On September 30, 2024, the US District Court for the Middle District of Florida dismissed a False Claims Act (FCA) case on the grounds that the qui tam provision of the FCA is unconstitutional. This ruling will almost certainly be appealed to the US Court of Appeals for the Eleventh Circuit and could reach the Supreme Court in the next year or two. If the decision is upheld, it would have extraordinary consequences for FCA enforcement, which is driven primarily by qui tam relator claims. At a minimum, this ruling has important litigation and strategic implications for anyone involved in qui tam litigation today or in the future.
In Depth
The FCA allows private whistleblowers – called relators – to file and prosecute FCA cases. When the government declines to intervene and take over the case (which it frequently declines to do), relators can continue the case and represent the government on their own, through discovery, trial, and any appeals. If they win, relators can keep as much as a third of the recovery, plus attorney fees. As the district court noted, these self-appointed relators act with “great independence” and “unfettered discretion” to “decide whom to investigate, whom to charge in the complaint, which claims to pursue, and which legal theories to employ” in cases where the government declines to intervene.
Over the last few decades, the volume of FCA whistleblower cases (i.e., qui tam cases) has increased dramatically due to expanded qui tam provisions designed to incentivize claims. But a recent decision from Judge Kathryn Kimball Mizelle of the US District Court for the Middle District of Florida threatens to upend the status quo, at least if it is upheld on appeal.
The district court’s decision breaks new ground, but the issue is not new. A footnote in the Supreme Court’s 2000 opinion (by Justice Antonin Scalia) in Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, expressly reserved the question that Judge Mizelle analyzed, noting that “we express no view on the question whether qui tam suits violate Article II, in particular the Appointments Clause of § 2 and the ‘take Care’ Clause of § 3.” And, more recently, Justice Clarence Thomas’s dissent in United States, ex rel. Polansky v. Exec. Health Res., Inc., 599 U.S. 419 (2023), described in detail the argument why “Article II does not permit private relators to represent the United States’ interests in FCA suits,” while signaling that Justice Thomas is receptive to this position.
We have been tracking the development of this issue for over a decade and have briefed it extensively on behalf of our clients before district courts, courts of appeal, and the Supreme Court in a certiorari petition for which the Court requested the government’s response on this question.
The Ruling
After almost five years of litigation, the defendants in Zafirov changed course and challenged the constitutionality of the qui tam provision. They raised two separate arguments: (1) that the qui tam provision violates the Take Care Clause and the Executive Vesting Clause of Article II because the FCA “den[ies] the President necessary removal authority and sufficient supervisory control over” a relator; and (2) that the qui tam provision violates the Appointments Clause because a relator is an officer of the United States but is not appointed under proper procedures (or at all). The court agreed with the second argument and dismissed the case on that ground, and accordingly determined that it did not need to reach the first argument.
The defendants faced an initial hurdle: waiver. The relator argued that the defendants had missed their chance to raise this argument and waived the issue. The court disagreed. Although it found that it is possible to waive the issue (i.e., it is not about subject-matter jurisdiction), the court indicated that it would permit the defendants to raise the issue late given the trial schedule in the case. However, this close brush with waiver illustrates the importance for other defendants of raising this issue early and preserving their rights.
Tracking the argument outlined in Justice Thomas’s Polansky dissent, Judge Mizelle (who clerked for Justice Thomas before taking the bench) found that an FCA relator satisfies both of the required prongs necessary to be considered an “officer” of the United States. First, the court found that relators possess and exercise “significant” civil enforcement authority on behalf of the government. Examining other similarly situated officials such as independent counsels, the court reasoned that relators’ powers are a “textbook” exercise of significant executive authority. Second, the court found that an FCA relator “occupies a continuing position established by law” which is analogous to other “temporary-yet-continuing” officers like bank receivers. Because relators are not appointed in a way permitted by the Constitution, the qui tam provision is unconstitutional.
The court rejected the relator’s historical argument that qui tam actions date back to the nation’s founding and are thus part of the constitutional scheme. Instead, it held that notwithstanding historical practice, the plain text of the Constitution prohibits the FCA’s qui tam scheme.
The court held that the only remedy is dismissal with prejudice as to the relator.
Key Takeaways
This is a district court ruling and is not binding precedent. However, Judge Mizelle’s opinion makes it far easier for other defendants to persuade other courts to follow the same path. Further, the relator in this case will almost certainly appeal to the Eleventh Circuit, and the government will likely intervene to defend the qui tam provisions of the FCA (as it did unsuccessfully in the district court).
If the Eleventh Circuit agrees with Judge Mizelle’s analysis, declined qui tam cases will be dismissed across the Eleventh Circuit (and relators will likely hunt for other forums). Further, such a ruling would create a split from other circuits that have rejected constitutionality challenges (including the Second, Sixth, and Ninth Circuits), and it seems quite likely that the Supreme Court would take up the issue to resolve such a split and determine whether the law is constitutional.
For now, this decision is another tool for defendants facing qui tams where the government has declined to intervene. Such defendants should – at a minimum – preserve the issue through an affirmative defense and give serious consideration to a motion to dismiss, a motion for judgment on the pleadings, or a summary judgment motion at the appropriate time.
The most dramatic consequences will follow if the Eleventh Circuit and Supreme Court uphold this analysis and strike down the qui tam provision, which is certainly a possible outcome. In that event, the government would lose a key enforcement mechanism, as declining to intervene would result in the end of a case. These would be difficult problems to remedy with changes in law, so the government may face pressure to take more cases. Likewise, defendants might consider expanding their arguments to suggest that qui tam complaints are unconstitutional even before an intervention decision.
In short, anyone with possible FCA exposure should track this issue carefully, and those with pending cases should immediately review their litigation strategy to account for this development.
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