Important False Claims Act cases are slated to be decided in 2025, impacting clients across industries that contract with the government—from healthcare to defense. Additionally, the second Trump Administration released an executive order invoking the power of the False Claims Act against federal contractors who maintain diversity, equity, and inclusion programs. These are some of the key trends and cases to watch this year.
What is the False Claims Act?
The False Claims Act ("FCA") is a federal statute that punishes fraud against the government. Containing both criminal and civil provisions, and a private right of action through qui tam proceedings in which the government may intervene, the statute gives significant enforcement authority to the U.S. Department of Justice ("DOJ"). Under the FCA, any person who knowingly submits, or causes to be submitted, false claims to the government (or makes a statement material to a false claim) is liable for three times the government's damages plus civil monetary penalties (up to $28,619 for each false claim). Financial consequences under the FCA can, and often do, reach into the hundreds of millions. In its 2024 fiscal year alone, DOJ reported collecting more than $2.9 billion in FCA settlements and judgments—$2.4 billion of which stemmed from whistleblower qui tams. Federal prosecutors rely on qui tam actions now more than ever to enforce perceived contractual and legal obligations, reporting a record-breaking 979 qui tam filings in 2024 fiscal year alone.
FCA Liability for Continuing DEI Programs
President Trump's January 21, 2025 executive order, Ending Illegal Discrimination and Resorting Merit-Based Opportunity ("Executive Order"), links the continuation of diversity, equity, and inclusion ("DEI") programs to FCA liability, requiring—as relevant here—federal contractors to certify they do "not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws." Venable's Government Contracts group analyzed the Executive Order in more detail, including potential delayed enforcement as a result of likely challenges. For now, the Executive Order's directive "to deter DEI programs or principles," including in the private sector, through government "intervention, or statements of interest" in litigations and "[p]otential regulatory action and sub-regulatory guidance," signals a significant new front for FCA qui tams and government actions.
Case to Follow: Qui Tam Proceedings
Despite increased reliance on qui tam cases for government recoveries, the FCA's qui tam provision is currently under threat. On September 30, 2024, a federal district court judge in Florida held the FCA's qui tam provision unconstitutional under the Appointments Clause of the U.S. Constitution. See United States ex rel. Zafirov v. Fla. Med. Assocs., LLC, 2024 U.S. Dist. LEXIS 176626 (M.D. FL. Sept. 30, 2024). The Zafirov relator filed her FCA qui tam action in 2019, accusing defendants of violating the FCA by misrepresenting to Medicare certain patients' medical conditions. The government declined to intervene. In 2024, defendants moved to dismiss the case on constitutionality grounds, arguing that the FCA's qui tam is unconstitutional for two independent reasons: (1) it violates Article II's Take Care and Vesting Clauses by denying the President necessary removal authority and sufficient supervisory control over a relator; and (2) it violates the Appointments Clause because a relator is an improperly appointed officer of the United States. The government intervened for the limited purpose of defending the constitutionality of the qui tam provision.
The court anchored its decision solely on the Appointments Clause, without reaching defendants' other constitutional arguments, holding that "an FCA relator is an officer of the United States," FCA relators are not exempt from the Appointments Clause, and because the relator was "not constitutionally appointed, dismissal is the only permissible remedy." Judge Mizelle's decision follows Supreme Court Justice Clarence Thomas—for whom Judge Mizelle clerked—who published a 2023 dissenting opinion calling the qui tam provision of the FCA an "attempt to vest the authority to represent the United States in litigation in a party outside the Executive Branch," signaling he may find the provision unconstitutional if given the chance. United States ex rel. Polanksy v. Exec. Health Res., Inc., 599 U.S. 419, 451 (2023) (Thomas, J., dissenting).
The Zafirov decision is currently on appeal. In its January 6, 2025, opening brief, the government argued that the district court decision is an "outlier ruling" and that "every other court to have addressed the constitutionality of the False Claims Act's qui tam provisions has upheld them." How the Eleventh Circuit will decide remains to be seen but this case should pique the interest of at least some members of the Supreme Court. With the constitutionality of the FCA's qui tam provision hanging in the balance against the backdrop of DOJ's increased reliance on qui tam actions for government FCA recoveries, this case is a crucial one to watch in 2025 as the appeal unfolds.
Case to Follow: What is a Claim?
In November 2024, the U.S. Supreme Court heard argument in Wisconsin Bell, Inc., v. United States ex rel. Heath. The case asks the Court to decide whether the FCA applies when only some of the payment obtained from the alleged false claims is government money. A qui tam whistleblower alleged that Wisconsin Bell, a telecommunications provider, defrauded the Federal Communications Commission ("FCC") E-rate program, a Congressionally mandated program designed to help public entities (e.g., schools and libraries) afford internet and telecommunications through rebates. Wisconsin Bell argued that it could not have submitted false "claims" under the FCA because the rebate program is administered by a private nonprofit organization and funded by private telecommunications carriers, not by the government.
The Supreme Court signaled at oral argument that it was unlikely to adopt Wisconsin Bell's argument in its entirety and seemed persuaded to uphold the FCA claim based on the government's role in establishing the program and maintaining a $100 million debt collection provision. That being said, at least some Justices appeared to be open to limiting false claims to those that source to government funding—namely the $100 million debt—rather than view the entire private contribution as "tainted" by the government portion. With a decision expected by the end of the Court's term in mid-2025, this is another keystone FCA development to track.
Case to Follow: FCA Meets Cybersecurity
The DOJ has started using the FCA to enforce contractual cybersecurity requirements since the October 2021 launch of its Civil Cyber-Fraud Initiative. The Civil Cyber-Fraud Initiative targets federal contractors and grant recipients who fail to maintain up-to-standard cybersecurity programs or provide false information concerning cybersecurity assessments. In 2024, the DOJ settled several cybersecurity FCA actions, obtaining settlements of $2.7 million in May 2024; $11.3 million in June 2024; $1.25 million in October 2024; and $300,000 in October 2024. In the same year, the DOJ intervened in its first cybersecurity FCA qui tam lawsuit, alleging that defendant knowingly failed to meet cybersecurity requirements imposed on them as Department of Defense contractors. It remains to be seen whether the Trump administration will temper the cybersecurity enforcement initiatives launched under the Biden administration.
Case to Follow: Kickback Causation
Finally, the First Circuit is wrestling with what standard of causation to apply in FCA cases premised on Anti-Kickback Statute violations. In United States v. Regeneron Pharmaceuticals Inc., No. 1:20-cv-11217-FDS (D. Mass), the DOJ claims the pharmaceutical company violated the Anti-Kickback Statute by paying patients' Medicare drug copays through a third-party charity to induce use of their drugs. On appeal, the issue is whether the government must show that the claims for reimbursement would not be submitted "but-for" the copay subsidy (which the district court adopted, following the Sixth and Eighth Circuits), or whether a lower "sufficient causal connection" would suffice. The First Circuit panel seemed to favor the but-for causation standard at the July 2024 oral argument. No matter which interpretation is adopted, the existing circuit split is expected to deepen, creating a broader foundation for eventual Supreme Court review.
These FCA developments will reverberate nationwide across FCA litigations and enforcement matters. As always, Venable's Investigation and White Collar Practice and Government Contracts Practice is ready to help clients navigate the changing landscape of FCA actions, no matter how these cases turn out.