Opinion ID: 772535
Heading Depth: 2
Heading Rank: 4

Heading: Application of the Excessive Fines Clause

Text: 31 In its money judgment, the district court included a civil penalty of $555,000. Mackby contends this penalty violates the Excessive Fines Clause of the Eighth Amendment. 32 A fine is unconstitutionally excessive if (1) the payment to the government constitutes punishment for an offense, and (2) the payment is grossly disproportionate to the gravity of the defendant's offense. United States v. Bajakajian, 524 U.S. 321, 327-28, 334 (1998). Bajakajian did not deal with a civil sanction but rather with the criminal forfeiture of property involved in the unreported transportation of over $10,000 in currency out of the country. However, prior to Bajakajian, the Supreme Court held that civil fines fall within the scope of the Eighth Amendment. See Hudson v. United States, 522 U.S. 93, 103 (1997) (The Eighth Amendment protects against excessive civil fines, including forfeitures.) (citing Alexander v. United States , 509 U.S. 544 (1993) and Austin v. United States, 509 U.S. 602 (1993)). In addition, we have applied the first part of Bajakajian's rule, examining the punitive or remedial nature of a penalty, to civil sanctions. See Louis v. Comm'r of Internal Revenue, 170 F.3d 1232, 1236 (9th Cir. 1999) (quoting Austin , 509 U.S. at 610, and citing Bajakajian, 524 U.S. at 329 n.4). We have held that a civil sanction that cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes, is punishment. Wright v. Riveland, 219 F.3d 905, 915 (quoting Austin, 509 U.S. at 610). In determining whether a civil sanction is punitive or remedial, the court considers factors such as the language of the statute creating the sanction, the sanction's purpose(s), the circumstances in which the sanction can be imposed, and the historical understanding of the sanction. Louis, 170 F.3d at 1236 (citing Bajakajian , 524 U.S. at 32732). 33 The language of the FCA does not specify whether its sanction of $5,000 to $10,000 per claim is meant to be punitive or remedial. See 31 U.S.C. SS 3729-3733 (1994). However, the sanction clearly has a punitive purpose. No damages to the government need be shown. Hagood, 929 F.2d at 1421 (citingRex Trailer Co. v. United States, 350 U.S. 148, 153 n.5 (1956)). Furthermore, in addition to the sanction, treble damages are recoverable, demonstrating that the sanction's purpose is not to provide a form of damages. See Wright, 219 F.3d at 915 (stating that deductions from inmates' funds which were made regardless of whether an inmate committed an offense for which restitution is appropriate and regardless of whether the inmate had already been ordered to pay court-ordered restitution at sentencing served the goal of deterrence and therefore constituted punishment for Excessive Fines Clause purposes). In addition, the legislative history of the False Claims Amendments Act of 1986 indicates that the statute has a deterrent purpose. For example, the Senate Report states that the FCA is a much more powerful tool in deterring fraud than common-law contract remedies. S. Rep. No. 99-345, at 4 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5269. 34 The fact that the FCA's purpose is at least in part punitive has been recognized by the Supreme Court. In United States v. Bornstein, 423 U.S. 303, 309 n.5 (1976) (citations omitted), the Court stated, According to its sponsor, the False Claims Act was adopted `for the purpose of punishing and preventing . . . frauds.'  Additionally, in Austin , 509 U.S. at 619, the Court noted that an innocent owner defense was one factor in the Court's determination that the statute in question was in part punitive and therefore subject to the Excessive Fines Clause. 35 We conclude the civil sanctions provided by the False Claims Act are subject to analysis under the Excessive Fines Clause because the sanctions represent a payment to the government, at least in part, as punishment. Inquiry must be made, therefore, to determine whether the payment required by the district court is so grossly disproportionate to the gravity of Mackby's violation as to violate the Eighth Amendment. See Bajakajian, 524 U.S. at 327-28, 334. For purposes of that inquiry, the record must be further developed by the district court. For example, one of the factors to be considered is whether a fine as large as that imposed by the district court is required to achieve the desired deterrence. That and other factors that may be relevant to the inquiry should be addressed in the first instance by the district court. Accordingly, we remand this case to the district court for a determination of whether the $555,000 fine was unconstitutionally excessive. See Wright, 219 F.3d at 918-19 (remanding to the district court for a fact-intensive inquiry to determine the issue of excessiveness). 36 That brings us to the final issue -whether the district court's treble damage award is also subject to an Excessive Fines Clause analysis. Although the Supreme Court has not directly addressed the question whether treble damages under the FCA are punitive, thus requiring an Excessive Fines Clause analysis, it has stated that [t]he very idea of treble damages reveals an intent to punish past, and deter future, unlawful conduct. Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 639 (1981). Although that statement was made in the context of an antitrust case, it was later cited by the Supreme Court in Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 784-86, 120 S.Ct. 1858, 1869-70, 146 L.Ed.2d 836(2000), to support the statement that treble damages under the FCA are essentially punitive in nature, for the purposes of determining state liability in a qui tam suit. 37 Moreover, the Supreme Court has held numerous times that treble damages pursuant to antitrust statutes are not purely remedial. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 635 (1985) (The treble-damages provision wielded by the private litigant is a chief tool in the antitrust enforcement scheme, posing a crucial deterrent to potential violators, citing Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134, 138-39 (1968)); Am. Soc' y of Mech. Eng' rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 575 (1982) ([A]ntitrust treble damages were designed in part to punish past violations of the antitrust laws . . . . [T]reble damages were also designed to deter future antitrust violations.) (citing Texas Indus., 451 U.S. at 639). But cf. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 331 n.1 (1990) (stating that the treble damages provision of the Clayton Act is a remedial provision). 38 We conclude that the FCA's treble damages provision is, like the statutory penalty provision, not solely remedial and therefore subject to an Excessive Fines Clause analysis under the Eighth Amendment. Accordingly, we remand to the district court for its consideration of the question whether a treble damage award in this case would be unconstitutionally excessive. See Wright, 219 F.3d at 918-19.