Federal Court Grants Interlocutory Appeal on Constitutionality of False Claims Act

On July 28^th, 2025, the U.S. District Court for the Southern District of Ohio has stayed a False Claims Act (FCA) lawsuit while awaiting resolution of the constitutional challenge to the FCA in United States of America et al. v. TriHealth Inc. et al. Although the court rejected the defendant’s claim that the FCA violates Articles II and III of the Constitution, it certified the order for interlocutory appeal, noting that the case presents a legal question “to which there is substantial ground for difference of opinion.” The order was issued by Judge Douglas Russell Cole, a 2019 Trump appointee.

The qui tam provision of the False Claims Act is one of the strongest anti-corruption laws in the United States. It allows private individuals to file lawsuits against other private individuals or organizations on behalf of the federal government. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery.

TriHealth is the third in a concerning trend of cases challenging the FCA’s constitutionality. The FCA is the most powerful and effective anti-corruption law in the United States. In question is the qui tam provision, which, if nullified, would cripple one of the FCA’s most powerful tools to detect corruption and would cause the United States to lose billions of dollars of taxpayers’ money to corrupt actors.

The case stems from two qui tam suits filed by whistleblowers Thomas Murphy and Dr. Set Shahbabian. The whistleblowers claimed TriHealth (a partnership between TriHealth, Inc., Bethesda Hospital, Inc., and Good Samaritan Hospital of Cincinnati, Ohio) violated the Stark Act and the Anti-Kickback Statute (AKS). Under Stark and the AKS, physicians or management companies are prohibited from receiving compensation for issuing referrals. Inducing referrals through payment is a form of fraud covered by the False Claims Act.

During his employment as a Physician Practices Chief Financial Officer, Murphy allegedly witnessed TriHealth’s illegal scheme to increase patient market share by paying physicians for referrals, subsidizing TriHealth physicians to cover these referral payments, and issuing “sham management fees” to physicians in exchange for said referrals. After internally complaining about TriHealth’s violation of the FCA, Murphy’s job was threatened, ultimately resulting in his filing a retaliation lawsuit.

Ten months later, Shahbabian initiated a similar FCA qui tam action against TriHealth, where he also reported the referral compensation scheme.

An Underhanded Challenge to the FCA’s Constitutionality

In response to the two suits, TriHealth asserted that the FCA’s qui tam provisions violate the Constitution’s Article II Appointments and Take Care Clauses, and that the whistleblowers lack standing under Article III.

Under Article III of the Constitution, a party must satisfy three elements to have standing to sue: an injury in fact, causation, and redressability. That is to say, the plaintiff must have suffered an actual injury, the injury must have been caused or seem to have been caused by the Defendant, and the injury must be able to be remedied.

Despite TriHealth’s claims, the court ruled that Article III does not apply to the qui tam provisions of the FCA. While Murphy and Shahbabian did not personally suffer any injuries, a relator may bring a qui tam action through “partial assignment of the Government’s damages,” or on the government’s behalf. In Vermont Agency of Natural Resources v. United States ex rel. Stevens, as referenced by Judge Cole, the Supreme Court upheld relators’ standing under the FCA, stating “the assignee of a claim has standing to assert the injury in fact suffered by the assignor.” In this case, Murphy and Shahbabian act as assignees for the United States government, the assignor.

“Nowhere do the Defendants explain why Stevens would not bind this Court,” Judge Cole writes, “​​But their disagreement with Supreme Court precedent does not provide a basis for this Court to ignore it.” Article III was clearly not violated, and attempting to argue otherwise blatantly flouts a long-established precedent.

TriHealth also turned to Article II, arguing that Murphy violated both the Appointments Clause and the Take Care Clause. Under the Constitution, the Appointments Clause “requires that either the President, a department head, or the courts” appoint an “officer.” TriHealth claims, however, that whistleblowers are “improperly appointed officers because they essentially appoint themselves.”

Furthermore, the Take Care Clause requires that the President “shall take Care that the Laws be faithfully executed.” The Defendants again claimed that the qui tam provisions of the FCA interfere with the President’s execution of the laws by granting relators the power “to enforce the law without sufficient executive oversight.”

Judge Cole denied the Defendant’s motion to dismiss the case under Article II, writing that “long-settled Sixth Circuit precedent dooms [the argument].” Referencing United States ex rel. Taxpayers Against Fraud v. Gen. Elec. Co., the court held that a relator is not an officer, and thereby the Appointments Clause does not pertain to the case. The court also held that the qui tam provisions do not violate the Take Care Clause because “the Executive Branch retains ‘sufficient control’ over the relator’s conduct” to ensure the President can perform their duty. Under Stevens and Taxpayers, the FCA’s constitutionality remains secure.

