Damages Slashed by More than Half in False Claims Act Judgment Against Precision Lens and Late Co-Founder

In early 2023, a federal civil jury found that between 2006 and 2015, Precision Lens and its late co-founder Paul Ehlen provided gifts and other benefits to ophthalmologists to induce their use of Precision Lens’ products when performing cataract surgeries paid for by federal health programs, in violation of the False Claims Act and Anti-Kickback Statute.

While the jury determined the damages to be roughly $43 million, the DOJ sought treble damages, resulting in a $129 million damage verdict. Civil penalties were added on top of the damage amount, resulting in a more than $487 million judgment for damages and penalties against Precision Lens and Ehlen. In the judgment, Judge Wilhelmina M. Wright noted that she was only addressing the numerical calculation of the judgment amount and was not going to resolve any of Precision or Ehlen’s arguments that the judgment should be for a reduced amount, “anticipat[ing] that those arguments and perhaps others will be raised by Defendants following the entry of judgment.”

On February 8, 2024, Judge Wright partially granted the defendant’s motion for post-judgment relief, primarily focusing her ruling on the argument that the judgment was unconstitutional under the Excessive Fines Clause of the Eighth Amendment. The Court noted that the Excessive Fines Clause applies to punitive civil penalties and that the amount owed by Precision Lens and Ehlen’s estate “consists substantially of penalties.” The Court went on to say that – based on precedent – a “punitive sanction violates the Excessive Fines Clause if it is ‘grossly disproportional to the gravity of a defendant’s offense,” using a variety of factors.

Some of the factors considered in determining whether a sanction is grossly disproportional include:  reprehensibility of the defendant’s conduct, the relationship between the penalty and the harm to the victim, the  sanctions  in  other  cases  for  comparable  misconduct,  legislative  intent,  as well as  the  defendants’ ability to pay.

The Court also noted that the Supreme Court has stated that “an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety,” and that in cases where “compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit” of constitutionality, but has stopped short of creating a “simple mathematical formula” to determine the constitutional line.

While “no single factor was determinative in reaching [its] conclusion,” the court found that in this case, the damages were constitutionally capped at roughly $217 million: about $43 million in actual damages, $86 million in treble damages (less the single-damages base), and $86 million in penalties (not including post-judgment interest, attorneys’ fees, or other taxable costs).

This revised judgment amount is still about five times the amount of actual damages in the case and the ratio of punitive damages to actual damages is four-to-one. The Court noted that “the compensatory damages assessed in this matter, however calculated, are notably severe” and that while the conduct for which defendants were found liable warranted additional penalties that exceeded the compensatory damages, “an amount greater than the amount imposed [in the revised judgment] threatens to become grossly disproportional to the gravity of the offense.”

Whether either side will appeal this reduction is to be determined, especially as it does not seem that Precision Lens nor Ehlen’s estate will be able to satisfy the compensatory damages in the matter.

While there isn’t a black and white rule to determine whether an award is unconstitutional under the Eighth Amendment, Alexander O. Canizares of Perkins Coie LLP stated, “It is reasonable to expect future cases in which Eighth Amendment arguments are made to examine the ratio of the FCA’s penalties to the government’s compensatory damages when determining whether the penalties are ‘grossly disproportionate’ to the gravity of the offense.”