New decision striking down False Claims Act's Qui Tam statute sparks further whistleblower lawsuits

A recent Florida District Court ruling stated that the False Claims Act (FCA) qui tam This provision violates the Constitution by transferring executive power to private whistleblowers (relators) who are not appointed by the president.

The first decision of its kind and a sharp break from past precedent, it signals that lawsuits over the constitutionality of qui tam litigation is likely to continue in FCA cases.

In its advice of September 30, 2024 United States ex rel. Zafirov v. Florida Medical Associates, LLCthe United States District Court for the Middle District of Florida ruled that the FCAs qui tam The provision allowing relators to file lawsuits against defendants violates the Appointments Clause in Article II of the Constitution. Judge Kathryn Kimball Mizelle wrote for the court that relators who take FCA actions against suspects act as officers of the United States who must therefore be appointed by the president. According to its decision, allowing relators to bring FCA actions alleging that defendants submitted false claims to the government “directly violates the Appointments Clause by allowing unsworn, unsworn private actors to become the principal to exercise executive power with substantial consequences for the public.”

Disputes over the constitutionality of qui tam The number of lawsuits has increased since the United States Supreme Court decision United States ex rel. Polansky v. Executive Health Resources, Inc. (No. 21-1052), in which Justice Clarence Thomas, joined by two other justices, issued a dissent suggesting that the qui tam The statute could violate Article II of the Constitution and prompt the Supreme Court to review the issue in the future. To date, every district court hearing the issue had reaffirmed the constitutionality of the statute. Zafirov will likely prompt more lawsuits and arguments over the viability of the qui tam device.

In this update we investigate the Zafirov decision and its implications in future cases.

Background: The Qui Tam Determination and the Constitutional Question

A Civil War-era civil statute to combat fraud against the government allows the FCA qui tam relators to bring an action on behalf of the United States against defendants alleging that a defendant has submitted or caused to be submitted a false or fraudulent claim for payment to the government. The U.S. Department of Justice (DOJ) can initiate FCA actions on behalf of the government, but… qui tam lawsuits are the source of most litigation under the FCA and generate billions of dollars in recoveries annually. Relationships are eligible to recover between 15% and 30% of any recovery from the government in a settlement or judgment under the FCA.

Justice Thomas’s dissent in Polansky revived arguments challenging the FCAs qui tam provisions. In PolanskyAccording to the majority opinion, written by Justice Elena Kagan, the government may intervene in a qui tam take action at any time and proceed with dismissal based on a respectful standard. In his dissent, Justice Thomas expressed his disagreement with the majority’s position and suggested that the qui tam provisions in the FCA conflict with Article II of the Constitution. Judge Thomas wrote that relators may not represent the interests of the United States in lawsuits and that allowing a private citizen to file a lawsuit “in defense of public rights” is an executive function that may only be exercised by an official of the United States under the Appointments Clause. Judge Thomas reasoned that since a relator is not an official of the United States, he or she should not have the authority to “represent the interests of the United States in civil litigation.” Justice Brett Kavanaugh wrote a brief concurring opinion, joined by Justice Amy Coney Barrett, in which he stated that he agreed with Justice Thomas that there are “substantial arguments” that the qui tam provisions are contrary to Article II of the Constitution and that the Court must examine the issue “in an appropriate case”. The remaining six justices did not address the constitutional issue.

Since Polanskydefendants have raised the constitutional issue in several cases. However, apart from that ZafirovThese arguments have so far proven unsuccessful. They don’t write on a blank slate. In decisions that predate the date Polanskythe U.S. Courts of Appeals for the Fifth, Sixth, Ninth, and Tenth Circuits rejected all of the FCA’s constitutional challenges qui tam provisions. The cases highlight that the government retains significant authority qui tam cases, even if it does not intervene in the action and take it over. Into the Fifth Circuit Riley to St. Luke’s Episcopal Hosp.252 F.3d 749 (5th circa 2001) (and sofa) believed that the qui tam The statute does not conflict with the Appointments Clause because, even in dismissed cases, the government has “a number of checks and balances,” such as the power to veto settlements and dismiss the lawsuit based on the objections of the relator. Similarly, the Ninth Circuit explained that a relator, who litigates “only a single matter,” has no “primary responsibility” for enforcing the FCA and does not exercise authority so “significant” that the Constitution only requires an officer of the United Nations allows. States to exercise this. United States ex rel. Kelly v Boeing Co., 9 F.3d 743, 758–59 (9th Cir. 1993).

Other than Zafirov, since then there have been five district court rulings Polansky which dealt with the issue of the appointment clause, and in each of these cases the court rejected the argument that the qui tam statute was unconstitutional.(1) In these cases, the courts distinguished between relators and executive officers covered by the appointments clause. They explained that relators do not have unchecked power, but temporary positions limited to one lawsuit, and that the government exercises significant control over all aspects of the lawsuit.

The Zafirov Case – Background and retention

Like most FCA matters, Zarifov is a matter of concern. In 2019, plaintiff Clarissa Zafirov filed a petition qui tam suit against several defendants, including her employer, a healthcare provider, alleging that she misrepresented patients’ medical conditions to Medicare in violation of the FCA. The government declined to intervene in the lawsuit, and Zafirov continued to litigate the case on her own (the DOJ oversees cases in which it refuses to intervene).

The defendants moved to dismiss her lawsuit, arguing that the qui tam provision is unconstitutional. The court agreed. In its ruling, the court first noted that to be considered an officer of the United States, an individual must “exercise considerable authority under the laws of the United States” and “hold a continuing position established by law ‘. Applying this test, the court found that a relator (1) exercises significant authority because the qui tam provisions give relators “

The way forward

The Zafirov decision is the first case to find that the FCA’s qui tam provisions are unconstitutional and deviate from decades of precedents that otherwise exist.

As of this writing, Zafirov has not yet appealed the district court’s decision to the Eleventh Circuit Court of Appeals. For now, Zafirov is an outlier. Nevertheless, the decision will likely invite FCA defendants to raise constitutional challenges in future cases, with the issue raised in motions to dismiss before district courts and ultimately before the U.S. Courts of Appeals. The prospects that the Supreme Court will hear the issue are far from clear. Issuing a subpoena certiorari in the Supreme Court requires the votes of at least four justices, and the willingness of the Court to comply certiorari in a particular case often depends on several factors, including the extent to which lower courts are divided.

For the time being, companies receiving government funding should be aware of the emerging case law and its implications for FCA enforcement. One of the issues that may arise in future cases is the extent to which the constitutional analysis differs depending on whether the government has decided to intervene in a case or refuses to do so.

Endnote

(1) See United States ex rel. Butler vs. ShikaraNo. 20-80483-CV, 2024 WL 4354807 (SD Fla. Sept. 6, 2024); United States v. Riverside Med. Grp., PCNo. CV 22-04165 (SDW) (LDW), 2024 WL 4100372 (DNJ September 6, 2024); United States ex rel. Wallace v. Exactech, Inc., 703 F. Supp. 3d 1356 (N.D. Ala. 2023); United States ex rel. Thomas versus care, No. CV-22-00512-PHX-JAT, 2023 WL 7413669 (D. Ariz. Nov. 9, 2023); United States ex rel. Miller v. ManPow, LLCNo. 221CV05418VAPADSX, 2023 WL 8290402 (CD Cal. August 30, 2023).

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