Participation by Processor-Owned Catcher Vessels in Inshore Cooperatives Under the American Fisheries Act of 1998

Participation by Processor-Owned Catcher Vessels in Inshore

Cooperatives Under the American Fisheries Act of 1998

Section 21 0 (b ) o f the A m erican Fisheries A ct o f 1998 perm its catcher vessels ow ned by shoreside

pro cesso rs to participate in A FA -authorized fishery cooperatives.

December 10, 1999

M e m o r a n d u m O p in io n f o r t h e G e n e r a l C o u n s e l

Depa rtm en t o f C om m erce

You have requested our advice as to the appropriate construction of section

210(b) of the American Fisheries Act, Pub. L. No. 105-277, 112 Stat. 2681-616,

2681-629 (1998) (“ AFA” ). Specifically, you have asked whether catcher vessels

owned by shoreside processors may participate in fishery cooperatives in the

inshore sector of the Alaska pollock fishery, which are authorized under section

210(b) o f the AFA, or whether participation in such cooperatives is limited to

independently owned catcher vessels. See Letter for Randolph Moss, Acting

Assistant Attorney General, Office of Legal Counsel, from Andrew J. Pincus, Gen­

eral Counsel, Department of Commerce (Aug. 10, 1999) (“ Commerce Letter” ).

As explained more fully below, we conclude that section 210(b) does permit proc-

essor-owned catcher vessels to join AFA-authorized fishery cooperatives.

I. BACKGROUND

A. The BSAI Fishery

The Bering Sea and Aleutian Islands (“ BSAI” ) fishery, located in the Bering

Sea off the coast of Alaska, is the largest single-species groundfish fishery in

the world. In recent years, growing market demand for the Alaskan pollock —

a fish used in the United States primarily as an ingredient in breaded fish products

and used worldwide for processing into the protein paste surimi — has spurred

tremendous growth in the BSAI fishery, with increasing numbers of vessels

entering the fishery each year to compete for a share of the annual catch.

The pollock harvested in the BSAI fishery are processed by two competing

sectors, inshore (including shoreside) and offshore processors. Inshore processors

operate traditional land-based processing plants and floating processors that are

moored in a single location for the entire year. They obtain fish either from catcher

vessels that are independently owned (“ independent catcher vessels” ) or from

vessels in which they or other processors have an ownership interest (“ processor-

owned catcher vessels” ). Offshore processing takes place on factory trawlers (also

known as “ catcher-processors” ) or motherships. Catcher-processors are large ves­

sels that harvest pollock and process their own catch. They also purchase fish

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harvested by catcher vessels and process that catch. Mothership processors are

vessels engaged solely in processing; they operate at sea by taking deliveries of

fish harvested by catcher vessels and processing them.

The BSAI fishery is managed by the Secretary of Commerce (“ Secretary” )

through the National Marine Fisheries Service ( “ NMFS” ) and the North Pacific

Fishery Management Council (“ Council” ). The Council acts as an advisory board

and recommends fishery management actions to the Secretary. See generally 16

U.S.C. § 1852 (1994). Among the Council’s responsibilities is to recommend to

the NMFS a “ total allowable catch” (“ TAC” ) for each species of fish in the

BSAI fishery. See 50 C.F.R. §679.20 (1998). The TAC represents the maximum

amount of fish that can be harvested in any given fishing season.

Before 1998, the Council was responsible for recommending to the Secretary

how the annual TAC for Alaskan pollock should be allocated between the offshore

and inshore components of the BSAI fishing industry. In 1992, the Council rec­

ommended an allocation that permitted the offshore sector to harvest sixty-five

percent of the pollock TAC, and the inshore sector to harvest thirty-five percent.

See General Accounting Office, Fishery Management: Market Impacts o f the

American Fisheries A ct on the Production o f Pollock Fillets 3 (June 1999). Not

surprisingly, that percentage allocation was the subject of bitter dispute each year

between the offshore and inshore sectors. Moreover, although the Council’s alloca­

tion formula limited the amount of pollock each sector could harvest, it did not

regulate the amount of pollock that individual catcher vessels or catcher-processors

could catch. As a result, a “ race for fish” ensued within this open access system:

each fishing season, vessels within each sector raced to catch as much pollock

as possible until their allocation was reached and the season closed. Those vessels

that caught the most fish made the most money. Over the years, as more and

more vessels joined the race in response to increased market demand for pollock,

the fishery suffered increasingly from overcapitalization and inefficiency.

B. The American Fisheries Act o f 1998

In 1998, Congress enacted the AFA to address some of these problems. Senator

Breaux, one of the AFA sponsors, described the legislation as “ another major

milestone in our long efforts to reserve U.S. fishery resources for bona fide U.S.

citizens as well as take steps to substantially improve the conservation and

management of our Nation’s fishery resources through a reduction in the overcapi­

talization of our fishing fleets.” 143 Cong. Rec. S10,299 (daily ed. Oct. 1, 1997)

(statement of Sen. Breaux). The sponsors of the AFA thus sought to accomplish

three goals — “ Americanization, decapitalization, and rationalization” of the

BSAI fishery. See 144 Cong. Rec. S 12,801 (daily ed. Oct. 21, 1998) (statement

of Sen. Gorton); see also id. at S 12,777 (statement of Sen. Stevens).

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Subtitle I of the AFA attempts to achieve “ Americanization” by imposing new

ownership requirements on U.S. flag vessels. See AFA §202, 112 Stat. at 2681-

617 to 2681-618. Subtitle I also partly addresses the problem of overcapitalization

of the fishery by placing limits on the size of new vessels in U.S. waters. See

id.

