United States ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC

Decision Date26 July 2016
Docket NumberCiv. No. 12-1562-SLR
Citation196 F.Supp.3d 436
Parties UNITED STATES of America ex rel. Moore & Company, P.A., Plaintiff, v. MAJESTIC BLUE FISHERIES, LLC, Pacific Breeze Fisheries, LLC, and Joyce Jungmi Kim, Defendants.
CourtU.S. District Court — District of Delaware

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, Esquire, 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: Robert S. Salcido, Esquire, of Akin Gump Strauss Hauer & Feld LLP.

MEMORANDUM OPINION

ROBINSON, District Judge

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"), and Joyce Jungmi Kim ("Joyce Kim") (collectively, "defendants").1 (D.I. 1) On May 21, 2013, the U.S. 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, 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). (D.I. 17) Rather than respond to 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. (Id. at ¶¶ 110-62)

On February 11, 2014, defendants filed a motion to dismiss Moore's amended 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). (D.I. 25) Because the case was filed after the FCA was amended by the Patient Protection and Affordable Care Act ("PPACA"), the court applied the pre-PPACA FCA to the pre-amendment conduct and the post-PPACA FCA ("amended FCA") to later conduct. Majestic Blue Fisheries, LLC , 69 F.Supp.3d at 423. The court granted defendants' motion to dismiss the amended complaint on September 23, 2014, dismissing the complaint under Rule 12(b)(1) of the Federal Rules of Civil Procedure. Id. at 416. Specifically, the court concluded that Moore's claim was barred by public disclosure and that Moore was not an original source of knowledge for the alleged fraud. Id.

On October 23, 2014, Moore appealed the dismissal to the Third Circuit. (D.I. 39) The Third Circuit determined that Moore was an original source under the post-PPACA public disclosure bar. United States ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC , 812 F.3d 294, 307 (3d Cir.2016). Presently before the court is defendants' Rule 12(b)(6) motion to dismiss in relation to Moore's claims arising under the post-PPACA FCA. (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 in Coral Gables, Florida. (D.I. 23 at ¶ 11)

Majestic Blue and Pacific Breeze (collectively, "the LLCs") are Delaware limited liability corporations with a principal place of business located in Piti, Guam. (Id. at ¶¶ 12-13) The LLCs own, respectively, two fishing vessels, the Majestic Blue and the Pacific Breeze ("the vessels").2 (Id. )

Joyce Kim is a Korean-born, naturalized U.S. States citizen who currently resides in California. (Id. at ¶ 17) Former defendant Jayne Kim is a Korean-born, naturalized U.S. citizen who currently resides in Korea. (Id. at ¶ 16) Jayne Kim and Joyce Kim are sisters, and both are daughters of Jaewoong Kim, a former executive of Dongwon. (Id. at ¶¶ 15-17) Jayne Kim is the majority shareholder and president of Majestic Blue and the minority shareholder and treasurer of Pacific Breeze. (Id. at ¶ 16) Joyce Kim is the majority shareholder and president of Pacific Breeze and the minority shareholder and treasurer of Majestic Blue. (Id. at ¶ 17)

Former defendant Jaewoong Kim is a citizen of and resides in South Korea. (Id. at ¶ 15) He is the father of Jayne Kim and Joyce Kim, and the brother of J.C. Kim, Dongwon's chairman. (Id. ) Jaewoong Kim is also a former executive of Dongwon. (Id. )

B. The South Pacific Tuna Treaty

Under the South Pacific Tuna Treaty ("SPTT"), the U.S. provides approximately $18 million in economic assistance annually to the Foreign Fisheries Association ("FFA"), an international body designated as the "administrator" of the SPTT. (Id. at ¶¶ 29, 31-32) This money is allocated to the Pacific Island nations that are signatories to the treaty. (Id. at ¶ 32) 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." (Id. at ¶¶ 29-30) South Korea is not a signatory to the SPTT.3 (Id. at ¶ 30)

To qualify for a SPTT license, a fishing vessel needs a U.S. Coast Guard Certificate of Documentation with a registry endorsement. (Id. at ¶ 33) This certification is only available to vessels "under the ownership and control of U.S. citizens." (Id. ) The license applications are submitted to the National Marine Fisheries Service and are issued by the FFA. (Id. at ¶ 31)

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 the LLCs and registered the vessels. (Id. at ¶ 36) There are no other purported owners or shareholders in the LLCs. (Id. at o¶ 43) Moore alleges that Joyce Kim and Jayne Kim each only invested $50 in the LLCs, with no further investment. (Id. at ¶ 37)

On April 23, 2008, Dongwon executed bills of sale that allegedly sold the vessels to the LLCs for $10 each. (Id. at ¶ 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. (Id. at ¶ 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. (Id. at ¶¶ 28, 29, 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. (Id. at ¶¶ 48-53) In April and May 2008, William Phil, a purported manager of the LLCs, sent emails to the National Oceanic and Atmospheric Administration seeking SPTT licenses. (Id. at ¶ 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." (Id. at ¶ 50) Moore further alleges that neither Joyce Kim nor the general manager of the LLCs, Jurgen Unterberg ("Unterberg"), knew who William Phil was, although both 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." (Id. at ¶¶ 49, 57)

On May 15, 2008, Joyce Kim and Jayne Kim, on behalf of the LLCs, submitted initial applications for U.S. documentation for the fishing vessels. (Id. 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." (Id. 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. (Id. at ¶ 53) On May 20, 2008, the National Vessel Documentation Center granted temporary U.S. documentation for the vessels. (Id. )

On May 21, 2008, the LLCs signed agreements with Dongwon for crew manning, ship maintenance, supply, insurance, and tuna supply. (Id. at ¶ 54) Moore alleges that these agreements authorize Dongwon to exercise complete control over the vessels and the LLCs. (Id. 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 who did not exert any actual control. (Id. 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. (Id. 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. (Id. ) 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 (Id. 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...

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