- Bass, Berry & Sims attorneys analyze cases on FCA's scope
- Qui tam's constitutionality has become more uncertain
A federal district court in Florida recently ruled that the False Claim Act's qui tam provision—which allows private citizens to file suit on behalf of the federal government—is unconstitutional and thus unenforceable. Though appealed last month, the decision is one of several case law developments that have made the future of the qui tam provision more uncertain than ever.
Through the FCA, the federal government delegates some of its prosecutorial functions to private citizens, known as relators, in part because it can't pursue every fraud allegation. Congress has allowed a private plaintiff with firsthand knowledge of the alleged fraud to aid the government for the past 171 years. Relators initiated nearly three quarters of all new FCA matters between Oct. 1, 1986, and Sept. 30, 2021, according to the Department of Justice.
But they may not be able to do so for much longer.
In US ex rel. Zafirov v. Florida Medical Associates, the US District Court for the Middle District of Florida held that allowing relators to represent the government violates the Appointments Clause in Article II of the Constitution. The Appointments Clause h requires that the president, the head of an executive department, or a court appoint all federal government officers.
US District Court Judge Kathryn Kimball Mizelle held that relators act as officers of the US because essentially they are self-appointed special prosecutors who can recover damages against private parties for the federal government. But she ruled that any relator-led FCA case is unconstitutional because relators aren't appointed by the president, the head of an executive department, or a court.
The Zafirov opinion is the first to declare the FCA's qui tamprovision unconstitutional. But its rationale isn't based on a novel argument.
Mizelle's reasoning piggybacked on a dissent last year by US Supreme Court Justice Clarence Thomas in US ex rel. Polansky v. Executive Health Resources, where he observed that the qui tamprovision exists in "something of a constitutional twilight zone."
Foreshadowing Mizelle's ruling, Thomas recognized substantial arguments that the FCA's relator-framework are "inconsistent" with the Appointments Clause "and that private relators may not represent the interests of the United States in litigation."
While the FCA's constitutionality wasn't directly at issue in Polansky, Thomas created the framework for Mizelle's opinion in Zafirov. He captured the attention of at least two other justices—Brett Kavanaugh and Amy Coney Barrett—who in a separate concurrence agreed with Thomas and suggested the Supreme Court should consider the Appointments Clause issue "in an appropriate case."
Zafirov may not necessarily have a seismic impact on the health-care industry because it's a district court opinion that applies only to the relator, Florida Medical Associates, and other defendants. But the decision signals an uncertain future for the FCA, especially in light of Thomas' influential history with the statute.
Within the last 10 years, the Supreme Court has heard and opined on six FCA cases, including Polansky, and Thomas has written opinions in half of those cases, each for a unanimous bench.
Most recently, he authored the 2023 decision in US ex rel. Schutte v. SuperValu, a case interpreting what it means for a defendant to knowingly submit fraudulent claims to the federal government. Thomas reframed the standard for establishing scienter in FCA cases and confirmed it as a subjective standard rather than the objective one it had become in several courts of appeals.
In 2016's Universal Health Services v. US ex rel. Escobar, Thomas similarly recalibrated the standard for materiality in FCA cases and reiterated that FCA liability can attach for implied false certifications and express misrepresentations.
In 2019, Thomas said in Cochise Consultancy v. US ex rel. Hunt that relator-led and federal-government led FCA lawsuits are subject to the same discovery rule for statute of limitations purposes, regardless of whether the government intervenes.
While this may seem unrelated to whether a relator can represent the federal government, Cochise is notable because Thomas said relators weren't US officials "in the ordinary sense of that phrase," at least for purposes of the FCA's statute of limitations, because they're neither appointed as officers nor employed by the federal government. Four years later, he took the position one-step further: because relators are neither appointed nor employed, it is also unconstitutional for them to represent the government at all.
The government and the relator in Zafirov have appealed Mizelle's decision. If the US Court of Appeals for the Eleventh Circuit affirms the decision, it may reach the Supreme Court and present a fundamental question underlying the FCA. Given that Thomas already has the ear of other justices—and his apparent penchant for leading a unanimous court on FCA cases—the future of the qui tam provision's fate has never been more in question.
The case is United States ex rel. Zafirov v. Florida Medical Associates, LLC, M.D. Fla., No. 8:19-cv-1236, notices of appeal 10/29/24.
Originally published by Bloomberg Law, 29 November 2024
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