FISHERMEN‘S FINEST, INC., FISHERMEN‘S FINEST HOLDINGS, LLC, NORTH PACIFIC FISHING, INC., U.S. FISHING, LLC, AMERICA‘S FINEST FISHING, LLC v. UNITED STATES
2021-2326
United States Court of Appeals for the Federal Circuit
February 8, 2023
Before MOORE, Chief Judge, DYK and CHEN, Circuit Judges.
Appeal from the United States Court of Federal Claims in No. 1:20-cv-01061-MBH, Senior Judge Marian Blank Horn.
SVEND BRANDT-ERICHSEN, Nossaman LLP, Seattle, WA, argued for plaintiffs-appellants. Also represented by BRIAN FERRASCI-O‘MALLEY.
BORISLAV KUSHNIR, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by BRIAN M. BOYNTON, ELIZABETH MARIE HOSFORD, PATRICIA M. MCCARTHY.
This case involves commercial fishing within the United States’ Exclusive Economic Zone1 (EEZ). Fishermen‘s Finest, Inc.; Fishermen‘s Finest Holdings, LLC; North Pacific Fishing, Inc.; U.S. Fishing, LLC; and America‘s Finest Fishing, LLC (collectively, FFI) appeal a decision by the United States Court of Federal Claims (Claims Court) dismissing their Fifth Amendment takings claim for lack of a cognizable property interest in certain fishing endorsements, licenses, and permits, separate from or appurtenant to their fishing vessels. Because (i) our precedent establishes that fishing permits and licenses issued pursuant to the Magnuson-Stevens Fishery Conservation and Management Act (the Magnuson-Stevens Act) are revocable privileges, rather than compensable property interests, Conti v. United States, 291 F.3d 1334, 1341-42 (Fed. Cir. 2002); Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363, 1373-76 (Fed. Cir. 2004); (ii) subsequent amendments to the Magnuson-Stevens Act and the National Marine Fisheries Service‘s (Fisheries Service) regulations did not then create compensable property rights in fishing permits or licenses; and (iii) there is no inherent right in vessel ownership to fish within the EEZ, Am. Pelagic, 379 F.3d at 1382-83, we affirm.
BACKGROUND
A. Statutory And Regulatory Scheme
Congress enacted the Magnuson-Stevens Act in 1976 as part of “[a] national program for the conservation and management of the fishery resources of the United States.”
The Fisheries Service regulates fisheries in the EEZ. See N.C. Fisheries Ass‘n, Inc. v. Gutierrez, 550 F.3d 16, 17 (D.C. Cir. 2008). Pursuant to the Magnuson-Stevens Act, the Fisheries Service has promulgated regulations, having the force and effect of law, that establish various licensing and permitting requirements to govern fishing activities in the Gulf of Alaska (GOA) and the Bering Sea and Aleutian Islands (BSAI) management areas (collectively, Management Areas). See
In 2007, Congress amended the Magnuson-Stevens Act to expand on then-existing individual fishing quotas by establishing national criteria for quota-based fishing programs, known as limited access privilege programs, and authorizing the quota-based fishing permits and licenses at issue in FFI‘s Fifth Amendment takings claim. See S. REP. NO. 109-229, at 1 (2006); Magnuson-Stevens Fishery Conservation and Management Reauthorization Act of 2006, Pub. L. No. 109-479, sec. 303A, 120 Stat. 3575, 3586-93 (2007) (codified at
First, a Federal Fisheries Permit (FFP) is required for a vessel to fish in the Management Areas. See
Second, a License Limitation Program (LLP) license is also required for a vessel to harvest or process fish in the Management Areas. Id.
Third, the QS permits relevant here are associated with the Amendment 80 (A80) limited access privilege program. After Congress amended the amended Magnuson-Stevens Act, the Fisheries Service promulgated regulations to implement the A80 limited access privilege program, allocating fishing quotas for six species of non-pollock groundfish in the BSAI management area: Pacific ocean perch, Atka mackerel, flathead sole, Pacific cod, rock
The Fisheries Service approves certain vessels-designated A80 vessels-for participation in the A80 program, see id. at 52,671, and non-A80 vessels are prohibited from catching A80 species,
Fourth, a vessel must obtain a fishery endorsement to engage in commercial fishing activities.
