The False Claims Act (FCA), 31 U.S.C. § 3729, prohibits federal contractors and others from defrauding the government through the submission of false claims that cause the government to pay too much or receive too little. The federal government is normally the party that asserts FCA claims When they succeed, the government may recover both the actual damages suffered, plus treble damages and fines.
The FCA also permits any “person,” referred to as a relator, to bring a claim in the name of the United States. After such a party files a complaint, the government may choose to intervene as a plaintiff in the action, which transfers control to the government. If the government declines to intervene, the relator may proceed with prosecution, including any appeals, without having to consult with or take direction from the government. If the relator succeeds with the claim, they may collect up to thirty percent of the judgment as an award. A total of 712 these qui tam actions were brought in 2023, compared to 500 FCA claims filed directly by the United States. In 2023, FCA claims that started as qui tam actions resulted in more than $2.3 billion in judgments and settlements.
On September 30, the United States District Court for the Middle District of Florida ruled in United States of America ex rel. Clarissa Zafirov v. Florida Medical Associates, LLC, et. al. that the qui tam provisions of the FCA are unconstitutional, and that a whistleblower cannot file FCA claims on behalf of the federal government. Although this decision is limited to the claim before it, and does not invalidate qui tam actions in general, it may be the first step toward elimination of opportunity for whistleblowers to assert FCA claims. Given that a majority of FCA claims have been initiated through qui tam actions, this could substantially reduce the number of FCA claims prosecuted against federal contractors since the federal government apparently may no longer rely on the qui tam provisions of the FCA.
In Florida Medical Associates, the plaintiff was a former employee who sued her employer under the FCA for Medicare fraud. The plaintiff brought her claim as a relator and the federal government declined to intervene. The plaintiff proceeded to litigate the claim. The defendants argued that the FCA’s qui tam provision violates Article II’s Appointments Clause, Take Care Clause, and Vesting Clause.
The District Court found that the FCA’s qui tam provisions indeed violates the Appointments Clause of the Constitution. The Appointments Clause requires that “Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States be appointed by the President subject to the advice and consent of the Senate, although Congress may vest the appointment of inferior officers in the President alone, in the Courts of Law, or in the Heads of Departments.” The District Court concluded that a relator in an FCA case is an “Officer of the United States” because he or she possesses “civil enforcement authority on behalf of the United States”:
The Supreme Court deems an individual an officer of the United States if she “exercis[es] significant authority pursuant to the laws of the United States,” Id. (quoting Buckley, 424 U.S. at 126), and “occup[ies] a ‘continuing’ position established by law,” Id. (quoting United States v. Germaine, 99 U.S. 508, 511 (1879)). If an individual satisfies both conditions, the Constitution requires that she be appointed consistent with the Appointments Clause.
Applying that test, an FCA relator is an “Officer[] of the United States.” Because a relator possesses civil enforcement authority on behalf of the United States, a relator exercises significant authority. And because the FCA prescribes a relator’s statutory duties, powers, and emoluments, and the position mirrors the role of a bank receiver or special prosecutor in its duration and non-personal nature, a relator occupies a continuing position. Thus, [plaintiff] Zafirov is subject to the Appointments Clause.
The District Court reasoned that:
an FCA relator wields significant authority because she “conduct[s] civil litigation in the courts of the United States for vindicating public rights.” Buckley, 424 U.S. at 126, 140. A relator may file a complaint, without ex ante oversight by the federal government, to initiate an enforcement action on behalf of the United States for treble damages and substantial statutory penalties. 31 U.S.C. §§ 3729(a)(1), 3730(b). That act precludes all but the Attorney General from “interven[ing] or bring[ing] a related action based on the facts underlying” the complaint. Id. § 3730(b)(5). The filing of the complaint also begins a sixty-day seal period during which the government investigates both the claims and the relator and determines whether to intervene. Id. § 3730(b)(2). That ticking clock forces the Executive Branch to align its investigative priorities with those of a self-interested third party. If the government elects to intervene, the relator still enjoys “the right to continue as a party to the action, subject to [statutory limitations in § 3730(c)(2)].” Id. § 3730(c)(1). If the government does not intervene, the relator may prosecute her action to final judgment however she chooses, including litigating appeals that can become binding precedent on the government. Id. § 3730(b)(4). That is textbook “significant authority.” Buckley, 424 U.S. at 126, 138–39.
