Constitutional Challenges Reshape False Claims Act Enforcement Landscape

Constitutional challenges to the False Claims Act (FCA) gained significant momentum in 2025, potentially reshaping the enforcement landscape for healthcare providers and government contractors. Two key constitutional issues have reached critical mass in courtrooms across the country: challenges to the FCA’s qui tam provisions under Article II and pushback against excessive penalties under the Eighth Amendment.

Courts are increasingly scrutinizing whether the FCA’s qui tam provisions, which allow private citizens to file lawsuits on behalf of the government, violate constitutional principles regarding executive authority. This scrutiny comes as the new administration adopts a more expansive view of executive power under Article II.

In a notable development, Judge Mizelle’s 2024 decision in Zafirov, which held that the FCA’s qui tam provisions violate the Appointments Clause, has prompted the Department of Justice to intervene in previously declined cases to defend the constitutionality of the statute. The government’s defense strategy has evolved significantly, narrowing its arguments and now relying heavily on historical precedent rather than broader constitutional claims.

“The government’s position on the constitutional issue has narrowed during the Zafirov appeal,” explained a legal expert tracking the case. “They’ve shifted from arguing the Appointments Clause doesn’t apply to qui tam relators to acknowledging that private actors can be subject to the clause in some circumstances.”

This shift coincided with the presidential transition, reflecting the current administration’s strong stance on executive authority. The government now bases its defense primarily on the argument that a relator’s position is not “continuing” and thus doesn’t trigger Appointments Clause concerns, while also emphasizing the historical practice of qui tam provisions dating back to the nation’s founding.

Multiple federal judges have signaled agreement with the constitutional concerns. In March 2025, Judge Duncan of the Fifth Circuit issued a concurring opinion stating that the qui tam provisions violate both the Appointments Clause and the Take Care Clause because the Constitution “does not allow this outsourcing of prosecutorial power to a private person.” Similarly, Judge Ho urged the Fifth Circuit to revisit the constitutionality of qui tam provisions in a concurring opinion issued in November.

The constitutional question appears headed for the Supreme Court, potentially as early as 2026, creating uncertainty for healthcare organizations and government contractors facing whistleblower lawsuits.

Simultaneously, courts are addressing Eighth Amendment challenges to FCA penalties that defendants argue are grossly disproportionate to their offenses. Several cases in 2025 demonstrated the evolving judicial approach to excessive fines in FCA matters.

In United States ex rel. Taylor v. HealthCare Associates of Texas, LLC, a jury found the defendant submitted 21,844 false claims causing $2.75 million in damages. When the relator sought statutory penalties that would have totaled $449.3 million—a ratio exceeding 100:1 compared to actual damages—the court reduced the civil penalty to a 3:1 ratio, emphasizing that the defendant’s misconduct involved technical billing rule violations rather than deliberate fraud.

By contrast, in United States ex rel. D’Anna v. Capstone Medical Resources, LLC, the court upheld a much larger penalty ratio of 65:1 where defendants had previously pled guilty to criminal healthcare fraud for the same conduct, highlighting how the nature and severity of the violation significantly impact constitutional analysis.

“Courts are establishing a pattern where penalties above a 4:1 ratio may trigger constitutional concerns, particularly in cases involving technical violations or substantial compensatory damages,” noted a healthcare compliance attorney. “However, courts remain willing to impose higher ratios in cases involving egregious misconduct or criminal fraud.”

The case of United States ex rel. Bassan v. Omnicare, Inc. further illustrated this principle when the court approved a 4:1 penalty-to-damages ratio, noting this was “probably the outer limit” of constitutional permissibility given the substantial damages already imposed.

The pending Third Circuit appeal in United States ex rel. Penelow v. Janssen Products, LP, which challenges a $1.2 billion civil penalty representing a 10:1 ratio to the $120 million compensatory damages award, may soon provide additional guidance on appropriate penalty ratios in high-value cases.

As these constitutional challenges advance through the appellate courts, healthcare organizations face significant uncertainty regarding FCA enforcement. A Supreme Court decision limiting qui tam provisions could fundamentally alter the whistleblower landscape, while continued refinement of excessive fines jurisprudence may provide defendants with new arguments against disproportionate penalties.

Industry stakeholders should closely monitor these developments in 2026, as they may significantly impact FCA litigation strategy, settlement negotiations, and compliance planning in the healthcare sector and beyond.