Appendix — American Pelagic Fishing Co. v. United States, 125 S. Ct. 2963 (2005) (No. 04-1252)

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APPENDIX A

In the United States Court of Appeals

for the Federal Circuit.

AMERICAN PELAGIC FISHING COMPANY, L.P.,

Plaintiff-Appellee,

UNITED STATES, Defendant-Appellant.

No. 03-5101.

Aug. 16, 2004.

Before CLEVENGER, SCHALL, and BRYSON, Circuit

Judges.

SCHALL, Circuit Judge.

The United States appeals the decision of the United

States Court of Federal Claims that American Pelagic

Fishing Co., L.P. (“American Pelagic”) suffered a taking in

violation of the Fifth Amendment to the U.S. Constitution,

for which the court awarded damages in the amount of

$37,275,952.67. Am. Pelagic Fishing Co. v. United States,

49 Fed.Cl. 36 (2001) (liability) (“Am. Pelagic I’); 55 Fed.Cl.

575 (2003) (damages) (“Am. Pelagic IT’). We conclude,

however, that American Pelagic did not suffer the taking of a

property interest that is legally cognizable under the Fifth

Amendment. We therefore reverse the decision with regard

to liability, vacate the award of damages, and remand the

case to the Court of Federal Claims with the instruction that

it enter judgment in favor of the United States.

BACKGROUND

This case involves commercial fishing for mackerel and

herring in the Exclusive Economic Zone (“EEZ”) of the

United States in the Atlantic Ocean. The EEZ consists of the

waters two hundred nautical miles from the coastal boundary

of each state. See 16 U.S.C. § 1811 (2000); Proclamation

No. 5030, 48 Fed.Reg. 10,605 (Mar. 14, 1983).

The pertinent facts are not in dispute. Throughout the

1990s, the National Marine Fisheries Service (“NMFS”)

reported that mackerel and herring stocks in the Atlantic

Ocean were at record highs and were substantially

underfished. Am. Pelagic, 49 Fed. Cl. at 39. In 1993, a

study commissioned by the U.S. Senate Finance Committee

and prepared by the U.S. International Trade Commission

concluded that only larger ships could improve the

competitive position of the U.S. Atlantic mackerel industry

with respect to European competitors. Mackerel:

Competitiveness of the U.S. Industry in Domestic and

Foreign Markets, Inv. No. 332-333, Pub. 2649 (Int’l Trade

Comm’n June 1993). In 1994, following a recommendation

by the Mid-Atlantic Fishery Management Council

' The Magnuson-Stevens Fishery Conservation and Management

Act, Pub.L. No. 94-265, 90 Stat. 331 (1976) (codified at 16 U.S.C. §§

1801-1883) (“Magnuson Act”), confers federal management authority

over marine fishery resources upon the Secretary of Commerce

(“Secretary”) and the NMFS, a subunit of the National Oceanic and

Atmospheric Administration, which is an agency within the Department

of Commerce (“Commerce”). See Am. Pelagic I, 49 Fed. Cl. at 38-39.

(“MAFMC”),” the NMFS rescinded its potential controls’

over access to the Atlantic mackerel fishery, explaining that

stocks were “extremely high” and harvesting low. Atlantic

Mackerel, Squid, and Butterfish Fisheries, 59 Fed.Reg.

49,235 (Dep’t Commerce Sept. 27, 1994) (rescinding the

control date of August 13, 1992, set forth in Atlantic

Mackerel, Squid, and Butterfish Fisheries, 57 Fed.Reg.

36,384 (Dep’t Commerce Aug. 13, 1992)). In 1996, the

MAFMC concluded that

[i]n order to compete in the world bulk market, the U.S.

will have to emulate its foreign competitors which

harvest, process, and ship mackerel in large quantities so

as to take advantage of economies of scale. Currently,

the U.S. east coast industry does not have the large

vessels necessary to participate in this market * * * .

> The MAFMC is one of eight regional fishery councils charged

with developing fishery management plans for fisheries within the EEZ in

accordance with the standards set forth in the Magnuson Act. See 16

U.S.C. § 1851. The MAFMC has management responsibility for Atlantic

mackerel, while the New England Fishery Management Council

(“NEFMC”) has management responsibility for Atlantic herring. Once a

Fishery Management Plan (“FMP”) is approved by the Secretary, it is

promulgated by the NMFS. During the relevant time period in 1997, an

official FMP was in place for the Atlantic mackerel fishery, but only a

preliminary FMP was in place for the Atlantic herring fishery. Am.

Pelagic I, 49 Fed. Cl. at 39.

>A “control date” provides notice to anyone subsequently

entering a fishery that he is not assured of continued participation in the

fishery should a limited entry scheme be implemented. See, e.g., Atlantic

Mackerel, Squid, and Butterfish Fisheries, 57 Fed.Reg. 36,384 (Dep’t

Commerce Aug. 13, 1992).

Annual Quota Specifications for Atlantic Mackerel, Loligo,

Illex, and Butterfish for 1997 12 (MAFMC July 1996).

For 1997, the NMFS established an allowable biological

catch of 1.178 million metric tons of Atlantic mackerel, but

commercial landings totaled only 15,406 metric tons. Am.

Pelagic I, 49 Fed.Cl. at 39.* In its draft FMP for Atlantic

herring in 1997, which was partially approved by the

Secretary in 1999, the NEFMC proposed an allowable

biological catch of 300,000 metric tons; yet, commercial

landings totaled only 95,715 metric tons. /d. at 40.

Il.

Lisa Torgersen is the President and sole shareholder of

American Pelagic. Am. Pelagic II, 55 Fed.Cl. at 577. In

November 1996, Atlantic Star Fishing Company, American

Pelagic’s predecessor, purchased a large, U.S.-flagged hull

with the intent of transforming it into a commercial fishing

vessel. Jd. at 579-80. In January 1997, it contracted with a

Norwegian shipyard to convert the hull into a freezer

trawler—a large, commercial fishing vessel with the capacity

to catch all of its own fish, freeze them on board, and offload

them for shipping to their final destination. Jd. at 579 n.6,

580. The result was the Atlantic Star, a vessel 369 feet long,

displacing 6,900 gross tons, and having a total of 13,400

horsepower (about 7,000 horsepower for running the

generators for the freezers and the remainder for propulsion).

Id. at 580. Outfitted with the most sophisticated technology

The government’s interrogatory responses indicate that

commercial landings of Atlantic mackerel in 1997 totaled 15,406 metric

tons, not 15,706 as the Court of Federal Claims stated in Am. Pelagic I,

49 Fed.Cl. at 39.

for locating, sorting, and freezing fish year-round, the

Atlantic Star could safely hold 400 to 500 metric tons of fish.

Id. at 580-81. American Pelagic’s total investment in the

vessel approached $40 million. Am. Pelagic I, 49 Fed. Cl. at

38.

While the vessel was being outfitted, American Pelagic

set about applying for the necessary permits and gear

authorizations. Pursuant to 50 C.F.R. § 648.4(a)(5) (1996),

the Atlantic Star was required to carry on board a valid

Atlantic mackerel permit to fish for, possess, or land Atlantic

mackerel in or from the EEZ. Because of the potential for

incidental bycatch, the Atlantic Star also was required to

have a Northeast Multispecies (Nonregulated) fish permit.

Id. § 648.4(a)(1). In April 1997, the Northeast Regional

Office of the NMFS reissued both permits to American

Pelagic: Federal Fisheries Permit # 610018 for, inter alia,

Atlantic mackerel, expiring December 31, 1997; and Federal

Fisheries Permit # 610018 for Northeast Multispecies

(Nonregulated), expiring April 30, 1998. In addition,

pursuant to 50 C.F.R. § 648.80(d) (1996), on August 28,

1997, the Northeast Regional Office issued to American

Pelagic a Gulf of Maine/Georges Bank Midwater Trawl Gear

Authorization letter for, inter alia, Atlantic herring, expiring

April 30, 1998.° Am. Pelagic I, 49 Fed. Cl. at 40.

* Initially, the permits were issued to the Atlantic Star Fishing

Company on February 5, 1997. Am. Pelagic I, 49 Fed.Cl. at 40.

American Pelagic was required to carry this authorization letter

because it planned to harvest fish with midwater trawl gear of mesh size

less than that normally required by the regulations. 50 C.F.R. §

648.80(d).

Il.

During 1997, as Ms. Torgersen prepared for commercial

operation, opposition to the Atlantic Star began to develop.

Id. Concerns about the size of the vessel and its potential

effect on the Atlantic mackerel and herring fisheries were

voiced at a joint meeting of the Herring Section of the

Atlantic States Marine Fisheries Commission and the

NEFMC Herring Committee in March 1997. These concerns

subsequently were incorporated into legislation introduced in

the U.S. House of Representatives to establish a moratorium

on any fishing vessel, in the Atlantic mackerel and herring

industries, equal to or greater than 165 feet in length, with an

engine of more than 3,000 horsepower. Jd. at 40-41 (citing

H.R. 1855, 105th Cong. (1997)). In September 1997, a

similar bill was introduced in the U.S. Senate. The Senate

bill would have revoked Atlantic mackerel or herring permits

that had been issued to vessels 165 feet or longer with an

engine of more than 3,000 horsepower. Jd. at 41 (citing S.

1192, 105th Cong. (1997)).

Despite the fact that neither bill was enacted, Congress

passed a rider to an appropriations act that effectively

cancelled American Pelagic’s existing permits and

authorization letter, and at the same time prevented any

further permits from being issued to the Atlantic Star. Id. at

41-42 (citing text of Departments of Commerce, Justice, and

State, the Judiciary, and Related Agencies Appropriations

Act, 1998, Pub.L. No. 105-119, § 616, 111 Stat. 2440, 2518-

19 (1997) (“1997 Appropriations Act”)). The following year,

Congress enacted the identical provision in another

appropriations act,’ and in 1999, it made the size limitation

and permit revocation permanent.® /d. at 42. The NMFS has

since promulgated regulations reflecting this prohibition.” Jd.

As a result of the legislation, the Atlantic Star was unable to

receive a permit to fish in any U.S. fishery within the EEZ; at

the time, no other vessel was affected by the legislation. Jd.

at 42, 43.

After the Atlantic Star’s permits were cancelled,

American Pelagic took the vessel to the Baltic Sea to

participate in a research project. During this time, the vessel

operated as a “mother ship”: it did not catch fish itself but

merely processed the fish caught by other vessels. Because

the venture was not profitable, the Atlantic Star spent only a

few months in the Baltic. Subsequently, American Pelagic

took the Atlantic Star to Mauritania, off the coast of west

Africa, and purchased fishing rights for those waters while

maintaining its status as a U.S.-flagged vessel. The vessel

: Departments of Commerce, Justice, and State, the Judiciary, and

Related Agencies Appropriations Act, 1999, Pub.L. No. 105-277, tit. II, §

202, 112 Stat. 2681, 2681-618 (1998) (“1998 Appropriations Act”).

* 1999 Emergency Supplemental Appropriations Act, Pub.L. No.

106-31, § 3025, 113 Stat. 57, 100-101 (1999) (“1999 Appropriations

Act”) (amending section 617 of the 1998 Appropriations Act).

° See Fisheries of the Northeastern United States, 64 Fed.Reg.

57,587 (Dep’t Commerce Oct. 26, 1999) (revising 50 C.F.R. pt. 648 and

imposing size and power limitations on vessels in the Atlantic mackerel

fishery); Magnuson-Stevens Fishery Conservation and Management Act

Provisions, 65 Fed.Reg. 77,450 (Dep’t Commerce Dec. 11, 2000)

(revising 50 C.F.R. pt. 648 and imposing size and power limitations on

vessels in the Atlantic herring fishery).

and its equipment performed to expectations; however, the

lack of fish and warm water temperatures prevented the

Atlantic Star from being profitable. American Pelagic chose

not to reflag the Atlantic Star and obtain authorization to fish

in a foreign fishery. By April 1999, American Pelagic was

operating at a loss. After unsuccessful attempts to secure

additional financing, and after rejecting Chapter 11

bankruptcy, American Pelagic sold the Atlantic Star to two

of its partners on July 6, 1999. Am. Pelagic II, 55 Fed. Cl. at

582-83.

IV.

American Pelagic brought suit in the Court of Federal

Claims in March 1999, alleging that the 1997 and 1998

Appropriations Acts revoking its permits and barring it from

receiving future permits effected a temporary taking of the

Atlantic Star. Am. Pelagic I, 49 Fed.Cl. at 44. In its

complaint, American Pelagic asserted that it had a property

right in its fishery permits and authorizations that was taken

by the legislation. Compl. {J 58, 64. American Pelagic

further asserted that the United States had “taken, destroyed,

and deprived [American Pelagic] of its compensable,

investment backed expectations in the use and operation of

the [Atlantic Star |” and had “taken all economically viable

use” of the vessel. Jd. 9¥ 59-60, 65-66. Thus, American

Pelagic alleged a taking of its property without just

compensation in violation of the Fifth Amendment. /d. ¥J

61, 67. American Pelagic sought relief in the form of “the

fair market value” of its property that had been taken,

measured as “the expected net revenues or profit from

operation of the [Atlantic Star] in the fisheries of the United

States” during the fiscal years 1998 and 1999. /d. It

estimated its just compensation to be in or around $10

million for each fiscal year, not including pre-or

postjudgment interest, damages, costs, and attorneys’ fees.

Id. “Prayer for Relief” J 1-3. In due course, the parties filed

cross-motions for summary judgment. On April 4, 2001, the

Court of Federal Claims granted summary judgment in favor

of American Pelagic on the issue of liability. Am. Pelagic /,

49 Fed. Cl. 36.

The court started from the premise that because licenses

and permits are traditionally not protected by the Takings

Clause, the res potentially taken by the legislation consisted

of the Atlantic Star itself, which the government conceded to

be property for Fifth Amendment purposes. /d. at 46. The

court then explained, “To determine whether a property right

exists independent of the regulatory scheme, it is necessary to

decide ‘whether an independent or preexisting right of use

under common law applies.’ “ Jd. at 47 (quoting Maritrans

Inc. v. United States, 40 Fed. Cl. 790, 796 (1998)). In that

context, the court determined that

[t]he relevant stick in the bundle in this context is the

right to use the Atlantic Star to fish, subject to regulation.

* ** We are not confronted here with a property or a use

which is inherently dangerous or a nuisance. There is

nothing in the nature of a fishing vessel that suggests that

any use is totally a matter of governmental grace. * * *

Absent such a built-in limitation, personal property, like

land, comes with an inherent right of use. We note that

the right to use is one of the group of rights inhering in

the citizen’s relation to [a] physical thing.

Id. (citations and internal quotation marks omitted). The

court thus determined that American Pelagic possessed a

property interest “in using [the Atlantic Star] to fish.” Jd. at

48.

The court then embarked upon a regulatory takings

analysis. In its analysis, the court decided that all three

factors of the Penn Central test weighed in favor of finding

that a regulatory taking had occurred: (i) American Pelagic’s

investment-backed expectation of participating in the

10a

Atlantic mackerel fishery was reasonable; (ii) the degree of

economic impact was severe enough to leave the Atlantic

Star with no commercially viable uses; and (iii) the character

of the government action, in purpose and effect, was both

retroactive and targeted at American Pelagic. Jd. at 48-51

(citing Penn Cent. Transp. Co. v. City of New York, 438 U.S.

104 (1978)).

