Kevin Marilley v. Charlton Bonham ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KEVIN MARILLEY; SALVATORE No. 13-17358
PAPETTI; SAVIOR PAPETTI, on
behalf of themselves and D.C. No.
similarly situated, 4:11-cv-02418-DMR
Plaintiffs-Appellees,
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 En Banc June 21, 2016
San Francisco, California
Filed December 21, 2016
2 MARILLEY V. BONHAM
Before: Sidney R. Thomas, Chief Judge, and Stephen
Reinhardt, Kim McLane Wardlaw, William A. Fletcher,
Marsha S. Berzon, Milan D. Smith, Jr., Mary H. Murguia,
Jacqueline H. Nguyen, Andrew D. Hurwitz, John B.
Owens, and Michelle T. Friedland, Circuit Judges.
Opinion by Judge W. Fletcher;
Dissent by Judge Milan D. Smith, Jr.;
Dissent by Judge Reinhardt
SUMMARY*
Civil Rights
The en banc court reversed the district court’s summary
judgment in favor of plaintiffs and remanded for the district
court to enter summary judgment for California in an action
brought by a class of nonresident commercial fishers
challenging California’s nonresident fee differential for four
commercial fishing licenses, vessel registration and permits.
The en banc court first held that California’s fee
differentials for commercial fishing vessel registrations,
fishing licenses, Dungeness crab permits, and herring gill
net permits fell within the purview of the Privileges and
Immunities Clause. The en banc court determined that
whether the calculation was made at the general level of all
nonresident commercial fishers, or at the specific level of
nonresident commercial fishers for Dungeness crab and
*
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
herring, the fee differentials charged by California were less
than the amount by which California subsidized the
management of the nonresidents’ portions of its commercial
fishery. The en banc court therefore held that the fee
differentials survived the Privileges and Immunities Clause
challenge because the differentials were justified by a
substantial reason that was closely related to the differential
fees.
The en banc court held that the fees survived an Equal
Protection Clause challenge because California’s interest in
receiving compensation for its commercial fishery
management provided a “rational basis” for its fee
differentials.
Dissenting, Judge M. Smith, joined in full by Hurwitz and
Owens and by Reinhardt and Berzon as to Part III, stated the
majority assumed away the major defect in its analysis: the
fact that nonresident fishermen pay multiple California taxes
too, yet nonetheless commence each fishing season thousands
of dollars in the hole by virtue of California’s discriminatory
differentials. In Judge M. Smith’s view, the fee differentials
are illegal under the Privileges and Immunities Clause.
Dissenting, Judge Reinhardt, joined by Judge Berzon,
concurred in Part III of Judge M. Smith’s dissent and agreed
that California failed to carry its burden of demonstrating that
the differential fees it charges to nonresidents were closely
drawn to the achievement of a substantial state objective.
4 MARILLEY V. BONHAM
COUNSEL
M. Elaine Meckenstock (argued) and Gary Alexander,
Deputy Attorneys General; Annadel A. Almendras,
Supervising Deputy Attorney General; Robert W. Byrne,
Senior Assistant Attorney General; Kamala D. Harris,
Attorney General; Office of the Attorney General, Oakland,
California; for Defendant-Appellant.
Stuart G. Gross (argued) and Jared M. Galanis, Gross Law,
San Francisco, California; Todd R. Gregorian and Tyler A.
Baker, Fenwick & West LLP, Mountain View, California; for
Plaintiffs-Appellees.
OPINION
W. FLETCHER, Circuit Judge:
California charges nonresident commercial fishers higher
fees for vessel registrations, licenses, and permits than it
charges resident commercial fishers. A certified class of
nonresident commercial fishers challenges the fee
differentials under the Privileges and Immunities Clause and
the Equal Protection Clause. We hold that California’s fee
differentials do not violate either clause.
I. Background
California requires both resident and nonresident
commercial fishers to register their vessels and to purchase
licenses and permits in order to engage in commercial fishing
in the waters of the state. See Cal. Fish & Game Code
§§ 7852, 7881 (2013). For many years, California has
MARILLEY V. BONHAM 5
managed its commercial fishery at a substantial loss. See Cal.
Fish & Game Code §§ 710.5(a), 710.7(a)(1) (2007). In Fiscal
Year (FY) 2010–11, the year for which we have the most
extensive documentation in the record, California’s
Department of Fish and Game spent approximately $20
million managing its commercial fishery. In the same year,
California received approximately $5.8 million in
fees—including registration, license, and permit fees paid by
residents and nonresidents—from participants in its
commercial fishing industry. The approximately $14 million
shortfall was covered by California’s general tax revenues.
California has statutorily mandated fees for commercial
fishing vessel registrations, licenses, and permits. See Cal.
Fish & Game Code §§ 713, 7852, 7881, 8280.6, 8550.5. Fees
are adjusted annually based on inflation. Beginning in 1986,
California charged nonresidents more than residents for
certain commercial fishing registrations, licenses, and
permits. In 1986, California for the first time charged
nonresidents more than residents for herring gill net permits.
In 1993, California for the first time charged nonresidents
more for commercial fishing vessel registrations and
commercial fishing licenses. In 1995, California for the first
time charged nonresidents more for Dungeness crab permits.
In license year 2010, the fees for resident and nonresident
commercial fishers were as follows:
Commercial fishing vessel registration:
Resident: $317.00
Nonresident: $951.50
6 MARILLEY V. BONHAM
Commercial fishing license:
Resident: $120.75
Nonresident: $361.75
Dungeness crab vessel permits:
Resident: $254.00
Nonresident: $507.50
Herring gill net permits:
Resident: $336.00
Nonresident: $1,269.00
Cal. Dep’t Fish & Game, Digest of California Commercial
Fishing Laws and Licensing Requirements (2010).
Dungeness crab and herring were (and are) limited entry
fisheries for which a limited number of permits was (and is)
available.
Depending on the activity in question, a commercial
fisher in California could be required to pay several fees. For
example, a fishing vessel owner who personally engaged in
fishing for herring was required to pay a vessel registration
fee, a commercial fishing license fee, and a herring gill net
permit fee. For a California resident holding a single permit,
the total cost in 2010 would have been $773.75. For a
nonresident, the total cost would have been $2,582.25, or 3.3
times as much as for a resident. A vessel owner who
personally engaged in fishing for Dungeness crab was
required to pay a vessel registration fee, a commercial fishing
license fee, and a Dungeness crab permit fee. For a
California resident, the total cost in 2010 would have been
$691.75; for a nonresident, the total cost would have been
$1,820.75, or 2.6 times as much as for a resident. Of the
approximately $5.8 million in fees paid to California in FY
MARILLEY V. BONHAM 7
2010–11 by the commercial fishing industry, approximately
$435,000 came from fee differentials paid by nonresidents.
Plaintiffs, a class of nonresident commercial fishers,
challenge the four nonresident fee differentials—for
commercial fishing vessel registrations, commercial fishing
licenses, Dungeness crab permits, and herring gill net
permits. Plaintiffs brought a class action in district court
against California’s Director of the Department of Fish and
Game (for convenience, “California”), challenging the fee
differentials as violating the dormant Commerce Clause, the
Privileges and Immunities Clause, and the Equal Protection
Clause. Plaintiffs voluntarily dismissed their dormant
commerce clause claim. The parties filed cross-motions for
summary judgment on the remaining two claims. The district
court ruled for the plaintiff class on its privileges and
immunities claim, did not reach its equal protection claim,
and entered judgment under Federal Rule of Civil Procedure
54(b). California appealed the grant of Plaintiffs’ motion for
summary judgment and the denial of its own motion for
summary judgment. A divided three-judge panel of this court
affirmed. Marilley v. Bonham, 802 F.3d 958 (9th Cir. 2015).
We granted rehearing en banc. Marilley v. Bonham, 815 F.3d
1178 (9th Cir. 2016).
For the reasons that follow, we reverse the grant of
summary judgment to Plaintiffs. We remand with directions
to grant summary judgment to California.
II. Standard of Review
We review de novo a district court’s decision granting or
denying a motion for summary judgment. Rocky Mountain
8 MARILLEY V. BONHAM
Farmers Union v. Corey, 730 F.3d 1070, 1086 (9th Cir.
2013).
