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The 5th U.S. Circuit Court of Appeals reversed itself on one of its most controversial opinions to date by knocking down a 1999 panel decision that found the qui tam provision of the False Claims Act unconstitutional. In an 11-2 vote on May 25, the en banc court ruled that the century-old law allowing whistleblowers to pursue civil actions when they expose alleged fraud against the federal government was indeed constitutional. Opponents of the qui tam law maintain that permitting individuals to file suits and recover damages for fraud committed against the government is a violation of the separation of powers doctrine. The qui tam law delegates some of the duties of the executive branch to individual whistleblowers, opponents say. Yet Circuit Judge Carl E. Stewart, who wrote the majority opinion in Joyce Riley v. St. Luke’s Episcopal Hospital, et al., found no such problems with the law. “Any intrusion by the qui tam relator in the Executive’s Article II power is comparatively modest, especially given the control mechanisms inherent in the FCA to mitigate such an intrusion and the civil context in which qui tam suits are pursued,” Stewart wrote. “Hence, the qui tam portions of the FCA do not violate the constitutional doctrine of separation of powers by impinging upon the executive’s constitutional duty to take care that the laws are faithfully executed under Article II of the Constitution,” Stewart wrote. Circuit Judge Jerry Smith, who wrote the original November 1999 panel opinion in Riley, dissented; he was joined by Judge Harold DeMoss. “Although Judge Stewart has presented a well-written, comprehensive opinion on behalf of the en banc majority … [t]hat majority fails to recognize either the encroachment on executive power that results from turning over litigation of the government’s business to self-appointed relators or the consequent violations of separation of powers,” Smith wrote. In September 2000, the plaintiffs reargued the case before the entire 5th Circuit armed with a May 2000 U.S. Supreme Court opinion — Vermont Agency of Natural Resources v. Stevens — that gave an exhaustive history of the qui tam law. Appellate courts have addressed the qui tam law numerous times and — with the exception of Smith’s 1999 panel opinion — have never found it unconstitutional, the plaintiffs’ lawyers argued. [ Even so, several 5th Circuit judges seemed skeptical of the qui tam law during oral argument last year, making their ruling last month all the more surprising. "I would be lying if I told you I wasn't amazed by the majority," says Jim Perdue Jr., of Houston's Perdue Law Firm, who represents Joyce Riley. LONG BATTLE 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 U.S. Justice Department did not intervene in Riley's qui tam suit. U.S. District Judge Kenneth Hoyt of Houston dismissed Riley's case in 1997 and declared the law unconstitutional, prompting the appellate battle. "The defendants claimed they wanted clarity in this area of the law," Perdue says. "I think they've gotten it." William Boyce, a Fulbright & Jaworski partner representing the defendants in Riley, says his clients have not yet decided whether to appeal the ruling. "I'm disappointed," Boyce says of the 5th Circuit's reversal. "The majority opinion paints with a pretty broad brush and doesn't get into a lot of detail." Boyce says it is somewhat of a leap to say the U.S. Supreme Court blessed qui tam as constitutional in Stevens. "And I think it's also telling that Judge Smith has identified places where Justices [Antonin] Scalia, [Clarence] Thomas and [Anthony] Kennedy have gone on record with concerns with separation of powers issues.” After years of appeals in Riley, Perdue says he’s anxious to litigate the case in a trial court. Says Perdue: “This is exciting for me because I finally get to talk about the facts of the case again.”

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