New Decision Overturning False Claims Act Qui Tam Statute Sets Up New Litigation Over Whistleblower Lawsuits | Perkins Coie

A recent Florida district court decision declared that the False Claims Act (FCA) qui tam This provision violates the Constitution by vesting executive power in private whistleblowers (rapporteurs) who have not been appointed by the president.

It is the first decision of its kind and radically breaks with previous precedents, and indicates that the litigation over the constitutionality of qui tam Lawsuits are likely to continue in FCA cases.

In his opinion of September 30, 2024, in United States ex rel. Zafirov v. Florida Medical Associates, LLCThe U.S. District Court for the Middle District of Florida held that the FCA qui tam The provision allowing relators to file lawsuits against defendants violates the Appointments Clause of Article II of the Constitution. Judge Kathryn Kimball Mizelle wrote for the court that relators who bring FCA actions against defendants are acting as officials of the United States and therefore must be appointed by the president. According to its decision, allowing whistleblowers to bring actions to the FCA alleging that defendants have submitted false claims to the government “directly challenges the appointments clause by allowing unaccountable and non-sworn private actors to exercise central executive power with substantial consequences for members of the public.”

Litigation over the constitutionality of qui tam Lawsuits have increased since the United States Supreme Court’s decision in United States ex rel. Polansky v. Executive Health Resources, Inc. (No. 21-1052), in which Justice Clarence Thomas, joined by two other justices, issued a dissenting opinion suggesting that the qui tam The statute may violate Article II of the Constitution and encourage the Supreme Court to review the issue in the future. Until now, every district court that took up the issue had reaffirmed the constitutionality of the statute. sapphirov will likely lead to more litigation and discussions about the feasibility of the qui tam device.

In this update, we examine the sapphirov decision and its implications in future cases.

Background: The qui-tam Constitutional provision and issue

A Civil War-era civil statute to combat fraud against the government, the FCA allows qui tam relations to bring a lawsuit on behalf of the United States against the defendants alleging that a defendant presented or caused to be presented a false or fraudulent claim for payment to the government. The US Department of Justice (DOJ) can bring FCA actions on behalf of the government, but qui tam Lawsuits are the source of the majority of claims under the FCA and produce billions of dollars in recoveries each year. Whistleblowers are eligible to recover between 15% and 30% of any recovery from the government in any settlement or judgment under the FCA.

Justice Thomas’ dissenting opinion in Polanski Arguments questioning the FCA’s decision were revived. qui tam provisions. In PolanskiThe majority opinion written by Justice Elena Kagan held that the government can intervene in a qui tam action at any time and request dismissal under a deferential standard. In his dissenting opinion, Justice Thomas disagreed with the majority’s position and suggested that the qui tam The provisions of the FCA are inconsistent with Article II of the Constitution. Justice Thomas wrote that relators cannot represent the interests of the United States in litigation and that allowing a private citizen to sue “to vindicate public rights” is an executive function that can only be performed by an official of the United States under the Appointments Clause. Justice Thomas reasoned that since a relator is not an official of the United States, he should have no authority to “represent the interests of the United States in civil litigation.” Justice Brett Kavanaugh wrote a brief concurring opinion, joined by Justice Amy Coney Barrett, stating that he agreed with Justice Thomas that there are “substantial arguments” that the qui tam provisions are inconsistent with Article II of the Constitution and that the Court should consider the issue “in an appropriate case.” The remaining six justices did not address the constitutional question.

From Polanskidefendants have raised the constitutional question in several cases. However, apart from sapphirovThese arguments have been unsuccessful so far. They are not writing with a clean slate. In previous decisions PolanskiThe United States Courts of Appeals for the Fifth, Sixth, Ninth, and Tenth Circuits rejected all constitutional challenges to the FCA qui tam provisions. The cases emphasize that the government retains significant authority in qui tam cases even when he does not intervene in the action and takes charge of it. The Fifth Circuit in Riley v. St. Luke’s Episcopal Hosp.252 F.3d 749 (5th Cir. 2001) (on bench) argued that the qui tam The statute does not violate the Appointments Clause because, even in rejected cases, the government has “a number of control mechanisms,” such as the power to veto agreements and dismiss the lawsuit over the relator’s objections. In a similar ruling, the Ninth Circuit explained that a relator, who litigates “only one case,” does not have “primary responsibility” for enforcing the FCA and does not exercise authority so “significant” that the Constitution only allows an official of the United States. States to exercise it. United States ex rel. Kelly v Boeing Co., 9 F.3d 743, 758–59 (9th Cir. 1993).