III. Discussion
A. Privileges and Immunities
Article IV, Section 2, clause 1, of the Constitution
provides that “[t]he Citizens of each State shall be entitled to
all Privileges and Immunities of Citizens in the several
States.” The Clause’s “primary purpose . . . was to help fuse
into one Nation a collection of independent, sovereign
States.” Toomer v. Witsell, 334 U.S. 385, 395 (1948). The
Clause “establishes a norm of comity” between citizens of
separate states. Austin v. New Hampshire, 420 U.S. 656, 660
(1975).
A challenge under the Privileges and Immunities Clause
entails “a two-step inquiry.” Sup. Ct. of Va. v. Friedman,
487 U.S. 59, 64 (1988); United Bldg. and Constr. Trades
Council v. Camden, 465 U.S. 208, 218 (1984); see also
Council of Ins. Agents & Brokers v. Molasky-Arman,
522 F.3d 925, 934 (9th Cir. 2008). At step one, the plaintiff
bears the burden of showing that the challenged law “fall[s]
within the purview of the Privileges and Immunities Clause.”
Friedman, 487 U.S. at 64 (quoting Camden, 465 U.S. at
221–22); see also Schoenefeld v. Schneiderman, 821 F.3d
273, 279 (2d Cir. 2016) (quoting Friedman, 487 U.S. at 64).
If the plaintiff makes the required step-one showing, at step
two the burden shifts to the state to show that the challenged
law is “closely related to the advancement of a substantial
state interest.” Friedman, 487 U.S. at 65 (citing Sup. Ct. of
N.H. v. Piper, 470 U.S. 274, 284 (1985)); see also
MARILLEY V. BONHAM 9
Schoenefeld, 821 F.3d at 279 (quoting Friedman, 487 U.S. at
67).
We address these two steps in turn.
1. Purview of the Clause
The “threshold matter” in any Privileges and Immunities
Clause case is whether a challenged law “fall[s] within the
purview” of the Clause. Camden, 465 U.S. at 218 (quoting
Baldwin v. Mont. Fish & Game Comm’n, 436 U.S. 371, 388
(1978)). A plaintiff must show that the challenged law treats
nonresidents differently from residents and impinges upon a
“fundamental” privilege or immunity protected by the Clause.
Camden, 465 U.S. at 218. Because California charges higher
fees to nonresident commercial fishers, see Cal. Fish & Game
Code §§ 7852, 7881, 8280.6, 8550.5, we easily conclude that
Plaintiffs’ interests are “facially burdened.” McBurney v.
Young, 133 S. Ct. 1709, 1715 (2013); see also Hillside Dairy
Inc. v. Lyons, 539 U.S. 59, 66–67 (2003); Carlson v. State,
798 P.2d 1269, 1274 (Alaska 1990) (“[L]icense fees which
discriminate against nonresidents are prima facie a violation
of [the Privileges and Immunities Clause].”). Further, an
unbroken line of authority characterizes commercial fishing
as a “common calling” that is protected by the Privileges and
Immunities Clause. See Mullaney v. Anderson, 342 U.S. 415,
417–19 (1952) (striking down Alaska’s differentials for
commercial fishing licenses as violating the Privileges and
Immunities Clause); Toomer, 334 U.S. at 403 (“[C]ommercial
shrimping in the marginal sea, like other common callings, is
within the purview of the privileges and immunities clause.”);
Connecticut ex rel. Blumenthal v. Crotty, 346 F.3d 84, 96 (2d
Cir. 2003) (holding that “commercial lobstering” falls within
the purview of the Privileges and Immunities Clause);
10 MARILLEY V. BONHAM
Tangier Sound Waterman’s Ass’n v. Pruitt, 4 F.3d 264, 266
(4th Cir. 1993) (explaining that commercial fishing is a
“protected privilege” because it implicates “‘the right to earn
a living’” (quoting Toomer, 344 U.S. at 403)); Carlson,
798 P.2d at 1274 (“Commercial fishing is a sufficiently
important activity to come within the purview of the
Privileges and Immunities Clause.”).
We therefore conclude that California’s challenged fee
differentials fall within the purview of the Privileges and
Immunities Clause.
2. Closely Related to the Advancement of a Substantial
State Interest
a. Commercial Fishing Fees and State Subsidy
California’s differential fees for nonresident fishers have
not reduced the percentage of nonresidents obtaining permits.
In license year 1986, the year differential fees were
introduced for herring gill net permits, nonresidents held
17.5% of these permits in California. In license year 2012,
the most recent year for which we have information in the
record, nonresidents held 19% of these permits. In license
year 1993, the year differential fees were introduced for
commercial fishing vessel registrations and commercial
fishing licenses, nonresident commercial fishers held 7.2% of
all commercial fishing vessel registrations and 6.6% of all
commercial fishing licenses in California. In license year
2012, nonresident commercial fishers registered 9.4% of all
commercial fishing vessel registrations and 12.9% of all
commercial fishing licenses in California. In license year
1995, the year differential fees were charged for Dungeness
MARILLEY V. BONHAM 11
crab permits, nonresidents held 9.8% of these permits. In
license year 2012, nonresidents held 13.9% of these permits.
According to a declaration of Tony Warrington, Assistant
Chief of the Law Enforcement Division of California’s
Department of Fish and Game (“DFG”) (now the Department
of Fish and Wildlife), a “reasonable and conservative
estimate” of commercial fishing enforcement expenditures by
the Law Enforcement Division in FY 2010–11 is
$10,320,963. According to a declaration of Helen Carriker,
Deputy Director of Administration of DFG, additional FY
2010–11 expenditures by the License and Revenue Branch of
DFG and by the Marine Region of DFG were $9,499,000.
Carriker states, however, that these numbers do “not capture
all of DFG’s commercial fishing costs,” and that “all DFG
programs benefit commercial fishermen in some way.”
These numbers also do not include fishing-related
conservation expenditures by other California agencies, such
as the California Coastal Commission. Based on the numbers
provided by Warrington and Carriker, a conservative estimate
is that California spent approximately $20,000,000 in FY
2010–11 on enforcement, management, and conservation
activities benefitting commercial fishers.
Warrington estimated the FY 2010–11 expenditures by
the Law Enforcement Division of DFG attributable to the
Dungeness crab fishery as $921,394, and attributable to the
herring gill net fishery as $75,094. He noted, however, that
these numbers “likely underestimate the enforcement costs
for these two fisheries” because not all personnel costs (in
terms of both numbers of people and numbers of overtime
hours) were included, and because some equipment expenses
were not included. Carriker estimated the FY 2010–11
expenditures by the License and Revenue Branch of DFG
12 MARILLEY V. BONHAM
attributable to the Dungeness crab fishery as $83,921, and
attributable to the herring gill net fishery as $97,431.
According to a declaration by Marci Yaremko,
Environmental Program Manager for DFG, FY 2010–11
expenditures by the Marine Region of DFG attributable to the
Dungeness crab fishery were “at least” $109,797, and
attributable to the herring gill net fishery were “at least”
$285,981. Combining the expenditures by the Law
Enforcement Division, the License and Revenue Branch, and
the Marine Region, in FY 2010–11 California’s DFG spent at
least $1,115,112 attributable to the Dungeness crab fishery
and at least $458,506 attributable to the herring gill net
fishery.
During FY 2010–11, California residents registered 2,812
commercial fishing vessels; nonresidents registered 304
vessels. Nonresidents’ vessels thus accounted for
approximately 10% of the total registrations in that year.
California residents purchased 5,618 commercial fishing
licenses; nonresidents purchased 775 licenses. Nonresidents
accounted for approximately 12% of the total licenses.
California residents paid the yearly fee for 500 Dungeness
crab permits; nonresidents paid the fee for 76 permits.
Nonresidents accounted for approximately 13% of the total
Dungeness crab permits. California residents paid the yearly
fee for 180 herring gill net permits; nonresidents paid the fee
for 39 permits. Nonresidents accounted for approximately
18% of the total herring gill net permits.
During FY 2010–11, California received, from residents
and nonresidents, a total of approximately $2,415,000 for
commercial vessel registrations, commercial fishing licenses,
Dungeness crab permits, and herring gill net permits. Of that
amount, approximately $435,000 was due to fee differentials
MARILLEY V. BONHAM 13
paid by nonresident fishers. Broken down by category, the
fee differentials were approximately $193,000 for
commercial fishing boat registrations; approximately
$187,000 for commercial fishing licenses; approximately
$19,000 for Dungeness crab permits; and approximately
$36,000 for herring gill net permits.
