Riley v. St. Luke's Episcopal Hosp.

• Decision Date: 25 May 2001
• Docket Number: No. 97-20948,97-20948
• Citation: 252 F.3d 749
• Parties: (5th Cir. 2001) JOYCE RILEY, Plaintiff-Appellant, v. ST. LUKE'S EPISCOPAL HOSPITAL, BRANISLAV RADOVANCEVIC, O. HOWARD FRAZIER, M.D., SURGICAL ASSOCIATES OF TEXAS, P.A., THE UNIVERSITY OF TEXAS HOUSTON HEALTH SCIENCE CENTER, BAYLOR COLLEGE OF MEDICINE, TEXAS HEART INSTITUTE, and EDWARD K. MASSIN, M.D., Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 749

252 F.3d 749 (5th Cir. 2001)

JOYCE RILEY, Plaintiff-Appellant, v. ST. LUKE'S EPISCOPAL HOSPITAL, BRANISLAV RADOVANCEVIC, O. HOWARD FRAZIER, M.D., SURGICAL ASSOCIATES OF TEXAS, P.A., THE UNIVERSITY OF TEXAS HOUSTON HEALTH SCIENCE CENTER, BAYLOR COLLEGE OF MEDICINE, TEXAS HEART INSTITUTE, and EDWARD K. MASSIN, M.D., Defendants-Appellees.

No. 97-20948

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

May 25, 2001

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Texas.

Before JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES, STEWART, PARKER, and DENNIS, Circuit Judges.^*

CARL E. STEWART, Circuit Judge:

We took this case en banc to reconsider the issue of whether the qui tam provisions of the False Claims Act ("FCA"), which permits private citizens, or relators, to pursue actions for fraudulent claims in the name of the federal government, violate the constitutional separation of powers doctrine under the Take Care and Appointments Clauses of Article II. Because we find no such unconstitutional intrusion, we reverse and remand to the district court.

FACTUAL AND PROCEDURAL HISTORY

Joyce Riley ("Riley"), a former nurse at St. Luke's Episcopal Hospital ("St. Luke's"), sued eight defendants under the qui tam provisions of the FCA, claiming that they defrauded and conspired to defraud the United States Treasury in violation of the statute. Riley proceeded with the lawsuit although the government exercised its right not to intervene under 31 U.S.C. § 3730(b)(4)(B) (2000).¹ The district court subsequently dismissed Riley's lawsuit on standing grounds.² On appeal however, this Court held that although Riley had standing to sue under Article III,³ qui tam actions pursued under the FCA in which the government does not intervene violate the doctrine of separation of powers and the Take Care Clause.

The United States intervened to defend the constitutionality of the FCA. We subsequently decided to rehear this case en banc, but delayed it pending the Supreme Court's decision in Stevens.⁴

DISCUSSION

I. The Role of History

Qui tam lawsuits have been used throughout American and English history as a means todiscover and to prosecute fraud against the national treasuries. Indeed, the Founding Fathers and the First Congress enacted a number of statutes authorizing qui tam actions. Stevens, 529 U.S. at 793-96 nn.5-7, 120 S.Ct. 1858. After undergoing a decline in popularity and need, qui tam, under the guise of the original FCA, enjoyed a renaissance during the Civil War era. This renaissance was precipitated by a desire to combat widespread corruption and fraud amongst defense contractors who supplied the Union Army. Stevens, 529 U.S. at 792, 120 S.Ct 1858.

In 1986, qui tam underwent a similar surge of popularity after Congress's decision to amend the FCA in order to promote such lawsuits in the face of an ever-growing federal deficit and fears that defense contractors were once again defrauding the government. The most important amendment that Congress made to the 1986 legislation was to increase the reward offered to qui tam plaintiffs. J. Randy Beck, The False Claims Act and the English Eradication of Qui Tam Legislation, 78 N.C. L. Rev. 539, 541-42 (2000). The increase in the proceeds available to relators has resulted in an augmented number of lawsuits filed by qui tam relators. Id. at 542. As of September 1999, more than 2900 qui tam lawsuits had been filed. Id. Moreover, more than a billion dollars have been recovered under the FCA qui tam provisions since 1987. Anna Mae Walsh Burke, Qui Tam: Blowing the Whistle for Uncle Sam, 21 Nova L. Rev. 869, 871 (1997).

The practical effects of the 1986 amendments to the FCA notwithstanding, the Supreme Court in Stevens gave due credence to the important historical role that qui tam lawsuits have played on both sides of the Atlantic as a means to root out corruption against national governments. Justice Scalia, writing for the 7-2 majority in Stevens, noted that the history of qui tam was "well nigh conclusive" with respect to resolving the question of whether qui tam relators filing suit under the FCA have Article III standing. Stevens, 529 U.S. at 792, 120 S.Ct. 1858.

