February 7, 1997
Senator Beverly M. Perdue North Carolina General Assembly State Legislative Building Raleigh, North Carolina 27601
ADVISORY OPINION: Limitations on commercial fishing licenses available to non-residents;
U.S. Const., Article IV, Section 2.
Dear Senator Perdue:
This responds to your verbal request at the January meeting of the Seafood and Aquaculture Study Commission for an opinion on the question of whether North Carolina can limit the number of commercial fishing licenses available to nonresidents in a lottery or "limited entry" system. For reasons which follow, it is our opinion that the Privileges and Immunities Clause of the United States Constitution restricts the State’s ability to limit the number of commercial fishing licenses available to non-resident fishermen, unless residents are subject to the same restrictions. If our understanding of your question was incorrect, we ask that you forward your question in writing, and it will be promptly answered.
I. Can North Carolina limit the number of total licenses allocated to out-of-state fishermen to a certain percentage through the use of a lottery system?
Answer: No, unless the limitations and percentages also apply to North Carolina commercial fishermen. An attempt to create a disparate percentage in a lottery system, or in a limited entry program allocating commercial fishing licenses between North Carolina citizens and out-of-state residents will likely be found to be violative of the Privileges and Immunities Clause of the United States Constitution. While there is no relevant case-law on lotteries of this type, cases on the Privileges and Immunities Clause are helpful in addressing this issue.
The intent and effect of the Privileges and Immunities Clause, Article IV, Section 2 of the U.S. Constitution has been described as follows:
The primary purpose of this clause . . . was to help fuse into one Nation a collection of independent, sovereign States. It 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.
Toomer v. Witsell, 334 U.S. 385, 395 (1948).
While the Supreme Court has avoided defining the words "privileges and immunities" or specifying the rights which those words secure and protect, it has consistently outlined those rights in the following terms:
Beyond doubt those words are words of very comprehensive meaning, but it will be sufficient to say that the clause plainly and unmistakably secures and protects the right of a citizen of one state to pass into any other state of the Union for the purpose of engaging in lawful commerce, trade or business, without molestations; to acquire personal property; to take and hold real estate; to maintain actions in the courts of the state; and to
be exempt from many higher taxes or excuses than are imposed by the state upon its own
citizens. [emphasis supplied]
Ward v. Maryland, 79 U.S. 418, 429-30 (1870); Little v. Miles, 204 N.C. 646, 169 S.E. 273 (1933).
Although the Clause does not preclude disparity of treatment of nonresidents in situations where there are valid independent reasons for such action, it does bar "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." Toomer v. Witsell, 334 U.S. at 396. In Toomer, the Supreme Court invalidated a series of South Carolina statutes which required that nonresident commercial shrimp fishermen pay a license fee one hundred times higher than resident fishermen for shrimping in the State’s territorial sea. Id.
To determine whether allocating a finite number or percentage of commercial fishing licenses to non-residents is compatible with the Privileges and Immunities Clause, the reviewing court will undertake a two-pronged analysis. First, the court will determine whether the benefit or activity constitutes a privilege or immunity protected by the Clause. Second, the court will determine whether there is a substantial state interest served by the disparate treatment of non-residents. Rotunda, Novak & Young, Treatise on Constitutional Law: Substance and Procedure (1986), §
12.7.
Upon review of the language of Ward v. Maryland and Little v. Miles there is little doubt that commercial fishing licenses are privileges that are protected under the Privileges and Immunities Clause. These types of licenses are used for the purpose of engaging in lawful commerce or business and are in many cases the means to a non-resident’s livelihood. In Baldwin v. Montana, 436 U.S. 371 (1978), the Supreme Court held that Montana could charge non-residents substantially more for recreational elk-hunting licenses since recreational licenses are not a means to a livelihood, and thus are not protected. Conversely, the Court indicated that commercial licenses would be protected by the Privileges and Immunities Clause since these licenses are concerned with "the pursuit of common callings . . ." Baldwin v. Montana, 436 U.S. 371, 378 (citing Ward v. Maryland, 79 U.S. at 430).
