SAN FRANCISCO (CN) – It is legal for California to charge out-of-state residents more than in-state residents for commercial fishing licenses, the Ninth Circuit ruled Wednesday.
Overruling a federal judge and its panel, the en banc court ruled that the state is entitled to summary judgment because the differing fees survived challenges to the Privileges and Immunities Clause and Equal Protection Clause of the U.S. Constitution.
A class action filed by Kevin Marilley and other non-resident fishermen challenged California’s charging them a nonresident rate for commercial fishing licenses, vessel registrations, herring gill net permits and Dungeness crab vessel permits. This practice, which began in 1986 with increased fees for nonresidents for herring gill net permits, was a response to the state’s Department of Fish and Wildlife historically operating at a heavy loss. The fees Marilley and other class members had to pay were two to three times more than California fishermen.
In 2013, a federal judge agreed that the different fees were unconstitutional and granted summary judgment to the fishermen. A Ninth Circuit panel voted 2-1 to affirm that ruling in 2015, finding the fees were tied to legitimate state objectives like conservation and enforcement but that they unfairly burdened nonresidents’ rights.
The en banc court disagreed.
Circuit Judge William A. Fletcher, who authored the majority opinion, wrote that the U.S. Supreme Court has held “that a state’s expenditures may justify discrimination against nonresidents that would otherwise be impermissible under the Privileges and Immunities Clause.”
When a state provides a natural resource as a benefit to both residents and nonresidents and pays for its upkeep from a source to which nonresidents do not contribute, the state is within its discretion to charge the nonresidents if it treats both groups with “substantial equality.” What constitute reasonable amounts in charges, though, do not necessarily have to “be determined with mathematical precision,” Fletcher wrote.
“California spent approximately $20 million managing its commercial fishing industry in [fiscal year] 2010–11. Not including the fee differentials paid by nonresident fishers, California received a total amount of approximately $5,365,000 in fees from the commercial fishing industry,” Fletcher wrote. “The shortfall [of $14,635,000] was a subsidy, or benefit, provided by California to its commercial fishing industry, paid by California taxpayers. All commercial fishers in California – residents and nonresidents alike – benefited from this subsidy.”
Because nonresident fishermen represented about 12 percent of the fishermen in California for that year, they received a disproportionately high benefit from the subsidy. And since the fees are not exclusionary – percentages of out-of-state applications for licenses and permits have gone up since 1986 – they are allowable under the Privileges and Immunities Clause, the majority held.
As for the Equal Protection Clause, the state has a “substantial reason” for the fees and they do not discriminate on the basis of a protected class, the majority said.
But Circuit Judge Milan D. Smith Jr. authored a dissent that five other judges joined.
“The majority assumes away the major defect in its analysis: the fact that nonresident fishermen pay multiple California taxes too, yet nonetheless commence each fishing season thousands of dollars in the hole by virtue of California’s discriminatory differentials.”
Fletcher responded that the named plaintiffs paid minimal income tax in California and there was no evidence of what unnamed plaintiffs pay.
To which Smith wrote: “Apparently unable to respond more adequately to our argument, the majority steps purposefully to the plate, swings as hard as it can, and whiffs, by fixating on Rule 23’s class certification standards. Emphatically, those standards do not require that class members be carbon copies of each other. They therefore cannot excuse the majority’s failure to grapple with the hole in its argument.”
Smith also argued that the majority’s holding could have further consequences.
“If left to stand on this showing, we have no reason to think interstate-fee differentials will not proliferate. Indeed, California could, for example, charge nonresident truckers and commercial airline pilots fees for earning a living off state-subsidized highways and airports.
“This country is more than a league of confederated states – it is a nation. Yet the enactment of discriminatory fee differentials promotes our economic balkanization.”
Circuit Judge Stephen Reinhardt added a short dissent as well, concurring with Smith and arguing that the state did not demonstrate that nonresident fishermen represent an extra enforcement burden.
The fishermen’s attorney, Stuart Gross from Gross & Klein in San Francisco, said his clients intend to appeal to the Supreme Court.
“The decision by the en banc panel is in conflict with decisions by other courts, including the Fourth Circuit and the Alaska Supreme Court,” he said. “The manner in which the majority framed its decision opens up a broad path for parochial discrimination.”
Gross added that he agreed with Smith’s dissent.
“The Privileges and Immunities Clause protects an individual’s liberty to pursue a living in another state,” Gross said. “That refusal to apply the clause in a way that protected individual rights is another element of what we believe is the legally erroneous way the majority decided the case.”
Representatives from the California Department of Fish and Wildlife did not return requests for comment on Thursday.