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Pacific Choice Seafood Co. v. Ross

United States District Court, N.D. California

February 21, 2018

PACIFIC CHOICE SEAFOOD COMPANY, et al., Plaintiffs,
v.
WILBUR ROSS, [1] et al., Defendants.

          ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT RE: DKT. NOS. 70, 78

          HAYWOOD S. GILLIAM, JR. UNITED STATES DISTRICT JUDGE.

         Pending before the Court are Plaintiffs' and Defendants' cross motions for summary judgment. Dkt. Nos. 70, 78. In this action, Plaintiffs Pacific Choice Seafood Company, Sea Princess, LLC, and Pacific Fishing, LLC challenge certain provisions of a federal fisheries management program that establishes an individual fishing quota program (the “IFQ Program”). For the reasons detailed below, the Court DENIES Plaintiffs' motion and GRANTS Defendants' motion for summary judgment.

         I. BACKGROUND

         This case concerns the manner in which the Secretary of Commerce and the National Marine Fisheries Service (“NMFS”) regulate the fishing of Pacific non-whiting fish species off the coasts of Washington, Oregon, and California.

         A. Statutory Background

         Congress enacted the Magnuson-Stevens Fishery Conservation Act (“Magnuson Act” or the “Act”) to “conserve and manage the fishery resources found off the coasts of the United States” and “to promote domestic commercial and recreational fishing under sound conservation and management principles.” 16 U.S.C. § 1801(b)(1), (3). The Act established eight regional fishery management councils, tasked with developing fishery management plans (“FMP”) and any necessary amendments and implementing regulations to “achieve and maintain, on a continuing basis, the optimum yield from each fishery.” 16 U.S.C. §§ 1801(b)(4)-(5), 1852(a)(1)(F), (h)(1), 1853(c). NMFS, acting on behalf of the Secretary, reviews these FMPs to ensure compliance with national standards for fishery conservation and management, the Magnuson Act, and any other applicable law.[2] See Id. §§ 1851(a), 1854.

         As part of a region's FMP, the councils may limit access to the fishery through limited access privilege programs (“LAPPs”) such as quotas. See 16 U.S.C. §§ 1802(26), 1853a. In creating such a program, councils must take into account several factors: participation in the fishery; historical fishing practices; economics; capability of vessels to engage in other fisheries; cultural and social framework and affected fishing communities; fair and equitable distribution of access privileges; and other relevant considerations. Id. §§ 1853(b)(6), 1853a(c). The councils must also ensure that no privilege holders “acquire an excessive share” of the total limited access privileges. See Id. § 1853a(c)(5)(D). Moreover, any privilege created under a LAPP “may be revoked, limited, or modified at any time.” See Id. § 1853a(b)(2).

         B. Pacific Groundfish Fishery

         At issue in this case are amendments to the Pacific Coast Groundfish Fishery Management Plan, the FMP for the Pacific Groundfish Fishery that covers the United States' territorial waters off the coast of Washington, Oregon, and California (the “Fishery”). Cf. 42 Fed. Reg. 12, 937-98 (Mar. 7, 1977). The Fishery is overseen by the Pacific Fishery Management Council (the “Council”). See 16 U.S.C. § 1852(a)(1)(F). Every two years, the Council establishes catch limits, which “represent an annual quantity of fish that the groundfish fishery as a whole may catch.” See Pac. Coast Fed'n of Fishermen's Ass'ns v. Blank, 693 F.3d 1084, 1089 (9th Cir. 2012). Prior to the amendments at issue in this case, the Council regulated the Fishery's catch limits through trip, gear, and season restrictions. See id.; see also 75 Fed. Reg. 32, 994, 32, 995-96 (June 10, 2010). Beginning in 2003, however, the Council began developing a new LAPP to manage the Fishery instead. Pac. Coast, 693 F.3d at 1089.

         C. Challenged Amendments

         Amendments 20 and 21 to the Fishery's FMP created a new LAPP - the IFQ Program - through which participants receive permits to harvest a specific portion or quota share (“QS”) of the Fishery's total allowable catch. The Council presented the amendments to NMFS on May 7, 2010. See Dkt. No. 72-4 (letter from Council to NMFS). NMFS approved the amendments in August 2010, and issued two sets of regulations codifying the amendments. See 75 Fed. Reg. 60, 868 (Oct. 1, 2010); 75 Fed. Reg. 78, 344 (Dec. 15, 2010). The IFQ Program became effective on January 1, 2011, and established the following provisions relevant to this action: (1) a 2.7% aggregate limit on the amount of total QS of all non-whiting species fished in the Pacific Fishery that a person or entity may own or control, see 50 C.F.R. §§ 660.11, 660.140(d)(4)(i)(C); (2) a regulation that defines “control” as, inter alia, “the ability through any means whatsoever to control or have a controlling influence” over QS, 50 C.F.R. § 660.11; (3) a divestiture rule that required any participant whose ownership or control of QS exceeded the 2.7% limit to divest its excess shares by November 30, 2015, 50 C.F.R. § 660.140(d)(4)(v); and (4) a revocation provision providing that NMFS would automatically revoke any excess QS not divested by the November 30, 2015, deadline, 50 C.F.R. § 660.140(d)(4)(v).