Although the Court in Stevens expressed no opinion regarding the role of history in evaluating the Article II Take Care and Appointments Clauses questions, we are persuaded that it is logically inescapable that the same history that was conclusive on the Article III question in Stevens with respect to qui tam lawsuits initiated under the FCA is similarly conclusive with respect to the Article II question concerning this statute. Indeed, the dissent in Stevens noted that history alone resolves the question of whether the qui tam provisions in the FCA violate Article II, stating "[t]hat [historical] evidence, together with the evidence that private prosecutions were commonplace in the 19th century . . . is also sufficient to resolve the Article II question that the Court has introduced sua sponte, ante, at 1865, n.8." Stevens, 529 U.S. at 801. (Stevens, J., dissenting). Therefore, we find that history, although not the sole definitive argument supporting the view that the FCA's qui tam provisions do not violate Article II, is certainly a "touchstone illuminating" their constitutionality. Riley, 196 F.3d at 543-44 (Stewart, J., dissenting). Moreover, this historical perspective provides us with a helpful bridge into the workings of the statute itself.

II. The Executive's Control Over Qui Tam Actions Initiated Under the FCA

That a private citizen may pursue qui tam litigation under the FCA, whether the government chooses to intervene or does not choose, does not interfere with the President's constitutionally assigned functions under Article II's Take Care Clause. Although the Clause states that the Executive must "take Care that the Laws be faithfully executed," it does not require Congress to prescribe litigation by the Executive as the exclusive means of enforcing federal law. U.S. Const. art. II, § 3. Thus, even though Congress has historically allowed alternative mechanisms of fraud enforcement against the federal government, this state of affairs does not therefore mean that the Executive's functions to control such litigation are necessarily impinged.

As this Court has previously noted, the Executive retains significant control over litigation pursued under the FCA by a qui tam relator. First, there is little doubt that the Executive retains such control when it intervenes in an action initiated by a relator.⁵ Second, even in cases where the government does not intervene, there are a number of control mechanisms present in the qui tam provisions of the FCA so that the Executive nonetheless retains a significant amount of control over the litigation. The record before us is devoid of any showing that the government's ability to exercise its authority has been thwarted in cases where it was not an intervenor.

Our precedent, moreover, accords with the position that this en banc court now takes. In Searcy v. Philips Elec. N. Am. Corp., et al., 117 F.3d 154 (5th Cir. 1997), we held that the FCA clearly permits the government to veto settlements by a qui tam plaintiff even when it remains passive in the litigation. We cited several ways in which the government may assume control over qui tam litigation in which it does not intervene under the FCA. See id., 117 F.3d at 160. We noted that not only may the government take over a case within 60 days of notification, but it may also intervene at a date beyond the 60-day period upon a showing of good cause. Id., 117 F.3d at 159 (citing 31 U.S.C. § 3730(d)(2)(A) and 31 U.S.C. §§ 3730(b)(3) & (c)(3)). This Court also stated that the government retains the unilateral power to dismiss an action "notwithstanding the objections of the person." Id., 117 F.3d at 160 (citing 31 U.S.C. § 3730(c)(2)(A)).

In United States ex rel. Russell v. Epic Healthcare Mgmt. Group, we held that parties, in a qui tam suit filed under the FCA in which the United States does not intervene, have 60 days to file a notice of appeal under Rule 4(a)(1) of the Federal Rules of Civil Procedure.⁶ 193 F.3d 304, 306 (5th Cir. 1999). We similarly stated in Russell that although the government does not intervene, its involvement in the litigation nonetheless continues. Id. We noted, for example, that, in addition to the control mechanisms already stated in Searcy, the government "may request that it be served with copies of pleadings and be sent deposition transcripts . . . [and it] may pursue alternative remedies, such as administrative proceedings." Id. at 307; see also 31 U.S.C. § 3730(c)(3) and (5). We also noted that despite the government's non-intervention, it "receives the larger share of any recovery," amounting to up to 70% of the proceeds of a lawsuit.⁷ Id.; see also 31 U.S.C. § 3730 (d)(1) and (2).

Furthermore, the FCA itself describes several additional ways in which the United States retains control over a lawsuit filed by a qui tam plaintiff. In the area of settlement, for example, the government may settle a case over a relator's objections if the relator receives notice and hearing of the settlement. 31 U.S.C. § 3730(c)(2)(B). Additionally, in the area of discovery, if the government shows that discovery initiated by a qui tam plaintiff "would interfere with the Government's investigation or prosecution of a criminal or civil matter arising out of the same facts, the court may stay the discovery for sixty days or more," whether or not the government intervenes. 31 U.S.C. § 3730(c)(4).

For this reason, it is therefore apparent that the Supreme Court's decision in Morrison v. Olson, 487 U.S. 654, 108 S. Ct. 2597, 101 L. Ed. 2d 569 (1988), the primary case upon which the Riley panel majority relied to analyze the constitutionality of the qui tam provisions of the FCA under...