The parties proceeded to a trial on damages in December

2002. Am. Pelagic II, 55 Fed.Cl. 575. The court awarded

American Pelagic damages in the amount of the fair rental

value of the Atlantic Star. In the absence of any market for

leasing such a vessel for fishing off the east coast of the

United States, the court derived a model for fixing the fair

rental value based upon a “reasonably established net

revenue stream” as presented by American Pelagic, with

minor modifications. Jd. at 584-90, 592-95. Ultimately, the

Court of Federal Claims awarded American Pelagic damages

in the amount of $37,275,952.67 for what it described as “a

temporary regulatory taking of all value of its vessel for a

twenty month period.”’° Jd. at 595.

The government has timely appealed the Court of Federal

Claims’ decisions on both liability and damages. We have

jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

10 In Am. Pelagic II, the court also affirmed its previous analysis of

the three Penn Central factors in light of Tahoe-Sierra Preservation

Council v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), which

issued after Am. Pelagic I and which reaffirmed that the Penn Central

analysis is the proper way to address whether a temporary regulatory

taking has occurred. 55 Fed. Cl. at 590-91 (quoting Tahoe-Sierra, 535

U.S. at 335).

POR EL EE ee eS ee ee ee

lla

ANALYSIS

Summary judgment is appropriate only if there is no

genuine issue of material fact and the moving party is entitled

to a judgment as a matter of law. Fed. Cl. R. 56(c);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48

(1986). We review a grant of summary judgment by the

Court of Federal Claims de novo to determine whether it

correctly applied this standard. See Cienega Gardens v.

United States, 265 F.3d 1237, 1244 (Fed. Cir. 2001). We

affirm if, when the facts are viewed in the light most

favorable to the nonmoving party and doubts are resolved

against the movant, there are no genuine issues of material

fact and the moving party is entitled to judgment as a matter

of law. Helifix, Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339, 1345-

46 (Fed. Cir. 2000). Whether a compensable taking has

occurred is a question of law based on factual underpinnings.

Maritrans Inc. v. United States, 342 F.3d 1344, 1350-51

(Fed. Cir. 2003) (citing Wyatt v. United States, 271 F.3d

1090, 1096 (Fed. Cir. 2001)). As noted above, in this case,

the pertinent facts are not in dispute.

In reviewing a final decision of the Court of Federal

Claims after a trial, we review legal conclusions de novo, and

we review factual findings under the clearly erroneous

standard. Jd. (citing Glendale Fed. Bank, FSB v. United

States, 239 F.3d 1374, 1379 (Fed. Cir. 2001)). “A finding is

‘clearly erroneous’ when although there is evidence to

support it, the reviewing court on the entire evidence is left

with the definite and firm conviction that a mistake has been

committed.” /d. (citing United States v. United States

Gypsum Co., 333 U.S. 364, 395 (1948)).

12a

The government challenges both the grant of summary

judgment on liability and the award of damages to American

Pelagic. Because our ruling on the issue of liability disposes

of the case, we do not reach the government’s challenge to

the award of damages.

Il.

The law generally applicable to takings claims is well

settled. The Fifth Amendment to the United States

Constitution provides that private property shall not “be

taken for public use without just compensation.” U.S. Const.

amend. V, cl. 4. The purpose of this prohibition is to prevent

“Government from forcing some people alone to bear public

burdens which, in all fairness and justice, should be borne by

the public as a whole.” Penn Central, 438 U.S. at 123

(quoting Armstrong v. United States, 364 U.S. 40, 49

(1960)). Real property, see Lucas v. S.C. Coastal Council,

505 U.S. 1003, 1019 (1992); personal property, see Andrus v.

Allard, 444 U.S. 51, 65 (1979); and intangible property, see

Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04 (1984),

each may constitute the res of a takings claim. The Supreme

Court has recognized that the government may “take”

private property either by physical invasion or by regulation.

Lucas, 505 U.S. at 1014-15. This case involves an alleged

regulatory taking. “A ‘regulatory taking may occur when

government action, although not encroaching upon or

occupying private property, still affects and limits its use to

such an extent tliat a taking occurs.’” Cienega Gardens, 265

l3a

F.3d at 1244 (citing Palazzolo v. Rhode Island, 533 U.S. 606,

617 (2001)).""

We have developed a two-part test to determine whether

a taking has in fact occurred. See Maritrans, 342 F.3d at

1351 (citing M & J Coal Co. v. United States, 47 F.3d 1148,

1153-54 (Fed.Cir.1995)); see also Conti v. United States, 291

F.3d 1334, 1339 (Fed.Cir.2002), cert. denied, 537 U.S. 1112

(2003). First, as a threshold matter, the court must determine

whether the claimant has established a property interest for

purposes of the Fifth Amendment. Maritrans, 342 F.3d at

1351. “It is axiomatic that only persons with a valid property

interest at the time of the taking are entitled to

compensation.” Wyatt, 271 F.3d at 1096 (citing, inter alia,

Almota Farmers Elevator Warehouse Co. v. United States,

409 U.S. 470, 473-74 (1973); Cavin v. United States, 956

F.2d 1131, 1134 (Fed: Cir. 1992)). If the claimant fails to

demonstrate the existence of a legally cognizable property

interest, the courts task is at an end. Maritrans, 342 F.3d at

1352 (citing M & J Coal, 47 F.3d at 1154).

'' American Pelagic alleged a temporary, as opposed to a

permanent, taking of its property interest. Temporary takings are not

different in kind from permanent takings—a temporary taking simply

occurs when what would otherwise be a permanent taking is temporally

cut short. Wyatt, 271 F.3d at 1097. “The essential element of a temporary

taking is a finite start and end to the taking.” Jd. In this case, the time

period of the alleged taking ran from November 26, 1997, the date upon

which American Pelagic’s permits and authorization letter were revoked

in the 1997 Appropriations Act, to July 6, 1999, the date on which the

Atlantic Star was sold. See Am. Pelagic II, 55 Fed. Cl. at 576; Compl. §

57.

14a

Second, after having identified a valid property interest,

the court must determine whether the governmental action at

issue amounted to a compensable taking of that property

interest. Chancellor Manor v. United States, 331 F.3d 891,

902 (Fed.Cir.2003) (citing M & J Coal, 47 F.3d at 1153-54).

With regard to this second inquiry, we have stated that it is

important to decide at the outset whether the alleged taking

was “categorical” or not. /d. (citing Rith Energy, Inc. v.

United States, 247 F.3d 1355, 1362 (Fed.Cir.2001) (on

rehearing)). In Rith Energy, we explained the difference

between a categorical and a noncategorical taking: A

categorical taking has been defined as one in which “all

economically viable use, i.e., all economic value, has been

taken by the regulatory imposition.” Palm Beach Isles

Assocs. v. United States, 231 F.3d 1354, 1357 (Fed. Cir.),

modifying 208 F.3d 1374 (Fed. Cir. 2000). A categorical

taking is distinct from a taking “that is the consequence of a

regulatory imposition that prohibits or restricts only some of

the uses that would otherwise be available to the property

owner, but leaves the owner with substantial viable economic

use.” Id. 247 F.3d at 1362. When a taking is noncategorical,

the court will undertake the fact-based inquiry enumerated in

Penn Central to evaluate whether the governmental action

constituted a compensable taking of the property interest.

Maritrans, 342 F.3d at 1351. The three Penn Central factors

are (i) the character of the governmental action, (ii) the

economic impact of the action on the claimant, and (iii) the

extent to which the action interfered with the claimant’s

reasonable investment-backed expectations. 438 U.S. at 124.

On the other hand, when the taking 1s categorical, we have

explained that “analyzing whether compensation is due does

not require an inquiry into whether the plaintiff had

reasonable investment-backed expectations that were

defeated by the regulatory measure that gave rise to the

takings claim.” Rith Energy, 247 F.3d at 1362 (citing Palm

Beach Isles Assocs., 231 F.3d at 1357).

Ill.

Preliminarily, American Pelagic alleged that it had a

property right in its “lawfully duly issued fishery permits and

authorizations” that was “appurtenant to the use and

operation of [American Pelagic’s] fishing vessel, the

[Atlantic Star].” Compl. ¥J 58, 64; Br. Pl.-Appellee at 27-29.

According to American Pelagic, this property right was taken

by the United States because the fishery permits and

authorization letter had already been issued when the 1997

Appropriations Act was passed, and at the time, the NMFS

lacked the discretion not to renew them. Br. Pl.-Appellee at

27-29. The Court of Federal Claims concluded, however,

that no such property right existed: “Licenses or permits are

traditionally treated as not protected by the Takings Clause

because they are created by the government and can be

cancelled by the government and normally are not

transferable.” Am. Pelagic I, 49 Fed. Cl. at 46.

On appeal, American Pelagic reasserts its contention that

it had a legally cognizable property interest in its lawfully

issued fishing permits and authorization letter. First, it

argues that the permits and authorization letter were

mandatory, rather than discretionary. See Foss v. Nat'l

Marine Fisheries Serv., 161 F.3d 584, 588 (9th Cir.1998)

(finding, for purposes of a procedural due process claim, a

constitutionally protectible property interest in a fishing

quota permit from the NMFS because the NMFS had no

discretion to deny a permit application if regulatory

requirements were met). According to American Pelagic, the

only grounds for denying their issuance or renewal were

incomplete, late, or altered applications, or the failure to meet

eligibility requirements, none of which applied in the case of

the Atlantic Star. 50 C.F.R. § 648.4(e), (i). American Pelagic

also argues that the permits could only have been revoked or

l6a

suspended for a specified “offense” or for failure to pay a

penalty, neither of which occurred in this case. Id. §

648.4(m); 15 C.F.R. § 904.301(a) (1997).

The government responds that American Pelagic did not

have a property interest in its fishery permits. In support of

its position, it cites Conti, 291 F.3d at 1341, which concluded

that a swordfishing permit did not confer a property interest

for purposes of the Takings Clause. The government

explains that American Pelagic’s permits were not

transferable or assignable, 50 C.F.R. § 648.4(k);'* that they

did not confer exclusive fishing privileges; and that they

could be revoked, suspended, or modified by the

government, id. § 648.4(h), (m).'° In addition, the

government distinguishes a constitutionally protected right to

a permit under a due process analysis from a compensable

property right under a Takings Clause analysis; according to

the government, the two are not coterminous. The

government points out that in Foss, upon which American

Pelagic relies, the court actually engaged in a procedural due

Section 648.4(k} provides: “A permit issued under this part is

not transferable or assignable. A permit will be valid only for the fishing

vessel, owner and/or person for which it is issued.” 50 C.F.R. § 648.4(k).

' Section 684.4(h) provides: “A permit will continue in effect

unless it is revoked, suspended, or modified under 15 CFR part 904, or

otherwise expires, or ownership changes, or the applicant has failed to

report any change in the information on the permit application to the

Regional Administrator as specified in paragraph (f) of this section.” Jd. §

648.4(h). Section 684.4(m) provides: “The Assistant Administrator may

suspend, revoke, or modify, any permit issued or sought under this

section. Procedures governing enforcement-related permit sanctions or

denials are found at subpart D of 15 CFR part 904.” Id. § 648.4(m).

dered

17a

process analysis, not a Fifth Amendment takings analysis.

The government also points out that 15 C.F.R. § 904.301(a),

upon which American Pelagic relies for the mandatory nature

of its permits, specifically states that “Nothing in this subpart

precludes sanction or denial of a permit for reasons not

relating to enforcement.”

We conclude that American Pelagic did not and could not

possess a property interest in its fishery permits and

authorization letter. In Conti, we explained that because he

could not assign, sell, or transfer his swordfishing permit,

because it did not confer exclusive fishing privileges, and

because the government at all times retained the right to

revoke, suspend, or modify it, Paul Conti did not possess a

property interest in his permit. 291 F.3d at 1341-42. This

“absence of crucial indicia of a property right, coupled with:

the government’s irrefutable retention of the right to suspend,

revoke, or modify” the swordfishing permit “compels the

conclusion that the permit bestowed a revocable license,

instead of a property right.” Jd. at 1342. The same reasoning

extends to American Pelagic’s permits and authorization

letter. There is simply no contention that American Pelagic

had the authority to assign, sell, or transfer its permits and

authorization letter,'* nor that it was granted exclusive

Although American Pelagic contends that its permits were

potentially transferable to future owners of the Atlantic Star, it does not

contend that those permits were transferable to a different vessel.

Moreover, American Pelagic does not argue that it had the authority to

effect a transfer of its permits to future owners of the Atlantic Star. It

asserts only that future owners of the same vessel could apply for the

same permits held by American Pelagic, and if they qualified, the permit

numbers would stay the same and remain with the vessel.

18a

privileges to fish for Atlantic mackerel and herring in the

EEZ. American Pelagic distinguishes its permits from Mr.

Conti’s only by alleging that the government could not refuse

to issue or reissue, revoke, modify, or suspend them in the

absence of specified conditions. As the government notes,

however, the regulation upon which American Pelagic relies

specifically provides that “Nothing in this subpart precludes

sanction or denial of a permit for reasons not relating to

enforcement.” 15 C.F.R. § 904.301(a). This language

preserved the government’s right to deny or sanction the

permits and authorization letter issued to the Atlantic Star.

The conditions we set forth in Conti are therefore met. We

agree with the Court of Federal Claims that American

Pelagic did not possess a property interest in its fishing

permits and authorization letter.

IV.

American Pelagic’s main contention in the Court of

Federal Claims was that the 1997, 1998, and 1999

Appropriations Acts, as implemented in 50 C.F.R. pt. 648,

effected a taking of the use of the Atlantic Star for fishing in

the Atlantic mackerel and herring fisheries in the EEZ."°

Compl. Fj 57-58, 60-61. Specifically, American Pelagic

'S It is undisputed that American Pelagic had a property interest in

the Atlantic Star. See Am. Pelagic I, 49 Fed. Cl. at 46. However,

American Pelagic does not contend that the Atlantic Star itself was taken

by the revocation of its permits and authorizations. In fact, as the trial

court explained, “the owner was left with the ship; it was not physically

taken. Instead, restrictions merely were placed on its use.” Jd. Thus,

American Pelagics main contention, as stated in its complaint, was that

the revocation of its permits and authorizations took from it the right to

use the Atlantic Star to fish for Atlantic mackerel and herring in the EEZ.

ee, ee

19a

argued that, in fiscal years 1998 and 1999, the revocation of

its permits “prohibited [American Pelagic’s] use of the

[Atlantic Star] for its intended operation in the Atlantic

mackerel and herring fisheries of the United States, and any

other fishery of the United States * * * and has taken the

expected net revenues or profits [American Pelagic] would

have earned and received from use and operation of the

[Atlantic Star] * * *.” Id. 9§ 57, 63; see also id. FJ 60, 66

(“United States has taken, destroyed, and deprived [American

Pelagic] of its compensable investment backed expectations

in the use and operation of the ATLANTIC STAR * * * and

has taken all economically viable use of the [Atlantic

Star] * * *.”); Br. Pl.-Appellee at 20-27.

American Pelagic asserted that there was either a

- categorical or a noncategorical regulatory taking. According

to American Pelagic, a temporary categorical taking occurred

because the revocation of American Pelagic’s permits and

authorizations deprived the Atlantic Star of all economically

beneficial use during the takings period. In the alternative,

American Pelagic contended that analysis of each of the Penn

Central factors established that a temporary noncategorical

regulatory taking occurred.

The Court of Federal Claims concluded that American

Pelagic did in fact possess a property interest in the use of the

Atlantic Star to fish in the Atlantic mackerel and herring

fisheries in the EEZ, and that this right was taken by the

revocation of its permits and authorization letter. Am.

