[00:00:00] Speaker 02:
Number 21-2326, Fisherman Finest, Inc.

[00:00:04] Speaker 02:
versus United States.

[00:00:05] Speaker 02:
OK, Mr. Brent Erickson.

[00:00:08] Speaker 01:
May it please the court, Sven Brent Erickson, for Fisherman's Finest.

[00:00:12] Speaker 01:
This case centers on the limited access permits assigned to three vessels that were targeted by Section 836 of the Coast Guard Authorization Act of 2018.

[00:00:25] Speaker 01:
Contrary to the trial court's ruling, fisherman's finest has a cognizable property interest in those permits that are intangible property appurtenant to the three fishing vessels.

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Now, the federal government has recognized that limited access permits are property when imposing liens to collect on a tax debt.

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By statute, a tax lien can only be imposed on a property interest.

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The IRS found that limited entry permits and quotas are property because they are transferable, and there is a market for them.

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Maritime liens likewise recognizes that licenses are a significant part of the value of a vessel.

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When liens are imposed under maritime law, they are imposed not just on the vessel, but also on the pertinent licenses, because that is a substantial portion of the value of the vessel.

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The Coast Guard Act itself recognizes that the licenses are pertinent to the fishing vessels.

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It imposes limits on the three vessels and on any replacement vessels.

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Under the Magnuson-Stevens Act, vessels are replaced by transferring the licenses.

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And in fact, one of the restrictions in Section E36 is on one of the permits on the LLP for the defender

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and to any vessel assigned to it.

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So the restrictions imposed by the Coast Guard Act are tied to the licenses and follow the licenses.

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I imagine that was true of the licenses in Conti and American Ophthalagic too.

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The question is not whether in the tax context this constitutes property or the maritime lien context this constitutes property, but for purposes of a taking

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And here, when these licenses were granted, it was provided that they were revocable.

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And in American philagic, we noted the significance of that.

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In the peanut case, the same thing.

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Why is not the fact that these licenses are revocable?

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deprive them of characteristics of property in the takings context.

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So there are fundamental differences between the current state of affairs with limited access permits and the situation that existed when Conte and American Pelagic were decided.

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Both of those cases preceded 2007 when the Magnuson-Stevens Act was amended to create, to authorize the creation of market-based systems.

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And Amendment 80, which is the

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The program under which these permits and licenses were issued is a product of that process in which the United States drew a circle around a resource in order to conserve the resource and to promote a healthy fishery and excluded anyone who's not in that circle from that fishery.

[00:03:39] Speaker 01:
Under the Magnuson-Stevens Act,

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the licenses are not freely revocable on an individual basis.

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So the license that's issued to an individual company, the individual licenses and permits, limited access permits, are not freely revocable.

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Individual permits can be modified.

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Suppose we were to say the contrary, and that they are freely revocable.

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Then they're not property, right?

[00:04:06] Speaker 01:
Well, but the statute limits the authority.

[00:04:09] Speaker 02:
No, no, you're not accepting my hypothetical.

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If they're freely revocable, they're not property, right?

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I would say it depends on the circumstance under which they're revocable.

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There are two circumstances contemplated by that.

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My question was, if they're freely revocable, if there are no restrictions on revocation, they're not property.

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That is correct, which is the situation that existed in Conte and American Pledge.

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But there are restrictions on revocation of individual permits under the Magnuson-Stevens Act.

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Individual permits can be modified or revoked only upon noncompliance or prohibited acts after notice and an opportunity for hearing.

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The provision.

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Well, in American Pelagic, the language was pretty similar to the language here.

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And yet, we found that they were freely revocable, right?

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The difference in American Pelagic was that the provision in question had

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a reservation of rights, an open-ended reservation of rights that identified grounds for revision, but that said that the government could, for other reasons, without limitation, also revoke or modify the permits.

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Here.

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You know, it said nothing in this statute prevents that.

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And that was construed to make them pretty revocable.

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And the same kind of language exists here.

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Now here, the general provision of the Magnuson-Stevens Act says that these permits and licenses can be modified and revoked in accordance with the chapter.

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And it is specific.

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You have to look within the chapter for the authority.

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That's not the only language.

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It's the relevant language that's in there.

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You think so.

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But there's other language that says nothing in the statute will prevent it from being revoked on other grounds, right?

[00:06:08] Speaker 01:
No, there is not.

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There's not?

[00:06:10] Speaker 01:
No.

