On September 30, 2024, in an extremely important decision for False Claims Act (FCA) litigation, U.S. District Judge Kathryn Kimball Mizelle of the Middle District of Florida dismissed an FCA qui tam (whistleblower) lawsuit after finding that the FCA’s qui tam provisions are unconstitutional.
The order was entered in United States ex rel. Zafirov v. Florida Medical Associates, LLC, an FCA qui tam lawsuit filed by an employee of the defendant medical practice, alleging that her employer misrepresented patient diagnoses to Medicare.
The decision came about a year and a half after Supreme Court Justice Clarence Thomas, in a dissenting opinion in United States ex rel. Polansky v. Executive Health Resources, Inc., questioned the constitutionality of the qui tam provisions.
As a general rule, anyone who has knowledge of an FCA violation can file a whistleblower lawsuit and will typically be entitled to between 15% and 30% of the eventual recovery. In fiscal year 2023 alone, the federal government recovered nearly $2.7 billion under the FCA, nearly 87% of which was the result of qui tam whistleblower lawsuits. That same year, FCA whistleblowers themselves (known by the FCA as “relators”) received nearly $350 million as part of their collective share of the government’s massive recovery. 2023 was not unusual when it comes to FCA activity. In fact, the last time the federal government recovered less than $2 billion under the FCA in a year was 2008, when it collected just under $1.5 billion. And importantly, in the last ten years (2014-2023), there has only been one year where qui tam lawsuits have not represented the majority of the total FCA recovery.[3] As a result, the qui tam whistleblower bar has become an extremely influential force in the world of FCA litigation.
All of that came into question in June 2023, when the Supreme Court issued its decision in Polansky. That case addressed a fairly nuanced issue: the standard that should be applied where the federal government moves to dismiss an FCA qui tam over the relator’s objection. The Court in Polansky held, 8-1, that such motions should be evaluated under the general dismissal standard of Fed. R. Civ. P. 41(a).
But it was what Justice Thomas said in his sole dissent about the qui tam provisions that caused heads to turn. In that dissent, Justice Thomas stated that the FCA’s qui tam provisions “have long inhabited something of a constitutional twilight zone” and 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.” Specifically, Justice Thomas cited Article II’s Appointments Clause, which requires “principal officers” to be nominated by the President and confirmed by the Senate, and “inferior officers” to be appointed by Congress or by the President, Courts of Law, or Heads of Departments, if Congress permits.
Justice Thomas opined that, in conducting litigation on behalf of the United States, an FCA relator serves an “executive function” that may only be discharged by individuals who were appointed as an “officer of the United States.” According to Justice Thomas, “[a] private relator under the FCA, however, is not ‘appointed as an officer of the United States’ under Article II . . . It thus appears to follow that Congress cannot authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation.” In a separate concurrence, Justices Kavanaugh and Barrett stated their agreement with Justice Thomas’ constitutional concerns.
After Polansky, FCA defendants nationwide began filing motions to dismiss based on Justice Thomas’ constitutional analysis. At least one District Judge—Judge Donald Middlebrooks of the Southern District of Florida—recently rejected the argument. In United States ex rel. Butler v. Shikara, Judge Middlebrooks noted that “no court has held the qui tam provision of the FCA unconstitutional,” although he did recognize the three Justices who expressed their skepticism in Polansky.[4] Judge Middlebrooks noted that, although the Eleventh Circuit has not yet ruled on this issue, “[e]very circuit court that has considered the issue outside of the Eleventh Circuit has considered the provision constitutional.” According to Judge Middlebrook’s opinion, this includes the Fifth, Sixth, Ninth, and Tenth Circuits.
So, until Judge Mizelle’s decision in Zafirov, no judge had actually held that the qui tam provisions of the FCA were unconstitutional, although three Supreme Court Justices suggested that they might make such a finding if given the opportunity.
In her decision, Judge Mizelle (who clerked for Justice Thomas) lays out the history and mechanics of the qui tam provisions, ultimately concluding that, under those provisions, an FCA relator “exercises significant authority, indeed core executive power . . . but lacks proper appointments under the Constitution.” According to Judge Mizelle, not only does the FCA allow a relator “to direct litigation, but also to bind the federal government without direct accountability to anyone in the Executive Branch.” Judge Mizelle concluded—as Justice Thomas previewed—that because an FCA relator “possesses civil enforcement authority on behalf of the United States,” such a relator is subject to Article II’s Appointments Clause. Because the relator in the case before the court (like all FCA relators) was not appointed pursuant to Article II’s constitutionally mandated process, Judge Mizelle concluded that dismissal was the only proper remedy.
Within a day of issuing her decision in Zafirov, The Anti-Fraud Coalition (“TAF”) — the central lobbying arm of the FCA relator bar—issued a strong statement condemning Judge Mizelle’s decision, describing it as “an outlier breaking with years of precedent, including the decisions of every appellate court that has considered this question.”
It is virtually certain that the relator in Zafirov will appeal Judge Mizelle’s decision to the Eleventh Circuit, where it is equally certain that the Department of Justice and private organizations such as TAF, as well as industry-backed organizations, will contribute their respective positions on this issue. Because the Eleventh Circuit has yet to address the issue, it is unclear how that court will decide. It is likely, however, that this issue will eventually work its way to the Supreme Court, where at least three Justices will likely vote to affirm Judge Mizelle’s dismissal.