What Goes Around Comes Around: The Origins of Zafirov's Holding
Where did the False-Claims-Act-Qui-Tam-provision-violates-the Constitution’s-Appointments-Clause-argument found in United States ex rel Zafirov v. Florida Medical Associates et al., (M.D. Fla.) come from? Did the argument originate with Judge Kathryn Mizelle, the author of Zafirov, and with the Zafirov defense lawyers who advanced it? If you are like us, you probably believed the Appointments’ Clause argument came from Justice Clarence Thomas’ 2023 dissent in United States ex rel. Polansky v. Exec. Health Res., Inc., 599 U.S. 419, 442 (2023). There, Justice Thomas argued that the FCA’s qui tam provision violated the Appointments Clause, and he urged, together with Justices Brett Kavanaugh and Amy Coney Barrett, the U.S. Supreme Court to take up the question. Justice Thomas’ dissent together with a boost by an originalist jurist (and former Thomas law clerk) such as Judge Mizelle, gave new legs to the Appointments Clause argument.
The Appointments Clause argument, however, did not originate with them nor do they claim to be its progenitor. Looking at its origins, turns out that the Appointments Clause argument has been around since not long after the False Claims Act (FCA) was amended in 1986. What was once a constitutional challenge made long ago, however, has with the increasing number of judicial originalists named to the federal bench now gained a whole new life.
Qui tam defendants appear to have first raised the Appointments Clause argument right after the 1986 amendments to the False Claims Act. For example, the 1989 case, United States, ex rel. Stillwell v. Hughes Helicopters, Inc., 174 F. Supp. 1084 (C.D. Cal. 1989), appears to be first reported decision addressing and finding that the FCA’s Qui Tam Provision did not violate the Appointments Clause. The Court also denied two other related constitutional challenges, which the Stillwell court referred to as “cousins” to the Appointments Clause argument, finding that the Qui Tam Provision violated the Constitution’s separation of powers (“Take Care Clause” argument) and Article III’s standing requirement. Over the following years, qui tam defendants frequently challenged the Qui Tam Provision by making these three constitutional arguments. The Supreme Court resolved one of the three constitutional challenges in Vermont Agency of Natural Resources v. Stevens, 529 U.S. 765 (2000). There, the Supreme Court found that qui tam relators did in fact have Article III standing to bring qui tam cases. The Zafirov defendants raised the remaining two constitutional challenges: the Take Care Clause and Appointments Clause arguments.
Another early constitutional challenge to the Qui Tam Provision was made in 1989 by then Assistant Attorney General Bill Barr. See 13 Op. O.L.C. 207. In a “memorandum opinion” to Attorney General Thornburgh, Barr argued that the Qui Tam Provision was unconstitutional based on all three cousin arguments. With U.S. Department of Justice (DOJ) repeatedly declaring over the last 30-plus years the virtues of the FCA, the importance of qui tam relators, and billions it has recovered from qui tams, it is hard to believe that in 1989 DOJ’s Office of Legal Counsel and Civil Division “all agree[d] that the qui tam provisions. . . are unconstitutional.” (In fact, Barr’s memo reflects that the Solicitor General at that time did not hold such a position.) Both Justice Thomas and Zafirov cite to Barr’s memorandum opinion.
Defendants continued to challenge the constitutionality of the Qui Tam Provision in the 1990s and early 2000s, including on Appointments Clause grounds. During that time, several circuits ruled against all such challenges, and those decisions essentially put those qui tam defenses to rest. See United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 751-58 (9th Cir. 1993); United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., 41 F.3d 1032, 1040-42 (6th Cir. 1994); Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749 (5th Cir. 2001) (en banc); United States ex rel. Stone v. Rockwell Int'l Corp., 282 F.3d 787, 804-07, 92 Fed. Appx. 708 (10th Cir. 2002).
The high point for the separation of powers argument came in 1999, when a divided panel of the Fifth Circuit ruled in favor of the qui tam defendants and found the Qui Tam Provision to be unconstitutional in cases where DOJ does not intervene. United States ex rel. Riley v. St. Luke’s Episcopal Hospital, 196 F.3d 514 (5th Cir. Tex. 1999), reversed by Riley v. St. Luke's Episcopal Hosp. 252 F.3d 749, (5th Cir. 2001) (en banc). The 1999 panel decision, however, did not reach the defendants’ Appointments Clause argument, but only addressed the Take Care Clause argument. Circuit judges Smith and DeMoss, who authored the original panel decision, dissented in the Fifth Circuit’s en banc determination of Riley. Their dissent reflects the earliest favorable expression by members of the judiciary of the argument that the Qui Tam Provision violates the Appointments Clause and Take Care Clause.
In the sum, with its Appointments Clause decision, Zakirov resurrects an old argument against the Qui Tam Provision. What went around long ago has come around again.
Please contact A. Brian Albritton, Raquel Ramirez Jefferson or any member of the Phelps Health Care or White Collar Defense and Investigations teams if you have questions or need advice or guidance.