Since the right to obtain a commercial fishing license is a privilege protected by the Privileges and Immunities Clause, North Carolina must be able to show that allocating fewer commercial fishing licenses to nonresidents in a lottery or limited entry system bears a substantial relationship to the peculiar "evil" that nonresidents present. Rotunda, supra. We have no information to demonstrate this. Assuming that the "evil" is depletion of the resource or the threat of overfishing, a substantial relationship would be hard to show since resident commercial fishermen also contribute to these problems. While placing reasonable conditions on licenses or subjecting both residents and non-residents to the same restrictions is acceptable, a disparate lottery system that discriminates against a class of commercial fishermen solely on the basis of residency will probably not be rationally related to the State’s interest of conserving natural resources.
We recognize that existing N.C.G.S. § 113-154(c) and N.C.G.S. § 113-202 both discriminate against nonresidents by restricting the issuance of shellfish licenses and shellfish leases, respectively, only to residents of North Carolina. These statutes are based on the largely discredited nineteenth century legal fiction that the state "owned" the fish, oysters and wild game within its borders, and thus could reserve them solely for its citizens. McCready v. Virginia, 94
U.S. 391 (1876); Geer v. Connecticut, 161 U.S. 519 (1896), overruled by Hughes v. Oklahoma, 441 U.S. 322 (1979). However, modern courts which have addressed this question have uniformly rejected that theory as a basis for discriminating against non-residents. For example, Hughes v. Oklahoma, 441 U.S. 322 (1979) expressly overturned Geer v. Connecticut, an 1896 case which had relied on the ownership theory to uphold a Connecticut statute forbidding out-ofstate shipment of wild game birds killed within the state. Similarly, Tangier Sound Watermen’s Assoc. v. Douglas, 541 F. Supp. 1287 (E.D. Va. 1982), struck down a Virginia statute prohibiting commercial harvest of blue crabs by nonresidents as violative of the Privileges and Immunities Clause. The case noted that the doctrine has been eroded in recent years by the U.S. Supreme Court, but remained a factor to be considered in determining whether discrimination against nonresidents violates the Clause.
Unlike the Geer decision, McCready v. Virginia, an 1877 case which upheld discriminating against nonresidents in the harvest of shellfish, has not been overturned. It may be possible to justify the existing restrictions in N.C.G.S. § 113-154(c) and N.C.G.S. § 113-202 based on the distinction between shellfish, which are embedded in the soil, and mobile resources, such as crabs and finfish.
Discussion of Systems Adopted by Other States
As the issue may arise, we take this opportunity to discuss the methods by which some other states have addressed this question.
A. Alaska’s Limited Entry System
Legislation that gives preference to one class of individuals over other commercial fishermen could violate the Equal Protection Clause of the U.S. Constitution if the protectionist measure is not rationally related to a legitimate local purpose. Matson v. Alaska, 785 P.2d. 1200 (1990). For example, Alaska’s "limited entry" program for awarding commercial fishing licenses uses certain factors to determine which applicants will have priority for permits. The "limited entry" permit system was developed in order to "promote the conservation and the sustained yield management of Alaska’s fishery resource and the economic health and stability of commercial fishing in Alaska by regulating and controlling entry into the commercial fisheries . . . ." Alaska Stat. § 16.43.010(1987). Entry permits entitle the permit holder to fish in a specified fishery using a specific type of gear. The permits are issued on the basis of a detailed point system designed to gauge the hardship an applicant would suffer if denied a permit. The point system ranks applicants by weighing such factors as past participation in the fishery, degree of economic dependence on the fishery, access to alternative employment, and investment in vessels or gear. David Weiss, A Taxing Issue: Are Limited Entry Fishing Permits Property? Alaska L. Rev. 93, 95 (1992). Several of these factors could arguably give preference to Alaskan residents If these or similar factors were adopted for North Carolina, they might work to benefit North Carolina residents as well. It must be noted that Alaska’s limited entry program applies to all applicants, not just out-of-state residents, and therefore does not violate the Privileges and Immunities Clause. Although perhaps susceptible to an equal protection challenge, Alaska’s statute has not yet been challenged as having an indirect discriminatory effect on nonresident fishermen.
