In a one-of-a-kind decision that flies in the face of decades of precedent, a Florida federal district court recently held that the False Claims Act's ("FCA") qui tam provisions are unconstitutional as violating the U.S. Constitution's Appointments Clause. See U.S. ex rel. Zafirov v. Florida Medical Assocs., LLC, No. 8:19-CV-01236-KKM-SPF, (M.D. Fla. Sept. 30, 2024).
While the court's decision in Zafirov is not binding on any other federal court, the case presents a significant legal development for all grantees and government contractors who can be targets of qui tam relator-initiated FCA lawsuits. If appealed to the Eleventh Circuit and adjudicated there—or, eventually, before the U.S. Supreme Court, an endorsement of the Middle District of Florida's decision would fundamentally alter the FCA enforcement landscape and impact the government's ability to obtain recoveries and settlements through its primary enforcement tool.
Relators' Role in FCA Suits
FCA actions annually result in billions of dollars in recoveries, due in no small part to the statute's treble damages and penalties provisions. The FCA's qui tam provisions permit private citizens, referred to as whistleblowers or relators, to bring lawsuits on behalf of the U.S. government against those who have submitted false or fraudulent claims for payment to the government. By bringing a qui tam lawsuit, the relator essentially stands in the shoes of the U.S. government—the "real party in interest" in the suit—and, in collaboration with the government, prosecutes the lawsuit against any entity (such as a grantee or contractor) who has falsely received or fraudulently retained federal funds. After conducting a required investigation of a whistleblower's allegations, the U.S. Department of Justice ("DOJ") can opt to "intervene," i.e. join and take the lead in the case—or can decline to intervene, leaving the relator to litigate on his or her own (while retaining important final authority on things like settlement terms).
The FCA's qui tam provisions incentivize relator actions by providing whistleblowers a significant percentage of any monetary recovery. During the 2023 fiscal year, the DOJ reported nearly $2.7 billion in settlements and judgments, with $2.3 billion of that total (or 86 percent of all recoveries) coming from qui tam lawsuits. More than 700 cases were initiated by relators in fiscal year 2023, an average of 13 new cases per week.
The Zafirov Case
In Zafirov, Judge Kathryn Mizelle of the U.S. District Court for the Middle District of Florida held that because the FCA's qui tam provisions grant relators significant authority to initiate litigation for false and fraudulent claims (which harm the public), relators qualify as "Officers of the United States" within the meaning of the United States Constitution's Appointments Clause. The court then concluded that relators had not been properly appointed under that Clause, and dismissed the lawsuit—over the government's objection— as an invalid exercise of federal executive authority.
The case began in 2019 when the relator sued her employer and other defendants for allegedly misrepresenting Medicare patients' medical conditions to falsely obtain payments. As the court noted, the relator did not assert she had been harmed by the defendants' conduct—instead, as is standard in FCA qui tam actions, she filed the complaint based on monetary harm suffered by the United States. Five years after DOJ declined to intervene in the case, the defendants moved for judgment on the pleadings—making a rare constitutional argument arguing that the FCA's long-standing and frequently used qui tam provisions violated the Constitution.
In considering the motion, the court observed that Supreme Court precedent establishes that a person is an officer of the United States if that person both:
- exercises significant authority pursuant to the laws of the United States and
- occupies a continuing position established by law.
Under the first requirement, the court reasoned that because the FCA permits a relator to file a complaint without prior authorization by the federal government, and the filing of such a complaint forces the Executive Branch to investigate the suit's claims and determine whether to intervene, the relator has such "significant authority." The relator's ability to initiate and litigate FCA lawsuits constitutes "significant authority" for purposes of the Appointments Clause, according to the court.
The court also found that "the office of relator" constitutes a "continuing position." In examining the FCA's text, the court noted that a relator must comply with several statutory duties, including:
- filing the initial complaint in camera and under seal,
- serving a copy of the complaint and "written disclosure of substantially all material evidence and information [she] possesses" on the government, and
- waiting at least sixty days before serving the defendant so that the government has time to determine whether to intervene.
Once a relator complies with these duties, the court determined that she has considerable power. The relator "enjoys unfettered freedom to prosecute the action" by deciding which defendants to sue, theories to raise, motions to file, and evidence to obtain. And of course, if the action succeeds, a relator receives a monetary reward for her efforts: between 15 percent and 25 percent of the judgment.
For these reasons, the court concluded that a relator occupies a "continuing position" created and maintained by federal law even though an individual relator's "term" expires at the end of a single matter.
After concluding that relators exercise significant authority and occupy a continuous position, the court rejected arguments that "the FCA's qui tam structure survives constitutional scrutiny because early Congresses enacted some analogous statutes." Ultimately, the court ruled that the relator was acting as an unappointed federal officer, which required dismissal of the relator's suit.
Will Other Courts Follow?
How other courts view the legality of the qui tam provisions remains a continuing open issue for court watchers and recipients of federal funds.
Notably, in U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023), while the majority held that DOJ retains broad authority to seek dismissal of qui tam FCA lawsuits under the FCA—even where relators want to maintain their suits—Justice Thomas's dissent noted "substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation." Whether Justice Thomas's dissenting view invites a constitutional FCA challenge at the high court remains to be seen.
In the meantime, grantees and contractors should recognize the Zafirov decision applies only to the parties in that case. For grantees and contractors facing liability in the Middle District of Florida, of course, drawing a particular judge could be a lucky break indeed. Additionally, as more courts consider similar challenges to the constitutionality of qui tam actions, grantees and contractors should continue to follow these developments and, where appropriate, assert all available defenses—a nod to Zafirov and its unexpected constitutional defense among them.
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