A recent decision by a Court in Florida is gaining national attention because the Court found for the first time that the federal False Claims Act’s qui tam clause was unconstitutional. The phrase “qui tam” is Latin, meaning “who as well” and in the 13th Century, it referred to English lawsuits where a person sued on behalf of the King … “as well” as for himself.
By way of background, federal law allows a party who believes they have evidence the United States Government has been defrauded to file suit. Uniquely, the Plaintiff must present this suit to the Government who assigns the case to a United States Attorney, and potentially fraud specialists in that area of government spending, to evaluate and assess the merits of the case. Under the law, the United States Government can then “intervene” in the case and proceed with the claims as if they were the Plaintiff, even though the private party has discovered the alleged fraud and damages. The Government can also elect not to intervene and instead allow the private plaintiff to proceed with the suit, prove the case and recover the damages. The law provides for the sharing of damages by a successful litigant, who can benefit handsomely from a case where they prove the Government was defrauded and suffered considerable losses.
The federal qui tam law is unique in the sense that the Plaintiff is a private citizen, are called “relators,” and advocate and prosecute the civil suit on behalf of the United States Government seeking to prove and recover damages suffered by the government. In this recent case, a Florida judge held that the Act, as applied in that case, was unconstitutional. U.S. District Judge Kathryn Kimball Mizelle dismissed the case, which involved Medicare Advantage fraud, ruling that qui tam relators who file lawsuits under the FCA are essentially acting as “officers of the United States” and thereby violating the U.S. Constitution’s Appointments’ Clause, which requires such officers to be appointed by the president, a court, or the head of a federal department.
Why is this of interest?
The Court’s ruling is of interest nationwide because the rationale for the Court’s decision has implications for current and future cases pending throughout the country. The Court dismissed the suit on the theory that the False Claims Act is unconstitutional because it allows for the deputization of a layperson, who is then empowered to act as an agent of the government in violation of Article II. The Court reasons that a relator – the plaintiff – is a private party but they are, de facto, an extension or a governmental officer of the United States Government who has not been formally appointed under Article II of the United States Constitution. Article II provides the means and authority under which officers, the heads of agencies and other governmental officials serving at high levels in government, must be appointed and then approved.
The Constitution requires, as a general and default rule, that “Officers of the United States” must be nominated by the President and confirmed by the Senate. The Constitution allows only an exception to this rule for cases where the officer is merely an “inferior officer,” in which circumstance, Congress may waive Senate consent.
Recent rulings by our Supreme Court signal that the Court may be willing to consider these arguments and resolve them in favor of the defense. In other rulings, the Court has weakened the previously wide discretion granted to federal agencies to prosecute, interpret, and enforce regulations. Other federal courts may reach similar rulings, relying upon this as persuasive authority, and the collective cases could eventually reach SCOTUS.
To be clear, the Florida decision presently applies only to the facts of that case and to the defendants in the Medicare case: United States ex rel. Zafirov v. Florida Medical Associates, LLC. The decision could have broad implications for other Qui Tam cases which are pending and which may be filed in New Jersey and other jurisdictions. The decision could empower counsel in other cases to make the same arguments and/or settle claims on more favorable terms. The prospect of fighting both a private litigant represented by experienced counsel, with the backing of the United States Attorney and its staff, is a daunting task. Now, defense counsel and health care providers have something to cite in an effort to counterbalance against the considerable leverage the Department of Justice and private counsel have over them in these cases.
Although the federal court ruling outlines the many pitfalls and potentially unconstitutional aspects of the law, the False Claims Act has several salient benefits. In some jurisdictions, the federal government does not have a budget, a fraud task force, or staff to handle these types of cases. Allowing private litigants to prosecute them saves the United States Government time to pursue other cases and the funds to do so.