United States of America ex rel Moore & Company P A v. Majestic Blue Fisheries LLC et al

Filing 37

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 9/23/2014. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

UNITED STATES OF AMERICA
ex rei. MOORE & COMPANY, P.A.,

)
)
)
Plaintiff,
)
)
)
v.
)
MAJESTIC BLUE FISHERIES, LLC,
)
PACIFIC BREEZE FISHERIES, LLC,
)
DONGWON INDUSTRIES COMPANY, )
LTO, JAYNE SONGMI KIM, JOYCE
)
JUNGMI KIM, and JAEWOONG KIM
)
)
Defendants.
)

Civ. No. 12-1562-SLR

William M. Kelleher, Esquire of Gordon, Fournaris & Mammarella, P.A., Wilmington,
Delaware. Counsel for Plaintiff. Of Counsel: Michael T. Moore, Esquire and Clay M.
Naughton, Esquire of Moore & Company, P.A.
Steven J. Fineman, Esquire and Jason J. Rawnsley of Richards, Layton & Finger, P.A.,
Wilmington, Delaware. Counsel for Defendants Majestic Blue Fisheries, LLC, Pacific
Breeze Fisheries, LLC, and Joyce Jungmi Kim. Of Counsel: RobertS. Salcido,
Esquire and Sarah R. Teachout, Esquire, of Akin Gump Strauss Hauer & Feld LLP.

MEMORANDUM OPINION

Dated: SeptemberJ.?>, 2014
Wilmington, Delaware

I. INTRODUCTION
On November 26, 2012, the law firm of Moore & Company, P.A. ("Moore") filed
this complaint under seal pursuant to the False Claims Act ("FCA"), 31 U.S.C. §§ 37293732, against Majestic Blue Fisheries, LLC ("Majestic Blue"), Pacific Breeze Fisheries,
LLC ("Pacific Breeze"), Dongwon Industries Company, Ltd. ("Dongwc;m"), Jayne Songmi
Kim ("Jayne Kim"), Joyce Jungmi Kim ("Joyce Kim"), and Jaewoong Kim (collectively,
"defendants"). (D.I. 1) On May 21, 2013, the United States government declined to
intervene in the case. (D. I. 6) On May 24, 2013, the case was unsealed. (D. I. 7) On
November 14, 2013, Majestic Blue, Pacific Breeze, and Joyce Kim (collectively,
"appearing defendants") moved to dismiss the complaint for lack of subject matter
jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a
claim pursuant to Federal Rule of Civil Procedure 12(b)(6). 1 (D.I. 17) Rather than
respond to the appearing defendants' motion, on January 10, 2014, Moore filed its first
amended complaint. (D.I. 23) In the first amended complaint ("amended complaint"),
Moore brings claims against defendants of violation of the FCA, reverse false claims for
violation of the Vessel Documentation Act, conspiracy to violate the FCA, conspiracy to
commit reverse false claims for violation of the Vessel Documentation Act, reverse false
claims for violation of the Act to Prevent Pollution from Ships ("APPS"), and conspiracy
to commit reverse false claims for violation of APPS. (/d. at
.

,m 11 0-62)

Currently before the court is the appearing defendants' motion to dismiss

Moore's amended complaint for lack of subject matter jurisdiction pursuant to Federal
1

Dongwon, Jayne Kim, and Jaewoong Kim have not entered appearances in this
case, nor do they appear to have retained counsel.

Rules of Civil Procedure 12(b )( 1) and for failure to state a claim pursuant to Federal
Rules of Civil Procedure 12(b)(6). (D. I. 25) This court has jurisdiction pursuant to 28
· U.S.C. § 1331 and 31 U.S.C. §§ 3729, 3730(b).

II. BACKGROUND
A. Parties
Moore is a professional association of attorneys with its principal office located at
355 Alhambra Circle, Suite 1100, Coral Gables, Florida. (0.1. 23 at ,-r 11)
Majestic Blue and Pacific Breeze (collectively, "the LLCs") are Delaware limited
liability corporations with a principal place of business located at 1026 Cabras Highway,
Suite 110, Piti, Guam. (!d. at ,-r,-r 12-13) The LLCs own, respectively, two fishing
vessels, the Majestic Blue and the Pacific Breeze. (!d.) Dongwon is a South Korean
corporation with its principle place of business at 275 Yanglae-Dong, Seocho-gu, Seoul,
South Korea. (!d. at ,-r 14) Dongwon is in the business of buying, processing, and
selling tuna and tuna products, and was the owner of the Majestic Blue and the Pacific
Breeze vessels (collectively, "the vessels") (previously named the Eastern Kim and the
Costa de Marfil) prior to 2008. (!d. at ,-r,-r 26-27)
Jayne Kim is a Korean-born, U.S. naturalized citizen who currently resides in
Korea. (!d. at ,-r 16) Joyce Kim is a Korean-born, U.S. naturalized citizen who currently
resides in California. (!d. at ,-r 17) Jayne Kim and Joyce Kim are sisters, and both are
daughters of Jaewoong Kim. (/d. at ,-r,-r 16-17) Jayne Kim is the majority shareholder
and president of Majestic Blue and the minority shareholder and treasurer of Pacific
Breeze. (Jd. at ,-r 16) Joyce Kim is the majority shareholder and president of Pacific