Overall, during FY 2010–11 California received
approximately $5,800,000 in commercial fishing revenues,
including revenues from resident and nonresident fishing
vessel registrations, fishing licenses, Dungeness crab permits,
and herring gill net permits. Using $20,000,000 as the
conservative estimate of California’s overall commercial
fishery expenditures, the FY 2010–11 shortfall was slightly
over $14,000,000. If we exclude from the calculation fee
differentials paid by nonresidents, the shortfall in FY
2010–11 was approximately $14,435,000. The shortfall was
covered by California’s general tax revenues. This shortfall
was a subsidy, or benefit, provided by California taxpayers to
the commercial fishing industry in California. The question
before us is whether, or to what degree, nonresident
commercial fishers may be required to pay differential fees to
account for their proportionate share of that subsidy, or
benefit.
b. Advancement of a Substantive State Interest
i. State Expenditures and Compensation by Nonresidents
(a) State Expenditures
The Supreme Court has decided two cases in which
differential fees were charged to nonresident commercial
fishers. First, in Toomer v. Witsell, 334 U.S. 385 (1948),
14 MARILLEY V. BONHAM
South Carolina charged a license fee of $25 for commercial
shrimp boats owned by state residents. It charged a license
fee of $2,500—one hundred times greater—to commercial
shrimp boats owned by nonresidents. Id. at 389. The Court
wrote that “South Carolina plainly and frankly discriminates
against non-residents, and the record leaves little doubt but
what the discrimination is so great that its practical effect is
virtually exclusionary.” Id. at 396–97; see also id. at 398
(noting “a near equivalent of total exclusion”). The Court
struck down the fee differential as a violation of the
Privileges and Immunities Clause. Id. at 403. The Court was
careful, however, to endorse differential fees that were
compensation or reimbursement for state-provided benefits as
to which nonresidents would otherwise be free riders. The
Court wrote that the Clause allows a state “to charge non-
residents a differential which would merely compensate the
State for any added enforcement burden they may impose or
for any conservation expenditures from taxes which only
residents pay.” Id. at 399.
Second, in Mullaney v. Anderson, 342 U.S. 415 (1952),
the Tax Commissioner of Alaska charged a commercial
fishing license fee of $5 to residents and a $50 fee—a ten
times greater fee—to nonresidents. Alaska sought to justify
the fee differential based on enforcement costs attributable to
nonresident commercial fishers, but the record did not
support its attempted justification. Indeed, wrote the Court,
the Tax Commissioner and his Deputy “specifically
disclaimed any knowledge of the dollar cost of enforcement.”
Id. at 418. Applying the Privileges and Immunities Clause to
a Territory (as Alaska then was), the Court struck down the
fee differential. The Court quoted the language from Toomer
endorsing differential fees that prevent nonresidents from free
riding on state-provided enforcement and conservation
MARILLEY V. BONHAM 15
efforts, id. at 417, and the Court was careful to say that
precise cost and reimbursement figures were not required in
order to justify differential fees, id. at 418 (“Constitutional
issues affecting taxation do not turn on even approximate
mathematical determinations.”).
To justify the fee differentials challenged in this case,
California points to the approximately $14 million yearly
shortfall in its expenditures in managing its commercial
fishery. As noted above, without the revenue produced by the
fee differentials, the yearly shortfall would be an additional
$435,000. California contends that the fee differentials
charged to nonresident commercial fishers appropriately
compensate it for costs incurred in enforcement and
conservation efforts attributable to nonresidents as their
proportionate share, and that the fee differentials reduce
(though do not entirely eliminate) the free-rider problem that
would otherwise exist.
On several occasions, the Supreme Court has stated that
a state’s expenditures may justify discrimination against
nonresidents that would otherwise be impermissible under the
Privileges and Immunities Clause. As just noted, the Court
stated in Toomer and Mullaney that a state may charge
differential fees to nonresident commercial fishers in order to
recover the state’s expenditures in enforcement and
conservation measures that are attributable to the
nonresidents. In Camden, a municipal ordinance required
that at least forty percent of workers employed on city
construction projects be residents of Camden, New Jersey.
The Court wrote, “The fact that Camden is expending its own
funds or funds it administers in . . . terms of a grant is
certainly a factor—perhaps the crucial factor—to be
considered in evaluating whether the statute’s discrimination
16 MARILLEY V. BONHAM
violates the Privileges and Immunities Clause.” Camden,
465 U.S. at 221.
The Court’s decisions under the Commerce Clause make
much the same point about state expenditures. Commerce
Clause decisions are relevant to the Privileges and
Immunities Clause because the two clauses share the same
underlying concerns. See, e.g., Hicklin v. Orbeck, 437 U.S.
518, 531–32 (1978) (“[T]he mutually reinforcing relationship
between the Privileges and Immunities Clause . . . and the
Commerce Clause—a relationship that stems from their
common origin in the Fourth Article of the Articles of
Confederation and their shared vision of federalism . . .
—renders several Commerce Clause decisions appropriate
support for our conclusion [under the Privileges and
Immunities Clause].” (internal citation omitted)). In Reeves,
Inc. v. Stake, 447 U.S. 429 (1980), South Dakota built and
owned its own cement plant. When demand for cement
exceeded supply, South Dakota instituted a policy of
satisfying all orders from South Dakota customers first,
relegating out-of-state customers to the end of the line. The
Court sustained the policy against a dormant Commerce
Clause challenge, writing:
The State’s refusal to sell to buyers other than
South Dakotans is “protectionist” only in the
sense that it limits benefits generated by a
state program to those who fund the state
treasury and whom the State was created to
serve . . . . Such policies, while perhaps
“protectionist” in a loose sense, reflect the
essential and patently unobjectionable purpose
of state government—to serve the citizens of
the State.
MARILLEY V. BONHAM 17
Id. at 442. Similarly, in McBurney v. Young, 133 S. Ct. 1709
(2013), the Supreme Court rejected a dormant Commerce
Clause challenge to a Virginia Freedom of Information Act
provision under which only Virginia residents were allowed
to compel production of state government documents. Citing
Reeves, the Court wrote, “Insofar as there is a ‘market’ for
public documents in Virginia, it is a market for a product that
the Commonwealth has created and of which the
Commonwealth is the sole manufacturer.” Id. at 1720. The
Court therefore held that Virginia could reserve for its
citizens the benefits of the product it had created through the
expenditure of state funds.
(b) Compensation by Nonresidents for State-provided
Benefits
The core principle of the foregoing cases is that when a
state makes an expenditure from a fund to which nonresidents
do not contribute, and when the state provides a benefit
through that expenditure to both residents and nonresidents,
the state may exclude nonresidents from the benefit either in
whole or in part, or it may seek compensation from
nonresidents for the benefit conferred. When the benefit at
issue is access to a natural resource, the state may not exclude
nonresidents, but it may seek reimbursement for money spent
to manage and preserve the resource. In such cases, as the
Court wrote in Toomer, the Privileges and Immunities Clause
allows a state “to charge non-residents a differential which
would merely compensate the State for any added
enforcement burden they may impose or for any conservation
expenditures from taxes which only residents pay.” Toomer,
334 U.S. at 399.
18 MARILLEY V. BONHAM
Several related principles come from these same cases.
First, the benefit provided to a nonresident, and the
appropriate amount of compensation from the nonresident,
need not be determined with mathematical precision. The
constitutional question “do[es] not turn on even approximate
mathematical determinations.” Mullaney, 342 U.S. at 418.
Second, we accord states deference in determining the benefit
provided and the appropriate amount of compensation. A
privileges and immunities inquiry “must . . . be conducted
with due regard for the princip[le] that the States should have
considerable leeway in analyzing local evils and in
prescribing appropriate cures.” Toomer, 334 U.S. at 396.
Third, in seeking compensation from nonresidents, a state
must treat nonresidents and residents with “substantial
equality.” Id. at 396 (“[I]t was long ago decided that one of
the privileges which the [Privileges and Immunities Clause]
guarantees to citizens of State A is that of doing business in
State B on terms of substantial equality with the citizens of
that State.”).
