Kevin Marilley v. Charlton Bonham , 802 F.3d 958 ( 2015 )


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  •                      FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    KEVIN MARILLEY; SALVATORE                          No. 13-17358
    PAPETTI; SAVIOR PAPETTI,
    individually and on behalf of all                    D.C. No.
    others similarly situated,                        4:11-cv-02418-
    Plaintiffs-Appellees,                DMR
    v.                              OPINION
    CHARLTON H. BONHAM, in his
    official capacity as Director of the
    California Department of Fish and
    Game,
    Defendant-Appellant.
    Appeal from the United States District Court
    for the Northern District of California
    Donna M. Ryu, Magistrate Judge, Presiding
    Argued and Submitted
    July 7, 2015—San Francisco, California
    Filed September 18, 2015
    Before: Susan P. Graber and Paul J. Watford, Circuit
    Judges, and Paul L. Friedman, District Judge.*
    *
    The Honorable Paul L. Friedman, United States District Judge for the
    District of Columbia, sitting by designation.
    2                     MARILLEY V. BONHAM
    Opinion by Judge Friedman;
    Dissent by Judge Graber
    SUMMARY**
    Constitutional Law
    The panel affirmed the district court’s summary judgment
    in favor of a plaintiff class of non-resident commercial fishers
    who contended that California’s discriminatory fishing fees
    violated the Privileges and Immunities Clause of the United
    States Constitution.
    The panel held that California’s differential commercial
    fishing license fees, Cal. Fish & Game Code §§ 7852, 7881,
    8550.5, and 8280.6, which charged non-residents two or
    three times more in fees than residents, violated the Privileges
    and Immunities Clause because California failed to offer a
    closely related justification for its discrimination against non-
    residents.
    Judge Graber dissented because she would hold that
    further evidentiary development is necessary to determine
    whether the differential fees are permissible under the
    Privileges and Immunities Clause, and she would reverse the
    summary judgment and remand for further proceedings.
    **
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    MARILLEY V. BONHAM                        3
    COUNSEL
    Kamala D. Harris, Attorney General, Robert W. Byrne,
    Senior Assistant Attorney General, Annadel A. Almendras,
    Supervising Deputy Attorney General, Gary Alexander and
    M. Elaine Meckenstock (argued), Deputy Attorneys General,
    Office of the Attorney General, Oakland, California, for
    Defendant-Appellant.
    Stuart G. Gross (argued) and Jared M. Galanis, Gross Law,
    P.C., San Francisco, California; Todd R. Gregorian and Tyler
    A. Baker, Fenwick & West LLP, Mountain View, California,
    for Plaintiffs-Appellees.
    OPINION
    FRIEDMAN, District Judge:
    Commercial fishers in California are subject to a bevy of
    fees. For certain fees, however, non-residents are charged
    two to three times more than residents. Plaintiffs represent a
    class of non-resident commercial fishers who contend that
    California’s discriminatory fees violate the Privileges and
    Immunities Clause of the United States Constitution.
    Because California has failed to offer a closely related
    justification for its discrimination against non-residents, we
    agree with plaintiffs and therefore affirm the district court’s
    grant of summary judgment to the plaintiff class.
    BACKGROUND
    The named plaintiffs are commercial fishers residing
    outside California. They represent a class of non-residents
    4                  MARILLEY V. BONHAM
    who, since 2009, have purchased commercial fishing licenses,
    registrations, or permits from California and paid higher fees
    than residents. Plaintiffs sued Charlton Bonham, in his
    official capacity as the Director of the California Department
    of Fish and Game, alleging that the differential fees violate
    the Privileges and Immunities and Equal Protection Clauses
    of the United States Constitution.
    Plaintiffs challenge four specific fees: general commercial
    fishing license fees, commercial fishing vessel registration
    fees, Herring Gill net permit fees, and Dungeness Crab vessel
    permit fees. See Cal. Fish & Game Code §§ 7852, 7881,
    8550.5, 8280.6. While the parties dispute the prevalence of
    Herring Gill and Dungeness Crab permits, it is undisputed
    that, at a minimum, non-resident commercial fishers must
    purchase the general license to fish in California waters and
    a vessel registration to do so from a boat they own or operate.
    See 
    id. §§ 7852,
    7881. In 2012–13, the relevant fees were as
    follows:
    •   Commercial fishing license: $130.03 for
    residents; $385.75 for non-residents;
    •   Commercial fishing vessel registration:
    $338.75 for residents; $1,002.25 for non-
    residents;
    •   Herring Gill net permit: $359.00 for
    residents; $1,334.25 for non-residents;
    •   Dungeness Crab vessel permit: $273.00
    for residents; $538.00 for non-residents.
    MARILLEY V. BONHAM                               5
    All four licenses would set a resident back $1,100.78, but a
    non-resident $3,260.25.