B. Maryland’s Delayed Entry Statute for Commercial Fishing
Like Alaska, Maryland has a limited entry program for obtaining commercial fishing licenses. Maryland’s limited entry program is in the form of a "delayed-entry" program. Under § 4-307 of the state’s Natural Resources Article, a new entrant must register with the Department of Natural Resources two years before he can actually receive a license to catch finfish, crabs, oysters or clams. Md. Code Ann., Nat. Res. § 4-307 (1996). Anyone who held a license, even an inactive one, as of September 1, 1988, is exempt from this requirement. Section 4-307 also exempts anyone from the two year requirement who "has successfully completed a 2-year course of study in commercial fisheries which includes instruction on fisheries conservation and regulation and is offered in a career and technology education program approved by the State Board of Education." Id.
In our opinion, this limited entry program is subject to an equal protection challenge. Equal protection challenges of limited-entry programs usually claim that the limiting regulations, which classify fishermen based on experience, the date they obtained a permit, or other criteria, violate the Fourteenth Amendment of the U.S. Constitution. (Ted Allen, Maryland Attorney General’s Office, Limited Entry for Commercial Fishing, 29 (1993). The state Supreme Courts in Alaska and Washington have applied low-level scrutiny (the rational basis test) to these programs and have upheld their respective states’ limited entry program against equal protection challenges. See Foley v. Washington Dept. of Fisheries, 837 P.2d 14 (Wash. 1992); Commercial Fisheries Entry Comm. v. Apokedak, 606 P.2d 359 (Ala. 1980). Although a Maryland court would probably apply the rational basis test in an action challenging § 4-307 under the Equal Protection Clause, it is doubtful that the statute would withstand even this scrutiny. This statute does little more than slow the entry of new fishermen into Maryland waters. Allen, supra, at 29. Since the law places no cap on the maximum number of permits that can be issued, it does not limit the exploitation of Maryland fisheries. The purpose of the law seems to be to protect existing fishermen from additional competition which probably would not qualify as a real and substantial interest. Id.
The statute could be defended on the premise that it protects fishermen with a significant investment in the fishery, an argument accepted by both Alaska and Washington courts. However, unlike Maryland, Alaska and Washington also have measures that may work to conserve their respective fisheries. For example, Alaska limits the total permits that may be issued. While the state of Washington does not have an absolute limit on permits, it does impose past landing requirements, which work to exclude some license holders. On the other hand, Maryland’s law is very broad and allows all pre-1988 license holders, regardless of the status of their license or the amount of their investment, to continue to fish in Maryland waters. Thus, there is no rational nexus between Maryland’s delay of new entrants and protecting the resource. While the statute might prevent a massive influx of new commercial fishermen into the market, it would still allow a gradual growth of harvesters into a declining fishery. Id.
C. New York’s Unsuccessful Attempt to Limit Out-of-state Commercial Fishermen – Atlantic Prince v. Jorling, 710 F. Supp. 893 (E.D.N.Y. 1989).
In Atlantic Prince v. Jorling, 710 F. Supp. 893 (E.D.N.Y. 1989), an action was brought in the federal district court for the Eastern District of New York concerning a New York statute that prohibited vessels longer than 90 feet from fishing in New York waters. The action alleged that the statute violated the Commerce Clause of the U.S. Constitution because it was enacted to protect New York commercial fishermen from out-of-state competitors. Id. at 894. The plaintiff alleged that New York fishermen used boats less than 90 feet long, so that a ban on longer boats affects only out-of-state fishermen. New York claimed that the law was not discriminatory because it prohibited all commercial fishermen, regardless of state origin, from using boats over 90 feet long from fishing in New York waters. The state also claimed that the statute was valid because any burden placed on interstate commerce is not "clearly excessive" in comparison with the legitimate state purpose of protecting the environment. Id.
The District Court for the Eastern District of New York held that the statute violated the Commerce Clause found in Article I, Section 8, Clause 3 of the U.S. Constitution. The Commerce Clause gives Congress the power to regulate Commerce among the several states. It also limits the power of States to erect barriers against interstate trade. Maine v. Taylor, 477 U.S. 131, 137 (1986). This doctrine, known as the dormant Commerce Clause, is based upon "the principle that one state in its dealing with another may not place itself in a position of economic isolation." Philadelphia v. New Jersey, 437 U.S. 617, 623 (1978). There are two types of stateimposed barriers to trade that can violate the dormant Commerce Clause: (1) nondiscriminatory state statutes which burden interstate commerce only incidentally, and (2) state statutes which affirmatively discriminate against interstate commerce, either on their face or in "practical effect." Hughes v. Oklahoma, 441 U.S. 322, 335 (1979).