Subtitle II of the AFA advances the goals of “ decapitalization” and “ rational­

ization” through various provisions that reduce excess capacity in the fishery and

substitute a comprehensive management scheme for the pre-existing open access

system. Section 206 deals with the question of the appropriate allocation of the

pollock TAC by establishing statutory allocations for the offshore and inshore

sectors. After setting aside ten percent of the TAC as a directed fishing allowance

for the western Alaska community development quota program, section 206

divides the remainder of the TAC equally between the inshore and offshore proc­

essing sectors. See § 206(a)-(b)(l). The offshore sector allocation is split further,

with catcher-processors and the catcher vessels supplying them receiving forty

percent of the TAC and the catcher vessels harvesting pollock for motherships

receiving ten percent. See § 206(b)(2)-(b)(3).

Sections 207 through 209 aim to streamline and restructure the BSAI industry.

Sections 207 and 209 provide for a buyout of nine predominantly foreign-owned

catcher-processors that will henceforth be ineligible to participate in the BSAI

fishery. Section 208 limits participation in the fishery by establishing strict eligi­

bility requirements for vessels and processors in both the offshore and inshore

sectors. See § 208(a) (eligibility requirements for catcher vessels delivering to

shoreside processors); § 208(b) (listing eligible catcher vessels delivering to

catcher-processors and eligibility criteria for other catcher vessels delivering to

catcher-processors); § 208(c) (listing eligible catcher vessels delivering to

motherships and eligibility criteria for other catcher vessels delivering to

motherships); § 208(d) (listing eligible motherships); § 208(e) (listing eligible

catcher-processors); § 208(f) (eligibility criteria for shoreside processors).

Section 210 of the AFA, the provision at issue here, seeks to eliminate the

race for fish by providing a framework for the formation of fishery cooperatives

in each of the BSAI processing sectors. See § 210(b) (cooperatives of catcher ves­

sels delivering fish to shoreside processors), § 210(c) (cooperatives of catcher ves­

sels delivering fish to catcher-processors), § 210(d) (cooperatives of catcher vessels

delivering fish to motherships). Although certain types of fishery cooperatives

were already authorized under the Fisherman’s Collective Marketing Act of 1934,

15 U.S.C. §521 (1994) (“ FCMA” ), section 210 provides a powerful incentive

for the creation of fishery cooperatives: It reserves a certain percentage of the

TAC for the members of each cooperative, thereby guaranteeing them a share

of the fish that they can harvest at their own pace.

The precise criteria for the establishment of AFA fishery cooperatives in the

inshore processing sector are set out in subsection 210(b). Under those criteria,

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if eighty percent or more of the “ qualified catcher vessels” that delivered pollock

to a particular shoreside processor the previous year sign “ a contract imple­

menting a fishery cooperative under subsection (a)” — i.e., a contract under sec­

tion 1 of the FCMA — and if these vessels further agree to deliver pollock only

to that particular shoreside processor (and the processor agrees to process the pol­

lock), then the Secretary of Commerce may establish a separate allocation for

the cooperative. § 210(b)(1). That allocation would be equal to the average

percentage of the TAC that the vessels in the cooperative caught during 1995,

1996 and 1997. See id. If a fishery cooperative is formed, section 210(b)(2)

requires the cooperative to permit other catcher vessels that delivered most of

their catch to that shoreside processor to join the cooperative under the same terms

and conditions as member vessels. See § 210(b)(2).

Catcher vessels that participate in a fishery cooperative under section 210(b)

may harvest only the pollock that is allocated to them by the Secretary; they are

not allowed to harvest any of the pollock that remains in the “ open access” por­

tion of the inshore allocation under section 206(b)(1). See § 210(b)(5). The open

access allocation is equivalent to that portion of the inshore allocation that has

not been reserved by the Secretary for fishery cooperatives. See id.

n . DISCUSSION

The question before us is whether catcher vessels that are owned by shoreside

processors may participate in fishery cooperatives under section 210(b) of the

AFA. Section 210(b)(1), which creates the entitlement of fishery cooperatives to

a portion of the TAC, provides:

(b) C atcher Vessels O nshore —

(1) C atcher vessel cooperatives. — Effective January 1, 2000,

upon the filing of a contract implementing a fishery cooperative

under subsection (a) which —

(A) is signed by the owners of 80 percent or more of the quali­

fied catcher vessels that delivered pollock for processing by a

shoreside processor in the directed pollock fishery in the year prior

to the year in which the fishery cooperative will be in effect; and

(B) specifies, except as provided in paragraph (6), that such

catcher vessels will deliver pollock in the directed pollock fishery

only to such shoreside processor during the year in which the

fishery cooperative will be in effect and that such shoreside proc­

essor has agreed to process such pollock,

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the Secretary shall [set aside a fishing allowance from the inshore

allocation of the TAC for that fishery cooperative].

Section 210(b)(1) points to two possible statutory bases for limiting eligibility

to independently owned vessels. First, the AFA by its own terms might impose

the limitation. Second, the reference in section 210(b)(1) to “ a contract imple­

menting a fishery cooperative under subsection (a)” might effectively incorporate

limits from the FCMA, since subsection (a) refers to “ a contract implementing

a fishery cooperative” under the FCMA.

A. Language and Legislative History o f AFA

Taken by itself, the AFA does not restrict eligibility to independently owned

catcher vessels. Section 210(b)(3) defines “ qualified catcher vessel” as follows:

Qualified catcher vessel. — For the purposes of this subsection, a

catcher vessel shall be considered a “ qualified catcher vessel” if,

during the year prior to the year in which the fishery cooperative

will be in effect, it delivered more pollock to the shoreside proc­

essor to which it will deliver pollock under the fishery cooperative

in paragraph (1) than to any other shoreside processor.

