In recent months, False Claims Act (FCA) defendants have increasingly sought to challenge the constitutionality of the statute’s qui tam provisions.  

This trend gained momentum following Justice Thomas’s dissent in United States ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023).  There, Justice Thomas raised “serious constitutional questions” about the qui tam provisions, including their potential inconsistency with Article II and the Appointments Clause.

Since Polansky, constitutional challenges to the qui tam provisions have, in some cases, been advanced through a post-answer motion for judgment on the pleadings.  But what if a defendant failed to raise the constitutional defense in its answer?  Could that omission jeopardize the defendant’s ability to raise it later in the litigation?  One recent district court decision, United States ex rel. Shepherd v. Fluor Corporation, suggests that it might.

District Court’s Ruling in U.S. ex rel. Shepherd v. Fluor Corporation

In Shepherd, the defendants face a qui tam lawsuit alleging that they violated the FCA by defrauding the federal government in connection with a contract for support services at military bases in Afghanistan.  The government declined to intervene.  After the district court denied the defendants’ motion to dismiss, they answered the complaint, and discovery began.  Several years into discovery, the Supreme Court decided Polansky.  Citing Justice Thomas’s dissent, the defendants then moved for judgment on the pleadings.  They asserted that the qui tam provisions violate Article II and asked the court to dismiss the action on that basis.

On September 13, 2024, the district court denied the defendants’ motion without prejudice.  The court reasoned that a constitutional separation-of-powers challenge is a type of affirmative defense, which must be raised in the defendant’s answer at risk of being forfeited.  Here, the defendants had not specifically invoked their constitutional defense in the answer, though they had included a “catch-all provision,” which “invoke[d] the defenses, protections, and limitations of the False Claims Act.”  But the court found that language was too vague to provide sufficient notice.  So, the court held that if the defendants wanted to rely on the constitutional defense, they would have to “amend their answer to add it and raise it in compliance with the appropriate rules.”

Further complicating matters, however, was that the deadline for amending the pleadings had already expired.  As a result, the court noted that the defendants would have to demonstrate “good cause” for belated amendment, which requires a showing of diligence.  If, and only if, the defendants could make that showing, the court said, it would allow them to reassert the constitutional defense at summary judgment.  The court accordingly denied the motion without prejudice, allowing the defendants an opportunity to seek to amend their answer.

In summary:

1. The court treated the defendants’ constitutional challenge to the qui tam provisions as an affirmative defense.
2. As an affirmative defense, the court held that the constitutional challenge must be raised in the answer to avoid forfeiture.
3. To assert a constitutional challenge that was not originally raised in the answer, the defendants would have to amend their answer, which would require a showing of good cause.

Key Takeaways for FCA Defendants

Given that an Article II challenge goes to the very validity of the statute under which a relator asserts his or her claims, one could reasonably question whether the district court correctly concluded that the defendants’ constitutional attack is the type of “affirmative defense” that must be raised in an answer.  Certainly, that is not an obvious outcome, and other courts may—and perhaps should—decide the issue differently. 

Still, given the risk that other courts might agree with the district court’s analysis, the decision in Shepherd offers several important takeaways for qui tam defendants:

1. Timeliness Is Critical: Because some courts may deem a constitutional challenge to the qui tam provisions to be an affirmative defense, defendants should consider raising the issue in their answer, at least as a precautionary measure.  Failure to do so could result in forfeiture, significantly limiting a defendant’s ability to assert the constitutional arguments later.
2. A Lack of Specificity May Not Suffice: While the defendants in Shepherd argued that their answer had sufficiently preserved the constitutional challenge through a catch-all provision, the court disagreed, finding that more specificity was required. The ruling serves as a reminder that courts may be unwilling to allow vague language to substitute for specific affirmative defenses.
3. Amendment is Possible – But No Guarantee: If a defendant fails to raise a specific affirmative defense in its initial answer, the defendant might later be able to amend its pleading to include it.  But doing so typically requires good cause for the delay. And while the federal rules provide that amendment should be “freely” permitted, courts can, and do, deny belated attempts to amend.

In light of these considerations, qui tam defendants should work closely with experienced FCA counsel to ensure that all defenses—including those relating to the constitutionality of the qui tam provisions—are properly and timely asserted.  

For more information about both substantive and procedural aspects of defending qui tam lawsuits, subscribe to this blog or contact one of our False Claims Act attorneys.