An update on how False Claims Act damages are calculated
Gross Trebling vs. Net Trebling
What is Gross Trebling?
Gross Trebling is the Department of Justice’s preferred methodology for calculating treble damages under the False Claims Act. It involves first trebling ( tripling) the false claim amount and then deducting the value of the goods and services provided(aka “value of benefit conferred”). This methodology severely reduces the value of any value received by the government, reducing the impact of the defense of “benefit conferred”.
What is Net Trebling?
Net Trebling provides a more fair picture of the government’s actual damages by taking into account the actual damages sustained by the government due to the FCA violation by accounting for the value of benefit conferring prior to trebling.
What happened on March 21, 2013?
The Seventh Circuit rejected the Department of Justice’s preferred methodology of gross trebling, emphasizing that FCA damages should be calculated according to the net trebling methodology. See United States v. Anchor Mortgage Corp., No. 10-3122, 2013 WL 1150213 (7th Cir. 2013). The Seventh Circuit held that the Department of Justice’s choice of gross trebling is not sustained by policy or statutory language, and is relying on a misinterpretation of United States vs. Bornstein, 423 U.S. 303 (1976).
The Seventh district refused to follow the Ninth Circuit decision in United States v. Eghbal, 548 F.3d 1281 ( 9th Cir. 2008), citing the Ninth Circuits failure to address note 13 in Bornstein. Instead, the Seventh Circuit found support in numerous post- Bornstein appellate decisions, including the Second Circuit’s recent decision in United States ex rel. Feldman v. Van Gorp, 697 F.3d 78 (2d Cir. 2012), generally using a net trebling approach.