The argument that qui tam whistleblowers lack oversight was also denied. Judge Cole clarified that 31 U.S. Code § 3730, which regulates the rights of parties to qui tam actions, grants the government sufficient authority and agency over the case. The United States has complete freedom to participate in the action, and, in participating, can dismiss the case, settle it, or otherwise limit the participation of the whistleblower however it chooses. Even if the government elects not to participate, the court “may nevertheless permit the Government to intervene at a later date upon a showing of good cause.”

Judge Leaves Door Open for Future Actors to Circumvent Qui Tam Whistleblower Provision

Ultimately, the court denied TriHealth’s claims, thereby asserting the False Claims Act’s constitutionality. The District Court did, however, certify the order for interlocutory appeal to the Sixth Circuit Court, opening the FCA to further attacks.

An interlocutory appeal is a legal decision wherein the court orders a non-final decision on the grounds that the case hinges on “a controlling question of law” with “substantial ground for difference of opinion,” such that an appeal may “advance the ultimate termination of the litigation.” Sufficing these requirements, the court permitted TriHealth to appeal to the Sixth Circuit.

Recent discourse demonstrates the unfounded interrogation of FCA’s constitutional standing. According to an article by Sarah Cummings Stewart and Selina Coleman published in ReedSmith, TriHealth marks the “third federal court of appeals” to examine the constitutionality of the qui tam provisions.

One such case, cited by TriHealth, is United States of America ex rel. Clarissa Zafirov v. Florica Medical Associates. Unlike Judge Cole, Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida ruled against the constitutionality of the False Claims Act’s qui tam provisions, stating that qui tam relators are, in fact, officers and therefore must adhere to the Appointments Clause. The court ruled that the relators exercise “significant authority, indeed core executive power, under the continuing position of relator but [lack] proper appointment under the Constitution.” Zafirov is currently before the Eleventh Circuit.

Court watchers have already begun to see the impact of Zafirov. A recent decision in the District Court for the District of New Jersey, United States v. Janssen Prods. LP, was appealed to the Third Circuit in July 2025. The defendants claim that the initial decision was unconstitutional under the Appointments Clause and Vesting Clause. According to the brief, qui tam whistleblowers are effectively “wresting the executive Power from the President’s hands” and are described as “unaccountable bounty hunters.”

Both Zafirov and Janssen cite Justices Clarence Thomas’s dissenting opinion and Justices Brett M. Kavanaugh and Amy Coney Barrett concurring opinion in United States ex rel. Polansky v. Executive Health Resource Inc., et al.. Justice Thomas, with whom Justices Kavanaugh and Barrett agree, writes, “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.”

It is only a “matter of time,” Stewart and Coleman warn, “before a challenge to the constitutionality of the False Claims Act results in a petition to the Supreme Court.”

Preserving Qui Tam is a Win-Win: Private Whistleblowers Generate Public Funds

Declaring the qui tam provision unconstitutional would nullify one of the government’s most powerful anti-corruption tools. Since 1986, when the FCA was modernized, settlements and judgments have totaled over $78 billion. Over the course of this fiscal year, as reported by the United States Department of Justice (DOJ), recovered funds exceeded $2.9 billion—$2.4 billion of which came from qui tam whistleblowers alone. The FCA is the most significant anti-fraud law in the United States, and the qui tam provision gives it teeth.

Whistleblowers are instrumental in combating domestic and foreign corruption. The qui tam provision is the sole mechanism allowing an individual or private organization to come forward and fight corruption. Without access to information from private individuals, the burden of detecting and preventing fraud will fall solely on the government. Currently, the billions of dollars collected in judgments and settlements go to the government to aid in the fight against corruption and to reward brave whistleblowers. Qui tam is a win-win: the more private whistleblowers, the more public money.

Whistleblowers also act as a form of deterrence. Individuals are incentivized by reward laws to come forward if they have knowledge of fraud against the government. Potential fraudsters are less likely to engage in fraud for the sake of outperforming competition when they know they can be turned in for a reward. This mechanism will cease to exist if the qui tam provisions are declared unconstitutional.

“The False Claims Act and its whistleblower provisions remain a critical tool in protecting the public fisc and ensuring that taxpayer funds serve the purposes for which they were intended,” said Principal Deputy Associate Attorney General Benjamin C. Mizer.