Seafarers Intern. Union of North America v. U.S. Coast Guard

• Decision Date: 12 April 1996
• Docket Number: 95-5017,Nos. 95-5016,s. 95-5016
• Citation: 81 F.3d 179
• Parties: SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA et al., Appellants/Cross-Appellees, v. UNITED STATES COAST GUARD et al., Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 179

81 F.3d 179

317 U.S.App.D.C. 84

SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA et al., Appellants/Cross-Appellees, v. UNITED STATES COAST GUARD et al., Appellees/Cross-Appellants.

Nos. 95-5016, 95-5017.

United States Court of Appeals,

District of Columbia Circuit.

Argued Nov. 7, 1995.

Decided April 12, 1996.

Appeals from the United States District Court for the District of Columbia (No. 93cv00787); Louis F. Oberdorfer, Judge.

David E. Frulla, Washington, DC, argued the cause for appellants/cross-appellees, with whom Stanley M. Brand was on the briefs.

Frank A. Rosenfeld, Washington, DC, United States Department of Justice, argued the cause for appellees/cross-appellants, with whom Frank W. Hunger, Assistant Attorney General, Eric H. Holder, Jr., United States Attorney, and William G. Kanter, Deputy Director, were on the briefs. Alfred Mollin, Senior Counsel, entered an appearance.

Before: EDWARDS, Chief Judge, HENDERSON and ROGERS, Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

Separate opinion concurring in part and dissenting in part filed by Circuit Judge HENDERSON.

HARRY T. EDWARDS, Chief Judge:

This case arises out of the Coast Guard's establishment of fees for maritime licensing, certification of registry, and merchant mariner documentation. In 1990, with the passage of section 10,401 of the Omnibus Budget Reconciliation Act of 1990 ("OBRA 1990"), Pub.L. No. 101-508, 104 Stat. 1388-397 (Nov. 5, 1990) (codified as amended at 46 U.S.C. § 2110(a) (Supp. IV 1992)), Congress authorized the Coast Guard to collect "user" fees, so long as any such fees were collected in accordance with the Independent Offices Appropriations Act ("IOAA"), 31 U.S.C. § 9701 (1988). ¹ A coalition of unions now challenges the fee schedule, arguing that the Coast Guard has no statutory authorization to impose the particular fees in question.

The Supreme Court has made it clear that, as a general matter, a person who seeks to obtain an occupational license may be charged a fee to reimburse the licensing agency for the cost of processing the license. See National Cable Television Ass'n v. United States, 415 U.S. 336, 340-41, 94 S.Ct. 1146, 1148-49, 39 L.Ed.2d 370 (1974) ("NCTA"). The only question we face, therefore, is whether the actual licensing scheme adopted by the Coast Guard is reasonably necessary to fulfill the substantive demands underlying the licensing process authorized by OBRA 1990 and related statutes. If so, then, under the IOAA, the agency may charge the applicant a fee to process the license. If not, a user fee is impermissible.

Under this test, we hold that the bulk of the fees being challenged by the unions are permissible under the IOAA, and we therefore affirm the District Court's finding to that effect. However, we reverse the trial judge's ruling that the Coast Guard cannot charge a first-time applicant a fee to perform a Federal Bureau of Investigation ("FBI") background check, because we find that the agency is statutorily required to determine whether an applicant has a disqualifying criminal record. Therefore, to the extent that the FBI check is limited to the criminal history of the applicant, the fee is permissible. Nevertheless, we remand on this question so that the District Court can determine whether the actual check performed by the FBI sweeps more broadly than is required by the underlying statute, thereby rendering part of the fee excessive.

I. BACKGROUND

A. The Statutory Scheme

The Coast Guard is authorized by statute to issue merchant mariner licenses, certificates of registry, or merchant mariner documentation (depending on the specific job classification) to qualified individuals seeking to work aboard a United States merchant marine vessel. See generally 46 U.S.C. Subtitle II, Part E (1988). These documents serve as occupational licenses, because an individual must possess one to work in the merchant marine.

The Coast Guard began charging fees for issuing the documents in question following the passage of OBRA 1990, which authorized the Coast Guard to establish user fees in accordance with the IOAA. Originally passed in 1951, the IOAA directs that "[t]he head of each agency ... may prescribe regulations establishing the charge for a service or thing of value provided by the agency." 31 U.S.C. § 9701(b) (1988). The only limitations on the fees are that they be "fair," and based on "(A) the costs to the Government; (B) the value of the service or thing to the recipient; (C) public policy or interest served; and (D) other relevant facts." Id.