2

Breeze and the minority shareholder and treasurer of Majestic Blue. (/d. at 1117)
Jaewoong Kim is a citizen of and resides in South Korea. (/d. at 1115) He is the
father of Jayne Kim and Joyce Kim, and the brother of J.C. Kim, Dongwon's chairman.
(/d.) Jaewoong Kim is also a former executive of Dongwon. (/d.)

B. The South Pacific Tuna Treaty

Under the South Pacific Tuna Treaty ("SPTT"), the United States provides
approximately $18 million in economic assistance annually to the Foreign Fisheries
Association ("FFA"), an international body designated as the "administrator" of the
SPTT. (/d. at 111129, 31-32) This money is allocated to the Pacific island nations that
are signatories to the treaty. (/d. at 1132) In return, the SPTT provides for a certain
number of fishing licenses to be issued to U.S. fishing vessels, permitting them to fish
for tuna in exclusive zones in the South Pacific, "some of the most tuna rich waters in
the world." (/d. at 111129-30) South Korea is not a signatory to the SPTT. (/d. at 1130)
To qualify for a SPTT license, a fishing vessel needs a United States Coast
Guard (USCG) Certificate of Documentation with a registry endorsement. (/d. at 1133)
This certification is only available to vessels "under the ownership and control of U.S.
citizens." (/d.) The license applications are submitted to the National Marine Fisheries
Service and are issued by the FFA. (/d. at 1131)
C. Alleged Facts Related to Claims Under the False Claims Act and Vessel
Documentation Act

On March 25, 2008, Joyce Kim and Jayne Kim founded and registered Majestic
Blue and Pacific Breeze. (/d. at 1136) Jayne Kim owns 51% of Majestic Blue and 49%

3

of Pacific Breeze, while Joyce Kim owns 51% of Pacific Breeze and 49% of Majestic
Blue. (/d. at ,-r 43) There are no other purported owners or shareholders in the LLCs.

(/d.) Moore alleges that Joyce Kim and Jayne Kim each only invested $50 in the LLCs
with no further investment. (/d. at ,-r 37)
On April 23, 2008, Dongwon executed bills of sale that allegedly sold the vessels
to Majestic Blue and Pacific Breeze, respectively, for $10 each. (/d. at ,-r 41) In the
original purchase and sale agreement executed by Dongwon, the LLCs agreed to pay
$4.4 million for each vessel. The agreement did not hold Joyce Kim or Jayne Kim
responsible for the debt and no mortgage was taken out on the vessels. (/d. at ,-r 38)
Moore alleges that this arrangement occurred because Dongwon never actually gave
up ownership or control of the vessels; instead, Dongwon used Joyce Kim and Jayne
Kim as "straw owners" of the LLCs because of their American citizenship. (!d. at ,-r,-r 28,
39)
After transferring ownership of the vessels to the LLCs, the LLCs applied for FFA
fishing licenses to fish for tuna in the waters covered by the SPTT. (/d. at ,-r,-r 48-53) In
April and May 2008, William Phil, a purported manager of the LLCs, sent emails to the
National Oceanic and Atmospheric Administration ("NOAA") seeking SPTT licenses.
(/d. at ,-r 49) Moore alleges that William Phil was not a manager of the LLCs, but "is

actually a pseudonym for three Korean nationals who are also employees of Dongwon
who operated under the false name in order to sound more like an American citizen."
(/d. at ,-r 50) Moore further alleges that neither Joyce Kim nor the general manager of

the LLCs, Jurgen Unterberg ("Unterberg"), knew who William Phil was though both

4

believed he was the manager of the LLCs, reinforcing Dongwon's control over the LLCs
"to the exclusion" of "U.S. citizens that purported[ly] owned and operated [the vessels]
according to the LLCs' corporate documents and the [v]essels' documentation. (/d. at

,m 49, 57)
On May 15, 2008, Jayne Kim and Joyce Kim, on behalf of the LLCs, submitted
initial applications for U.S. documentation for the fishing vessels. (/d.

at~

51) The

applications certified that within the LLCs, "non-citizens do not have authority within a
management group, whether through veto power, combined voting, or otherwise, to
exercise control over the LLC." (/d.