    Following discovery, the parties filed cross-motions for
    summary judgment. The district court concluded that
    California had failed to demonstrate a genuine issue of
    material fact and granted summary judgment to the plaintiff
    class on its Privileges and Immunities Clause claim. The
    district court then entered final judgment as to plaintiffs’
    Privileges and Immunities Clause claim pursuant to Rule
    54(b) of the Federal Rules of Civil Procedure.1
    STANDARD OF REVIEW
    We have jurisdiction under 28 U.S.C. § 1291. We review
    a grant of summary judgment de novo. See Pac. Shore
    Props., LLC v. City of Newport Beach, 
    730 F.3d 1142
    , 1156
    (9th Cir. 2013). Viewing the evidence in the light most
    favorable to the State, we must decide whether there are any
    genuine disputes of material fact and whether the district
    court correctly applied the substantive law. See Olsen v.
    Idaho St. Bd. Of Med., 
    363 F.3d 916
    , 922 (9th Cir. 2004).
    DISCUSSION
    The Privileges and Immunities Clause provides that “[t]he
    Citizens of each State shall be entitled to all Privileges and
    Immunities of Citizens in the several States.” U.S. Consti.
    art. IV, § 2, cl. 1. This clause “was designed ‘to place the
    citizens of each State upon the same footing with citizens of
    1
    The district court expressly did not reach or enter final judgment on
    plaintiffs’ Equal Protection Clause claim. We therefore lack jurisdiction
    over that claim. See 28 U.S.C. § 1291.
    6                     MARILLEY V. BONHAM
    other States, so far as the advantages resulting from
    citizenship in those States are concerned.’” Sup. Ct. of Va. v.
    Friedman, 
    487 U.S. 59
    , 64 (1988) (quoting Paul v. Virginia,
    75 U.S. (8 Wall.) 168, 180 (1869)); see also Toomer v.
    Witsell, 
    334 U.S. 385
    , 395 (1948) (The Clause “was designed
    to insure to a citizen of State A who ventures into State B the
    same privileges which the citizens of State B enjoy.”). The
    Clause thus “establishes a norm of comity” between residents
    and non-residents of a State, Austin v. New Hampshire,
    
    420 U.S. 656
    , 660 (1975), to create “a national economic
    union,” Council of Ins. Agents & Brokers v. Molasky-Arman,
    
    522 F.3d 925
    , 934 (9th Cir. 2008) (quoting Sup. Ct. of N.H.
    v. Piper, 
    470 U.S. 274
    , 280 (1985)).2
    The Clause, however, “is not an absolute.” Molasky-
    
    Arman, 522 F.3d at 934
    (quoting 
    Toomer, 334 U.S. at 396
    ).
    “While it bars ‘discrimination against citizens of other States
    where there is no substantial reason for the discrimination
    beyond the mere fact that they are citizens of other States . . .
    it does not preclude disparity of treatment in the many
    situations where there are perfectly valid independent reasons
    for it.” Id. (quoting 
    Toomer, 334 U.S. at 396
    ). We therefore
    employ a two-part test to determine whether disparate
    treatment violates the Clause. “First, the activity in question
    must be ‘sufficiently basic to the livelihood of the Nation’ . . .
    as to fall within the purview of the Privileges and Immunities
    Clause.” 
    Friedman, 487 U.S. at 64
    (quoting United Bldg. &
    Constr. Trades Council v. Mayor and Council of Camden,
    
    465 U.S. 208
    , 221–22 (1984)). “Second, if the challenged
    restriction deprives nonresidents of a protected privilege, we
    2
    “While the Privileges and Immunities Clause cites the term ‘Citizens,’
    for analytic purposes citizenship and residency are essentially
    interchangeable.” 
    Friedman, 487 U.S. at 64
    .
    MARILLEY V. BONHAM                          7
    will invalidate it only if we conclude that the restriction is not
    closely related to the advancement of a substantial state
    interest.” 
    Id. at 65
    (citing 
    Piper, 470 U.S. at 284
    ). California
    contends that the differential license fees pass muster under
    both parts of this test. We disagree.
    A
    California does not dispute that plaintiffs’ right to pursue
    “a common calling is one of the most fundamental of those
    privileges protected by the Clause.” 
    Camden, 465 U.S. at 219
    ; see also 
    Toomer, 334 U.S. at 403
    (“Thus we hold that
    commercial shrimping in the marginal sea, like other
    common callings, is within the purview of the privileges and
    immunities clause.”). It instead argues that, in addition to
    demonstrating that the affected activity is protected, plaintiffs
    must make two additional showings.
    First, California argues that our decision in International
    Organization of Masters, Mates, & Pilots v. Andrews,
    
    831 F.2d 843
    (9th Cir. 1987), requires plaintiffs to show that
    the differential fees exclude them, in whole or in part, from
    commercial fishing. This showing cannot be made,
    California claims, because the percentage of non-resident
    commercial fishers in California has increased, not decreased.
    In Andrews, we held that the Clause was not violated by a
    statute regarding cost of living wage adjustments because the
    statute was “designed to provide equity between the wages of
    [citizen] and non-[citizen] workers.” 
    Andrews, 831 F.3d at 846
    . The statute in Andrews thus created equality, not
    inequality, and therefore did not run afoul of the Privileges
    and Immunities Clause because, we said, “the appellants
    ha[d] not shown that they are prevented or discouraged by the
    State from pursuing employment.” 