Other than Zafirov, There have been five district court decisions since Polanski when addressing the Appointments Clause issue, and in each of those cases, the court rejected the argument that the qui tam statute was unconstitutional.(1) In these cases, courts distinguished relators from executives subject to the Appointments Clause. They explained that relators do not have unlimited power, they hold temporary positions limited to a lawsuit, and the government exercises significant control over all aspects of the lawsuit.

He sapphirov Case: background and possession

Like most FCA cases, Zarifov It is a health case. In 2019, plaintiff Clarissa Zafirov filed a lawsuit qui tam filed suit against several defendants, including his employer, a health care provider, alleging that he had misrepresented patients’ medical conditions to Medicare in violation of the FCA. The government refused to intervene in the lawsuit, and Zafirov proceeded to litigate the case on his own (the Justice Department monitors cases in which it refuses to intervene).

The defendants moved to dismiss their complaint, arguing that the qui tam provision is unconstitutional. The court agreed. In its decision, the court first noted that to be considered an official of the United States, an individual must “exercise significant authority under the laws of the United States” and “hold a continuing position established by law.” . In applying this test, the court determined that a relator (1) exercises significant authority because the qui tam The provisions give relators “the power to bring an enforcement action on behalf of the United States to vindicate a public right” and (2) hold a continuing position because “the office of relator exists independently of whether a person is appointed to that position.” or not, making that position ‘continuous and permanent.'” The court concluded that the relators are United States officials who must be appointed by the president. Because the FCA does not require such an appointment, the court held, the qui tam provisions (31 USC § 3730(b)) are unconstitutional. Addressing the four circuit courts that had held otherwise, Judge Mizelle noted that these decisions “are not binding” and, in any case, did not examine the precedent that established the enforcement authority as a central executive branch. The court rejected the arguments, citing historical examples of qui tam provisions, reasoning that the “historical pedigree of the qui tam provisions do not save” the rapporteur from qualifying as an “official” of the United States. The court dismissed the lawsuit.

The road ahead

He sapphirov The decision is the first case to hold that the FCA’s decision qui tam The provisions are unconstitutional and depart from decades of precedent holding otherwise.

As of this writing, Zafirov has not appealed the district court’s decision to the Eleventh Circuit Court of Appeals. For now, sapphirov It is an atypical case. However, the decision is likely to invite FCA defendants to raise constitutional challenges in future cases, taking the issue through motions to dismiss before the district courts and ultimately before the Courts of Appeals. of the United States. The prospects for the Supreme Court taking up the issue are far from clear. Grant a car certiorari in the Supreme Court requires the votes of at least four justices, and the Court’s willingness to grant certiorari in a given case often depends on multiple factors, including the degree of division of the lower courts.

For now, firms receiving government funding should be aware of emerging case law and its implications for FCA enforcement. Among the issues that may arise in future cases is the extent to which constitutional analysis differs depending on whether the government has decided to intervene in a case or refuses to do so.

Final note

(1) See United States ex rel. Butler vs. ShikaraNo. 20-80483-CV, 2024 WL 4354807 (S.D. Fla. Sept. 6, 2024); United States v. Riverside Med. Group, PCNo. CV 22-04165 (SDW) (LDW), 2024 WL 4100372 (DNJ Sept. 6, 2024); United States ex rel. Wallace v. Exactech, Inc., 703 F. Supplement. 3d 1356 (N.D. Ala. 2023); United States ex rel. Thomas v Care, No. CV-22-00512-PHX-JAT, 2023 WL 7413669 (D. Ariz. Nov. 9, 2023); United States ex rel. Miller v. ManPow, LLCNo. 221CV05418VAPADSX, 2023 WL 8290402 (CD Cal. Aug. 30, 2023).

(See source.)