District Court Recognizes that Even Minimum FCA Civil Penalties Could Be Unconstitutional Under the Excessive Fines Clause

Recently, the Southern District of New York issued a decision imposing FCA penalties that provides further guidance on the circumstances under which such penalties may violate the Eighth Amendment.

In United States ex rel. Bassan v. Omnicare, Inc. (S.D.N.Y. July 7, 2025), the jury found that Omnicare submitted over 3.3 million false claims to federal healthcare programs between 2010 and 2018, resulting in more than $135 million in single damages to the government. The jury also found CVS Health Corporation (“CVSHC”) caused the submission of 30.4%, or over one million, of those false claims following its acquisition of Omnicare in 2015, although it attributed no additional damages to CVSHC’s conduct. The court trebled the single damages assessed against Omnicare, to reach a total of more than $406 million in damages.

The court recognized that were it to apply FCA’s penalty provision “to the letter,” it would result in a minimum penalty of roughly $26.9 billion, on top of the treble damages. The judge emphasized that “[h]ad the Government pursued penalties calculated in strict accordance with the FCA, my conscience indeed would have been shocked – and I think the Supreme Court’s would have as well.” Id. at 4. Instead, the government exercised prosecutorial discretion by declining to seek the full statutory minimum penalty under the FCA, and sought $542 million in statutory penalties against Omnicare (a 4:1 penalties-to-actual-damages ratio), with 30.4% of those penalties, or $164.8 million, imposed jointly and severally on CVSHC. The court imposed the government’s requested penalties, finding them constitutionally permissible under the Eight Amendment’s Excessive Fines Clause. The court’s imposed penalties equate to a per-claim civil penalty of approximately $162, well under the current minimum statutory penalty of $13,946.

This decision is consistent with other recent decisions from the District of Minnesota and the Northern District of Texas that we reported on here and here, which found that even the minimum penalties mandated by the FCA were unconstitutionally excessive, and imposed substantially reduced penalties.

In Omnicare, the court rejected the defendants’ argument that the Constitution prohibits a penalty-to-actual damages ratio greater than 1:1 in a False Claims Act case. In support of their argument, the defendants cited the Supreme Court’s decision in State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), in which the Court suggested “perhaps” a 1:1 ratio of punitive-to-compensatory damages is appropriate where “compensatory damages are substantial.” Id. at 8 (citing State Farm). However, State Farm is neither an Eighth Amendment Excessive Fines Clause nor an FCA case. Thus, the Omnicare court emphasized that State Farm’s Due Process Clause analysis of jury punitive damages awards does not control the review of statutorily prescribed FCA penalties under the Excessive Fines Clause. Id. at 7. However, the court reasoned, “if there is one lesson I can take from State Farm, it is that the AMOUNT of actual/compensatory damages is highly relevant when deciding whether the RATIO between actual damages and either punitive damages or a fine qualifies as excessive.” Id. at 8.

Instead, the Omnicare court’s analysis, like the district court decisions that we previously reported on, centered on the proportionality factor test that inquires into whether a penalty is grossly disproportionate under the Eighth Amendment. The proportionality test considers factors such as the nature of the harm caused by the defendant’s conduct, the essence of the offense, and the maximum fine that could be imposed.

Applying these factors to the case, the Omnicare court found that the government’s proposed penalty satisfied the proportionality test. The court reasoned that the government sustained harm to the “administration and integrity” of its health insurance programs, as well as harm in the form of the time and resources spent investigating the fraud. Additionally, it characterized Omnicare’s FCA violations as “deliberate and egregious,” as evidenced by its decision not to implement resolutions it developed, despite years of warnings from employees and state regulators about its conduct. Id. at 9. Ultimately, the court found that the government’s proposed penalty of $542 million against Omnicare—representing a 4:1 penalty-to-actual-damages-ratio—was within constitutional bounds, noting that other courts have awarded FCA penalties of a similar or greater ratio and that, in the instant case, the statutory minimum penalty of over $26 billion would have resulted in a penalty nearly 200 times greater.

As to CVSHC, the court imposed joint and several liability for a 30.4% share of the penalties—proportionate to the jury’s finding that CVSHC was jointly and severally liable for causing the submission of 30.4% of the false claims. The court did so despite the defendants’ argument that it would be inappropriate to award penalties when the jury assessed no additional damages against CVSHC. The court justified this result because “Congress chose to impose the statutory penalty on a per-violation basis,” rather than on the amount of damages the government sustained. Id. at 11.

In sum, the Omnicare decision affirms that substantial penalties may be constitutionally permissible in FCA cases of deliberate and egregious large-scale fraud, particularly where the government exercises restraint in its penalty requests and where the statutory minimum penalties would otherwise result in penalties many orders of magnitude greater than the actual damages.

A copy of the court’s opinion can be found here.

Summer associate Kennedy Cribbs also contributed to this blog post.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.