Consistent with these principles, we may calculate at a
general level the benefit provided by California and the
appropriate compensation from nonresident fishers.
California spent approximately $20,000,000 managing its
commercial fishing industry in FY 2010–11. Not including
the fee differentials paid by nonresident fishers, California
received a total amount of approximately $5,365,000 in fees
from the commercial fishing industry. This amount includes
all fees, not limited to commercial fishing license fees,
commercial fishing vessel registration fees, Dungeness crab
permits, and herring gill net permits. Of that total amount
(again excluding the amount paid in fee differentials),
approximately $1,980,000 came from registration, license,
and permit fees paid by commercial fishers. The remaining
MARILLEY V. BONHAM 19
approximately $3,385,000 came from fish landing taxes and
from licensing fees paid by fish buyers, sellers, and
importers. The shortfall in revenues (excluding nonresident
differentials) in FY 2010–11 was approximately $14,635,000,
or approximately 73% of the entire amount spent by
California in managing its commercial fishery. The shortfall
was a subsidy, or benefit, provided by California to its
commercial fishing industry, paid by California taxpayers.
All commercial fishers in California—residents and
nonresidents alike—benefited from this subsidy.
We will assume, as a rough estimate, that commercial
fishers as a whole benefited from the states’ subsidy in
proportion to the amount they paid in fees. Excluding fee
differentials, the amount paid to California by commercial
fishers ($1,980,000) was 37% of the total amount paid to
California by the entire commercial fishing industry
($5,365,000). Thirty-seven percent of the state’s $14,635,000
subsidy is approximately $5,341,000. That amount went to
commercial fishers as their proportionate share of the subsidy
in FY 2010–11. Nonresident commercial fishers in
California were 12% of all commercial fishers in FY
2010–11. Twelve percent of the $5,341,000 subsidy that
went to all commercial fishers is approximately $641,000.
California could have charged up to that amount to
nonresident fishers in FY 2010–11, as their proportionate
share of the subsidy, or benefit, provided to them by
California out of its general fund. In actual fact, nonresident
fishers paid a total of $435,000 in fee differentials in FY
2010–11, substantially less than the amount of their
proportionate share of the subsidy, or benefit, provided to
them by California.
20 MARILLEY V. BONHAM
We may also calculate the subsidies provided to the two
specific fisheries for which California charges fee
differentials—Dungeness crab and herring. As described
above, in FY 2010–11 California’s DFG spent approximately
$1,115,000 attributable to the Dungeness crab fishery and
approximately $460,000 attributable to the herring fishery.
As noted above, the overall subsidy provided by California to
its commercial fishery is 73% of California’s total
expenditures for managing its commercial fishery. We will
assume, as a rough estimate, that 73% of the amount spent on
the Dungeness crab and herring fisheries is the amount by
which those specific fisheries were subsidized in FY
2010–11.
Seventy-three percent of the subsidy provided to the
Dungeness crab fishery is approximately $814,000.
Nonresidents were 13% of the Dungeness crab permit holders
in FY 2010–11. Thirteen percent of $814,000 is
approximately $106,000, which is the proportionate share of
the subsidy provided to nonresident Dungeness crab fishers
in FY 2010–11. The differential fee charged to nonresident
Dungeness crab fishers in FY 2010–11 was approximately
$19,000, substantially less than the $106,000 subsidy, or
benefit, provided to them.
Seventy-three percent of the subsidy provided to the
herring fishery is approximately $335,000. Nonresidents
were 18% of the herring gill net permit holders in FY
2010–11. Eighteen percent of $335,000 is approximately
$60,000. The differential fee charged to nonresident herring
gill net fishers in FY 2010–11 was $36,000, substantially less
than the $60,000 subsidy, or benefit, provided to them.
MARILLEY V. BONHAM 21
Thus, whether the calculation is made at the general level
of all nonresident commercial fishers, or at the specific level
of nonresident commercial fishers for Dungeness crab and
herring, the fee differentials charged by California are less
than the amount by which California subsidizes the
management of the nonresidents’ portions of its commercial
fishery.
In contrast to the fee differential charged in Toomer,
California commercial fishing differentials are not “virtually
exclusionary.” Toomer, 334 U.S. at 397. Indeed, quite the
contrary. As the numbers given above demonstrate, the
percentages of nonresident fishing vessel registrations,
nonresident commercial fishing licenses, nonresident
Dungeness crab permits, and nonresident herring gill net
permits have all increased since the institution of differential
fees for nonresidents. Further, in contrast to the fee
differentials in Toomer and Mullaney, the multiples of the
fees charged to residents are relatively modest. In Toomer,
South Carolina charged nonresident shrimpers one hundred
times what it charged residents. In Mullaney, Alaska charged
nonresident fishers ten times what it charged residents. In
California, the multiples ranged from about two to slightly
less than four.
We therefore conclude that the fee differentials charged
by California are permitted under the Privileges and
Immunities Clause.
ii. California Taxes Paid by Nonresident Fishers
The above analysis is premised on the nonresident fishers
in this case not having paid “taxes which only [California]
residents pay.” Toomer, 334 U.S. at 399. Plaintiffs did not
22 MARILLEY V. BONHAM
argue in the district court or in their briefs to us that they have
paid California income tax on their earnings from commercial
fishing in California, and that they are therefore protected by
the Privileges and Immunities Clause from having to pay fee
differentials. Plaintiffs made this argument for the first time
during oral argument before our en banc panel. Our
dissenting colleagues use Plaintiffs’ late-raised argument as
the central rationale of their dissent. We could hold
Plaintiffs’ argument waived for failure to raise it in the
district court and for failure to raise it in their briefs to us.
However, we address it on the merits, for there is enough
uncontested information in the record to allow us to consider
and reject it. Because we reject the argument, there is no
unfairness to California resulting from Plaintiffs’ failure to
raise it until oral argument before our en banc panel.
If Plaintiffs paid more than de minimus income tax to
California, such that they should be assimilated, either
entirely or in part, to California resident taxpayers for
purposes of the Privileges and Immunities Clause, we would
have to modify our analysis. However, we do not need to do
so because the three named plaintiffs have paid either no or
minimal California income tax. One of the named plaintiffs
has fished commercially in California for many years and has
never paid California income tax. The other two named
plaintiffs have fished commercially in California for many
years; each has paid income taxes in California for only three
of those years.
Named plaintiff Savior Papetti lives in McKinney, Texas.
He owns two commercial fishing boats. He uses one of them
to fish in Alaska. He has kept the other boat in San Francisco
since 2000. He does not own any herring gill net permits, but
has fished regularly for herring in California, missing only a
MARILLEY V. BONHAM 23
few years, by leasing permits from others. He has fished for
Dungeness crab regularly since 2006 except for a “couple [of]
years.” He stated in his deposition that he has filed California
tax returns “every year.” He specifically stated that he has
not paid California income tax since 1992. There is nothing
in the record to indicate that he paid California income taxes
before 1992.
Named plaintiff Salvatore Papetti, Savior’s father, lives
in Bellingham, Washington. He states in his deposition that
he has worked as a commercial fisherman since 1963. He
owns two commercial fishing boats. He keeps one of them in
Alaska. He now uses it to fish for salmon, but in the past has
used it to fish for Dungeness crab and herring in California.
At the time of his deposition, his other boat was in
Washington for repairs. He uses that boat to fish for herring
in Alaska and in California, and for salmon in Washington.
He fished for Dungeness crab in California as late as 2007.
About five or six years ago, he sold his crab permit to his son
Savior. He has never missed a herring season in California
except the year the season was closed due to an oil spill in
San Francisco Bay. He has filed California income tax
returns “every year,” but has paid income taxes to California
in only three of those years. He paid $331 in 2004, $652 in
2009, and $2,273 in 2010.
Finally, named plaintiff Kevin Marilley lives in Lynden,
Washington. He has worked as a commercial fisherman since
1974. He owns three commercial fishing boats. He keeps
two in Alaska and uses them to fish there. He keeps the third
boat in Bellingham, Washington, and uses it to fish for
salmon in Alaska and herring in California. He fished for
squid and herring in California between 1989 and 2005, and
fished for squid in California in 2009. He regularly fished for
24 MARILLEY V. BONHAM
herring in California through 2007. He stated in his
deposition that he intended to fish for herring in California in
2013. He stated in his deposition that he “believe[d]” he filed
a California tax return for every year he fished in California
up through 2003. The last time he filed a tax return in
California was 2003. He paid income tax in California in
only three years. He paid $153 in 1994, $3,161 in 1995, and
$845 in 1996. He last paid California income tax twenty
years ago.