B. Procedural Background
FFI is a collection of related Washington State companies. J.A. 73 ¶ 10. Until 2014, FFI owned two vessels-American No. 1 and U.S. Intrepid-with the necessary fishery endorsements, FFPs, LLP licenses, and A80 QS permits to operate in the Management Areas. See J.A. 73 ¶ 10; J.A. 73-74 ¶ 11; J.A. 78 ¶ 28; J.A. 81 ¶¶ 39-40. FFI‘s LLP licenses and A80 QS permits were issued pursuant to the Magnuson-Stevens Act.
In November 2014, FFI retained Dakota Creek Industries, Inc. (Dakota Creek) to construct a new fishing vessel-America‘s Finest. J.A. 80 ¶ 37. In early 2017, the Fisheries Service approved (1) FFI‘s purchase of an LLP license and a QS permit (originally associated with another fishing vessel known as Defender) from another fishing company. J.A. 81 ¶ 39. FFI also obtained approval to (1) designate America‘s Finest as a replacement vessel for American No. 1 and transfer the latter‘s LLP license and A80 QS permit to the former and (2) designate American No. 1 as a replacement vessel for Defender and transfer the latter‘s LLP license and A80 QS permit to the former. J.A. 81-82 ¶¶ 40-41; J.A. 73-74 ¶ 11. However, in March 2017, Dakota Creek informed FFI that foreign steel was used in the construction of America‘s Finest. J.A. 82 ¶ 42. Accordingly, the Coast Guard, which oversees vessel documentation, determined that America‘s Finest was noncompliant with
Dakota Creek then lobbied Congress for a waiver to the “built in the United States” requirement for America‘s Finest, J.A. 83 ¶ 44, and Congress subsequently passed the Frank LoBiondo Coast Guard Authorization Act of 2018, Pub. L. No. 115-282, 132 Stat. 4192 (Coast Guard Act). Section 835 thereof granted a waiver so that America‘s Finest could harvest and process fish in the Management Areas. See id. sec. 835(a)-(b). However, section 836 of the Coast Guard Act limited the amount of A80 groundfish and non-A80 fish that FFI‘s vessels could collectively harvest and process in the Management Areas. See id. sec. 836(a)(1)(A)-(B). These “sideboards,” which do not apply to harvesting outside of the GOA management area and expire in 2024, restrict FFI‘s three vessels (i.e., U.S. Intrepid, America‘s Finest, and American No. 1), any replacement vessels thereto, and any vessel assigned the Defender‘s LLP license, to the collective, historic harvesting and processing figures of those vessels from 2012 to 2017. See id. sec. 836(a)-(b). FFI interprets these sideboards as restricting its three vessels to the U.S. Intrepid and American No. 1‘s historical figures, depriving FFI of any increased capacity from acquiring the Defender‘s LLP license and QS permit and building America‘s Finest. See J.A. 93-94 ¶¶ 70-71.
FFI then filed a claim with the Claims Court, alleging that the Coast Guard Act‘s sideboards amounted to an unlawful, uncompensated taking that (1) deprived FFI of the full scope of its rights under its endorsements, licenses, and permits; and (2) devalued its vessels. J.A. 71-72 ¶¶ 3-5. The government moved to dismiss. Fishermen‘s Finest, Inc. v. United States, 155 Fed. Cl. 576, 591 (2021). Relying on our decisions in Conti and American Pelagic, the Claims Court dismissed FFI‘s complaint for failure to state a claim, concluding that: (i) the express language of the Magnuson-Stevens Act indicated “congressional intent not to confer any right, title, or interest, and to preserve the government‘s authority to revoke privileges enjoyed in” fishing licenses and permits issued pursuant to the Magnuson-Stevens Act, id. at 601-02; (ii) FFI‘s licenses and permits did not have the essential characteristics of compensable property-i.e., transferability and the right to exclude others, id.; and (iii) FFI “do[es] not have a cognizable property interest in the right to conduct commercial fishing activities in any part of the EEZ,” id. at 606-07.
FFI timely appealed. We have jurisdiction pursuant to
DISCUSSION
I
When reviewing a dismissal for failure to state a claim, we “must accept as true all the factual allegations in the complaint and we must indulge all reasonable inferences in favor of the non-movant.” Conti, 291 F.3d at 1338 (citation omitted). Whether the Claims Court properly dismissed a complaint for failure to state a claim is a question of law that we review independently and without deference. Id. For Fifth Amendment takings claims, “[w]e review de novo the existence of a compensable property interest.” Hardy v. United States, 965 F.3d 1338, 1344 (Fed. Cir. 2020).
