The FCA Sky Won’t Fall if Qui Tam Provisions are Unconstitutional

With post-Polansky constitutional challenges like U.S. ex rel. Zafirov v. Florida Medical Associates LLC and U.S. ex rel. Shepherd v. Fluor Corporation already brewing, it seems only a matter of time before the Supreme Court decides the fate of the False Claims Act’s (FCA) qui tam provisions. And with three sitting justices having already signaled directly, and a fourth indirectly, that the qui tam device may be at odds with Article II, the chances aren’t slight that we may shortly live in a world without relators.

In these challenges already underway, and no doubt should a case reach the Supreme Court, the government and relators have argued and will argue that the death of the qui tam would be catastrophic — that since the FCA’s 1986 revamp, over 15,000 qui tam suits have been filed, accounting for nearly 70% of the over $75 billion recovered; that putative FCA violators will skate scot-free if relators are no more; that the FCA sky is about to fall.

Hold on Chicken Little. Not only does the Department of Justice (DOJ) have hundreds of FCA lawyers in Washington, D.C. and peppered throughout U.S. Attorneys’ offices nationwide, but there are other means to incentivize “whistleblowers” without running afoul of Article II.

For example, as detailed in our colleagues’ recent Enforcement Edge post, the DOJ’s newly minted Corporate Whistleblower Awards Pilot Program (Pilot Program) will compensate private citizens who provide original information about certain types of corporate misconduct if the information leads to a successful criminal or civil forfeiture exceeding $1 million. It includes a process for whistleblowers to submit information and, if the tip leads to recovery, claim a percentage of the assets recovered — up to 30% depending on the circumstances. Sound familiar?

For now, this three-year pilot excludes recoveries obtainable through the FCA, but it is not such a stretch to imagine that the DOJ (and/or Congress) could make a change should the qui tam constitutional wrong be righted. The DOJ does not (and undoubtedly constitutionally could not) cede criminal prosecution or civil forfeiture to whistleblowers. The decision whether and under what circumstances to prosecute remains firmly in the hands of executive officers directly accountable to the President and thus indirectly to the people.

In our view, there is no reason to treat the quasi-criminal FCA differently. It is, after all, a punitive statute that subjects defendants to the prospect of daunting damages and penalties that can reach hundreds of millions of dollars or more depending on the case. As with criminal prosecution, the FCA is a weighty cudgel that should be wielded only by federal officers answerable to the Executive. Should the DOJ think it prudent nonetheless to pay bounties for successful FCA cases, its own Pilot Program demonstrates it can plot a path forward that does not trip over the Constitution.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.