Our dissenting colleagues do not ask to alter our analysis
based on the non-existent or minimal California income taxes
paid by the three named plaintiffs. Rather, they ask us to do
so based on an unsupported assumption that unnamed class
members paid substantially more in California income taxes
than did the named plaintiffs.
The record contains no evidence of California income
taxes paid by any of the unnamed class members. Attorneys
for the plaintiff class had an opportunity in the district court
to present evidence of California income taxes paid by
unnamed class members, but they failed to present any such
evidence. Nor did they make any argument in the district
court based on payment of California income taxes by any
class member, named or unnamed. An assumption that
unnamed class members paid substantially more than the
named plaintiffs is inconsistent with the basic premises of
class certification. Federal Rule of Civil Procedure 23(a)(3)
requires that the “claims . . . of the representative parties [be]
typical of the claims . . . of the class.” That is, a claim by an
unnamed member of the class must match a “typical” claim
by a named plaintiff. In this case, there is no such “typical”
claim in the complaint because the named plaintiffs made no
claim whatsoever based on their payment of California
MARILLEY V. BONHAM 25
income taxes. Rule 23(a)(2) also requires that there be
“questions of law or fact common to the class.” If a claim
based on the payment of California income taxes had been
made in the district court (which it was not), that claim was
required to have been based on law or fact “common to the
class.” To the extent there were facts common to such a
claim, if it had been made, the only facts in evidence were
those recounted above.
In short, our dissenting colleagues ask us to make an
assumption, based on sheer speculation, that unnamed class
members paid substantially more in California income taxes
than did the named plaintiffs. We respectfully decline to
make that assumption.
B. Equal Protection
Plaintiffs also challenged California’s commercial fishing
fee differentials under the Equal Protection Clause. The
district court struck down the fee differentials as a violation
of the Privileges and Immunities Clause and did not reach the
equal protection question. We could remand to the district
court to address that question in the first instance, but in the
interest of judicial efficiency we decide the question
ourselves.
Because California’s commercial fishing fee differentials
do not “classify persons based on protected characteristics,
such as race, alienage, national origin, or sex” or “affect the
exercise of fundamental rights,” rational basis review applies.
Fields v. Legacy Health Sys., 413 F.3d 943, 955 (9th Cir.
2005); see also Country Classic Dairies, Inc. v. State of
Mont., Dep’t of Commerce Milk Control Bureau, 847 F.2d
593, 596 (9th Cir. 1988) (“[T]he right to pursue a calling is
26 MARILLEY V. BONHAM
not a fundamental right for purposes of the Equal Protection
Clause.” (citing New Orleans v. Dukes, 427 U.S. 297, 303–05
(1976) (per curiam))); see also Medeiros v. Vincent, 431 F.3d
25, 32 (1st Cir. 2005) (“The right to ‘make a living’ is not a
‘fundamental right,’ for either equal protection or substantive
due process purposes.”). Therefore, in order to succeed
Plaintiffs must “negat[e] every conceivable basis which might
support the legislative classification” between residents and
nonresidents. Fields, 413 F.3d at 955. As explained above,
California has a “substantial reason” for charging nonresident
differentials. It has an obvious interest in recovering from
nonresident commercial fishers their share of the benefit
provided to them by its management of its commercial
fishery. Congress has recognized this interest as legitimate.
See Pub. L. No. 109-13, § 6036(b)(1), 119 Stat. 231. But
even absent such congressional endorsement, California’s
interest in receiving compensation for the benefit its
management confers provides a “rational basis” for its fee
differentials.
Conclusion
We reverse the district court’s grant of summary
judgment to Plaintiffs. California’s fee differentials for
commercial fishing vessel registrations, fishing licenses,
Dungeness crab permits, and herring gill net permits survive
the Privileges and Immunities Clause challenge because the
differentials are justified by a substantial reason that is
closely related to the differential fees. The fees survive the
Equal Protection Clause challenge because California has a
rational basis for charging the differential fees. California is
MARILLEY V. BONHAM 27
therefore entitled to summary judgment on both of Plaintiffs’
claims. We remand with directions to the district court to
enter summary judgment for California.
REVERSED and REMANDED.
M. SMITH, Circuit Judge, with whom HURWITZ and
OWENS, Circuit Judges, join in full, and REINHARDT and
BERZON, Circuit Judges, join as to Part III, dissenting:
The majority assumes away the major defect in its
analysis: the fact that nonresident fishermen pay multiple
California taxes too, yet nonetheless commence each fishing
season thousands of dollars in the hole by virtue of
California’s discriminatory differentials. To avoid dealing
with this problem, the majority employs the analytical head
fake of fixating on the named plaintiffs and ignoring the rest
of the class. It then opines that the named plaintiffs’ tax
liability is de minimus, assumes that finding is representative,
and concludes that its analysis need go no further.
That approach is deeply flawed. Our analysis cannot
properly ignore the bevy of taxes nonresident fishermen pay
collectively to the State. Moreover, the majority improperly
transposes the evidentiary burden: it is California that must
demonstrate that the differentials recoup a subsidy funded
only by its residents. Hence, any purported lack of evidence
on the tax liability of nonresident fishermen counts against
the State, not the other way around. The majority shrugs this
off, and thereby fails to require California to bear the burden
the Privileges and Immunities Clause demands.
28 MARILLEY V. BONHAM
California, like the majority, overlooks how nonresident
taxes defray the costs of any subsidy for conservation, and
thereby fails to meet its burden to show its discrimination is
“closely drawn” to the achievement of a substantial state
objective. Sup. Ct. of Va. v. Friedman, 487 U.S. 59, 68
(1988). For that reason, I would affirm the district court’s
judgment in favor of the plaintiffs, and I respectfully dissent.
I.
Salvatore Papetti and his wife Nancy fish for herring
together in a two person team. They make the trip to San
Francisco from Bellingham, Washington, to fish on their
boat, the “Pacman.” It is tough work—“being on the ocean
day and night, your body wears out” because “when there’s
fish, you just got to go go go go . . . they’re here today and
they’re gone tomorrow. . . . You got to catch as much as you
can when you can.” They fish “five days a week, 24 hours a
day, Sunday sundown till Friday noon.” They land their
catch every day while the fish are still fresh to ensure the
bounty does not spoil.
They hold two commercial fishing licenses, three herring
gill net permits, and one commercial fishing vessel
registration. This would cost them $1566.50 in license fees
if they were California residents, using the majority’s
numbers from 2010. California, however, extracts $5482.00
from the Papettis, based simply on their status as
nonresidents. So, Salvatore and Nancy start the season with
a $3915.50 deficit, relative to their in-state competitors.
Adding insult to injury, every year it gets worse because
commercial fishing fees are automatically indexed for
inflation. Cal. Fish & Game Code § 713 (2013). The effect
MARILLEY V. BONHAM 29
of the indexing is to widen the gap between resident and
nonresident fishing license fees each season.
Savior Papetti—Nancy and Salvatore’s son—must endure
the same built-in headwinds. He registers a boat in
California, obtains a fishing license, and secures permits to
fish for herring and crab. But since he hails from McKinney,
Texas, he starts each season $2062.00 behind his California
resident competitors. Kevin Marilley is no different. He sets
sail on the “Sundance Kid” near San Francisco to fish for
herring. He registers his boat, obtains a fishing license, and
has three herring gill net permits, so he starts $3674.50 in the
red, unlike his California resident competitors. Frustrated by
the disadvantage, Marilley and the Papettis challenge four of
California’s differential fees under the Privileges and
Immunities Clause of the U.S. Constitution.
A.
The Privileges and Immunities Clause is one of the
cornerstones upon which our nation was built. Its origins add
an important perspective on the State’s burden in this dispute.
