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U.S. EX REL. CHANDLER v. HEKTOEN INSTITUTE

February 9, 1999

U.S. EX REL. JANET CHANDLER, PLAINTIFF,
v.
THE HEKTOEN INSTITUTE FOR MEDICAL RESEARCH; COOK COUNTY HOSPITAL; AND COOK COUNTY, ILLINOIS, DEFENDANTS.



The opinion of the court was delivered by: Gettleman, District Judge.

MEMORANDUM OPINION AND ORDER

Relator/plaintiff Janet Chandler ("plaintiff") has brought a three-count complaint against defendants the Hektoen Institute for Medical Research ("Hektoen"), Cook County Hospital ("CCH"), and Cook County (together, "the County Defendants"). Plaintiff alleges: (1) presentation of false claims in violation of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. (Count I); (2) retaliation in violation of the FCA (Count II); and (3) retaliatory discharge in violation of Illinois law and public policy (Count III).

Defendant Hektoen moves to dismiss Counts I and III, arguing that: (1) the FCA's qui tam provisions are unconstitutional; and (2) plaintiff does not allege that Hektoen's actions violated clearly established Illinois public policy. Hektoen has also moved for an extension of time in which to answer Count II, pending the court's decision on the County Defendants' motion to dismiss Count II. The United States has filed an amicus brief in opposition to Hektoen's argument that the qui tam provisions of the FCA are unconstitutional.

The County Defendants have likewise filed a motion to dismiss the complaint, arguing that: (1) CCH is not a suable entity under Illinois law; (2) Count II fails to state a claim against the County Defendants because plaintiff was employed by Hektoen, not by the County; (3) the County Defendants are immune from punitive damages for Count III; (4) Count III fails to state a claim for retaliatory discharge; and (5) the qui tam provisions of the FCA are unconstitutional. The County Defendants have filed a supplemental motion to dismiss, arguing that they are not "persons" who can be sued under the FCA.*fn1

FACTS

This action arises out of defendants'*fn2 alleged misconduct in implementing a federal research grant. In 1989, the National Institute of Drug Abuse ("NIDA") issued a request for proposals for a study investigating the treatment of drug-dependant pregnant women. In response, CCH submitted a grant application seeking $5 million to study 300 such women over the course of five years (the "New Start study"). CCH also submitted an Assurance of Compliance plan to a division of the United States Department of Health and Human Services ("HHS"). In this plan, CCH represented that its study would comply with federal regulations governing research on human subjects. NIDA initially awarded the grant to CCH (which developed the protocol to be used in performing the study), and later transferred the administration of the grant to Hektoen. Plaintiff was hired by Hektoen as New Start's project director on September 1, 1993.

The federal grant had two components. The clinical component was designed to provide the research subjects with a comprehensive medical and social service program that included drug treatment and prenatal care. The research component was designed to study whether the research subjects had benefitted from the comprehensive treatment program.

Plaintiff alleges that during her employ, she became aware that defendants were not complying with the terms of the grant or with federal regulations and were misrepresenting the progress of the New Start study. Specifically, plaintiff alleges that defendants: did not follow the mandatory protocol associated with research on human subjects and the dispensing of methadone to pregnant women; did not obtain informed consent from study participants; did not obtain thorough medical or drug histories from the participants; provided the participants with substandard care; failed to keep accurate records; and failed to randomize participants. Plaintiff also alleges that defendants reported "ghost" research subjects and submitted false progress reports to the government. Finally, plaintiff alleges that defendants violated the grant and federal law because they did not have procedures in place to protect whistleblowers from retaliation.

