Courts Challenge Constitutionality of False Claims Act Provisions

Recent federal court rulings have reignited discussions surrounding the constitutionality of the False Claims Act’s (FCA) qui tam provisions, which permit private individuals to file lawsuits on behalf of the U.S. Government. A decision by Judge Kathryn Mizelle on October 1, 2024, has sparked calls for the Supreme Court to review these provisions, raising significant questions about the balance of power within the U.S. federal system.

Federal Courts Reassess Qui Tam Provisions

For many years, courts consistently upheld the legality of the FCA’s qui tam mechanism, which empowers private citizens, known as relators, to sue entities that submit fraudulent claims for government payments. Successful whistleblowers can receive up to 30% of the government’s recovery, highlighting the FCA’s role as a vital enforcement tool, particularly in the healthcare and defense sectors.

In her ruling, Judge Mizelle determined that the qui tam provision infringes upon the Appointments Clause of the Constitution. She argued that it allows unappointed individuals to wield executive power by initiating legal actions on behalf of the U.S. Government. This decision could have profound implications for how the government enforces compliance in various industries.

The Fifth Circuit Court also weighed in on this issue, affirming the dismissal of a qui tam lawsuit in the case of United States ex rel. Gentry v. Encompass Health Rehab. Hosp. of Pearland, L.L.C.. The court found that the relator, a former sales representative, did not provide adequate details regarding the alleged misconduct, which involved false Medicare claims influenced by nonclinical employees. However, in a concurring opinion, Judge James C. Ho called for a reevaluation of the constitutional issues associated with the FCA’s qui tam provisions.

Implications of Potential Circuit Split

The judicial scrutiny surrounding these provisions may lead to a split among federal circuits, particularly if the Eleventh Circuit upholds Judge Mizelle’s findings in the Zafirov case. Such a split could set the stage for a Supreme Court review, potentially altering the landscape of whistleblower-driven enforcement in the U.S.

Judge Ho’s concurrence reflects a growing skepticism regarding the FCA’s constitutionality, echoing concerns previously raised by Justices Kavanaugh and Barrett, as well as Justice Thomas, who questioned the alignment of qui tam provisions with the separation of powers principle enshrined in Article II of the Constitution. These perspectives may influence future judicial interpretations and could challenge longstanding precedents.

As the U.S. Government appeals Judge Mizelle’s ruling to the Eleventh Circuit, the legal community is closely monitoring the developments of this case. The outcomes of these proceedings could have sweeping effects on how FCA cases are litigated, especially those where the government has not intervened. Since a significant portion of FCA recoveries stem from qui tam actions, any constitutional shifts could notably impact enforcement across the healthcare, defense, and government contracting sectors.

In conclusion, the current wave of judicial scrutiny over the FCA’s qui tam provisions underscores a pivotal moment in legal interpretations of whistleblower protections. The implications of these rulings may redefine the landscape of fraud enforcement and the role of private citizens in holding entities accountable for misconduct against the U.S. Government. Legal stakeholders must remain vigilant as these cases unfold, as their outcomes could reshape the enforcement mechanisms that have been in place for decades.