    Id. 8 MARILLEY
    V. BONHAM
    California contends that our choice of the words
    “prevented or discouraged” upset decades of precedent and
    added an exclusion requirement to the first part of the test.
    We disagree. As we recited in Andrews just two paragraphs
    before, the first step requires only that “we determine first
    whether [the statute] burdens” rights protected under the
    Clause. 
    Id. at 845.
    An exclusion requirement would
    undermine the purpose of the Clause because permitting a
    State to freely discriminate against non-residents up to the
    point they are driven out would not “place the citizens of each
    State upon the same footing with citizens of other States.”
    Lunding v. N.Y. Tax Appeals Tribunal, 
    522 U.S. 287
    , 296
    (1998) (quoting Paul, 75 U.S. (8 Wall.) at 180). And, to any
    extent that Andrews may have implied that a plaintiff must
    demonstrate exclusion from pursuing their common calling,
    the Supreme Court’s subsequent statement in Friedman
    makes clear that “[n]othing in [its] precedents . . . supports
    the contention that the Privileges and Immunities Clause does
    not reach a State’s discrimination against nonresidents when
    such discrimination does not result in their total exclusion
    from the 
    State.” 487 U.S. at 66
    .3
    Second, California argues that McBurney v. Young, 
    133 S. Ct. 1709
    (2013), the Supreme Court’s most recent
    Privileges and Immunities Clause decision, requires that
    plaintiffs show that the differential fees were enacted for a
    “protectionist purpose.” The Supreme Court in McBurney
    did note that prior cases “struck laws down as violating the
    3
    Our conclusion is supported by the fact that, as the district court noted,
    our “most recent Privileges and Immunities Clause decision, Molasky-
    Arman, contains no discussion at all — at either step of the inquiry — of
    the extent to which the challenged law’s increased burden on nonresidents
    led to any deterrence or exclusion.”
    MARILLEY V. BONHAM                         9
    privilege of pursuing a common calling only when those laws
    were enacted for the protectionist purpose of burdening out-
    of-state citizens.” 
    Id. at 1715.
    California urges us to read
    that statement to mean that proof of a protectionist purpose
    always is required to meet step one of our privileges and
    immunities inquiry. We cannot accept that interpretation of
    McBurney.
    When the Court determines that the Privileges and
    Immunities Clause does not apply at all, it says so. For
    example, in Baldwin v. Fish & Game Commission, 
    436 U.S. 371
    , 388 (1978), the Court held that, because elk hunting was
    “not basic to the maintenance or well-being of the Union,”
    the state’s decision to charge non-residents more than
    residents for elk-hunting licenses “simply [did] not fall within
    the purview of the Privileges and Immunities Clause.” In
    McBurney, the Court rejected one of McBurney’s arguments
    — that Virginia’s law denied them “the right to access public
    information on equal terms with citizens” of Virginia — for
    similar reasons, holding that the Privileges and Immunities
    Clause did not “cover[] this broad 
    right.” 133 S. Ct. at 1718
    .
    By contrast, with respect to McBurney’s common calling
    argument, the Court held that the Virginia law at issue did not
    “abridge [non-residents’] ability to engage in a common
    calling in the sense prohibited by the Privileges and
    Immunities Clause.” 
    Id. at 1715
    (emphasis added). The
    Court reached that conclusion because the statute had only an
    “incidental effect” on the pursuit of a common calling, and
    because the distinction it made between citizens and
    non-citizens had a “distinctly nonprotectionist aim.” 
    Id. at 1716.
    This reasoning, along with the Court’s discussion of
    earlier cases involving statutes with protectionist purposes, is
    a part of step two of the inquiry, which requires the state to
    10                 MARILLEY V. BONHAM
    point to a “substantial reason[]” for the discrimination.
    
    Friedman, 487 U.S. at 67
    . “Part and parcel to this analysis is
    determining whether [the state has] demonstrated a
    substantial factor unrelated to economic protectionism to
    justify the discrimination.” Connecticut ex rel. Blumenthal v.
    Crotty, 
    346 F.3d 84
    , 97 (2d Cir. 2003).
    Requiring proof of a legislature’s protectionist purpose at
    the first step of the inquiry, as California urges, would negate
    the second step’s burden on the state to provide a valid
    justification for the discrimination against non-residents.
    Moreover, an intent requirement would undermine the
    Clause’s purpose to “plac[e] the citizens of each State upon
    the same footing with citizens of other States,” 
    Lunding, 522 U.S. at 296
    (quoting Paul, 75 U.S. (8 Wall.) at 180), by
    mandating different outcomes depending upon a State’s
    motive. We therefore reject California’s invitation to read
    McBurney as a dramatic overhaul of the first step of the
    settled two-step inquiry.
    To reiterate, contrary to California’s arguments, the first
    step of the Privileges and Immunities Clause inquiry asks
    only whether the challenged statute directly burdens a
    protected activity. It is undisputed that California’s
    commercial fishing license fees are significantly higher for
    non-resident fishers than for residents. And it is common
    sense that commercial fishing license fees directly affect
    commercial fishing. Those facts alone satisfy plaintiffs’
    burden at the first step of the inquiry. See 
    Toomer, 334 U.S. at 396
    (a statute that charged $25 to residents for commercial
    shrimping licenses, but charged $2,500 to non-residents
    “plainly and frankly discriminate[d] against non-residents”
    and thus satisfied the first step); Mullaney v. Anderson,
    
    342 U.S. 415
    , 417–18 (1952) (holding that the Privileges and
    MARILLEY V. BONHAM                               11
    Immunities Clause “would bar any State from imposing” a $5
    license fee on resident fishers and a $50 fee on non-residents
    unless a State offered a substantial, closely related
    justification at the second step of the inquiry).