Pelagic I, 49 Fed.Cl. at 44-52. The court first determined

that the Takings Clause applies to both tangible and

intangible personalty. Jd. at 45-46. It then turned to the

matter of identifying the property interest allegedly taken:

“In this case, from the standpoint of traditional property

concepts, the res potentially taken by the government was the

ship itself.” Jd. at 46. However, the court recognized that the

Atlantic Star itself was not taken nor destroyed; rather,

20a

restrictions were placed upon its use. /d. Relying on Lucas

for the proposition that compensation is owed when

government “so completely destroys the beneficial uses of

property that it is, in effect idled,” the court distilled the

existence of a property interest to a single question: “[A]re

the uses prohibited within the bundle of rights otherwise

inherent in the vessel?” Jd.

The court answered: “To determine whether a property

right exists independent of the regulatory scheme, it is

necessary to decide ‘whether an independent or preexisting

right of use under common law applies.’ ” Jd. at 47 (quoting

Maritrans, 40 Fed. Cl. at 796, and citing Mitchell Arms, Inc.

v. United States, 7 F.3d 212, 217 (Fed.Cir.1993)). While

acknowledging that the use of the Atlantic Star to fish in the

EEZ was entirely dependent upon a regulatory scheme, the

court emphasized that the use (fishing) was not inherently

dangerous, a nuisance, or “totally a matter of governmental

grace.” Jd. Thus, the court concluded that “the right to use is

one of the group of rights inhering in the citizen’s relation to

[a] physical thing. Inherent in the ownership of vessels is the

right to use them.” /d. (internal quotation marks and citations

omitted). The court thus distinguished the nondangerous use

of the Atlantic Star for fishing in the EEZ from the use of

spent plutonium for nuclear fission, Allied-Gen. Nuclear

Servs. v. United States, 839 F.2d 1572 (Fed.Cir.1988), and

the importation of semiautomatic assault rifles into the

United States for sale, Mitchell Arms, 7 F.3d 212. Am.

Pelagic I, 49 Fed. Cl. at 47. Finally, the court distinguished

Conti on the ground that the restriction there was limited to a

particular use of the claimant’s boat (fishing for swordfish

using drift gillnets) and did not, as the court found in this

case, restrict all economically beneficial uses. Nor was there

any allegation, as there is here, that Mr. Conti was being

targeted by the legislation that banned the use of drift gillnets

for swordfishing. Jd. at 48. Accordingly, the court

2la

concluded that because “[flishing as a livelihood is not a

creation of the government *** [American Pelagic]

possessed a property interest in using its vessel to fish, albeit

subject to the regulatory regime.” Jd.

Having found a cognizable property interest, the court

went on to determine that each of the Penn Central factors

was Satisfied. Jd. at 48-51. The court concluded that from

the time the 1997 Appropriations Act was passed until the

time that American Pelagic sold the Atlantic Star, the

government “took [American Pelagic’s] property interest in

the use of its vessel to fish for Atlantic mackerel in the EEZ

O29 ao

On appeal, the government challenges the grant of

summary judgment on liability in favor of American Pelagic.

The government starts from the premise that in order for a

taking claim to succeed, what must be taken is one of the

sticks in the bundle of rights that defines the owner’s

relationship to the res. From there, it argues that the Court of

Federal Claims erred in holding that American Pelagic

possessed a property interest in the use of the Atlantic Star to

fish for Atlantic mackerel and herring in the EEZ, even

subject to government regulation. The government urges that

no property interest exists in an individual’s investment in

uses of personalty that are dependent upon discretionary

permit issuances by the government. Br. Def.-Appellant at

22.

American Pelagic recognizes that one of the sticks in the

bundle of property rights that the owner of property acquires

with his title must be proscribed in order for a taking to

occur. Br. Pl.-Appellee at 21-27; Supp. Br. Pl.- Appellee at

2. However, because the use of the Atlantic Star to fish was

lawful not only under traditional property and nuisance

22a

principles, Lucas, 505 U.S. at 1030, but also under the

regulatory regime by which its permits were issued,

American Pelagic argues that use of the vessel to fish for

Atlantic mackerel and herring constituted a _ legally

cognizable property interest. In contrast to Mitchell Arms, in

which we explained that the ability to sell a firearm does not

inhere in ownership of the firearm itself upon the owner’s

acquisition, American Pelagic asserts that the right to fish for

Atlantic mackerel and herring in the EEZ did inhere in its

ownership of the Atlantic Star.

Thus, the question we must answer is this: Was the right

to fish for Atlantic mackerel and herring in the EEZ a legally

cognizable property interest such that it was a stick in the

bundle of property rights that American Pelagic acquired as

the owner of the Atlantic Star? For the reasons that follow,

we conclude that it was not. Consequently, American

Pelaic’s takings claim fails.

We determine whether an asserted right is one of the

rights in the bundle of sticks of property rights that inheres in

a res by looking to “existing rules or understandings” and

“background principles” derived from an independent source

such as state, federal, or common law. Lucas, 505 U.S. at

1030 (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S.

564 (1972)).'© These rights define the dimensions of the

'© The Court explained:

[O)jur “takings” jurisprudence * * * has traditionally

been guided by the understandings of our citizens

regarding the content of, and the States power over, the

“bundle of rights” that they acquire when they obtain title

(cont'd)

23a

requisite property interest for purposes of establishing a

takings claim. Significantly, the Supreme Court has

distinguished personal property from real property:

And in the case of personal property, by reason of the

State’s traditionally high degree of control over

commercial dealings, [the owner] ought to be aware of

the possibility that new regulation might even render his

property economically worthless (at least if the property’s

only economically productive use is sale or manufacture

for sale). See Andrus v. Allard, 444 U.S. 51, 66-67

(1979).

Lucas, 505 U.S. at 1027. Thus, it is conceivable that the

owner of personal property, as opposed to land, may have a

lower expectation that he has a property interest in using his

personal property for commercial dealings. Moreover, there

is a distinction between simply not being disturbed in the

particular use of one’s property and having the right to that

use of the property. Clearly, in order for there to be a

cognizable property interest sufficient to support a takings

claim, the latter must be true. Thus, simply because many

commercial fishermen were not affected by the 1997, 1998,

and 1999 Appropriations Acts and continued to fish for

Atlantic mackerel and herring in the EEZ, it does not follow

to property. It seems to us that the property owner

necessarily expects the uses of his property to be restricted,

from time to time, by various measures newly enacted by

the State in legitimate exercise of its police powers; “as

long recognized, some values are enjoyed under an implied

limitation and must yield to the police power.” Pa. Coal

Co. v. Mahon, 260 U.S. [393,] 413 [(1922)].

Lucas, 505 U.S. at 1027.

24a

that those fishermen had a property interest in the use of their

vessels to fish in the EEZ. They simply were enjoying a use

of their property that the government chose not to disturb. In

other words, use itself does not equate to a cognizable

property interest for purposes of a takings analysis.

Up until the 1960s, most nations with coastlines,

including the United States, had declared jurisdiction over

territorial seas of three miles and conservation zones of

twelve miles. See, e.g., Bartlett Act, Pub. L. No. 88-308, 78

Stat. 194 (1964) (previously codified at 16 U.S.C. §§ 1081-

86) (three-mile territorial sea jurisdiction); Pub. L. No. 89-

658, 80 Stat. 908 (1966) (previously codified at 16 U.S.C. §§

1091-94) (three-to twelve-mile conservation zone

jurisdiction) (both repealed by the Magnuson Act, title IV, §

402(a), (b), 90 Stat. at 360). Similarly, prior to the enactment

of the Magnuson Act, a state could regulate its state-

registered vessels and its citizens while fishing in what is

now the EEZ pursuant to a line of Supreme Court cases

culminating in Skiriotes v. Florida, 313 U.S. 69 (1941).

Countries generally attempted to achieve conservation of fish

by entering into international fishing agreements (to

approximately twenty of which the United States was a

party). See S. Rep. No. 94-416, n.3, app. 1. In 1976,

however, in response to the third session of the United

Nations Convention on the Law of the Sea (““UNCLOS”),

which provided for coastal nation management of resources

within a two-hundred-mile zone, Congress enacted the

Magnuson Act:

Fishery conservation zone

There is established a zone contiguous to the

territorial sea of the United States to be known as the

fishery conservation zone. The inner boundary of the

fishery conservation zone is a line coterminous with the

25a

seaward boundary of each of the coastal States, and the

outer boundary of such zone is a line drawn in such a

manner that each point on it is 200 nautical miles from

the baseline from which the territorial sea is measured.

16 U.S.C. § 1811 (1976).

Subsequently, in a presidential proclamation, President

Reagan established the EEZ and assumed sovereign rights for

the United States over this two-hundred-mile zone. Quoting

from UNCLOS, Dec. 10, 1982, art. 56, p 1, 21 LL.M. 1245,

1280,'’ he announced:

Within the Exclusive Economic Zone, the United

States has, to the extent permitted by international law,

(a) sovereign rights for the purpose of exploring, .

exploiting, conserving and managing natural resources,

both living and non-living, of the seabed and subsoil and

the superjacent waters and with regard to other activities

for the economic exploitation and exploration of the

zone, such as the production of energy from the water,

currents and winds * * *.

Proclamation No. 5030, 48 Fed.Reg. 10,605. It is clear from

this language that, at least as of 1983, the United States had

asserted sovereignty with respect to the exploration,

exploitation, conservation, and management of the natural

resources of the EEZ. This assertion of sovereignty was

subsequently codified in the 1986 amendments to the

Magnuson Act:

'7 To date, the United States has not ratified UNCLOS.

aii

26a

United States sovereign rights to fish and fishery

management authority

(a) In the exclusive economic zone. Except as

provided in section 102 [16 USCS 1812], the United

States claims, and will exercise in the manner provided

for in this Act, sovereign rights and exclusive fishery

management authority over all fish, and all Continental

Shelf fishery resources, within the exclusive economic

zone.

(b) Beyond the exclusive economic zone. The

United States claims, and will exercise in the manner

provided for in this Act, exclusive fishery management

authority over the following:

(1) All anadromous species throughout the migratory

range of each such species beyond the exclusive

economic zone; except that that management authority

does not extend to any such species during the time they

are found within any waters of a foreign nation.

(2) All Continental Shelf fishery resources beyond

the exclusive economic zone.

Act of Nov. 14, 1986, Pub. L. No. 99-659, tit. I, § 101(b),

100 Stat. 3706, 3706-97 (codified as amended at 16 U.S.C.

§ 1811 (2000)). Thus, Congress explicitly assumed

“sovereign rights and exclusive fishery management

authority over all fish” in the EEZ. This assumption of |

sovereignty indisputably encompasses all rights to fish in the

EEZ.

The various provisions of the Magnuson Act are

consistent with this exercise of U.S. sovereignty over the

EEZ and the fish and resources within it. Enacted to “take

immediate action to conserve and manage the fishery

resources found off the coast of the United States,” 16 U.S.C.

§ 1801(b)(1), the Magnuson Act established national

ee Ee ae Pome E ne eee

27a

standards by which fishery “conservation and management”

plans would be developed, id. § 1851(a). Congress further

established under the auspices of the Secretary Regional

Fishery Management Councils, including the NEFMC and

the MAFMC, with direct authority over the fisheries within

their respective geographic regions. Jd. § 1852. As noted

above, each council is charged with the obligation, among

others, of preparing and submitting FMPs for the fisheries

within its authority. Jd. § 1852(h). Congress required the

FMPs to contain

conservation and management measures * * * necessary

and appropriate for the conservation and management of

the fishery, to prevent overfishing and rebuild overfished

stocks, and to protect, restore, and promote the long-term

health and stability of the fishery * * *.

Id. § 1853(a)(1)(A). Significantly, the Magnuson Act bars

foreign fishing in the EEZ entirely, except as the United

States permits, id. § 1821, and authorizes the regional

councils to require federal permits for U.S. fishermen to fish

in any fishery within the EEZ, id. § 1853(b)(1). Thus, in

addition to asserting U.S. sovereignty over the EEZ and the

fish and resources therein, Congress also erected an elaborate

framework by which the fisheries in the EEZ would be

managed under the oversight of the Secretary.

Pursuant to the Magnuson Act, the “conservation and

managem<nt of the EEZ” belongs to the sovereign, and this

necessari:y includes the right to fish in the zone. Moreover,

there is no-language in the statute to the effect that any

fishing privileges that are granted pursuant to the Magnuson

Act vest in their owners a property right protected by the

Fifth Amendment. See Foss, 161 F.3d at 588 (“{T]he

language of the Magnuson Act does not confer any claim of

entitlement or property rights.”); see also Parravano v.

Babbitt, 861 F.Supp. 914, 928 (N.D. Cal. 1994) (“Thus, the

28a

Magnuson Act confers on the Secretary of Commerce

authority to manage the fishery resources in the EEZ for

conservation. It does not confer on commercial fishermen

any right or title in the fishery resources under the

Department of Commerce’s authority.”), aff’d, 70 F.3d 539

(9th Cir. 1995), cert. denied, 518 U.S. 1016 (1996).

—— - Because it was already in place by the time American

Pelagic purchased the Atlantic Star, the Magnuson Act was

an “existing rule” or “background principle[ ]” of federal law

that inhered in American Pelagic’s title to the vessel. Lucas,

505 U.S. at 1029-30. In the words of the Supreme Court, as

far as ownership of the Atlantic Star was concerned, the

sovereign rights of the United States in the EEZ “inhere[d] in

the title itself, in the restrictions that background principles of

the [federal government’s] law * * * already place[d] upon

* * * ownership.” Jd. at 1029 (discussing restrictions on real

property). It was against this framework of existing federal

restrictions on fishing in the EEZ that American Pelagic

invested in the Atlantic Star. As of 1996, when the Atlantic

Star was purchased, the Magnuson Act and the attendant

regulatory scheme precluded any permitted fisherman from

possessing a property right in his vessel to fish in the EEZ.

The revocation of American Pelagic’s permits, therefore, did

not “go[ ] beyond what the relevant background principles

would dictate.” Jd. at 1030.

The Magnuson Act is consistent with the historical role

played by the sovereign, state or federal, with respect to its

waters. As early as 1876, the Supreme Court concluded that

[t]he principle has long been settled in this court, that

each State owns the beds of all tide-waters within its

jurisdiction, unless they have been granted away. In like |

manner, the States own the tide-waters themselves, and

the fish in them, so far as they are capable of ownership

while running.

———————

= ll

29a

McCready v. Virginia, 94 U.S. 391, 394 (1876) (citations

omitted); see also, e.g., State v. Leavitt, 105 Me. 76, 72 A.

875, 876 (1909) (“It is, therefore, settled law that each State,

unless it has parted with title * * * owns the bed of all tidal

waters within its jurisdiction, and as well, the tide waters

themselves and the fish in or under them, so far as they are

capable of ownership. * ** It is in fact a property right

x *

We are not persuaded by American Pelagic’s contention

that there exists a historical common law right to use vessels

to fish in the EEZ that was not abrogated by the Magnuson

Act. American Pelagic points to language in the Magnuson

Act that Congress was authorizing “no impediment to, or

interference with, recognized legitimate uses of the high seas,

except as necessary for the conservation and management of

fishery resources * * *.” 16 U.S.C. § 1801(c)(2). Plainly,

rendering the ability to fish in the EEZ a matter of

governmental permission, rather than a property right, is

“necessary for the conservation and management of fishery

resources * * *.” Jd. The language itself thus explicitly carves

out from the “legitimate uses” those involved in the

conservation and management of fishery resources.

