196 F. Supp. 3d 436
D. Del.2016Background
- Relator Moore & Company sued Majestic Blue Fisheries, Pacific Breeze, and Joyce Kim under the False Claims Act (FCA) and related statutes, alleging the vessels were fraudulently documented as U.S.-controlled to obtain South Pacific Tuna Treaty (SPTT) fishing licenses.
- Moore alleges Dongwon (a South Korean company) retained actual control via sham sales, service agreements, pseudonymous managers, and control of crew/captains, while the LLCs and Korean-born relatives served as "straw" U.S. owners.
- The LLCs obtained U.S. vessel documentation and FFA-issued SPTT licenses in 2008 after certifying U.S. citizen control; Moore contends those certifications were false and material to obtaining licenses.
- Moore also alleged reverse false claims under the Vessel Documentation Act and APPS based on alleged concealment of control and failure to report illegal garbage/oil dumping to avoid fines and vessel seizure.
- District court previously dismissed pre-PPACA claims as barred by public disclosure, but the Third Circuit held Moore was an original source for post-PPACA claims; the district court here addressed defendants’ Rule 12(b)(6) motion on the post-PPACA claims.
- The court dismissed the amended complaint: (1) FCA claims fail because SPTT licenses are regulatory (not "property" under the FCA); and (2) reverse-false-claim theory fails because alleged obligations were contingent unassessed fines not covered by § 3729(a)(1)(G).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SPTT fishing licenses constitute "property" under the FCA | Licenses are government property/benefit obtained by false citizenship certifications and thus actionable under the FCA | Licenses are regulatory approvals (like video-poker or regulatory permits) and not government property or a cognizable property right | Held: SPTT licenses are regulatory and not "property" for FCA purposes; FCA claim dismissed |
| Whether false citizenship certifications support express or implied false-certification FCA claims | Annual certifications that LLCs were U.S.-controlled were express and material; omissions about noncompliance support implied false certification | Requests for licenses are not "claims" for payment or property under the FCA | Held: Because licenses are not property/claims under the FCA, the false-certification theory fails |
| Whether reverse false-claim liability covers avoiding potential/unassessed statutory fines (Vessel Documentation Act, APPS) | False records concealing control and noncompliance created obligations to pay penalties and thus fall within reverse-false-claim provision | Potential fines are contingent, unassessed, and thus not obligations covered by the reverse-false-claim statute | Held: Reverse false claims do not extend to contingent/unassessed statutory fines; reverse-claim allegations dismissed |
| Viability of conspiracy claims | Conspiracy derives from the underlying FCA and reverse-claim violations (thus viable if underlying claims survive) | Conspiracy claims fail if underlying FCA and reverse-claim theories fail | Held: Conspiracy claims dismissed because underlying claims fail |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (two-step plausibility analysis for Rule 12(b)(6))
- United States ex rel. Moore & Co. v. Majestic Blue Fisheries, LLC, 812 F.3d 294 (3d Cir. 2016) (relator found an original source under post-PPACA public-disclosure bar)
- Cleveland v. United States, 531 U.S. 12 (licenses issued under regulatory schemes are not governmental "property")
- Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363 (fishing rights dependent on regulation do not create independent property interests)
- Gen. Category Scallop Fishermen v. Sec'y of U.S. Dep't of Commerce, 720 F. Supp. 2d 564 (fishing licenses lack property interest independent of regulatory regime)
- United States v. Henry, 29 F.3d 112 (framework for identifying property interests under fraud statutes)
- United States v. Hedaithy, 392 F.3d 580 (object of fraud must be a traditionally recognized property right)
- United States v. Evans, 844 F.2d 36 (considerations for recognizing property under federal fraud statutes)
- Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989 (describing implied false certification doctrine)