BNSF Railway Company et al v. The Center for Asbestos Related Disease, Inc.

Filing 233

ORDER: The judgment in this matter is amended to reflect a total damages award of $3,243,795.00 for the United States Government and the imposition of $2,582,228.00 in penalties for the 337 FCA violations found by the jury. IT IS FURTHER OR DERED that BNSF, as relator, is entitled to 25% of the total proceeds. IT IS FURTHER ORDERED that BNSF's request for attorneys' fees and costs will be resolved by separate order once that issue has been fully briefed and submitted to the Court. Signed by Judge Dana L. Christensen on 7/18/2023. (ASG)

Case 9:19-cv-00040-DLC Document 233 Filed 07/18/23 Page 1 of 12

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
BNSF RAILWAY COMPANY,
on behalf of THE UNITED STATES
OF AMERICA,

CV 19–40–M–DLC

ORDER

Plaintiff,
vs.
CENTER FOR ASBESTOS
RELATED DISEASE, INC.,
Defendant.

Before the Court are the parties’ briefs regarding damages and penalties to
be imposed against Defendant Center for Asbestos Related Disease, Inc.,
(“CARD”) under the False Claims Act. (Docs. 224, 225.) Having read and
considered the briefs filed by the parties, the Court amends the judgment in this
matter to award the United States $3,243,795.00 in damages, impose
$2,582,228.00 in penalties, and award Relator BNSF Railway Co. (“BNSF”) 25%
of the total proceeds of the action. BNSF’s attorneys’ fees and costs will be
addressed through a later order once the issue has been fully submitted.
BACKGROUND
BNSF brought this qui tam action, pursuant to 31 U.S.C. § 3730, alleging
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that CARD violated the False Claims Act (“FCA”), § 3729(a)(1)(A), (B), and (G).
(Doc. 66 at 49–54.) BNSF claimed that CARD violated the FCA by knowingly
presenting or causing to be presented: (1) “false or fraudulent claims for payment
or approval to the federal government;” (2) “a false record or statement material to
a false or fraudulent claim;” and (3) “false records or statements material to an
obligation to pay or transmit money or property to the government.” (Id.)
Specifically, BNSF alleged that CARD submitted false claims and statements
through Environmental Health Hazards (“EHH”) Medicare Coverage forms to the
Social Security Administration, bills to Medicare for opioid and other drug
prescriptions, and grant applications and reports to the American Toxic Substances
Disease Registry and Centers for Disease Control and Prevention. (See id. at 48–
54.)
A jury trial commenced on June 12, 2023, and on June 28 the jury found that
CARD had committed a total of 337 violations of the FCA—246 violations
occurring before November 2, 2015, and 91 occurring after November 2, 2015—
and awarded the United States $1,081,265.00 in damages. (Doc. 216.) Following
the verdict, the Court ordered the parties to submit supplemental briefing on the
issue of the total damages and penalties to be awarded under the FCA. (See Doc.
214.) This issue is now fully briefed and before the Court.

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DISCUSSION
First, the Court will address the statutory damages and penalty to be imposed
pursuant to the FCA. The Court will then address whether the damages and
penalty imposed violate the Eighth Amendment’s Excessive Fines Clause.
I.

Statutory Damages and Penalties.