    B
    At the second step, the burden shifts to the State to
    demonstrate that “substantial reasons exist for the
    discrimination and [that] the degree of discrimination bears
    a close relation to such reasons.” 
    Friedman, 487 U.S. at 67
    .4
    To determine whether the State’s proffered justifications bear
    a close relation to the discrimination, we must “consider[]
    whether, within the full panoply of legislative choices
    otherwise available to the State, there exist alternative means
    of furthering the State’s purpose without implicating
    constitutional concerns.” 
    Id. The Supreme
    Court has noted that “[t]he State is not
    without power . . . to charge non-residents a differential
    which would merely compensate the State . . . for any
    conservation expenditures from taxes which only residents
    pay.” 
    Toomer, 334 U.S. at 398
    –99. California argues that it
    is doing just that — merely compensating itself for
    4
    California argues that the district court applied a purportedly different
    rule taken from the Supreme Court’s “tax” cases, as opposed to its
    “common calling” cases, and failed to consider California’s justifications
    for the discrimination. The Supreme Court, however, has employed the
    same two-step inquiry for both “tax” and “common calling” cases.
    Compare 
    Friedman, 487 U.S. at 64
    –65 (challenge to a residency
    requirement for admission to the State bar), with 
    Lunding, 522 U.S. at 296
    –98 (challenge to a differential income tax deduction). The district
    court applied the correct test and properly considered California’s asserted
    State objectives.
    12                 MARILLEY V. BONHAM
    expenditures on conservation and enforcement efforts from
    which non-residents benefit. But California claims that
    Toomer allows for inequality at step two and therefore any
    fee differential is permissible so long as the State does not
    “overcompensate” itself in the aggregate, which, according
    to California, means only that the amount collected from non-
    residents cannot exceed their collective “fair share” of the
    State’s expenditures. These differential fees thus are
    permissible, according to California, because the total
    additional amount collected from non-residents
    (approximately $400,000) constitutes a mere 3% of the
    budget shortfall between costs and revenues (approximately
    $14.6 million) but non-residents comprise approximately
    11% of the commercial fishers in California.
    We are unpersuaded. Although we agree that obtaining
    compensation for expenditures the State makes for
    conservation or enforcement is a permissible state objective,
    the additional fees charged to non-residents must bear a close
    relation to the “taxes which only residents pay.” 
    Toomer, 334 U.S. at 399
    ; see also Molasky-
    Arman, 522 F.3d at 934
    (noting that “a ‘substantial reason’ for discrimination does
    not exist ‘unless there is something to indicate that non-
    citizens constitute a peculiar source of the evil at which the
    statute is aimed’”) (quoting 
    Toomer, 334 U.S. at 398
    ). In
    other words, a State may justify a differential fee by showing
    either that it is closely related to the costs of addressing a
    burden non-residents uniquely impose or that it approximates
    the amount in “taxes which only residents pay” towards the
    relevant State expenditures from which non-residents also
    benefit. 
    Toomer, 334 U.S. at 399
    ; see also Tangier Sound
    Waterman’s Ass’n v. Pruitt, 
    4 F.3d 264
    , 267 (4th Cir. 1993)
    (Toomer permits state to discriminate against non-residents
    where state “establishes an ‘advancement of a substantial
    MARILLEY V. BONHAM                        13
    state interest’ as a reason for the disparate treatment, and, in
    the facts of this case, evenly or approximately evenly
    distributes the costs imposed on residents and nonresidents to
    support those programs benefiting both groups.”). Such a
    differential would “bear[] a close relation to the achievement
    of [a] substantial state objective[],” 
    Friedman, 487 U.S. at 70
    ,
    because it would address the particular evil non-residents
    present, unfairly benefiting from residents’ tax expenditures.
    It also would place non-residents “upon the same footing
    with,” 
    id. at 64,
    or at least in “substantial equality” with
    California residents, 
    Toomer, 334 U.S. at 396
    , by forcing an
    individual non-resident who benefits from the State’s
    expenditures to contribute an amount substantially equal to
    that which an individual resident contributes across all fees
    and related taxes.
    California does not claim, however — nor has it presented
    any evidence that shows — that the fee differential
    approximates the amount in taxes a resident contributes to the
    State’s expenditures related to commercial fishing. 
    Mullaney, 342 U.S. at 418
    ; see also Hicklin v. Orbeck, 
    437 U.S. 518
    ,
    527 (1978) (“[T]he discrimination the [statute] works against
    nonresidents does not bear a substantial relationship to the
    particular ‘evil’ they are said to present.”). California alone
    bore the step two “burden of showing that the discrimination
    is warranted by a substantial state objective and closely
    drawn to its achievement.” 
