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 ) 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 ( EHC ): 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