at~

52) Moore alleges that this certification was a

"misrepresentation" of the actual control of the LLCs, and that the LLCs were actually
controlled by Dongwon, a foreign corporation. (/d.

at~

53) On May 20, 2008, the

National Vessel Documentation Center granted temporary U.S. documentation for the
vessels. (/d.)
On May 21, 2008, the LLCs signed agreements with Dongwon for crew manning;
ship maintenance, supply, and insurance; and tuna supply. (/d.

at~

54) Moore alleges

that these agreements authorize Dongwon to exercise complete control over the
vessels and the LLCs. (!d.

at~~

54, 67-71) Furthermore, Moore alleges that Dongwon

exercised control over the vessels beyond these agreements by controlling the
employment of American captains, who were necessary to maintain the facade of
American control but did not exert any actual control. (/d.

at~~

72-87)

On July 1, 2008, the FFA issued certificates of registration for the vessels,
allowing them to fish in SPTT waters under the U.S. flag. (/d.

5

at~

60) Moore alleges

that the grant of the FFA licenses was based on false statements in the application
indicating American control of the LLCs and vessels, when in fact both were controlled
by Dongwon. (/d.) Moore alleges that this "fraud" continues through today, as the
Pacific Breeze vessel continues to fish in the SPTT-protected waters under the U.S.
flag. 2 (/d. at~ 91)

D. Alleged Facts Related to Claims under APPS
In December 2008, Captain John Jeskevicius ("Jeskevicius"), captain of the
Majestic Blue vessel, realized that the crew onboard the ship was illegally dumping
trash over the side of the vessel. (ld.

at~~

92-95) Through December 2008,

Jeskevicius reported the illegal activity to Unterberg multiple times via email. (ld.

at~~

95-98, 100) On December 27, 2008, Jeskevicius resigned as captain, allegedly
at~

because of the illegal garbage dumping. (ld.

99) In fall 2009, Captain Doug Pine

("Pine"), the next captain of the Majestic Blue vessel, also observed illegal dumping.
(Id.

at~~

102-05) Despite having knowledge of this illegal activity, defendants allegedly

did nothing to change the Majestic Blue vessel's policies or otherwise stop the dumping
from occurring. (/d.

at~

106) Hill, the last captain of the Majestic Blue vessel before it

sank, observed illegal dumping as well. (Id.

at~~

106-09) Moore alleges that "[Hill] and

other crew members knew about the dumping but intentionally did not report it." (ld. at
~

108) Hill allegedly told Unterberg, but Moore alleges that Unterberg had no authority

within Majestic Blue to address the problem himself. (Id.
2

at~

109)

The Majestic Blue vessel maintained its SPTT licenses until it sank in June
2010. (0.1. 23 at~~ 83, 91) The captain at the time, David Hill ("Hill"), died. (Jd. at~
83) Moore represented Hill's wife in a wrongful death action against Dongwon and
Majestic Blue. (D. I. 26 at 4)

6

Ill. STANDARD OF REVIEW
Not only may the lack of subject matter jurisdiction be raised at any time, it
cannot be waived and the court is obliged to address the issue on its own motion. See

Moodie v. Fed. Reserve Bank of NY, 58 F.3d 879, 882 (2d Cir. 1995). Once jurisdiction
is challenged, the party asserting subject matter jurisdiction has the burden of proving
its existence. See Carpet Group lnt'l v. Oriental Rug Importers Ass'n, Inc., 227 F.3d 62,
69 (3d Cir. 2000).
Under Rule 12(b)(1 ), the court's jurisdiction may be challenged-either facially
(based on the legal sufficiency of the claim) or factually (based on the sufficiency of
jurisdictional fact). See 2 James W. Moore, Moore's Federal Practice§ 12.30[4] (3d ed.
1997). Under a facial challenge to jurisdiction, the court must accept as true the
allegations contained in the complaint. See id. Dismissal for a facial challenge to
jurisdiction is "proper only when the claim 'clearly appears to be immaterial and made
solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and
frivolous."' Kehr Packages, Inc. v. Fide/cor, Inc., 926 F .2d 1406, 1408-09 (3d Cir. 1991)
(quoting Be// v. Hood, 327 U.S. 678, 682 (1946)).
Under a factual attack, however, the court is not "confine[d] to allegations in the .
. . complaint, but [can] consider affidavits, depositions, and testimony to resolve factual
issues bearing on jurisdiction." Gotha v. United States, 115 F.3d 176, 179 (3d Cir.
1997); see a/so Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891-92 (3d
Cir. 1977). In such a situation, "no presumptive truthfulness attaches to plaintiff's
allegations, and the existence of disputed material facts will not preclude the trial court

7

from evaluating for itself the merits of jurisdictional claims." Carpet Group, 227 F.3d at
69 (quoting Mortensen, 549 F.2d at 891 ).

