By: Robin B. Mark
On September 30, 2024, a federal district court in the Middle District of Florida dismissed a qui tam action under the False Claims Act (“FCA”) on the basis that the FCA’s qui tam provision – which allowed individuals to sue on behalf of the government – is unconstitutional. U.S. ex rel. Zafirov v. Florida Medical Associates LLC, is the first case in which a court has held the FCA’s qui tam provision unconstitutional and it carries significant implications for the future of FCA litigation.
The FCA permits any private party, known as whistleblowers or relators, to enforce the statute by filing a lawsuit in the name of the federal government. See 31 U.S.C. § 3730(b)(1). Successful relators may receive a portion of the proceeds recovered, ranging from 15 to 30%. Id. at 3730(d). This incentivizes private parties and their lawyers to file qui tam actions. The vast majority of FCA actions are initiated by private parties rather than government initiated FCA cases. In a February 2024 press release, the Department of Justice reported that “[w]histleblowers filed 712 qui tam suits in fiscal year 2023, and this past year the Justice Department reported settlements and judgments exceeding $2.3 billion in these and earlier-filed suits.”
In Zafirov, a whistleblower physician filed a qui tam action against her employer, among others, asserting that Florida Medical Associates intentionally misrepresented patient medical conditions to Medicare, resulting in unnecessary medical services. The government declined to intervene. After years of litigation, the district court opined that relators filing lawsuits on behalf of the government operate as “Officers” of the United States executive branch, which requires an appointment under Article II of the U.S. Constitution. Article II requires the president, a court, or the head of a federal department to appoint “Officers of the United States.” The court found that relators in FCA cases enjoyed “unfettered discretion to decide whom to investigate, whom to charge in the complaint, which claims to pursue and which legal theories to employ.” U.S. ex rel. Zafirov v. Florida Medical Associates LLC, 2024 WL 4349242, at *2 (M.D. Fla. Sept. 30, 2024).
The Zafirov case will most likely be appealed to the United States Court of Appeals for the 11th Circuit and will likely be reconciled with a recent Supreme Court holding in U.S. ex rel. Polansky v. Executive Health Resources, Inc., where the Supreme Court described the relator’s control of a qui tam suit as being significantly more limited. Supreme Court Justice Clarence Thomas wrote in his 2023 dissent in Polansky, “the [False Claims Act’s] qui tam provisions have long inhabited something of a constitutional twilight zone.” Justice Thomas pointed out that there 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.”
The Court in Zafirov has now stepped into the “twilight zone.” Should the Zafirov defendants prevail on appeal and create a split among the circuit courts, the United States Supreme Court will likely be called upon to resolve the constitutionality of the FCA’s qui tam provision, a decision that could change the landscape of enforcement actions nationwide. For the time being, at least one court has held that qui tam whistleblowers are unconstitutional.
Key Takeaways
The Zafirov decision could signal challenges for future FCA relators, as it calls into question their standing to pursue claims on behalf of the government. If the government elects not to intervene in a qui tam, litigants should consider pursuing dismissal of the relators complaint based upon a Constitutional challenge to the Appointments Clause.
Whether the Zafirov decision will prevail is still uncertain as the government will appeal, but there is reason to anticipate that Zafirov may become the law of the land as several U.S. Supreme Court Justices have expressed concerns about the constitutionality of qui tam provisions of the FCA.
If relators are ultimately limited in their ability to pursue qui tam cases, the burden will fall on the government to handle more fraud cases, which could reduce the overall number of FCA enforcement cases that the government has the resources to pursue and compromise the government’s ability to recover through qui tam cases.
Robin B. Mark is a partner at Burr & Forman LLP. She focuses her practice on the representation of individuals and corporations facing government enforcement actions. She assists clients with conducting internal investigations, navigating their potential civil and criminal exposure and responding to law enforcement inquires. Robin may be reached at rmark@burr.com or (205) 458-5473.