Nothing in this definition suggests an ownership limitation. Pursuant to section

210(b)(3), whether or not a catcher vessel is “ qualified” under the AFA to partici­

pate in a fishery cooperative linked to a particular shoreside processor depends

upon whether the vessel delivered the majority of its catch to that processor, not

upon its ownership structure.

Nor does the definition of the underlying term “ catcher vessel” contain any

ownership-based restriction. “ Catcher vessel” is defined in section 205(3) of the

AFA as ‘ ‘a vessel that is used for harvesting fish and that does not process pollock

onboard.” What this definition excludes are boats that process fish onboard —

catcher/processors (see § 205(2)) and motherships (see § 205(8)) — but it does not,

by its own terms, exclude vessels on the basis of ownership.

Further clarification of the scope of the term “ catcher vessel” appears in sub­

sections 208(a) and (c). Section 208 generally sets forth eligibility criteria for

catcher vessels participating in the inshore and offshore sectors of the BSAI

fishery. Under section 208(a), eligibility to harvest pollock for the inshore sector

is limited to those catcher vessels that: (1) either have delivered at least 250 metric

tons o f pollock to a shoreside processor in 1996, 1997 or 1998, or are less than

sixty feet long and have delivered at least forty metric tons of pollock to a shore­

side processor in any of those years; (2) have an approved license to harvest pol­

lock; and (3) are not listed in subsection 208(b) (which lists catcher vessels

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eligible to deliver pollock to catcher/processors). See § 208(a)(1). None of these

eligibility criteria relates in any way to ownership of the catcher vessel.

Subsection 208(c), which defines the eligibility of catcher vessels delivering

pollock to motherships, also offers textual support for an interpretation of “ catcher

vessel’ ’ that makes no distinction based on ownership. Section 208(c) lists specifi­

cally named “ catcher vessels” that remain eligible to harvest the portion of the

TAC allocated to motherships. While some of the catcher vessels identified in

section 208(c) are independently owned, many of those listed are owned wholly

or in part by a mothership. See Robert Halvorsen et al., “ Discussion Paper on

Inshore Sector Catcher Vessel Cooperatives in the Bering Sea/Aleutian Islands

Pollock Fisheries” at Appendix C (Sept. 13, 1999) (“ University of Washington

Discussion Paper” ) (listing vessels participating in BSAI fishery and their owner­

ship structure). By including both independently owned vessels and mothership-

owned vessels within the list of eligible “ catcher vessels,” section 208(c) extends

the scope of that term to vessels owned by an entity within one of the processing

sectors. Although none of the vessels listed in section 208(c) is owned by a shore­

side processor,1 section 208(c) makes clear that the term “ catcher vessel” is not

limited to non-processor-owned boats. Since there is nothing in the definition of

“ catcher vessel” to distinguish between different types of processor owners, it

follows that the term “ catcher vessel” includes boats owned by shoreside proc­

essors as well.

The overall purpose animating section 210(b), as revealed in the language and

history of the provision, supports this inclusive definition. Rather than placing

any ownership limitation on vessel participation in cooperatives, section 210(b)

expressly encourages broad participation in inshore cooperatives by all vessels.

Section 210(b)(2) provides that “ [a]ny contract implementing a fishery coopera­

tive under paragraph (1) must allow the owners of other qualified catcher vessels

to enter into such contract after it is filed . . . under the same terms and conditions

as the owners of the qualified catcher vessels who entered into such contract upon

filing.” The conference report to the AFA explains that this provision extends

the authority to join cooperatives to all qualified catcher vessels “ on a class-wide

basis” :

If a fishery cooperative is formed, other catcher vessels that deliv­

ered most of their catch to that shoreside processor would be

required to be allowed to join the fishery cooperative under the

same terms and conditions as other participants at any time before

the calendar year in which fishing under the cooperative will

begin. . . . The vessels eligible to harvest pollock allocated for

processing by shoreside processors would continue to have the

1 This comes as no surprise, since a catcher vessel owned by a shoreside processor would likely be delivering

the majority o f its catch to that shoreside processor, not to a mothership

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authority to form a fishery cooperative on a class-wide basis as

well.

144 Cong. Rec. S12.780 (daily ed. Oct. 21, 1998).

Moreover, the manner in which Congress chose to structure fishery cooperatives

for the inshore sector requires the participation of shoreside processor-owned

catcher vessels in order to achieve the goal for which AFA cooperatives were

being established: to end the race for fish. In order for a fishery cooperative to

be formed under section 210(b), the owners of eighty percent or more of the

qualified catcher vessels that delivered pollock to a particular shoreside processor

in the previous year must agree to join the cooperative. See § 210(b)(1). In 1998,

however, processor-owned vessels apparently made up over twenty percent of the

total number of vessels delivering pollock to six out of seven shoreside processors.

See University of Washington Discussion Paper at 46. Thus, if processor-owned

vessels were excluded from participating in AFA cooperatives, six out of seven

o f the potential cooperatives that might be formed under the AFA could not reach

the eighty percent threshold for vessel participation. In other words, if participation

in AFA cooperatives was limited to independently owned vessels, only one

cooperative could be formed pursuant to the requirements of section 210(b). See

Commerce Letter at 1-2.