B. The Fee Structure

On June 20, 1991, the Coast Guard issued a Notice of Proposed Rulemaking ("NPRM") to establish fees for the issuance of merchant mariner licenses, certificates of registry, and merchant mariner documents. 56 Fed.Reg. 28,448. The NPRM proposed a fee schedule based on the three phases of the licensing process: (1) an evaluation fee (covering the cost of processing and evaluating the application); (2) an examination fee (covering the cost of scheduling, proctoring, and grading examinations and then notifying examinees of the test results); and (3) an issuance fee (covering the cost of issuing original, duplicate, or replacement licenses, certificates, or documents). In addition, the Coast Guard proposed to charge all first-time applicants a $17 fee to cover the cost of an FBI criminal record check.

On March 19, 1993, the Coast Guard issued a final rule entitled "User Fees for Marine Licensing, Certification of Registry and Merchant Mariner Documentation." 58 Fed.Reg. 15,228 (codified in scattered sections of 46 C.F.R. (1993)). While revising some of the fees downward, the final rule retained the fee schedule essentially intact.

C. The District Court's Decision

On April 15, 1993, a coalition of United States maritime labor organizations and individual merchant seamen and boatmen filed this action challenging the final rule imposing the fees. Subsequently, both parties filed cross-motions for summary judgment. On November 23, 1994, the District Court denied the Government's motion for summary judgment, and granted the unions' motion for summary judgment in part and denied it in part. Seafarers Int'l Union v. United States Coast Guard, 871 F.Supp. 9 (D.D.C.1994).

The District Court rejected the unions' claim that the Coast Guard has no authority under the IOAA and OBRA 1990 to assess any fees for its licensing and documentation services. The unions had argued that the fees were impermissible under the IOAA because they primarily benefitted the public rather than the regulated individuals or entities. While acknowledging the "impressive array of historical materials" indicating that the purpose of merchant mariner licensing is to protect various public interests, the District Court nevertheless determined that the Coast Guard's "central contention that the license confers the benefit of professional employment is not irrational." Id. at 15-16. Therefore, the court ruled that the Coast Guard had established a private benefit sufficient to justify the fees.

The District Court did, however, grant the unions' motion for summary judgment with respect to the required FBI background check. The court found that, "[i]n contrast to the license itself, the FBI check does not confer a private benefit upon the individual applicant. The reason the agency conducts the FBI check is primarily maritime safety." Id. at 16-17. Accordingly, the court prohibited the Coast Guard from charging applicants for the background checks. ²

II. ANALYSIS

The IOAA itself provides little specific direction on how to assess the propriety of user fees. However, the Supreme Court long ago set forth the considerations that control agency determinations to assess fees for Government services:

Taxation is a legislative function, and Congress, which is the sole organ for levying taxes, may act arbitrarily and disregard benefits bestowed by the Government on a taxpayer and go solely on ability to pay, based on property or income. A fee, however, is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. The public agency performing those services normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society. It would be ... a sharp break with our traditions to conclude that Congress had bestowed on a federal agency the taxing power.... A "fee" connotes a "benefit" and the [IOAA] by its use of the standard "value to the recipient" carries that connotation.

NCTA, 415 U.S. at 340-41, 94 S.Ct. at 1149 (footnote omitted). As is obvious from the foregoing quotation, the Court in NCTA carefully distinguished between a permissible user fee and an unconstitutional tax. In so doing, the Court made it clear that a user fee will be justified under the IOAA if there is a sufficient nexus between the agency service for which the fee is charged and the individuals who are assessed.

This same analytical framework, focusing on the value of the service to the recipient, was adopted by the Court in a companion case decided the same day, Federal Power Commission v. New England Power Co., 415 U.S. 345, 94 S.Ct. 1151, 39 L.Ed.2d 383 (1974) ("NEPCO"). There the Court held that fees are valid so long as the agency levies "specific charges for specific services to specific individuals or companies." Id. at 349, 94 S.Ct. at 1154. Under this test, it does not matter whether the ultimate purpose of the regulatory scheme giving rise to the license requirement (and accompanying user fee) is to benefit the public. Indeed, the Supreme Court in NCTA rightly recognized that a regulatory scheme would be a "failure" if some benefits did not ultimately inure to the public. NCTA, 415 U.S. at 343, 94 S.Ct. at 1150.

Although the Court's rulings in NCTA and NEPCO broadly permit user fees in...