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United States v. Bourseau

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA


December 1, 2006

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ROBERT I. BOURSEAU, ET AL., DEFENDANTS.

The opinion of the court was delivered by: Hon. Roger T. Benitez United States District Judge

ORDER GRANTING PLAINTIFF'S AND DEFENDANTS' RULE 59(e) MOTIONS TO ALTER OR AMEND THE JUDGMENT

Now before the Court are motions by both Plaintiff and Defendants to alter or amend the Judgment pursuant to Federal Rules of Civil Procedure Rule 59(e). The motions are timely filed and this Court has jurisdiction. The motions are granted as follows.

I. PLAINTIFF'S MOTION

The Government moves to amend the Judgment to correct and reduce the amount of damages, reducing the amount of the Judgment from $23,776,332 to $15,657,585. Defendants do not oppose the reduction. Therefore, the Motion is Granted. The Damages are reduced as follows:

YearFalse Claim SubmittedOriginal DamagesAmended Damages 1997Interest Claimed But Never Paid$2,550,722$1,494,753  Unrelated Bankruptcy Legal Fees$860,144$421,470  Interest Claimed But Never Paid$2,761,803$1,807,880 1998Unrelated Bankruptcy Legal Fees$112,303$112,303  Management Fees to NCFE$180,000$189,847  Non-Existent Lease Expense$414,618$414,618  Inflated Square Footage Effect on Reimbursement$279,899$279,899 1999Unrelated Bankruptcy Legal Fees$53,535$53,535  Management Fees to NCFE$240,000$118,798  Inflated Square Footage Effect on Reimbursement$135,521$135,521  Program Costs (Interest Claimed But Never Paid)$336,899$190,571 Total $7,925,444$5,219,195

The total single damages is reduced from $7,925,444 to $5,219,195. At the same time, the total trebled damages is reduced from $23,776,332 to $15,657,585. The $31,000 of civil penalties remains unchanged.

II. DEFENDANTS' MOTION

Defendants also move to alter or amend seeking amended findings and challenging the damages as an excessive fine under the Eighth Amendment and a violation of the Due Process Clause of the Fifth Amendment.

A. Amended Findings

The motion is granted insofar as the Judgment will be altered to make explicit what was implicit previously: the false claims of the 1997, 1998, and 1999 Medicare Cost Reports for California Psychiatric Management Services ("CPMS") doing business as Bayview Hospital & Mental Health Systems ("Bayview") actually damaged the Government and are actionable both as affirmative false claims under 31 U.S.C. § 3729(a)(1), §3729(a)(2) or §3729(a)(3), and as reverse false claims under § 3729(a)(7) adopting the reasoning of United States, ex rel. A Homecare, Inc. v. Medshares Management Group, Inc., 400 F.3d 428 (6th Cir. 2005), cert. denied, 126 S.Ct. 797 (2005).

B. Eighth Amendment

The motion is granted insofar as the Court now considers whether the fines and trebled damages imposed here violate either the Eighth Amendment or the Due Process Clause. The Court finds they do not.

The trebled damages awarded do not violate the Eighth Amendment. In United States v. Mackby, 261 F.3d 821, 831 (9th Cir. 2001) ("Mackby I"), which the Defendants rely on*fn1 , the Ninth Circuit concluded that the False Claims Act treble damages provision had a punitive element and was, therefore, subject to an Excessive Fines analysis under the Eighth Amendment. Two years later, the Supreme Court determined that the treble damages provision of the False Claims Act also has "a compensatory side, serving remedial purposes in addition to punitive objectives." Cook County, Illinois v. United States, 538 U.S. 119, 130 (2003). In fact, Cook County suggests that in a False Claims Act case much of the trebled damages award serves a compensatory purpose. The Supreme Court observes that there is "no question that some liability beyond the amount of the fraud is usually necessary to compensate the Government completely for the costs, delays, and inconveniences occasioned by fraudulent claims." Id. Earlier, in United States v. Halper, 490 U.S. 435, 445 (1989), the Supreme Court found that the injury from the presentment of a false claim is "not merely the amount of the fraud itself, but also ancillary costs, such as the costs of detection and investigation, that routinely attend the Government's efforts to root out deceptive practices directed at the public purse." Moreover, the Cook County decision notes that trebled damages help compensate the Government in the absence of a separate provision for consequential damages and prejudgment interest.*fn2 Id. at 131 and n.9 ("The treble damages provision was, in a way, adopted by Congress as a substitute for consequential damages.").

In the Mackby litigation following remand and coming after the Cook County decision, the Ninth Circuit held that treble damages and fines awarded under the False Claims Act in that case did not violate the Excessive Fines Clause where the size of the penalty was "not grossly disproportional to [defendant's] level of culpability and the harm he caused." United States v. Mackby, 339 F.3d 1013, 1017 (9th Cir. 2003), cert. denied, 124 S.Ct. 1657 (2004) ("Mackby II").

Here, a large portion of the trebled damages award of $15,657,585 is compensatory in nature. The remaining smaller portion which may be punitive and the fines of $31,000 are not grossly disproportional to the Defendants' level of culpability and the harm that the Defendants caused. As in Mackby II, the false claims here harmed the Government "in the form of both monetary damages and harm to the administration and integrity of Medicare." Id. at 1018. In Mackby II, the Ninth Circuit explains that, "[t]he government has a strong interest in preventing fraud, and the harm of such false claims extends beyond the money paid out of the treasury." Id. at 1019. Mackby II continues, "[f]raudulent claims make the administration of Medicare more difficult, and widespread fraud would undermine public confidence in the system." Id. Finally, dollars fraudulently obtained from the public fisc by unscrupulous or reckless medical services providers, exhaust the Medicare resources which are set aside for deserving Medicare patients.

For all of these reasons, this Court concludes that the amount of damages and penalties found in this case does not violate the Excessive Fines Clause.

C. Due Process Clause

Defendants also argue that the trebled damages are punitive damages that violate the Due Process Clause of the Fifth Amendment. In State Farm Mutual Automobile Insurance Company v. Campbell, 538 U.S. 408 (2003), which Defendants rely on, the Supreme Court held that punitive damages awarded by a jury may implicate the Due Process Clause.*fn3 The damages award here, however, is not the product of a jury verdict and does not have the potentially arbitrary quality of a classic punitive damages award. Cook County, Illinois, 538 U.S. at 132 ("Treble damages certainly do not equate with classic punitive damages, which leave the jury with open-ended discretion over the amount...."). Defendants do not cite, and this Court has not found, a decision holding that a trebled damage award imposed under the False Claims Act violates the Due Process Clause. In view of the mixed compensatory and punitive nature of False Claims Act trebled damages, the Court finds that the damages imposed against the Defendants in this case do not offend the Due Process Clause.

III. CONCLUSION

Both motions are granted. The Findings of Fact and Conclusions of Law and Judgment are, hereby, amended. The Medicare Cost Reports are actionable as false claims under 31 U.S.C. § 3729(a)(1), §3729(a)(2) or §3729(a)(3), and as reverse false claims under § 3729(a)(7). The amount of actual damages is reduced to $5,219,195. The amount of trebled damages is reduced to $15,657,585. The fines and trebled damages imposed here do not violate either the Excessive Fines Clause of the Eighth Amendment or the Due Process Clause of the Fifth Amendment.

IT IS SO ORDERED.


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