    Friedman, 487 U.S. at 68
    . It
    failed to carry that burden, despite ample opportunity to
    develop and support its offered justification and “all the facts
    . . . in [its] possession.” 
    Mullaney, 342 U.S. at 418
    –19.
    14                 MARILLEY V. BONHAM
    CONCLUSION
    For the above reasons, we hold that California’s
    differential commercial fishing license fees, Cal. Fish &
    Game Code §§ 7852, 7881, 8550.5, and 8280.6, violate the
    Privileges and Immunities Clause. Charging non-residents
    two to three times the amount charged to residents plainly
    burdens non-residents’ right to pursue a common calling, in
    this case commercial fishing. Such discrimination violates
    the Privileges and Immunities Clause unless the State carries
    its burden to show “that such discrimination bears a close
    relation to the achievement of substantial state objectives.”
    
    Friedman, 487 U.S. at 70
    . Although its stated objective,
    compensation for State expenditures for conservation or
    enforcement, is valid, California has failed to show that the
    differential fee charged to a non-resident is closely related to
    a resident’s share of the State’s expenditures.
    AFFIRMED.
    GRABER, Circuit Judge, dissenting:
    I respectfully dissent. Although I agree fully with the
    majority’s analysis at step one of the inquiry, I would hold, at
    step two, that the differential fees survive summary judgment.
    Further evidentiary development is necessary to determine
    whether the nonresident fees “merely compensate the State
    for any added enforcement burden [nonresidents] may impose
    or for any conservation expenditures from taxes which only
    residents pay.” Toomer v. Witsell, 
    334 U.S. 385
    , 399 (1948).
    MARILLEY V. BONHAM                       15
    We have little guidance to assist us in determining what
    the United States Supreme Court meant in the foregoing
    passage from Toomer. Only twice since Toomer has the
    Court quoted the phrase “taxes which only residents pay” in
    a privileges and immunities context, and in neither case did
    it explain the meaning of those words. Baldwin v. Fish &
    Game Comm’n , 
    436 U.S. 371
    , 401 (1978); Mullaney v.
    Anderson, 
    342 U.S. 415
    , 417 (1952). As I explain in more
    detail below, two state supreme courts have reached different
    conclusions about the proper interpretation of that phrase.
    But we do not know which (if either) of those courts got it
    right, because the Supreme Court denied certiorari in both
    cases. Carlson v. Alaska Commercial Fisheries Entry
    Comm’n, 
    519 U.S. 1101
    (1997); Glaser v. Salorio, 
    449 U.S. 874
    (1980). Further complicating our interpretive task, the
    Privileges and Immunities Clause of Article IV “is not one
    the contours of which have been precisely shaped by the
    process and wear of constant litigation and judicial
    interpretation over the years since 1789.” 
    Baldwin, 436 U.S. at 379
    .
    Acknowledging those limitations, we must decide how to
    interpret the phrase “taxes which only residents pay.”
    
    Toomer, 334 U.S. at 399
    . On the one hand, as the State urges,
    the phrase could be read to refer to residents’ aggregate tax
    contribution to commercial fishing. Under that reading,
    California permissibly could charge differential fees to
    nonresidents so long as those fees do not exceed the
    nonresidents’ fair share of the portion of commercial fisheries
    management costs that California residents’ tax dollars fund.
    The New Jersey Supreme Court has interpreted Toomer
    in this way. In Salorio v. Glaser, 
    414 A.2d 943
    (N.J. 1980),
    the plaintiffs challenged New Jersey’s imposition of an
    16                 MARILLEY V. BONHAM
    Emergency Transportation Tax, which applied only to
    nonresident users of the state highway system. Although it
    found the record insufficiently developed to render a final
    decision, the New Jersey Supreme Court held that a tax that
    applied only to nonresidents could, in theory, pass
    constitutional muster, because “[t]he Constitution does not
    entitle nonresident commuters to a ‘free ride.’ The State may
    exact from them a fair share of the cost of adequate
    transportation facilities without violating the Privileges and
    Immunities Clause.” 
    Id. at 954.
    The court read Toomer and
    other Supreme Court cases to authorize a state to “impose
    upon non-residents the additional expenses occasioned by
    their activities within the state, or the reasonable costs of
    benefits which they receive from the state.” 
    Id. at 953.
    Applying the Salorio court’s reasoning here, nonresidents
    are on “equal footing” with residents so long as they are not
    charged more than their “fair share” of commercial fisheries
    management expenses that residents’ tax dollars fund.
    California introduced evidence that nonresidents purchased
    11% of commercial fishing licenses, while the differential
    fees for out-of-state licenses equaled only 3% of the net
    general fund contributions to the Department of Fish and
    Wildlife (“DFW”) budget. The State asserts that it
    constitutionally could charge differential fees that total up to
    11% of the DFW’s general fund-supported commercial
    fishing expenditures, so the smaller fee that California
    actually charges is—a fortiori— permissible.
    On the other hand, Plaintiffs read “taxes which only
    residents pay,” 
    Toomer, 334 U.S. at 399
    , very differently.
