In the Upside Down: District Court Upends Decades of False Claims Act Precedent in Declaring Qui Tam Provisions Unconstitutional

In a novel False Claims Act (FCA) ruling, on September 30, 2024, Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida upended decades of FCA jurisprudence in declaring the qui tam provisions of the FCA unconstitutional in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024). This decision follows Justice Thomas’ dissent in the recent Supreme Court decision, U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023), where he posited, “[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.” While Justice Thomas’ implicit constitutional challenge was not entirely new to FCA practitioners, including it in his Polansky dissent, with Justices Kavanaugh and Barrett in a concurring opinion noting their agreement that the Court should consider the constitutional questions in an appropriate case, swung wide open a door of opportunity for defendants and their counsel to attempt to dismiss FCA qui tam suits on constitutional grounds. Judge Mizelle’s decision in Zafirov is the first of its kind to actually dismiss a qui tam suit on constitutional grounds, and will likely lead to an avalanche of similar motions in nearly every non-intervened lawsuit brought by a relator.

The Decision

Judge Mizelle’s decision focused on three primary arguments concerning the constitutionality of the FCA’s qui tam provisions: (1) jurisdiction and waiver; (2) whether a relator is an “officer of the United States” in violation of the Constitution’s Appointments Clause; and (3) whether Article II of the Constitution contains a “qui tam exception” to prevent an FCA relator from being considered an “officer of the United States.” 

In dismissing with prejudice Zafirov’s qui tam complaint, Judge Mizelle first held that the defendants had not waived the constitutional arguments, even though they were not included in defendants’ responsive pleadings, and that there was no subject matter jurisdiction concern. Next, following a two-part framework laid out in Lucia v. Securities and Exchange Commission, 585 U.S. 237 (2018), Judge Mizelle found that FCA relators both exercise significant authority (in the form of “core executive power”) and occupy a continuing position established by law, meaning that they are properly considered officers of the United States, and must be appointed by the Executive Branch under the Appointments Clause. Accordingly, Judge Mizelle ruled that Zafirov’s self-appointment to that role under the FCA’s qui tam provisions was improper. Finally, relying on the Supreme Court’s recent analysis in United States v. Rahimi, 602 U.S. --, 144 S. Ct. 1889 (2024), Judge Mizelle explained that the mere fact that historical statutes have included provisions analogous to the FCA’s qui tam provisions does not supersede a constitutional challenge under Article II of the Constitution—and, in fact, there is no indication that these historical statutes were ever viewed as consistent with the Constitution at all. According to Judge Mizelle, the FCA’s qui tam provisions therefore permit an unconstitutional appointment of an officer and delegation of executive power.

Key Takeaways

This decision is certain to have ripple effects in qui tam cases nationwide and could ultimately have enormous consequences for FCA defendants, relators, and the government. The long-term impacts will come to light as practitioners and judges work through how the Zafirov decision affects their lawsuits, but several immediate takeaways are:

• Zafirov is, for now anyway, a district court decision without precedential value. And several other district courts have recently denied similar challenges to the FCA’s qui tam provisions in the wake of Justice Thomas’ Polansky dissent. Because Zafirov granted a motion to dismiss with prejudice, it will likely be appealed to the Eleventh Circuit in short order, and that court will weigh in, either to affirm or reverse the district court’s constitutional ruling.
• However the Eleventh Circuit might rule in an appeal of Zafirov, that decision could then be taken up by the Supreme Court. Given that three members of the Court have already indicated that they view the constitutionality of the qui tam provisions an important question, a grant of certiorari seems at least reasonably probable even if a formal circuit split has not yet developed by the time of a petition.
• Defendants litigating FCA qui tam suits should consider a motion to dismiss on constitutional grounds, if only to preserve the issue on appeal. The Zafirov decision is only one ruling in one district in one circuit, but it provides a reasoned starting point for what is a purely legal question in any district court in any circuit, particularly in combination with Justice Thomas’ dissent in Polansky. The posture of Zafirov supports defendants moving to dismiss a qui tam even after other arguments have been denied, e.g., Rule 12(b)(6) motions on failure to state a claim.
• That said, though not as immediately apparent, defendants must also consider the potential for negative downstream impacts of the Zafirov decision, particularly on to-be-filed actions. For example, the Department of Justice conceivably could leverage government resources to directly initiate more FCA investigations and suits and avoid any potential qui tam constitutionality questions. Similarly, part of the government’s response to Zafirov might be to intervene in more qui tam suits to avoid a relator being considered an “officer of the United States” in violation of the Appointments Clause. These are more theoretical concerns for now, unless and until other courts, including courts of appeal, side with Zafirov, as it seems unlikely that the government will look at this decision as “good cause” for intervention or reallocation of its resources.
• The impacts for the relator-side bar are similarly wide-ranging. Most importantly, relators now risk any qui tam lawsuit being dismissed with prejudice on constitutional grounds. This decision may also lead to forum-shopping as relators seek to file their qui tams in circuits where (1) Zafirov has not been analyzed; (2) district courts have rejected recent qui tam constitutionality challenges filed in the wake of Polansky; or (3) the circuit precedent suggests that the court of appeals would reject a constitutional challenge to the FCA’s qui tam provisions when and if presented with it.

Beyond this, the Zafirov decision raises many other questions. Could the entirety of the qui tam provisions be struck down, or is it just qui tams in which the government declines to intervene that are at risk? What is the impact in either of those scenarios, or some middle ground between them? Zafirov does not address these and other questions, both legal and practical. But it will be one to watch on appeal, as will the increase of defendants filing motions and courts being confronted with the constitutionality of the FCA’s qui tam provisions.