Florida Federal Court Holds False Claims Act Qui Tam Provision Violates Article II

A federal court in Florida this week ruled that the qui tam provision of the False Claims Act (FCA) violates the Appointments Clause in Article II of the U.S. Constitution because it allows private parties to exercise “core executive power” without being constitutionally appointed. The FCA’s qui tam provision authorizes private “relators” to sue on behalf of the United States for fraudulent claims to the federal government for payment. In her September 30 order, in United States ex rel. Zafirov v. Florida Medical Associates LLC, Judge Mizelle in the Middle District of Florida, granted defendants’ motion for judgment on the pleadings and dismissed the case with prejudice as to the relator in that case, Dr. Clarissa Zafirov. Because Dr. Zafirov “exercises significant authority, indeed core executive power, under the continuing position of relator but lacks proper appointment under the Constitution,” the court explained, “dismissal is the only permissible remedy.”

Integral to the court’s ruling was its conclusion that the FCA’s qui tam provision creates a role of “officer of the United States” subject to the Appointments Clause in Article II, because an FCA relator exercises “significant authority pursuant to the laws of the United States” and occupies a “continuing position established by law,” applying the Supreme Court’s test described in the 2018 decision Lucia v. Securities Exchange Commission. Under Article II, officers must be duly appointed, either by the President and confirmed by the Senate, or for certain positions, by “the Courts of Law, or…the Heads of Departments.”

The court first concluded that an FCA relator exercises “significant authority pursuant to the laws of the United States” by “conducting civil litigation in the courts of the United States for vindicating public rights,” recognizing litigation as “the ultimate remedy for a breach of the law” and thus an executive function. While declining to decide whether the FCA also violates the Take Care clause in Article II, Section 3, Judge Mizelle cited the clause in determining that litigation on the federal government’s behalf constitutes a core function—a “quintessentially executive power”—reserved to the Executive Branch.

Next, the court found that an FCA relator occupies a “continuing position established by law” because the statute defines the “statutory duties, powers, and emoluments” for “the office of relator.” Further, “the office of an FCA relator is continuous even if it is not continually filled,” and therefore it does not matter that a particular relator only prosecutes a single qui tam action because the office is permanent even if it “varies from occupant to occupant.” The court likened this aspect of the role to that of an attorney general or an ambassador, as well as that of an independent prosecutor, quoting Justice Thomas’ recent concurrence in Trump v. United States, that as pertains to the latter, “it is difficult to see how an official exercising the Department of Justice’s duties to enforce the criminal law by leading a prosecution could be anything but an officer.” More directly, the court explained that relators essentially “self-appoint as special prosecutors to recover punitive damages against private parties on behalf of the federal government.”

In holding that the FCA qui tam provision creates a United States officer position subject to the Appointments Clause, the court also found that historical acceptance of qui tam provisions is immaterial to the question of constitutionality. “Simply put, the Constitution prevails over practice, especially when the test is clear and the practice is neither continuous nor challenged.”

In its decision, the court noted that the Supreme Court and 11th Circuits have both expressly reserved a ruling on whether the FCA violates the Appointments Clause. Most recently, dissenting and concurring opinions in United States ex rel. Polansky v. Executive Health Resources, Inc., et al., where the Court held that the government may move to dismiss an FCA action so long as it has intervened in the case, alluded to the ripeness of an Article II challenge to the statute’s qui tam provisions. Justice Thomas, in dissent, noted that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II [of the U.S. Constitution] and that private relators may not represent the interests of the United States in litigation.” 599 U.S. 419, 449 (2023) (Thomas, J., dissenting).

However, four circuit courts of appeal have considered and rejected the argument that the FCA’s qui tam provisions violate the Appointments Clause: the Ninth Circuit in United States ex. rel. Kelly v. Boeing Company (1993), the Fifth Circuit in Riley v. St. Luke’s Episcopal Hospital (2001), the 10th Circuit in United States ex rel. Stone v. Rockwell International Corporation (2002), and the Sixth Circuit in United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co. (1994).

Judge Mizelle’s order stands in contrast to a 2023 Northern District of Alabama decision in United States ex rel. Wallace v. Exactech, Inc., where the court held that the FCA does not violate the Appointments Clause. In the event of an appeal, giving the 11th Circuit another opportunity to reach the validity of the qui tam provision under the Appointments Clause, the court’s decision on this question will be one to watch.

Conclusion

Given the ever-increasing prevalence of qui tam litigation under the FCA, Article II challenges like the one in Zafirov v. Florida Medical Associates have the potential for impact beyond the bounds of any single case. If the Eleventh Circuit is presented with another opportunity to opine on the question of whether the FCA violates the Appointments Clause, a question it declined to reach in 2020, the outcome could create a split amongst the circuits, as four other circuit courts of appeal have held that the FCA’s qui tam provisions do not violate the Appointments Clause. As alluded to by Judge Mizelle, in the event of a split, the U.S. Supreme Court may be inclined to accept an opportunity to resolve the question once and for all.

Attorneys in Ballard Spahr’s White Collar Defense/Internal Investigations Group have deep experience defending corporate clients in government investigations and qui tam actions brought under the False Claims Act. Please contact us for more information.

Copyright © 2024 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.