regulations, “the 

Stark Law bec[ame] a classic example of a moving target. For 

lawyers, who must depend on the predictability of the law when 

they give counsel to their clients, such unpredictability [i]s 

an unusually heavy burden.” Wales, supra at 21.
66

In this case, there can be no doubt that Tuomey sought and 

followed the advice of its long-time counsel, Nexsen Pruet. 

Nexsen Pruet drafted and approved the contracts at the heart of 

this litigation. Tuomey and Nexsen Pruet consulted with others, 

including the nation’s largest healthcare law firm and a 

national consulting firm with expertise in physician

compensation. Those experts, too, signed off on the 

arrangements (though the parties dispute whether Tuomey had 

shared all pertinent information for purposes of these 

additional assessments). 

Nevertheless, as the majority opinion notes, “a reasonable 

jury could have concluded that Tuomey was . . . no longer acting 

in good faith reliance on the advice of its counsel when it 

refused to give full consideration to McAnaney’s negative 

assessment of the” contracts. Id. at 32. As already explained, 

McAnaney, the former Chief of the Industry Guidance Branch at 

the Department of Health and Human Services’ Office of Counsel 

to the Inspector General, also served as Tuomey’s counsel. And 

he advised Tuomey that the proposed arrangements raised 

significant red flags and may well be unlawful. Had Tuomey 

followed McAnaney’s advice, it likely would have faced no 

lawsuit in which to raise an advice of counsel, or any other, 

defense. 
67

III.

This case is troubling. It seems as if, even for wellintentioned health care providers, the Stark Law has become a 

booby trap rigged with strict liability and potentially ruinous 

exposure—especially when coupled with the False Claims Act. 

Yet, the district court did not abuse its discretion when it 

granted a new trial and the jury did not act irrationally when 

it determined that Tuomey violated both the Stark Law and the 

False Claims Act. Accordingly, I must concur in the outcome 

reached by the majority.