Similarly, if processor-owned vessels were excluded from AFA cooperatives,

none o f the fishery cooperatives that Congress intended to create within the

mothership sector pursuant to section 210(d) could be formed. Like section 210(b),

section 210(d) permits “ the filing of a contract implementing a fishery cooperative

under [section 1 of the FCMA].” § 210(d)(1). These contracts must be entered

into “ by the owners of 80 percent or more of the catcher vessels eligible under

208(c).” Id. The latter provision lists 19 named vessels, 13 of which are processor-

owned. Section 208(c) includes a provision allowing additional vessels to be added

to this list, but only if the Secretary of Commerce makes certain factual findings

and the new vessel is eligible to harvest pollock under a license limitation program

recommended by the North Pacific Council. See § 208(c)(20)(A), (B). Unless an

additional 46 independently owned boats were added to this list by January 1,

2000, there would be no possibility that 80 percent of the catcher vessels eligible

under section 208(c) could b e independently owned. Because one of the central

aims of the AFA was to reduce excess capacity in the fishery, it is obvious that

Congress did not intend to authorize the creation of FCMA cooperatives within

the mothership sector only if the number of catcher vessels within that sector

more than tripled, from 19 to 65. Section 210(d), therefore, confirms that Congress

expected processor-owned vessels to enter into contracts “ implementing a fishery

cooperative under’’ the FCMA.

Thus, interpreting the AFA to exclude processor-owned vessels would essen­

tially defeat the primary purpose of the Act, which was to encourage the formation

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of fishery cooperatives in order to end the annual race for fish. As noted above,

see supra p. 253, under section 210(b)(5), catcher vessels that do not participate

in a fishery cooperative may harvest pollock from that portion of the inshore

allocation that is reserved for open access. If only a small number of catcher

vessels join cooperatives, the percentage of the TAC set aside for cooperatives

will also be small, leaving a correspondingly greater percentage of the TAC avail­

able for open access, with a large number of non-cooperative vessels competing

for a portion of that catch. The race for fish would continue.

The legislative history of the AFA likewise confirms that Congress intended

fishery cooperatives to play a critical role in ending the race for fish. As Senator

Murray explained during the Senate debate on the AFA,

This bill relies in great measure on the ability and willingness of

the North Pacific pollock fishery sectors to form fishery coopera­

tives. Fishery cooperatives, authorized under current law, are a pri­

vately negotiated allocation on a company-by-company or vessel-

by-vessel basis of a portion of the total allowable catch. Similar

to an individual fishing quota program, cooperatives provide fishery

participants with the certainty they need to stop the race for fish,

and harvest and process the fish on a more flexible schedule with

greater attention to bycatch, efficiency, and safety. The existing

fishery cooperative in the offshore sector of the Pacific Whiting

fishery has shown tremendous benefits in these regards and has

helped rationalize the fishery. It is hoped that cooperatives can do

the same in the pollock fishery.

144 Cong. Rec. S12.708 (daily ed. Oct. 20, 1998) (statement of Sen. Murray).

It can reasonably be assumed that, in crafting cooperatives as a solution to the

open access problem, Congress was familiar with the BSAI fishing industry and

its various components. Cf. Rodriguez v. P eters , 63 F.3d 546, 567 (7th Cir. 1995).

More particularly, it is clear that Congress was aware of the extent to which the

shoreside processing sector was vertically integrated and that Congress did not

intend to omit processor-owned boats from the fishery cooperatives whose forma­

tion was essential to the purposes of section 210. The clear language of the AFA

and its legislative history and purpose thus demonstrate a congressional intent

to include processor-owned vessels in fishery cooperatives under section 210(b).2

2 To be sure, the purpose o f section 210(b) could also be achieved if processors sold their catcher vessels to

independent operators The legislative history, however, makes no reference to such divestiture, and it seems unlikely

that Congress, without even referring to divestiture, would make the entire success of section 210(b) rest on this

contingency.

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B. Section 210(b) Reference to FCMA Cooperatives

We now turn to the question whether the reference in subsection 210(b) to

“ fishery cooperatively] under subsection (a),” which refers to the fishery coopera­

tive provision o f the FCMA, 15 U.S.C. § 521, places any limitations on the forma­

tion of cooperatives under the AFA. The National Oceanographic and Atmospheric

Administration ( “ NOAA” ) does not dispute the conclusion that the text and legis­

lative history of the AFA indicate a congressional intent to include processor-

owned vessels in cooperatives under section 210(b). However, NOAA argues that,

by referring to FCMA fishery cooperatives under section 210(b), Congress nec­

essarily incorporated into the AFA cooperatives those eligibility restrictions that

apply to FCMA cooperatives. See Letter for Randolph Moss, Acting Assistant

Attorney General, Office of Legal Counsel, from Monica P. Medina, General

Counsel, National Oceanographic and Atmospheric Administration (June 7, 1999)

(“ NOAA Letter” ). And because NOAA interprets the FCMA to preclude the

participation of processor-owned vessels, it concludes that, likewise, processor-

owned vessels are ineligible to participate in cooperatives under § 210(b) of the

AFA. See id. at 5.

Because the question of the interplay between the FCMA and the AFA is rel­

evant to a proper interpretation o f section 210(b), we will briefly discuss the anti­

trust exemption under the FCMA and the statute upon which it is modeled, the

Capper-Volstead Act, 7 U.S.C. § 291 (1994), before returning to the AFA.

1. Integrated Processors under the FCMA and the Capper-Volstead Act

The FCMA grants an exemption from antitrust liability for certain collective

activities in the fishing industry. Specifically, it provides:

Persons engaged in the fishery industry, as fishermen, catching, col­

lecting, or cultivating aquatic products, . . . may act together in

associations, corporate or otherwise, with or without capital stock,

in collectively catching, producing, preparing for market, proc­

essing, handling, and marketing in interstate and foreign commerce,

such products of said persons so engaged. . . . Such associations

may have marketing agencies in common, and such associations

and their members may make the necessary contracts and agree­

ments to effect such purposes.

