Fifth Circuit Decides "Solo" Qui Tam Action are Unconstitutional


© 2001 - Haynes and Boone, LLP

As many health care providers have learned in recent years, the prospect of a qui tam lawsuit under the federal False Claims Act is particularly unsettling. Filed under seal, qui tam actions proceed against a company without notice. As the case progresses and discovery is taken, the lawsuit is revealed to the defendant, and the Department of Justice is given the opportunity to intervene and assume control of the litigation. If DOJ declines to intervene, the lawsuit continues under the direction of the person who first filed the action (known as a qui tam "relator"), often an employee of the defendant.

In Riley v. St. Luke's Episcopal Hospital, No. 97-20948 (5th Cir., Nov. 15, 1999, revised Nov. 22, 1999), the Fifth Circuit became the first court in the country to hold that in cases where DOJ declines to intervene, the qui tam provisions of the False Claims Act are unconstitutional, a reversal of 100 years of precedent and 210 years of practice. Recognizing that this opinion creates a split among the federal circuits on the issue, the entire Fifth Circuit immediately ordered an en banc rehearing of the case, tentatively scheduled for the week of January 17, 2000.

Although qui tam provisions were enacted into law by the first Congress in 1789, the roots of the False Claims Act reach to the Civil War era, when Congress enacted the False Claims Act to combat widespread fraud by government contractors. In particular, the qui tam provisions of the False Claims Act allow individual citizens to sue for fraud on behalf of the federal government and, if successful, to collect part of the government's recovery. Once a qui tam suit is filed, DOJ may intervene and proceed with the action. If DOJ declines to intervene, however, the citizen who filed the action may prosecute the case.

In Riley, a former nurse in the heart transplant unit of St. Luke's Episcopal Hospital filed a qui tam lawsuit against several hospitals and doctors on the alleged grounds that the defendants conspired to defraud Medicare and the U.S. military's health insurance program. After reviewing the lawsuit, DOJ declined to intervene. The District Court ultimately dismissed the lawsuit on jurisdictional grounds, finding that Riley was not personally injured by the alleged fraud and, as a result, had no standing to sue. The Fifth Circuit reversed this aspect of the lower court's decision, based on an intervening decision by an different panel of the Fifth Circuit, which held that qui tam relators do have standing to sue. U.S. ex rel. Foulds v. Texas Tech University, No. 97-11182 (5th Cir., Mar. 29, 1999, revised April 1, 1999). (Perhaps not coincidentally, four days after the Fifth Circuit's decision in Riley, the U.S. Supreme Court took the highly unusual step of directing the parties in a pending False Claims Act case to file supplemental briefs on the question, "Does a private person have standing under Article III [of the Constitution] to litigate claims of fraud upon the government?")

On appeal in the Riley case, the health care provider-defendants argued, among other things, that the qui tam provisions of the False Claims Act are unconstitutional in cases such as Riley. Specifically, the defendants maintained that, when the federal government declines to intervene, qui tam actions violate the Take Care Clause of United States Constitution and the Separation of Powers Doctrine. The Take Care Clause declares that the enforcement of federal law is part of the executive power of the federal government, which is vested solely in the Executive: i.e., the President. The Fifth Circuit agreed, concluding that such qui tam actions encroach on two important aspects of the Executive's authority: (i) the discretion to decide whether to prosecute a claim and (ii) the ability to control litigation filed to protect the Government's interests.

  • In another qui tam development, Public Law No. 106-113, the Consolidated Appropriations Act signed by President Clinton on November 29, requires the Government Accounting Office -- Congress' investigative watchdog -- to monitor the Justice Department's implementation of its own civil False Claims act guidelines for the next three years.  In August 1999, the GAO released a report that criticized DOJ for its inconsistent application of its guidelines [HTML][PDF].

Together with the attorneys in our Government Investigations and Specialized Litigation section, Haynes and Boone has many years of experience defending health care providers in qui tam actions.  As qui tam issues develop at both the Fifth Circuit and Supreme Court levels in the coming year, we will continue to update this page. If, in the meantime, you have any questions concerning False Claims Act litigation, please feel free to contact one of our health care attorneys listed at the top of the page.

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