Eleventh Circuit Rejects Appointments Clause Challenge to False Claims Act Qui Tam Provisions

A published appellate decision reverses the dismissal of a Medicare fraud whistleblower case and rejects an Appointments Clause challenge to the False Claims Act’s qui tam provisions, while leaving two other constitutional challenges unresolved.

 

The U.S. Court of Appeals for the Eleventh Circuit reversed a district court decision holding that the False Claims Act’s (“FCA”) qui tam provisions violate the Constitution’s Appointments Clause. In United States ex rel. Zafirov v. Florida Medical Associates, LLC, the court held that private whistleblowers, known as relators, are not “Officers of the United States” who must be appointed under Article II because they do not occupy a continuing position established by law.

The decision revives an FCA action alleging that healthcare organizations knowingly submitted false diagnosis codes to increase Medicare payments. The court did not decide the defendants’ separate challenges under the Take Care Clause and Vesting Clause and returned those issues to the district court.

Why This Matters

The FCA permits private relators to file actions on behalf of the United States and continue those cases when the government declines to intervene. Many healthcare FCA cases begin with allegations by current or former employees concerning coding, billing, medical necessity, referral relationships, and other practices involving federal healthcare payments. The district court’s decision threatened that private enforcement mechanism by holding that relators lacked constitutional authority to prosecute FCA claims without an appointment under Article II.

Dr. Clarissa Zafirov filed this qui tam action in 2019 against her employer and related healthcare entities. She alleged that the defendants knowingly submitted false diagnosis codes that increased Medicare payments. The government investigated the allegations and declined to intervene, leaving Zafirov to pursue the case. When the defendants later challenged the constitutionality of the FCA’s qui tam provisions, the United States intervened for the limited purpose of defending the statute.

The Constitutional Challenge to the FCA

The defendants raised three challenges under Article II. They argued that relators violate the Appointments Clause because they exercise significant federal authority without being constitutionally appointed; the Take Care Clause because the President lacks sufficient supervision and control over relators exercising executive authority; and the Vesting Clause because private relators exercise executive power by prosecuting civil enforcement actions on behalf of the United States.

The district court agreed on the Appointments Clause. It concluded that FCA relators exercise significant federal authority by prosecuting enforcement actions in the government’s name and occupy what it called a continuing “office of relator.” Because Zafirov had not been appointed under Article II, the court dismissed the case. It did not reach the Take Care Clause or Vesting Clause arguments.

The Eleventh Circuit Rejects the Appointments Clause Challenge

The Eleventh Circuit disagreed. Looking at the tenure, duration, compensation, and duties of a relator, the court found no continuing federal position. A relator’s role is temporary and limited to a particular FCA action. When the case ends, the relator has no continuing responsibilities. A case lasting several years does not turn that case-specific role into a permanent federal position.

Relators also do not receive continuing government compensation, and their duties are personal to the particular action. The court rejected the district court’s “office of relator,” noting that no such office appears in the FCA or any other law. Because a relator does not occupy a continuing position established by law, the court held that relators are not Officers of the United States subject to the Appointments Clause.

Impact on Healthcare Organizations and Physicians

Healthcare defendants in the Eleventh Circuit cannot dismiss an FCA qui tam action simply because a private relator was not appointed under the Appointments Clause. That is particularly important when the government declines intervention. Declination does not end the case. The relator can continue litigating in the government’s name, while the government retains statutory rights in the action.

The allegations in Zafirov also involve a recurring healthcare enforcement issue: Medicare Advantage risk adjustment. Diagnosis codes can affect federal reimbursement, and allegations that unsupported diagnoses increased Medicare payments can lead to FCA investigations and litigation. Similar exposure can arise from coding, billing, medical necessity, documentation, referral relationships, and other practices affecting federal healthcare payments.

Key Takeaway

The Eleventh Circuit has closed one constitutional path for challenging FCA qui tam actions. Healthcare organizations and physicians cannot assume that a government decision declining intervention will end a whistleblower case. The relator may continue pursuing the action in the government’s name, while the government retains statutory rights in the case.

The Eleventh Circuit now joins the Fifth, Sixth, Ninth, and Tenth Circuits in rejecting Appointments Clause challenges to FCA relators. The court left the defendants’ Take Care Clause and Vesting Clause challenges for the district court on remand. The Fifth, Sixth, Ninth, and Tenth Circuits have also rejected Take Care Clause challenges to the FCA’s qui tam provisions, although the scope of those decisions varies depending on whether the government intervened.

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