Riley v. St. Luke's Episcopal Hosp.

• Decision Date: 15 November 1999
• Docket Number: No. 97-20948,97-20948
• Citation: 196 F.3d 514
• Parties: (5th Cir. 1999) JOYCE RILEY, Plaintiff-Appellant, v. ST. LUKE'S EPISCOPAL HOSPITAL; DR. BRANISLAV RADOVANCEVIC; O. HOWARD FRAZIER, M.D.; SURGICAL ASSOCIATES OF TEXAS, P.A.; UNIVERSITY OF TEXAS HEALTH SCIENCE CENTER AT HOUSTON; BAYLOR COLLEGE OF MEDICINE; TEXAS HEART INSTITUTE; and EDWARD K. MASSIN, M.D., Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

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196 F.3d 514 (5th Cir. 1999) JOYCE RILEY, Plaintiff-Appellant,
v.
ST. LUKE'S EPISCOPAL HOSPITAL; DR. BRANISLAV RADOVANCEVIC; O. HOWARD FRAZIER, M.D.; SURGICAL ASSOCIATES OF TEXAS, P.A.; UNIVERSITY OF TEXAS HEALTH SCIENCE CENTER AT HOUSTON; BAYLOR COLLEGE OF MEDICINE; TEXAS HEART INSTITUTE; and EDWARD K. MASSIN, M.D., Defendants-Appellees. No. 97-20948 IN THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT November 15, 1999

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

Before SMITH, DeMOSS, and STEWART, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Joyce Riley appeals the dismissal, for want of jurisdiction, of her action for damages under the False Claims Act ("FCA"), 31 U.S.C. 3729 et seq. While we conclude, based on intervening circuit caselaw, that the district court did have jurisdiction, we also determine that Riley may not maintain her suit, for the provisions of the FCA under which she sued violate the Take Care Clause of Article II of the Constitution. Accordingly, we affirm the dismissal.^*

I.

Riley, a former nurse in the heart transplant unit of St. Luke's Episcopal Hospital ("St. Luke's"), sued eight defendants: St. Luke's, Baylor College of Medicine, the University of Texas Health Science Center at Houston, the Texas Heart Institute, Surgical Associates of Texas, Doctors Edward Massin and O. Howard Frazier, and Branislav Radovancevic. Riley alleges that these defendants violated the FCA by defrauding and conspiring to defraud the United States Treasury.¹

Riley brought her suit under the qui tam provisions of the FCA, which allow individual citizens to sue for fraud on behalf of the government and collect part of the government's recovery. Pursuant to the procedures established in the qui tam provisions, see 31 U.S.C. 3730(b)(2), Riley filed a preliminary statement under seal, which the United States reviewed at length. The government eventually decided not to intervene under 31 U.S.C. 3730(b)(4)(B), so Riley proceeded in the district court on her own.

After Riley filed her original complaint, the defendants moved to dismiss under FED. R. CIV. P. 12(b)(6) for failure to state a claim. The district court denied each motion but requested additional briefing to address Riley's standing under Article III of the United States Constitution. Riley, the University of Texas Health Science Center at Houston, and the United States as intervenor for the limited purpose of defending the FCA's constitutionality, briefed the standing issue. Riley then filed a second amended complaint, which was met with another round of motions to

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dismiss. Among the grounds for dismissal was an assertion by the University of Texas Health Science Center at Houston that the Eleventh Amendment bars Riley from suing it, because it is an arm of the state. See U.S. CONST. amend. XI.

In a scholarly and persuasive opinion, the district court dismissed Riley's claims on jurisdictional grounds, concluding that she had suffered no injury-in-fact and therefore lacked standing to sue. See Riley v. St. Luke's Episcopal Hosp., 982 F. Supp. 1261, 1263-69 (S.D. Tex. 1997) (Hoyt, J.). Because the court dismissed on standing grounds, it did not reach the arguments presented in the motions to dismiss, including the Eleventh Amendment defense.

On appeal, the defendants maintain that Riley lacks standing, and they assert two other constitutional arguments that they presented to the district court in their motions to dismiss: (1) that the qui tam provisions of the FCA violate the Constitution's Appointments Clause and (2) that qui tam actions in which the government does not intervene violate the Take Care Clause and the constitutional doctrine of separation of powers. The United States continues its intervention for the limited purpose of defending the constitutionality of the qui tam provisions.

II.

