New York Criminal Lawyer Blog
Complainant is a heart transplant nurse at a certain hospital who sued eight defendants for having allegedly violated the False Claims Act (“FCA”) by defrauding and conspiring to defraud the United States Treasury. She 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, Complainant 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 complainant proceeded in the district court on her own.
After complainant filed her original complaint, the criminal 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 complainant’s standing under Article III of the United States Constitution. Complainant, 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. Complainant then filed a second amended complaint which was met with another round of motions to dismiss. Among the grounds for dismissal was an assertion by the University of Texas Health Science Center at Houston that the Eleventh Amendment bars complainant from suing it, because it is an arm of the state. The district court dismissed complainant’s claims on jurisdictional grounds, concluding that she had suffered no injury-in-fact and therefore lacked standing to sue. Because the court dismissed on standing grounds, it did not reach the arguments presented in the motions to dismiss, including the Eleventh Amendment defense. Assault was not charged.
On appeal, the defendants maintain that complainant 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.
Complainant now appeals the dismissal of her case for want of jurisdiction, of her action for damages under the False Claims Act (“FCA”), 31 U. While the court concludes, based on intervening circuit case law, that the district court did have jurisdiction, they also determine that Complainant 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.
The purpose for the enactment of the FCA in 1863 by Congress is to combat widespread fraud by government contractors during the Civil War. The Act 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. 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. Though initiated by a private persona “relator” a qui tam action is “brought in the name of the Government.” The qui tam provisions stress that the United States is the real party in interest. The relator serves 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. The Attorney General then must decide, within sixty days, whether to “intervene and proceed with the action. 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.”
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. If the relator 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. 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.” 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.” The relator, however, retains “the right to continue as a party to the action.” 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. 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. In addition, the relator participates fully at trial, calling and cross-examining witnesses, except that upon 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.
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. Moreover, if the government decides to pursue its claim in some forum other than an FCA suit such as an administrative penalty action the relator has the same rights in that proceeding that he would have in court.
Complainant and the government contend that the long history of qui tam actions in federal courts indicate 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. There is no evidence, however, 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.” The qui tam statutes that did permit private actions injuries suffered by private individuals not by the government exclusively. There 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 the society.” The court declined to defer to history to resolve the constitutional questions presented.
The district court held that complainant lacked standing under Article III because she did not allege all the elements required by recent supreme court decisions, i.e., she lacked an injury- in- fact.
On appeal, the defendants present a number of arguments in support of the district court’s conclusion that a qui tam relator who has not experienced any personalized injury fails the test for Article III standing set forth in Lujan v. Defenders of Wildlife. However, the court is precluded from addressing those contentions. The court recently concluded that a qui tam relator who has suffered no personalized injury may have standing even if the government does not intervene. The Foulds panel (United States ex rel. Foulds v. Texas Tech Univ., 5th Cir. 1999) relied on two authorities: a pre-Defenders of Wildlife opinion of this court concluding that an uninjured relator had standing and a recent opinion in which the Supreme Court adjudicated an FCA qui tam suit without objecting to the standing of the uninjured relator. Defendants argue that neither of these authorities is controlling. The Supreme Court has indicated that the injury requirement is a constitutional not a prudential standing requirement and, accordingly, cannot be waived by legislation.
Defendants contend that Foulds’s discussion of relator standing is dictum and thus is not binding. They note that the Foulds court did not need to reach the issue of the relator’s standing to resolve the question presented in that case, i.e., whether the Eleventh Amendment barred the relator’s claims against state entities for the Eleventh Amendment issue was itself jurisdictional. Hence, Foulds’s holding that the Eleventh Amendment barred the qui tam relator’s suit against state entities disposed of all claims in that case, regardless of whether the relator individually possessed Article III standing. Defendants therefore urge that Foulds’s discussion of a qui tam relator’s standing does not control the Article III issue presented in this appeal.
