On September 30, 2024, a federal judge for the Middle District of Florida issued a groundbreaking decision invalidating the qui tam provision of the False Claims Act (“FCA”) as unconstitutional because the relator (or whistleblower) bringing such a suit qualifies as an “Officer” of the executive branch who was “improperly appointed” in violation of the Appointments Clause of Article II of the Constitution. U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, et al., No. 8:19-CV-01236, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024) (Mizelle, J.). Over objections from the government (which had declined to intervene in the underlying action) and various amici, the court dismissed the case with prejudice on the basis of its constitutional holding. The decision will likely be appealed to the Eleventh Circuit and could ultimately be decided by the Supreme Court, where three justices have already questioned whether the FCA’s qui tam provision violates Article II. The decision also provides judicial support for companies facing qui tam FCA lawsuits to make similar arguments, if warranted under the circumstances.
The FCA’s qui tam provision allows private individuals to file actions “brought in the name of the [federal] Government,” 31 U.S.C. § 3730(b), and successful qui tam relators receive a portion of the proceeds the Government recovers. This whistleblower incentive has led to a proliferation of such litigation, with private relators bringing the majority of FCA actions. In a press release issued earlier this year, the U.S. Department of Justice announced that whistleblowers filed 712 qui tam suits in fiscal year 2023, averaging more than 13 new cases every week. By comparison, 500 new FCA matters in fiscal year 2023 were not qui tams, which Principal Deputy Assistant Attorney General Brian Boynton, who oversees DOJ’s Civil Division, noted is an “all-time record” for DOJ, in remarks he delivered at the 2024 Federal Bar Association’s Qui Tam Conference.
In June 2023, the Supreme Court addressed the government’s authority to dismiss FCA actions brought by relators in United States, ex rel. Polansky v. Executive. Health Resources Inc., 599 U.S. 419, 443–52 (2023). While the case did not address the Article II constitutional question, three justices signaled a concern that the FCA’s qui tam provisions may be unconstitutional. In a dissenting opinion, Justice Thomas raised a “potential inconsistency” between qui tam enforcement and Article II, and suggested that there is “good reason to suspect that Article II does not permit private relators to represent the United States’ interests in FCA suits.” Id. at 450 (Thomas, J., dissenting). In a concurring opinion, Justice Kavanaugh, joined by Justice Barrett, expressed agreement with this notion, noting that “the Court should consider the competing arguments on the Article II issue in an appropriate case.” Id. at 442 (Kavanaugh, J., concurring).
Zafirov is the first decision to invalidate the FCA’s qui tam authority based on Article II’s Appointments Clause since Justice Thomas’s comments in Polansky. The Zafirov case arose over five years ago when relator Clarissa Zafirov sued various medical providers for allegedly misrepresenting patients’ medical conditions to Medicare. Zafirov, 2024 WL 4349242, at *3. The government declined to intervene, and Zafirov privately continued to pursue the litigation on behalf of the United States as relator. Id.
On February 16, 2024, the defendants jointly moved for judgment on the pleadings or to dismiss for lack of subject matter jurisdiction. In their motion, the defendants argued, among other issues, that the qui tam provision violated Article II because a relator is an improperly appointed officer of the United States, just as Justice Thomas had suggested in his Polansky dissent. The United States filed a statement of interest, arguing that the qui tam mechanism is constitutional and that the court should reject defendants’ constitutional argument.
The district court agreed with defendants’ Appointments Clause argument and as a result, dismissed the case with prejudice. The court explained that in assessing whether a qui tam relator is an “officer” under the Appointments Clause, it must consider whether relators: (1) exercise significant authority pursuant to the laws of the United States; and (2) occupy a continuing position established by law. Id. at *6. The court answered “yes” to both questions.
Addressing the first question, the court held that FCA relators exercise significant authority by vindicating public rights through initiating enforcement actions on behalf of the United States for treble damages and substantial statutory penalties. Id. at *7. The court relied on the Supreme Court’s decision in Buckley v. Valeo, 424 U.S. 1, 140 (1976), which held that members of the Federal Election Commission are “officers,” in part because of its responsibility to vindicate public rights through civil litigation. Zafirov, 2024 WL 4349242, at *7. The court also analogized FCA relators to administrative judges, the Director of the Consumer Financial Protection Bureau, and the Federal Housing Finance Authority, who “play a role in enforcing or administering federal law.” Id.
Addressing the second question, the court held that an FCA relator’s position is “continuing” because “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.” 2024 WL 4349242, at *11.
The court then rejected Zafirov’s and the government’s argument that the historical pedigree of qui tam provisions weighs in favor of the FCA qui tam structure’s survival—an argument Justice Thomas also appeared to reject in Polansky. According to the court’s decision, a careful analysis of founding-era examples painted a “complicated” picture that failed to overcome the text of Article II and “weight” of Article II jurisprudence. Id. at 15–18. Addressing a separate issue Justice Thomas had also raised in his Polansky dissent, the court held that the FCA’s partial assignment of the government’s damages claim to the relator is “inextricably intertwined with the statute’s unconstitutional” vesting of authority, and thus could not save the relator’s suit from dismissal. Id. at *19.
In light of its decision regarding the Appointments Clause, the court did not address the defendants’ other arguments that the FCA’s qui tam provisions also violate the Take Care and Vesting Clauses of Article II, due to the lack of removal authority and supervisory control over a relator.
As the court noted, its decision conflicts with pre-Polansky decisions upholding the FCA’s constitutionality from the Fifth, Sixth, Ninth, and Tenth Circuits. The decision also conflicts with another Florida district court decision earlier last month, which rejected a defendant’s Article II argument and denied defendants’ motion to dismiss while noting “the Eleventh Circuit has yet to squarely consider the issue.” United States ex rel. Butler v. Shikara, No. 20-80483-CV, 2024 WL 4354807, at *10–13 (S.D. Fla. Sept. 6, 2024).
The Zafirov opinion sets up a likely appeal to the Eleventh Circuit, which will have a chance to split from the other circuits or join them, and the case may ultimately end up before the Supreme Court, where Justices Kavanaugh, Barrett, and Thomas have expressed both interest in the issue and skepticism about the government’s arguments. In the meantime, the decision also presents companies facing qui tam suits with an additional argument for dismissal. The decision could also lead to increased government intervention in qui tam initiated actions.
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