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There is language that says that if a permit is revoked, you don't have a property interest.

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And our reading of it is that that is a reference to the prior paragraph.

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If you look at section 16 USC 1853A paragraph B sub 2, it says it may be revoked, limited, or modified at any time in accordance with this chapter, including revocation of the system is found to have jeopardized sustainability of the style.

[00:06:53] Speaker 01:
In essence, it has to be revoked in accordance with the chapter.

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And the Magnuson-Stevens Act creates basically two circumstances under which they may be revoked or modified.

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There can be general changes that apply to the program as a whole, which may be adopted.

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For example, an area may be closed to protect the fish and to allow rebounding of a stock.

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And that would affect everyone operating in that fishery.

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Or under paragraph F, which addresses characteristics, a limited access privilege established after January 12, 2007.

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And it goes on to say, in paragraph sub 2, will be revoked, limited, or modified if the holder is found by the secretary after notice and opportunity for hearing.

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I'm sorry, which statutory section are you looking at?

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This is in 1853A, paragraph F, subparagraph 2 and 3, which provide the criteria for

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actions against individual permits, which are basically limited to non-compliance or violation of prohibition.

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But in subsection B, it specifically says, shall not confer any right to compensation to the holder of such limited access, privilege, quota, share, or other limited access system if it's revoked, limited, or modified, right?

[00:08:28] Speaker 01:
And we would read that as referencing, that's in paragraph B, subparagraph

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3, we would read that as referencing to the prior subparagraph 2, which says that the revocation or modification can only occur in accordance with the chapter.

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But if we construe that as broader than that, you lose, right?

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That's correct.

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OK.

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What about 1853 AB 4, which says these privileges and quota shares shall not create any right title or interest?

[00:09:07] Speaker 01:
That is true.

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That is what it says.

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However, the property right is created by the distinctions that are created.

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But basically, it's created the elements

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of property exists here in what has been provided to the holder of these licenses?

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Well, if there's a property right, it has to be created by this statute, right?

[00:09:36] Speaker 01:
Yes.

[00:09:37] Speaker 03:
OK.

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And then this statute, I don't know.

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I'm just looking at what the words are, and I just read them out loud.

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It says, these limited access privileges and quota shares shall not create any right title or interest.

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But if you look at the nature of the right that is created, it is, in fact, a property right.

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And it's exactly the same kind of property right.

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So then we would have to disagree with Congress, because Congress didn't mean what it said when it said what it said.

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So what the property right that is created here is

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It is consistent with basically the way in which.

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You're asking us basically to disagree with this provision in the act.

[00:10:26] Speaker 01:
Isn't that right?

[00:10:27] Speaker 01:
What we're asking you to do is to recognize the limitations.

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If we were to write an opinion in your favor, we would have to somehow confront this provision, as well as the other provisions in B, subsection B.

[00:10:40] Speaker 03:
And we would have to somehow explain why this statement.

[00:10:48] Speaker 01:
I'm sorry.

[00:10:48] Speaker 01:
I reread it.

[00:10:49] Speaker 01:
And I now remember.

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You've got an argument.

[00:10:52] Speaker 01:
Yes.

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Because what it says is it doesn't create a right or interest in the fish before the fish are harvested, which is different.

[00:11:02] Speaker 01:
That would be creating an actual right

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collect a certain number of fish.

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In essence, what that would do, if you had a right to the fish, that would allow you to counteract the biological management decisions that are made about the total allowable catch.

[00:11:24] Speaker 01:
So within these fisheries, each year, the agencies, the Fishery Management Council, adjust the amount of fish that are going to be available.

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And if you were to interpret

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the rights branded by the permit to be a right to a specific volume of fish, that would undercut the authority of the Fishery Management Council to manage to the biology of the fish.

[00:11:53] Speaker 02:
Okay, we have not only the language here of three and four, but we also have legislative history in the Senate report that says an LAPP is a permit that may be revoked or limited at any time without right to compensation.

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That is apparently what they viewed the statute as saying, which seems to be what it says on its face.

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It is revocable or modified as applied to the program as a whole.

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And the distinction here, this is really a part two of the takings analysis question.

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The restrictions here were imposed on an individual company as opposed to restrictions imposed on the program as a whole.

[00:12:40] Speaker 02:
Well, they were imposed on an individual company because there was a waiver of the American bill.

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limitation which you sought, your clients sought in Congress.

[00:12:51] Speaker 01:
Yes, that is correct.