    They contend that the phrase requires a per capita calculation
    of a California resident’s tax burden related to DFW’s
    commercial fishing budget. The Alaska Supreme Court
    MARILLEY V. BONHAM                      17
    adopted this alternative interpretation in Carlson v. State,
    
    798 P.2d 1269
    (Alaska 1990). There, the plaintiffs
    challenged Alaska’s commercial fishing fees, which were
    three times higher for nonresidents than for residents. The
    state urged the court to follow Salorio. But the Alaska
    Supreme Court rejected the New Jersey Supreme Court’s
    interpretation of Toomer:
    Implicit in Salorio is the notion that it is
    permissible to require nonresidents to pay up
    to 100% of their pro rata share of
    expenditures regardless of what percentage of
    their pro rata share residents are in fact
    paying. In other words, Salorio, as applied to
    this case, seems to add up to a general
    proposition that the state may subsidize its
    own residents in the pursuit of their business
    activities and not similarly situated
    nonresidents, even though this results in
    substantial inequality of treatment.
    
    Carlson, 798 P.2d at 1278
    . The court held that the proper
    inquiry was “whether all fees and taxes which must be paid
    to the state by a nonresident to enjoy the state-provided
    benefit are substantially equal to those which must be paid by
    similarly situated residents when the residents’ pro rata
    shares of state revenues to which nonresidents make no
    contributions are taken into account.” 
    Id. Under the
    Carlson court’s approach, the state would have
    to divide general fund expenditures for commercial fishing
    management by the total number of California taxpayers; the
    quotient would represent the maximum permissible
    differential fee. The State introduced evidence that net
    18                    MARILLEY V. BONHAM
    annual general fund outlays for commercial fisheries
    management total at least $12 million. Thus, for instance, if
    there were 12 million taxpayers in California, the per capita
    formula would limit the permissible differential fee to $1 per
    nonresident fisher.1 According to Plaintiffs, this formula puts
    residents and nonresidents on “equal footing” because their
    out-of-pocket costs to support commercial fisheries are the
    same.
    I would reject the per capita formula. The purpose of the
    Privileges and Immunities Clause is to “place the citizens of
    each State upon the same footing with citizens of other States,
    so far as the advantages resulting from citizenship in those
    States are concerned.” Paul v. Virginia, 75 U.S. (8 Wall.)
    168, 180 (1868). In my view, the per capita approach does
    not advance that goal. The per capita formula attributes to
    each resident a pro rata contribution to every program and
    activity supported by a state’s general fund expenditures. But
    that sort of rigid across-the-board calculation does not
    accurately reflect the real benefit that a taxpayer obtains
    through his or her tax dollars. Taxpayer dollars support a
    large number of state-funded programs. Education, natural
    resources management, healthcare services, corrections and
    rehabilitation, infrastructure, and transportation all are at least
    partially funded with state tax revenues in California. In a
    given year, an individual taxpayer likely receives no direct
    benefit from some of those programs, but a benefit that far
    1
    This illustrative example likely is a generous estimate, as the
    population of California was nearly 39 million in 2014. U.S. Census
    Bureau, State & County QuickFacts, http://quickfacts.census.gov/qfd/
    states/06000.html. Thus, the permissible differential likely would be less
    than $1 under the per capita formula, even though a substantial number of
    California residents—for example, minor children—are not taxpayers.
    MARILLEY V. BONHAM                              19
    exceeds his or her pro rata contribution from others. This is
    the deal that we make when we pay taxes: We all put a
    portion of our income into a big pot and it is spent in a variety
    of ways, some of which benefit us directly and some of which
    do not.
    California residents subsidize each other with their taxes.
    For example, suppose that each taxpayer’s share of state
    support for secondary schools is $1 per year. A certain
    California taxpayer has a teenager who attends public high
    school. That taxpayer’s per capita “payment” for the
    educational benefit is $1, but the benefit to the taxpaying
    parent is worth much more than that. The parent agrees to
    subsidize a number of other activities in the state, including
    commercial fishing. In exchange, taxpayers without school-
    age children subsidize public education.2 The per capita
    formula permits a nonresident fisher to obtain the same
    benefit as a resident fisher, but the nonresident does not have
    to subsidize any other programs or activities in California in
    exchange. The per capita formula thus systematically
    disadvantages the resident vis-à-vis the nonresident.
    Instead of using a per capita formula, I would adopt the
    Salorio court’s “fair share” approach. At step two of the
    privileges and immunities inquiry, the state must show that
    the discrimination against nonresidents is “closely related to
    2
    Of course, some commercial fishers are parents whose children attend
    public school. But that fact just demonstrates that each taxpayer benefits
    directly from a different set of state programs supported by his or her tax
    dollars. The value of the taxpayer-funded investment in a given program
    to each individual taxpayer who benefits from that program varies. The
    value is less than the taxpayer’s total tax bill, but more—generally,
    significantly more—than the taxpayer’s strict pro rata contribution to the
    program.
