It was brought by a pair of activists
with a long history of opposition to the menhaden reduction fishery and to
Omega Protein, the company which has long been responsible for just about all
of the menhaden reduction harvest on the East Coast. In
2010, the same individuals, Chris Manthey and W. Benson Chiles, brought a
lawsuit against Omega alleging that fish oil supplements sold by the company
for human use contained PCBs in concentrations that exceeded state limits. While that suit was eventually settled, it
is nonetheless evidence that the two people have long had Omega in their
crosshairs, and have long sought reasons to bring legal actions against the
company.
The fact that
Omega had been purchased by a Canadian conglomerate, Cooke Inc., which focuses
on aquaculture, commercial fishing, and related industries, set the stage
for the new suit, as United States law requires that fishing vessels operating
in U.S waters be at least 75 percent owned by U.S. citizens, and the plaintiffs
in the relevant lawsuit claimed that as Omega was now Canadian-owned, it was violating
that law.
Normally, those facts wouldn’t provide
grounds for citizens to initiate litigation.
However, the complaint in the recent lawsuit alleged that, although
Omega had sold its fishing vessels to a new, U.S.-owned company, Alpha VesselCo
LLC, in seeming compliance with applicable law, such sale was a sham that left
Cooke still in effective control of the new company, because Alpha VesselCo was
owned by an employee of Cooke who was also a nephew of Cooke’s CEO. The complaint argued that such ownership
constituted what it called “figurehead fraud,” and gave rise to a claim under
the federal False Claims Act, because absent such fraud,
“the United States…would not have
determined that the Omega Vessels [now owned by Alpha VesselCo] are eligible to
receive fishery endorsements, and would not have issued fishery endorsements to
the Omega Vessels in 2018, 2019, 2020, or 2021, meaning that Defendants would
not have taken millions of dollars of fish each year from U.S. waters.”
In
the event that a person or entity employs fraud or a false claim to obtain “money or property” from the federal government, the
False Claims Act allows private citizens to sue such person or entity on the government’s
behalf, although the government is given the opportunity to assume
responsibility for the lawsuit should it choose to do so. If the lawsuit is successful, the private
party bringing the action may receive as much as 30 percent of the judgment
awarded to the United States, depending on such party’s contribution to the
suit’s outcome.
Given that the law also allows
the court to award damages that are three times the amount of the government’s
losses attributable to the false claim, anyone bringing a suit claiming that
the defendants had wrongfully taken “millions of dollars of fish each year,”
could have been setting themselves up for a pretty big payday, while forcing
the defendants to pay a high price for the allegedly fraudulent behavior—if
they prevailed.
The only thing that stood in
their way was a federal judge, and that judge’s interpretation of federal law.
Those turned out to be pretty big
obstacles, for to prevail, the two persons bringing the suit had to establish,
among other things, that the defendants fraudulently or falsely obtained “money”
or “property” that belonged to the federal government. Unless they could do that, all of the other
allegations contained in their 57-page complaint had no meaning under the False
Claims Act.
A long, long time ago, in the age
before cell phones, when the first personal computers were still on the drawing
boards and not generally available for sale, I sat down in my first law school class. It happened to be a class on property
law, and although the year was 1976,
the first case we considered was decided far earlier, in 1805. No lawyer would be surprised to learn that the case was Pierson v. Post, which a 1989 court decision described as
“one of the first cases encountered by the
neophyte law student and stands for a basic proposition of property law that no
right to a wild animal is created until it is reduced to possession by so
circumscribing its movement that escape is impossible.”
“[a]s a general rule, wild fish, birds and
animals are owned by no one. Property
rights in them are obtained by reducing them to possession.”
He also cited a United States
Supreme Court decision from 1977, which quoted from the dissent in an earlier
matter to make the point that
“Neither the States nor the Federal
Government, any more than a hopeful fisherman or hunter, has title to these
creatures until they are reduced to possession by skilled capture.”
Thus, the judge made it clear
that the “millions of dollars of fish” allegedly caught by the defendants did
not belong to anyone, and most particularly did not belong to the United
States government, when they were caught, so the False Claims Act allegations necessarily
failed.
