Federal judge dismisses qui tam case based on constitutional concerns: Is the False Claims Act era coming to a close?

In a stunning, but not unexpected, case for all who follow the False Claims Act (FCA), a federal judge in the Middle District of Florida ruled that the qui tam component of the FCA is unconstitutional. The case gives further vitality to the dissenting opinion of Justice Clarence Thomas in U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419, 449 (2023), which questioned the constitutionality of allowing a qui tam plaintiff’s case to proceed when the government does not intervene in the case. See U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, et al., No. 8:19-CV-01236-KKM-SPF, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024) (Mizelle, J.).

In Zafirov, the District Court held that because a qui tam relator, who under the FCA can pursue actions on behalf of the government and share up to 30 percent of the recovery, is not appointed by the President and has no executive power, the relator cannot pursue a case in the name of the government. Zafirov, 2024 WL 4349242, at *2. The Court noted that a relator, who has not received a commission or sworn an oath of loyalty to the federal government, has no direct accountability to anyone in the Executive Branch, and “enjoys unfettered discretion to decide whom to investigate, whom to charge in the complaint, which claims to pursue, and which legal theories to employ.” Zafirov, 2024 WL 4349242, at *5. Furthermore, the Court noted that a relator determines whether to appeal, “thereby shaping the broader legal landscape for the federal government.” Id. In addition to the control of the litigation, the Court stressed the unique financial constructs of the qui tam statute, stating that the reality is that a relator “seek[s] daunting monetary penalties against private parties on behalf of the United Stated in federal court” without an Executive Branch appointment to do so. Id., *29 (citations omitted).

Critically, the Court noted that the “unclear role” of litigation funding companies “heightens the tension between qui tam actions and ordinary Executive Branch practice” because a relator may sell some of their interest to a litigation funder, blurring the lines of who is actually pursuing the action and the financial motivations. Id., p. 8.

The Court held that because the relator is an officer of the United States, historical examples of qui tam provisions do not exempt a relator from the Appointments Clause; since a relator is not constitutionally appointed but rather self-appointed as a special prosecutor, dismissal “is the only permissible remedy.” Id. p. 11. Although there are other constitutional concerns under the Take Care and Vesting Clauses, the Court ruled in favor of the defendants on the Appointments Clause issue and, therefore, did not discuss the other constitutional issues. Zafirov, 2024 WL 4349242, at *3-*4.

The same argument that prevailed in Zafirov was recently made by Norton Rose Fulbright lawyers Thomas Coulter and Brian Stolarz in a long-standing qui tam action in the United States District Court for the District of Columbia in a motion to dismiss that went into considerable detail about the history of the FCA, the qui tam statute and the 1986 amendments to the law that greatly increased the number of qui tam cases that are filed on an annual basis. 

Private relators now bring the majority of FCA cases, and since 1986, relators have received almost US$9 billion from FCA cases. The legislative history of the 1986 amendments makes plain the intent of the qui tam statute—Congressman Howard Berman stated that “[t]his is precisely what this law is intended to do: deputize ready and [willing] people . . . to bring to justice those contractors who overcharge the government.” 132 Cong. Rec. 29,322 (1986). This improper deputizing is exactly what Zafirov determined was unconstitutional. The fundamental argument is that the faithful execution of the law does not mean the transfer of exclusive authority to individual relators who are primarily motivated by personal gain rather than the protection of federal funds. Although Norton Rose Fulbright’s motion to dismiss was denied summarily without a written opinion, the arguments it raised, one of which was adopted in Zafirov’s thorough opinion, show that the constitutional issues in the qui tam statute are real and concerning and federal judges should take note of them in future cases as they will continue to be raised.

The Supreme Court is certainly very interested in the issues raised in Zafirov. In Polansky, Justice Thomas stated that “[t]he potential inconsistency of qui tam suits with Article II has been noticed for decades.” Polansky, 143 S.Ct. at 1741. Justice Thomas also stated that the FCA “has long inhabited something of a constitutional twilight zone” and “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 1741 (emphasis added).

Justices Barrett and Kavanaugh, in concurrence, stated they agreed with Justice Thomas that “[t]here are 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.” Id. at 1737. Furthermore the concurring Justices stated that the Court “should consider the competing arguments on the Article II issue in an appropriate case.” Id. Finally, in addition to these statements by the dissenting Justices, in the majority opinion, Justice Kagan stated that the FCA “has been enforced by a unique public-private scheme,” acknowledging that the FCA is not a typical federal statute. Id. at 1727.

The plaintiffs whistleblower bar has predictably called the case an outlier and a potential gateway for more fraud if there are no qui tam relators. However, the constitutional requirement of being a properly appointed Executive Branch official is not a nicety or convenience and cannot be avoided by an argument that the ends of fraud detection and revenue for the government justify the statute.

The case is clearly heading for an appeal to the Eleventh Circuit and likely to the Supreme Court due to other federal courts that did not find the qui tam statute unconstitutional in similar circumstances. With three Supreme Court Justices interested in the right case to analyze the qui tam aspects of the FCA, Zafirov may be that case and may signal that the False Claims qui tam era is coming to an end.