    20                     MARILLEY V. BONHAM
    the advancement of a substantial state interest.” Supreme
    Court of Va. v. Friedman, 
    487 U.S. 59
    , 65 (1988). We
    recently reiterated that “[a] ‘substantial reason’ for
    discrimination does not exist ‘unless there is something to
    indicate that non-citizens constitute a peculiar source of the
    evil at which the statute is aimed.’” Council of Ins. Agents &
    Brokers v. Molasky-Arman, 
    522 F.3d 925
    , 934 (9th Cir. 2008)
    (quoting 
    Toomer, 334 U.S. at 398
    )). Nonresidents increase
    the amount of commercial fishing activity in California’s
    coastal waters. That increased activity, in turn, requires the
    state to spend more money than it otherwise would spend on
    commercial fisheries management, including enforcement
    and conservation. Because nonresidents are a “peculiar
    source” of those additional costs, I would hold that not
    subsidizing nonresident participation in an activity funded
    with residents’ tax dollars is a substantial reason for
    discrimination. See Tangier Sound Waterman’s Ass’n v.
    Pruitt, 
    4 F.3d 264
    , 268 (4th Cir. 1993) (assuming, without
    deciding, that such an interest is permissible under the
    Privileges and Immunities Clause).
    Turning to the “close relationship” requirement, I would
    hold that the State has the burden to show three things. First,
    it must isolate the state expenditures that benefit only the
    licensees.3 See 
    id. (rejecting Virginia’s
    differential license
    fee in part because it unfairly charged nonresident
    3
    These expenditures would include any costs associated with programs
    or activities in which only licensees participate—for example, the cost of
    enforcing rules such as size of fish or season limits. They also would
    include conservation expenditures made necessary by licensees’ activities.
    If the state engages in conservation activities designed to keep fish stocks
    at a certain level, some of those activities benefit only licensees. To count
    those costs, the state must separate general conservation activities from
    conservation activities directed to the effect of commercial fishing.
    MARILLEY V. BONHAM                               21
    commercial fishers “for programs funded by all taxpayers to
    benefit all fishermen, whether commercial or sport
    fishermen”). Second, it must determine what portion of those
    expenditures fairly may be characterized as deriving “from
    taxes which only residents pay.” 
    Toomer, 334 U.S. at 399
    ;
    see 
    Tangier, 4 F.3d at 267
    (striking down Virginia’s
    differential commercial fishing license fees in part because
    the state calculated the fee without considering nonresident
    fishers’ payment of state sales and use taxes); 
    Salorio, 414 A.2d at 955
    (discussing whether property and sales taxes
    are “taxes imposed upon residents alone” in light of the fact
    that some nonresidents pay them). And third, it must assess
    what portion of qualifying expenditures is fairly allocable to
    the nonresidents as “the additional expenses occasioned by
    their activities within the state.”4 
    Salorio, 414 A.2d at 953
    ;
    see also 
    Tangier, 4 F.3d at 267
    (holding that “the record does
    not disclose that the Commonwealth of Virginia has shown
    that it created any credible method of allocating costs as
    between residents and nonresidents”).
    I would hold that the “close relationship” requirement of
    step two is satisfied so long as the state charges a differential
    4
    It may be, as the State asserts, that multiplying the qualifying
    expenditures by the percentage of commercial fishers who are
    nonresidents is the appropriate way to calculate those nonresidents’ fair
    share, but that is not necessarily the case. See Salorio v. Glaser, 
    461 A.2d 1100
    , 1106 (N.J. 1983) (“Although the State has not shown that New York
    commuters cause higher average costs per commuter than New Jersey
    commuters, the New York commuter does exacerbate the peak load.
    Accordingly, both incremental and average costs are pertinent factors in
    determining the costs attributable to the New York commuter.”); 
    Salorio, 414 A.2d at 955
    (questioning a “strict percentage computation” that
    assumed equal transportation costs for nonresident and resident
    commuters).
    22                     MARILLEY V. BONHAM
    fee that, in the aggregate, does not exceed5 the amount that
    the state spends that (1) benefits only licensees, (2) derives
    from taxes that only residents pay, and (3) is fairly allocable
    to nonresidents.6 This test puts residents and nonresidents on
    “substantially equal footing” with respect to commercial
    fishing: Residents reap the benefit of the tax dollars that they
    alone pay, and nonresidents cannot be required to pay more
    than their “fair share” of the benefits they enjoy that are
    subsidized by those resident-paid tax dollars.
    This fair share approach accurately reflects the relative
    benefit that residents and nonresidents obtain from a state’s
    general fund expenditures. Suppose that a state charges a $50
    license fee to resident commercial fishers. Over and above
    the revenue collected from those fees, the state spends $1
    million in tax-supported funds on commercial fisheries
    management. If 10,000 people per year obtain licenses, the
    benefit of the $1 million subsidy to each fisher is $100. Thus,
    a nonresident may be charged the $50 fee that residents pay,
    plus a $100 differential. If only 5,000 people obtain licenses,
    5
    Because the Privileges and Immunities Clause neither bars the
    residents of a state from deciding to use their tax dollars to subsidize the
    activities of nonresidents nor precludes a state from providing a greater
    benefit to nonresidents than it provides to residents, it is permissible for
    a state to charge less than the maximum allowable differential.