After the revolution, “[t]he strong sympathies . . . which
bound the States together during a common war, dissolved on
the return of peace.” Gibbons v. Ogden, 22 U.S. 1, 223
(1824) (Johnson, J. concurring). For the first time, the states
found themselves “in the unlimited possession of those
powers over their own commerce, which they had so long
been deprived of, and so earnestly coveted.” Id. at 224. State
parochialism “began to show itself in iniquitous laws and
impolitic measures, from which grew up a conflict of
commercial regulations, destructive to the harmony of the
States.” Id.
30 MARILLEY V. BONHAM
New York, for instance, obtained firewood from
Connecticut and goods from the farms of New Jersey, but
because such trade harmed domestic industry, the State
required “every Yankee sloop” and “Jersey market boat” to
pay an entrance fee and a duty. JOHN FISKE, THE CRITICAL
PERIOD OF AMERICAN HISTORY, 1783–1789 150S52 (1897).
New Jersey retaliated by laying a tax on property New York
had acquired in Sandy Hook. Id. at 152. Connecticut’s
merchants refused “to send any goods whatever into the hated
state for a period of twelve months.” Id. Yet, as three other
New England states “closed their ports to British shipping,”
Connecticut saw fit to “thr[ow] hers wide open, an act which
she followed up by laying duties upon imports from
Massachusetts.” Id. at 148S49. Connecticut’s practice of
“denying to outlanders the treatment that its citizens
demanded for themselves was widespread.” Austin v. New
Hampshire, 420 U.S. 656, 660 (1975). “This came to
threaten at once the peace and safety of the union.” H. P.
Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 533 (1949)
(internal quotation marks omitted).
The new country initially tried to solve the problem with
the toothless Articles of Confederation, which provided:
The better to secure and perpetuate mutual
friendship and intercourse among the people
of the different States in this Union, the free
inhabitants of each of these States . . . shall be
entitled to all privileges and immunities of
free citizens in the several States; and the
people of each State shall have free ingress
and regress to and from any other State, and
shall enjoy therein all the privileges of trade
and commerce, subject to the same duties,
MARILLEY V. BONHAM 31
impositions, and restrictions as the inhabitants
thereof . . . .
Art. IV. Since no state could unilaterally enforce this
provision, the economic interaction of the several states
became more and more fraught. Ultimately, this internecine,
economic fratricide became “the immediate cause[] that led
to the forming of a [constitutional] convention.” Gibbons,
22 U.S. at 224; see also KATHLEEN M. SULLIVAN & GERALD
GUNTHER, CONSTITUTIONAL LAW 82 (17th ed. 2010) (“The
poor condition of American commerce and the proliferating
trade rivalries among the states were the immediate
provocations for the calling of the Constitutional
Convention.”)
The Privileges and Immunities Clause was primarily
aimed at “creat[ing] a national economic union,” Sup. Ct. of
N.H. v. Piper, 470 U.S. 274, 279S80 (1985), and was taken
from the Articles of Confederation “with no change of
substance or intent, unless it was to strengthen the force of the
clause in fashioning a single nation,” Austin, 420 U.S. at 661.
It affirms “[t]he Citizens of each State shall be entitled to all
Privileges and Immunities of Citizens in the several States.”
U.S. Const. art. IV, § 2, cl. 1. Alexander Hamilton referred
to the Clause quite simply as “the basis of the Union.” The
Federalist No. 80, at 502 (B. Wright ed., 1961). It “place[d]
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. 168, 180 (1868). The Court found it gave outsiders
“an exemption from higher taxes or impositions than are paid
by the other citizens of the state.” Corfield v. Coryell,
6 F. Cas. 546, 552 (No. 3,230) (Cir. Ct. E.D. Pa. 1823). “It
has been justly said that no [other] provision in the
32 MARILLEY V. BONHAM
Constitution has tended so strongly to constitute the citizens
of the United States one people . . . .” Paul, 75 U.S. at 180.
B.
In light of this background, when states erect barriers that
impair our national economic unity, they bear a significant
burden of justification: laws implicating the Clause must
serve a “substantial state interest” and be “closely related” to
the advancement of that interest to be valid. Friedman,
487 U.S. at 65. A substantial interest does not exist “unless
there is something to indicate that non-citizens constitute a
peculiar source of the evil at which the [discriminatory]
statute is aimed.” Hicklin v. Orbeck, 437 U.S. 518, 525S26
(1978) (quotation marks omitted, brackets in original). States
of course do have some flexibility in prescribing appropriate
cures for local ills and, when levying fees, need not
demonstrate mathematical precision. See Toomer v. Witsell,
334 U.S. 385, 396 (1948). But citizens of State A must be
allowed to do business in State B “on terms of substantial
equality with the citizens of that State.” Id. (emphasis
added).
C.
The “evil” the fee differentials target in this case is the
potential for nonresidents to “free ride” on California’s
investment in its fisheries.1 The State’s valid interest thus lies
1
The California legislature never articulated this aim, but the State
insists the fee differentials were passed to close a budget gap. It is
undisputed that nonresident fishermen were never actually identified as a
unique source of any problem that would justify charging them a
differential. Additionally, as “the Clause forbids a State from intentionally
MARILLEY V. BONHAM 33
in seeking reimbursement for a benefit funded exclusively by
California residents. In this situation, California may exact
only “a differential which would merely compensate the State
for [1] any added enforcement burden [nonresidents] may
impose or [2] for any conservation expenditures from taxes
which only residents pay.” Toomer, 334 U.S. at 399
(emphasis added).2
giving its own citizens a competitive advantage in business or
employment,” it is appropriate to examine whether the differentials were
enacted for a protectionist purpose. McBurney v. Young, 133 S. Ct. 1709,
1716 (2013). Here, California’s enactment of the Dungeness crab fee
differential bears the hallmarks of economic protectionism. As the district
court observed, the California Assembly Committee on Water, Parks, and
Wildlife opposed an early version of the bill, noting it “provided[d] an
unfair advantage to the sponsors of the bill – the Pacific Coast Federation
of Fisherman [sic] [a resident fishermen advocacy group] – by making it
very difficult for any new crab fishers to obtain permits and enter the
market.” The Department of Fish and Game (“DFG”) later commented
“[t]his bill is an attempt to . . . control competition to California fishermen
and processors from out of state.” DFG’s enrolled bill report described
the legislation as “an industry sponsored bill to prevent out-of-state
commercial fishermen from moving into California and getting an undue
share of the California Dungeness crab resource.” When the fee was
renewed in 2006, Senate Republican analysis of the bill observed “where
resource management crosses the line into economic protectionism it
should be opposed . . . DFG should explore other management options that
focus on maintaining the crab population instead of the industry
population.”
2
The majority suggests that “a state’s expenditures may justify
discrimination against nonresidents.” Maj. Op. at 15. But the cases it
cites involve the Commerce Clause, not the Privileges and Immunities
Clause, and assume that nonresidents do not “fund the state treasury.”
Reeves, Inc. v. Stake, 447 U.S. 429, 224 (1980); McBurney v. Young,
133 S. Ct. 1709, 1712S13 (2013) (quoting Reeves, 447 U.S. at 224).
34 MARILLEY V. BONHAM
California elected to put all of its eggs in the second
basket, as it never asserted, much less provided any evidence,
that nonresident commercial fishermen impose any added
enforcement or management burden on the State.3 In
conducting our analysis, we thus look to the aggregate
benefits nonresident fishermen receive at the expense of
California’s taxpayers. To calculate that benefit, I will
leverage, but do not endorse, the majority’s handiwork.
The majority assumes the $20 million spent on licensing
and enforcement is akin to conservation. Maj. Op. at 18–19.
It then finds a $14,635,000 shortfall, after accounting for
$5,365,000 received in fees, not including differentials. Id.
Next, the majority assumes commercial fishermen benefitted
from the subsidy in proportion to the amount they paid in fees
($1,980,000 / $5,365,000).4 Id. That equals thirty-seven (37)
percent of the $14,635,000 shortfall, meaning fishermen were
subsidized to the tune of $5,341,000. Id. at 19. Since
nonresidents account for twelve percent of commercial
fishermen, the majority tags them with twelve percent of that
amount. Id. at 19. In other words, according to the majority,
nonresident fishermen received a $641,000 “subsidy.” Id.