IV. DISCUSSION
A. The False Claims Act
The False Claims Act ("FCA") creates liability for any person who "knowingly
presents, or causes to be presented, a false or fraudulent claim for payment or
approval" to the government. 31 U.S.C. § 3729(a)(1 )(A). The FCA seeks "to strike a
balance between encouraging private persons to root out fraud and stifling parasitic
lawsuits." Graham Cnty. Soil & Water Conservation Dist. v. U.S. ex ref. Wilson, 559
U.S. 280, 281 (201 0). Prior to the Patient Protection and Affordable Care Act
("PPACA") legislation, enacted on March 23, 2010, 3 the FCA provided in pertinent part
that:
(4 )(A) No court shall have jurisdiction over an action under this section
based upon the public disclosure of allegations or transactions in a
criminal, civil, or administrative hearing, in a congressional, administrative,
or Government Accounting Office report, hearing, audit, or investigation,
or from the news media, unless the action is brought by the Attorney
General or the person bringing the action is an original source of the
information.
(B) For purposes of this paragraph, "original source" means an individual
who has direct and independent knowledge of the information on which
the allegations are based and has voluntarily provided the information to
the Government before filing an action under this section which is based
on the information.
31 USC§ 3730(e)(4)(A)&(B) (2008) ("pre-PPACA FCA").
The amended FCA provides in part:

3

Effective July 22, 2010.

8

(4)(A) The court shall dismiss an action or claim under this section,
unless opposed by the Government, if substantially the same allegations
or transactions as alleged in the action or claim were publicly disclosed
(i) in a Federal criminal, civil, or administrative hearing in which the
Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal
report, hearing, audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the person
bringing the action is an original source of the information.
(B) For purposes of this paragraph, "original source" means an individual
who either (i) prior to a public disclosure under subsection (e)(4)(a), has
voluntarily disclosed to the Government the information on which
allegations or transactions in a claim are based, or (2) who has knowledge
that is independent of and materially adds to the publicly disclosed
allegations or transactions, and who has voluntarily provided the
information to the Government before filing an action under this section.
31 U.S.C. § 3730(e)(4)(A)&(B) ("amended FCA").
The parties disagree over which version of the statute applies to the claims at
bar. The Supreme Court in Graham County explained that "[t]he legislation makes no
mention of retroactivity, which would be necessary for its application to pending cases
given that it eliminates petitioners' claimed defense to a qui tam suit." Graham County,
559 U.S. 281, 283 n.1 (citing Hughes Aircraft Co. v. United States ex ref. Schumer, 520
U.S. 939, 948 (1997)); see a/so, United States ex ref. Zizic v. Q2Administrators, LLC,
728 F.3d 228, 232 n.3 (3d Cir. 2013) (applying pre-amendment public disclosure bar to
a matter which was pending before the amendment). In Hughes, the Supreme Court
addressed whether an amendment controls when it becomes effective before a suit
was commenced, noting that "the legal effect of conduct should ordinarily be assessed
under the law that existed when the conduct took place .... " Hughes, 520 U.S. 939,
946 (citing Landgraf v. US/ Film Products, 511 U.S. 244, 265 (1994)). The Supreme

9

Court concluded that "[g]iven the absence of a clear statutory expression of
congressional intent to apply the ... amendment to conduct completed before its
enactment, we apply our presumption against retroactivity .... " /d. at 952.
The case at bar was filed after the PPACA amendment took effect and involves
continuing conduct, both before and after the PPACA amendment. Based on the
reasoning of the Supreme Court discussed above, the court applies the pre-PPACA
FCA to pre-amendment conduct and the amended FCA 4 to later conduct. See U.S. ex
ref. Judd v. Quest Diagnostics Inc., Civ. No. 10-4914, 2014 WL 2435659 (D.N.J. May

30, 2014).
B. Application of the Public Disclosure Provision
To determine if the pre-PPACA FCA public disclosure provision applies to bar a
relator's complaint, the Third Circuit explained that a court
must first assess whether the relator's claim is based on publicly disclosed
allegations or transactions. This, in turn, requires a twofold analysis.
First, [the court] determine[s] whether the information was disclosed via
one of the sources listed in§ 3730(e)(4)(A). Second, [the court] decide[s]
whether the relator's complaint is based on those disclosures. To be
"based upon" the publicly revealed allegations or transactions the
complaint need only be "supported by" or "substantially similar to" the
disclosed allegations and transactions.[5 ]
United States ex ref. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 519 (3d Cir.

