US Appeals Court Reviews Challenge to Whistleblower Powers Under False Claims Act

Federal appeals court judges in Atlanta heard opposing arguments Friday in a case that could fundamentally reshape the U.S. False Claims Act, a pivotal whistleblower law that has recovered billions of dollars for the government over decades.

The three-judge panel from the 11th U.S. Circuit Court of Appeals is reviewing a controversial 2024 ruling from a Florida federal judge who struck down key whistleblower provisions of the law, claiming they unconstitutionally allow private citizens to wield executive power without presidential accountability.

During the hearing, Circuit Judge Elizabeth Branch noted that several Supreme Court justices have recently questioned the constitutionality of the law’s whistleblower mechanism. The False Claims Act, which dates back to the Civil War era, enables private individuals to file lawsuits on behalf of the federal government against entities that have allegedly defrauded the United States.

The law has become a powerful tool for combating fraud against government programs, particularly in healthcare. Whistleblowers who bring successful cases receive a significant financial incentive — between 15% and 25% of recovered funds when the government intervenes, or between 25% and 30% when the government declines to take over the case.

The constitutional challenge centers on whether these whistleblower provisions violate the separation of powers by allowing private individuals who aren’t government employees to pursue litigation in the name of the United States. The panel questioned whether such whistleblowers should be subject to the Constitution’s appointments clause, which governs how government officers are appointed.

Daniel Winik, representing the federal government, argued that the executive branch maintains sufficient control over these cases through various mechanisms. He urged the court to reverse the lower court’s ruling, emphasizing the law’s importance in the government’s anti-fraud efforts.

The case reached the appeals court after U.S. District Judge Kathryn Mizelle dismissed a lawsuit brought by whistleblower Clarissa Zafirov in September 2024. Zafirov had accused several Florida healthcare companies of defrauding Medicare by using inaccurate diagnosis codes to exaggerate patients’ medical conditions, potentially leading to inflated payments from the federal program.

Judge Mizelle’s ruling determined that the whistleblower provisions improperly elevate private citizens into roles that function essentially as officers of the United States, despite not being appointed by or answerable to the president.

Tejinder Singh, representing Zafirov, countered this interpretation during Friday’s hearing. “They can’t compel the government really to do anything,” Singh argued. “The government is still in the passenger seat and able to grab the wheel at any time.” This position emphasizes that whistleblowers merely initiate cases that remain under ultimate government control.

On the opposing side, attorney Kannon Shanmugam, representing Florida Medical Associates and related entities, argued that whistleblowers under the statute “exercise significant executive authority” — a constitutional problem in his view.

The U.S. Chamber of Commerce has also entered the case in support of the healthcare providers, highlighting the significant business interests at stake in this constitutional challenge.

The outcome of this case could have far-reaching implications for government anti-fraud efforts. Since 1986, when Congress strengthened the False Claims Act, the government has recovered more than $70 billion in cases brought under the law, with whistleblowers receiving billions in rewards.

Healthcare fraud cases make up the largest portion of these recoveries, with pharmaceutical companies, hospitals, and medical practices frequently targeted. If the appeals court upholds the lower court’s ruling, it could severely limit one of the government’s most effective tools for detecting and prosecuting fraud against taxpayer-funded programs.

The case, formally titled Clarissa Zafirov v. Florida Medical Associates LLC et al, No. 24-13581, now awaits the 11th Circuit’s ruling, which could potentially set the stage for Supreme Court consideration of this significant constitutional question.