A Writ Challenging Qui Tam and D&O Implications

Key Takeaways

• Eli Lilly challenges FCA qui tam constitutionality before Supreme Court.
• Case argues relators exceed Article II executive authority.
• Ruling could reshape private enforcement and D&O liability.
• Potential shift toward government‑initiated FCA actions if qui tam limited.
• Courts may see rise in Article II defenses in FCA suits.

Pulse Analysis

The False Claims Act, enacted during the Civil War, has evolved into a cornerstone of federal fraud enforcement, largely because private relators can sue on the government’s behalf and claim a share of recoveries. Recent administrations have amplified this tool, with the DOJ reporting over $6.8 billion in FCA settlements through fiscal year 2025. Eli Lilly’s petition, however, attacks the very mechanism that fuels these recoveries, contending that allowing non‑appointed individuals to wield executive enforcement powers violates Article II’s separation‑of‑powers mandates. If the Supreme Court entertains the issue, it would trigger a seismic reassessment of the legal architecture that underpins not only FCA actions but also other statutes that rely on citizen‑initiated enforcement.

The constitutional argument draws on recent jurisprudence emphasizing presidential control over executive functions. A 2024 Florida district court decision, bolstered by Justice Clarence Thomas’s dissent in a 2023 case, suggested that qui tam provisions may be unconstitutional. Eli Lilly’s brief cites these precedents, arguing that relators act as “private bounty hunters” without the accountability required of federal officers. While the Seventh Circuit dismissed the claim, the growing judicial appetite for Article II challenges could encourage defendants nationwide to raise similar defenses, adding a new layer of complexity to FCA litigation strategy.

For D&O insurers, the stakes are high. Qui tam actions have long been a significant source of exposure for companies in regulated sectors, often triggering secondary securities claims and extended notice periods. A Supreme Court decision curtailing or eliminating private relator authority could reduce the volume of such lawsuits, but might also concentrate risk in government‑initiated actions, which can be more aggressive and less predictable. Insurers will need to monitor the case’s progress closely, reassess policy language around exclusions and notice, and consider the potential for increased constitutional defenses to affect settlement dynamics and coverage triggers.