Plaintiff alleges that in 1994, she began informing doctors employed by CCH of her concerns that the study was violating the terms of the grant, the Assurance of Compliance plan, and federal regulations. She alleges that after reporting her concerns, Dr. Mason, an employee of CCH, rescinded a number of her responsibilities. Plaintiff also alleges that Hektoen retaliated against her by recalculating her vacation and sick time. According to plaintiff, after she reported in a draft of her paper for NIDA that the study had not been successful, she was further chastized by employees of both CCH and Hektoen. On January 24, 1995, John Prochaska ("Prochaska"), the administrator of Hektoen, accused plaintiff of lying in her monograph on the study and fired her. On February 21, 1995, plaintiff was formally removed as co-principal investigator of the study. Plaintiff subsequently testified at an HHS Commission on Research Integrity hearing, and in August 1996, a subdivision of HHS issued a report on the research conducted by CCH and Hektoen that identified "multiple failures to comply with requirements of the HHS human subjects regulations."

DISCUSSION

I. Defendant Hektoen's Motions

A. Motion to Dismiss Count I

Hektoen moves to dismiss Count I on the grounds that the qui tam provisions of the FCA are unconstitutional.*fn3 Hektoen argues: (1) qui tam relators do not have Article III standing to bring an FCA claim; (2) the qui tam provisions violate separation of powers principles by encroaching on the authority of the executive branch, U.S. Coust., Art. II, § 3; and (3) the qui tam provisions violate the Constitution's Appointments Clause, U.S. Coust., Art. II, § 2. Defendants rely primarily on the reasoning of a lone decision from the Eastern District of Texas, United States ex rel. Riley v. St. Luke's Episcopal Hospital, 982 F. Supp. 1261 (S.D.Tex. 1997). The overwhelming majority of courts that have considered the issue have upheld the qui tam provisions of the FCA in the face of identical constitutional challenges.

1. Standing

Defendants argue that plaintiff does not have Article III standing to bring suit under the qui tam provisions of the FCA because she does not allege an injury-in-fact, one of the three elements of Article III standing, see Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The Seventh Circuit has held that because the United States is the real party in interest in a qui tam action, a relator has standing to pursue the suit as long as the federal government has suffered an injury-in-fact. See United States ex rel. Hall v. Tribal Development Corp., 49 F.3d 1208, 1214 (7th Cir. 1995) ("It is enough . . . that the United States, as the entity on whose behalf and in whose name this suit was brought, has suffered an injury in fact under Article III. Requiring an additional showing of injury on the part of the qui tam relator would be an analytical redundancy.").

Although defendants acknowledge the existence of Hall, they urge this court to abjure binding precedent in favor of the reasoning of Riley, a district court decision from another circuit that explicitly disagreed with Hall. See Riley, 982 F. Supp. at 1266. Defendants also argue that Hall is not binding on this court because it did not arise under the FCA. However, Hall relied on FCA cases to draw its ultimate conclusion that qui tam relators need not demonstrate an injury-in-fact. See U.S. v. Johnson, 43 F.3d at 1214 (quoting the Second Circuit's holding in United States ex rel. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d 1148, 1154 (2d Cir. 1993): "[un a qui tam action [under the False Claims Act], the plaintiff sues on behalf of and in the name of the government and invokes the standing of the government resulting from the fraud injury."). The FCA comports with the principle that "if an injured person assigns his right of action to someone else, the assignee has standing to enforce the right even though he is not the one who was injured by the defendant's wrongdoing." National Ass'n of Realtors v. National Real Estate Ass'n, Inc., 894 F.2d 937, 941 (7th Cir. 1990).

Other courts have used similar reasoning to hold that qui tam relators have standing to bring suit under the FCA. See, e.g., United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 748 (9th Cir. 1993) ("the FCA effectively assigns the government's claims to qui tam plaintiffs such as Kelly, who then may sue based upon an injury to the federal treasury."); United States ex rel. Lamers v. City of Green Bay, 924 F. Supp. 96, 98 (W.D.Wis. 1996) (agreeing with Kelly); United States ex rel. Robinson v. Northrop Corp., 824 F. Supp. 830, 836 (N.D.Ill. 1993) ("Congress . . . can transfer the rights of the United States to ...


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