Federal Judge Rules False Claims Act Qui Tam Provisions Unconstitutional
In a surprise decision that could have far-reaching implications, a federal judge in Florida has ruled that the qui tam provisions of the False Claims Act (“FCA”) are unconstitutional. While this ruling only directly applies to the specific case at hand, it opens up a potential new avenue for challenging qui tam actions across the country.
On September 30, 2024, Judge Kathryn Kimball Mizelle of the U.S. District Court for the Middle District of Florida issued the ruling in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC. Although not binding on other courts, this decision provides a blueprint for defendants in FCA cases to challenge the constitutionality of qui tam actions.
The case involves a whistleblower, Clarissa Zafirov, who alleged that her former employers had misrepresented patients’ medical conditions to Medicare. After the government declined to intervene, Zafirov pursued the case as a qui tam relator under the FCA.
Judge Mizelle's ruling focuses on the Appointments Clause of Article II of the Constitution. She determined that FCA relators qualify as “Officers of the United States” because they:
Exercise significant authority under federal law by conducting civil litigation on behalf of the United States.
Occupy a continuing position established by law through statutorily defined duties, powers, and financial rewards.
As such, the judge concluded that relators must be appointed in accordance with the Appointments Clause. Since relators essentially appoint themselves, Judge Mizelle found this arrangement unconstitutional.
The decision marks a significant departure from previous rulings by several appeals courts that have upheld the FCA's constitutionality. However, it aligns with recent Supreme Court decisions emphasizing the need for oversight of those wielding executive power.
Reactions to the ruling have been mixed. Andrew Varcoe of the U.S. Chamber of Commerce Litigation Center praised the decision, stating that “Congress may not take the enforcement of the laws out of the President’s hands and turn that power over to unaccountable bounty hunters.”
On the other hand, Ari Yampolsky, a partner at Whistleblower Partners, called the ruling “an aberration” and expressed confidence that appellate courts would reject the challenge.
The case is likely to be appealed to the Eleventh Circuit Court of Appeals and could potentially reach the Supreme Court. The outcome of this legal battle could have far-reaching implications for the future of qui tam actions under the False Claims Act, which has been a powerful tool for combating fraud against the government since the Civil War era.
As this case progresses through the appeals process, companies involved in FCA litigation should consider whether to raise similar constitutional arguments in their own cases. The ruling opens up a new avenue for challenging qui tam actions and may reshape the landscape of whistleblower litigation in the United States.
Fun Note: The False Claims Act was originally enacted in 1863 to combat fraud by contractors supplying goods to the Union Army during the Civil War. Some of the fraud included reselling horses and mules already rejected as unfit for service, providing gunpower barrels filled with sawdust, and supplying damaged or rotten food rations to soldiers.