The FCA provides that a person who violates the Act “is liable to the United
States Government for a civil penalty . . . plus 3 times the amount of damages
which the Government sustains because of the act of that person.” 31 U.S.C. §
3729(a)(1). The Act provides the Court with limited discretion to determine the
amount of the penalty to be imposed, adjusted in accordance with the Federal Civil
Penalties Inflation Adjustment Act of 1990. Id. For violations that occurred
between September 29, 1999, and November 2, 2015, the Court may impose a civil
penalty between $5,500 and $11,000 for each violation. 28 C.F.R. § 85.3(a)(9).
For violations that occurred after November 2, 2015, the Court may impose a civil
penalty between $13,508 and $27,018 for each violation. Id. § 85.5(a), (d). The
FCA also awards a qui tam relator “an amount which the court decides is
reasonable for collecting the civil penalty and damages . . . not less than 25 percent
and not more than 30 percent of the proceeds of the action,” which “shall be paid
out of such proceeds.” 31 U.S.C. § 3730(d)(2).
Here, the jury awarded the United States Government $1,081,265.00 in
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damages for 337 violations of the FCA. Trebling these damages results in a total
damages award of $3,243,795.00. Applying the minimum and maximum penalties
provided under the Act for the 337 violations—246 violations occurring before
November 2, 2015, and 91 occurring after November 2, 2015—results in a penalty
range between $2,582,228.00 and $5,164,638.00.1 BNSF defers to the Court’s
discretion as to the appropriate penalties within this range but urges the Court to
impose the maximum end of the range. (Doc. 224 at 4.) CARD argues that no
fines or additional damages should be imposed. (Doc. 225 at 16.) BNSF also
requests that it be awarded 25% of the total proceeds, which is the minimum
percentage allowable under the Act. (Doc. 224 at 6.)
The Court finds that a penalty at the low end of the statutory range of
$2,582,228.00 is sufficient to achieve the aims of the FCA. Specifically, the Court
is satisfied that this penalty will deter future wrongdoing and reflects the
seriousness of the offense. Accordingly, the judgement will be amended to reflect
that CARD is liable to the United States Government for $3,243,795.00 in
damages and $2,582,228.00 in penalties, for a total of $5,826,023.00. BNSF is
entitled to 25% of the total proceeds.

1

Penalties for violations between September 29,1999, and November 2, 2015:
Minimum: $5,500 x 246 = $1,353,000.00
Maximum: $11,000 x 246 = $2,706,000.00
Penalties for violations after November 2, 2015:
Minimum: $13,508 x 91 = $1,229,228.00
Maximum: $27,018 x 91 = $2,458,638.00

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II.

Excessive Fines Clause.

“An award of treble damages and civil penalties under the FCA is, at least in
part, punitive and subject to the Eighth Amendment’s Excessive Fines Clause.” 2
United States v. Bourseau, 531 F.3d 1159, 1173 (9th Cir. 2008); see also United
States v. Mackby, 261 F.3d 821, 829–31 (9th Cir. 2001) [hereinafter Mackby I]
(holding that “the FCA’s treble damages provisions, at least in combination with
the Act’s statutory penalty provision, is not solely remedial and therefore is subject
to an Excessive Fines Clause analysis under the Eight Amendment.”). Under the
Excessive Fines Clause, “[i]f the amount of the [fine] is grossly disproportional to
the gravity of the defendant’s offense, it is unconstitutional.” United States v.
Bajakajian, 524 U.S. 336, 337 (1998).
Though there is no rigid set of factors to consider when deciding whether a
fine violates the Excessive Fines Clause, the Ninth Circuit has recognized the

The Ninth Circuit has determined that the imposition of treble damages and civil penalties is in part punitive and in
part remedial but has declined to determine precisely what portion of either component of the judgment is remedial
versus punitive. However, the Fourth Circuit has gone further in its analysis of this issue. See United States ex rel.
Drakeford v. Tuomey, 792 F.3d 364, 389 (4th Cir. 2015). In that case, the court determined that the entire penalty
was punitive, but the actual damages award and the portion of the trebled damages award that was allocated to the
relator was remedial. Id. In that case, the Fourth Circuit also recognized the Supreme Court’s suggestion in State
Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003), that “an award of more than four times the amount
of compensatory damages might be close to the line of constitutional impropriety” may apply to FCA damages and
penalties. Id. The Ninth Circuit has not applied the limit from State Farm in the context of FCA damages and
penalties. Nonetheless, applying the Fourth Circuit’s analysis to this case, the punitive portion of the total proceeds
awarded is below the State Farm threshold. The remedial portion of the total proceeds is the sum of the jury’s
original damages award, $1,081,265.00, and the portion of the trebled damages that will go to relator, $810,948.75
(25% of trebled damages). The punitive portion of the total proceeds is the sum of the penalty, $2,582,228.00, and
the portion of the trebled damages award that remains after subtracting the relator’s share and the original damages
award. Thus, the punitive portion of the total proceeds is $3,933,809.25, which is less than four times the
compensatory damages award, or $4,325,060.00
2