This analysis fails because it assumes that the State’s
subsidy derives from “taxes which only residents pay,”
Toomer, 334 U.S. at 399, notwithstanding the fact that the
3
The State concedes it did not analyze the impact of nonresident
commercial fishermen on its fisheries generally, nor identify any savings
it would realize if nonresidents were excluded from participating in its
fisheries. As such, there is no evidence in the record that the differentials
compensate for any added burden or expense nonresidents impose on
commercial fisheries.
4
The State never advanced, let alone justified, this assumption.
MARILLEY V. BONHAM 35
record shows that nonresident commercial fisherman pay
California taxes as well. Nonresident fishermen, in other
words, must “be assimilated, either entirely or in part, to
California resident taxpayers for purposes of the Privileges
and Immunities Clause,” Maj. Op. at 22, because—like
Golden State residents—they too pay taxes to fund the State’s
conservation expenditures.
II.
A.
The State’s expert, Dr. Carriker, says commercial
fishermen in California earned $150 million in 2009, $179
million in 2010, and $204 million in 2011. The State also
consistently represented it could charge fees to nonresident
fishermen in relation to their percentage of overall fishermen.
Thus, taking the majority’s number, we can attribute twelve
percent of those earnings to the efforts of out-of-state
fishermen. By that account, nonresident fishermen paid
personal income taxes to the State on earnings approximating
$18–$24 million.5
We can also consider it in another way. Using the
landings data submitted both for residents and nonresidents,
Dr. Carriker submits that the “average per-fisherman income”
5
To be clear, California taxes the income of nonresidents “derived
from sources within this state,” Cal. Rev. & Tax. Code § 17041(i)(1)(B),
“including income from a business, trade, or profession carried on within
this State.” Cal. Code Regs. tit. 18, § 17951-2. California also imposes a
property tax on boats, including those registered in California but located
outside of it. See California State Board of Equalization, Frequently
Asked Questions – Personal Property, https://www.boe.ca.gov/
proptaxes/faqs/personal.htm.
36 MARILLEY V. BONHAM
in California was $91,293.03 in 2009, $105,858.00 in 2010,
and $105,070.28 in 2011. If we assume nonresident
fishermen are comparable to their in-state counterparts,
nonresidents would be liable for at least 9.3 percent in
personal income taxes on roughly those amounts. See
Franchise Tax Board, 2014 ANNUAL REPORT tbl.A1-B
(2014), available at https://www.ftb.ca.gov/Archive/
AboutFTB/Tax_Statistics/Reports/2014/Annual_Report.sht
ml#Tax_Rates (showing personal income tax rates for each
income level from 1935 to 2014) [hereinafter 2014 FTB
Report].
Alternatively, if we divide the aggregate earnings
(approximately $24 million) by the number of nonresident
fishermen (775), nonresidents would be paying California
taxes on $31,000 per year on average. This estimate,
however, assumes income is distributed evenly,
notwithstanding the fish will bite for some fishermen more
than others. Accordingly, $31,000 might be construed as the
median income, meaning half of nonresident fishermen would
make more each year, and the other half less. In that
scenario, it would not be surprising for the named plaintiffs
to have made modest in-state tax payments, even where
nonresident fisherman collectively contribute substantially.
California never contemplated, much less accounted for,
the contributions nonresident fishermen make in personal
income taxes.6 Based on the evidence in the record, however,
we can reasonably infer nonresident fishermen’s incomes
6
Regardless of when the issue was raised, the above evidence has
always been in the record, and we review a district court’s decision
granting a motion for summary judgment de novo. Rocky Mountain
Farmers Union v. Corey, 730 F.3d 1070, 1086 (9th Cir. 2013).
MARILLEY V. BONHAM 37
contribute meaningfully in the aggregate to the State’s
conservation expenditures. See, e.g., SER 20 (“[A]
substantial portion of General Fund revenue comes from
nonresident sources, including personal income tax paid by
nonresidents, including nonresident commercial fishermen.”).
Consider also the fact that California derives close to
thirty percent of the General Fund from sales and use tax
revenue. Nonresident fishermen like the Papettis pay those
taxes just as California residents do—to purchase food, fuel,
and other necessary materials in California. I assume that
nonresident fishermen are also a salty bunch, and likely pay
excise taxes too, on cigarettes, beer, wine, and alcohol,
thereby adding further to the State’s general revenue. Yet
California makes no effort to account for any of these
nonresident funds in justifying its fee differentials, or to
explain how nonresidents remain on the “same footing” as
residents in spite of them. That simply is unjustifiable; under
the Privileges and Immunities Clause California is required
to do more. See Mullaney v. Anderson, 342 U.S. 415, 418
(1952) (“[S]omething more is required than bald assertion to
establish a reasonable relation between the higher fees and
the higher cost[s] to the [State].”); Tangier Sound
Waterman’s Ass’n v. Pruitt, 4 F.3d 264, 267 (4th Cir. 1993)
(finding differential not “closely related” to asserted interest
because, among other things, State gave “no recognition” to
sales and use taxes paid by nonresident fishermen); Carlson
v. State, 798 P.2d 1269, 1278 (Alaska 1990) (reading Toomer
“to mean that if nonresident fishermen paid the same taxes as
Alaskans and these taxes were substantially the sole revenue
source for the state out of which conservation expenditures
were made, then differential fees would not be permissible”).
38 MARILLEY V. BONHAM
The majority concedes its analysis would have to be
“modif[ied]” if nonresident fisherman “paid more than de
minimus” taxes to California, Maj. Op. at 22, but it shrugs off
the few thousands of dollars the named plaintiffs paid to
California as being insufficient to meet its novel standard. By
itself, this is error—the State must demonstrate “a reasonable
relationship between the danger represented by non-citizens,
as a class, and the severe discrimination practiced upon
them.” Toomer, 334 U.S. at 399 (emphasis added). In this
case, California has failed to make any such showing.
Apparently unable to respond more adequately to our
argument, the majority steps purposefully to the plate, swings
as hard as it can, and whiffs, by fixating on Rule 23’s class
certification standards. Emphatically, those standards do not
require that class members be carbon copies of each other.
They therefore cannot excuse the majority’s failure to grapple
with the hole in its argument. For instance, the majority
invokes “commonality,” but “[t]he existence of shared legal
issues with divergent factual predicates is sufficient” to meet
that “permissive” standard. Hanlon v. Chrysler Corp.,
150 F.3d 1011, 1019 (9th Cir. 1988) (emphasis added).
Likewise, “typicality” requires “only that [the named
plaintiffs’] claims be ‘typical’ of the class, not that [the
named plaintiffs] be identically positioned to each other or to
every class member.” Parsons v. Ryan, 754 F.3d 657, 686
(9th Cir. 2014); see also Ellis v. Costco Wholesale Corp.,
657 F.3d 970, 985 n.9 (9th Cir. 2011) (“Differing factual
scenarios resulting in a claim of the same nature as other class
members does not defeat typicality.”).
Here, the district court found both elements satisfied
because the plaintiffs “articulated a common constitutional
issue at the heart of each proposed class member’s claim for
MARILLEY V. BONHAM 39
relief,” and resolution of that issue “would inform similar
claims by other proposed class members regardless of factual
differences among class members.” This finding by no
means warrants the majority’s factual assumption that every
class member paid the same amount as the named plaintiffs
in state taxes to California. Maj. Op. at 25. Indeed, Rule 23
requires only that each class member here pay fees higher
than those charged to in-state residents. And, though the
extent of nonresident tax liability might be a common
question, Rule 23 permits certification even where the answer
varies based on the unique factual circumstances of each
nonresident fisherman. In short, neither “commonality” nor
“typicality” mean the majority must assume every
nonresident fisherman, across all species, location, and
circumstance, earned the same income as the named plaintiffs
and owed the same taxes to the state of California. Maj. Op.
at 24–25. In fact, the opposite conclusion is more reasonable
given some nonresidents fish for herring, others for crab, and
still others for both, to say nothing of the fishermen who add
outings for crayfish or lobster, amongst many other
commodities. Were it not evident enough that the majority is
seeking to avoid the elephant in the room, it bemoans the
absence of any information about the income taxes
nonresident fishermen pay to California, id. at 24, without
even considering the aggregate statistics cited above, and the
reasonable inferences drawn from those data.7
7
The majority asserts our inferences are unsupported, but that is
incorrect. Our assessment derives from the aggregate earnings statistics
California placed into the record, which were taken from landings data
submitted both for resident and nonresident commercial fishermen. See
supra II.A. We do not claim, as the majority states, that every unnamed
class member makes “substantially more” than the named plaintiffs. Maj.