         On November 9, 2015, NMFS issued a final rule detailing the specific process for revocation of QS, added an option for the abandonment of QS, established that excess QS would be proportionally revoked across fish species and permits, and reaffirmed that revoked QS would be proportionally distributed among the Pacific Fishery participants (the “2015 Rule”). See 80 Fed. Reg. 69, 138 (Nov. 9, 2015).

         D. Plaintiffs' Quota Share

         Pacific Fishing is a limited liability company (“LLC”) that owns, inter alia, six other LLCs, including Plaintiff Sea Princess, which in turn own vessels that participate in the Fishery. See Dkt. No. 71 ¶ 2. Plaintiff Pacific Choice Seafood Company operates a seafood processing facility year-round in Eureka, California. See Dkt. No. 70 at 8. According to Plaintiffs, more than half of the groundfish it receives comes from four fishing vessels, all owned by LLCs that are, in turn, owned by Plaintiff Pacific Fishing. See id.

         On July 28, 2015, Plaintiff Pacific Fishing received a letter from NMFS informing the company that it owned QS in excess of the aggregate limit and would have to divest by November 30, 2015, or NMFS would revoke the excess QS. Dkt. No. 71, Ex. A. Pacific Fishing divested its shares by the November 30 deadline. See Id. ¶ 6.

         II. LEGAL STANDARD

         The Court's review in this action is governed by the Administrative Procedure Act (“APA”). Vt. Yankee Nuclear Power Corp. v. Natural Res. Def. Council, Inc., 433 U.S. 519, 558 (1978); 16 U.S.C. § 1855(f)(1); 5 U.S.C. § 706(2)(A)-(D). The Court must set aside regulations if they are “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law . . . .” 5 U.S.C. § 706(2)(A). Summary judgment is an appropriate procedural mechanism “for deciding the legal question of whether the agency could reasonably have found the facts as it did.” Occidental Eng'g Co. v. INS, 753 F.2d 766, 770 (9th Cir. 1985). Under the arbitrary and capricious standard, the Court must “determine whether the Secretary has considered the relevant factors and articulated a rational connection between the facts found and the choices made.” Midwater Trawlers Coop v. Dep't of Comm., 282 F.3d 710, 716 (9th Cir. 2002). This standard is deferential, presuming the agency action to be valid and affirming if there is a reasonable basis for the decision. Ranchers Cattlemen Action Fund v. U.S. Dep't of Agric., 499 F.3d 1108, 1115 (9th Cir. 2007). The Court reviews the administrative record as a whole, and decides whether the action is acceptable. See Citizens to Pres. Overton Park v. Volpe, 401 U.S. 402, 420 (1971); see also Ranchers Cattlemen Action Fund, 499 F.3d at 1115.

         III. ANALYSIS

         Plaintiffs challenge the IFQ Program, contending that NMFS acted ultra vires in defining the scope of ownership and control over QS and set an arbitrary and capricious aggregate limit on QS. Plaintiffs allege that as a result of these illegal rules, they had to divest valuable QS. The Court first addresses the ownership and control limitations and then turns to the aggregate limit.[3]

         A. Ownership and Control

         The IFQ Program limits how much QS a person may own or control, either individually or collectively. See 50 C.F.R. § 650.140(d)(4). Under the program, “[n]o person may own or control, or have a controlling influence over, by any means whatsoever an amount of QS . . . that exceeds [the aggregate limit].” Id. § 660.140(d)(4)(i)(A). “[O]wnership” of QS includes the QS owned by a person as well as the portion of QS “owned by an entity in which that person has an economic or financial interest, where the person's share of interest in that entity will determine the portion” it deems “owned” by the person. Id. § 660.140(d)(4)(ii). “Control” includes “the ability through any means whatsoever to control or have a controlling influence over [an] entity to which QS . . . is registered.” Id. § 660.140(d)(4)(iii)(H). The IFQ Program based its initial allocation of QS on prior fishing history before the implementation of the Program. See Id. § 660.140(d)(8).

         Plaintiffs challenge the definitions of “ownership” and “control” as overly expansive and charge that as a consequence, “permit holders are left with an extraordinarily low Aggregate Limit and no certainty about how to conduct business in a way that does not run afoul of the Ownership and Control Rules.” Dkt. No. 70 at 10.

         i. ...


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