On September 30, in U.S. ex rel. Zafirov v. Florida Medical Associates LLC, Judge Kathryn Mizelle in the Middle District of Florida dismissed a qui tam action under the False Claims Act (“FCA”) on the basis that the FCA’s qui tam provision—a provision included in the Act since its initial enactment in 1863—is unconstitutional. The first case in which a court found the FCA’s qui tam provision unconstitutional, Zafirov, carries significant implications for the future of FCA litigation and the qui tam device.
The FCA permits private parties, known as whistleblowers or relators, to bring qui tam suits on behalf of the U.S. government. While the FCA’s qui tam provision has centuries-old historical origins, long-dormant debates around the constitutionality of qui tam actions have been revived in recent federal jurisprudence. In the 2023 Supreme Court decision, United States ex rel. Polansky v. Exec. Health Res., Inc., Justice Thomas, in dissent, noted that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II [of the U.S. Constitution] and that private relators may not represent the interests of the United States in litigation.” 599 U.S. 419, 449 (2023) (Thomas, J., dissenting). Citing the Court’s 2020 decision in Seila Law LLC v. CFPB, 591 U.S. 197, 213 (2020) in stating that “[t]he entire ‘executive Power’ belongs to the President alone[,]” Justice Thomas argued that only the President and those acting under him may prosecute violations of federal law. Thus, he concluded that the FCA may have unconstitutionally authorized private relators—who are not U.S. officers appointed by the President under the Appointments Clause—to bring lawsuits on behalf of the government. Two other Justices, Kavanaugh and Barrett, shared the same concern and signaled that the Court should take up the constitutionality issue “in an appropriate case.” Id. at 442 (Kavanaugh, J., concurring).
Until Monday, district courts had declined to follow Justice Thomas’ dissent in Polansky 1. Indeed, the Middle District of Florida has previously rejected an Appointments Clause challenge to the FCA qui tam device, and a neighboring district within the Eleventh Circuit had done so just three weeks before the Zafirov decision 2. That approach accorded with the substantial trend in federal case law, where each circuit court called to consider the argument so far has rejected it 3. While the Eleventh Circuit had not yet had occasion to rule on this question, it surely will now.
Heavily relying on the Polansky dissent, Zafirov picks up the call for a closer look at the FCA by finding the qui tam device unconstitutional. A former clerk to Justice Thomas, Judge Mizelle reasoned that (1) an FCA relator is an officer of the United States subject to the Article II Appointments Clause, (2) despite historical qui tam provisions, the Appointments Clause does not exempt an FCA relator from its requirements, and (3) dismissal is the only permissible remedy as the qui tam plaintiff is not constitutionally appointed. In Judge Mizelle’s words, “An FCA relator’s authority markedly deviates from the constitutional norm … [The qui tam mechanism] directly defies the Appointments Clause by permitting unaccountable, unsworn, private actors to exercise core executive power with substantial consequences to members of the public.” (Slip Op. at 51.)
For now, Zafirov will cast doubt on FCA qui tam actions in the Middle District of Florida. We expect and will follow any appeal to the Eleventh Circuit. Should the Court of Appeals agree with Judge Mizelle, it would tee up a circuit split in an area of substantial importance to the federal government—representing some $2.7 billion in recoveries in 2023 alone—and thus an area ripe for review at the U.S. Supreme Court. More broadly, Zafirov is likely to affect qui tam actions in other jurisdictions and provide support for FCA defendants who may not have otherwise raised what was previously an uphill argument.
This development is especially relevant to companies involved in government contracting, most prominently those within the healthcare and defense contracting sectors. Current and future FCA defendants will, at a minimum, consider raising the Article II argument in other jurisdictions. The government may also now be more wary of letting adventurous relators make difficult caselaw, which could provide motivation to more actively dismiss qui tam suits, rather than passively permitting suits to proceed on claims in which the government declines to intervene. Needless to say, the FCA defense, relators’, and white-collar bars will be watching this space closely.
[1] See, e.g., United States ex rel. Miller v. Manpow, LLC, No. 2:21-cv-05418, 2023 U.S. Dist. LEXIS 179199 (C.D. Cal. Aug. 30, 2023); United States ex rel. Lagatta v. Reditus Labs., LLC, No. 2:21-cv-05418, 2024 U.S. Dist. LEXIS 177178 (C.D. Ill. Sept. 30, 2024); United States ex rel. Wallace v. Exactech, Inc., No. 7:18-cv-01010, 2023 U.S. Dist. LEXIS 207881 (N.D. Ala. Nov. 20, 2023).
[2] See United States v. Halifax Hosp. Med. Ctr., 997 F. Supp. 2d 1272 (M.D. Fla. 2014); United States ex rel. Butler v. Shikara, No. 20-80483-CV (S.D. Fla. Sept. 6, 2024).
[3] See, e.g., Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749 (5th Cir. 2001) (en banc); United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032 (6th Cir. 1994); United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 758 (9th Cir. 1993); United States ex rel. Stone v. Rockwell Int’l Corp., 282 F.3d 787 (10th Cir. 2002).