2007). Appearing defendants argue that the allegations in the amended complaint

4

While the amended FCA does not explicitly use jurisdictional language, stating
that a court "shall dismiss an action or claim," the application of such statute
necessitates the analysis of any "public disclosures." The court analyzes the later
conduct under the amended FCA pursuant to Federal Rules of Civil Procedure 12(b )( 1).
5

Aithough this analysis is directed to the pre-PPACA FCA, the court discerns no
difference in the application of such analysis to the amended FCA.
10

were disclosed (1) "as early as 2009 through several news media articles, postings, and
podcasts on internet websites" (0.1. 26 at 9-10 & n.6); (2) "multiple publicly disclosed
government reports," obtained by Moore through Freedom of Information Act ("FOIA")
requests, dated July 3, 2010 and April 19, 2011; and (3) prior civil litigation.
1. Sources
a. News media

The "sources of public disclosure in§ 3730(e)(4)(A), especially 'news media,'
suggest that the public disclosure bar provides 'a broa[d] sweep."' Schindler Elevator
Corp. v. U.S. ex ref. Kirk,- U.S.-, 131 S. Ct. 1885, 1891 (2011) (citing Graham
County, 559 U.S. at 290). While traditional news sources (including internet sources)
constitute news media, the question in "public disclosure" cases is whether a disclosure
on a particular website constitutes a "public disclosure" for the purposes of the FCA.
United States ex ref. Repko v. Guthrie Clinic, P.C., 2011 WL 3875987, at *7 (M.D. Pa.
Sept. 1, 2011 ), affirmed by United States ex ref. Repko v. Guthrie Clinic, P.C., 490 F.
App'x. 502, 504 (3d Cir. 2012). In Repko, the district court noted:
Generally accessible websites are available to anyone with an internet
connection and a web browser, and access is not restricted. Though they
are not traditional news sources, they serve the same purpose as
newspapers or radio broadcasts, to provide the general public with access
to information. They are easily accessible and any stranger to a fraud
transaction could discover the relevant information on them.
/d. at *7. The court concluded that the four websites at issue in that case publically
disclosed the information contained therein: a website which worked to "gather and
publicize information about nonprofit organizations;" one which billed itself as "the
leading source of information about philanthropy worldwide," which contained a
11

comprehensive database; information for investors on the Standard & Poors website;
and the Bloomberg Professional website which "provid[ed] access to all the news,
analytics, communications, charts, liquidity, functionality and execution services" to
assist investors. /d. at *8. In United States ex ref. Simpson v. Bayer Corp., 2013 WL
4710587 (D. N.J. Aug. 30, 2013), the court stated "while it is certainly the case that
websites may constitute news media in certain instances, not everything posted on the
internet qualifies." /d. at *7. Using a case-by-case framework, the court concluded that,
[u)nlike an article on a website maintained by a recognized news outlet, a
trade journal, or even a promotional website geared toward the
dissemination of information, the anonymous postings in this case ...
amounted to nothing more than vague allegations in an informal forum
discussion without any indicia of reliability or substantiation.
Healthboards.com holds itself out [as] an online group support community.
Similarly, although the homepage of cafepharma.com contains a section
entitled "current news," the posting on which [defendant] relies is on the
message board portion of the site.

/d.
In the case at bar, appearing defendants allege that the information posted on
the following websites are public disclosures: an interview with former Captain Pine
posted on CNN's website, "iReport.com," on October 28 2009 ("Pine recording") (D.I.
29, ex. A, B, G); a related article "Mutiny on American Ship, first in over 30 years,"
dated October 27, 2009, posted on iReport.com ("Mutiny article") (id., ex. B);
reproductions of the Pine recording and Mutiny article on other blogs (id., ex. C, E-G);
an article "Flogging and Mutiny in the 2P1 Century, Proudly Waving the Stars and
Stripes," dated October 22, 2009, posted on maritimeaccident.org ("Maritime Accident
article") (id., ex. C, D); a blog posting at bitterendblog.com ("BitterEnd blog post") (id.,

12

ex. H); and an article "Coast Guard Probes Island Mariner's Account of Fiasco at Sea,"
posted on vashonbeachcomber.com, dated November 17, 2009 ("Beachcomber
article") (id., ex. 1). Moore challenges the consideration of the Pine recording as a
public disclosure. While "iReport.com" is arguably part of CNN's website, the website is
a "community forum" and contains the disclaimer: "Stories submitted to CNN iReport
are not edited, fact-checked or screened before they post. So we mark all iReports with
the label 'NOT VETTED BY CNN' to let you know that this story hasn't been both
checked and cleared by a CNN editor." The court concludes that the postings on the
iReport website are not "news media" in the context of the FCA. Similarly, the blog
postings (e.g., BitterEnd blog and Sea Fever blog) are not "news media."
The Maritime Accident and Beachcomber articles6 allege the following pertinent
facts: The Majestic Blue vessel was a "flag of convenience vessel." After the vessel
was registered in the U.S., it needed an American captain. Therefore, "the Korean
captain became the fishmaster and Captain Pine joined as Captain." While the
company boasts that it is "1 00% owned by United States Citize[ns]," the vessel was
"Korean-managed" and "operated by a Korean company." Captain Pine was only a
'"paper captain' to meet the requirements of the US flag .... " The vessel's officers
were Korean and the deck hands were Korean, Indonesian and Filipino. The articles

