Eleventh Circuit Actively Engaged on Question of FCA’s Qui Tam Provisions’ Constitutionality

The panel consisted of Judges Elizabeth L. Branch and Robert J. Luck, both appointed by President Donald J. Trump, and Southern District of Florida Senior Judge Federico A. Moreno, who was sitting by designation and was appointed by President George H.W. Bush. It was not clear after more than 45 minutes of argument how the judges on the panel will decide the issue, but it was apparent that they are seriously considering the qui tam provisions’ constitutionality and likely will not find dispositive the decisions of other circuit courts that have green-lit relator-initiated FCA suits. Indeed, as Judge Branch highlighted at the onset of oral argument, it has been more than two decades since the last time a circuit court considered the issue, and justices on the US Supreme Court have indicated that the Court may take up the issue in the appropriate case.

As we previously discussed, Judge Kathryn Kimball Mizelle broke ground when she held in Zafirov that the FCA’s qui tam mechanism is unconstitutional. Specifically, she held that a relator is an “officer” under Article II’s Appointments Clause because (1) it exercises “significant authority” when it brings FCA actions on behalf of the United States (i.e., exercises executive power) and (2) the relator occupies a continuing position established by law. Because the relator in Zafirov was neither nominated by the president and confirmed by the US Senate nor properly appointed under Article II, Judge Mizelle dismissed the case. Her decision opened the door to defendants around the country to challenge the FCA device’s constitutionality.

The panel addressed Judge Mizelle’s opinion head on. Judges Branch and Luck were skeptical of the government’s and the relator’s counsel’s argument that the relator does not exercise significant authority. This is so because the government can intervene at any time; the government only permits non-intervened FCA cases to proceed that are consistent with the US Department of Justice’s (DOJ) enforcement policies, and such non-intervened cases are like any other private fraud suit and do not draw on the DOJ’s resources. But, as Judge Luck pointed out, the relator seems to exercise significant authority when it files an FCA complaint under seal because doing so obligates the government to investigate the allegations in the complaint, allowing a private plaintiff to direct the government’s investigative attention. Judge Moreno also seemed to imply that the relator exercises significant authority because, in his experience as a trial court judge, the government does not intervene in a vast majority of relator-initiated FCA suits, resulting in suits being treated like any other civil case.

It was less clear, however, what the panel thought as to whether the relator occupies a continuing position. The government forcefully argued that the court’s analysis should start and end on this point because the relator’s position ends once the litigation concludes, whereas the defendant’s counsel argued that the FCA creates the “office” of the relator for Appointments Clause purposes. Judge Branch pointed out that the relator position seems personal to the individual relator and suggested that the position is distinguishable from other cases considered by the Supreme Court where the position continues even after the office holder vacates the position. However, Judge Luck asked counsel on both sides whether the Appointments Clause even applies as the relator is neither an employee nor a contractor of the government.

Because relators appear to exercise core executive power, the panel inquired whether the proper analysis is under the Vesting and Take Care Clauses of Article II and not the Appointments Clause. Judge Luck specifically asked whether the case should be remanded back to Judge Mizelle because she only considered the qui tam mechanism’s constitutionality under the latter. Both sides asked the panel to address the Vesting and Take Care Clauses in the first instance, likely so they have an appealable issue for the Supreme Court.

A significant amount of time was spent on the history of qui tam analogs, though based on the panel’s questions, the history is unlikely to be dispositive. Of note, the panel pointed out that many of the early qui tam provisions at the country’s founding permitted private parties to bring criminal prosecutions, a proposition that is incongruous with Article II. Counsel for the defendants and amici US Chamber of Commerce pointed out that there is no evidence that the early qui tam provisions were widely used, and that the early US Congresses did not debate whether such provisions were compatible with Article II. The government and relator’s counsel argued that the FCA’s mechanism better complies with Article II than its early counterparts because the government currently exercises control over non-intervened FCA cases.

There was little discussion as to what the implications would be if the panel found the FCA’s qui tam provisions unconstitutional, except when Judge Moreno noted that doing so may create “chaos,” but that “sometimes the Constitution creates chaos.”

In the end, the Eleventh Circuit is not the only appellate court considering the qui tam mechanism’s constitutionality. The Third Circuit will likely consider the question in Janssen Products LP’s appeal of a historic $1.6 billion FCA jury verdict. And recently, in United States ex rel. Murphy v. TriHealth, Inc., a court in the Southern District of Ohio denied a motion to dismiss in an FCA case, holding that, under Sixth Circuit precedent, the qui tam provisions are consistent with Article II. But, given the statements made by members of the Supreme Court and the holding in Zafirov, the court certified its order for an interlocutory appeal, giving the Sixth Circuit an opportunity to reconsider its previous ruling.

We will continue to monitor post-Zafirov developments and will be watching out for the Eleventh Circuit’s opinion.