On September 30, 2024, in a surprising and highly significant opinion, United States District Judge Kathryn Kimball Mizelle of the Middle District of Florida dismissed a False Claims Act (FCA) lawsuit, finding that the whistleblower (qui tam) provisions are unconstitutional.  The ruling specifically found that FCA whistleblowers are not constitutionally appointed officers of the United States, and therefore lack the authority to proceed with such actions. The case name is United States ex rel. Zafirov v. Florida Medical Associates, LLC, et al. (Case No. 8:19-cv-1236). This marks the first time the FCA whistleblower provisions have been ruled unconstitutional, likely setting the stage for litigation on this topic for years to come. 

The False Claims Act and Its Qui Tam Provisions

The FCA has been the Federal government’s key enforcement tool in its fight against fraud, waste, and abuse involving government programs. The FCA provides for significant recoveries to the government in the form of treble damages and monetary penalties for each false claim. In FY 2023, the Department of Justice (DOJ) recovered $2.68 billion in FCA settlements and judgments with the majority of those matters involving the health care industry.

Since 1986, the FCA has not only been enforced by the DOJ but also through private whistleblowers (qui tam relators) who are financially incentivized to report suspected fraud to the government. Whistleblowers receive anywhere between 15% and 30% of the government’s recovery in a FCA action. They account for a large portion of total FCA recoveries year after year. In FY 2023 alone, more than $2.3 billion of DOJ’s FCA recoveries resulted from whistleblower lawsuits.

The Ruling in Zafirov

In Zafirov, the whistleblower sued her employer and other defendants for violations of the FCA by misrepresenting patients’ medical conditions to Medicare. After investigating these allegations, the government declined to intervene. However, the relator proceeded to litigate the case for five more years. Apart from filing two statements of interests, the government chose not to participate, allowing the relator to drive the litigation.

Judge Mizelle’s order squarely addresses whether qui tam relators are qualified to file and proceed with FCA lawsuits as “officers” of the United States. The Judge resoundingly said no. In her ruling, she noted: “That arrangement directly defies the Appointment Clause [of the U.S. Constitution] by permitting unaccountable, unsworn, private actors to exercise core executive power with substantial consequences to members of the public.”  In other words, FCA relators lack the proper appointment in exercising the significant executive authority they wield.

In Zafirov, the defendants asserted other noteworthy constitutional challenges to the qui tam provisions. However, Judge Mizelle found the Appointments Clause sufficient for her analysis. 

Interestingly, Judge Mizelle partly relied upon a recent Supreme Court dissent by Justice Clarence Thomas wherein he questioned the constitutionality of the FCA’s qui tam framework. Judge Mizelle previously clerked for Justice Thomas as well as Chief Circuit Judge William H. Pryor of the Eleventh Circuit. 

The decision also adds to the growing list of judicial orders and rulings over the past decade that have steadily reigned in the power of the Federal government and its administrative agencies to pursue enforcement actions against private businesses and individuals.

FCA Qui Tam Cases Will be Upended

The impact of this ruling on FCA cases remains to be seen. It is only one judge’s decision and is not considered binding precedent. Although it is a near certainty that the relator in Zafirov will appeal Judge Mizelle’s decision, and the DOJ and others will likely support that appeal. Other federal courts have upheld the constitutionality of the qui tam provisions. This may eventually lead to a circuit court split, in which case, these issues will have to be sorted out and decided by the Supreme Court. On the other hand, the decision, unless completely overruled by the Eleventh Circuit, still leaves the door open for FCA litigants in other cases to pursue similar arguments depending on the posture of the case.

On a practical level, the ruling may also give some pause to hasty relators driven only by a payday but who nevertheless exercise executive power as officers of the United States. At least one Federal judge apparently recognizes the import of these constitutional principles within the qui tam framework. 

Regarding the DOJ, as Judge Mizelle noted, it is the United States of America that remains “the real party of interest” in any FCA action. This decision ought to serve as a wake-up call for DOJ to closely examine its ability to seek full dismissal of qui tam actions whenever DOJ has declined to intervene.

For more information, please contact Edgar Bueno ([email protected]) or Mills Fleming ([email protected]) at HunterMaclean, or by phone at (912) 236-0261. We will continue to monitor and provide updates on this important and developing issue.