He also rejected the argument
that the commercial fishing endorsements obtained for the Alpha VesselCo fishing fleet constituted United States
property, citing a Supreme Court decision which noted the difference between “property
interests and regulatory interests,” and found that various licenses, including fishing licenses that were analogous to the
commercial fishing endorsements being considered in the menhaden/False Claims
Act case were “purely regulatory.”
As a result of such findings, Judge
Jesse S. Furman granted defendants’ motion to dismiss the complaint in its
entirety, writing
“When reviewing a motion to dismiss…the
Court must ‘accept all factual allegations in the complaint and draw all
reasonable inferences in the plaintiff’s favor.’ The Court will not dismiss any claims…unless
the plaintiff fails to plead sufficient facts to state a claim to relief that
is factually plausible, that is, one that contains ‘factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.’ More specifically,
a plaintiff must allege facts showing ‘more than a sheer possibility that a
defendant has acted unlawfully.’ A
complaint that offers only ‘labels and conclusions’ or ‘a formulaic recitation
of the elements of a cause of action will not do.’ Further, if a plaintiff has not ‘nudged [its]
claims across the line from conceivable to plausible, [those claims] must be
dismissed. [citations omitted]”
Given such language, which
accurately reflects the state of the law but also seems to be specifically
aimed at the inadequacy of the complaint in this particular action, it probably
isn’t surprising that the judge also chose to direct the Clerk of the Court
“to enter judgment in Defendants’ favor
consistent with this Opinion and Order, and to close the case,”
while denying plaintiffs’ request
to further amend the complaint (which had been amended before) in an effort
to prevent dismissal, and observing that
“it is well established that a district
court may deny leave to amend where amendment would be futile,”
a formal way of saying that the
lawsuit is dead as the dodo and that, given the facts of the case, no amendment
might realistically breathe new life into its corpse.
Plaintiffs’
counsel tried to put the dismissal in the best possible light, saying
“The judge did not approve or endorse
Cooke’s conduct as being legal. He did
not clear them of the allegations of fraud, did not clear them of the
allegations that they violated the American Fisheries Act.
“Instead the judge focused on a different
issue on whether what was at stake is property under some U.S. law.”
And that is arguably true,
although it is indisputably true that it was not the judge’s job to “clear” the
defendants of the allegations made in plaintiffs’ lawsuit. Instead, it is the plaintiffs’ job to prove that their
allegations are true.
In that, they failed.
And while it’s not impossible
that the plaintiffs will appeal, and if they do, it is not completely outside the realm of
possibility that they will win on appeal and then go on to win a favorable judgment on the merits, right now it looks very much like Cooke and
Omega have won this particular fight.
Cooke
certainly seems to believe so, and has issued a statement which says that it is
“pleased that the court has dismissed this
baseless lawsuit, which we have always maintained was without merit. For over a decade, the individuals behind
this lawsuit have repeatedly targeted menhaden harvesters and processors to
undermine a sustainable and essential sector of the fishing industry.”
Alpha VesselCo, which operates
under the name “Ocean Harvesters,” also issued a statement that said
“We are pleased that the court has
dismissed this baseless lawsuit. The
decision underscores our commitment to full compliance with federal laws and
regulations, and vindicates the integrity of our operations. From the outset, we have been transparent
with regulators.”
It all sounds good, but…
And it’s hard to forget that
Cooke is the same company that mismanaged salmon pens in the State of Washington,
to the point where a pen collapse allowed over a quarter-million non-native
salmon to escape into that state’s waters, then tried to deny the magnitude of
the problem.
So while
I’ve frequently criticized activists’ attacks on what appears to be a
sustainable menhaden fishery, largely because such attacks divert attention
from real fisheries problems and generally undercut the credibility of those advocating for fisheries conservation, I also have little use for Cooke’s arrogance and seeming
indifference to the need to properly manage and conserve coastal fisheries, as
well as to maintain coastal ecosystems.
This may be one of those times
when the phrase “A plague on both their houses” is the suitable response.
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