Yesterday, a federal district court in the Middle District of Florida issued a decision that threatens the federal government’s continued reliance on the False Claims Act (“FCA”) as the most powerful weapon in the Department of Justice’s enforcement arsenal. U.S. District Judge Kathryn Kimball Mizelle threw out a case against a group of Medicare Advantage organizations and providers on the grounds that an individual whistleblower suing on behalf of the federal government under the FCA, often called a “relator” in a “qui tam” lawsuit, violates the U.S. Constitution’s “appointments clause.” The Court concluded that relators, who are acting on behalf of the federal government, must be considered officers of the government and appointed in a manner consistent with Constitutional requirements. See U.S. ex rel Zafirov v. Florida Medical Associates, LLC, No. 8:19-cv-1236, 2024 U.S. Dist. LEXIS 176626, ECF No. 346 (M.D. Fl. Sept. 30, 2024).

The “Business” of FCA Cases 

The FCA empowers any “person” to enforce the statute by filing a lawsuit in the federal government’s name. See 31 U.S.C. § 3730(b)(1). If that person prevails, then he or she may collect an award of up to 30% of the proceeds of the action. Id. at 3730(d). This greatly incentivizes individuals and their lawyers, whose fees are recoverable under the FCA, to bring qui tam actions who, as Judge Mizelle noted, bring the vast majority of FCA actions compared to government-initiated FCA cases. Zafirov, 2024 U.S. Dist. LEXIS 176626, at *7. And these incentives have proved to be successful. The number of FCA actions have exploded since the 1980s, when pro-relator amendments were enacted. Id. at *10.

While the FCA provides that the federal government can intervene and take over the prosecution of a case from the relator, the reality is that the government declines to intervene in the vast majority of actions. That leaves the relator with unfettered discretionary authority to act on behalf of the federal government. Id. at *9. While the defense bar as long lamented over these issues, there has been increasing focus on the government’s authority over a realtor’s suit in recent years—including in Justice Thomas’ dissent in U.S. ex rel Polanksy v. Executive Health Resources Inc., where Justice Thomas (joined in part by Justice Kavanaugh and Justice Barrett), raised doubts that the qui tam provisions would pass muster under Article II. It was therefore only a matter of time until a decision like that in Zafirov. 

The Zafirov Decision

In her reasoning, Judge Mizelle notes that the Appointments Clause of the US Constitution requires that “all other Officers of the United States” must be appointed by the President subject to the advice and consent of the Senate (the “Principal Officers” provision), although Congress may vest the appointment of “inferior officers” in the “President alone, in the Courts of law, or in the Heads of Departments” (the “Inferior Officers” provision). U.S. CONST. art. II, § 2, cl. 2. Thus, the clause distinguishes between two types of officers and who can appoint them. Not mentioned in this provision is a third category: the “employees” within the government workforce for whom appointments do not apply.

In concluding that the relator provision violated the Appointments Clause, the district court made three notable conclusions: (a) the FCA relator is an officer (not an employee) of the United States and thus subject to the Appointments Clause; (b) an FCA relator is “self-appointed” and not exempt from the Appointments Clause; and (c) because the relator was not constitutionally appointed, dismissal was the only remedy.

Doing so, the district court-side stepped four other circuit decisions—in the Fifth, Sixth, Ninth and Tenth Circuits—which held that a relator’s powers are not significant and that a relator does not occupy a continuing position established by law, thus failing the Supreme Court’s test for whether an individual is an “officer.” While Judge Mizelle noted that the Supreme Court and Eleventh Circuit had not yet expressly ruled on the applicability of the Appointments Clause and thus this was a matter for first impression in this Circuit, she did note Justices Thomas, Kavanaugh, and Barrett’s comments in the Polansky case (i.e., that there was skepticism was to whether the qui tam provisions were inconsistent with that clause). Zafirov, 2024 U.S. Dist. LEXIS 176626, at *58-59 (citing U.S. ex rel Polansky v. Exec. Health Res., 599 U.S. 419, 442, 449 (2023) (Kavanaugh, J., concurring, joined by Barrett, J.; Thomas, J., dissenting)).

A Sign of Things to Come?

We expect that this is not the end of the Zafirov case—which will likely proceed through the appeal process. Should this holding be upheld on appeal or affirmed by the majority conservative Supreme Court, the FCA world as we know it will be upended. Without all of the incentives for private individuals to come forward, we expect that the number of FCA lawsuits will plummet. So, is this just another Florida outlier decision or is it a sign of things to come? All eyes in the FCA bar are now on the Eleventh Circuit.