Oral Argument in Zafirov Shows Eleventh Circuit Giving Careful Consideration to Constitutionality of FCA’s Qui Tam Device

This morning, the Eleventh Circuit heard the much-anticipated oral argument in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC. On the panel were Judges Branch and Luck, both appointees of President Trump, and Judge Moreno, a George H.W. Bush-appointed senior district judge from the Southern District of Florida sitting by designation. While tea-leaf reading based on oral argument is always a dangerous game, one thing was unmistakably clear: they are taking the constitutional challenge to the False Claims Act’s qui tam mechanism very seriously.

To briefly recap how we got here, Judge Mizelle’s decision below held that the qui tam device violates Article II’s Appointments Clause because (1) relators exercise significant authority pursuant to the laws of the United States because they can initiate lawsuits and, in declined cases, conduct them on the government’s behalf with few guardrails; and (2) relators occupy a continuing position established by law because the FCA effectively creates an “office of the relator.” She also held that the historical pedigree of qui tam actions was not consistent enough nor did it reflect enough consideration of the issues to overcome what she believed were clear constitutional principles. She did not address separate arguments about whether the qui tam device was unconstitutional under the Vesting and Take Care Clauses of Article II. After her decision, the government intervened for the sole purpose of defending the constitutionality of the qui tam provisions

In its opening brief, filed during the Biden administration, the government argued that Judge Mizelle erred on both prongs and that she misread the history. The government also argued categorically that, regardless of the power exercised by a relator, private persons are outside the reach of the Appointments Clause. The government’s reply brief, filed after President Trump took office, purported to “refine” its position. It focused in that brief and at oral argument on the idea that relators do not occupy a continuing position established by law, acknowledging that there are some circumstances in which a private party’s exercise of governmental authority can present an Appointments Clause problem. The government also refined its position on the significant authority issue, arguing the proper inquiry is whether the relator is performing a function that only the government can do, which, the government says, is not the case with relators under the FCA.

At argument this morning, the government shared time with relator’s counsel. Government counsel began by noting that all courts of appeals have rejected constitutional challenges, prompting Judge Branch to quickly interject and note that recent statements from the Supreme Court suggest there have been relevant developments in the law, and that several justices may view the issues differently. All three judges on the panel then proceeded to ask tough questions of both sides, indicating they are closely scrutinizing the issues anew and will not defer to the decisions of prior courts of appeals.

Judges Luck and Branch both expressed skepticism with the argument, advanced by the government and more forcefully by relator’s counsel, that relators do not exercise significant authority. Judge Luck noted that the filing of a qui tam suit requires the government to investigate, which effectively allows a private person to tell the government how to use its investigative authority and resources. He remarked that this “seems close” to the authority exercised by Federal Election Commission members in Buckley v. Valeo, which the Supreme Court held required appointment under Article II. And he noted that the history of qui tam actions, while perhaps relevant to the ultimate question of whether the qui tam provisions are constitutional, did not support the government’s and relator’s position on the significant authority question. Judge Moreno asked only one question, which also seemed to express some sympathy to the defendants’ significant authority argument. Reflecting on his experience as a district judge, he noted that the government is sometimes forced to decide quickly whether to intervene, and if it declines, a qui tam is then treated like any other civil case, not like a government enforcement action. He then suggested that a decision striking down the qui tam device may “create chaos” but noted that “sometimes the Constitution creates chaos.”

Judge Luck returned several times to the question of whether a private person with no employment or contractual relationship with the government can be subject to the Appointments Clause at all. He commented that it may be very harmful to have a private person exercise significant governmental authority, but that fact may not play into the Appointments Clause. He suggested that the issue may be more appropriately considered under the Vesting and Take Care Clauses. Recognizing, however, that Judge Mizelle did not rule on that issue, Judge Luck asked whether the case should be remanded so the district court can address it in the first instance. Government counsel responded that whether the qui tam provisions violate the Take Care and Vesting Clauses presents a pure issue of law that the Eleventh Circuit can consider now; defendants’ counsel also urged the court to address all of the constitutional arguments to tee them up for eventual Supreme Court review.

There was then considerable discussion about the history of qui tam statutes and what to make of them. Judge Luck agreed that Article II marked a significant break from the English parliamentary system, so perhaps the use of qui tam actions before ratification of the Constitution was not particularly telling. But he noted that there were also at least five qui tam statutes enacted by the First Congress and suggested there was some indication that those statues were considered during the administrations of Presidents Washington and Jefferson in the pardon context. However, he then identified what he said could be a “huge problem” for the government and relators: the early qui tam statutes permitted criminal prosecution. If relators and the government take the position that a private individual cannot pursue criminal prosecution, why is that not a concession that the “line needs to be drawn” somewhere other than where those early statutes indicate? He later framed the issue in even starker terms, observing that if the early qui tam statutes are constitutional, the FCA is too, but there are serious questions about the constitutionality of those statutes under Article II. In our humble opinion here at Qui Notes, neither the government nor relator’s counsel had a good answer to this question.

We will be watching closely for the opinion. In the meantime, stay tuned to our coverage of this issue as it makes its way through other courts of appeals.

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