George Breen Quoted in “Conservative Justices Cast Constitutional Cloud Over False Claims Act Decision”

Three conservative U.S. Supreme Court justices noted last week that they would consider future constitutional challenges to the federal False Claims Act, a law that since the Civil War has allowed private plaintiffs to sue over false bills sent to the government.

The high court’s decision Friday in U.S. ex rel. Polanksy v. Executive Health Resources Inc. did not touch on the constitutionality of the act. Instead, the court said judges should generally defer to the Department of Justice when it seeks the dismissal of a private plaintiff’s FCA lawsuit against a defendant accused of submitting bogus claims.

In some cases, the court explained, the DOJ may find that answering discovery requests may be more burdensome on the government than any damages award that an FCA plaintiff, known as a “relator,” is able to win in court.

The court’s decision itself was hardly a blockbuster. Justice Elena Kagan wrote the majority opinion on behalf of an 8-1 court.

Yet a lone dissent by Justice Clarence Thomas raised a separate question that is already making waves on both sides of the FCA bar. And it’s one that could potentially see the U.S. government miss out on billions of dollars in clawbacks from false or inflated bills.

Is the False Claims Act Unconstitutional?

In U.S. ex rel. Polansky, Thomas said the majority should have sent the case back to the U.S. Court of Appeals for the Third Circuit to consider the “serious constitutional questions” surrounding the FCA, which was originally passed by Congress in 1863 and nicknamed “Lincoln’s Law.”

Since the Civil War, the law has incentivized private relators to sue individuals or companies for overbilling or defrauding the government by giving the plaintiffs a share of the damages. Congress strengthened those qui tam provisions in 1986 by raising the damages cap along with the percentage relators could take home.

As a result, qui tam lawsuits account for roughly $50 billion of the $72 billion in FCA settlements and judgments from 1986 to 2022, according to DOJ statistics. The vast majority of that money has gone back to the government, even in cases where DOJ declined to intervene.

Or put another way, qui tam suits allowed the government to recover more than $40 billion in false payments over the last three and a half decades.

On Friday, however, Thomas suggested that such lawsuits might violate the Constitution.

“There 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,” Thomas wrote, referring to the constitutional section on executive-branch authority.

Executive power “can only be exercised by the President and those acting under him,” Thomas added. “It thus appears to follow that Congress cannot authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation.”

The fact the FCA has stood for nearly 160 years, and that qui tam regimes similar to the FCA date back to the nation’s founding, aren’t necessarily proof of their constitutionality, Thomas wrote.

‘Standing alone,’ however, ‘historical patterns cannot justify contemporary violations of constitutional guarantees,’” Thomas wrote, citing the 1983 Supreme Court decision Marsh v. Chambers.  “Nor is enactment by the First Congress a guarantee of a statute’s constitutionality.”

It’s not uncommon for Thomas to use solo dissents to call on his colleagues to revisit past precedent or entertain heterodox constitutional theories. But when it comes to concerns about the FCA, he is not alone.

Justice Brett Kavanaugh voted with the majority on the court’s underlying holding but wrote a concurrence, joined by Justice Amy Coney Barrett, in which he expressed support for Thomas’ constitutional concern.

“In my view, the Court should consider the competing arguments on the Article II issue in an appropriate case,” Kavanaugh said.

Open Invitation to FCA Defendants

When even one justice calls for reconsideration of an important legal question, lawyers around the country take notice. It usually doesn’t take long then before such a petition is sitting on the justices’ desks. Now when three justices do so, the temptation is almost too strong to resist. …

Under the qui tam provision—which even Kagan’s majority opinion acknowledged was “an unusual creature”—relators must file their lawsuits under seal and serve the government with a copy. During a 60-day seal-period, the government can decide whether to intervene in the case and pursue its claims against the defendant. If the DOJ declines to do so during that seal period, the relator can still pursue the claims without the government’s backing.

Often part of the defense strategy in these “declined” FCA cases—those being pursued exclusively by the relator—is convincing the government to drop the case.

“We often look to the government after the litigation is being pursued to say, ‘You ought to come in and you ought to intervene to dismiss this case,’” said George Breen, of Epstein Becker Green, who represents defendants in FCA cases. “This is litigation that is not only expensive to defendants, it’s also increasingly expensive to the government.”

The Supreme Court made it easier for the DOJ to do so in its ruling on Friday. But Thomas’ opinion, together with Kavanaugh’s concurrence, may encourage defense attorneys to try to raise constitutional defenses as well, Breen said.

“But I don’t know that there has been enough focus on whether the relator, under the terms of the Constitution, really has the ability to litigate what is purely a case that only the government has an interest in,” Breen said.

It’s unclear whether the three justices view all qui tam suits under the FCA as constitutionally suspect, or only those in which the government declines to intervene.

Declined cases account for only around $5 billion of the $50 billion in FCA settlements and judgments from qui tam cases brought since 1986. Still, last year was an exception due to a whistleblower’s successful $844 million kickback case against Biogen Inc. 

What a future constitutional challenge to the Supreme Court would look like is unclear, to say nothing of what a ruling in the case would say. Thomas allowed that the statute raises “complex questions” that should be addressed in a future case.

Still, Breen seemed to think the conservative jurist levied an attack on all qui tam cases, whether the government has intervened or not: “I think his question is broader than that: it is whether, as a practical matter, does the Constitution permit a relator to bring a cause of action in the name of the government.”