A new trend in False Claims Act (“FCA”) jurisprudence concerning the alleged unconstitutionality of the FCA’s whistleblower provisions is beginning to gain traction in federal courts, laying the groundwork for potentially powerful new defenses for those accused of having violated the statute, while creating significant uncertainty for current and future whistleblowers (referred to as “relators” under the FCA) seeking to recover under that law.
The Zafirov Decision
Recently, in a much-anticipated ruling in the matter of U.S. ex rel. Zafirov v. Fla. Med. Assocs., LLC, Dkt. No.: 19-cv-01236-KKM-SPF (M.D. Fla. 2024), the Middle District of Florida dismissed a relator’s FCA case on the grounds that the statute’s relator or “qui tam” provisions – which allow private parties to stand in the government’s shoes and sue those who have committed a fraud on the federal government – were unconstitutional, in violation of the “Appointments Clause” of the U.S. Constitution. Specifically, the Court found that a FCA relator was an “officer of the United States” under the Appointments Clause because they “exercise[] significant authority pursuant to the United States, and occup[y] a ‘continuing’ position established by law[.]” Id. at *20 (internal citations and most quotation marks omitted). In essence, the Court found that the FCA’s relator provisions over-delegated Article II – or Executive – authority by giving relators the power to exercise prosecutorial discretion and to, in fact, prosecute matters on behalf of the United States akin to a “self-appoint[ed] special prosecutor[,]” without ever being appointed by the President. Id. at *38-39.
The Zafirov decision – or at least a decision like it – was foreshadowed by a dissent authored by Justice Thomas in the 2023 decision in the matter of U.S. ex rel. Polansky v. Exec Health Res., Inc., 599 U.S. 419 (2023). There, Justice Thomas noted that the “FCA’s qui tam provisions have long inhabited something of a constitutional twilight zone[, in 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[] [b]ecause the ‘[t]he entire executive Power’ belongs to the President alone[.]” Id. at 449. And, indeed, Thomas’s dissent is cited with frequency in the Zafirov decision.
Importantly, the Zafirov decision is not binding on any other Court – though its reasoning and holding may, ultimately, be upheld by the 11th Circuit or the Supreme Court.
What This Means for Providers
For providers currently defending against a civil FCA matter (or for those being threatened with such a suit), the Zafirov matter – although not binding on any other Court – can be used as both persuasive authority and as a roadmap to argue that the action is unconstitutional in your matter. This could potentially bear fruit in securing a dismissal or, minimally, as a potential leverage point in your settlement negotiations with the government.
As for providers (or other individuals/entities) who have blown the whistle on government fraud, there is no question that Zafirov breeds substantial uncertainty for the future. Given the current Supreme Court’s conservative bent and their willingness to significantly depart from precedent in matters that (in the Court’s view) threaten the independence of the judiciary,[1] it stands to reason there is a reasonable possibility they may do the same in reviewing Zafirov or a decision like it to protect the independence of the Executive branch.
How Frier Levitt Can Help
Frier Levitt has a robust FCA defense practice, with attorneys practiced in raising both well-established and cutting-edge defensive arguments and strategies to protect its clients. Contact Frier Levitt to discuss.
[1] See Loper Bright Enterprises et al. v. Raimondo Secretary of Commerce, et al.; see also Securities and Exchange Commission v. Jarkesy et al.