District Court Finds Qui Tam Provisions of the False Claims Act Unconstitutional

The FCA is a federal anti-fraud law enacted in 1863, which contains qui tam provisions allowing private citizens, known as relators or whistleblowers, to file suit on behalf of the U.S. government against those who, among other things, have submitted false or fraudulent claims for payment to the government. The qui tam relator stands in the shoes of the government and may prosecute actions against any recipient of federal funding regardless of whether the U.S. Department of Justice (DOJ) decides to intervene in the action. The qui tam relator may pursue treble damages and other daunting monetary penalties for alleged harms to the public and, if successful, is entitled to collect up to 30 percent of the proceeds of the action. As a result, qui tam relators are responsible for the majority of FCA actions—many of which target government contractors.

In dismissing the complaint with prejudice, Judge Mizelle held that the qui tam provisions violate the Appointments Clause in Article II, Section 2 of the U.S. Constitution. Because a qui tam relator “exercis[es] significant civil enforcement authority,” Judge Mizelle found that an FCA relator qualifies as an “officer” of the United States and must be appointed by the executive branch under the Appointments Clause. Thus, because qui tam relators are not so appointed, Judge Mizelle declared the qui tam provisions of the FCA unconstitutional.

In reaching this novel conclusion, Judge Mizelle rejected “non-binding” decisions from four U.S. Circuit Courts of Appeal that had reached a contrary conclusion and rejected the relator’s argument about the long history of qui tam FCA actions, dating back to 1863, finding that “[w]hen the Constitution is clear, no amount of countervailing history overcomes what the States ratified.”

The Zafirov decision relies heavily on Justice Thomas’ dissent in a recent U.S. Supreme Court decision, U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023). In Polansky, the Supreme Court ruled that the DOJ has broad discretion to seek dismissal of qui tam FCA actions. Justice Thomas dissented, stating 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.” Justices Kavanaugh and Barrett similarly noted in a concurring opinion that “the Court should consider the competing arguments on the Article II issue in an appropriate case.” These comments suggest that at least three of the justices view the constitutionality of the qui tam provisions to be an important—and open—issue, and that the Zafirov decision may be on the fast track to the Supreme Court.

In sum, while not binding on other federal courts, the Zafirov decision has the potential to drastically reshape the landscape of FCA litigation. Indeed, in fiscal year 2023 alone, the DOJ obtained more than $2.68 billion in settlements from civil actions brought under the FCA, the vast majority of which—$2.3 billion—came from qui tam suits. Thus, elimination of qui tam suits would likely drastically reduce the number of lawsuits that government contractors, who are often targets of FCA suits, would be forced to defend against.

Accordingly, until the constitutional arguments in the Zafirov decision are settled by the Supreme Court, government contractors facing FCA qui tam actions should consider filing a motion to dismiss on the constitutional grounds set forth in the decision.