Florida District Court Finds FCA Qui Tam Provisions Unconstitutional in Outlier Opinion

On September 30, 2024, US District Judge Kathryn Kimball Mizelle of the Middle District of Florida held in United States ex rel. Zafirov v. Florida Medical Associates, LLC that the qui tam provisions of the False Claims Act (FCA) create self-appointed “officers” of the United States in violation of the Appointments Clause of Article II of the Constitution, taking up questions raised by last year’s US Supreme Court dissent in United States ex rel. Polansky v. Executive Health Resources.

This decision closely hews to that dissent by Justice Thomas in Polansky, which invited this point of view with a concurrence by Justices Kavanaugh and Barrett that the “substantial” arguments should be considered in an appropriate case. 

Whether the district court’s conclusion will withstand appellate review or be adopted by other courts remains to be seen, particularly given the long-established validity of the over 150-year-old statute and that the decision is contrary to at least five other post-Polansky district court decisions[1] and pre-Polansky decisions in the Fifth, Sixth, Ninth, and Tenth Circuits, all of which held that the FCA qui tam provisions do not violate Article II of the Constitution.[2]

BACKGROUND

Clarissa Zafirov, a physician, filed suit under the FCA’s qui tam provisions in May 2019, alleging that provider entities and private insurance MAOs worked in concert to artificially increase risk adjustment scores for Medicare Advantage enrollees to increase capitated payments from the Centers for Medicare and Medicaid Services. The case was initially assigned to Judge Steven Merryday. Less than a year later, the United States declined to intervene, and the case was subsequently unsealed. 

In January 2021, while motions to dismiss were pending, the case was reassigned to Judge Mizelle (confirmed by the US Senate just two months prior), who granted the motions in September 2021 on both Rule 9(b) particularity and FCA public disclosure bar grounds, but with leave to amend. In September 2022, following another round of motions to dismiss, another judge, Judge Thomas Barber, denied the motions after the government objected to dismissal on public disclosure bar grounds and filed a statement of interest to clarify its position on certain legal issues regarding the Medicare Advantage program. The defendants then filed answers that did not include an affirmative defense on the basis of Article II, and the case made its way back to Judge Mizelle.

In June 2023, while the case was in active discovery, the US Supreme Court issued its decision in Polansky. In February 2024, the defendants filed a motion for judgment on the pleadings, arguing that the FCA qui tam provisions violated Article II’s Appointments Clause, Take Care Clause, and Vesting Clause. The United States then intervened for the limited purpose of defending the constitutionality of the qui tam provisions. The Chamber of Commerce filed an amicus brief in support of the defendants, and the Anti-Fraud Coalition filed an amicus brief in support of the relator. 

While the constitutional issue was briefed and heard, the case continued through discovery until the district court’s September 30 ruling. 

THE DISTRICT COURT’S CONSTITUTIONAL ANALYSIS

While the defendants sought judgment on multiple Article II grounds, the district court’s opinion only analyzed the Appointments Clause. The court found that a qui tam relator is an official within the meaning of the Appointments Clause as a relator exercises “core executive power” but has not been “appointed” by the Executive as required by the Constitution. 

The basis for this “core executive power” finding rests largely on what the court characterized as the “unfettered discretion” of a relator with no accountability to the Executive. The court discounted the FCA’s statutory provisions setting forth the government’s ability to intervene, to dismiss a qui tam case, and to settle a case over a relator’s objection, characterizing all of this authority as “back-end executive supervision” that requires court approval and does not undermine a relator’s “front-end power” to file a qui tam complaint. 

The court hinged its reasoning on what it viewed as the prosecutorial-like discretion afforded to qui tam relators in deciding who to name as defendants in suits for what it characterized as “essentially punitive” damages and in forcing a mandatory investigation by the United States once a case is filed under seal.  

The district court’s downplaying of this so-called “back-end” control by the government is particularly notable as the Zafirov case itself demonstrated an unusually high level of  government involvement in the suit, with the United States objecting to dismissal under the public disclosure bar, filing numerous statements of interest, and intervening for the purpose of arguing the constitutional challenge to the qui tam provisions.

To support her holding, Judge Mizelle—a former Justice Thomas law clerk—drew heavily on Supreme Court precedent finding Federal Election Commission members to be “officers” due to their litigation powers and analogized to administrative law judges and CFPB and FHFA directors. Meanwhile, the district court distinguished the Fifth, Sixth, Ninth, and Tenth Circuit decisions upholding the constitutionality of the FCA qui tam provisions as failing to examine and reconcile past and more recent Supreme Court precedent defining core executive power in the context of enforcement authority.

The district court also rejected arguments that a qui tam relator does not meet the second part of the “officer” test because the position is not a continuing one. Relying on Supreme Court precedent regarding an independent counsel appointed for a single investigation and bank receivers, the district court found that even though relators change from case to case and only last through a single, individual case, the “office of relator persists by operation of the FCA” as a statutory scheme. The court also found support in the idea that relators can be substituted (e.g., upon death) or assign their rights. 

Finally, the district court stated that the “historical pedigree of qui tam provisions” does not create an exception to the Appointments Clause that could save the FCA provisions because, according to the court, that early history does not evidence consideration of constitutional challenges. In so doing, the court—like Justice Thomas in Polansky—rejected the position taken by the dissenting opinion in Vermont Agency of Natural Resources v. United States ex rel. Stevens.

In Stevens, the Supreme Court held that qui tam relators have Article III standing, as confirmed by the long history of qui tam statutes, but the majority opinion “express[ed] no view on the question whether qui tam suits violate Article II, in particular the Appointments Clause of § 2 and the ‘take Care’ Clause of § 3” as the issue was not raised in that case and is not a jurisdictional issue.[3] The dissent, authored by Justice Stevens and joined by Justice Souter, however, expressed that the same factors supporting Article III standing also resolved the Article II question in favor of constitutionality.

TAKEAWAYS

The Zafirov decision is the first to accept Justice Thomas’s invitation in the Polansky dissent to assess the constitutionality of the FCA qui tam provisions and to find those provisions unconstitutional. However, no appellate court has similarly held. As recently as this past July, the Fifth Circuit wrote approvingly of its 2001 decision in Riley v. St. Luke’s Episcopal Hospital, upholding the constitutionality of the FCA.[4]