Congress enacted the FCA in 1863 to combat widespread fraud by government contractors during the Civil War.² The Act, which was amended in 1943 and 1986, provides that anyone who presents a false money claim to the federal government shall be liable for double or treble damages and civil penalties of up to $10,000 per false claim. See 31 U.S.C. 3729. Under the qui tam provisions of the Act, any person may bring a civil action "for the person and for the United States Government" to recover damages and penalties.³ See id. 3730(b)(1). Though initiated by a private persona "relator"a qui tam action is "brought in the name of the Government." See id.

The qui tam provisions indicate that the United States is the real party in interest, with the relator functioning as the government's attorney. To initiate a qui tam action, a relator must serve on the government the complaint and a written disclosure of the information he possesses. See id. 3730(b)(2). The Attorney General then must decide, within sixty days, whether to "intervene and proceed with the action."⁴ See id. By the expiration of the sixty days, the Attorney General must inform the court whether the government shall proceed with the action; if not, "the person bringing the action shall have the right to conduct the action." See id. 3730(b)(4)(B).

If the Attorney General declines to proceed, the relator alone represents the United States, taking full control of the litigation, including discovery, admissions, and presentation of evidence, subject only to a few specific limitations.⁵ If the relator

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prevails, most of the recovery is paid into the Treasury, with the relator keeping between 25% and 30% as his reward. See id. 3730(d)(2). The relator is also entitled to attorneys' fees. See id.

If the Attorney General initially decides not to proceed, he may intervene later only upon a showing of "good cause," and such intervention may not limit "the status and rights of the person initiating the action." See id. 3730(c)(3). The relator thus retains primary control over the case, despite the government's intervention.

If the Attorney General does enter the action within the initial sixty-day period, the government has "primary responsibility for prosecuting the action." See id. 3730(c)(1). The relator, however, retains "the right to continue as a party to the action." See id. This participation right gives him a substantial role in the litigation, and he is entitled to a hearing if the Attorney General decides to dismiss the action. See id. 3730(c)(2)(A).

If the Attorney General proposes to settle the case but the relator objects, the settlement may proceed only if "the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances." See id. 3730(c)(2)(B). In addition, the relator participates fully at trial, calling and cross-examining witnesses, except that

[u]pon a showing by the Government that unrestricted participation during the course of the litigation by the person initiating the litigation would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant, or for the purposes of harassment, the court may, in its discretion, impose limitations on the person's participation.

See id. 3730(c)(2)(C).

When the False Claims action is primarily conducted by the Attorney General, the relator receives between 15% and 25% of the proceeds, plus reasonable expenses (including attorneys' fees), as determined by the court. See id. 3730(d)(1). Moreover, if the government decides to pursue its claim in some forum other than an FCA suitsuch as an administrative penalty actionthe relator has the same rights in that proceeding that he would have in court. See id. 3730(c)(5).

III.

Riley and the government contend that the long history of qui tam actions in federal courts indicates that such actions surely are constitutionally valid. But the qui tam mechanism's historical pedigree is not sufficient to insulate the FCA's qui tam provisions from serious constitutional scrutiny.

Riley and the government correctly point out that qui tam actions have been recognized throughout American history and were approved under English common law prior to the founding of the Republic.⁶ They also note that the first Congress enacted several statutes containing qui tam provisions,⁷ a fact they believe indicates

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that the framers did not think the qui tam concept is inconsistent with the Constitution.⁸

Longstanding historical usage, however, does not, by itself, render a practice constitutional.⁹ When the Supreme Court has deferred to history to validate the constitutionality of a practice, the practice has been one that was extensively debated by the adopting Congress and had become "part of the fabric of our society."¹⁰

Qui tam actions that are brought by uninjured relators and in which the government does not intervene simply do not possess historical credentials worthy of blind deference. There is no evidence that the early Congresses considered the constitutionality of such actions, and the presence of a few early qui tam statutes does not amount to an "unambiguous and unbroken history." Indeed, such statutes were adopted in the Republic's early years only sparsely, and they largely disappeared over a century ago.

Many of the early statutes granting bounties were simply informer laws that granted informers a reward but no right to sue on behalf of the government.¹¹ Of those qui tam statutes that did permit private actions, most redressed injuries suffered by private individualsnot by the government exclusively.¹² Later Congresses

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authorized qui tam actions only sporadically; apart from the FCA, subsequent Congresses enacted only seven qui tam statutes, and none was adopted after 1871.¹³ In short, this is no "unambiguous and unbroken history" indicating that qui tam actions by uninjured plaintiffs suing on the government's behalf "have become part of the fabric of our...