Additionally, the phrase “conservation and management”’ is

broadly defined in the statute to include, inter alia, “all of the

rules, regulations, conditions, methods, and other measures

* * * which are required to rebuild, restore, or maintain, and

which are useful in rebuilding, restoring, or maintaining, any

fishery resource and the marine environment * * *.” /d.

§ 1802(5) (2000). The right to use the Atlantic Star to fish

for mackerel and herring unquestionably implicates the

conservation and management of fishery resources.

Accordingly, we conclude that the Magnuson Act directly

assumes for the federal government sovereignty over the

right to fish for Atlantic mackerel and herring in the EEZ. As

American Pelagic itself notes, the Magnuson Act expressly

30a

asserts the United States’ “sovereign rights for the purposes

of exploring, exploiting, conserving, and managing all fish”

within the EEZ. Jd. § 1801(b)(1). The statute does not

explicitly, or implicitly, preserve any potentially pre-existing

common law right to fish in the EEZ.

'§ American Pelagic points to the text of 43 U.S.C. § 1332(1), (2)

(2000), which provides the United States with “jurisdiction, control, and

power of disposition” over the subsoil and seabed of the outer

Continental Shelf that underlies the waters of the EEZ. The statute states

that “the character of the waters above the outer Continental Shelf as high

seas and the right to navigation and fishing therein shall not be affected

* * *” Outer Continental Shelf Lands Act, Pub. L. No. 212, ch. 345, §§

2(a), 3(b), 67 Stat. 462, 462 (1953) (codified as amended at 43 U.S.C. §

1332) (“OCSLA”). Citing Massachusetts v. Andrus, 594 F.2d 872 (lst

Cir. 1979), American Pelagic contends that the Magnuson Act did not

abrogate this congressional recognition of the right to fish in the EEZ.

However, because it was enacted in 1953, more than twenty years prior to

enactment of the Magnuson Act, OCSLA’s intention not to affect the

then-existing rights to navigation and fishing does not bear on the

subsequent effect of the Magnuson Act. Moreover, the court in

Massachusetts v. Andrus was not faced with the question of whether a

property right to fish in the EEZ existed, but with the question of whether

the Secretary of the Interior had authority to permit the sale of oil drilling

leaseholds off the coast of New England. In dicta, the court did state that

it was “unable to see that [the Magnuson Act] altered the meaning and

purpose of [42 U.S.C. section 1332(2)], which had been directed at the

legal right to fish rather than at prohibiting physical impediments.” 594

F.2d at 889. Yet, the court also stated that the Magnuson Act is “thus no

less an assertion of a federal interest in conserving the fishery resources

in the waters of the Outer Continental Shelf than was the earlier Outer

Continental Shelf Lands Act an assertion of a federal interest in

developing the oil and gas wealth of the subsoil and seabed in the same

area.” Id. at 891. We do not think that OCSLA and Massachusetts v.

Andrus help American Pelagic.

3la

Neither are we persuaded by American Pelagic’s reliance

on President Reagan’s Proclamation No. 5030, which states

that the establishment of the EEZ “does not change existing

United States policies concerning the continental shelf,

marine mammals and fisheries ***.” 48 Fed. Reg. at

10,605. The short answer is that “existing United States

policies” included those “policies” enshrined in the

Magnuson Act itself, which predated Proclamation No.

5030.'? In sum, no right to fish in the EEZ inhered in

American Pelagic’s title when it acquired the Atlantic Star.

Because the right to use the vessel to fish in the EEZ was not

inherent in its ownership of the Atlantic Star, American

Pelagic did not suffer the loss of a property interest for

purposes of the Takings Clause when its Atlantic mackerel

and herring permits were revoked.

Our conclusion is consistent with Mitchell Arms and

Conti. In the first case, Mitchell Arms, Inc. (“Mitchell

Arms’’) filed suit in the United States Claims Court alleging

that the decision of the Bureau of Alcohol, Tobacco, and

Firearms to revoke permits allowing the importation and sale

of semi-automatic assault rifles constituted a taking of its

'9 American Pelagic also points to the statement in the fact sheet

accompanying Proclamation No. 5030 that “The President has not

changed the breadth of the United States territorial sea.” American

Pelagic’s reliance on this statement is misplaced. The EEZ, as stated in

Proclamation No. 5030, is an area “beyond the territory and territorial sea

of the United States,” 48 Fed. Reg. at 10,606, that now extends to twelve

nautical miles from the baseline of the United States. Proclamation No.

5298, 54 Fed. Reg. 777 (Dec. 27, 1988). Even assuming it is to be

accorded any measure of authoritative force, the statement in the fact

sheet simply does not pertain to the assumption of sovereignty over

fisheries in the EEZ pursuant to the Magnuson Act.

32a

right to use the permits for those purposes. Mitchell Arms, 7

F.3d at 215. The Claims Court dismissed Mitchell Arms’

complaint under its Rule 12(b)(4) for failure to state a claim

upon which relief could be granted. Jd. The court concluded

that neither the permits themselves nor Mitchell Arms’

expectations arising from the combination of the permits and

its contract to purchase the firearms from a foreign party

gave rise to a property interest for purposes of the Fifth

Amendment’s Takings Clause. Jd. Mitchell Arms appealed

the court’s decision and we affirmed. In our decision, we

characterized Mitchell Arms’ claim as follows: “that a

property interest was created when it agreed to purchase the

firearms with an expectation of importing them under the

issued permits.” Jd. We agreed with the Court of Federal

Claims, however, that no taking had occurred, for we

determined that Mitchell Arms had failed to assert a property

interest protected by the Fifth Amendment. /d. at 215-17.

We stated that the right to sell assault weapons in domestic

commerce was not “a right inherent in plaintiff's ownership

of [the] weapons.” Jd. (quoting Mitchell Arms, Inc. v. United

States, 26 Ci.Ct. 1, 6 (1992)).

The plaintiff in Conti was Paul Conti, a swordfisherman.

Mr. Conti was the owner of the F/V Providenza, a vessel that

he used to fish for swordfish in the Atlantic Swordfish

fishery using drift gillnets. Mr. Conti filed suit in the Court

of Federal Claims alleging that the government’s 1999 ban

on harvesting swordfish using drift gillnets constituted a

regulatory taking of his swordfishing permit, the Providenza,

and his gillnet gear without just compensation, in violation of

the Fifth Amendment. 291 F.3d at 1337. Mr. Conti

contended that, while he still was in possession of his permit,

the Providenza, and his gear, there had been taken from him

the ability to use those things in a particular way: to fish for

swordfish in the Atlantic Swordfish fishery using drift

gillnets. Jd. at 1340. The Court of Federal Claims dismissed

33a

Mr. Conti’s complaint for failure to state a claim upon which

relief could be granted. The court determined, inter alia, that

continued use of Mr. Conti’s property for harvesting

swordfish with drift gillnets did not constitute a compensable

property interest. See Conti v. United States, 48 Fed. Cl. 532,

539 (2001) (“The ability to use gillnets to harvest swordfish

is not a right inherent in holding a permit nor im the

ownership of the gear or the vessel.”).

Mr. Conti appealed the dismissal of his complaint, and

we affirmed. We did so on two grounds. Relying on Andrus

v. Allard,”° we concluded that Mr. Conti’s “continuing ability

prohibiting the sale of parts of birds that were legally killed before the

birds were protected by federal statute effected a taking of their bird

artifacts. Andrus, 444 U.S. at 64. The Supreme Court disagreed:

The regulations challenged here do not compel the surrender of

the artifacts, and there is no physical invasion or restraint upon

them. Rather, a significant restriction has been imposed on one

means of disposing of the artifacts. But the denial of one traditional

property right does not always amount to a taking. At least where

an owner possesses a full “bundle” of property rights, the

destruction of one “strand” of the bundle is not a taking, because the

aggregate must be viewed in its entirety. In this case, it is crucial

that appellees retain the rights to possess and transport their

property, and to donate or devise the protected birds.

Id. at 65-66. The Court went on to explain that the fact that the

regulations prevented the most valuable use of the claimants’ property

was not dispositive, and that a reduction in the value of property does not

necessarily amount to a taking. /d. at 66. The Court stated that the loss

of future profits, in the absence of any physical property restriction,

“provides a slender reed upon which to rest a takings claim.” /d.

ia ee

34a

to sell the vessel and the gear, fish in a different fishery, or

put both the nets and vessel to other uses” precluded us from

ruling that a regulatory taking had occurred. Conti, 291 F.3d

at 1343. We also stated that Mr. Conti’s takings claim failed

“for an additional reason.” Jd. at 1345 n.8. After noting that

Mr. Conti’s ability to use his vessel and gear to catch

swordfish using drift gillnets was dependent upon a

revocable permit, we pointed out that his case was analogous

to Mitchell Arms:

In Mitchell Arms, Inc. v. United States, 7 F.3d 212, 217

(Fed. Cir. 1993), we rejected the claim that the Bureau of

Alcohol, Tobacco, and Firearms’ decision to revoke a

permit allowing the importation and sale of certain

firearms constituted a taking of the claimant’s right to

use the permit for those purposes. We _ stated:

“Mitchell’s ability to import the rifles and sell them in

the United States was at all times entirely subject to the

exercise of ATF’s regulatory power. Consequently, any

expectation which arose on Mitchell’s part as a result of

the import permits did not constitute a property right

protected by the Fifth Amendment.” 7 F.3d at 217.

Likewise, the drift gillnet regulation at issue here has

banned a particular use of Mr. Conti’s vessel and gear

“which was not inherent in its ownership” and was

“totally dependent upon the * * * permit issued by” the

government. Jd.

Id.

Mitchell Arms and Conti control this case. What allegedly

was taken in Mitchell Arms was the right to import firearms

and sell them in domestic commerce. What allegedly was

taken in Conti was the right to harvest swordfish in the

Atlantic Swordfish fishery using drift gillnets. In each case,

the takings claim failed because what allegedly was taken

was not one of the sticks in the bundle of rights that inhered

35a

in ownership of the underlying res: in Mitchell Arms, certain

firearms; in Conti, a fishing vessel. American Pelagic is in

the same situation as the plaintiffs in Mitchell Arms and

Conti. As discussed above, because the Magnuson Act

assumed sovereignty for the United States over the

management and conservation of the resources located in the

EEZ, and specifically over fishery resources, American

Pelagic did not have, as one of the sticks in the bundle of

property rights that it acquired with title to the Atlantic Star,

the right to fish for Atlantic mackerel and herring in the EEZ.

American Pelagic thus did not possess the property right that

it asserts formed the basis for its takings claim. In the

absence of that property right, its claim is fatally defective.”!

*! American Pelagic argues that Maritrans, Inc. v. United States,

342 F.3d 1344, supports its assertion of a property interest in the right to

fish for Atlantic mackerel and herring in the EEZ. We do not agree.

Maritrans involved a statute requiring, inter alia, that all single hull tank

vessels, including tank barges, engaged in the marine transportation of oil

and petroleum products in the navigable waters of the United States be

either retrofitted wit?. double hulls or phased out of service. The plaintiff,

Maritrans, Inc. (“Maritrans”) alleged that the statutory requirement

constituted a taking of eight of its single hull tank barges that it had either

retrofitted, scrapped, or sold as a result of the legislation. Jd. at 1348-50.

Addressing the threshold inquiry of whether Maritrans possessed a

property interest in its barges, we held that it did. /d. at 1353. We did not

hold, however, that Maritrans had a property interest in the use of its

vessels on the navigable waters of the United States. Although we noted

the governments contention that the property interest Maritrans asserted

was the use of its vessels on the navigable waters of the United States, id.,

we did not approach the case in terms of such an asserted interest.

Rather, we explained that like Mr. Conti, Maritrans had a property

interest in the vessels themselves. /d. (“Martirans has various rights in its

barges that qualify them as property for Fifth Amendment purposes.”’).

We then determined that the legislation did not effect a categorical taking

(cont’d)

36a

CONCLUSION

For the foregoing reasons, we reverse the holding of

American Pelagic I that the revocation of American Pelagic’s

permits and authorization letter constituted a taking under the

Fifth Amendment. We therefore vacate the award of

damages in American Pelagic II. The case is remanded to the

Court of Federal Claims with the instruction that it enter

judgment in favor of the United States.

COSTS

Each party shall bear its own costs.

Reversed, Vacated, and Remanded

of Maritrans vessels, id. at 1353-55, and further, pursuant to the Penn

Central analysis, that Maritrans did not suffer a noncategorical taking of

its vessels, id. at 1356-59.

37a

APPENDIX B

In the United States Court of Federal Claims

AMERICAN PELAGIC FISHING COMPANY, L.P.,

Plaintiff,

The UNITED STATES, Defendant.

No. 99-119C.

April 4, 2001.

OPINION

BRUGGINK, Judge.

This is an action founded upon the Takings Clause of the

Fifth Amendment to the United States Constitution. Plaintiff

asserts that the enactment of legislation resulted in a

temporary taking of plaintiffs fishing vessel. Pending are

plaintiffs and defendant’s cross-motions for summary

judgment. Oral argument was held on November 21, 2000.

After oral argument, the court requested supplemental

briefing. For the reasons set forth below, plaintiff's motion

is granted, and defendant’s motion is denied.

38a

FACTUAL BACKGROUND'

Plaintiff American Pelagic Fishing Company, L.P.,

(“APFC”)’ is a limited partnership that invested nearly $40

' The relevant facts of this case are undisputed and are contained

in plaintiff's proposed findings of fact and supporting appendices.

Defendant stated that it was unable to respond to certain of plaintiff's

proposed facts regarding the economic impact of the congressional

legislation at issue here. It did not, however, request additional discovery

under Rule of the Court of Federal Claims 56(g) because counsel

believed that economic discovery had been prohibited. This was based

on the following statement by the court at a prior oral argument: “If you

say you need discovery or the Government does, and I’m talking about

things other than damages, then I would hope you all could reach some

agreement.” Tr. Dec. 14, 1999, Oral Arg. at 75. This statement did not

foreclose all economic discovery; the only discovery perhaps foreclosed

by the court’s statement was discovery relating solely to damages. The

relevance of the economic impact of the legislation in question here is not

limited to damages. The economic impact of the legislation is part of the

liability inquiry in a regulatory takings case. Defendant could have

responded, either substantively or by requesting additiona! discovery.

Without either of these actions, the facts alleged by plaintiff regarding the

economic impact of the legislation on its property are deemed established

for purposes of determining liability. See Rule of the Court of Federal

Claims 56(d)(3); Avia Group Int’l, Inc. v. L.A. Gear Cal., Inc., 853 F.2d

1557, 1561 (Fed. Cir. 1988); Carolina Power & Light v. United States, 48

Fed.Cl. 35, 41 n.4 (2000). We note, in any event, that if plaintiff in fact

suffered no economic impact, it will not be able to prove damages.

We also note that we do not rely on paragraph 7 of the Supplemental

Declaration of Lisa A. Kohiwes Torgersen. That paragraph improperly

contains legal argument. It is hereby stricken from the record.

2 APFC’s immediate predecessor as owner of the Atlantic Star is

the Atlantic Star Fishing Company. The owners of the Atlantic Star

Fishing Company created APFC to finance the Atlantic Star project. For

(cont’d)

39a

million in a fishing vessel, a freezer trawler named the

Atlantic Star, for the purpose of fishing for Atlantic mackerel

and herring i in the Exclusive Economic Zone (“EEZ”) of the

United States.* The Atlantic Star, a United States flag vessel

when owned by plaintiff, was 369 feet in length and weighed

over 6,900 gross tons. Each of its two engines was capable of

producing 6,700 horsepower. The Atlantic Star’s size

enabled it to contain a larger cold storage facility than other

participants in the Atlantic mackerel and herring fisheries.

