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U.S. v. MACKBY

September 3, 2002

UNITED STATES OF AMERICA, PLAINTIFF,
V.
PETER MACKBY, DEFENDANT.



The opinion of the court was delivered by: Armstrong, District Judge.

ORDER RE EXCESSIVE FINES CLAUSE

The United States ("Government") commenced this action against defendant, Peter Mackby, alleging violations of the False Claims Act, 31 U.S.C. § 3729. Following a three-day court trial, the Court found in favor of the Government and entered judgment against Mackby in the amount of $729,454.92. Mackby subsequently appealed to the Ninth Circuit Court of Appeals which, in a published opinion, affirmed this Court's finding of liability but remanded the action "for further development of the record to determine whether the civil penalty and treble damages presently contained in the district court's judgment violate the Excessive Fines Clause of the Eighth Amendment." United States v. Mackby, 261 F.3d 821, 831 (9th Cir. 2001). Having read and considered the briefs filed by the parties in connection with the remand, the Court finds that the judgment previously entered by the Court does not violate the Eighth Amendment.*fn1

BACKGROUND

The facts of this case are set forth in the Ninth Circuit's opinion, and will only be briefly summarized herein. Mackby and his business partner, Michael Leary ("Leary"), managed and owned a physical therapy clinic known as the Asher Clinic. Prior to June 1988, the Asher Clinic billed Medicare Part B for physical therapy services provided to Medicare patients by various therapists employed by Asher Clinic, using Leary's personal identification number ("PIN").*fn2 Mackby and Leary became embroiled in a lawsuit. As part of the settlement, Mackby acquired Leary's interest and assumed sole control over the Asher Clinic in June 1988. Since Leary was no longer affiliated with the clinic, Mackby began submitting bills for Medicare Part B claims using the PIN of his physician-father, M. Judson Mackby, M.D. ("Dr. Mackby"). However, Dr. Mackby never provided medical services at or for Asher Clinic, referred any patients to the clinic, nor was he involved with the care or treatment of its patients. He was also unaware that his son was using his PIN to obtain payment of Medicare claims.*fn3 Mackby eventually sold the Asher Clinic in May 1997 for $1.7 million.

In March 1998, the Government filed the instant action against Mackby, alleging violations of the FCA. The Government claimed that Mackby violated the Act by directing his clinic to submit claims to Medicare for physical therapy services with an unauthorized provider number, to wit, the PIN which in actuality belonged to Dr. Mackby. During the time period encompassing 1992 to 1996, Mackby caused 8,499 false claims to be submitted to Medicare, resulting in payments totaling $331,078. A three-day bench trial took place in February 1999. After considering the evidence and testimony presented, the Court found in favor of the Government. (Pl.'s Am. Findings of Fact and Conclusions of Law ("FFCL") at 10, filed March 8, 1999.) The Court found that between 1992 and July 1996, the Asher Clinic submitted $58,151.64 in claims which exceeded Medicare's annual payment limit per beneficiary for PTIP's. (Id.; see also supra n. 2.) Based on this figure, the Court imposed a treble damage award of $174,454.92. (Id.) The Court also imposed a civil penalty of $555,000.00 based on a minimum penalty of $5,000.00 per beneficiary per year that exceeded Medicare's annual payment limit for PTIPs, i.e., 111 claims. (Id.) On March 10, 1999, the Court entered judgment against Mackby in the amount of $729,454.92. (See Judgment, filed March 10,1999.)

Mackby filed an appeal with the Ninth Circuit challenging his liability and the amount of the monetary judgment. The appellate court affirmed this Court's determination that Mackby had violated the FCA. Mackby, 261 F.3d at 829, 831 ("Because the evidence established all of the elements of Mackby's violation of the FCA, the district court properly concluded that he violated that statute."). With regard to the judgment, however, the Ninth Circuit remanded the action for the limited purpose of determining whether the civil penalty and treble damage award violates the Excessive Fines Clause of the Eighth Amendment. Id. at 831. The court stated:

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. [Citation] 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.

Mackby, 261 F.3d at 830 (emphasis added).*fn4

The Ninth Circuit also concluded that the treble damage award is subject to an Excessive Fines Clause analysis, and remanded the action "to the district court for its consideration the question whether a treble damage award in this case would be unconstitutionally excessive." Id. at 830-31. However, the court noted that "the amount of the civil penalty and the amount of treble damages need not be considered as if the other did not exist. To the contrary, the amount of one will no doubt bear upon the district court's excessive fines analysis with regard to the other." Id. at 831. By Order of this Court, the parties have each submitted memoranda in connection with these issues.

LEGAL STANDARD

The Excessive Fines Clause of the Eighth Amendment prohibits the government from imposing "excessive fines" as punishment. See U.S. Const. amend. VIII. "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." Mackby, 261 F.3d at 830 (citing United States v. Bajakajian, 524 U.S. 321, 327-28, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998)). In this respect, the Court should consider (1) whether the violation was related to other illegal activities, (2) the availability of other penalties and the maximum penalties which could have been imposed, (3) the extent of the harm caused, and (4) the amount of the forfeiture relative to the gravity of the offense. United States v. 3814 NW Thurman Street, Portland, Or., A Tract of Real Property, 164 F.3d 1191, 1197-98 (9th Cir. 1999); see also Vasudeva v. United States, 214 F.3d 1155, 1161 (9th Cir. 2000) (examining the "the severity of the offense, the criminal fine that could have been imposed, and the harm caused by the defendant.").

DISCUSSION

A. Other Related Activities

The first factor for consideration is whether the misconduct at issue is related to any other illegal activities. Thurman, 164 F.3d at 1197. In this case, there is no indication that ...


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