Whenever there is a pot of money up for grabs, people will inevitably want more than their fair share. And when that money is doled out through government contracts, opportunities for fraud abound. The government can prosecute such frauds in its own right or it can arm private citizens to recoup money on its behalf. Or can it?
The U.S. District Court for the Middle District of Florida recently held that the answer is “no,” at least in the context of qui tam actions brought under the False Claims Act. This article explores the past, present and future validity of this device, in light of recent developments.
Originally passed during the Civil War, the False Claims Act (FCA) is supposed to deter and remedy fraud in government contracts.
Among other things, the FCA proscribes submitting fraudulent claims for payment to the United States. Although the government may prosecute such violations in its own right (see 31 U.S.C. § 3730(a)) the FCA empowers any “person,” including private citizens (and arguably, even foreign nationals) to prosecute these claims on the government’s behalf. (See Id. § 3730(b)(1).) As the Fourth Circuit put it, by passing the FCA, “Congress has let loose a posse of ad hoc deputies to uncover and prosecute frauds against the government.” (U.S. Ex rel. Milam v. Univ. of Texas M.D. Anderson Cancer Ctr., 961 F.2d 46, 49 (4th Cir. 1992).) In exchange for their service, these “deputies,” formally known as “relators,” receive an “award,” i.e., a percentage of the recovery. (Id. § 3730(d).) According to the DOJ, most FCA violations are prosecuted by relators — not the government.
Although the FCA’s qui tam device first surfaced in 1863, qui tam itself is far more ancient. For example, as early as 1318, Englishmen could prosecute public officials for “merchandi[zing] wines” and “as the King’s Gift” receive a third of the forfeited merchandise. (See e.g., 12 Edward II, ch. 6 (1318), Stats. Of The Realm 177, 178.) And even in American history, qui tam predates the FCA. Indeed, “immediately after the framing, the First Congress enacted a considerable number of informer statutes,” which “[l]ike their English counterparts, some of them provided both a bounty and an express cause of action; others provided a bounty only.” (Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 776 (2000).) In modern practice, qui tam actions often involve a whistleblower suing their employer for defrauding the government; the government then either takes over the case or allows the whistleblower to proceed ex rel, or on the government’s behalf.
Despite qui tam’s old roots, it was recently deemed unconstitutional by the U.S. District Court for the Middle District of Florida. Factually, the case concerned Clarissa Zafirov, the relator, who for years has sued “various corporate entities on behalf of the United States, pursuing treble damages and other daunting monetary penalties for alleged harms to the public fisc.” (United States ex rel. Zafirov v. Florida Medical Associates LLC, 8:19-cv-01236, (slip op. at 1).) Zafirov currently lives in Canada and sued various health care providers, alleging that they “acted in concert” with certain Medicare Advantage defendants to defraud the government by submitting false claims in the form of unsupported risk-adjusting diagnosis codes.
In response, the defendants argued that the FCA’s qui tam provisions violate the Vesting, Take Care, and Appointments Clauses. Judge Kathryn Kimball Mizelle agreed in part, holding that the FCA’s qui tam provision violates Article II’s Appointments Clause, but declining to address the other constitutional arguments.
The Appointments Clause provides that the President:
shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
[U.S. Const., art. II, § 2, cl. 2]
In layman’s terms, the president is to appoint federal “officers,” but Congress may permit the president, the courts or the heads of departments to appoint “inferior” officers, without advice and consent of the Senate. Not all federal workers are officers — inferior or otherwise. Indeed, mere “employees,” i.e., those “lesser functionaries” that comprise the “broad swath” of the federal workforce are invisible to the Appointments Clause — the Senate has no role in hiring these folks. (SEC v. Lucia, 585 U.S. 237, 245 (2018).)
So, whether an individual is an “employee,” “inferior officer” or “officer” determines how (if at all) Article II governs their hiring or appointment. This invites the question: what are qui tam relators? According to the Middle District of Florida, they are officers of the United States.