6

Moore does not challenge these sources as qualifying sources. The
maritimeaccident.org website describes itself as "an authoritative, credible source,
popular among both seafarers and maritime accident investigators." The
vashonbeachcomber.com website provides the local news for Vashon-Maury Island.
Both of these websites qualify as "news media."
13

also allege waste management violations, 7 stating:
The Korean officers refused to comply with MARPOL regulations, claims
Pine. A vessel waste management plan was posted throughout the ship
but ignored, even though the vessel had an adequate incinerator ad
oily-water separator. "I brought it up at the monthly safety meetings but
was ignored_," says Pine, who has video and photographic evidence that
the Korean officers "intentionally and wilfully" disposed of plastics wastes
and oil wastes at sea: "They didn't want to waste fuel by using the
incinerator," he says.
(0.1. 27, ex. C)

b. FOIA requests
Analyzing the pre-PPACA FCA, the Supreme Court concluded that a "written
agency response to a FOIA request falls within the ordinary meaning of 'report."'

Schindler, 131 S.Ct. at 1893. The Supreme Court explained that "[s]uch an agency
response plainly is 'something that gives information,' a 'notification,' and an 'official or
formal statement of facts."' /d. Moreover, "[a]ny records the agency produces along
with its written FOIA response are part of the response .... " /d. The Supreme Court
has described "a classic example of the 'opportunistic' litigation that the public
disclosure bar is designed to discourage" as a lawsuit filed after reviewing FOIA
requests or "identify[ing] a few regulatory filing and certification requirements,
submit[ing] FOIA requests until ... discover[ing] a federal contractor who is out of
compliance, and potentially reap[ing] a windfall in a qui tam action under the FCA." /d.
at 1894. In U.S. ex ref. Kraxberger v. Kansas City Power and Light Co., 756 F.3d 1075
(8th Cir. 2014 ), the Eight Circuit applied the reasoning in Shindler to the amended FCA,

7

Also alleged on shiptalk.com, which aggregates news from sources around the
world. (D.I. 27 ex. P)
14

finding that "documents disclosed by [the General Services Administration] in response
to counsel's FOIA request qualify as public disclosure under Schindler." /d. at 1079.
This court agrees. The amended FCA did not substantially change "report" as a public
disclosure, therefore, the responses to the FOIA requests qualify as public disclosures
under both versions of the FCA.
The responses to the FOIA provided the following pertinent factual information:
The certificates of vessel's nationality and sale documents evidence that Dongwon
owned the vessels and the purchase price was $4.4 million. The bill of sale lists the
amount paid as $10. (D.I 23, exs. 2, 6, 7) The signed certificates of documentation for
the vessels aver that the persons who manage the LLCs "are citizens of the United
States; and non-citizens do not have authority within a management group, whether
through veto power, combined voting, or otherwise, to exercise control over the LLC."
(/d., ex. 8) Accompanying the FOIA responses were emails including the following: (1)

an email from Raymond Clarke (with the NOAA) to Eric Dila (with the USCG) regarding
vessel insurance, where Clarke appears to question the documentation of the vessels
as U.S. vessels (id., ex. 12); 8 (2) an email from K.Y. Hwang (with Dongwon Industries)
stating that he is "in charge of the care for" the vessels (id., ex. 14); and (3) emails
regarding the vessel sent from individuals at Dongwon to NOAA (id., ex. 16-17).
c. Litigation documents

The disclosures in the civil litigation 9 qualify as "public disclosures" only under the

8

This email is in response to an inquiry from William Phil.

