Conservative appellate judge faults US whistleblower law's 'constitutional problems'

By Nate Raymond Nov 4 (Reuters) - A conservative federal appeals court judge is urging his court to revisit its own precedent in order to address the “serious constitutional problems” with a law that allows whistleblowers to sue companies on the government’s behalf to recover taxpayer funds paid out based on false claims. U.S. Circuit Judge James Ho of the New Orleans-based 5th U.S. Circuit Court of Appeals laid out his position in a concurring opinion on Monday as he joined a three-judge panel’s decision to uphold the dismissal of one such lawsuit against an inpatient-rehabilitation facility under the False Claims Act. His concurring opinion took aim at the “qui tam” provision of a law first enacted in 1863 during the Civil War that allows citizens to file lawsuits on the government’s behalf against individuals and companies defrauding it. That provision has become central to how the U.S. government today combats fraud in the health care and defense sectors. Settlements and judgments under the False Claims Act in cases first filed by whistleblowers exceeded $2.4 billion in the 2024 fiscal year, the U.S. Department of Justice said. Hundreds of such cases are filed annually, initially under seal so the Justice Department can investigate and decide whether to take them over. If it chooses not to, whistleblowers, who stand to receive a cut of any financial recovery, may pursue the lawsuits on the government’s behalf. The case before the 5th Circuit was one such lawsuit. It was filed against a rehabilitation hospital in Pearland, Texas, owned by Encompass Health Corp (EHC.N) by one of its former sales representatives, Deidra Gentry, who alleged it presented false claims to Medicare in order to get paid. Ho, who was appointed by Republican President Donald Trump during his first term in office, agreed with the panel’s decision to uphold the dismissal of Gentry’s complaint, which it said failed to allege facts that could show patients who did not require treatment were admitted. But Ho said the full 5th Circuit should consider going further by overturning its own 2001 precedent and holding that whistleblowers, or relators, like Gentry cannot constitutionally step into the role of the government to pursue such cases on its behalf at all in a future case. “They presume to represent the United States government in federal court, and to defend the interests of the United States Treasury against fraud,” Ho wrote. “But like federal civil servants, they are neither appointed by, nor accountable to, the President.” Ho noted that “many members of the federal judiciary have expressed repeated constitutional concerns about the qui tam provisions of the False Claims Act.” U.S. Supreme Court Justice Clarence Thomas in a 2023 dissent said the provisions exist in a “constitutional twilight zone,” and fellow conservative Justices Brett Kavanaugh and Amy Coney Barrett in a concurring opinion in that case, United States, ex rel. Polansky v. Executive Health Resources, said the Supreme Court should consider the issue in a future case. The Atlanta-based 11th U.S. Circuit Court of Appeals is scheduled on December 12 to consider whether to uphold a 2024 ruling by U.S. District Judge Kathryn Mizelle, a Trump appointee in Tampa, Florida, holding the law violates the Appointments Clause in Article II of the U.S. Constitution. The makeup of the 17-judge 5th Circuit, known as the most conservative federal appeals court, has changed since 2001 when it overwhelmingly upheld the law. Only three judges who participated in that case upholding the whistleblower provisions remain on the bench. They include U.S. Circuit Judge Jerry Smith, an appointee of Republican President Ronald Reagan, who wrote what Ho called a “lonely” dissent to the 2001 ruling. Ho noted that U.S. Circuit Judge Kyle Duncan, another Trump appointee, earlier this year in another case also called on the 5th Circuit to revisit its 2001 ruling. “Had I been on that panel, I would have joined him,” Ho wrote. “I’m pleased to do so now.” The case is U.S. ex rel Gentry v. Encompass Health Rehabilitation Hospital of Pearland, 5th U.S. Circuit Court of Appeals, No. 25-20093. For Gentry: Volney Brand of Brand Law and Keith French of Keith B. French Law For Encompass Health: Robert Layne and Alan York of Reed Smith Read more: Fight over False Claims Act whistleblower provision heats up on appeal False Claims Act’s whistleblower provisions are unconstitutional, US judge rules