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following factors as relevant in the context of an FCA action: “(1) the severity of
the offense and its relation to other criminal activity; (2) the maximum penalty
faced; (3) the harm caused[;] and (4) whether the defendant falls within the class of
persons targeted by the applicable law.” Bourseau, 531 F.3d at 1173; see also
United States v. Mackby, 339 F.3d 1013, 1016–17 (9th Cir. 2003) [hereinafter
Mackby II]. Other relevant factors may include a defendant’s ability to pay,
whether the penalty imposed is necessary to achieve the desired deterrence, and the
sanctions imposed in other cases for comparable conduct. See Cooper Indus., Inc.
v. Leatherman Tool Group, Inc., 532 U.S. 424, 435 (2001); Mackby I, 261 F.2d at
830; United States v. Aleff, 772 F.3d 508, 511 (8th Cir. 2014); Yates v. Pinellas
Hematology & Oncology, P.A., 21 F.4th 1288, 1314–16 (11th Cir. 2021);
Drakeford, 792 F.3d at 388–89. The penalties available under the FCA are
instructive in this analysis, though not dispositive. Mackby II, 339 F.3d at 1017.
Having assessed the relevant factors, the Court concludes that the damages and
penalties imposed in this case do not violate the Excessive Fines Clause.
A.

Relation to Other Criminal Activity.

The first factor requires the Court to consider whether the misconduct at
issue is related to any other illegal activities. This factor is not particularly relevant
here, as compared to criminal contexts, and does not aid in the Court’s analysis.

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B.

Maximum Penalties Available.

There is a presumption that a penalty within the statutory range is
constitutional. See Bajakajian, 524 U.S. at 336 (“[J]udgments about the
appropriate punishment for an offense belong in the first instance to the
legislature.”); see also Ellis v. Zheng, 799 Fed. Appx. 551 (9th Cir. Apr. 3, 2020)
(stating that the court has “never found an FCA penalty within the range permitted
by Congress to violate the Excessive Fines Clause.”). As discussed above, the
Court elected to impose penalties at the low end of the statutory range for all 337
violations. The difference between the minimum and maximum penalty in this
case is $2,582,410.00, which supports a finding that the judgment is not excessive.
See Mackby II, 339 F.3d at 1018 (noting that the substantial difference between the
actual judgment and the maximum available judgment weighs in favor of
upholding the judgment). The Court also notes that the Ninth Circuit has upheld
the imposition of treble damages and civil penalties at the maximum end of the
statutory range in the FCA context. Bourseau, 531 F.3d at 1173 (explaining that
the court “found no law requiring a district court to award less than treble damages
and the maximum amount of allowable civil penalties in an FCA case in order to
satisfy the Excessive Fines Clause” and further stating that “[t]he FCA, itself,
instructs the district court to treble damages and provides the district court with
limited discretion in calculating civil penalties”). Thus, this factor strongly favors
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a finding of constitutionality.
C.

Extent of the Harm Caused and Level of Culpability.

As the Ninth Circuit has recognized, the fact “Congress provided for treble
damages and an automatic monetary penalty per false claim shows that Congress
believed making a false claim to the government is serious offense.” Mackby II,
339 F.3d at 1017–18. “The 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.
Particularly relevant in this case, “[f]raudulent claims make the
administration of Medicare more difficult, and wide-spread fraud would undermine
public confidence in the system.” Id. Evidence presented at trial spoke directly to
this concern, with one pharmacist from the Libby area testifying that the running
joke around town was that an individual could qualify for lifetime Medicare
benefits by going to the CARD Clinic and coughing. Similarly concerning is the
breadth of the harm that occurred, with over one million dollars in actual damages
tied to the administration of Medicare; and, in reality, the damages were potentially
far greater, but the difficulty in proving and calculating the total damages resulted
in BNSF producing evidence on the average cost per violation, rather than an exact
dollar figure.
Regarding culpability, the FCA requires a showing that a defendant acted
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“knowingly.” 31 U.S.C. § 3729(a)(1). Although CARD continues to argue that it
acted in good faith, and therefore, lacked the requisite mental state, (Doc. 225 at 8–
12), that issue has already been decided by the jury. Thus, CARD’s culpability and
the extent of the harm caused support the constitutionality of the damages and
penalties imposed.
D.

Class of Persons Targeted by the FCA.

