Second Circuit Clarifies Scope of “Property” that an FCA “Claim” May Seek
Earlier this month, the Second Circuit issued a notable decision on a rare FCA topic—whether a request to the government seeks “property,” such that the request falls within the FCA’s definition of a “claim.” The Second Circuit determined that a request inducing the federal government to issue fishing endorsements permitting collection of wild fish did not constitute an FCA “claim” because wild fish are not “property.”
The relators alleged that the defendants defrauded the government when applying for and securing fishing endorsements. The defendants allegedly misrepresented the citizenship of the entity applying for the endorsements—“thereby inducing the issuance of fishing endorsements to an ineligible non-U.S. entity and permitting that entity to fish” for wild fish in state and federal waters. The district court dismissed and the relators appealed.
The Second Circuit observed that a false claim under the FCA “‘normally connotes a demand for money or some transfer of public property.’” So the question became whether wild fish were “property.” The court noted that the FCA does not define “property.” So the court turned to precedent on whether “free-swimming wild fish” are “the property of the state or federal government under traditional concepts of property law.” Citing Supreme Court cases, the Second Circuit noted the “‘general rule’” that “‘wild fish, birds and animals are owned by no one’”—and “‘[p]roperty rights in them are obtained by reducing them to possession.’” Accordingly, “no one owns or has a property interest in wild fish within state or federal waters and, thus, the wild . . . fish harvested in U.S. waters by Defendants are not ‘property’ within the meaning of the FCA.”
Reaching that conclusion, the court acknowledged that federal and state governments “retain broad powers to regulate the taking of such wild fish.” The relators, indeed, argued that because states have the right to “exclude, possess, and use with respect to fish in public waters,” states have an interest that “‘bears the hallmarks of all the sticks in the bundle of property rights.’” The Second Circuit disagreed: “the interest that the government retains in wild fish . . . is exercised through its regulatory power, and not by virtue of the government’s ownership in them, and that interest (though broad and important) does not transform the regulatory power into a property right.” After all, the relators had cited no “caselaw for the proposition that the FCA reaches claims for things in which the government retains some sort of bundle of interests or that are simply subject to governmental regulation.”
A copy of the opinion is available here.
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