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FCA Qui Notes
April 24, 2024

Defendants’ Dream or Relators’ Nightmare — Could the FCA’s Qui Tam Provisions Actually Be Held Unconstitutional?

Qui Notes: Unlocking the False Claims Act

The constitutionality of the False Claims Act’s (FCA) qui tam provisions took center stage in a Florida federal courtroom on April 22, 2024. As our readers well know, in dissenting from the majority opinion in United States ex rel. Polansky v. Executive Health Resources Inc., Justice Thomas noted “[t]here are substantial arguments that the [FCA’s] qui tam device is inconsistent with Article II.” Now, U.S. District Judge Kathryn Kimball Mizelle, his former law clerk, has heard those arguments and, based on her questioning, seems to find them substantial. Qui Notes was there to offer this quick ringside report.

In the case, Zafirov v. Florida Medical Associates LLC, defendants moved for judgment on the pleadings, arguing that the FCA’s qui tam device violates Article II’s Vesting, Take Care, and Appointments Clauses. Defendants argued that the FCA’s qui tam device (1) violates the Appointments Clause because relators exercise a key executive function — conducting civil litigation on behalf of the United States to enforce public rights — but are not properly appointed officers of the United States and (2) violates the Vesting and Take Care Clauses because the FCA delegates this key executive authority, without sufficient executive control to take care that the laws are faithfully executed, to private persons outside the Executive Branch. Defendants also asserted that history, which sometimes can support the constitutionality of a statute that has a strong historical pedigree, cannot save the FCA’s qui tam device.

At this week’s hearing on the motion, defendants and the U.S. Chamber of Commerce as amicus curiae squared off against the relator, the Department of Justice (DOJ), and the Anti-Fraud Coalition as amicus curiae, with everyone having their turn at the podium.

As might be expected during almost four hours of argument, the hearing hit on all of the issues raised in the parties’ briefs and more. But much of the day focused on three key “pressure points” the court identified at the very start (clearly having done its research in advance):

  1. What standard should the court apply to the Appointments Clause’s “continuity” requirement for determining whether a person is an Officer of the United States?
  2. What history should the court consider, and how, in determining whether the historical record supports the constitutionality of the FCA’s qui tam device?
  3. After Polansky, what remains, if anything, of the partial assignment of the government’s claim to the relator identified by the Supreme Court’s decision in Vermont Agency of Natural Resources v. United States ex rel. Stevens?

The specificity of the court’s questions suggests that it may have already gotten past some of the threshold issues presented, such as whether the Appointments Clause has anything to say about a private relator’s lawsuit. But this last question was not briefed by any party or amicus and hints that the court may be reconsidering relator standing after Polansky; the reason being that the Supreme Court held in Stevens that relators had Article III standing based upon the government’s partial assignment to a relator of its claim for damages under the FCA. However, given that Polansky afforded the government virtually unbridled discretion to dismiss a relator’s claim, the case raises the question of whether there is an assignment at all, thus perhaps requiring a re-evaluation of Stevens, or at the very least, a close look at the question of whether a relator has any cognizable property interest in the underlying litigation. The latter, too, is relevant to the Article II challenge as the lack of any such personal interest would demonstrate further that the relator is litigating a purely public right, the kind of thing executive officers and federal agencies do.

While teasing out each of these questions, Judge Kimball Mizelle made several statements suggesting that she doubts the constitutionality of the FCA’s qui tam device is as clear-cut as pre-Polansky decisions may have made it out to be. For example, she said it is hard to accept the DOJ and relator’s position that civil enforcement on behalf of the United States is not a substantial executive power. And, after telling DOJ that its best chance to defend the constitutionality of the FCA’s qui tam device is by arguing that its historical pedigree supports its constitutionality, she told relator that history is one of the hardest aspects of their position (thus seeming to suggest that DOJ’s “best chance” may not be all that good after all). This is perhaps because, as the court and defendants noted, the early comparable statutes fell into disuse and there is no evidence that the Framers consciously considered those statutes’ constitutionality at the time of their passing. Judge Kimball Mizelle also told DOJ that its argument that the FCA’s qui tam device is constitutional because the executive retains some control over relators helps its Take Care Clause argument, but causes a “big” Appointments Clause problem, presumably because it underscores that a relator does in fact exercise executive power. And, on several occasions, the court asked counsel for relator and DOJ to explain the distinction between corporate criminal prosecutions and the FCA’s “essentially punitive” treble damages scheme, at one point indicating that treble damages under the FCA can be a harsher punishment than a criminal indictment. Judge Kimball Mizelle also indicated that she is considering the question of remedy — that is, if the qui tam provisions are unconstitutional, what happens to the relator’s suit?

Though we of course cannot predict the outcome, the lengthy hearing and the court’s probing questions demonstrate Judge Kimball Mizelle is taking seriously the constitutional questions recently presented by one of her judicial mentors. Just last night, the court issued an order requesting supplemental briefing “providing additional founding-era historical evidence regarding federal qui tam enforcement.” We will report back on any noteworthy supplemental briefing, and you can be sure that we will be watching carefully for the decision.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.