9

Hi/l v. Majestic Blue Fisheries, LLC, Civ. No. 10-23886 (S.D. Fla. filed Oct. 26,
201 0), subsequently transferred to the District of Guam, Hill v. Majestic Blue Fisheries,

15

pre-PPACA FCA, as the government was not a party to the lawsuit. See Zizic, 728
F.3d at 235 (holding that civil litigation public documents and discovery (not subject to
"any court imposed limitation as to its use") are public disclosures) (citations omitted); §
3730(e)(4)(A). The litigation documents (D. I. 27, ex. L) allege the following facts:
Dongwon is a Korean corporation and was the "legal owner, operator, and/or manager
of, and/or maintained and/or controlled the [Majestic Blue vessel]." (/d. at 1f 10)
Dongwon formed Majestic Blue "to act as the record owner of the vessel Majestic Blue,"
in order to operate as a U.S.-flagged fishing vessel. Dongwon transferred the vessels
to two Delaware LLCs it formed, "for the sole purpose of owning its two U.S.-flagged
vessels, which must be owned by U.S. citizens." (/d. at 1f1f 37, 43) Dongwon was the
alter ego of Majestic Blue based on its alleged control over Majestic Blue's operations,
including the payment of employees and captain as well as making major operational
and onboard "policies, procedures and daily operations" decisions. Dongwon obtained
fishing licenses from the NOAA and USCG, on behalf of Majestic Blue, in order to "fish
in lucrative fishing grounds in which only U.S.-flagged vessels or vessels flying the flag
of other signatories to the applicable treaty could fish." (/d. at 1f 37) The officers and
crew on the Majestic Blue vessel were Korean or from other Southeast Asian countries.
The U.S. captains were merely "window dressing" to meet crewing requirements, and
were not employed "to command the Korean-operated, managed and de facto owned
Purse Seiner." (/d. at 1f1f 62-68) The crew violated international pollution treaties,

LLC, Civ. No. 11-34 (D. Guam transferred Nov. 21, 2011) (collectively, the "wrongful
death litigation") and Majestic Blue Fisheries, LLC v. Douglas E. Pine, Civ. No. 10-4 (D.
Guam filed Apr. 13, 201 0).
16

including MARPOL. This "led several captains to complain to ... Dongwon regarding
these violations and even led some to terminate their employment with Majestic Blue
and Dongwon in fear of losing their U.S. Master's licenses." (/d. at

,m 67, 70)

2. Allegation or transaction of fraud
A transaction warranting an inference of fraud is one that is composed of a
misrepresented state of facts plus the actual state of facts." Zizic, 728 F.3d at 236
(citing United States ex ref. Dunleavy v. Cnty. of Del., 123 F.3d 734, 741 (3d Cir.1997),
abrogated on other grounds by Graham County, 559 U.S. 280). The Third Circuit has
adopted the following formula to determine whether information publicly disclosed in a
specified source qualifies as an allegation or transaction of fraud:
If X + Y = Z, Z represents the allegation of fraud and X and Y represent its
essential elements. In order to disclose the fraudulent transaction
publicly, the combination of X andY must be revealed, from which
readers or listeners may infer Z, i.e., the conclusion that fraud has been
committed.

/d. (quoting Dunleavy, 123 F .3d at 741 ). The essential elements of the allegation of
fraud [Z] are "a misrepresented [X] and a true [Y] state of facts." Atkinson, 473 F.3d at
519 (citation omitted). The public disclosure bar applies "if either Z (fraud) or both X
(misrepresented facts) andY (true facts) are [publicly] disclosed by way of a listed
source." /d.
Moore alleges that defendants fraudulently obtained USCG certificates of
documentation in order to request fishing licenses from the government. The
certificates of documentation require compliance with the citizenship requirement and
that non-citizens do not exercise control over the owning entity. Defendants continue

17

the fraud by "renewing their U.S. Documentation by recertifying (falsely) each year that
the LLCs were not controlled by non-U.S. Citizens; and by yearly presenting their
fraudulently obtained Certificates of Documentation to the NMFS to obtain a renewal of
the FAA license purchased by the Government." (D.I. 23 at 129) The news articles
make reference to a "paper captain" and call into question the management of the ship.
Moreover, the articles reference a "paper captain." The FOIA documents add the
formal documents setting up the LLCs and transferring ownership of the vessels, with
bills of sale for $10. The court concludes that the articles and FOIA documents qualify
as an allegation or transaction of fraud. The litigation documents present all of the facts
and even allege the specific fraud from the amended complaint.
3. "Based on" public disclosures
The court must finally "decide 'whether the relator's complaint is based on those
[public] disclosures.' To be based on allegations or transactions of fraud, claims need
not be 'actually derived from' public disclosures. Rather, claims need only be
'supported by' or 'substantially similar to' public disclosures." Zizic, 728 F.3d at 237
(citations omitted). "[T]he public disclosure bar is not confined to actions 'solely based
upon' public disclosures. Instead, the public disclosure bar covers actions simply
'based upon' public disclosures, including actions 'even partly based upon' such
allegations or transactions." /d. at 238 (citations omitted). As the Third Circuit
describes "based on" as including claims "substantially similar" to public disclosures,
such analysis applies to either version of the FCA. Comparing the claims to the public
disclosures, the amended complaint is based on the public disclosures (either the
combination of the articles and the FOIA responses or the combination of all three
18

disclosures). Therefore, under both versions of the FCA, Moore's claims must be
dismissed.