Although the New York statute was clearly neutral on its face, the district court held that the provision was discriminatory "in practical effect." Atlantic Prince, 710 F. Supp. at 896. Nondiscriminatory statutes can violate the Commerce Clause if the burdens on interstate trade are "clearly excessive in relation to the putative local benefits[.]" Hughes, 441 U.S. at 336. The New York statue was discriminatory because it had a disproportional effect on non-residents since there was only one New York commercial fishing vessel exceeding 90 feet in length. Atlantic Prince, 710 F. Supp. at 897. The district court further held that New York could not show that the statute served a legitimate local purpose that could not be served as well by available nondiscriminatory means. Although environmental conservation is a legitimate concern, a state must show that the statute is "narrowly tailored to the conservation and preservation rationale" in order to withstand scrutiny. Atlantic Prince, 710 F. Supp. at 899. In short, the state could not establish any rational connection between its alleged environmental goals and the 90 foot limit on the size of commercial fishing vessels. New York’s measure was found to be based on economic protectionism, and not environmental protection, and thus violated the Commerce Clause. Atlantic Prince, 710 F. Supp. at 902.
This case indicates that a statute enacted for the "purpose" of environmental protection may fail under the Commerce Clause even if it is neutral on its face. Any such statute enacted by the North Carolina legislature that has the effect of placing limits on non-resident fishermen’s ability to fish in the state’s waters must be narrowly tailored to the purpose of the statute. This could be an extremely difficult test to meet. (This is apparent in the discussion and details given in the Atlantic Prince case).
D. Reciprocal Net Bans
A North Carolina statute imposing a reciprocal ban on marine net-fishing against a state such as Florida will probably be violative of the Privileges and Immunities Clause and possibly the Equal Protection Clause unless the ban applies equally to North Carolina residents and non-residents. Florida added a provision to its Constitution in 1995 that placed limitations on marine net fishing in Florida waters in order "to protect saltwater finfish, shellfish, and other marine animals from unnecessary killing, overfishing, and waste." Fla Const. Art. 10, § 16. (1995). The relevant prohibitory language is as follows:
- (1)
- No gill nets or other entangling nets shall be used in Florida waters; and
- (2)
- In addition to the prohibition set forth in (1), no other type of net containing more than 500 square feet of mesh area shall be used in nearshore and inshore Florida waters. Additionally, no more than two such nets, which shall not be connected, shall be used from any vessel, and no person not on vessel shall use more than one such net in nearshore and inshore Florida waters.
Id. The Florida provision does not violate the Privileges and Immunities Clause because it applies equally to all persons. It is an across-the-board ban on marine net fishing that is applicable to Floridians and non-residents alike. If North Carolina intends to prohibit only Florida commercial fishermen from net fishing in North Carolina, the ban will most likely be held invalid due to its discriminatory nature.
Conclusion
Commercial fishing is a "common calling" and is therefore a privilege that is protected under the Privileges and Immunities Clause of the U.S. Constitution. It is likely that any attempt to limit licenses to commercial fishermen solely on the basis of residency will be in violation of the Privileges and Immunities Clause and possibly the Equal Protection Clause. Additionally, any attempt to impose reciprocal net-bans on Floridians or residents of other states with net-bans will also be unconstitutional unless the limitation applies to both residents and non-residents. Although residency cannot be used to limit the number of commercial fishing licenses that can be issued to non-residents, the legislature may want to consider other factors, such as those used by Alaska and Washington in their limited-entry programs. Whether a limited-entry program in North Carolina will survive an equal protection challenge under the U.S. Constitution depends on whether the limiting factors of the program are rationally related to the articulated legitimate local purpose.
Daniel C. Oakley Senior Deputy Attorney General
J. Allen Jernigan
Special Deputy Attorney General