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And based on the finding of the Coast Guard in accordance with the provision of the Act, our clients had no knowledge of the need for such a waiver.

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They had no knowledge of the use of... But that may be, but they did ask for the waiver and the condition of the waiver was this restriction.

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But as was made clear, if in fact they found any fault by my client or by the shipyard, they would have not granted the waiver.

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So there was no fault imposed.

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So basically, it's a punitive measure that was imposed in return for receipt of the waiver.

[00:13:39] Speaker 01:
I'd like to reserve a little bit of time for my rebuttal.

[00:13:41] Speaker 02:
OK, we'll give you two minutes for rebuttal, and we'll hear from Mr. Singley.

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Unless Judge Moore has any questions.

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Hearing none, let's go to Mr. Singley.

[00:13:58] Speaker 00:
Thank you.

[00:13:58] Speaker 00:
Good morning, and may it please the court.

[00:14:01] Speaker 00:
The appellants are holders of revocable licenses and permits that allow them to harvest and process fish in the exclusive economic zone.

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These licenses and permits are revocable generally under the Magnuson-Stevens Act.

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But they are also revocable as a sanction.

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And specifically, Judge Dyke, you asked about whether the provisions, the sanctions provision in this case, is the same as the sanctions provision in American pelagic.

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And the answer is yes.

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That provision is found in 15 CFR part 904.

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That is the sanctions provision that says that the government may revoke a license or sanction a license, which includes revocation, for reasons not related to enforcement.

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And this court in American Pelagic found that this sanctions provision

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preserve the government's right to revoke a license or permit.

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That same provision applies here.

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The Magnuson-Stevens Act provides for sanctions in section 1857 and section 1588.

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I'm sorry, 1857 and 1858 of Title 16 of the United States Code.

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And then specifically when it comes to these two fisheries, the Gulf of Alaska and the Bering Sea and Aleutian Islands geographic areas,

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The relevant regulation is found in 50 CFR Part 679.487.

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And that regulation references 15 CFR Part 904, which, again, is exactly the same regulation that was applicable in American Pelagic and caused this court to found revocability in American Pelagic.

[00:15:46] Speaker 00:
As we explain in our briefing, the fact that these licenses and permits are fully revocable... Does that regulation exist when these permits were granted?

[00:15:57] Speaker 00:
Yes, Your Honor.

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That regulation has existed for a very long time.

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The two vessels that FFI had before purchasing the new vessel began operating in the 1990s, mid 1990s to late 1990s.

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This regulation was in effect then.

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And then the latest vessel, which was only built in 2017, the regulation was certainly in effect then as well.

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So as we see it, American Pelagic has resolved the main issue in this case, which is whether these licenses and permits are, in fact, applicable.

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I also want to note that this is an issue we raised in our response brief.

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And in reply, the appellants did not contest our arguments about 15 CFR part 904, or the applicability of this provision, or the way the court has interpreted it in American pelagic.

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In fact, the appellants did not discuss American pelagic at all in their reply brief.

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So we think the revocability issue has been conceded by the other side.

[00:17:04] Speaker 00:
Now, what we've explained in a briefing is the lack of, or I'm sorry, not the lack, but the revocability of these licenses and permits.

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means that there cannot be a cognizable property interest here.

[00:17:18] Speaker 00:
Because when the government preserves the right to revoke, to take away a license or a permit that the government grants, that means that the licensee or permittee does not have an entitlement to that license or permit or to the resource that the license or permit regulates.

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And without that entitlement, both the Supreme Court and this court have repeatedly said there cannot be a cognizable property interest.

[00:17:45] Speaker 03:
Could you respond to the opposing counsel's argument where he seemed to be stressing the in accordance with this chapter line of the statute?

[00:17:54] Speaker 00:
Sure.

[00:17:55] Speaker 00:
So we don't read in accordance with this chapter as broadly as the other side.

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The other side seems to suggest that in accordance with this chapter means the government can only revoke licenses or permits according to the

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bases for revocation that are set out in the Magnuson-Stevens Act.

[00:18:13] Speaker 00:
We think it can also be read to mean that the government has to revoke a license according to the procedures set out in the MSA.

[00:18:20] Speaker 00:
And that's a different issue because if FFI was to argue that the government revokes

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a license or permit but fail to follow the procedure within the MSA, that would not give rise to a takings claim.

[00:18:35] Speaker 00:
That would give rise to, at most, a due process claim that would have to be brought in district court.

