A federal judge has dismissed a 2021 lawsuit against Cooke Inc. that claimed it violated U.S. law when it acquired Omega Protein in 2017.
The lawsuit, filed by relators W. Benson Chiles and Chris Manthey on behalf of the U.S. government, was first unsealed in May 2024 after the U.S. Department of Justice declined to intervene. In the lawsuit, considered a “qui tam” action where a private citizen files on behalf of the U.S. government, Chiles and Manthey are considered “relators,” or private individuals who bring forth a lawsuit, while the U.S. government is the plaintiff.
The initial complaint claimed that Cooke was committing “figurehead fraud” by controlling a fleet of fishing vessels based in the U.S. – which would violate U.S. foreign ownership rules and constitute a violation of the False Claims Act (FCA).
If the accusation succeeded, the Blacks Harbour, New Brunswick, Canada-based firm could have been liable for as much as USD 2 billion (EUR 1.9 billion) in fines.
Under qui tam action, the two relators would be entitled to a portion of the reward.
The relators named an array of companies in the lawsuit, including Omega Protein; Alpha VesselCo Holdings, which is also known as Ocean Fleet Services; Ocean Harvesters; and Cooke Inc., claiming each had a role in deceiving the U.S. Maritime Administration (MARAD) and concealing Cooke’s control of the U.S. fishing fleet.
According to the original compliant, the relators claimed that after Cooke realized its purchase of Omega Protein would violate the American Fisheries Act of 1998 (AFA) – the law that made foreign ownership of fishing fleets illegal – the company came up with a figurehead scheme to violate the AFA citizenship requirements and defraud the U.S.
“Defendants ... concealed from MARAD multiple close connections between Cooke and the vessels’ nominal owner, including that he is a long-time Cooke employee and the Cooke CEO’s nephew,” the lawsuit said.
Now, a federal judge has dismissed the lawsuit entirely after agreeing with Cooke’s claim that neither fishing licenses nor fish quality as “property” under the FCA.
"Cooke Inc. is pleased that the court has dismissed this baseless lawsuit, which we have always maintained was without merit," Cooke Inc. said in a statement. "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. Fortunately, the court’s sound legal reasoning prevailed over special interest activism."
Ocean Harvesters also welcomed the dismissal, and said it shows the company has always complied with federal regulations and ownership laws.
"We are pleased that the court has dismissed this baseless lawsuit," Ocean Harvesters Spokesperson Ben Landry said. "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."
U.S. District Court Judge Jesse Furman wrote that based on current case law, the FCA is limited to fraud in connection with a claim, “which is defined, in relevant part, as a ‘request or demand ... for money or property’ that is ‘presented to an officer, employee, or agent of the United States.’”
That means under the FCA, relators needed to prove the lawsuit related to a request of money or property from the state – and they claimed Cooke Inc. did so when submitting false claims for fishery endorsements for its fishing vessels and the menhaden fish that were harvested in U.S. waters.
However, Furman wrote that those claims fell short of existing case law – namely a U.S. Supreme Court Decision on Cleveland V. United States – which established licenses granted by governmental entities do not constitute property. Under Cleveland, the court found licensing does not constitute a property as the interest in choosing who to grant licenses was purely regulatory, and while the state receives monetary compensation for the licenses, it does not expect revenue from the issuance of a fishing license other than a nominal application fee.
The second portion of the relator’s claims, that fish are property, was also denied. Furman wrote the FCA protects the funds and property of the government, and under case law fish in the ocean are not considered government property, as again prior case law – in this case an 1896 decision in Geer V. Connecticut – established fish are no one’s property until caught.
“The Court explained that ‘[a] State does not stand in the same position as the owner of a private game preserve and it is pure fantasy to talk of ‘owning’ wild fish, birds, or animals. 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 skillful capture,’” Furman wrote.
With neither fish licensing nor the fish constituting property, the relators' claims under the FCA fell short.
“Neither the fishery endorsements Defendants obtained for their fishing vessels nor the menhaden fish Defendants were able to harvest from U.S. waters are ‘property’ within the meaning of the FCA,” Furman wrote.
Furman also shot down the relators' argument about the FCA’s reverse false claim provision, which covers money owed to the government rather than payments made by the government. The argument stemmed from potential fines related to violations of the AFA – which are discretionary and don’t apply to the lawsuit, he wrote.
Furman also decided that the relators should not be given leave to amend based on the wording of the complaint and their argument.
“The Court previously granted Relators leave to amend the Complaint to cure the deficiencies raised in Defendants’ first motions to dismiss, and expressly warned that they would ‘not be given any further opportunity’ to do so,” Furman wrote. “In any event, it is well established that a district court may deny leave to amend where amendment would be futile.”