II
The Fifth Amendment to the United States Constitution provides that private property “shall not be taken for public use without just compensation.”
As to the first prong, “[i]t is well settled that existing rules and understandings and background principles derived from an independent source, such as state, federal, or common law, define the dimensions of the requisite property rights for purposes of establishing a cognizable taking.” Id. at 857 (internal quotation marks omitted). However, where a “claimant fails to demonstrate the existence of a legally cognizable property interest, the court[‘]s task is at an end.” Am. Pelagic, 379 F.3d at 1372. Our precedent establishes that fishing permits and licenses issued pursuant to the Magnuson-Stevens Act are revocable privileges, rather than compensable property interests, see Conti, 291 F.3d at 1341-42, and there is no inherent, cognizable property interest in the use of vessels for fishing within the EEZ, see Am. Pelagic, 379 F.3d at 1382-83.
In Conti, a claimant alleged that the government limited his rights under a swordfish permit, issued pursuant to the Magnuson-Stevens Act, without compensation. Conti, 291 F.3d at 1339. We observed inter alia that the Magnuson-Stevens Act expressly states that any limited access authorization system “shall not create, or be construed to create, any right, title, or interest in or to any fish,”
Likewise in American Pelagic, we rejected an argument that the “government could not refuse to issue or reissue, revoke, modify, or suspend” fishing privileges issued pursuant to the Magnuson-Stevens Act absent the commission of “specified ‘offense[s]’ or for failure to pay a penalty.” See Am. Pelagic, 379 F.3d at 1373-74. The claimant alleged that Congress “took” its right to use its vessel for fishing by canceling its fishery permits and authorization letter. Id. at 1374 n.15. We explained, however, that the Fisheries Service‘s regulations “preserved the government‘s right to deny or sanction the permits and authorization letter issued” by specifically stating that nothing precluded “sanction or denial of a permit for reasons not relating to enforcement.” Id. at 1374 (quoting
III
Attempting to overcome our precedent in Conti and American Pelagic, FFI argues those cases were decided before Congress amended the Magnuson-Stevens Act in 2007, which, in FFI‘s view, altered the nature of fishing endorsements, licenses, and permits such that they now bear the traditional hallmarks of compensable
Even though Conti and American Pelagic were decided before the Magnuson-Stevens Act was amended, neither the amended Magnuson-Stevens Act nor the Fisheries Service‘s subsequent regulations governing limited access privilege programs (e.g., the A80 program) made FFI‘s fishing licenses and permits compensable property. The amended Magnuson-Stevens Act continues to expressly state that “[l]imited access privilege, quota share, or other limited access system authorization . . . shall not create, or be construed to create, any right, title, or interest in or to any fish before the fish is harvested by the holder.”
Moreover, the Magnuson-Stevens Act‘s statutory language-both before and after amendment-informs the public‘s expectations and forms the “existing rule or background principle of federal law that inhered in [FFI]‘s title to [its] vessel[s].” See Am. Pelagic, 379 F.3d at 1379 (cleaned up) (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1029-30 (1992)). Indeed, FFI concedes that compensable property rights, if any, must be established by the Magnuson-Stevens Act. See Oral Arg. at 9:28-10:02. As with the statutory language of the Magnuson-Stevens Act that we analyzed in Conti and American Pelagic, there is nothing in the plain language of the amended Magnuson-Stevens Act that creates a compensable property right in fishing licenses or permits. On its face,
We reject FFI‘s contention that, despite the Magnuson-Stevens Act‘s clear expression that there are no compensable property rights in fishing permits and licenses, its LLP licenses and A80 QS permits are compensable because, under the amended Magnuson-Stevens Act, they are transferable, exclusive, and irrevocable. See Appellants’ Br. 20-34 (citing
FFI‘s contention that
We are also unpersuaded by FFI‘s argument that subjecting its fishing licenses and permits to taxation or liens by the Internal Revenue Service (IRS) or liens under maritime law overrides Congress‘s express intent that such licenses and permits are non-compensable property. See Appellants’ Br. 39-41. The IRS taxes both non-compensable, government-issued privileges and compensable property. See Internal Revenue Serv. Notices of Levy on Undelivered Com. Dep‘t Fishing Quota Permits, 19 U.S. O.L.C. 23, 1995 WL 944019, at *4 (1995) (“Despite the recognition that licenses and permits are considered[] privileges and not rights . . . courts nonetheless treat them as property subject to levy. . . .” (emphases added)). In other words, taxation does not transform non-compensable privileges-e.g., fishing endorsements, LLP licenses, and QS permits-into compensable property, contrary to congressional intent. FFI‘s reliance on maritime law, specifically, Gowen, Inc. v. F/V Quality One, 244 F.3d 64 (1st Cir. 2001), is also unavailing. In Gowen, the First Circuit held that federal fishing permits under the Magnuson-Stevens Act are “appurtenances” of a vessel and subject to maritime liens due to the value such permits contribute to the vessel. See id. at 67. Gowen, however, was silent as to whether the permits are themselves compensable property. Regardless, value alone does not transform a revocable, non-compensable privilege into a compensable property interest. See Fuller, 409 U.S. at 493 (holding that “the value added to fee lands by a revocable permit authorizing the use of neighboring lands that the Government owns” is not compensable under the Fifth Amendment); see also Conti, 291 F.3d at 1340-41 (holding that revocable fishing permits under the Magnuson-Stevens Act are not compensable because to hold otherwise would compensate “a claimant for ‘the value of a right that the Government . . . can grant or withhold as it chooses‘” (alteration in original) (quoting Fuller, 409 U.S. at 493)).