15 U.S.C. §521. The FCMA exemption was patterned after a similar antitrust

exemption for agricultural activities, set forth in section 1 of the Capper-Volstead

Act, 7 U.S.C. §291. In fact, the only court that has considered the scope of the

FCMA exemption concluded that “ though there are some differences between

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Participation by Processor-Owned Catcher Vessels in Inshore Cooperatives

Capper-Volstead and the Fisherman’s Act, the two Acts provide exemptions from

antitrust liability for essentially the same activities.” United States v. Hinote, 823

F. Supp. 1350, 1354 n.7 (S.D. Miss. 1993).

The Supreme Court considered the scope of the Capper-Volstead exemption

in National Broiler Mktg. A ss’n v. United States , 436 U.S. 816 (1978) (“ NBMA ” ).

In NBMA, the United States brought a civil action against a nonprofit cooperative

association of producers of broiler chickens — the NBMA — alleging a conspiracy

in violation of section 1 of the Sherman Act. The question before the Court was

whether a producer of broiler chickens, which did not own a breeder flock or

hatchery, could nevertheless qualify as a “ farmer” within the meaning of the

Capper-Volstead Act. See id. at 817. After reviewing the legislative history of

the Capper-Volstead Act, the Court concluded that it could not:

We, therefore, conclude that any member of NBMA that owns nei­

ther a breeder flock nor a hatchery, and that maintains no grow-

out facility at which the flocks to which it holds title are raised,

is not among those Congress intended to protect by the Capper-

Volstead Act. The economic role of such a member in the produc­

tion of broiler chickens is indistinguishable from that of the proc­

essor that enters into a preplanting contract with its supplier, or

from that of a packer that assists its supplier in the financing of

his crops. . . . We hold that such members are not “ farmers,” as

that term is used in the Act, and that a cooperative organization

that includes them — or even one of them — as members is not enti­

tled to the limited protection of the Capper-Volstead Act.

Id. at 827-29 (footnotes omitted).

In coming to this conclusion, the Court specifically reserved the question of

the status of the integrated producer:

[W]e need not consider here the status under the Act of the fully

integrated producer that not only maintains its own breeder flock,

hatchery, and grow-out facility, but also runs its own processing

plant. Neither do we consider the status of the less fully integrated

producer that, although maintaining a grow-out facility, also con­

tracts with independent growers for a large portion of the broilers

processed at its facility.

Id. at 829 n.21. In a concurring opinion, Justice Brennan did address these ques­

tions reserved by the Court. He reviewed the legislative history of the Capper-

Volstead Act, and asserted that “ Congress’ manifest purpose to protect the small,

individual economic units engaged in fanning,” id. at 835 (Brennan, J., concur­

ring), precluded automatic extension of the exemption to the integrated producer:

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I seriously question the validity of any definition of “ farmer” in

§ 1 which does not limit that term to exempt only persons engaged

in agricultural production who are in a position to use cooperative

associations for collective handling and processing — the very

activities for which the exemption was created. At some point along

the path of downstream integration, the function of the exemption

for its intended purpose is lost, and I seriously doubt that a person

engaged in agricultural production beyond that point can be consid­

ered to be a farmer . . . . Thus, in my view, the nature of the

association’s activities, the degree of integration of its members,

and the functions historically performed by farmers in the industry

are relevant considerations in deciding whether an association is

exempt.

Id. at 835-36.

Only one court has actually ruled on the question whether an integrated producer

is entitled to Capper-Volstead or FCMA exemption. In United States v. Hinote,

823 F. Supp. 1350, 1359 (S.D. Miss. 1993), the district court, relying largely upon

Justice Brennan’s concurrence, concluded that catfish processors could not take

advantage of the antitrust exemption under the FCMA solely by purchasing or

leasing some interest in a catfish farming operation. The court reasoned that if

it were to come to the opposite conclusion,

large integrated agribusinesses organized to market and sell agricul­

tural products could exempt themselves from the antitrust laws by

the simple expedient of purchasing and/or leasing some interest in

a farming operation, no matter how de minimis the interest. Such

a result, however, would undermine Congress’ express purpose in

enacting both the Sherman and Capper-Volstead Acts.

Id. There is certainly support in the legislative history of the Capper-Volstead

Act for this conclusion, much o f which is catalogued by Justice Brennan in his

NBMA concurrence. However, as Justice White recognized in his dissent in

NBMA, there is also conflicting evidence in the history and language of the statute

that might lead to the opposite conclusion. 436 U.S. at 844—49.

While we understand that it is generally assumed that integrated producers and

processors may not participate in exempted cooperatives, the sparse case law inter­

preting the scope of the FCMA and Capper-Volstead exemptions cannot be said

to have dispositively resolved the question. However, as we discuss in the next

section, we need not decide that question in order to determine whether processor-

owned vessels may participate in the cooperatives authorized under section 210(b).

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2. Reconciling the FCMA with the AFA

It is a well-established principle of statutory interpretation that the law favors

rational and sensible construction. See, e.g., 2 A Norman J. Singer, Sutherland

Statutory Construction §45.12 (5th ed. 1992). Thus, if there exists some reason­

able interpretation that reconciles two otherwise allegedly inconsistent statutes in

a manner that does not destroy or hinder the intent or meaning of either one,

that interpretation is favored. See id. Moreover, if a statute is capable of more

than one interpretation, it should be construed to effectuate its underlying purpose.

See Norwest Bank o f North Dakota, N.A. v. Doth, 159 F.3d 328, 333 (8th Cir.

