Judge Tosses Qui Tam Case; Rules that False Claims Act is in Part Unconstitutional

Clarissa Zafirov believed that her employer, a small medical primary care practice, was engaged with others in a fraudulent scheme to steal from Medicare.? She brought what is known as a qui tam claim under the federal False Claims Act, under which a private citizen as whistle-blower can go to court to claim damages on behalf of the government – and for her coming forward recover a percentage of the damages. In this case the damages would be assessed against and paid out by Florida Medical Associates and its collaborators. Qui tam claims often involve substantial amounts – last year qui tam suits enabled the federal government to recover $2.3 billion.? Inside whistleblowers have more direct knowledge than government investigators and are a cornerstone of rooting out corrupt practices, including in health care.

To resist Zafirov’s litigation the defendants resorted to the U.S. Constitution to attack not Zafirov directly but the existence of the qui tam provisions in the law itself.? They asserted that Zafirov, although a private citizen, was actually an officer of the United States government. As such she was subject to the Appointments Clause of Article II of the Constitution.? An officer of the government must be appointed by the President or through the courts or the heads of his departments.? Since neither the President nor a court appointed her, and beyond her any other qui tam plaintiffs (known as “relators”), the provision for such suits in the False Claims Act was unconstitutional.

A federal judge in the Middle District of Florida bought this argument and last month threw out the claim - and the very cause of action itself. False Claims Act whistleblowers cannot “self appoint” because the qui tam provisions of the FCA are unconstitutional.? United States ex rel. Clarissa Zafirov v. Florida Medical Associates, LLC, Case No. 8:19-cv-01236.

This is not a post-Chevron decision nullifying administrative agency interpretations.? This ruling considered the constitutionality of part of a federal statute, and the statute did not pass the test.

Expect this theory to emerge in qui tam cases elsewhere – this ruling only applies to the Central Florida federal court district – and there will certainly be battles in other courts over the characterization of a private citizen being an employee of the United States government.

There is the additional matter of how this theory applies in cases under the federal law that outlaws improper compensation arrangements between doctors and medical centers in Medicare cases.? The Stark law is engrafted on the False Claims Act and allows relators to sue over illicit referral fee arrangements for Medicare-related medical services.? The elements to plead and prove a Stark law claim provide a lower bar for relators, e.g., no burden to prove intentional fraud. ?But it appears that such lawsuits would also be in jeopardy under the reasoning of this decision.