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Although the plaintiff came armed with a recent U.S. Supreme Court opinion her lawyers say favors her position, the 5th U.S. Circuit Court of Appeals seemed reluctant to back off on one of its hottest opinions of 1999 during an en banc rehearing. On Sept. 21, a hot and muggy day in New Orleans, the plaintiff wanted the full court to reconsider its controversial and first-of-its-kind opinion in Joyce Riley v. St. Luke’s Episcopal Hospital, et al., which by a 2-1 vote overturned the qui tam provision of the False Claims Act. That November 1999 ruling turned more than 100 years of jurisprudence on its head. The panel found that the provision allowing whistleblowers to pursue civil actions when they expose alleged fraud against the federal government was unconstitutional — specifically violating the separation-of-powers doctrine and the take-care clause of Article II of the U.S. Constitution. Qui tam opponents argue the executive branch doesn’t have the power to delegate to a private individual the authority to “take care that the laws be faithfully executed.” But a May 2000 decision from the U.S. Supreme Court gave the plaintiff in Riley hope for success in the 5th Circuit. That opinion — Vermont Agency of Natural Resources v. Stevens– went into exhaustive detail regarding the history behind the century-old qui tam law, which allows individuals who believe they have uncovered fraud against the government to sue on the government’s behalf even when federal lawyers decline to prosecute. The plaintiff claims qui tam actions have a strong history in the United States, and in the Supreme Court, which has considered issues related to such actions numerous times. But defense lawyers say there’s no way the Executive Branch can delegate litigation power to individuals on the government’s behalf and the time has come to do away with the law. Yet several of the 5th Circuit judges did not seem impressed by the high court’s opinion during their questioning of lawyers. “With respect to the take-care clause . . . does the statute interfere with the executive branch?” Judge E. Grady Jolly asked David Ogden, one of the government lawyers defending the law. “Why isn’t the argument in this case based on the statute . . . rather than what seems like a rabbit trail?” Jolly asked. “Why aren’t we talking about the statute instead of the history of qui tam actions?” Jim Perdue Jr., a Houston lawyer who represents the plaintiff in Riley, stressed that his client did not present a separation-of-powers question because she has standing as a “partial assignee” of the government. But in a particularly prickly line of questioning, Judge Edith Jones seemed incredulous that individuals are allowed to file cases on behalf of the government — cases over which the government has little control. “What troubled me is the relators can pursue these qui tam actions . . . they go on for years and years and years,” Jones said. “And the government couldn’t get them to stop.” “This case doesn’t have those concerns,” Perdue answered. IMPORTANT HISTORY In his original Nov. 15, 1999, majority opinion in Riley, Judge Jerry Smith became the first appellate judge in the United States to write that the qui tam provision violates the separation-of-powers doctrine and the take-care clause of Article II of the Constitution. The qui tam law was passed by Congress in 1863 to fight fraud by government contractors during the Civil War. It allows a private party to sue for fraud on the government’s behalf and collect a bounty or share of the recovery. Incentives are attractive for whistleblowers, who are entitled to 15 percent to 25 percent of any recovery if the Department of Justice intervenes in the case and may get an even bigger chunk of the recovery, as much as 30 percent, if the DOJ declines intervention. In her suit, Joyce Riley, a former registered nurse in the heart transplant unit at St. Luke’s Episcopal Hospital in Houston, alleged the hospital defrauded Medicare and the U.S. military’s health insurance program by upgrading patients to intensive care and providing unnecessary treatment — allegations the defendants strongly deny. The Justice Department did not intervene in Riley’s suit. In 1997, U.S. District Judge Kenneth Hoyt of Houston dismissed Riley’s suit and declared the qui tam law unconstitutional. Hoyt ruled that Riley had no standing under Article III of the Constitution to pursue a claim as an uninjured party. Riley appealed, but the original 5th Circuit panel differed from Hoyt, rejecting Riley’s qui tam action under Article II instead. Although the Supreme Court’s recent decision in Stevens focused more on questions surrounding Article III — which restricts judicial power to “cases and controversies of the sort traditionally amenable to, and resolved by, the judicial process” — Riley’s lawyers hope the 5th Circuit will look at the high court’s analysis of the qui tam law’s historical importance. In Stevens, a 7-2 opinion, Justice Antonin Scalia wrote: “We think this history well nigh conclusive with respect to the question before us here: whether qui tam actions were �cases and controversies of the sort traditionally amenable to, and resolved by, the judicial process.’ “ But in a footnote, Scalia also wrote that “we express no view on the question whether qui tam suits violate Article II.” TAKING CARE Ogden, the DOJ lawyer who defended the qui tam statute on behalf of the government, urged the 5th Circuit to let history, as well as the Supreme Court, be its guide. “Their reasoning [in Stevens] strongly undermines the panel’s decision,” Ogden told the 5th Circuit judges. “This history compels that it is constitutional.” William Boyce, a Fulbright & Jaworski partner representing the defendants in Riley, argued that the qui tam provision fundamentally violates the take-care clause by stripping the government of “unfettered prosecution” on its own behalf. “It strips the government discretion to investigate,” Boyce argued. “It provides no means to remove the relator from the proceedings — even for good cause.” Judge Carl Stewart, a dissenting member of the original Riley panel, asked Boyce if he could name a case in which the government was prevented from litigating a qui tam fraud claim because of res judicata. He could not. “It is nonetheless a deleterious effect,” Boyce responded. Judge Fortunato “Pete” Benavides also seemed inclined to follow the history of the qui tam statute. “Why wouldn’t we necessarily look at the historical context in how it was placed in the Constitution?” Benavides asked. “Wouldn’t it be relevant what the framers thought when they put it in the Constitution?” Boyce responded that the qui tam provision was altered by Congress in 1986, which gave individuals even more power to sue and increased the dollar amount that could be sought for damages. Congress strengthened the statute to combat the overbilling of the military. “The history doesn’t get you very far when you get to the 1986 amendment,” Boyce said. After the arguments concluded, Boyce said he was encouraged by the judges’ lines of questioning. “I think Judge Jolly’s focus indicated the court’s concern with the specific statute,” Boyce says. “He is less impressed with the history than the other courts have been.” Perdue was less encouraged by the argument and the effect the Stevens opinion will have on the 5th Circuit. “The Supreme Court can provide hints,” Perdue says. “But it can’t make them follow the law.”

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