Appeals court weighs fate of US whistleblower law

By Mike Scarcella

WASHINGTON, Dec 12 (Reuters) - A U.S. appeals court heard dueling arguments on Friday on the legality of the federal False Claims Act’s whistleblower provisions, which have helped to fuel billions of dollars in government settlements and judgments.

The three-judge panel of the 11th U.S. Circuit Court of Appeals in Atlanta is weighing a ruling by a Florida federal judge who struck down the provisions last year, finding that they improperly allowed whistleblowers to exercise federal executive power without accountability to the president.

Circuit Judge Elizabeth Branch at the hearing pointed to recent statements from some members of the U.S. Supreme Court questioning the constitutionality of the whistleblower provision of the False Claims Act, which was first enacted during the Civil War and allows private citizens to bring lawsuits on the government's behalf alleging fraud against the United States.

Whistleblowers are entitled to a 15% to 25% cut of proceeds when the government intervenes in a False Claims Act case and helps to litigate it. When the government does not intervene, the amount is 25% to 30%.

The appeals panel grilled attorneys on both sides of the case, including on whether a whistleblower who isn't paid by the government can be subject to the U.S. Constitution's appointments clause.

A lawyer for the government, Daniel Winik, argued that the executive branch exercises sufficient control over whistleblower litigation, and urged the court to reject the lower court's decision.

Tejinder Singh, who argued for the whistleblower, and attorney Kannon Shanmugam, representing Florida health care providers accused of fraud in the underlying case, declined to comment after the hearing.

Whistleblower Clarissa Zafirov filed the appeal after U.S. District Judge Kathryn Mizelle in September 2024 dismissed her False Claims Act lawsuit accusing the health companies of bilking Medicare by using false diagnosis codes to misrepresent patients’ medical conditions.

Mizelle concluded that the whistleblower law improperly elevates private tipsters, who are not subject to the president's appointment powers, to function as officers of the United States.

Singh told the appeals court that False Claims Act whistleblowers are not “officers” of the United States. "They can't compel the government really to do anything," he said. "The government is still in the passenger seat and able to grab the wheel at any time."

Shanmugam, arguing for the Florida Medical Associates and affiliates seeking to uphold Mizelle's ruling, told the court that whistleblowers under the False Claims Act "exercise significant executive authority."

The U.S. Chamber of Commerce participated in the hearing in support of the medical organizations.

The case is Clarissa Zafirov v. Florida Medical Associates LLC et al, 11th U.S. Circuit Court of Appeals, No. 24-13581.

For Zafirov: Tejinder Singh of Sparacino

For United States: Daniel Winik of the U.S. Justice Department

For Florida Medical: Kannon Shanmugam of Paul Weiss

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