The court disagrees that Foulds is not controlling. In concluding that Foulds’s discussion of the relator’s standing is unnecessary to the opinion’s ultimate conclusion and is therefore dictum, the defendants assume that the jurisdictional requirements of Article III and the Eleventh Amendment are “at the same level.” In other words, it is not necessary, they assume, to determine whether there is an Article III case or controversy before deciding whether the Eleventh Amendment limits the federal court’s power to hear the case.
The Supreme Court has concluded otherwise. It determined that it “must first address” whether a particular action for a declaratory judgment was an Article III case or controversy before deciding the Eleventh Amendment question on which certiorari had been granted. The Calderon Court explained that while the Eleventh Amendment is jurisdictional in the sense that it is a limitation on the federal court’s judicial power, and therefore can be raised at any stage of the proceedings, we have recognized that it is not coextensive with the limitations on judicial power in Article III.
Hence, while the Foulds court was correct to characterize whether the Eleventh Amendment applies as a “threshold jurisdictional issue,” defendants are wrong in assuming that Article III standing a more “basic” jurisdictional requirement need not be addressed before considering whether the Eleventh Amendment abrogates federal jurisdiction. Foulds’s discussion of standing, then, is not dictum and binds this panel to the conclusion that an uninjured qui tam relator may have Article III standing.
The defendants moved to dismiss, inter alia, on the ground that qui tam actions that are brought by uninjured relators such as complainant and in which the government does not intervene violate the Constitution’s Take Care Clause and the constitutional doctrine of separation of powers. Although the district court dismissed only on the basis of lack of standing, the defendants’ alternative constitutional arguments are properly before the court on appeal and provide an alternative ground for affirming the dismissal.
The Take Care Clause states that the Executive shall take Care that the Laws be faithfully executed. The doctrine of separation of powers prohibits one branch of government from intruding on the constitutionally granted powers of another. The doctrine may be violated when one branch of government aggrandizes itself at the expense of another or when one branch “impermissibly undermines” the constitutionally granted powers and functions of another, even if there is no aggrandizement.
Defendants assert that prosecution of the government’s claims by individuals wholly outside the Executive Branch constitutes a violation of the Take Care Clause and the fact that the Legislative Branch stripped the Executive Branch of its exclusive prosecution power constitutes a violation of the separation of powers doctrine. We consider these arguments together, because they are closely intertwined: Each is concerned with the encroachment on the Executive’s exclusive power to conduct litigation on behalf of the United States.
To determine whether the qui tam provisions violate the Take Care Clause and the separation of powers doctrine, the court first considers the extent to which the provisions reduce the Executive’s control of litigation on the government’s behalf and then compares that loss of control to the degree of loss the Morrison Court (Morrison v. Olson, 1988) found to be constitutionally acceptable.
FCA qui tam actions in which the government does not intervene encroach on two aspects of the Executive’s authority: (1) the discretion to decide whether to prosecute a claim and (2) the control of litigation brought to protect the government’s interests. Complainant and the government maintain that the prosecutorial discretion given the Executive means simply that he cannot be compelled to pursue an enforcement action he believes to be unwarranted; his discretion does not include the power to bar others from filing lawsuits under statutory schemes that permit enforcement through both governmental and private actions. But complainant and the government are falsely analogizing qui tam actions to actions in which the plaintiff sues on his own behalf and incidentally benefits the government.
Private enforcement actions by aggrieved individuals are not subject to the Executive’s prosecutorial discretion, but when the sole injury the only ticket into court belongs to the government, the Executive’s prosecutorial discretion must include the power to decide whether to bring suit. Therefore, the FCA provisions permitting qui tam actions to proceed when the government has decided not to intervene do encroach on the Executive’s authority to initiate litigation aimed solely at redressing the government’s injuries. The Executive may not freely dismiss a qui tam action but if the relator objects to the decision to dismiss, the government must notify the relator of the filing of the motion to dismiss, and the court must grant the relator a hearing before deciding whether to permit dismissal. The Executive may not freely settle a qui tam action; if the relator objects to the government’s attempt to settle, the government must obtain court approval, and the court may approve only after it holds a hearing and finds that the settlement is “fair, adequate, and reasonable under all the circumstances.” The Executive may not freely restrict the relator’s participation in the qui tam action; the government must first show the court that the relator’s unrestricted participation “would interfere with or unduly delay the Government’s prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment. The Executive has no power to remove the relator from the litigation under any circumstances.