Its size did not, however, mean that it was capable of

catching more fish than smaller vessels; a vessel’s size does

not have a direct relationship to the amount of fish that the

vessel can catch. APFC planned to use the Aflantic Star to

harvest Atlantic mackerel from December to May of each

year and to harvest Atlantic herring year-round. Plaintiff

expected the Atlantic Star to catch approximately 50,000

metric tons of fish per year.

Prior to purchasing the Atlantic Star, plaintiff researched

the east coast Atlantic mackerel and herring fisheries.

Plaintiff's research included consulting various government

publications, in particular a study conducted by the United

States International Trade Commission (“ITC”) entitled

“Mackerel: Competitiveness of the U.S. Industry in Domestic

and Foreign Markets.” The ITC study resulted from a

request by the Senate Finance Committee, which was

the sake of simplicity, the term “plaintiff” in this opinion shall include

both APFC and the Atlantic Star Fishing Company.

The Atlantic Star was acquired by plaintiff on November 14,

1996. The vessel underwent conversion and outfitting work in 1997, with

the work being completed in November of that year. On July 6, 1999,

plaintiff sold the Atlantic Star to its Dutch lenders.

40a

concerned about the lack of development of the United States

Atlantic mackerel resource. The ITC concluded, among

other things, that the use of larger fishing vessels would offer

economies of scale and would improve the competitive

position of the United States Atlantic mackerel industry.

Plaintiff relied on this study in developing the Atlantic Star

project.

Plaintiff's considerations took place against the backdrop

of the regulatory scheme governing the Atlantic mackerel

and herring fisheries. Beyond state waters, out to the 200-

mile limit of the EEZ, the federal government manages

fishery resources. The federal regulatory scheme was

established by the Magnuson Fishery Conservation and

Management Act (“Magnuson Act”), 16 U.S.C. §§ 1801-

1883 (1994 & Supp. III 1997).* The Magnuson Act confers

primary federal management authority over marine fishery

resources on the Secretary of Commerce and the National

Marine Fisheries Service (“NMFS”), a subunit of the

National Oceanic and Atmospheric Administration

(“NOAA”) within the United States Department of

Commerce. Integral in the management of the fisheries

within the EEZ are eight regional fishery management

councils. These councils are charged with developing fishery

management plans in accordance with national standards set

forth in 16 U.S.C. § 1851. Once developed and approved by

the Secretary of Commerce, a Fishery Management Plan

(“FMP”) is then promulgated by the NMFS. The relevant

councils here are the Mid-Atlantic Fishery Management

* In this opinion, all citations to the United States Code and the

Code of Federal Regulations are to those codes as they existed in 1997.

4la

Council (“MAFMC”) and the New England Fishery

Management Council (“NEFMC”). The MAFMC has

management responsibility for Atlantic mackerel, and an

FMP was in place for Atlantic mackerel at the time plaintiff

was seeking entry to that fishery. The NEFMC has

management responsibility for Atlantic herring. An FMP

was not in place for Atlantic herring at the time plaintiff

sought entry to that fishery.

For several years prior to plaintiff's development of the

Atlantic Star project, the NMFS had been making public

statements that the herring and mackerel stocks were at high

abundance levels and low levels of exploitation.

Additionally, several documents published by the MAFMC

in the years leading up to the Atlantic Star project discussed

the need for large fishing vessels in the east coast industry.

Each of these documents contained the following passage,

relied upon by plaintiff in developing the Atlantic Star

project:

The key problem for the U.S. fishery remains that of

Atlantic mackerel not being a desirable fish in the eyes of

most American consumers, and transportation costs have

been prohibitive in shipping this low-value, bulk product

to foreign markets where it enjoys greater acceptance. In

order to compete in the world bulk market, the U.S.

industry will have to emulate its foreign competitors,

which harvest, process and ship mackerel in large

quantities to take advantage of economies of scale. * * *

Currently the U.S. east coast industry does not have the

large vessels necessary to participate in this market * * *.

In addition, in 1994 the NMFS had rescinded an earlier

control date for the Atlantic mackerel fishery. The control

date of August 13, 1992, had been intended to “preclude

speculative entry into the mackerel fishery” by placing future

entrants to the fishery on notice that they would not be

42a

guaranteed future access to the Atlantic mackerei fishery

should a management regime be implemented. 57 Fed. Reg.

36,384 (Aug. 13, 1992). This control date was rescinded on

September 27, 1994, because the MAFMC no longer

believed “that the Atlantic mackerel fishery will require the

imposition of some type of limited-entry management

system.” 59 Fed. Reg. 49,235 (Sept. 27, 1994).°

For the years the Atlantic Star would have participated in

the Atlantic mackerel and herring fisheries, the MAFMC

proposed, and the NMFS approved, an Allowable Biological

Catch (“ABC”) for the Atlantic mackerel fishery. For

Atlantic mackerel, the ABC for 1997 was 1,178,000 metric

tons; the ABC for 1998 was 382,000 metric tons; and the

ABC for 1999 was 383,000 metric tons. These limits were

based on the best scientific information available to the

NMFS. The United States commercial landings of Atlantic

mackerel in the years listed were as follows: 15,706 metric

tons in 1997, 12,513 metric tons in 1998, and 12,050 metric

tons in 1999.

* Plaintiff alleges that it relied on the rescission of the control date

for Atlantic mackerel when making its decision to invest in the Atlantic

Star. P|.’s Proposed Findings | 54. However, this proposed finding cites

only to a paragraph of the complaint, J 30, that was denied by defendant.

Furthermore, there is no documentary evidence supporting this finding.

Pursuant to Rule of the Court of Federal Claims 56(d)(3), this court

cannot deem a fact established that is not “adequately supported.” This

support cannot come from a party’s own pleading. Rule of the Court of

Federal Claims 56(d)(1) (“Each paragraph [of the Proposed Findings of

Uncontroverted Fact] shall contain citations to the opposing party’s

pleadings or to documentary evidence, such as affidavits or exhibits, filed

with the motion or otherwise part of the record in the case.”).

43a

In its draft FMP for the Atlantic herring fishery,° the

NEFMC has proposed an ABC of 300,000 metric tons. The

United States commercial landings of Atlantic herring for the

past several years were as follows: 89,415 mc tons in

1996, 95,715 metric tons in 1997, and 81,512 meuic tons in

1998. |

Plaintiff relied on these figures in making its decisions

regarding the Atlantic Star project. As a result of its

research, plaintiff concluded that an investment in the

Atlantic mackerel and herring fisheries would be reasonable,

low risk, and profitable. Consequently, plaintiff purchased

the Atlantic Star and. set about converting the vessel in

Norway for use in the Atlantic mackerel and herring fisheries

of the EEZ.

Plaintiff also applied for the necessary fishery permits

and gear authorizations. Under 50 C.F.R. § 648.4(a)(5), a

fishing vessel must have and carry on board a valid Atlantic

mackerel permit in order to fish for, possess, or land Atlantic

mackerel in or from the EEZ. Under 50 C.F.R. § 648.4(e)(1),

the Regional Administrator for NMFS must issue the permit

within 30 days of receipt of the application. Additionally,

because of the possibility that Northeast Multispecies

(Nonregulated) fish might be caught as incidental by-catch,

plaintiff applied for a Northeast Multispecies (Nonregulated)

permit. Finally, vessels harvesting Atlantic mackerel and

herring in the Gulf of Maine/Georges Bank Regulated Mesh

Area with midwater trawl gear of mesh size less than that

normally required by the regulations were required to carry

This draft FMP was partially approved by the Secretary of

Commerce on October 27, 1999.

44a

on board an authorization letter issued *- the Regional

Administrator pursuant to 50 C.F.R. § 648.60(d).

The fishing permits were initially issued by the Northeast

Regional Office of NMFS to the vessel as owned by the

Atlantic Star Fishing Company on February 5, 1997, and

were re-issued to the vessel as owned by APFC on April 8,

1997, and April 12, 1997, after ownership of the vessel had

passed to APFC. The permit number remained the same

after transfer, and the permits granted were the following:

1. Federal Fisheries Permit # 610018, for Atlantic

mackerel and J//ex squid and for incidental Loligo squid

and butterfish, with an expiration date of December 31,

1997; and

2. Federal Fisheries Permit # 610018, for Northeast

Multispecies (Nonregulated), with an expiration date of

April 30, 1998.

On August 28, 1997, the regional office of NMFS also

issued to the Atlantic Star a Gulf of Maine/Georges Bank

Midwater Trawl Gear Authorization letter for Atlantic

herring, blueback herring, mackerel, and squid. The letter

had an expiration date of April 30, 1998.

As news of the Atlantic Star project spread, local

commercial opposition to the vessel’s entry into the Atlantic

mackerel and herring fisheries began to form. At a joint

meeting of the Atlantic Herring Section and the NEFMC

Herring Committee in March 1997, potential restrictions on

vessel specifications were discussed. The concern about the

Atlantic Star was obvious. One attendee at the joint meeting

stated, “There’s a U.S. boat in Norway that will have a 300

ton daily capacity. There’s room for growth in the herring

and mackerel fishery but not this much growth and not at this

pace without severely impacting the current herring and

mackerel fishery. We need to keep this fishery local.” A

motion was made to discuss, at the next meeting, placing a

45a

limit of 150-160 feet and 2500 horsepower on fishing

vessels. To this motion, one of the meeting’s participants

responded that a limit of 170 feet and 3000 horsepower

would be a “good limit” because he was refitting a 165 foot

boat for participation in the fishery.

The concerns expressed at the March 1997 Joint Meeting

were echoed in H.R. 1855, introduced in the United States

House of Representatives on June 10, 1997. This bill

proposed to establish a moratorium on large fishing vessels

in the Atlantic mackerel and herring fisheries. A large

fishing vessel was defined as “a fishing vessel * * * of the

United States that is equal to or greater than 165 feet in

length overall and has an engine of more than 3,000

horsepower.” Hearings on the bill were held on June 26,

1997, before the House Subcommittee on Fisheries

Conservation, Wildlife and Oceans. The Atlantic Star project

was specifically discussed at these hearings. See Fish and

Wild Life Issues: Hearing on H.R. 1855 Before the House

Subcomm. on Fisheries Conservation, Wildlife and Oceans,

105th Cong. (1997). Michael Love, general manager of the

Atlantic Star, testified against the bill and stated that, to the

best of his knowledge, plaintiff owned the only vessel “that

would be kept out by the bill in its present form.” See id. at

1997 WL 11234446. The bill passed the House on July 28,

1997.

In September 1997, the NMFS announced a new control

date for the Atlantic mackerel fishery. The control date was

issued to provide notice to anyone “entering the commercial

Atlantic mackerel fishery after September 12, 1997,” that

they would “not be assured of future access to the Atlantic

mackerel resource in Federal waters if a management regime

is developed and implemented” under the Magnuson Act. 62

Fed. Reg. 48047 (Sept. 12, 1997). “The potential eligibility

criteria [in the future might] be based on_ historical

participation [in the fishery], defined as any number of trips

46a

having any documented amount of Atlantic mackerel

landings.” Jd. The rationale given for the new control date

was as follows:

Discussion of reinstatement of a control date was

prompted by news that a large factory trawler’ was

undergoing conversion to enter this fishery. Council

members noted that, although the fishery is currently

underexploited, a substantial increase in exploitation

could be effected in a short period of time by the

introduction of a factory trawler fleet. To prevent

overcapitalization, Council members expressed the need

to implement a management program for this fishery that

allowed for controlled expansion ***. The Council

members noted that [the existing capital in the fishery],

along with the possible addition of factory trawlers,

raised concerns because the current estimate of long-term

potential yield for this fishery is 150,000 [metric tons].

Further, both NMFS and the Council have indicated that

first preference for entry into this fishery should be

afforded to Northeast region vessels as an alternative to

traditional fisheries that have been severely overfished.

Id®

Also in September 1997, a bill paralleling H.R. 1855 was

introduced in the United States Senate. That bill, S. 1192,

7 Tobe precise, the Atlantic Star was not a factory trawler; it was :

a freezer trawler. A freezer trawler only freezes the fish it catches; it

does not otherwise process them.

At the time this lawsuit was filed, no rule had been adopted

limiting access to the fishery.

47a

provided for the revocation of Atlantic mackerel or herring

permits that had been issued to vessels “165 feet in length or

longer” or possessing “an engine or engines capable of

producing a total of more than 3,000 horsepower.” In

introducing the bill, Senator Olympia Snowe, although not

naming the Atlantic Star, undoubtedly spoke of the vessel

when referring to the “369 foot factory trawler” entering the

Atlantic mackerel and herring fisheries as a “dramatic new

proposal * * * which could alter the planned course of

sustainable development for these fisheries.” 143 Cong. Rec.

$9637-01, $9644 (Sept. 18, 1997).

Neither H.R. 1855 nor S. 1192 was enacted into law. In

fact, the NMFS and NOAA questioned the wisdom of

legislatively revoking plaintiffs permits; the general

position of the NMFS was that the regional fishery

management councils were the appropriate entities to

consid: limits on fisheries permits.

Nevertheless, Congress achieved the purpose of H.R.

1855 and S. 1192 through a rider attached to the Departments

of Commerce, Justice, and State, the Judiciary, and Related

Agencies Appropriations Act, 1998, Pub. L. 105-119, which

was enacted on November 26, 1997 (“1997 Appropriations

Act”). Section 616 of the 1997 Appropriations Act provided

as follows:

(a) None of the funds made available in this Act may be

used to issue or renew a fishing permit or authorization

for any fishing vessel of the United States greater than

165 feet in registered length or of more than 750 gross

registered tons, and that has an engine or engines capable

of producing a total of more than 3,000 shaft

horsepower—

(1) as specified in the permit application required under

part 648.4(a)(5) of title 50, Code of Federal Regulations,

and the authorization required under part 648.80(d)(2) of

48a

title 50, Code of Federal Regulations, to engage in fishing

for Atlantic mackerel or herring (or both) under the

Magnuson-Stevens Fishery Conservation and

Management Act (16 U.S.C. 1801 et seq.); or

(2) that would allow such a vessel to engage in the

catching, taking, or harvesting of fish in any other fishery

within the exclusive economic zone of the United States

(except territories), unless a certificate of documentation

has been issued for the vessel and endorsed with a fishery

endorsement that was effective on September 25, 1997

and such fishery endorsement was not surrendered at any

time thereafter.

(b) Any fishing permit or authorization issued or renewed

prior to the date of the enactment of this Act for a fishing

vessel to which the prohibition in subsection (a)(1)

applies that would allow such vessel to engage in fishing

for Atiantic mackerel or herring (or both) during fiscal

year 1998 shall be null and void, and none of the funds

made available in this Act may be used to issue a fishing

permit or authorization that would allow a vessel whose

permit or authorization was made null and void pursuant

to this subsection to engage in the catching, taking, or

harvesting of fish in any other fishery within the

exclusive economic zone of the United States.

The rider, in short, retroactively cancelled plaintiff's existing

permits and authorization letter and prospectively precluded

re-issuance of such permits. It is undisputed that the only

immediate impact of the rider was to invalidate the Atlantic

Star’s current fishing permits. No other vessels were

affected by the legislative revocation.

