Federal District Court Holds FCA’s Private Whistleblower Provisions Unconstitutional

On September 30, 2024, a federal district court judge held that the qui tam provisions of the False Claims Act (FCA) violate the Appointments Clause of Article II of the Constitution. U.S. ex rel. Zafirov v. Fla. Med. Assocs., LLC, C.A. No. 8:19-cv-01236-KKM, 2024 U.S. Dist. LEXIS 176626 (M.D. Fla. Sept. 30, 2024) (“Zafirov”). While Zafirov’s holding is novel, the constitutional issue raised in that decision is not.

Last summer, in U.S. ex rel. Polansky v. Executive Health Resources, Justice Thomas outlined in dissent the “substantial arguments” that the FCA’s qui tam provisions may be “inconsistent with Article II.” We previously discussed Justice Thomas’s Polansky dissent here, here, and here. The Zafirov decision, authored by Judge Kathryn Kimball Mizelle, a former law clerk for Justice Thomas, hews closely to Justice Thomas’s dissent in Polansky.

While Zafirov is not binding and will likely be appealed, FCA defendants are taking a renewed interest in potential constitutional challenges to FCA lawsuits that the government declines to pursue.

Background

In 2019, Clarissa Zafirov, a physician and former employee of the defendant medical providers, filed a lawsuit under the FCA alleging that the defendants misrepresented patients’ medical conditions to Medicare. Zafirov, 2024 U.S. Dist. LEXIS 176626, at *12. The government declined to intervene in the lawsuit and the case was unsealed. Zafirov then pursued the case on her own. In 2022, following two rounds of motions to dismiss, defendants answered Zafirov’s complaint. Notably, defendants’ answers did not include an affirmative defense that the FCA was unconstitutional. Then, post-Polansky, defendants filed a motion for judgment on the pleadings, raising the constitutional argument that the FCA’s qui tam provisions violate Article II of the Constitution.

Analysis

Defendants raised two constitutional challenges, arguing that the FCA’s qui tam provisions violate both the Vesting and Take Care Clauses, as well as the Appointments Clause. The court in Zafirov took up only the Appointments Clause issue.

As an initial matter, Judge Mizelle rejected Zafirov’s argument that defendants had waived their constitutional challenge by failing to raise those issues as affirmative defenses. Instead, the court found that Zafirov was on sufficient notice of the defense, given that the motion for judgment on the pleadings was filed over a year before trial.

The court then turned to the Appointments Clause challenge. First, the court found that a qui tam whistleblower is an “Officer” of the United States within the meaning of Article II. “Officers” are those that exercise “significant authority” under the laws of the United States and “occupy a continuing position established by law.” If both of those two conditions are met, then the Officer must be appointed consistent with the Appointments Clause.

The court’s analysis focused on the authority exercised by FCA relators. The FCA’s qui tam provisions authorize private whistleblowers (known as “relators”) to bring a lawsuit “in the name of” the government and proceed with that action even if the government declines to intervene. 31 U.S.C. §§ 3730(b)(1), (c)(3). As the court explained, relators enjoy “unfettered discretion” in deciding to initiate litigation, prompt government investigations, direct litigation, and bind the federal government “without direct accountability to anyone in the Executive Branch.” Zafirov, 2024 U.S. Dist. LEXIS 176626, at *7-8. The government declines to intervene in the vast majority of FCA actions, so relators’ prosecutorial decisions are often made without direction from DOJ. And the court noted that the “unclear role of litigation funding” in qui tam actions means that, in some instances, the government may not even know the identity of the relator or whether litigation funders are controlling relators’ litigation and settlement decisions. In sum, the Court concluded that prosecutorial and enforcement discretion is a “core executive power” and thus constitutes “significant executive authority” under the Appointments Clause.  Id. at *25-26.

Next, the court found that a relator occupies a continuing position established by law. Though relators may change from case to case, the court analogized this role to “other temporary officials wielding core executive power”—like bank receivers, independent counsels—who “possess all the traditional indicia” of constitutional officer status.  Id. at *45-46.

Finally, after concluding that Zafirov was an Officer, the court found there was “no question” relator was not properly appointed. Rather, the FCA allows any “person” to “self-appoint” by initiating an enforcement action. Finding that relator was unconstitutionally appointed when the Zafirov lawsuit was filed, the court granted defendant’s motion for judgment on the pleadings and dismissed the case.

Implications

Four implications of Zafirov’s holding and reasoning are particularly noteworthy.

First, Zafirov is a district court decision, which means the court’s holding does not establish binding precedent. In fact, every court of appeal to consider a similar Article II challenge (including the Second, Fifth, Sixth, Ninth, and Tenth Circuits) has found the FCA constitutional. However, all of these Circuit court decisions were issued pre-Polansky. Federal district courts that have considered this post-Polansky, including another district court within the Eleventh Circuit, have rejected the Article II constitutional challenge.

Second, the district court’s decision in Zafirov will almost certainly be appealed to the Eleventh Circuit. If the Eleventh Circuit agrees with the analysis in Zafirov, that ruling would create a circuit split. Circuit splits on constitutional questions often earn Supreme Court review. Indeed, in Polansky, Justices Kavanaugh and Barrett urged the Supreme Court to “consider the competing arguments on the Article II issue in an appropriate case.” Polansky, 599 U.S. at 442 (Kavanaugh, J., concurring, joined by Barrett, J.). A grant of certiorari by the Supreme Court requires four votes, so only one additional Justice would be required to join Justices Thomas, Kavanaugh, and Barrett in deeming this issue cert-worthy.

Third, Judge Mizelle’s analysis in Zafirov is best understood in the context of a larger debate about the scope of Presidential power under Article II and separation of powers principles. The unitary executive theory, which posits that Congress cannot curb Presidential control of the Executive branch, has gained traction in recent years, including with a number of members of the Supreme Court. These broader issues are implicated in the constitutionality of the FCA’s qui tam provision, raising the likelihood of eventual Supreme Court review.

Fourth, putting aside all debates about constitutional interpretive theories, FCA defendants must now consider whether and when to raise constitutional defenses when faced with an unsealed FCA lawsuit. Though non-binding, Zafirov provides guidance. If the government declines to intervene, circumstances may warrant raising (or at least not waiving) the constitutional issue. This issue will likely be raised by other FCA defendants and courts in other jurisdictions will weigh in. It remains to be seen whether Zafirov is an aberration or the start of a trend in constitutional challenges to the FCA’s “unusual” and “unique” qui tam provisions.

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