In sum, the Magnuson-Stevens Act, as amended, forecloses FFI‘s claim, and we hold that FFI‘s LLP licenses and A80 QS permits were subject to revocation, modification,
IV
FFI also argues that the Coast Guard Act‘s sideboards deprived it of a property interest in using its vessels to harvest and process fish. Appellants’ Br. 45-46. We disagree. FFI does not have a compensable property interest in using its vessels to harvest and process fish in the Management Areas.
In American Pelagic, we rejected a claimant‘s similar assertion that it had a property right in its fishing permits and authorizations “appurtenant to the use and operation of [its] fishing vessel” to harvest or process fish in the EEZ. Am. Pelagic, 379 F.3d at 1372-73. Because Congress, via the Magnuson-Stevens Act, “assumed ‘sovereign rights and exclusive fishery management authority over all fish’ in the EEZ,” which “indisputably encompasses all rights to fish in the EEZ,” the ability to harvest and process fish in the United States’ sovereign waters is not a right inherent to vessel ownership, even of permitted, licensed vessels. Id. at 1378-79, 1381. The right to fish in the EEZ is not “one of the sticks in the bundle of property rights that [are] acquired with title.” Id. at 1382-83.
Here, the Coast Guard and the Fisheries Service issued and approved fishing endorsements, LLP licenses, and A80 QS permits that allowed FFI‘s vessels to harvest and process fish from the Management Areas. Without these government-issued privileges, FFI does not have an inherent right to use its vessels to harvest or process fish in the Management Areas, as FFI itself recognizes. See Appellants’ Reply Br. 10 (“[I]t is the combination of licenses, permits and endorsements, including Amendment 80 QS and Amendment 80 LLPs, which allows FFI to fish in [the Management Areas].” (second emphasis added)); Appellants’ Br. 7 (contending that “new entrants must acquire an existing vessel, license, and endorsements” (emphasis added)). As such, FFI does not have a compensable interest as to the use of its vessels to harvest and process fish in the Management Areas. See Am. Pelagic, 379 F.3d at 1381 (“Because the right to use the vessel to fish in the EEZ was not inherent in its ownership of the [vessel], [claimant] did not suffer the loss of a property interest for purposes of the Takings Clause when its [fishing] permits were revoked.“); see also Mitchell Arms, Inc. v. United States, 7 F.3d 212, 217 (Fed. Cir. 1993) (concluding that the right to sell assault weapons in domestic commerce was merely a “collateral interest,” incidental to gun ownership, that was not protected by the Fifth Amendment and not “a right inherent in [claimant]‘s ownership of [property]“).
Although the Coast Guard Act limits FFI‘s ability to use its vessels, FFI may nonetheless continue to operate its vessels in the Management Areas. Any expectation that FFI might have had in using its vessels to harvest or process fish arise from government-issued permits, licenses, and endorsements that were always subject to revocation, modification, and limitation. See Am. Pelagic, 379 F.3d at 1382-83.
CONCLUSION
We have considered FFI‘s remaining arguments and do not find them persuasive. For the foregoing reasons, the Claims Court did not err in dismissing FFI‘s takings claim for lack of a cognizable property
AFFIRMED