1998); cf. United States N a t’l Bank o f Oregon v. Independent Ins. Agents o f Am.,

Inc., 508 U.S. 439, 455 (1993) (stressing that, “ [i]n expounding a statute, we

must not be guided by a single sentence or member of a sentence, but look to

the provisions of the whole law, and to its object and policy” ) (quoting United

States v. Heirs o f Boisdore, 49 U.S. (How.) 113, 122 (1849)). Applying these

principles to the case before us, we must, if possible, construe the cross-reference

to FCMA cooperatives in section 210(b) in. a reasonable manner that is both con­

sistent with the purposes of the AFA and compatible with section 1 of the FCMA.

Congress’s primary purpose in enacting section 210 was to encourage the forma­

tion of as many fishery cooperatives as possible in order to rationalize the BSAI

fishery and end the race for fish. See supra pp. 256-57. Congress chose to effec­

tuate this purpose for the inshore sector of the BSAI fishery by creating “ catcher

vessel cooperatives” under section 210(b). Congress chose also to define section

210(b) cooperatives by cross-referencing the FCMA. Because the participation of

processor-owned vessels in section 210(b) cooperatives was critical to achieving

Congress’s purpose, Congress must have intended that such vessels would be

included in cooperatives under the FCMA.3 In interpreting section 2 10(b)’s cross-

reference to the FCMA, therefore, we are presented with three possibilities: (1)

Congress was mistaken about the scope of the FCMA, which excludes such

integrated processors, and processor-owned vessels may not participate in coopera­

tives under section 210(b); (2) Congress correctly understood the FCMA to

include integrated processors, and processor-owned vessels may participate in

cooperatives under section 210(b); or (3) Congress has in the AFA effectively

declared that, regardless of the actual scope of the FCMA in other contexts, proc­

essor-owned vessels may participate in FCMA fishery cooperatives in the BSAI

fishery. Of these three possible interpretations, we must reject the first because

it so plainly frustrates the purpose of the AFA. We need not decide between the

second and third possible interpretations, however, because, under either, it is clear

3 O f course, it might be argued that Congress deliberately referred to the FCMA cooperatives in section 210(b)

in order to exclude processor-owned boats from AFA cooperatives However, there is nothing in the legislative

history of the statute to support such an assertion, and there is significant evidence to the contrary. See supra pp

253-57 Thus, we do not think this interpretation o f the reference to the FCMA merits consideration

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that catcher vessels owned by shoreside processors may participate in the fishery

cooperatives authorized by section 210(b) of the AFA.

The first of these interpretations assumes the conclusion reached by NOAA,

namely that the FCMA does not perm it integrated processors to participate in

cooperatives under 15 U.S.C. §521. To argue further, as NOAA does, that this

cross-reference necessarily incorporates the limitations of FCMA cooperatives into

the AFA scheme requires us to conclude that Congress mistakenly assumed that

FCMA cooperatives could include integrated processors and, as a result, enacted

a provision that cannot operate as Congress intended. Moreover, as we have

already observed, if processor-owned vessels are excluded from participating in

cooperatives under section 210(b), only one fishery cooperative could be formed

under section 210(b), thereby thwarting the primary purpose of section 210.

Thus if we accept this first interpretation, we render section 210(b) practically

ineffective.4

W e are reluctant to adopt a construction of a statute that presumes congressional

error and that renders its provisions either ineffective or contrary to stated legisla­

tive objectives. The ‘ ‘unreasonableness of the result produced by one among alter­

native possible interpretations of a statute is reason for rejecting that interpretation

in favor of another which would produce a reasonable result.” 2A Singer, Suther­

land Statutory Construction §45.12; see also American Tobacco Co. v. Patterson,

456 U.S. 63, 71 (1982) ( “ Statutes should be interpreted to avoid . . . unreason­

able results whenever possible.” ).

W e therefore look to the two other proposed interpretations to see if they offer

a more reasonable result that achieves the AFA’s underlying purposes. The second

interpretation accomplishes these goals because it would allow processor-owned

catcher vessels to join cooperatives under both the FCMA and the AFA. Of

course, this interpretation would require us to determine that integrated processors

may participate in fishery cooperatives under the FCMA, a conclusion that cannot

be said to be settled under the case law and that we understand may have profound

implications for both the fishing and other industries. We are therefore reluctant

to rely upon this conclusion, and need not do so because, even if the FCMA

exemption does not cover integrated processors, we believe Congress’s intent to

permit the formation of cooperatives under section 210(b) that include processor-

owned vessels can still be given effect under the third interpretation.

The third interpretation posits that Congress declined to express or assume a

view concerning the scope o f the FCMA generally and instead decided that,

regardless of whether processor-owned vessels are permitted to participate in all

cooperatives under the FCMA, they should participate in the FCMA cooperatives

4 It might be argued that the fact lhat o n e cooperative o f independently owned catcher vessels could be formed

under the provisions o f section 210(b) is sufficient to render this interpretation viable. However, in light of Congress’s

clear intent in section 210(b) to encourage the formation o f cooperatives on a “ class-wide basis,” we think such

an interpretation would in fact “ thwart th e obvious purpose o f the statute.” In Re Trans Alaska Pipeline Rate Cases,

436 U S 631, 643 (1978). Moreover, as noted above, see supra pp 256-57, this interpretation would completely

nullify section 210(d)

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authorized by the AFA. By referring to the FCMA in a statute that intended to

include integrated processors in its fishery cooperatives, Congress effectively

determined that, at least for the purpose of BSAI directed pollock fisheries, proc­

essor-owned vessels are entitled to participate in cooperatives that enjoy FCMA

antitrust immunity.