    6
    The test here is one of “substantial equality of treatment,” not absolute
    equality. Austin v. New Hampshire, 
    420 U.S. 656
    , 665 (1975). So long
    as the state “fairly attempts to distribute the burdens and costs of
    government to those receiving its benefits” pursuant to a reasonable
    methodology, I would hold that the requirements of the Privileges and
    Immunities Clause are met. 
    Salorio, 414 A.2d at 952
    ; see also Travelers’
    Ins. Co. v. Connecticut, 
    185 U.S. 364
    , 371 (1902) (“It is enough that the
    state has secured a reasonably fair distribution of burdens, and that no
    intentional discrimination has been made against nonresidents.”).
    MARILLEY V. BONHAM                                23
    each nonresident may be charged a $200 differential. This
    variance makes sense, because the benefit to each fisher of
    the tax-supported outlay decreases as more people use the
    resource. The per capita approach makes less sense because
    it is unresponsive to such changes; so long as a state’s tax rate
    and general fund outlay on the commercial fisheries program
    remain unchanged, the permissible differential is fixed. It is
    the same whether 10 or 10,000 people obtain licenses and use
    the resource.
    Plaintiffs raise the specter of a year in which only one
    nonresident purchases a commercial fishing license. They
    argue that the state’s approach would permit California to
    collect hundreds of thousands of dollars from that single
    licensee. Not so. The fair share formula accounts for this
    possibility. Assuming the scenario described above, in a year
    in which a single nonresident and 4,999 residents obtain
    licenses the permissible differential for that nonresident
    would remain $200.7
    Finally, Plaintiffs challenge the “fair share” approach
    because, using it, the state could set nonresident license fees
    ten, twenty, or even a hundred times higher than resident
    license fees. They point out that the Supreme Court has
    rejected nonresident fees at such ratios before. See 
    Mullaney, 342 U.S. at 418
    (invalidating nonresident fees ten times
    7
    The only way the permissible differential charged to a nonresident
    would skyrocket is if the overall number of fishers obtaining licenses
    plunged to single digits. But if that happened, the state likely would slash
    its commercial fisheries management spending. And if it did not cut
    spending, it is hard to see how the State could prove that the full $1
    million in my example benefitted just a handful of fishers, because it is not
    reasonable to attribute hundreds of thousands of dollars in enforcement
    and conservation costs to a single fisher.
    24                      MARILLEY V. BONHAM
    higher than resident fees); 
    Toomer, 334 U.S. at 389
    (striking
    down nonresident fees one hundred times higher than resident
    fees). And they urge us to rely on the ratio of nonresident to
    resident fees here (roughly three to one)8 to reject the “fair
    share” analysis. Plaintiffs’ argument is flawed for two
    reasons.
    First, the Supreme Court did not reject the differential
    fees because of the size of the ratio. Rather, it rejected the
    nonresident fees because Alaska and South Carolina had
    failed to show any connection between the differential and
    state spending on services to the nonresidents. See 
    Mullaney, 342 U.S. at 418
    & n.1 (rejecting the state’s argument that the
    differential fees merely compensated the state for
    enforcement against nonresidents because the state had not
    calculated the cost of that enforcement and the total amount
    of differential fees collected “may easily have exceeded the
    entire amount available for administration” of the office in
    charge of enforcement); 
    Toomer, 334 U.S. at 398
    (noting that
    “[n]othing in the record indicate[d] . . . that any substantial
    amount of the State’s general funds [was] devoted to shrimp
    conservation” and that, even if there had been such evidence,
    it “would not necessarily support a remedy so drastic as to be
    a near equivalent of total exclusion”).
    Second, focusing on the size of the ratio requires
    consideration of fees in a vacuum. That isolation makes little
    sense in light of the Supreme Court’s statement that a state
    may charge a fee designed to “compensate [it] for any added
    8
    The ratio of nonresident fees to resident fees for commercial fishing
    licenses and commercial boat registrations is three to one. For dungeness
    crab vessel permits, the ratio is lower (two to one); and for herring gill net
    permits, the ratio is higher (nearly four to one).
    MARILLEY V. BONHAM                       25
    enforcement burden [nonresidents] may impose or for any
    conservation expenditures from taxes which only residents
    pay.” 
    Toomer, 334 U.S. at 399
    . In Salorio, the tax at issue
    applied only to nonresidents. On appeal after remand, the
    New Jersey Supreme Court ultimately invalidated the
    tax—but not because the nonresident-to-resident ratio was too
    high. The problem was that, during a period of two decades,
    the revenues collected by the state through the tax had
    exceeded the costs attributable to nonresidents by a factor of
    more than two. Salorio v. Glaser, 
    461 A.2d 1100
    , 1107 (N.J.
    1983). Focus on the size of the ratio per se is misplaced; the
    privileges and immunities inquiry requires consideration of
    all taxes and fees paid by residents and nonresidents in
    support of commercial fishing.
    Because it applied a different test, the district court did
    not address whether the net general fund outlay benefits only
    licensees, whether that outlay derives solely from taxes that
    only residents pay, or what portion of qualifying costs is
    properly allocable to nonresident fishers. Thus, on the
    current record, I would hold that we cannot determine
    whether the differential fees are permissible under the
    Privileges and Immunities Clause. Accordingly, I would
    reverse the summary judgment of the district court and
    remand for further proceedings.