An identical provision, applicable to the following fiscal

year, was enacted on October 21, 1998, as § 617 of the

Department of Commerce, Justice, and State, the Judiciary,

and Related Agencies Appropriations Act, 1999, Pub. L.

49a

105-277 (“1998 Appropriations Act”). Finally, on May 21,

1999, Congress enacted § 3025 of the 1999 Emergency

Supplemental Appropriations Act, Pub. L. 106-31, (“1999

Appropriations Act”) which amended § 617 of the 1998

Appropriations Act and made the vessel-size limitation and

permit revocation permanent:”

Section 617 of [the 1998 Appropriations Act] is

amended—

(1) by striking subsection (a) and inserting the following:

“(a) None of the funds made available in this Act or any

other Act hereafter enacted may be used to issue or renew

a fishing permit or authorization for any fishing vessel of

the United States greater than 165 feet in registered

length, of more than 750 gross registered tons, or that has

an engine or engines capable of producing a total of more

than 3,000 shaft horsepower as specified in the permit

application required under part 648.4(a)(5) of title 50,

Code of Federal Regulations, part 648.12 of title 50,

Code of Federal Regulations, and the authorization

required under part 648.80(d)(2) of title 50, Code of

Federal Regulations, to engage in fishing for Atlantic

mackerel or herring (or both) under the Magnuson-

Stevens Fishery Conservation and Management Act (16

® In the time since this lawsuit was filed, the MAFMC and

NEFMC have recommended, and the NMFS has promulgated,

regulations reflecting the statutory prohibition. See 64 Fed. Reg. 57587-

01 (Oct. 26, 1999) (imposing vessel-size limitations on vessels engaged

in the Atlantic mackerel fishery); 65 Fed. Reg. 77450 (Dec. 11, 2000)

(imposing vessel-size limitations on vessels engaged in the Atlantic

herring fishery).

50a

U.S.C. 1801 et seq.), unless the regional fishery

management council of jurisdiction recommends after

October 21, 1998, and the Secretary of Commerce

approves, conservation and management measures in

accordance with such Act to allow such vessel to engage

in fishing for Atlantic mackerel or nerring (or both).”;

and

(2) in subsection (b), by striking “subsection (a)(1)” and

inserting “subsection (a)”.

This legislative approach to the revocation of fishery

permits and authorization letters was unique. Never before

had the NMFS revoked a fishery permit in response to a

Congressional appropriation act. Congress did not consult

with United States fishery officials before deciding to nullify

the Atlantic Star’s permits or ask those officials to

recommend or consider alternatives. Congress did not ask the

NMFS what its opinion would be regarding the revocation of

a fishing permit by act of Congress. The size thresholds

established by the legislation were developed by Congress

and not by the NMFS. Furthermore, in a deposition taken in

this case, the government’s own stock assessment scientist

for Atlantic mackerel and herring stated that the Aflantic

Star’s entry into the Atlantic mackerel and herring fisheries

would have had no negative impact on either species.

Congress’s action also differed from previous legislative

programs to reduce fishing capacity. In the past, the

government has paid owners when it sought to obtain their

permits and remove their vessels from fishing. For example,

a fishing capacity reduction program was created by the

Sustainable Fisheries Act, Pub. L. 104-297, enacted on

October 11, 1996. This legislation authorizes the Secretary

of Commerce to pay the owner of a fishing vessel if the

vessel is withdrawn from a particular fishery; it also

authorizes the Secretary to pay the owner of a fishing permit

Sla

if the permit is surrendered for permanent revocation.

Pursuant to this legislation, the Secretary of Commerce may

implement a fishing capacity reduction program if certain

statutory criteria are met; these criteria include finding that

the program is necessary to “prevent or end overfishing,”

finding that the program is consistent with the “Federal or

State fishery management plan,” and finding that the

program is “cost-effective.” 16 U.S.C. § 186la(b)(1). This

reduction program is voluntary, and its objective is “to obtain

the maximum sustained reduction in fishing capacity at the

least cost and in a minimum period of time.” 16 U.S.C. §

1861a(b)(2). Plaintiff was aware of this prior practice. The

legislation revoking the Atlantic Star’s permit and

authorization letter was not voluntary and did not provide for

any Compensation to the owners.

The Atlantic Star was the only vessel to have its Atlantic

mackerel permit and gear authorization letter revoked

because of the 1997 Appropriations Act. Because of the

revocation of its Atlantic mackerel permit, the Atlantic Star

could not lawfully participate in the Atlantic mackerel fishery

from the beginning of December 1997 until July 1999 when

plaintiff sold the Atlantic Star. Furthermore, because of the

prohibition on issuing any other fishing permits, the Atlantic

Star, during this period, could not participate in any other

United States fisheries in the EEZ for which permits were

required. But for the revocation of its permit and

authorization letter by these enactments, the Atlantic Star

would have fished for Atlantic mackerel and herring in 1997,

1998, and 1999. No regulations of general application were

promulgated in 1997 or 1998 that would have prevented the

Atlantic Star from fishing for Atlantic mackerel if its

fisheries permit had not been rendered null and void by

Congress.

With the Atlantic Star unable to participate in the

fisheries for which it was intended or in any other fisheries in

52a

the EEZ requiring a permit, the economic value of the vessel

was dramatically reduced. Although, even after the

enactment of the 1997 Appropriations Rider, the Atlantic

Star could have fished solely for Atlantic herring in non-

closed waters with midwater trawl gear, it would not have

earned a profit doing so. The profitability of the Atlantic Star

depended upon its ability to fish for Atlantic mackerel, with

or without the gear authorization letter.'° There are no

fisheries in existence in waters of the United States not

requiring a fishery permit in which the Atlantic Star could

have participated on a profitable basis.'' Furthermore, there

are no commercially-marketable fish beyond the 200 mile

limit of the EEZ that can be economically harvested by a

pelagic mid-water trawler such as the Atlantic Star. The

Atlantic Star had the capability to fish in foreign waters but

not on an economically viable basis. The Atlantic Star was a

United States flagged vessel and, as such, could not

participate in foreign fisheries without purchasing fishing

rights. These foreign fishing rights are typically very

'0 For this reason, the use the court shall consider in its analysis is

the use of the Atlantic Star to fish for mackerel.

'! Defendant did not agree with this proposed finding and stated,

“There were other fisheries within the EEZ of the United States which the

Atlantic Star could have fished without a permit or gear authorization.”

Def.’s Stmt. Genuine Issues J 152. This statement is non-responsive to

plaintiff's proposed finding. Plaintiff did not allege that there were no

fisheries available to it at all; rather, it alleged that there were no

fisheries available to it in which it could make a profit. Plaintiff

supported this statement with the Declaration of Lisa A. Kohlwes

Torgersen. Consequently, defendant has failed to identify a genuine

dispute regarding this fact.

53a

expensive. Furthermore, reflagging the vessel in a foreign

country would have permanently barred the Atlantic Star

from ever participating in American fisheries as a United

States flagged vessel.

Plaintiff could not convert the Atlantic Star to any non-

fishing use because of the specialized fishing and freezing

equipment on board the vessel. Conversion would have

required the removal of this equipment, and this removal

only could have been accomplished at a high cost.

Additionally, removal of this freezing equipment would have

destroyed the value of the vessel and the investment plaintiff

made in it. Plaintiff would no longer have had a fishing

vessel, and nothing would have been left of the investment in

the vessel for the purpose of fishing.

In response to the revocation of its permit and

authorization letter, plaintiff filed a lawsuit in the U.S.

District Court for the District of Columbia, challenging the

constitutionality of the government’s action and seeking a

preliminary injunction against enforcement of _ the

appropriations provisions. The district court denied the

request for a preliminary injunction. On March 9, 1999,

plaintiff filed this lawsuit alleging an uncompensated taking.

On July 9, 1999, plaintiff sold the vessel to its Dutch lenders.

On November 29, 1999, the district court action was

dismissed as moot because plaintiff no longer owned the

Atlantic Star. This court must now determine whether the

Fifth Amendment’s Takings Clause provides a basis for

granting plaintiff relief.

DISCUSSION

The Fifth Amendment to the United States Constitution

prohibits the federal government from taking private property

without just compensation. This is not an abstract guarantee.

It is an immensely practical device to protect the rights of the

individual when faced with collective action. In this

54a

connection, the present facts are deeply disturbing. It is

undisputed that plaintiffs owners undertook, virtually at

government invitation, to invest substantial resources in the

vessel. They did everything required of them at the time to

comply with the existing regulatory regime to ensure that the

Atlantic Star could be used for commercial fishing.

Congress put those regulations in place and entrusted to the

NMFS their enforcement, including the ground rules for

possible revocation. Although the court has misgivings

about the rationale for what Congress then did, it will be

assumed that Congress had good and sufficient reasons for

revoking only the Atlantic Star’s permits, and thereby

making the regulatory scheme uniquely unavailable to the

vessel. The impact was the same. The investment,

reasonably undertaken under the circumstances, was

compromised in an instant. What makes the facts

particularly troublesome is that, under existing precedent, it

is far from clear that the Takings Clause is implicated. If that

is the case, however, the result would undermine

fundamental assumptions as to the government’s rights vis a

vis private property. .

As nothing was physically taken or destroyed, plaintiff

asserts a regulatory taking of personal property. The

beginning of the application of the Takings Clause to other

than physical takings is often traced to Holmes’s observation

that “while property may be regulated to a certain extent, if

regulation goes too far it will be recognized as a taking.” Pa.

Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). He pointed

out that “[w]jhen this seemingly absolute protection [the —

Takings Clause] is found to be qualified by the police power,

the natural tendency of human nature is to extend the

qualification more and more until at last private property

disappears.” Jd. From this, the Court has held that land use

regulation will constitute a taking if it “denies an owner

iat nN

55a

economically viable use of his land.” Agins v. Tiburon, 447

U.S. 255, 260 (1980).

This regulatory takings analysis has frequently been

tested in the context of the regulation of real estate. See, e.g.,

Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992); Penn

Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978).

The rule is relatively clear. If the regulation destroys all

economically viable use of the land, i.e., if the owner has

been “called upon * * * to leave his property economically

idle,” there is a compensable taking per se. Lucas, 505 US.

at 1019. If the destruction of use is less than complete, the

court engages in an “essentially ad hoc, factual inquiry” that

includes analysis of three factors: the extent to which the

governmental action interferes with distinct, investment-

backed expectations; the character of the governmental

action; and the extent of economic impact on the claimant.

Penn Cent., 438 U.S. at 124. As the Court explained in Penn

Central, the focus in less-than-total destruction of use claims

is “on the uses the regulations permit.” Jd. at 131.

The Penn Central analysis for identifying a regulatory

taking also has been applied in the context of personalty. In

Andrus v. Allard, 444 U.S. 51 (1979), the Court used the

three-part analysis when considering a prohibition on the sale

of Indian artifacts containing eagle feathers. It held that “the

denial of one traditional property right does not always

amount to a taking. At least where the owner possess a full

‘bundle’ of property rights, the destruction of one ‘strand’ of

the bundle is not a taking because the aggregate must be

viewed in its entirety.” Jd. at 65-66. In the circumstances, it

found that the prohibition on use was not complete, nor was

“it clear that appellees [would] be unable to derive economic

benefit from the artifacts.” Jd. at 66.

In Connolly v. Pension Benefit Guaranty Corp., 475 U.S.

211 (1986), the Court launched the Penn Central three-part

56a

regulatory takings analysis into new waters: intangible

personalty. That case involved the legislative creation of an

obligation to private third parties, in a way arguably

inconsistent with prior contract rights and obligations. The

court rejected the takings claim, concluding that the Fifth

Amendment is not implicated merely because Congress

chooses to require one person to benefit another. The

government had not occupied or destroyed the employer’s

property, the penalty for withdrawal was not out of

proportion to the company’s experience with the plan, and

pension plans had long been subject to regulation. /d. at 226-

27.

A more recent claim of regulatory taking involving

intangible personalty is Eastern Enterprises v. Apfel, 524

U.S. 498 (1998). A plurality of the Court applied the

Takings Clause to strike down (rather than require

compensation for) legislation that, in the majority’s view,’

created a liability from one private entity to another based on

past actions. In short, the legislation was retroactive in

effect. It created financial obligations in companies presently

or previously engaged in coal mining to present or former

employees or their families. lu

The plurality begins its analysis with a recognition that

the Takings Clause has potential application to economic

regulation affecting personalty. Eastern Enterprises, 524

U.S. at 523. It then calls attention to the relevance of the

“justice and fairness” of the governmental action in

Justice Kennedy created a majority in remedy by agreeing that

the retroactive nature of the liability was problematic, though because of

the Due Process Clause rather than the Takings Clause.

S7a

determining whether a taking has occurred. /d. (citing

Andrus, 444 U.S. at 65. In implementing that inherently

factual and ad hoc inquiry, the plurality uses the three Penn

Central factors. Id.

Positing the power of Congress to “adjust the burdens

and benefits of economic life,” id. at 524 (citing Usery v.

Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976) (a

challenge based on due process)), the plurality nevertheless

concluded that “{oJur decisions have left open the possibility

that legislation might be unconstitutional if it imposes severe

retroactive liability on a limited class of persons that could

not have anticipated the liability, and the extent of the

liability is substantially disproportionate to the parties’

experience.” /d. at 528-29. In applying these factors, the

plurality used the familiar Penn Central template to conclude

that the medical benefits legislation at issue constituted a

taking: the economic impact, while not confiscatory, was

“substantial”; the plaintiff had good reason not to anticipate

the imposition, thus it had a reasonable, investment-backed

expectation that the retroactive legislation would not have

been adopted; and finally, the targeted nature of the

legislation made the character of the government action

appear to be a taking.

Justice Kennedy disagreed with the takings analysis

because he could find no clearly identified, traditional,

property interest. Jd. at 544 (Kennedy, J., concurring in the

judgment and dissenting in part). He believed the legislation

to be constitutionally defective, however, on due process

grounds, because the remedy imposed by the legislation bore

no legitimate relationship to the interests asserted by the

government in its support. He, too, was troubled by the

retroactive, targeted nature of the legislation. Jd. at 549.

From these decisions, we deduce that the Takings Clause

has applicability to both tangible and intangible personalty.

58a

The relevant test for a regulatory taking in such

circumstances is the now-traditional Penn Central three part

analysis. Despite the plurality in Eastern Enterprises,

however, what has not changed is the need to identify the

“property” allegedly taken for public use, because the

Takings Clause only protects juridicaliy recognized property

interests. See M & J Coal Co. v. United States, 47 F.3d

1148, 1154 (Fed. Cir. 1995). In this case, from the

standpoint of traditional property concepts, the res potentially

taken by the government was the ship itself. Licenses or

permits are traditionally treated as not protected by the

Takings Clause because they are created by the government

and can be cancelled by the government and normally are not

transferrable.

The Atlantic Star, qua ship, plainly constitutes property

for Fifth Amendment purposes, as the government concedes.

Here, however, the owner was left with the ship; it was not

physicaliy taken. Instead, restrictions merely were placed on

its use. That is not fatal to a takings claim, however. As

evident from Lucas, the Fifth Amendment contemplates that

compensation is owed when government, by regulation, so

completely destroys the beneficial uses of property that it is,

in effect, idled. This focus on the vessel thus distinguishes

the facts from cases dealing with claims that the permits at

issue were property in themselves. See Bradshaw v. United

States, 47 Fed.Cl. 549, 553 (2000) (“A grazing permit * * *

was never intended to become a property right.”); Hage v.