“ [WJhere . . . Congress adopts a new law incorporating sections of a prior

law, Congress normally can be presumed to have had knowledge of the interpreta­

tion given to the incorporated law, at least insofar as it affects the new statute.”

Lorillard v. Pons, 434 U.S. 575, 581 (1978). Here, however, as noted above, there

was no dispositive judicial interpretation of the scope of either the FCMA or the

Capper-Volstead Act to guide Congress when it enacted the AFA in 1998. More­

over, because it was not actually amending the FCMA, Congress had no reason

in the AFA to settle this far-reaching issue. Cf. Pierce v. Underwood, 487 U.S.

552, 567 (1988) (stating that “ it is the function of the courts and not the Legisla­

ture, much less a Committee of one House of the Legislature, to say what an

enacted statute means” ); Patsy v. Board o f Regents o f the State o f Florida, 457

U.S. 496, 508-09 (1982) (according interpretive weight to views of a subsequent

Congress where that Congress acted in light of settled rule that exhaustion is not

required in section 1983 actions and imposed an exhaustion requirement for a

discrete class of 1983 claims). Rather, all that was required was for Congress

to determine that processor-owned vessels should be allowed to participate in AFA

cooperatives that enjoy FCMA immunity.

The language of section 210 offers textual support for the view that Congress

legislated in this limited manner. Notably, while it authorized the execution of

contracts “ implementing a fishery cooperative under” the FCMA, Congress did

not describe the signatories to such contracts by cross-reference to the FCMA.

Thus, it did not authorize “ fishermen, within the meaning of the FCMA, who

own qualified catcher vessels” to enter into contracts under section 210. Nor did

it authorize ‘ ‘owners of qualified catcher vessels otherwise eligible to form FCMA

cooperatives” to do so. Indeed, Congress did not use any of the FCMA’s operative

terms — “ persons,” “ fishermen,” “ planters” — in specifying who could partici­

pate in section 210(b) cooperatives entitled to antitrust immunity. Instead, Con­

gress provided that FCMA contracts under section 210(b)(1) be signed by

“ owners” of “ qualified catcher vessels,” and nothing in the statutory definition

of “ qualified catcher vessels” suggests any limitation based on ownership or

vertical integration. The text of the statute is thus entirely consistent with a

congressional intent to permit integrated processors to participate in FCMA

cooperatives for purposes of the AFA, whether or not such entities could partici­

pate in FCMA cooperatives generally. C f Lorillard, 434 U.S. at 582 (construing

one statute in light of congressional “ selectivity . . . in incorporating provisions

and modifying certain . . . practices” under an earlier statute that Congress incor­

porated by reference in the subsequent statute).

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Unlike the first interpretation we outlined above, the third interpretation effec­

tuates Congress’s underlying purpose in the AFA while simultaneously reconciling

the AFA with the FCMA. It best gives effect to Congress’s express intent: that

all catcher vessels, both independently-owned and processor-owned, participate

in FCMA fishery cooperatives under the AFA so that the race for fish in the

BSAI fishery can be ended. Particularly in light of the fact that there is no clearly

settled law on the question whether, and if so, under what circumstances,

integrated processors can participate in FCMA cooperatives, that congressional

intent should control here.5

This interpretation does not require us to accept or reject Justice Brennan’s

interpretation of the Capper-Volstead Act or the Hinote court’s view concerning

the scope of the FCMA. As we read section 210, Congress did not take any posi­

tion on the scope of the FCMA — a statute it left entirely undisturbed — and

instead effectively declared that, whatever the scope of that statute generally, proc-

essor-owned vessels could participate in pollock fishery cooperatives entitled to

FCMA immunity.

In any event, Justice Brennan’s analysis in NBMA is simply inapplicable here.

In his concurring opinion, Justice Brennan concluded that the Capper-Volstead

exemption should not extend to those who are not “ in a position to use coopera­

tive associations for collective handling and processing,” 436 U.S. at 835-36,

presumably those who already have their own processing capacity. The purpose

of cooperatives under the AFA, however, is not to facilitate collective proc­

essing— in fact, each cooperative that might be formed under section 210(b) is

expressly tied to an existing shoreside processor that is responsible for processing

the catch of the cooperative. Rather, cooperatives under the AFA are formed for

the purpose of receiving a guaranteed allocation of the pollock TAC, thereby

permitting members of the cooperative to fish more efficiently and safely. It thus

makes no sense to evaluate the eligibility of participants in AFA cooperatives

on the basis of their ability to use the cooperative only for purposes of collective

processing.

We do not share NOAA’s concern that this third interpretation is inconsistent

with section 210(d), which expressly extends the antitrust exemption under the

FCMA to processing activities by motherships. NOAA argues that, because, Con­

gress expressly extended the reach of the FCMA to include one type of processor

in section 210(d), we should not read such an extension into § 210(b) on an

implied basis. See NOAA Letter at 4 n.4. However, the principle expressio unius

5 In fact, as noted above, under this interpretation, the scope of the FCMA in other contexts is irrelevant to the

result. If the FCMA permits integrated processors to participate in cooperatives in other contexts, then the AFA

simply makes clear that this authority applies to all catcher vessels in the BSAI fishery, including those owned

by processors, and encourages them to tak e advantage o f the existing authority by offering catcher vessel cooperatives

a guaranteed allocation o f the TAC If th e FCMA does not permit integrated processors to participate in cooperatives

in other contexts. Congress’s intent that they be permitted to participate in FCM A cooperatives for the purpose

of harvesting pollock in the BSAI fishery is a decision to extend FCMA immunity to a limited group of processor-

ow ned vessels operating in a single fishery.