CARD is squarely in the class of defendants at whom the FCA is principally
directed—those who knowingly defraud the United States Government through
false claims or statements.
E.

Need for Deterrence.

Of particular importance to the Court is the need to deter future misconduct
by CARD and others who may engage in similar conduct. Substantial penalties are
effective in dissuading fraudulent misconduct. Despite the evidence elicited in the
course of this trial, and this Court’s ruling as to the what constitutes a “diagnosis”
under the EHH Medicare provisions, the Court heard testimony from CARD’s
current director, Dr. Karen Lee Morrissette, that the clinic intends to continue
operating in the same manner that it had been leading up to this lawsuit.
Other evidence elicited at trial also raises concerns about future fraud or
misconduct. In particular, the Court is concerned by testimony that Dr. Brad
Black, former director of the CARD Clinic, diagnosed himself with an asbestos
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related disease and had Nurse Michelle Boltz sign his EHH Medicare checklist
form; testimony that Nurse Michelle Boltz signed the form to submit her own
mother for EHH Medicare; and evidence regarding alarmingly high rates of opiate
prescriptions from the CARD clinic for people who may or may not have had a
legitimate diagnosis of an asbestosis related disease. While these acts may not
have constituted any of the 337 FCA violations found by the jury, they do
demonstrate, in this Court’s opinion, a reckless disregard for proper medical
procedure and the legal requirements of government programs.
Accordingly, the Court finds that the need for a significant deterrent effect
warrants the imposition of significant penalties and treble damages.
F.

CARD’s Ability to Pay.

CARD urges this Court to take into consideration its ability to pay and its
status as a non-profit entity dependent on government funding to support its
operations. (Doc. 225 at 14–16.) The Court acknowledges that CARD fills an
important role in Libby, Montana, and the surrounding area as a health-care
provider. The Court also acknowledges that CARD is a non-profit and is, at least
in part, funded by federal government grants.3 However, CARD’s status as a nonprofit does not provide the Court sufficient information to determine CARD’s
ability to pay the damages and penalties imposed here.

3

Evidence was introduced at trial that CARD also received donations from private individuals and entities.

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Moreover, the Court cannot simply disregard the factors discussed above
and give CARD’s financial status undue weight in this analysis. The FCA is the
United States Government’s “primary litigative tool for combatting fraud against it
and is intended to reach all fraudulent attempts to cause the Government to pay.”
Yates, 21 F.4th at 1315 (cleaned up). And, as discussed above, CARD falls
squarely in the FCA’s crosshairs. The FCA does not carve out exceptions on the
basis of the offender’s corporate form, and the Court does not find it appropriate to
do so.
CARD’s argument that the penalty should somehow be reduced on the basis
that the jury did not find CARD liable for all alleged violations, (Doc. 225 at 15–
16), finds no support in the law. CARD appears to conflate the analysis employed
in calculating attorneys’ fees and costs with the imposition of damages and
penalties under the FCA.
Accordingly, CARD’s ability to pay and status as a non-profit do not support
a finding that the damages and penalties imposed here are excessive under the
Eighth Amendment.
CONCLUSION
For the foregoing reasons, the Court finds that the jury’s damages award
must be trebled, resulting in a total damages award of $3,243,795.00 for the United
States Government. Penalties at the low end of the statutory range will be imposed
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for all 337 FCA violations, resulting in a total penalty of $2,582,228.00.
Therefore, the United States Government is entitled to total proceeds of
$5,826,023.00, and BNSF, as relator, is entitled to 25% of the total proceeds. The
damages and penalties are not excessive under the Eighth Amendment in light of
CARD’s culpability, the extent of the harm done, the need for deterrence, and the
FCA’s statutory direction on damages and penalties.
Accordingly, IT IS ORDERED that the judgment in this matter is amended
to reflect a total damages award of $3,243,795.00 for the United States
Government and the imposition of $2,582,228.00 in penalties for the 337 FCA
violations found by the jury.
IT IS FURTHER ORDERED that BNSF, as relator, is entitled to 25% of the
total proceeds.
IT IS FURTHER ORDERED that BNSF’s request for attorneys’ fees and
costs will be resolved by separate order once that issue has been fully briefed and
submitted to the Court.
DATED this 18th day of July, 2023.

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