Pac. Choice Seafood Co. v. Ross

• Decision Date: 25 September 2020
• Docket Number: No. 18-15455,18-15455
• Citation: 976 F.3d 932
• Parties: PACIFIC CHOICE SEAFOOD COMPANY; Sea Princess, LLC ; Pacific Fishing, LLC, Plaintiffs-Appellants, v. Wilbur ROSS, U.S. Secretary of Commerce; National Marine Fisheries Service, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

976 F.3d 932

PACIFIC CHOICE SEAFOOD COMPANY; Sea Princess, LLC ; Pacific Fishing, LLC, Plaintiffs-Appellants,

v.Wilbur ROSS, U.S. Secretary of Commerce; National Marine Fisheries Service, Defendants-Appellees.

No. 18-15455

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 4, 2019 San Francisco, California

Filed September 25, 2020

Ryan P. Steen (argued) and Jason T. Morgan, Stoel Rives LLP, Seattle, Washington, for Plaintiffs-Appellants.

David Gunter (argued) and Bridget Kennedy McNeil, Attorneys; Eric Grant, Deputy Assistant Attorney General; Jeffrey Bossert Clark, Assistant Attorney General; Environment and Natural Resources Division, United States Department of Justice; Maggie B. Smith, Office of the General Counsel, National Oceanic and Atmospheric Administration, Washington, D.C.; for Defendants-Appellees.

Before: Sidney R. Thomas, Chief Judge, and William A. Fletcher and Eric D. Miller, Circuit Judges.

MILLER, Circuit Judge:

In 2010, the National Marine Fisheries Service implemented a quota system for the Pacific non-whiting groundfish fishery, one of several stocks of fish that the Service administers in the Pacific Ocean. Acting under the Magnuson-Stevens Fishery Conservation and Management Act of 1976, 16 U.S.C. §§ 1801 – 1891d (the Magnuson-Stevens Act or the Act), the Service imposed a quota limiting the total allowable catch, divided it among the participants in the fishery, and prohibited any one entity from "own[ing] or control[ling]" more than 2.7 percent of the outstanding quota share. 50 C.F.R. § 660.140(d)(4)(i). The Service defined "control" to include "the ability through any means whatsoever to control or have a controlling influence over" an entity with quota share. Id. § 660.140(d)(4)(iii)(H).

In 2015, the Service determined that Pacific Choice Seafood Company and related entities (collectively, Pacific Choice) together owned or controlled at least 3.8 percent of the quota share. After the Service ordered Pacific Choice to divest its excess share, Pacific Choice brought this action, alleging that the Service's 2.7 percent maximum share and its "control" rule exceeded its authority under the Magnuson-Stevens Act and violated the Administrative Procedure Act. The district court granted summary judgment to the Service. We affirm.

I

Congress enacted the Magnuson-Stevens Act to prevent overfishing and to ensure that "fisheries [are] conserved and maintained so as to provide optimum yields on a continuing basis." 16 U.S.C. § 1801(a)(5). The Act establishes eight regional fishery management councils, each of which is charged with developing a "fishery management plan" for the fisheries in its region. Id . § 1852(a)(1), (h)(1). A management plan must prescribe measures "necessary and appropriate for the conservation and management of the fishery." Id . § 1853(a)(1), (b)(3). Once a council develops a plan, the Secretary of Commerce must evaluate it and either approve or reject it. Id . § 1854(b)(1). The Secretary has delegated that responsibility to the Service. See Pacific Dawn LLC v. Pritzker , 831 F.3d 1166, 1170 (9th Cir. 2016).

In 1990, the regional fishery councils began to regulate some fisheries by adopting quota programs under which the councils divided up the total allowable catch and gave participants in the fishery the right to harvest a specified quantity of fish. See Pacific Coast Fed'n of Fishermen's Ass'ns v. Blank , 693 F.3d 1084, 1087 (9th Cir. 2012). Such programs proved controversial, and in 1996, Congress imposed a temporary moratorium on new quota programs. Sustainable Fisheries Act, Pub. L. No. 104-297, § 108(e), 110 Stat. 3559, 3576–77 (1996). In 2007, after the National Academy of Sciences concluded that quota programs "can be effective solutions to a host of fishery-related problems, including economic inefficiency, overcapitalization ... and overfishing," Congress reauthorized new quota programs, which it called "limited access privilege programs." Pacific Coast , 693 F.3d at 1087–88 ; see Magnuson-Stevens Fishery Conservation and Management Reauthorization Act of 2006, Pub. L. No. 109-479, § 106, 120 Stat. 3575, 3586 (2007).

