Wild Fish Are Not “Property” Under the False Claims Act; Unassessed AFA Penalties Are Not an FCA “Obligation”

Case: United States Ex Rel. Chiles v. Cooke Inc. (2d Cir. Aug. 5, 2026)

Posture: Appeal from S.D.N.Y. dismissal of FCA qui tam claims challenging allegedly fraudulent procurement of fishery endorsements.

1. Introduction

Relators W. Benson Chiles and Chris Manthey brought a qui tam action under the False Claims Act (“FCA”) against Cooke-related entities and individuals and associated parties (including Omega-related entities and others), alleging a scheme to misrepresent citizenship to the Maritime Administration (“MARAD”) to obtain fishery endorsements for large vessels and thereby fish for menhaden in U.S. waters. The American Fisheries Act of 1998 (“AFA”) limits eligibility for fishery endorsements through a 75% U.S.-citizenship ownership-and-control requirement at each tier of ownership.

The appeal presented three core issues: (i) whether wild menhaden in public waters constitute “property” for FCA “claim” purposes; (ii) whether unassessed AFA civil penalties can constitute an FCA “obligation” supporting a reverse false claim; and (iii) whether the district court abused its discretion by denying leave to add an additional FCA theory after dismissal.

2. Summary of the Opinion

The Second Circuit affirmed dismissal. It held that free-swimming wild fish are not “property” within the meaning of the FCA, foreclosing the relators’ FCA presentment/false-statement/conspiracy claims premised on harvesting menhaden as “government property.” It also held that unassessed AFA civil penalties are not an “obligation to pay” under the FCA’s reverse false claim provision because the penalty scheme is not self-executing and depends on agency discretion and affirmative governmental steps. Finally, the Court found no abuse of discretion in denying leave to amend to add a different FCA subsection theory late in the case.

3. Analysis

A. Precedents Cited

1) FCA “claim” framework and pleading standards

  • Carruthers v. Colton and Romea v. Heiberger & Assocs.: de novo review of Rule 12(b)(6) dismissals and statutory interpretation.
  • Ashcroft v. Iqbal: plausibility pleading standard.
  • Mikes v. Straus (abrogated on other grounds by Universal Health Servs., Inc. v. United States ex rel. Escobar): elements of an FCA claim, including a “claim” seeking payment from the federal treasury.
  • United States v. McNinch: the “false claim” concept “normally connotes a demand for money or for some transfer of public property.”
  • Miller v. United States ex rel. Miller and United States ex rel. Billington v. HCL Techs. Ltd.: emphasize the FCA’s limits—“not an all-purpose antifraud statute”—and frame modern FCA interpretation in the Circuit.

2) “Property” and the status of wild animals (ferae naturae)

  • Cleveland v. United States: when statutes do not define “property,” courts look to “traditional concepts of property.”
  • Geer v. Connecticut: historically suggested state “ownership”/trustee language regarding wildlife; crucially, the Second Circuit treats later Supreme Court precedent as rejecting proprietary ownership.
  • Missouri v. Holland: rejects the “title” theory; “Wild birds are not in the possession of anyone; and possession is the beginning of ownership.”
  • Toomer v. Witsell: characterizes the ownership theory as a “fiction” shorthand for regulatory power.
  • Douglas v. Seacoast Products, Inc. and Baldwin v. Fish & Game Comm'n of Mont.: “pure fantasy” to talk of owning wild fish; no title until reduced to possession by capture.
  • Hughes v. Oklahoma: expressly overrules Geer v. Connecticut and cements the “ownership” rhetoric as a defunct legal fiction.
  • United States v. Long Cove Seafood, Inc.: Second Circuit adoption of the rule that wild fish are “owned by no one” until reduced to possession; distinguishes sedentary shellfish (potentially capable of possession) from roaming wildlife.

3) Reverse false claims and “obligation” to pay

  • United States ex rel. Foreman v. AECOM: reverse FCA claims involve money owed to the government rather than payments made by the government.
  • Miller v. United States ex rel. Miller: the controlling Circuit guidance—an “obligation” exists only where there is an “immediate and self-executing duty to pay”; “potential or contingent exposure to penalties” is not enough.
  • Out-of-circuit alignment (cited approvingly in Miller v. United States ex rel. Miller): United States ex rel. Kasowitz Benson Torres LLP v. BASF Corp. and United States ex rel. Simoneaux v. E.I. duPont de Nemours & Co., rejecting reverse-FCA theories based on unassessed penalties.
  • District court reinforcement: United States ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC (unassessed AFA penalties are contingent and discretionary).

4) Statutory interpretation and agency deference context

  • Loper Bright Enters. v. Raimondo: courts exercise independent judgment in statutory interpretation; regulations may still inform context.
  • United States v. Harris and Clemente v. Lee: Second Circuit practice of according substantial weight to Supreme Court dicta absent changed legal landscape (used to rebut the “dicta” characterization of wildlife-property language).

5) Amendment practice

  • Balintulo v. Ford Motor Co. and Pyskaty v. Wide World of Cars, LLC: standard of review and futility principles.
  • Nat'l Credit Union Admin. Bd. v. U.S. Bank Nat'l Ass'n, Solomon v. Flipps Media, Inc., and Porat v. Lincoln Towers Cmty. Ass'n: district courts may deny serial, delayed, theory-by-theory amendments (“theories seriatim”).
  • United States v. Bengis: invoked by relators to support a proposed FCA conversion theory (but the panel affirmed denial on delay grounds and did not reach futility).

B. Legal Reasoning

1) Wild fish are not “property” under the FCA

The Court treated the dispute as turning on the FCA’s statutory definition of “claim,” which requires a request or demand for “money or property.” Because the FCA does not define “property,” the Court followed Cleveland v. United States and looked to traditional property law.

