Federal Court Tees Up False Claims Act Constitutionality Dispute

The Supreme Court recently decided U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023).  In dissent, Justice Thomas questioned the constitutionality of the qui tam regime under the False Claims Act (FCA), by which a private “relator” represents the interests of the United States in litigation.  Concurring with the majority, Justices Kavanaugh and Barrett nevertheless agreed with Justice Thomas that the constitutional issue he raised should be considered in “an appropriate case.”  Dykema covered the decision, including the dissent, in a previous article.

The seed planted by Justice Thomas has now blossomed into a lower court decision finding the FCA’s qui tam provision unconstitutional.

In United States ex rel. Zafirov v. Florida Medical Associates, LLC, No. 19-cv-01236 (M.D. Fla.), Clarissa Zafirov, on behalf of the United States, sued various healthcare organizations for allegedly submitting false claims in the form of unsupported risk-adjusting diagnosis codes.  The defendants moved for judgment on the pleadings, arguing that the qui tam provision violates Article II of the Constitution.  The motion acknowledged that four courts of appeals have held that the FCA does not violate the constitution, but argued that under Justice Thomas’s recent dissent, those decisions are incorrect. Ms. Zafirov argued that the FCA is constitutional, as confirmed by its long history and every decision examining the issue.

Judge Kathryn Kimball Mizelle, a former clerk of Justice Thomas, ruled for the defendants, holding, in a 53 page opinion, that the qui tam provision violates the Appointments Clause of Article II.  Judge Mizelle concluded that an FCA relator is necessarily an officer of the United States because the relator both exercises significant authority in conducting civil litigation to vindicate public rights and occupies a “continuing position.”  Such officers must be appointed by “the President alone, in the Courts of Law, or in the Heads of Departments,” Judge Mizelle observed.  And because relators are not so appointed, Judge Mizelle concluded that they lack the power to pursue claims on behalf of the United States.

This decision has stark implications for qui tam actions under the FCA.  If qui tam actions are unconstitutional, FCA defendants have gained a potent argument for dismissal, or alternatively, for persuading government attorneys to become more engaged when relators act unreasonably in the handling or proposed disposition of FCA cases.

Judge Mizelle’s decision is likely to be appealed to the Eleventh Circuit U.S. Court of Appeals.  If the Eleventh Circuit were to affirm the dismissal, thereby becoming the first appellate court to hold that the FCA’s qui tam provision is unconstitutional, the issue would be primed for Supreme Court review.  And with three justices having already expressed interest to address the issue, it wouldn’t be surprising for the case to be taken up by the Supreme Court no matter the outcome in the Eleventh Circuit.

For more information, please contact Chantel Febus, Jonathan Feld, Mark Chutkow, Cory Webster, and Christopher Sakauye.