The Supreme Court’s decision in United States ex rel. Polansky v. Executive Health Resources, Inc., 143 S. Ct. 1720 (2023), has increased attention on arguments that the False Claims Act’s qui tam provisions may be unconstitutional. Although the majority’s opinion in the case did not address the issue, the dissent by Justice Thomas—joined in this regard by Justices Kavanaugh and Barrett—stated that “[t]here 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.” Id. at 1741 (Thomas, J., dissenting); see also id. at 1737 (Kavanaugh, J., concurring).
Justice Thomas’s opinion focused on the potential violation of the Appointments Clause by allowing “a private relator to wield executive authority to represent the United States’ interests in civil litigation.” Id. at 1741 (Thomas, J., dissenting). He went on to critique arguments in which supporters of qui tam suits have relied on “the long historical pedigree” of such suits. Id. The lower courts, in decisions not discussed in Polansky, also have found the qui tam provisions constitutional by characterizing actions thereunder as one-time events. See, e.g., United States ex rel. Stone v. Rockwell Int’l Corp., 282 F.3d 787, 805 (10th Cir. 2002) (relying on “temporary” nature of relator’s role (quotation omitted)); United States ex rel. Taxpayers Against Fraud v. General Elec. Co., 41 F.3d 1032, 1041 (6th Cir. 1994) (relying on view that relator’s role “is without tenure, duration, continuing emolument, or continuous duties” (quotation omitted)); United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 759 (9th Cir. 1993) (relying on view that relator “litigates only a single case”).
Third-Party Litigation Funding (“TPLF”) presents a challenge to both the historical justification for qui tam suits and the position that they are one-off actions. TPLF has no longstanding historical precedent, and its potential to shift control of a qui tam action even further away from the Executive Branch has become a concern for the government in recent years. In 2020, for example, DOJ indicated that it will ask relators during the period in which a case is under seal “whether [a funding] agreement entitles the funder to exercise any direct or indirect control over the relator’s litigation or settlement decisions.” Ethan Davis, Remarks on the False Claims Act at the U.S. Chamber Institute for Legal Reform (June 26, 2020). The constitutional problems raised by a private individual representing the interests of the government in litigation are compounded where a funder has invested in multiple qui tam actions, thereby raising the prospect of a concentration of power and control at odds with the view of a relator as a one-time protector of the government.
At least one court has entertained arguments about the intersection of TPLF and constitutional issues raised by the qui tam provisions. In Ruckh v. Salus Rehabilitation, LLC, 963 F.3d 1089 (11th Cir. 2020), the Eleventh Circuit addressed the impact of TPLF on a relator’s standing to bring suit under Article III, ultimately finding that the relator had standing because she had assigned “only a small interest” in her portion of any recovery, and her funding agreement was “clear” that she “retain[ed] sole authority over the litigation.” Id. at 1101. After Justice Thomas’s invitation in Polansky, similar considerations of the degree to which the relator has assigned her interest in an action and the extent to which a funder has gained control over the litigation may be more likely to be advanced in the context of arguments about the improper appointment of private citizens to exercise executive power under Article II.
In addition to impacting attacks on the constitutionality of the qui tam provisions in cases involving TPLF, Justice Thomas’s opinion in Polansky may have less high-profile effects that bear on the use of TPLF in qui tam actions. For example, defendants often face relevance objections when seeking information in discovery about TPLF; those objections should carry less weight when viewed in light of the potential impact of TPLF on the concerns expressed by Justice Thomas. In addition, third-party funders themselves could become subject to inquiry if there is reason to believe that they have made investments in a meaningful number of qui tam suits. And even setting aside situations (such as that in Polansky) in which the government moves to dismiss an action over a relator’s objection under 31 U.S.C. § 3730(c)(2)(A), the presence of a third-party funder may make a relator more likely to object when the government seeks to settle an action, leading to more disputed resolutions under 31 U.S.C. § 3730(c)(2)(B).
With increased attention on both the use of TPLF in qui tam litigation and constitutional concerns with the qui tam device, litigants and courts should expect the two issues to arise in an increasing number of cases, potentially in combination with one another.