Congress set out several requirements for limited access privilege programs. Most relevant here, a council must ensure that no one entity acquires "an excessive share" of the total privileges. 16 U.S.C. § 1853a(c)(5)(D). To that end, a council must establish "a maximum share, expressed as a percentage of the total limited access privileges, that a limited access privilege holder is permitted to hold, acquire, or use," along with "any other limitations or measures necessary to prevent an inequitable concentration of limited access privileges." Id.

This case involves the limited access privilege program for the Pacific non-whiting groundfish fishery. As their name suggests, groundfish live near the bottom of the ocean. See West Coast Groundfish , National Oceanic and Atmospheric Administration, https://www.fisheries.noaa.gov/ species/west-coast-groundfish. The fishery consists of more than 90 species of groundfish in the Pacific Ocean off the coast of California, Oregon, and Washington, including lingcod, sablefish, sole, and rockfish, but not including the Pacific whiting, or hake, which is regulated separately. See 50 C.F.R. § 660.140, table 1 to paragraph (d)(1)(ii)(D). The relevant regional council for the fishery is the Pacific Fishery Management Council, which has representatives from California, Oregon, Washington, and Idaho, as well as from Indian tribes with federally recognized fishing rights in those States. 16 U.S.C. § 1852(a)(1)(F).

Even before Congress reauthorized limited access privilege programs in 2007, the Council had started to implement a rationalization program for the Pacific fisheries it manages. In this context, "rationalization" means avoiding overcapacity—the presence of more fishing vessels than necessary to catch a sustainable number of fish—by, among other things, reducing the number of vessels operating in the Council's fisheries. In addition to reducing overfishing, the Council aimed to "increase net economic benefits" from its fisheries and to create "individual economic stability" for vessels that operated within them. Pacific Coast , 693 F.3d at 1089.

The Council's years-long deliberative process began with the Trawl Individual Quota Committee, a committee of industry representatives formed to analyze possible quota limits on both an aggregate and per-species level. In 2003, relying on data from aggregate average catches from 1994 to 2003, the Quota Committee proposed several possible limits on the aggregate quota share that could be held by any one entity, ranging from 1.5 to 5 percent of the total allowable catch.

After the Quota Committee completed its analysis, the Groundfish Allocation Committee reviewed the recommendations and "added three options for the Council's consideration," ranging from the average maximum share for the 1994–2003 period to 1.5 times those limits. The Allocation Committee's report paid particular attention to the "maximum fleet consolidation level" that each option would create—in other words, how much market concentration would result. Part of the Allocation Committee's analysis involved calculating a Herfindahl-Hirschman index, or "HHI," a measure of market concentration commonly employed in the antitrust context. See Saint Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke's Health Sys., Ltd. , 778 F.3d 775, 786 (9th Cir. 2015). That analysis suggested that the Council could set aggregate catch limits up to about 18 percent without creating anticompetitive effects in the fishery.

But after significant deliberation among the Quota Committee, the Allocation Committee, and the Council, the Allocation Committee failed to agree on a single recommendation. After proposing two new options, the Allocation Committee asked yet another committee—the Groundfish Management Team—to evaluate all of the options that had been proposed.

The Management Team began by noting that while "[a]ntitrust concerns define the upper extreme of where limits can be set," fishing quotas are also "a tool for balancing the Council's social objectives against the undesired effects of the ... drive toward increased economic efficiency." In contrast to the Quota Committee and the Allocation Committee, which had focused on aggregate revenues, the Management Team focused on per-vessel profitability. It analyzed historical data on a per-vessel basis to determine the current profitability of the fishery. It then projected profitability based on varying fleet sizes, and it cautioned that "concerns about control" resulting from higher quota share maximums "go beyond revenues" and involve "other issues such as bargaining, market power, and types of relationships that may influence the operation of the fishery." In light of its conclusion that a fleet size of 40 to 50 vessels would provide optimal profitability while minimizing "control and consolidation of quota ownership," the Management Team presented possible maximum quota shares ranging from approximately 1.3 to 3.8 percent but ultimately recommended a limit of 2.3 to 2.7 percent depending on the desired amount of consolidation.

The Management Team's per-vessel approach mostly won out. In March 2009, the Groundfish Advisory Subpanel evaluated proposals from the Management Team and the Allocation Committee and issued a brief report. The Advisory Subpanel acknowledged the "trade-off" recognized by the Management Team "between preventing excessive market control ... and the lower revenues and efficiency associated with control limits that are set too low." It recommended a 2.7 percent maximum aggregate quota share, which it noted was the "mid range of the data" in the Management Team's report. The Advisory Subpanel did not completely adopt the Management Team's recommendations; some of its proposed limits for individual species instead matched the Allocation Committee...