U.S. ex rel. Riley v. St. Luke's Episcopal Hosp., Civil Action No. H-94-3996.

• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
• Citation: 982 F.Supp. 1261
• Docket Number: Civil Action No. H-94-3996.
• Parties: UNITED STATES of America ex rel. Joyce RILEY, Plaintiff, v. ST. LUKE'S EPISCOPAL HOSPITAL, et al., Defendants.
• Decision Date: 21 October 1997

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982 F.Supp. 1261 UNITED STATES of America ex rel. Joyce RILEY, Plaintiff,
v.
ST. LUKE'S EPISCOPAL HOSPITAL, et al., Defendants. Civil Action No. H-94-3996. United States District Court, S.D. Texas, Houston Division. October 21, 1997.

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Frank W. Hunger, Asst. Atty. Gen., Michael F. Hertz, Joyce R. Branda, Rosemary A. Filou, Attys., Civ. Div., U.S. Dept. of Justice, Commercial Litigation Branch, Washington, DC, for U.S.

Carol S. Barnes, ARM, Office of Risk Management, Ins. Manager, Baylor College of Medicine, Houston, TX, Samuel S. Crocker, Vice President for Legal Affairs, Baylor College of Medicine, Houston, TX, Barry Aranowitz, Directors and Officers Liability, A.I. Management and Professional Liability Claim Adjusters, New York, NY, Carol Resh, Sr. Claims Administrator, Johnson & Higgins of Texas, Inc., Houston, TX, for Defendant Baylor College of Medicine.

Jim M. Perdue, Sr., JoAnn Bennett, Jim M. Perdue, Jr., Houston, TX, for Qui Tam Plaintiff/Relator.

L. Boyd Smith, Jr., Vinson & Elkins, L.L.P., Houston, TX, for St. Luke's Hosp., Dr. Branislav Radovancevic and Texas Heart Institute.

Toni Hunter, Office of Atty. Gen., Austin, TX, for University of Texas Health Science Center.

Jeffrey B. McClure, Mayor, Day, Caldwell & Keeton, L.L.P., Jeffrey D. Meyer, Houston, TX, for Defendants Surgical Associates of Texas, P.A. and O. Howard Frazier, M.D.

Brian P. Johnson, Hanen, Alexander, Johnson & Spalding, Houston, TX, for Defendant Edward K. Massin, M.D.

MEMORANDUM OPINION

HOYT, District Judge.

This qui tam suit filed under the False Claims Act ("FCA") raises a significant issue of constitutional proportions: whether the federal Constitution permits Congress to confer standing upon a qui tam plaintiff who has suffered no cognizable injury under Article III of the Constitution. The Court concludes that Congress may not do so, consistent with the principles of "separation of powers."

I. Statement of Facts and Procedure

The qui tam plaintiff in this suit, Joyce Riley, alleges that some of the defendants filed false claims for Medicare and Medicaid reimbursement during her employment as a nurse at St. Luke's Episcopal Hospital in Houston. She filed this suit as a qui tam relator under the FCA, to vindicate the interests of the United States in preventing fraud against the government. 31 U.S.C. §§ 3729, 3730 (Supp.1997). The United States declined to intervene in the suit, pursuant to section 3730(b) of the statute, although it did file an amicus brief in favor of the constitutionality

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of the qui tam provisions of the Act. The defendants have filed various motions to dismiss Riley's claim.

II. Background on the Qui Tam Provisions of the False Claims Act

Congress enacted the FCA in 1863, during the emergency of the Civil War, as the "primary litigative tool for combating fraud against the federal government." SENATE JUDICIARY COMM., FALSE CLAIMS AMENDMENTS ACT OF 1986, S. REP. No. 99-345, at 2 (1986), reprinted in 1986 U.S.C.C.A.N. 5266. President Lincoln sought such a law to combat profiteering by Union Army suppliers. United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1497 (11th Cir.1991). The Act authorized district attorneys (precursors to United States Attorneys) and private persons to bring suit, with the incentive of recovering a share of the damages. Id. When the Act was passed, the attorney general's office was in its infancy and the Department of Justice would not come into being until 1870. Ara Lovitt, Fight for Your Right to Litigate: Qui Tam, Article II, and the President, 49 STAN. L. REV. 853, 856 & n. 20 (1997). After the Civil War, the FCA fell into disuse until World War II, and again until 1986 when Congress amended the Act to increase the financial incentives for individuals to bring such suits. Id. at 856-57; S. REP. No. 99-345, at 2, 23-24, reprinted in 1986 U.S.C.C.A.N. at 5267, 5288-89.