Op. at 24. Our argument is that the record reasonably reflects that
nonresident fishermen—taken collectively, across the full range of their
40 MARILLEY V. BONHAM
Even if we accept the majority’s framing, the named
plaintiffs can still “be assimilated . . . to California resident
taxpayers.” Maj. Op. at 22. We have no reason to believe
that fishermen are any different from resident and nonresident
tax-filers in the State more generally. And whereas fifty-
eight (58) percent of resident filers owe personal income
taxes to California, sixty (60) percent of nonresident filers
owe them.8 Compare 2014 FTB Report tbl.B-4A (showing
58.4 percent of residents returns were taxable in 2013), with
id. tbl.B-4G (showing 60.2 percent nonresident returns were
taxable in 2013). So, like ordinary Californians, some
nonresident fishermen pay the State more in personal income
income distribution—pay taxes that contribute materially to the State’s
conservation expenditures (a fact California completely ignores). Unlike
the majority’s hypothesis, under which unnamed class members are clones
of the named plaintiffs, our assessment comports with common sense. We
appreciate that 775 fisherman—some of whom fish the whole year in
California, others of whom fish part-time—will earn incomes that fall
along a distribution, such that some will owe California income taxes, and
others will not. Given that point, the majority has no basis, under Rule 23
or otherwise, to assume the California tax liability of the three named
plaintiffs is broadly representative. More importantly, it is California’s
burden to demonstrate our understanding is untrue in order to justify its
discriminatory differentials. It has made no such showing in this case.
Next, while it is true that “[i]f a claim based on the payment of
California income taxes had been made in the district court, that claim was
required to have been based on law or fact ‘common to the class,’” Maj.
Op. at 25, that observation affords the majority no help. The law common
to the class is the constitutional issue under the Privileges and Immunities
Clause, and Rule 23(a)(2), stated in the disjunctive, requires nothing more.
In other words, the only common “claim” that is required by Rule 23 to
appear in the complaint is the one the plaintiffs advanced—that each class
member pays fees higher than those charged to California residents.
8
The Franchise Tax Board’s 2014 Annual Report is the most recent
available data.
MARILLEY V. BONHAM 41
taxes than others, but like Californians generally, nonresident
fishermen contribute meaningfully to the State’s coffers
collectively. All told, the majority improperly focuses on a
few fishermen whose contributions it deems insignificant on
the overall tax liability spectrum, but the record reflects, and
common sense dictates, nonresident fishermen’s taxes
contribute materially to conservation expenditures.
B.
By chalking up to a rounding error the taxes nonresidents
pay, the majority effectively shifts the applicable burden.
Yet, any purported lack of evidence on the tax liability of
nonresident fishermen is a strike against California, not
against the plaintiffs. It is California that shoulders the
burden to demonstrate that its discrimination “bears a close
relation to the achievement of substantial state objectives.”
Friedman, 487 U.S. at 70. Moreover, it is California that
must demonstrate its differentials “merely compensate” for
expenditures that derive from taxes “which only residents
pay.” Toomer, 334 U.S. at 399. Finally, it is California that
must demonstrate it permits nonresident fishermen to do
business “on terms of substantial equality” with citizens of
the State. Id. at 396. Unfortunately, the majority lets
California off the hook, for while the State is owed some
deference, it made no effort to account for nonresident taxes
whatsoever. California simply fails to meet its burden. The
upshot is that nonresident fishermen stand on different
footing than residents, whether fisherman or not. They alone
pay differentials but must also pay the same taxes on income
earned within the State.
To illustrate, the 775 nonresident fishermen can be
charged for a $641,000 “subsidy,” even though they pay state
42 MARILLEY V. BONHAM
taxes to cover this conservation expenditure. In-state
fishermen, by contrast, receive a $4,700,080 subsidy, but
California’s 15,000,000 taxpayers collectively foot the bill.
Accordingly, using the majority’s numbers, California
residents, whether fisherman or not, pay about thirty cents on
average towards the subsidy to in-state fishermen, whereas
nonresident fishermen are charged over $800 each on average
for the “subsidy” they receive.9
It bears repeating: California shoulders the burden of
showing the additional fees charged to nonresidents are
closely related to the “taxes which only residents pay,”
Toomer, 334 U.S. at 399, and California must permit
nonresident fishermen to do business on terms of substantial
equality with citizens of the State. By overlooking how the
taxes nonresident fishermen pay the State defray the costs of
any subsidy for conservation, California fails to meet its
burden. The fee differentials must accordingly be struck
down.
9
Notably, Carlson rejected the “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.” 798 P.2d at 1278. The court found such a
system “economically indistinguishable from imposing a facially equal tax
on residents and nonresidents while making it effectively unequal by a
system of credits and exemptions.” Id. It declined to strike down the
differential imposed by Alaska on this basis because state taxes were not
“substantially the sole revenue source” for conservation expenditures. Id.
(noting 86 percent of state revenues derived from petroleum production).
The opposite is true here—personal income tax and sales tax made up 86
percent of General Fund revenues for the year ending June 30, 2015. See
California State Controller’s Office, COMPREHENSIVE ANNUAL FINANCIAL
REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 42 (2016), available
at http://www.sco.ca.gov/Files-ARD-Local/LocRep/cafr15web.pdf.
MARILLEY V. BONHAM 43
C.
If left to stand on this showing, we have no reason to
think interstate fee differentials will not proliferate. Indeed,
California could, for example, charge nonresident truckers
and commercial airline pilots fees for earning a living off
state-subsidized highways and airports. And why wouldn’t
states seek to recoup from those professions conservation
expenditures aimed at maintaining air quality? As in this
case, they need only intend to close a budget gap and need
not identify any relationship between the shortfall and
nonresident truckers or pilots. Further, they need not
determine what burdens nonresidents impose, if any, on the
state’s air, roads, and other infrastructure. Nor would they
need to identify any savings the state would realize if
nonresident truckers and pilots were excluded. Finally, they
could, like California, ignore nonresident taxes in setting the
fee, so long as a few of the truckers or pilots earned incomes
that led to modest in-state tax payments. The Privileges and
Immunities Clause should preclude such barriers because
they disrupt interstate economic harmony unjustifiably. The
majority unfortunately holds otherwise, and thereby subverts
one of the most important economic compacts that initially
bound us together.
III.
This country is more than a league of confederated
states—it is a nation. Yet the enactment of discriminatory fee
differentials promotes our economic balkanization. We must
be mindful of competing interests when evaluating such
measures, but they require ample justification. California’s
showing in this case does not come close to meeting its
44 MARILLEY V. BONHAM
burden, so the fee differentials are illegal under the Privileges
and Immunities Clause. I respectfully dissent.
REINHARDT, Circuit Judge, dissenting, in which BERZON,
Circuit Judge, joins.
I concur in Part III of Judge M. Smith’s dissent and agree
that California failed to carry its burden of demonstrating that
the differential fees it charges to nonresidents are “closely
drawn” to the achievement of a “substantial state objective.”
Supreme Court of Virginia v. Friedman, 487 U.S. 59, 68
(1988). Permissible state objectives include “compensat[ing]
the State for any added enforcement burden they may impose
or for any conservation expenditures from taxes which only
residents pay.” Toomer v. Witsell, 334 U.S. 385, 399 (1948).
Here, California does not contend that nonresident fishermen
impose any sort of added enforcement burden. Nor does the
state provide persuasive evidence that its fee differentials
bear a “reasonable relationship” to its legitimate interest in
receiving compensation from nonresidents for its
“conservation expenditures from taxes which only residents
pay.” Toomer, 334 U.S. at 399 (1948). Therefore, I agree with
Judge M. Smith that the state has failed to make the requisite
showing to justify any differential. That conclusion does not
embrace either of the views expressed by the original panel
as to how a differential should be calculated when it is in fact
justified. See Marilley v. Bonham, 802 F.3d 958, 966–68 (9th
Cir. 2015), reh’g en banc granted, 815 F.3d 1178 (9th Cir.
2016) (Graber., J., dissenting) (comparing the “per capita”
and “fair share” approaches to calculating a justified fee
differential).