In upholding the independent counsel provisions, the Morrison Court stressed four features of the Ethics in Government Act that preserved Executive control of prosecutions:
Most importantly, the Attorney General retains the power to remove the counsel for “good cause,” a power that we have already concluded provides the Executive with substantial ability to ensure that the laws are “faithfully executed” by an independent counsel. No independent counsel may be appointed without a specific request by the Attorney General, and the Attorney General’s decision not to request appointment if he finds “no reasonable grounds to believe that further investigation is warranted” is committed to his unreviewable discretion. The Act thus gives the Executive a degree of control over the power to initiate an investigation by the independent counsel. In addition, the jurisdiction of the independent counsel is defined with reference to the facts submitted by the Attorney General, and once a counsel is appointed, the Act requires that the counsel abide by Justice Department policy unless it is not “possible” to do so.
None of these features is present in the FCA’s qui tam provisions. The Attorney General has no power to remove a relator, no matter how irresponsible the suit becomes. If he makes the proper showing to the court, the Attorney General may limit the relator’s participation and may dismiss the action after the court has provided the relator with a hearing on the motion to dismiss but may not simply remove the relator. The second crucial feature present in the independent counsel statute is missing: The Attorney General loses all control over the decision whether to initiate the suit. Even if the Attorney General determines that there are “no reasonable grounds” for the fraud action, the relator may override that judgment and initiate a lawsuit. The action goes forward in the government’s name, under total control of the self-interested and publicly unaccountable relator, even if the Attorney General has concluded that proceeding with a lawsuit is not merited or is otherwise not in the United States’ interests or is even contrary to those interests.
The third and fourth features are also conspicuously absent. The Attorney General has no control over the breadth of a relator’s suit. Indeed, a relator may make sweeping allegations that, while true, he is unable effectively to litigate. He thereby can bind the government, via res judicata, and prevent it from suing over those concerns at a later date when more information is available. Finally, the relator, unlike the independent counsel, need not adhere to the rules and policies of the Department of Justice.
Taking the qui tam provisions as a whole and not focusing on any of the particular differences between the provisions and the independent counsel statute, qui tam affects a greater degree of encroachment on Executive prerogatives than does the Ethics in Government Act upheld in Morrison. Clearly, the government has greater authority to prevent the initiation of prosecution by an independent counsel than by a qui tam relator. Once suit has been filed, the controls the Executive Branch may exercise most of which require court approval of some sort are simply not sufficient to counterbalance this major encroachment on Executive power.
The FCA’s qui tam provisions, on the other hand, aim to increase protections against fraud and are not narrowly tailored to achieve their ends. Given the independent counsel statute’s special objective and narrow tailoring, the Morrison Court likely was especially forgiving of Executive encroachment. Morrison, then, represents, as we have said, the outer boundary of constitutionally permissible encroachment on executive powers, and the FCA’s qui tam provisions must fall under Morrison’s compelling balancing test.
The defendants argued that complainant’s lawsuit also violates Article II of the Constitution because, as a qui tam relator suing on behalf of the federal government, complainant is acting as an “officer of the United States” but has not been appointed in conformity with Article II’s Appointments Clause. Also, defendants contend that the FCA’s qui tam provisions violate the Appointments Clause by authorizing private parties to initiate and conduct litigation on behalf of the United States a power properly exercised only by persons who qualify as “officers” under the Appointments Clause. Complainant and the government admit that qui tam relators are not appointed pursuant to any of the mechanisms set forth in the Appointments Clause, but they aver that relators are not “officers” and that, accordingly, they need not be appointed according to Article II’s provisions.
The court affirms the dismissal on the ground that the qui tam provisions of the FCA violate the Take Care Clause and the separation of powers doctrine and find it unnecessary to reach the Appointments Clause issue.
Dismissal is affirmed.
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