[00:18:39] Speaker 00:
It would be an entirely different kind of case.

[00:18:43] Speaker 00:
But again,

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That provision in 1853A subsection B is only one provision that talks about license revocation.

[00:18:52] Speaker 00:
There is an entire other part of the Magnuson-Stevens Act in sections 1857 and 1858 and the corresponding regulation in 15 CFR part 904 that talk about revocability as a sanction.

[00:19:08] Speaker 00:
That is a separate basis for license revocation.

[00:19:11] Speaker 00:
And as I explained in American Pelagic, the court has already

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held that that provision preserved the government's right to revoke these types of fishing licenses and permits.

[00:19:26] Speaker 00:
Now, in addition to revocability, if the court goes beyond revocability, although I would know that I think my friend on the other side conceded in response to Judge Dyke's question that if there is no revocability here, if the government can freely revoke these licenses and permits, then there is no cognizable property interest.

[00:19:48] Speaker 00:
So the court would not need to go past revocability here.

[00:19:52] Speaker 00:
But if the court were to do that, there are other indicators that this is not a recognizable property interest.

[00:19:59] Speaker 00:
In particular, Judge Chan, as you noticed, the express statutory language where Congress said this is not

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a cognizable property interest.

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And NMFS followed that up with express language and the regulation as well under this court's holding in the peanut quota holder's case.

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That too can be dispositive of a claim for a cognizable property interest.

[00:20:23] Speaker 00:
But then in addition to that, you have the lack of exclusivity, and then you have the degree of regulatory control that the government exerts over this space, the space of fishing in the exclusive economic zone.

[00:20:38] Speaker 00:
All of those point to the lack of a cognizable property interest.

[00:20:43] Speaker 00:
And so we believe that the trial court correctly held that there is no cognizable property interest here subject to the Fifth Amendment, and the court should affirm the trial court's hold.

[00:20:54] Speaker 02:
Okay, any further questions?

[00:20:56] Speaker 02:
Chief Judge Moore, any questions?

[00:21:00] Speaker 02:
Okay, hearing none, thank you.

[00:21:01] Speaker 02:
Thank you.

[00:21:05] Speaker 02:
Mr. Brent Erickson, you've got two minutes.

[00:21:10] Speaker 01:
All right.

[00:21:13] Speaker 01:
On the question of revocability of this permit,

[00:21:18] Speaker 01:
The regulation can't change the scope of authority of the agency under the statute.

[00:21:26] Speaker 01:
And the change that happened between American Pelagic when that was decided.

[00:21:31] Speaker 02:
Do you agree this regulation existed when the permits were issued?

[00:21:35] Speaker 01:
Yes, I would agree.

[00:21:36] Speaker 01:
The regulation did exist.

[00:21:38] Speaker 01:
But what had changed was the Magnuson Act was amended in 2007 to create market-based systems.

[00:21:45] Speaker 01:
And that's what this is.

[00:21:47] Speaker 01:
These are treated as property by the agency itself.

[00:21:51] Speaker 01:
It keeps a registry of liens on these licenses.

[00:21:57] Speaker 01:
There is an expectation that these licenses will be used to finance vessels.

[00:22:03] Speaker 01:
And in fact, the program is set up to facilitate.

[00:22:10] Speaker 01:
The government facilitates the tracking of those liens.

[00:22:17] Speaker 01:
I'd say while this is a heavily regulated space, and this goes to the part two of the takings analysis, if you look at the discussion in CNEGA Gardens 8, which is cited in our briefs, even though an industry participates in a heavily regulated industry, there are certain expectations as to what kind of changes will be made in that regulatory scheme.

[00:22:43] Speaker 01:
The government is free to make changes to the scheme that applies to Amendment 80 as a whole.

[00:22:49] Speaker 01:
It is not free to single out one company within that space and to restrict its fishing and to basically give its fishing rights to other members in that sector without compensating for that change.

[00:23:05] Speaker 01:
And that's basically what has happened here.

[00:23:07] Speaker 01:
The government took rights from one participant in a limited fishery and gave it to others.

[00:23:13] Speaker 01:
for a six-year period.

[00:23:14] Speaker 02:
OK.

[00:23:15] Speaker 02:
Thank you.

[00:23:16] Speaker 02:
Thank both counsel.

[00:23:17] Speaker 02:
The case is submitted.

[00:23:17] Speaker 02:
That concludes our session for this morning.