The Court’s opinion spans 53 pages, but ultimately concludes that qui tam relators meet Buckley v. Valeo’s “officer of the United States” test, namely: (1) they “exercise significant authority pursuant to the laws of the United States” and (2) “occupy a continuing position established by law.” (Zafirov, slip op. at 16 (cleaned up).) Because a relator is an “officer” of the United States, they must be appointed by the president with the advice and consent of the Senate — but that is not how the FCA’s qui tam provision operates. The result, according to the Court, is an “officer” of the United States who hasn’t been constitutionally appointed.
The court rejected what it viewed as “non-binding” decisions from U.S. Circuit Courts of Appeal that deemed relators to not be officers. Those cases, according to the court, did not “examine, much less reconcil[e] the long line of Supreme Court precedents explaining that enforcement authority and charging discretion are core executive powers, especially when coupled with the authority to impose a punitive sanction.” (Id. at 22.) Moreover, the court recognized that the Supreme Court has “only solidified the strictures of the Appointments Clause,” since those cases were decided. (Id. at 24.)
In sidestepping these contrary circuit court decisions, the Court looked to Justice Thomas’s dissent in U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023). That case concerned the DOJ’s discretion in seeking dismissal of qui tam actions brought under the FCA. In dissent, Justice Thomas pointed out that: (1) “there 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,” and (2) “the entire executive power belongs to the President alone, [and thus] it can only be exercised by the president and those acting under him.” (Id. at 449 (Thomas, J., dissenting).) Justices Kavanaugh and Barrett joined the majority opinion in full but wrote separately “only” to note their agreement with Justice Thomas in being skeptical of qui tam itself. (Id. at 442.)
The relator has not yet appealed. But if (more likely, when) the Eleventh Circuit hears the case, there circuits may split, which is often fertile ground for certiorari. And given the concurring and dissenting opinions in Polansky, it seems that the Court has at least some appetite for the matter. But regardless of what happens on appeal with respect to the Appointments Clause, the Middle District did not rule on every aspect of the Article II challenge. Rather, the Court expressly declined to rule on the defendants’ arguments that qui tam prosecutions violate the Take Care and Vesting Clauses of Article II. Those arguments are still alive and might be raised in defense of a qui tam suit down the line.
The Take Care Clause, contained in Article II, § 3 of the United States Constitution, provides that the President “shall take Care that the Laws be faithfully executed.” The Vesting Clause provides that “[t]he executive Power shall be vested in a President of the United States of America.” (U.S. Const. art. II, §1, cl. 1.)
At bottom, the argument goes that qui tam prosecutions violate the Vesting and Take Care Clauses is that:
(1) Article II vests “the executive Power” not in the executive branch, but in the president himself, see, e.g., Seila Law LLC v. CFPB, 591 U.S. 197, 203 (2023) (“the ‘executive Power’ — all of it — is ‘vested in a president,’ who must ‘take Care that the Laws be faithfully executed.’”);
(2) any officers who wield executive power must be accountable to the president; but
(3) qui tam relators who exercise executive power by conducting civil litigation on behalf of the United States are essentially immune from presidential oversight.
In other words, the president is the executive branch, but he can appoint officers to assist him, provided that they are accountable to him; qui tam relators are not subject to such oversight.
The Court has recently struck down legislative schemes that would insulate officers from presidential oversight and removal, see, e.g., Seila Law, 591 U.S. at 205 (limitation that CFPB director can only be removed “for cause” is unconstitutional); Collins v. Yellen, 594 U.S. 220, 256 (2021)( “[t]he Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer.”). And in some ways, qui tam relators are the most immune from presidential oversight.
But there is only so much to be read in the tea leaves of a district court’s ruling on the pleadings and the non-majority opinions of the Supreme Court. For now, qui tam is alive and well, but those defending against such actions would be wise to know that at least one federal judge has taken issue with the device — perhaps others will too — and that at least three justices have raised their eyebrows.