The panel’s central move was to translate the long line of Supreme Court wildlife cases into a clean FCA rule: free-swimming wildlife (including menhaden) is “owned by no one” until reduced to possession by capture (Missouri v. Holland; Douglas v. Seacoast Products, Inc.; Hughes v. Oklahoma), and older “ownership” language was a regulatory-power “fiction” (Toomer v. Witsell). The Court reinforced that this is not merely a federalism-limited idea: the Supreme Court has repeatedly described wildlife as not in anyone’s possession (hence not owned) and the Second Circuit itself had stated the rule in United States v. Long Cove Seafood, Inc..

The Court also rejected statutory “title” arguments grounded in the Submerged Lands Act (“SLA”). In the panel’s view, the SLA’s reference to “natural resources” (including “fish”) did not create proprietary ownership of roaming fish; it codified state title to submerged lands and regulatory authority, consistent with later Supreme Court decisions (notably Douglas v. Seacoast Products, Inc., which directly addressed the SLA argument and still rejected “ownership” of free-swimming fish).

Finally, the Court rejected a “bundle of sticks” reframing: regulatory authority to manage, exclude, or sanction fishing is not itself a proprietary “property” interest for FCA purposes. The Court relied in part on the distinction that regulation does not create property (United States v. Evans) and echoed the Supreme Court’s caution against expanding “property” beyond traditionally recognized interests (citing Ciminelli v. United States).

2) Unassessed AFA civil penalties are not an FCA “obligation” (reverse false claim)

The reverse false claim provision, 31 U.S.C. § 3729(a)(1)(G), requires an “obligation”—defined as an “established duty” to pay. Under Circuit precedent, particularly Miller v. United States ex rel. Miller and United States ex rel. Billington v. HCL Techs. Ltd., “established” means an immediate, self-executing duty, not a contingent exposure dependent on agency discretion.

Applying that framework, the Court held AFA penalties are not self-executing. The statutory scheme contemplates agency investigation, assessment, and imposition by the Secretary of Transportation, including mechanisms that presuppose a penalty is first “imposed.” Contextual indicators—statutory and regulatory “may” language, and the complaint’s own narrative about agency “recommendations” and concurrence—confirmed discretion. As in Miller v. United States ex rel. Miller, even seemingly mandatory phrasing (“is liable”) did not equate to an immediately payable debt without governmental assessment.

The Court also distinguished arguments based on United States v. Monsanto (mandatory criminal forfeiture language), characterizing the AFA scheme as materially different and, in any event, not automatically payable upon violation.

3) Denial of leave to amend

Relators sought to add a new FCA theory under 31 U.S.C. § 3729(a)(1)(D) (a “conversion”/short-delivery provision), citing United States v. Bengis. The Court affirmed denial based on undue delay and serial pleading: the conversion theory was available long before (given United States v. Bengis dates to 2011), and Miller v. United States ex rel. Miller did not newly create or alter § 3729(a)(1)(D). The panel relied on the principle that district courts need not entertain theories “seriatim.”

C. Impact

  • Narrowing FCA reach in natural-resource licensing disputes: The decision significantly limits attempts to characterize access to public wildlife resources as “government property” for FCA “claim” theories, especially where the alleged benefit is the taking of wild, free-roaming resources (fish/game) rather than receipt of government funds or transfer of government-owned goods.
  • Strengthening the “assessment” barrier for reverse FCA claims: The Court’s application of Miller v. United States ex rel. Miller to AFA penalties reinforces a general rule: regulatory-penalty exposure does not become an FCA “obligation” until the government has taken steps that make the duty to pay established (e.g., assessed/issued/ordered), limiting reverse-FCA bootstrapping of unassessed fines.
  • Practical channeling to other enforcement tools: Allegations of citizenship misrepresentations to secure fishery endorsements may still support administrative revocation, enforcement under the AFA, potential criminal or civil remedies outside the FCA, or maritime documentation actions—but not FCA “property” claims premised on the fish themselves.
  • Pleading strategy consequences: The affirmance of denial of leave to add a new FCA subsection late underscores the importance of pleading alternative FCA theories early, particularly in specialized regulatory contexts.

4. Complex Concepts Simplified

  • Qui tam / relator: A private plaintiff (the relator) sues on behalf of the United States under the FCA and may share in any recovery.
  • FCA “claim” for “money or property”: The FCA generally targets fraud that causes the government to pay out money or transfer government property (or approve such a transfer). If what’s obtained is not “property” the government owns (in the relevant legal sense), the FCA claim fails.
  • Wildlife as “ferae naturae”: A traditional property concept: wild animals are not owned by anyone until captured/possessed. Government regulation of wildlife does not equal government ownership.
  • Reverse false claim (“obligation” to pay): This FCA provision targets fraud that helps someone avoid paying what they already owe the government. The debt must be “established”—not merely a possible future fine that an agency might impose.
  • Self-executing vs. discretionary penalties: A self-executing penalty becomes due automatically upon the violation; a discretionary penalty depends on agency action (investigation, assessment, decision to impose).

5. Conclusion

United States Ex Rel. Chiles v. Cooke Inc. establishes (for the Second Circuit) two consequential FCA boundary rules in the fisheries-licensing context: (1) free-swimming wild fish are not “property” under the FCA, even if governments heavily regulate their taking; and (2) unassessed civil penalties under the AFA do not create an FCA “obligation” for reverse false claim liability because they are not immediate and self-executing. The decision channels enforcement of alleged fishery-endorsement fraud toward administrative and other statutory mechanisms, while reinforcing a disciplined, property- and obligation-centered reading of the FCA.