United States, 35 Fed.Cl. 147, 171 (1996) (“reliance on the

privilege to graze * * * [cannot] create a property interest.”).

The question in this case thus becomes: are the uses

prohibited within the bundle of rights otherwise inhe.ent in

the vessel?

As this court noted in a takings case involving the use of

vessels to carry oil and hazardous substances: “The inquiry

is not so simple as examining whether the Government

59a

prevents the exercise of a property right by regulating it,

transforming the property right into one ‘totally dependent’

on the Government’s regulatory regime. That is a tautology;

the inquiry is considerably more nuanced.” Maritrans, Inc.

v. United States, 40 Fed.Cl. 790, 796 (1998). To determine

whether a property right exists independent of the regulatory

scheme, it is necessary to decide “whether an independent or

preexisting right of use under common law applies.” Jd. at

798; see also Mitchell Arms, Inc. v. United States, 7 F.3d

212, 217 (Fed. Cir. 1993).

The relevant stick in the bundle in this context is the right

to use the Atlantic Star to fish, subject to regulation. The

government argues that the use of the vessel to fish in the

EEZ was entirely dependent upon the government’s

regulatory scheme. We can assume for argument’s sake that

the government’s assertion is correct without terminating the

analysis. To say that the plaintiff's rights to fish were subject

to a pervasive regulatory scheme—plainly they were—is not

to say that nothing the government did with respect to those

rights could ever implicate the Takings Clause.

We are not confronted here with a property or a use

which is inherently dangerous or a nuisance. There is

nothing in the nature of a fishing vessel that suggests that any

use is totally a matter of governmental grace. This

distinguishes the facts at the outset from cases cited such as

Mugler v. Kansas, 123 U.S. 623 (1887), and Miller v.

Schoene, 276 U.S. 272 (1928). Absent such a built-in

limitation, personal property, like land, comes with an

inherent right of use. We note that the right to use is one of

the “group of rights inhering in the citizen’s relation to [a]

physical thing.” United States v. Gen. Motors Corp., 323

U.S. 373, 378 (1945); see also Front Royal & Warren

County Indus. Park Corp. v. Town of Front Royal, 135 F.3d

275, 286 (4th Cir. 1998) (identifying the right of use as one

60a

of the “classical property rights”). As this court has held,

“Inherent in the ownership of vessels is the right to use

them.” Maritrans, 40 Fed.Cl. at 799.

The nature of the use involved—fishing—also

distinguishes this case from two other decisions relied on

heavily by defendant. The Federal Circuit in Allied-General

Nuclear Services v. United States, 839 F.2d 1572 (Fed. Cir.

1988), found no taking where the government, in light of a

Presidential ban on the recycling of spent plutonium, refused

to issue an operating license to a plant designed for that

purpose. The ban was issued in the interest of national

security, and the court held that the Fifth Amendment

provided no protection to one “who proposed use of property

injurious to common defense.” Allied-General, 839 F.2d at

1576.

Mitchell Arms, Inc. v. United States, 26 Cl. Ct. 1 (1992),

aff'd, 7 F.3d 212 (Fed. Cir. 1993), concerned the suspension

of import licenses for semiautomatic, assault-type rifles. The

suspension of these licenses resulted in the plaintiff's loss of

“the opportunity to sell the assault rifles in their original

configuration.” Mitchell Arms, 26 C1.Ct. at 4. The plaintiff

alleged that loss of this opportunity amounted to a taking

without just compensation. This court rejected the argument,

finding that the “right to sell assault weapons in domestic

commerce [ ] is not a right inherent in plaintiff's ownership

of those weapons.” Jd. at 6.'°

'3 Mitchell Arms distinguished United Nuclear Corp. v. United

States, 912 F.2d 1432 (Fed. Cir. 1990), in which the court had found a

taking of a right to mine uranium. The Mitchell Arms court recognized

_ that the right to mine was “inherent in the ownership rights that United

(cont'd)

6la

Fishing, however, can hardly be equated to “the novelty

of nuclear fission” and “the fearsome effect of its use in

war,” Allied-General, 839 F.2d at 1577, or to the importation

of assault rifles. Fishing and fission only sound alike. The

use claimed—fishing—is not as transparently a matter of

official grace. For that reason, the present facts are more akin

to decisions dealing with what expectations can accrue in a

“highly regulated” but otherwise innocuous business.

This is not inconsistent with the recent decision of this

court in Conti v. United States, 48 Fed.Cl. 532 (2001). The

plaintiff in Conti alleged that an NMFS regulation

prohibiting the use of drift gillnets in the Atlantic swordfish

fishery had taken his property interest in the use of those

gillnets without compensation. In the opinion in Conti,

Judge Margolis concluded that a participant in the Atlantic

swordfish fishery did not possess a property interest in the

continued use of gillnets in that fishery; therefore, no taking

had occurred. Conti is distinguishable. There was no

revocation of any of Conti’s existing permits by any

government body, nor was there any denial of future permits.

The decision to implement the gillnet moratorium was made

by the NMFS, not Congress. The restriction was limited to a

particular use of plaintiff's boat, not, as here, effectively all

uses. Importantly, there was no allegation that the plaintiff

was being singled out. The court’s analysis, moreover,

focused on the permit itself as the relevant property interest.

The court stated, “[P]laintiff's reliance on his permit cannot

confer a property interest upon him,” and agreed with the

government’s assertion that “fishery permits do not create

property interests.” Conti, 48 Fed.Cl. at 538; see also 16

Nuclear * * * held independent of their denied permits.” Mitchell Arms,

26 C1.Ct. at 6.

62a

U.S.C. § 1853(d)(3)(D). The question the court addresses

here is framed differently: whether the legislation took all

economically beneficial use of the ship.'*

Defendant also points the court to Bowen v. Public

Agencies Opposed to Social Security Entrapment, 477 U.S.

41 (1986). In Bowen, the Court considered whether the State

of California, based on an agreement with the federal

government pursuant to a federal statute, possessed a

protected property right to withdraw from the Social Security

scheme. The Court rejected California’s argument and held

that the “ ‘contractual right’ at issue in this case bears little, if

any resemblance to rights held to constitute ‘property’ within

the meaning of the Fifth Amendment.” Bowen, 477 U.S. at

55. This finding was based on the fact that “the termination

provision in the Agreement exactly tracked the language of

the statute, conferring no right on the State beyond that

~ contained in [the statute] itself.” Jd. The subsequent

legislation, in short, took away what prior legislation had

created. The facts here are plainly different, for reasons

already cited. Fishing as a livelihood is not a creation of the

government. We conclude thati plaintiff possessed a property

interest in using its vessel to fish, albeit subject to the

regulatory regime. We must now decide whether the

particular facts of this case constitute a taking in the context

of the three-part Penn Central test.

'4 We note also that the court in Conti did not address the

revocation of existing permits.

63a

1. Interference with Distinct, Investment-Backed Expecta-

tions

In the years leading up to the time plaintiff purchased the

Atlantic Star and began investing money in its conversion to

a pelagic trawler, the NMFS and the ITC expressly stated

that there was a need for larger fishing vessels in the Atlantic

mackerel fishery. In 1994, the NMFS had rescinded a

control date for Atlantic mackerel because the MAFMC no

longer believed “that the Atlantic mackerel fishery [would]

require the imposition of some type of limited-entry

management system.” 59 Fed. Reg. 49,235 (Sept. 27, 1994).

Furthermore, the ABC for Atiantic mackerel in 1997, 1998,

and 1999 far exceeded the U.S. commercial landings of

Atlantic mackerel in those years. For example, in 1997, the

ABC for Atlantic mackerel was 1,178,000 metric tons, but

the U.S. commercial landings amounted to only 15,706

metric tons. Plaintiff planned to catch 50,000 metric tons of -

Atlantic mackerel and herring per year. Thus, plaintiff

reasonably believed there was ample room in the Atlantic

mackerel fishery for the Atlantic Star.

Pursuant to the regulatory scheme, a permit had already

been issued to the Atlantic Star at the time the 1997

Appropriations Act was enacted. The plaintiff was therefore

legally entitled to use the Atlantic Star to fish for Atlantic

mackerel in the EEZ. Under the regulations, this entitlement

could only be revoked for cause. The regulations created

certain expectations in both applicants and permit holders.

The NMFS, for instance, did not have discretion regarding

the issuance and renewal of Atlantic mackerel permits. The

NMFS must “issue a permit within 30 days of receipt of the

application, unless the application is deemed incomplete” for

one of five reasons:

(i) The applicant has failed to submit a complete

application * * *;

64a

(ui) The application was not received by the Regional

Administrator by the applicable deadline set forth in this

section;

(iii) The applicant and applicant’s vessel failed to meet

all applicable eligibility requirements set forth in this

section;

(iv) The applicant applying for a limited access

multispecies combination vessel or individual DAS

permit, a full-time or part-time limited access scallop

permit, or electing to use a VTS, has failed to meet all of

the VTS requirements * * *; or

(v) The applicant has failed to meet any other application

requirements stated in this part.

50 C.F.R. § 648.4(e)(1). Moreover, as long as a fishing

vessel to which a mackere! permit has been issued is in

compliance with the laws and regulations administered by the

NMFS, the NMFS is required to issue a renewal permit to

that vessel within 30 days of receipt of the owner’s renewal

application. It is also uncontroverted that, but for the

revocation of its permit by Congress, the Atlantic Star would

have fished for Atlantic mackerel in 1997, 1998, and 1999.

No regulations were promulgated in 1997 or 1998 that would

have prevented the Atlantic Star from obtaining a permit to

fish for Atlantic mackerel. Furthermore, plaintiff was aware

that, in the past, buyback programs such as that created by

Sustainable Fisheries Act, Pub. L. 104-297, had been

established when the government desired to reduce fishing

capacity.

Plaintiff's expectation of being able to use its vessel to

fish for Atlantic mackerel was thus reasonable. Indeed, the

government, through the NMFS and the ITC, induced

plaintiff to make its investment in the Atlantic Star. The

government cannot now argue that reliance by plaintiff on

the government’s own statements was unreasonable.

65a

Plaintiff could not assume that the regulatory regime would

remain static, but it had no reason to anticipate that Congress

would render the regulatory regime uniquely unavailable to

it. Plaintiff could not have anticipated that Congress would

single it out to revoke its permits by legislation.

In a regulated industry, government, through the

implementation of a regulatory scheme, helps set the

parameters for the reasonable expectations of investors. See

Good v. United States, 189 F.3d 1355, 1361 (Fed. Cir. 1999)

(considering the “regulatory climate that existed when

Appellant acquired the subject property” in discussing

reasonable expectations); Branch v. United States, 69 F.3d

1571, 1582 (Fed. Cir. 1995) (considering the “historical

practices in the bank regulatory field” in discussing

reasonable expectations); Atlas Corp. v. United States, 895

F.2d 745, 758 (Fed. Cir. 1990) (citing Connolly, 475 U.S. at

227 (quoting FHA v. Darlington, Inc., 358 U.S. 84, 91,

(1958)) (emphasis added) (“ * “Those who do business in the

regulated field cannot object if the legislative scheme is

buttressed by subsequent amendments to achieve the

legislative end.” ’ ”); Am. Cont’l Corp. v. United States, 22

CLCt. 692, 697 (1991) (emphasis added) (“[E]xpectations

must be based not only on then-existing federal regulations

but also on the recognition that there may well be related

changes in the regulations in the future.”). And Congress, of

course, retains the authority to change or even abolish that

scheme. The mere fact of regulation, however, does not

signify that an investor can never form a _ reasonable

expectation of a return on his investment.

Moreover, having established a particular regulatory

scheme, there are limits imposed by the Fifth Amendment to

the actions Congress can take in regard to that regulatory

scheme without compensating investors who have reasonably

relied on the scheme. Plaintiff, when considering entry to the

fisheries, could have reasonably anticipated a certain range of

66a

future governmental regulation, duly promulgated through

the regulatory scheme Congress established. Plaintiff

perhaps also could have reasonably foreseen legislation that

would limit, in a way applicable to others similarly situated,

the issuance of future permits. The targeted revocation of

existing permits, however, and the targeted denial of future

permits by Congress were not events any citizen in a

constitutional republic could have reasonably expected.'* In

short, at the time plaintiff made its investment in the Atlantic

Star, its expectation of participating in the Atlantic mackerel

fishery was reasonable.

2. Degree of Economic Impact'®

The economic impact on plaintiff of the appropriations

riders was severe. Plaintiff spent nearly $40 million on the

Atlantic Star specifically to equip it to participate in the

Atlantic mackerel and herring fisheries. With the enactment

of the riders, this investment was wiped out. The Aflantic

Star could not profitably operate without the permits that

were revoked and denied by Congress; the appropriations

riders prohibited all profitable uses of the vessel.

The fact that all profitable uses of the Atlantic Star were

prohibited distinguishes this case from Andrus v. Allard, 444

'S The retroactivity and targeted nature of the legislation shall be

addressed in the discussion of the character of the governmental action.

proposed findings of fact regarding the economic impact of the

legislation. For the reasons already discussed, we therefore deem

established the facts alleged by plaintiff and supported by the evidence

contained in the appendices accompanying plaintiff's motion.

67a

U.S. 51. In that case, the U.S. Supreme Court determined

that a prohibition on the sale of Indian artifacts containing

eagle feathers did not effect a taking. As previously noted,

this finding rested in part on the fact that “it [was] not clear

that appellees [would] be unable to derive economic benefit

from the artifacts.” Andrus, 444 U.S. at 66. Here, the facts

demonstrate the opposite conclusion: plaintiff was unable to

derive any profitable economic benefit from the Atlantic Star

after enactment of the appropriations riders. Although the

vessel may have retained some scrap value, the government

has not argued the possibility. In any event, the diminution

in the vessel’s value would have been virtually total. After

the enactment of the appropriations riders, the Atlantic Star

had no commercially viable uses.'’

3. Character of the Governmental Action

The factor of “the character of the governmental action”

has been cast in terms of whether the government physically

appropriates the res or comes close to doing so. See Penn

Cent., 438 U.S. at 124.'° The plurality opinion in Eastern

'’ This severe economic impact also distinguishes the instant case

from Goldblatt v. Town of Hempstead, 369 U.S. 590 (1962). In

Goldblatt, the Court upheld an ordinance regulating dredging and pit

excavating as a valid exercise of the police power not requiring the

payment of compensation. This holding rested on the fact that there had

been no evidence presented “which even remotely suggest[ed] that

prohibition of further mining [would] reduce the value of the lot in

question.” Goldblatt, 369 U.S. at 594. Here, the evidence to the contrary

is uncontested.

‘8 In Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed.

Cir. 1994), the court found that Lucas had changed this criterion, “from

one in which courts * * * were called upon to make ad hoc balancing

decisions, balancing private property rights against state regulatory

(cont’d)

68a

Enterprises, however, suggests that, in considering the

character of a governmental action alleged to constitute a

taking. at least two other factors are also relevant: (1)

whether the action is retroactive in effect, and if so, the

degree of retroactivity; and (2) whether the action is targeted

at a particular individual. Eastern Enterprises, 524 U.S. at

532-37.'° Both factors are present here.

The appropriations riders not only denied future permits

but also voided the ones that had already been issued to the

Atlantic Star. This revocation retroactively made the

regulatory scheme established by the Magnuson Act

unavailable to plaintiff. Plaintiff had complied with the

scheme, but that compliance was retroactively rendered

ineffective by Congress.

