Debate Over Qui Tam Constitutionality Resumes

By Herb Fenster, Peter Hutt II and Carl Wiersum

Photo: iStock

The motivating force behind the False Claims Act is its provision for qui tam enforcement, which authorizes private parties to initiate FCA cases on behalf of the United States.

In the 1980s, scholars and litigants questioned the constitutional validity of statutory authorization for relators to sue on behalf of the U.S. government. After 15 years of litigation, this debate withered, but has been recently re-invigorated.

There are principal challenges to the constitutionality of qui tam enforcement.

One is the issue of standing. The Supreme Court settled the question of whether relators have Article III standing in the affirmative in Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (1999). At issue was whether a relator has suffered the requisite “injury in fact” to satisfy Article III’s case-or-controversy requirement. The court held that “[t]he FCA can reasonably be regarded as effecting a partial assignment of the government’s damages claim,” and accordingly determined that a relator has standing based upon “the United States’ injury in fact.”

But the court’s opinion only whet litigants’ appetite for other constitutional challenges to qui tam. In concluding that a relator has Article III standing, Justice Antonin Scalia added in an enigmatic footnote, “we express no view on the question whether qui tam suits violate Article II, in particular the Appointments Clause of § 2 and the ‘Take Care’ Clause of § 3.”

A second issue is the Appointments Clause, which provides that the president shall nominate, and with the advice and consent of the Senate, shall appoint “officers of the United States,” and that Congress may vest appointment of “inferior officers” in the president alone, in the courts of law, or in the heads of departments.

Relators arguably serve as “officers” or “inferior officers” of the United States when they file qui tam actions and prosecute them on behalf of the federal government. The constitutional question is whether they may do so without specific appointment in accordance with the Appointments Clause.

A third issue is separation of powers. The Executive Vesting Clause and Take Care Clause provide that “[t]he executive power shall be vested in a president of the United States of America” and that the president “shall take care that the laws be faithfully executed.” The constitutional question — as framed 30 years ago in a Department of Justice memorandum by Attorney General William Barr — is whether the qui tam provisions impermissibly infringe upon the executive branch’s “discretion to decide whether to prosecute a claim, and [its] control of litigation brought to enforce the government’s interests.”

Intermountain Health Care recently sought certiorari asking the Supreme Court to decide whether qui tam violates the Appointments Clause. The petition argues that because relators “occupy a ‘continuing’ position established by law” and “exercis[e] significant authority pursuant to the laws of the United States,” they are officers whose appointment is subject to the procedures established in the clause.

Though Intermountain expressly raises only the Appointments Clause question, its petition emphasizes the separation of powers aspects of the Appointments Clause throughout, framing the clause as a “significant structural safeguard” and “a key constitutional means vested in the president” to “resist encroachment of the other” branches.

Intermountain’s alternative position — that “even if relators are not officers, the False Claims Act violates the Appointments Clause by vesting a core officer function in relators” — also invokes separation of powers principles. “Whatever other officer functions Congress might delegate to non-officers in other contexts,” Intermountain argues, “the Appointments Clause is stretched beyond its limits by Congress’ delegation of core sovereign functions of civil law enforcement to non-officers.”

As Barr argued three decades earlier, qui tam presents the structural danger that “Congress effectively could ‘privatize’ all civil law enforcement.”

Twenty years after the Stevens decision, why this moment for renewed debate?

The answer may be that in the last few years the Department of Justice has increasingly struggled to keep the ever-expanding qui tam docket under control. As qui tam actions have become big business, professional relators have emerged, represented by bigger and better-financed mainstream law firms. Relators in non-intervened cases routinely take aggressive positions that do not represent the views of the department, and have even proceeded to trial in matters that are directly contrary to the government’s interests — most notoriously in the Trinity matter, where the relator’s position was directly contradicted by the regulatory agency allegedly defrauded.

Most tellingly, a year ago Justice felt impelled to issue the so-called “Granston Memorandum” setting forth the factors that will lead the department to dismiss non-intervened actions, in a transparent effort to wrestle control back from unruly relators and their counsel.

Given the recent overreaches by relators and difficulties that Justice has faced in controlling non-intervened cases, it is unsurprising that defendants are again raising the obvious constitutional concerns over statutory empowerment of third parties to represent the interests of the United States. 

Herb Fenster is senior of counsel, Peter Hutt II is partner and Carl Wiersum is an associate at Covington & Burling LLP.

Topics: Defense Contracting, Defense Department, Government Collaboration, Government Contracting Insights, Government Policy

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