Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida recently declared the False Claims Act qui tam provisions unconstitutional in U.S. ex rel. Zafirov v. Fla. Med. Assocs., LLC, — F.Supp.3d –, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024), turning up the heat on a simmering constitutional fight
In the Upside Down: District Court Upends Decades of False Claims Act Precedent in Declaring Qui Tam Provisions Unconstitutional
In a novel False Claims Act (FCA) ruling, on September 30, 2024, Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida upended decades of FCA jurisprudence in declaring the qui tam provisions of the FCA unconstitutional in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024). This decision follows Justice Thomas’ dissent in the recent Supreme Court decision, U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023), where he posited, “[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.” While Justice Thomas’ implicit constitutional challenge was not entirely new to FCA practitioners, including it in his Polansky dissent, with Justices Kavanaugh and Barrett in a concurring opinion noting their agreement that the Court should consider the constitutional questions in an appropriate case, swung wide open a door of opportunity for defendants and their counsel to attempt to dismiss FCA qui tam suits on constitutional grounds. Judge Mizelle’s decision in Zafirov is the first of its kind to actually dismiss a qui tam suit on constitutional grounds, and will likely lead to an avalanche of similar motions in nearly every non-intervened lawsuit brought by a relator.Continue Reading In the Upside Down: District Court Upends Decades of False Claims Act Precedent in Declaring Qui Tam Provisions Unconstitutional
False Claims Act Settlement Illustrates Value of Disclosure and Cooperation
A recently-announced False Claims Act (FCA) settlement illustrates how government contractors and other FCA defendants can take advantage of a Department of Justice (DOJ) policy that rewards voluntary self-disclosure to, and subsequent cooperation with, the government.Continue Reading False Claims Act Settlement Illustrates Value of Disclosure and Cooperation
The Top FCA Developments of 2023
2023 brought many important False Claims Act developments for companies with business involving government funds. While overall recoveries remained down compared to pre-2022 levels, the total number of settlements and judgments exceeded any prior year. Those settlements and judgments also highlight areas of particular focus for the Government, including cybersecurity compliance, pandemic fraud, and small
Counterclaims Against Compliance-Officer-Turned-Relator Survive Motion to Dismiss
A recent decision in a non-intervened qui tam suit in the Northern District of Georgia provides an example of a defendant threading the needle to avoid dismissal of its counterclaims despite those counterclaims arguably implicating the conduct that the relator alleged violated the False Claims Act (FCA). It also stands as a rare instance where a company’s counterclaims against an FCA relator have survived early court scrutiny and, as such, provides FCA defendants with a potential strategy to combat opportunistic relators.Continue Reading Counterclaims Against Compliance-Officer-Turned-Relator Survive Motion to Dismiss
He’s a Material Guy in a Material World: Senator Grassley Proposes FCA Amendments to Weaken Materiality Defense Where Government Pays Despite Knowledge of Non-Compliance
The continual push and pull between the courts and Congress over the contours of the False Claims Act (“FCA”) has once again spawned proposed legislation unfavorable to FCA defendants, this time poised to curtail defense arguments that continued government payment of claims in the face of alleged noncompliance with contractual or other legal requirements demonstrates a lack of materiality.
On July 25, 2023, a bipartisan group of senators proposed legislation entitled the “False Claims Act Amendments of 2023.” Spearheaded by Senator Chuck Grassley (R-IA), the principal author of the 1986 FCA amendments, the bill purportedly attempts to close certain FCA defense “loopholes” left open by the U.S. Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016) (“Escobar”). Senator Grassley has been an outspoken critic of more recent FCA judicial developments, which he deems a gradual curbing of the power of the “single greatest tool in the fight against fraud.” These newest proposed amendments are another example of Grassley’s advocacy for stronger and more rigid fraud enforcement than courts have been willing to impose based on the text of the FCA. Continue Reading He’s a Material Guy in a Material World: Senator Grassley Proposes FCA Amendments to Weaken Materiality Defense Where Government Pays Despite Knowledge of Non-Compliance
Let’s Talk FCA: Supreme Court Upholds DOJ’s Broad Dismissal Authority
In this episode, Jason Crawford, Agustin Orozco, and Lyndsay Gorton discuss the Supreme Court’s opinion in United States ex rel. Polansky, which held in an 8-1 decision that the Department of Justice maintains broad authority to dismiss qui tam cases over a relator’s objection. The hosts also discuss Justice Thomas’s dissenting opinion which could
See(2)(A) You Later: Supreme Court Holds that DOJ Has Broad Dismissal Authority Even After Unsealing
On June 16, 2023, the U.S. Supreme Court, in United States ex rel. Polansky v. Executive Health Resources Inc., held that the Government may seek dismissal of a False Claims Act (“FCA”) qui tam suit over a relator’s objection so long as it intervenes in the litigation, either during the initial seal period or afterward. The Court also held that, when handling such a motion, district courts should apply Federal Rule of Civil Procedure (“FRCP”) 41(a), the rule generally governing voluntary dismissal of suits. And in a dissent that—in the long run—may end up being more impactful than the Court’s holding, Justice Thomas (joined in a concurring opinion by Justices Kavanaugh and Barrett) questioned the constitutionality of the qui tam provisions themselves. Continue Reading See(2)(A) You Later: Supreme Court Holds that DOJ Has Broad Dismissal Authority Even After Unsealing
Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA
Next Tuesday, April 18, 2023, the highest court in the land will hear arguments in what is poised to be the most influential False Claims Act (FCA) case since the landmark decision in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). On January 13, 2023, the U.S. Supreme Court granted certiorari to hear two consolidated appeals from the U.S. Court of Appeals for the Seventh Circuit in United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022). The Court’s decision will likely have far-reaching ramifications for FCA cases involving ambiguous contractual or regulatory requirements and may also provide benchmarks for assessing the key element of scienter across all FCA cases.
In Supervalu and Safeway, the Seventh Circuit joined several of its sister circuits in applying the scienter standard articulated by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) to the FCA, finding that a defendant’s conduct is not reckless when (1) acting under an objectively reasonable, albeit erroneous, interpretation of an ambiguous regulation or contract provision; and (2) no authoritative guidance existed to warn the defendant away from that interpretation. Continue Reading Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA
The Top FCA Developments of 2022
2022 was a busy year for the False Claims Act. While recoveries were down, new cases reached a record mark, and settlements addressed multiple important and developing enforcement areas, from cybersecurity to small business fraud, bid rigging, Trade Agreements Act compliance, pandemic fraud, and more. Of particular note, the U.S. Supreme Court held argument concerning