The District Court also found the position of relator was “continuous and permanent,” which is another factor used to determine if someone is an “Officer of the United States”:
When a relator initiates an enforcement action, she must comply with several statutory duties. She must file the initial complaint in camera, serve “[a] copy of the complaint and written disclosure of substantially all material evidence and information [she] possesses” on the government, and wait at least sixty days before serving the defendant so that the government may investigate and decide whether to intervene. See 31 U.S.C. § 3730(b)(2)–(3). Beyond the ability to initiate and litigate an action that binds the federal government, a relator enjoys unfettered freedom to prosecute the action as she determines best. She may choose which defendants to sue (and which not to sue, for reasons of her own), which theories to raise, which motions to file, and which evidence to obtain. Id. § 3730(b)(4)(B) (granting the relator “the right to conduct the action”). Unlike a government attorney, a relator proceeds untethered to, and unbound by, DOJ policy or the Justice Manual. And she has no duty to report to the Attorney General or his subordinates beyond serving (at taxpayer expense and upon request) certain litigation documents on the government. Id. § 3730(c)(3). Finally, if the action succeeds, the FCA compensates a relator with a statutory moiety between fifteen to twenty-five percent of the judgment. Id. § 3730(d). The existence of statutorily defined duties, powers, and emoluments confirms that a relator holds a continuing office. Germaine, 99 U.S. at 511.
As the above statutory duties, powers, and emoluments prove, the office of an FCA relator is continuous even if it is not continually filled. Although a particular person occupies the office—in the manner of an Attorney General, an Ambassador, or Secretary of the Treasury—for a time that varies from occupant to occupant, the office of relator persists by operation of the FCA regardless of the occupant and regardless of any intermittent vacancy, resignation, debilitation, or the like. Stated otherwise, the office of relator exists whether a person is appointed to that office or not, making that office “continuous and permanent.”
Accordingly, the District Court found that the plaintiff was an “Officer of the United States” and, to serve in that role, would have to be appointed by the President:
Because Zafirov is an officer, there is no question that she is improperly appointed. At its most permissive, the Appointments Clause allows Congress to “by law” vest the appointment of inferior officers “in the President alone, the head of an executive department, or a court.” Arthrex, 594 U.S. at 10. The FCA is a law, but rather than vest the appointment of a relator in the Executive Branch or in a court, the qui tam provision permits any “person” to self-appoint by initiating an enforcement action. See 31 U.S.C. § 3730(b)(1). Because self-appointment, obviously, does not satisfy the Appointments Clause, the defendants prevail on this constitutional challenge.
As relators in qui tam actions are not appointed by the President, the District Court found that the plaintiff did not have the constitutional authority to act as a relator and dismissed the case:
When a litigant’s challenge “involve[s] a Government actor’s exercise of power that the actor did not lawfully possess,” such as when an official is improperly appointed, the remedy is to set aside ultra vires actions. Collins, 594 U.S. at 258 (collecting cases); see also Id. at 283 (Gorsuch, J., concurring in part) (“[O]fficials cannot wield executive power except as Article II provides. Attempts to do so are void.”). Put differently, in Appointments Clause cases, “invalidation” is “the remedy,” which “follows directly from the government actor’s lack of authority to take the challenged action in the first place.” CFPB v. All Am. Check Cashing, Inc., 33 F.4th 218, 241 (5th Cir. 2022) (en banc) (Jones, J., concurring); Collins, 594 U.S. at 266 (Thomas, J., concurring) (“[A]n officer must be properly appointed before he can legally act as an officer.”). Here, these remedial principals require dismissal.
Zafirov, the only litigant on her side of the enforcement action, lacks the authority to prosecute on behalf of the United States. And absent congressional amendment, there is no way to obtain such authority (at least under the qui tam provision). Thus, the portion of this action vindicating the government’s interest cannot continue.
The District Court concluded by stating:
It is no surprise that the Supreme Court describes the FCA qui tam provision as “unusual” and “unique.” Polansky, 599 U.S. at 423–24. An FCA relator’s authority markedly deviates from the constitutional norm. The provision permits anyone—wherever situated, however motivated, and however financed—to perform a “traditional, exclusive [state] function” by appointing themselves as the federal government’s “avatar in litigation.” Yates, 21 F.4th at 1310. That arrangement directly defies the Appointments Clause by permitting unaccountable, unsworn, private actors to exercise core executive power with substantial consequences to members of the public. And although the Supreme Court and the Eleventh Circuit have reserved the Article II issue, my conclusion that an FCA relator is an officer of the United States is neither novel nor surprising.
Because Zafirov initiated this FCA action when unconstitutionally appointed, I grant the defendants’ motion for judgment on the pleadings and dismiss the case.
While this decision is limited to the case before it, and does not invalidate qui tam actions generally, it is likely that other qui tam defendants will use this decision as a basis to challenge FCA claims asserted against them.
If this decision, or others like it, are appealed and federal appellate courts and the U.S. Supreme Court reach the same conclusion, the number and scope of FCA claims will dramatically change. In 2023, there were 212 more FCA claims brought by relators under the qui tam provisions than FCA claims brought directly by the federal government. And FCA claims prosecuted by relators, i.e. those that the DOJ declined to take over, recovered $442,334,476 in judgments and settlements in 2023 alone. If those claims cannot be brought by relators, government contractors may see a marked decrease in the number of FCA claims filed, since the federal government may not have the prosecutorial resources to replace the private litigators who have recently leveraged the FCA’s qui tam provisions.