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est exclusio alterius is a canon of statutory construction, not a rule of law, and

can be overcome by a showing of contrary legislative intent or policy: “ [W]hether

the specification of one matter means the exclusion of another is a matter of legis­

lative intent for which one must look to the statute as a whole.” 2A Singer,

Sutherland Statutory Construction §47.25 n .l (citing Massachusetts Trustees o f

E. Gas & Fuel Assocs. v. United States, 312 F.2d 214 (9th Cir. 1963)); see also

United States v. Barnes, 222 U.S. 513, 519 (1912) (“ The maxim invoked

[expressio unius] expresses a rule of construction, not of substantive law, and

serves only as an aid in discovering the legislative intent when that is not other­

wise manifest. In such instances it is of deciding importance; in others, not.” ).

Given the strong evidence in the AFA that Congress intended integrated proc­

essors to participate in all fishery cooperatives in the BSAI fishery, we do not

find the maxim persuasive here.

A narrower reading of section 210(b) might also be urged based upon the rule

that “ [r]epeals of the antitrust laws by implication from a regulatory statute are

strongly disfavored,” United States v. Philadelphia N a t’l Bank, 374 U.S. 321,

350 (1963). This rule comes into play, however, only if the FCMA does not extend

to processor-owned vessels, a question we need not decide. Morever, even if we

assume that the FCMA does not include such vessels, we believe that this is one

of those unusual situations that presents a case of “ plain repugnancy between

the antitrust and regulatory provisions,” id. at 351, a rare exception to the general

rule. Where, as here, “ Congress has made a judgment that [certain] restrictions

on competition might be necessitated by the unique problems o f ’ a particular

industry, “ the antitrust laws must give way if the regulatory scheme established”

by that statute is to work. United States v. National Ass ’n o f Securities Dealers,

Inc., 422 U.S. 694, 729-30 (1975). Congress’s purpose in enacting the AFA was

to increase efficiency by decreasing excess capitalization and ending the race for

fish, and its mechanism for achieving that purpose was the creation of fishery

cooperatives that are necessarily exempt from antitrust liability.

Indeed, in the context of the BSAI fishery, where there is a fixed quota of

fish in a highly regulated industry, the creation of fishery cooperatives does not

undermine the goals of the antitrust laws. In the related context of the Pacific

Whiting fishery, the Antitrust Division recognized that “ reliance on an Olympic

race system to gather a fixed quota of fish ‘is both inefficient and wasteful,’ ”

and concluded that “ eliminating the race will increase processing efficiency and

concomitantly the output of [fish].” Letter for Joseph M. Sullivan, Esq., Mundt,

MacGregor, Happel, Falconer, Zulauf & Hall, from Joel L. Klein, Acting Assistant

Attorney General, Antitrust Division at 3 (May 20, 1997). The Antitrust Division

further determined that, in such a fixed quota setting, elimination of the race for

fish was unlikely to have an anticompetitive effect: “ [Elim ination of the race

to gather an input whose output is fixed by regulation seems unlikely to reduce

output or increase price under any likely scenario.” Id. Thus, from the perspective

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o f antitrust principles, there is no reason to read section 210(b) narrowly; on the

contrary, reading section 210(b) broadly to facilitate the formation of as many

fishery cooperatives as possible would ultimately allow for greater efficiency in

processing and might have procompetitive effects.6 Cf. id. at 3-4 (“ To the extent

that the proposed agreement allows for more efficient processing that increases

the usable yield (output) of the processed Pacific Whiting and/or reduces the inad­

vertent catching of other fish species whose preservation is also a matter of regu­

latory concern, it could have procompetitive effects.” ).

In short, there exists at least one interpretation of section 210(b) that is con­

sistent with its text and effectuates the purposes of the AFA. Because a statute

should be interpreted whenever possible to effectuate Congress’s purposes, and

because it is possible to do so here, we conclude that processor-owned vessels

may participate in section 210(b) cooperatives. In light of this conclusion, we

need not resolve the further question whether the FCMA generally permits such

vessels to participate in cooperatives that enjoy antitrust immunity.

CONCLUSION

The language and the legislative history of the AFA indicate that Congress

intended processor-owned catcher vessels to participate in inshore cooperatives

under the AFA. Because section 210(b) can be read in a manner consistent with

that intention, we conclude that processor-owned catcher vessels may join fishery

cooperatives under the AFA.

RANDOLPH D. MOSS

Acting Assistant Attorney General

Office o f Legal Counsel

6 O ur conclusion that processor-owned vessels may participate in FCMA cooperatives under the AFA is therefore

unlikely to lead to anticompetitive results Nevertheless, to minimize the possibility of negative effects on the fishing

industry. Congress included within the A FA several provisions designed to eliminate potentially adverse economic

consequences. See, e.g., § 213(c)(1) (granting the North Pacific Council the authority to recommend conservation

and management measures “ that supersede the provisions o f this title . . to mitigate adverse effects in fisheries

or on owners o f fewer than three vessels in the directed pollock fishery caused by . . fishery cooperatives in

the directed pollock fishery” ); see also 144 Cong Rec. S12.708 (daily ed. Oct. 20, 1998) (statement of Sen. Murray)

( “ In the interest o f ensuring that small, independent fishermen are the true beneficiaries of fishery cooperatives,

the bill includes a number o f requirements for fishery cooperatives in all three sectors which are designed to provide

these small, independent fishermen with sufficient leverage in the negotiations to protect their interests.” ) Thus,

should shoreside processors in the BSAI fishery affiliate with catcher vessels for no purpose other than to engage

in anticompetitive conduct under the um brella o f antitrust exemption, the AFA would appear to give the Council

the authority to check such abuses

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