C. Original Source Analysis
1. Pre-PPACA FCA
Although the conduct is based on public disclosures, Moore's claim survives if
Moore is an original source. The Third Circuit explained that,
[t]o be an original source, a relator's knowledge must be both direct and
independent. "Independent knowledge" is knowledge that does not
depend on public disclosures. "Direct knowledge" is knowledge obtained
without any "intervening agency, instrumentality or influence: immediate."
The FCA "seeks to encourage persons with 'first hand knowledge of
fraudulent misconduct,' or those 'who are either close observers or
otherwise involved in the fraudulent activity' to come forward."
Atkinson, 473 F.3d at 520.
Moore concedes that certain of its information was uncovered during its
representation of Captain Hill in the wrongful death litigation. Moore's declaration filed
with its brief evidences that the essential elements of the fraud were substantiated by
depositions and discovery in the civil litigations. (0.1. 29, ex.1) The Third Circuit has
explained that a relator is not an "original source" when the relator's information was
obtained through discovery during the course of representing a client in an action.
United States ex ref. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co.,
944 F.2d 1149, 1160-61 (3d Cir. 1991). Moore alleges in a conclusory fashion that "it
was only after more than two years of its own investigation that [it] had gathered
sufficient information and evidence to file this action .... " (D. I. 29 at 1) The
declaration provides that certain information was "independently obtained" by Moore

19

demonstrating: Dongwon's control over the vessels, employees, captains, and
violations; former ownership and sale documents for the vessels; control over the
maintenance of the vessels; control over the USCG's inspection of the vessels and
information provided to the USCG. (ld. at 4-7) Such information is duplicative of that
obtained from the public disclosures, particularly from the civil litigations. This does not
suffice to confer "original source" status on Moore. Atkinson, 473 F.3d at 522-23
(advocating a case-by-case approach to determining whether relator is an "original
source," which depends on the nature and extent of reliance upon information available
in the public domain.). The court concludes that Moore is not an original source.

1. Amended FCA
The definition of "original source" in the amended FCA differs from the prePPACA version, requiring "knowledge that is independent of10 and materially adds to
the publicly disclosed allegations or transactions." While the Third Circuit has not yet
defined the new language of the amended FCA, its previous decisions are informative
in interpreting this language:
[T]he extent of reliance on information already in the public domain should
be a consideration during the original source inquiry, even if that
information is not a public disclosure within the meaning of§
3730(e)(4)(A). While it is true that reliance solely on "public disclosures"
under§ 3730(e)(4)(A) is always insufficient under§ 3730(e)(4)(B) to
confer original source status, reliance on public information that does not
qualify as a public disclosure under§ 3730(e)(4)(A) may also preclude
original source status depending on the extent of that reliance and the
nature of the information in the public domain. Thus, in deciding whether
a relator's reliance on public records bars him from being an original
source under§ 3730(e)(4)(8), courts should consider both "the availability

1

°Contrasted with the "direct and independent" requirement of the pre-PPACA
version.
20

of the information and the amount of labor and deduction required to
construct the claim." The more obscure the records and the more
significant the investigative input of the relator, the more likely it is that
granting original source status will fulfill the FCA's "twin goals of rejecting
suits which the government is capable or pursuing itself, while promoting
those which the government is not equipped to bring on its own."
Atkinson, 473 F.3d at 522 (citations omitted).

In the case at bar, the information regarding the purchase of the vessels and
formation of the LLCs is disclosed in the FOIA responses. The inference of "paper
captain" is disclosed by the articles. As discussed above, the allegedly "independent"
information, which Moore relies upon to "materially add" to the public disclosures, are
duplicative of the information in the litigation documents. While these documents may
not qualify as public disclosures under the amended FCA, such documents are in the
public domain and not "obscure." See a/so, Zizic, 728 F.3d at 240 (holding that a
relator who merely applies his expertise to publically disclosed information does not
have independent knowledge). The court concludes Moore is not an original source
under the amended FCA.

V. CONCLUSION
For the aforementioned reasons, the court grants appearing defendants' motion
to dismiss the amended complaint. 11 (D. I. 25) An appropriate order shall issue. 12

11

The court does not reach appearing defendants' arguments under Federal Rule
of Civil Procedure 12(b)(6). As Moore has not filed proofs of service for Dongwon,
Jayne Kim, and Jaewoong Kim within the 120 days allowed by Federal Rule of Civil
Procedure (4)(m) and these defendants have not entered appearances, the case will be
closed.
12

Despite the fact that the court is more than a little alarmed if such conduct as
attributed at bar to defendants apparently goes uncorrected by the government
agencies responsible for oversight of the fishing industry.
21