The current version of the FCA authorizes both the United States Attorney General and private persons to bring civil actions to enforce the Act's prohibitions on fraud against the United States government. 31 U.S.C. § 3730 (Supp.1997). The private plaintiff is known as a "qui tam plaintiff" or "relator." Qui tam is short for the Latin phrase, "qui tam pro domino rege quam pro se imposo sequitur," meaning "who brings the action as well for the king as for himself." Bass Anglers Sportsman's Soc'y v. United States Plywood-Champion Papers, Inc., 324 F.Supp. 302, 305 (S.D.Tex.1971).

Under the amended FCA, the relator brings the action in the name of the government, and files his complaint under seal for 60 days, during which time the government determines whether to intervene in the action. 31 U.S.C. § 3730(b)(1), (2). If the government chooses to intervene, it may proceed with the action itself, exercising primary responsibility for the action. Id. § 3730(b)(4), (c)(1). The relator may continue as a party to the suit, although the government is not bound by the relator's acts. Id. § 3730(c)(1). If the government declines to take over the action, the relator may pursue it alone, although the court may later allow the government to intervene upon a showing of good cause. Id. § 3730(c)(1), (3).

The Act places certain restrictions on the government's ability to dismiss or settle a suit initiated by a relator, and grants the courts an active role in such determinations. The action may be dismissed only if the court and the attorney general give written consent to dismissal along with their reasons for consenting. Id. § 3730(b)(1). The government may settle such an action only if the court determines after a hearing "that the proposed settlement is fair, adequate, and reasonable under all the circumstances." Id. § 3730(c)(2)(B).

As an incentive for prosecuting the case, the relator receives a certain percentage of any proceeds recovered, depending on whether the government intervenes in the action. If the government intervenes, the relator receives between 15 percent and 25 percent of the recovery. Id. § 3730(d)(1). If the relator has pursued the claim alone, he receives between 25 percent and 30 percent of the recovery. Id. § 3730(d)(2). The court determines the appropriate amount of the recovery depending on the extent to which the relator "substantially contributed to the prosecution of the action," or according to what is "reasonable." Id. § 3730(d)(1), (2).

III. Standing of the Qui Tam Plaintiff

A. The Irreducible Constitutional Minimum

The threshold question that this Court must answer is whether the qui tam plaintiff meets Article III's standing requirement in order to bring a suit in federal court. "The jurisdiction of the federal court is defined and limited by Article III of the Constitution" and is limited to "cases" and "controversies." Flast v. Cohen, 392 U.S. 83, 94, 88 S.Ct. 1942, 1949, 20 L.Ed.2d 947 (1968). The law of Article III standing is built upon the principle of separation of powers. Allen v. Wright, 468 U.S. 737, 752, 104 S.Ct. 3315, 3325, 82 L.Ed.2d 556 (1984). The standing

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requirement avoids "convert[ing] the judicial process into `no more than a vehicle for the vindication of the value interests of concerned bystanders.'" Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 473, 102 S.Ct. 752, 759, 70 L.Ed.2d 700 (1982) (quoting United States v. SCRAP, 412 U.S. 669, 687, 93 S.Ct. 2405, 2415-16, 37 L.Ed.2d 254 (1973)).

The "irreducible constitutional minimum" of standing consists of three elements:

First, the plaintiff must have suffered an "injury in fact" — an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not `conjectural' or `hypothetical.'" Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be "fairly ... trace[able] to the challenged action of the defendant, and not ... th[e] result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 2136-37, 119 L.Ed.2d 351 (1992) (citations omitted).

The "injury-in-fact" test requires more than simply an injury to a cognizable interest. "It requires that the party seeking review be himself among the injured." Sierra Club v. Morton, 405 U.S. 727, 734-35, 92 S.Ct. 1361, 1365-66, 31 L.Ed.2d 636 (1972). In addition, a court must look to the substantive issues of the case "to determine whether there is a logical nexus between the status asserted and the claim sought to be adjudicated." Flast v. Cohen, 392 U.S. 83, 102, 88 S.Ct. 1942, 1953, 20 L.Ed.2d 947 (1968).

In addition to these minimum requirements imposed by Article III, prudential requirements also bear on standing, including the general requirement that (1) a plaintiff assert his own legal rights and interests and not those of third parties, and (2) the plaintiff's complaint falls within the "zone of interests" protected by the statute in question. Valley Forge, 454 U.S. at 474-75, 102 S.Ct. at 759-60 (citations omitted).

B. Asserting the Government's Interests

Qui tam plaintiffs admittedly are not asserting their own personal interests, but rather the interests of the federal government in combating fraud. Other courts considering standing challenges to the qui tam provisions of the FCA have found standing on the basis that the federal government is the "real party in interest." See, e.g., United States ex rel. Berge v. Board of Trustees, 104 F.3d 1453, 1457 (4th Cir.1997); United States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715, 720 (9th Cir.1994); United States ex rel. Kreindler v. United Technologies, Corp., 985 F.2d 1148, 1154 (2d Cir.1993).

The Ninth Circuit has expanded on this theory, explaining that the FCA ...