A groundbreaking decision out of the United States District Court for the Middle District of Florida, if affirmed and adopted by higher courts, could impact the ability of private citizens to file suit against those attempting to defraud the United States Government (the “Government”). On September 30, 2024, Judge Kathryn Kimball Mizelle of the United States District Court for the Middle District of Florida dismissed a qui tam action under the False Claims Act (“FCA”), holding that the FCA’s qui tam provision is unconstitutional. U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024).
Enacted in 1863, the FCA proscribes individuals from defrauding the Government by making any type of “false claim.” 31 U.S.C. § 3729(a)(1)(A)-(G), (b)(2)(A)(ii), (b)(3). The FCA purports to allow not only the Government to bring actions, but also authorizes a private citizen, a “relator,” to file suit on behalf of the Government using a mechanism called a “qui tam” suit. The Government can then choose whether to intervene as plaintiff and take over the action. However, if the Government does not intervene, the relator can continue to direct the litigation for the Government’s benefit without the Government’s input. A relator who brings a successful qui tam suit may receive a portion of the Government’s recovery—up to 30%.
In Zafirov, a private citizen brought an FCA claim via a qui tam suit against her employer and others for alleged Medicare fraud. The Government declined to intervene in the case, and defendants moved for judgment on the pleadings, arguing that the FCA’s qui tam provision was unconstitutional because it violated: (i) the Take Care Clause and Vesting Clause; and (ii) the Appointments Clause of Article II of the United States Constitution. Defendants first argued that the FCA denies the President removal authority and supervisory control over the relator, in violation of the Take Care and Vesting Clause of Article II. Second, defendants argued that the FCA illegally appoints the relator as an officer of the United States, in violation of the Appointments Clause of Article II.
Judge Mizelle found defendants’ Appointments Clause argument persuasive, dismissing the case after finding the FCA’s qui tam provisions unconstitutional by illegally empowering private citizens with “core executive power,” yet without the “proper appointment[.]” In reaching this decision, Judge Mizelle relied heavily on the Supreme Court’s decision in Buckley v. Valeo, 44 U.S. 1, 140 (1976), which held that an individual is an “officer” of the United States—and therefore subject to the Appointments Clause—if she exercises “significant authority” pursuant to the laws of the United States. Here, Judge Mizelle ruled that a relator exercises “significant authority” pursuant to the laws of the United States because she has the power to initiate an enforcement action in the name of the United States to vindicate a public right. The Court noted that a relator has the authority to “determine which defendants to sue, which theories to raise, which motions to file, and which evidence to obtain,” and if the action proceeds to an appeal, the relator “will decide which arguments to preserve, further binding the federal government.” In sum, “by suing on behalf of the United States to secure essentially punitive penalties, a relator performs a traditional, exclusive function of the government that is integral to the administration and enforcement of public law.” That kind of “core executive power,” Judge Mizelle held, satisfies Buckley’s “significant authority” test.
The relator and the United States, which intervened to defend the constitutionality of the FCA, argued that there were material distinctions between a relator’s power and the exercise of significant authority in Buckley, but Judge Mizelle found the proposed distinctions unpersuasive. First, the relator and the United States argued that a relator lacks substantial authority because she ordinarily only pursues one enforcement action rather than many. Judge Mizelle rejected this argument, finding that the “frequency of the exercise of enforcement authority power likewise does not diminish a relator’s significant authority.” Judge Mizelle explained that the “officer distinction instead turns on the power bestowed on the official” and not “the number of enforcement actions brought by one official as compared to another.”
Second, the relator and the United States argued that a relator lacks substantial authority because the Attorney General has the authority to intervene or pursue a parallel action and to dismiss a relator’s suit over her objection. Judge Mizelle disagreed, stating that “the government’s ability to pursue a parallel action and to exert limited control after intervening does not lessen a relator’s unchecked civil enforcement authority to initiate an enforcement action.” Judge Mizelle explained that “back-end executive supervision—exercised by the government in only a fifth of cases—does not dimmish the significance of an FCA relator’s front-end power to bring an enforcement action against a private party in federal court on behalf of the United States.”
Finally, the relator and the United States argued that a relator lacks substantial authority because a relator does not receive any pre-suit investigatory resources from the federal government. Judge Mizelle found this argument unpersuasive, stating that there is no legal support “for the view that an individual who prosecutes matters on behalf of the United States must receive federal resources for her pre-suit investigations to be deemed an officer of the United States.” Moreover, “[s]imply naming a power that relators do not possess does not vitiate their officer status.”
Zafirov is the first decision to invalidate the FCA’s qui tam authority and has considerable implications for the future of FCA litigation. Since the end of the fiscal year in September 2023, the United States Department of Justice (“DOJ”) obtained over $2.68 billion in settlements and judgements in suits involving fraud against the United States. Of those suits, there were a total of 712 qui tam suits as compared to the 500 non-qui tam suits.[1] From the settlements and judgments, over $300 million went to relators.
The Zafirov decision will undoubtedly be appealed to the Eleventh Circuit and could end up before the U.S. Supreme Court. For now, this decision provides an additional argument for dismissal of qui tam suits.
[1] Dep’t of Justice, https://www.justice.gov/opa/media/1339306/dl?inline (last accessed Oct. 10, 2024).
Links & Downloads
[View source.]
