7th Circuit Adopts “Net Trebling” Approach for FCA Damages

 

In U.S. v. Anchor Mortgage Corp., 711 F.3d 745 (7th Cir. 2013), the Court of Appeals for the 7th Circuit rejected the district court’s use of a “gross trebling” approach to compute False Claims Act damages in a case involving false statements made to obtain federal housing loan guarantees.

In an opinion by Judge Easterbrook, the Court reversed the lower court’s damage award because the court had offset from trebled rather than from single damages the U.S. Treasury ‘s recoupment of part of its losses on the guaranteed loans by selling the real estate pledged as security. The Court held that: the False Claims Act does not “signal a departure from the norm—and the norm is net trebling.” 711 F.3d at 749. The Court opined that net trebling has been employed in antitrust law and “generally” by appellate courts in the False Claims Act context, and that “net losses” are the ordinary measure of damages in civil litigation. 711 F.3d at 749-750. The Court rejected the United States’ longstanding reliance on United States v. Bornstein, 423 U.S. 303, (1976) for the proposition that compensatory payments should be deducted from treble rather than single damages, noting that, in fact, “[f[ootnote 13 in Bornstein unambiguously uses the contract measure of loss, supporting a net trebling approach.” 711 F.3d at 750.