The disproportionate impact of the legislation is as severe

as that at issue in Eastern Enterprises. In Eastern

Enterprises, the plurality stressed the plaintiff's lack of

responsibility for the “problem in the funding of retired coal

miners’ health benefits.” Eastern Enterprises, 524 U.S. at

537. Here, there is no serious evidence that a problem in the

Atlantic mackerel fishery even existed, and there is no

evidence that plaintiff was uniquely responsible for any

policy, to one in which state property law, incorporating common law

nuisance doctrine, controls.” Loveladies Harbor, 28 F.3d at 1179.

'? The plurality’s discussion of retroactivity seems to bridge its

analysis of reasonable, investment-backed expectations and its analysis of

the character of the governmental action. Because the question of

whether plaintiff could have reasonably expected retroactive legislation

and the question of whether retroactive legislation is of such a character

as to support the finding of a taking appear to us to be two sides of the

same coin, we discuss both retroactivity and targeting in our analysis of

the character of the governmental action.

69a

alleged problem. Without this evidence of responsibility,

retroactively making the regulatory scheme unavailable to

"plaintiff has no support. This retroactivity favors finding a

taking.

The circumstances here are different from those in United

States v. Locke, 471 U.S. 84 (1985), where legislation was

adopted revoking mining rights that were not perfected

within a certain period of time: “As long as proper notice of

these rules exists, and the burdens they impose are not so

wholly disproportionate to the burdens other individuals face

in a highly regulated society that some people are being

forced ‘alone to bear public burdens which, in all fairness

and justice, must be borne by the public as a whole,’ the

burden imposed is a reasonable restriction on the property

right.” 471 U.S. at 107 n.15 (citing Armstrong v. United

States, 364 U.S. 40, 49 (1960)). Here, there was no proper

notice of the rules, the burdens imposed were

disproportionately distributed, and one entity was singled out

to bear “public burdens which, in all fairness and justice,

must be borne by the public as a whole.” Armstrong, 364

U.S. at 49.

All of the legislation in question here was clearly targeted

at the Atlantic Star, as the predecessor bills to the

appropriations riders indicate. As previously stated, Senator

Snowe, when introducing S. 1192, referred to a “369 foot

factory trawler” that was about to enter the Atlantic mackerel

and herring fisheries; she was surely referring to the Atlantic

Star. Furthermore, Congress was informed, during hearings

regarding H.R. 1855, that the size prohibitions under

consideration would affect only the Atlantic Star and no

other vessels. Congressman Jack Metcalf of Washington

also pointed out this fact:

[APFC’s] vessel, the Atlantic Star, is the only vessel that

will be legislated out of existence—and into

a ami

70a

bankruptcy—by enactment of H.R. 1855. Such a result is

not only bad fishery policy, it is bad Government policy

and is manifestly unfair. We here in Congress should be

trying to prevent Government takings of private property,

not facilitating them, as this legislation most certainly

does.

143 Cong. Rec. E1556-01 (1997).

The effect of the 1997 Appropriations Act was that only

the Atlantic Star’s permits were revoked; the 1998

Appropriations Act and the 1999 Appropriations Act merely

continued this legislative ban on the use of the Atlantic Star.

The acts could not have achieved their objective any more

fully if the Atlantic Star had been identified by name in the

text of the acts. The character of the governmental action

here, because that action, in both purpose and effect, was

retroactive and targeted at plaintiff, supports the finding of a

taking. Because the other two parts of the Penn Central test

are also satisfied, we find that defendant took plaintiff's

property interest in the use of its vessel to fish for Atlantic

mackerel in the EEZ of the United States from the time the

1997 Appropriations Act was enacted until the time plaintiff

sold its vessel.

CONCLUSION

Paragraph 7 of the Supplemental Declaration of Lisa A.

Kohlwes Torgersen is hereby stricken. Plaintiff's motion for

summary judgment on liability is granted. Defendant’s

motion for summary judgment is denied. On or before

May 9, 2001, the parties shall file a joint proposed schedule

for resolving remaining issues.

= ————————eEEee 7 —

Tila

APPENDIX C

, In the United States Court of Federal Claims

AMERICAN PELAGIC FISHING COMPANY, L.P.

Plaintiff,

The UNITED STATES, Defendant.

No. 99-119C.

March 18, 2003.

OPINION

BRUGGINK, Judge.

American Pelagic Fishing Company (“APFC”) brings

this action pursuant to the Takings Clause of the Fifth

Amendment. Liability was previously determined in favor of

plaintiff in American Pelagic Fishing Co., LP v. United

States, 49 Fed.Cl. 36 (2001) (“American Pelagic I”).

Familiarity with the facts set out in that opinion is assumed.

Trial on damages was held in Washington, D.C. on

December 2-11, 2002. For the reasons set out below, we

accept, with some adjustments, plaintiff's proof of required

compensation.

PROCEDURAL HISTORY

Plaintiff, APFC, is a limited partnership, wholly owned

by Lisa Torgersen. At one time, the primary asset of APFC

was a fishing vessel, the Atlantic Star. Currently, its primary

asset is the rights to this litigation. Plaintiff filed this action

on March 9, 1999, alleging that Congress had effected a

complete, temporary regulatory taking of the use of the

Atlantic Star when it adopted legislation on three occasions,

effectively idling the vessel for the period from November

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1997 to July 6, 1999. Plaintiff's motion for summary

judgment on liability was granted on April 4, 2001, in

American Pelagic I, 49 Fed.Cl. 36. We applied a Penn

Central test and held that the legislation took all valuable use

of plaintiff's boat within the meaning of the Takings Clause.

We determined that Congress’ targeted and retroactive

revocation of plaintiff's permits effected a loss, not simply of

the permits, but of all use of plaintiff's vessel.

On January 28, 2002 defendant sought leave to file an

amended answer and assert an affirmative defense and

counterclaim based on fraud in connection with the flagging

of the vessel. The court denied that motion in American

Pelagic Fishing Co., LP v. United States, 52 Fed.Cl. 341

(2002) (“American Pelagic IT’). We held that the

government had no evidence that the Atlantic Star had been

improperly flagged. Nor did defendant bring forward any

evidence that Mrs. Torgersen had “knowingly or recklessly

[made] false statements with intent to deceive.” Jd. at 343

(citing Daff v. United States, 31 Fed.Cl. 682, 688 (1994)).

Further, defendant did not give an excuse for its delay in

bringing this affirmative defense two months before trial.

What remains is for the court to determine the nature and

amount of plaintiff's damage, if any.

BACKGROUND

Before going into the particulars of the evidence, the

court observes that it has rarely seen a greater contrast in the

quality and competence of opposing sets of witnesses.

Unlike defendant’s witnesses, plaintiff's witnesses were

uniformly straightforward, highly qualified, and, with the

exception of the Torgersens, disinterested.

1. Beginning the Atlantic Star Project

Lisa Torgersen is the President and sole shareholder of

APFC. She put herself through undergraduate and graduate

school working in the Alaskan salmon industry. Mrs.

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Torgersen worked as a crew member on salmon fishing boats

during the summers from 1981 to 1989. Her specializations

in school were international business and the Japanese

language. After she received her masters degree in 1989,

Mrs. Torgersen began to work full time for Birting Fisheries,

Inc. (“BFT’) in Seattle. For two years she continued as a

crew member aboard salmon fishing vessels owned by BFI.

In 1991, Mrs. Torgersen became the manager for a large

factory trawler in Alaska, the Ocean Rover.' Mrs. Torgersen

continued to work for BFI as its Operations Manager and

later became the Operations/Sales Manager. BFI owned one

large factory trawler and managed two others.

Later, Mrs. Torgersen went to New Zealand to manage

two fishing vessels. During this time, Mrs. Torgersen

married Harold Torgersen. Harold Torgersen is a Norwegian

citizen whose family fished for herring, mackerel, capelin,

and blue whiting. His father pioneered the herring and

mackerel industry in Norway. Mr. Torgersen worked with

his father’s business every summer while growing up. In

1973, Mr. Torgersen began working on his father’s fishing

vessels full time. The vessels were purse seine combined

trawlers.” In 1986, his family sold its vessels. In 1988, Mr. -

' A trawler is a vessel, like the Atlantic Star, which tows a net for

harvesting fish. A factory trawler has the ability to clean, fillet, freeze

and pack fish.

A purse seine vessel uses a fishing seine net to surround the fish.

The net hangs vertically, drawn down by weights on one side and held up

by floats on the other. It is then pulled together around the fish. A trawl

net, in contrast, is towed behind the boat for several hours in order to

catch fish. A combination vessel has the capability to use each type of

net.

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Torgersen formed American Seafood, with two partners, for

the purpose of exploiting the Alaskan fisheries. American

Seafood purchased vessels in the United States and converted

them into factory trawlers.

Although Mr. Torgersen had never been in Alaska, he

was in charge of the technical aspects and design of vessels

for American Seafood. Once converted into factory trawlers,

American Seafood vessels became the highest producing

vessels in Alaskan waters. In 1993, Mr. Torgersen sold his

interest in American Seafood. He joined a research venture

in Chile, fishing for blue whiting. After selling his stake in

that venture, Mr. Torgersen managed eleven Russian vessels

in Russian waters. He managed vessels of similar size and

capacity to the Atlantic Star, staying out at sea for as long as

six months. In short, Mr. Torgersen is one of the most

successful commercial fishermen in the world.

Mr. Torgersen eventually ended these activities to help his

wife pursue the possibility of a vessel for the East Coast. In

early 1996 BFI was sold. Mrs. Torgersen began to hear

about the opportunities available on the East Coast of the

United States. Mrs. Torgersen left BFI and began to

investigate the possibility of a vessel of her own.

a. Herring and Mackerel in the Western Atlantic

The National Marine Fisheries Service (“NMFS”) was in

the midst of a campaign to encourage American fishing

vessels to exploit the high levels of herring and mackerel

stocks in the western Atlantic, as Mrs. Torgersen was

researching the possibility of her own vessel. The agency

considered these fish stocks to be seriously underutilized.

NMEFS’s statements about underutilization of the pelagic

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species’ were discussed in our earlier opinion, American

Pelagic I, 49 Fed.Cl. at 38. Additionally, the Mid-Atlantic

Fishery Management Council published documents which

outlined the need for vessels of greater size in order to

participate in the world market for herring and mackerel.

Plaintiff's witnesses confirmed that in 1997, the East Coast

of America was the best, least exploited, fishing opportunity

in the world.

NMFS sets quotas for the United States fisheries. The

quotas have a direct relationship to the amount of fish

available in United States waters. There was virtually no

competition in the herring and mackerel industry off the East

Coast. At the time Mrs. Torgersen was doing her research,

only 15 to 20 percent of what was then the quotas for

Atlantic herring and mackerel were being caught. The Rhode

Island Seafood Council reported to NOAA in 1998 that there

was no danger of overfishing mackerel in this area. In fact,

the report noted that it was probable that the mortality rate of

the Atlantic mackerel was greater than the catch each year.

In her research, Mrs. Torgersen became aware of these

opportunities. She then began to research specifically the

viability of entering the western Atlantic waters with a large

fishing vessel outfitted for harvesting mackerel and herring.

She relied on the International Trade Commission’s (“ITC’’)

study, “Mackerel: Competitiveness of the U.S. Industry in

Domestic and Foreign Markets.” The study confirmed that

mackerel fisheries were underutilized in the United States. It

> Pelagic fish are those fish whose habitat is above the floor of the

ocean. Here, plaintiff was going to fish for two pelagic species, Atlantic

herring, and Atlantic mackerel.

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reasoned that due to a lack of economies of scale, the smaller

American vessels fishing in the western Atlantic could not

compete with the European vessels in terms of quality,

transportation and marketing. The study concluded that

larger fishing vessels would offer economies of scale and

allow the United States Atlantic mackerel industry to

compete internationally.

Capt. Michael Genovese testified for defendant. He

captains a fishing vessel, the White Dove Too, in the western

Atlantic. He took the view that the ITC studies were overly

optimistic, based on his own difficulty locating mackerel.

Capt. Genovese reasoned that mackerel were not present,

because he often could not find fish. Additionally, he

intimated that the government statistics were based on data

which was inaccurately gathered. Neither he nor any other

government witness furnished any details or explanation of

these purported inaccuracies. The court gives little weight to

his suspicions. He displayed a firm conviction that it would

be impossible to fish in any manner better than the traditional

one already employed off of the East Coast. Yet, Capt.

Genovese showed a complete lack of knowledge about

vessels of the same size and capacity as the Atlantic Star. He

made no attempt to conceal his personal opposition to new

vessels coming into East Coast waters. We accept the

accuracy of the NMFS and ITC data.

Harold Torgersen acknowledged that some of those

fishing on the East Coast may not have been able to find

herring and mackerel readily. He attributed these difficulties

to problems other than the lack of fish, however. He

explained that herring are usually widely distributed and can

be difficult to find. Advanced methods of targeting and

capturing the fish would eliminate most difficulties. Mr.

Torgersen also explained that mackerel swim much faster

than the cod or haddock normally caught along the East

Coast. The Atlantic Star was to be outfitted with the best

i Sa tl tek A i ee Dates

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sonar and finding equipment available.“ Such a vessel, with

substantially more horsepower than those vessels already

operating off the East Coast, would be necessary to catch

enough Atlantic herring and mackerel to compete with the

European industry.

Mr. Torgersen also explained that in order to be

profitable in the herring and mackerel industry, a vessel

would need to be capable of staying out at sea for long

periods of time. This would enable the vessel to stay with

the fish as they moved, eliminating the need to continually

relocate the schools of fish. He noted, however, that it was

common practice for the smaller East Coast vessels to return

to shore as soon as their relatively small storage tanks

became full. This disruption made the fish more difficult to

relocate. The court finds the explanations given by plaintiff's

witnesses to be more plausible than Capt. Genovese’s

unsupported assertions. We conclude that there were ample

stocks of mackerel and herring in the western Atlantic. “As

explained more fully below, the Atlantic Star was uniquely

well suited to find and catch them.

b. Financing and Marketing

After examining the ITC studies, Mrs. Torgersen

investigated whether there would be a market into which she

could sell East Coast mackerel and herring. While employed

at BFI, she had established a thriving niche market for atka

mackerel in Japan. Capitalizing on her strong ties to the

Japanese buyers, Mrs. Torgersen sent samples of mackerel to

The Atlantic Star was equipped with sonar that could find

herring within 4,000 meters and mackerel within 2,000 meters.

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three Japanese companies with whom she had done business

previously. Each sent back an enthusiastic letter expressing

their desire to purchase large quantities of Atlantic herring

and mackerel. Mrs. Torgersen was also confident, based on

her previous experience selling pollack with roe that she

could cultivate a market for herring with roe among Japanese

buyers. The court is persuaded that Mrs. Torgersen could

have developed a market for herring, herring with roe and

mackerel from the western Atlantic in Japan, as well as other

markets.

Mrs. Torgersen then sought financing for a vessel to fish

in the western Atlantic. Bryggens, an investment brokerage

company, aided Mrs. Torgersen in her search. Initially, a

plan was drawn up for the Atlantic Star to be a mother ship.

However, plaintiff was unable to obtain financing for the

vessel on that basis Investors did not think that the project

would offer sufficient economies of scale to make the

venture profitable. APFC changed its plans and began to

seek financing for a vessel which would both catch and

freeze its own fish in the western Atlantic.° APFC attempted

to find financing for the vessel as a freezer trawler without

updating the “mother ship” business plan provided by

Bryggens.

* A mother ship is a processing ship which does not catch its own

fish. Instead, smaller vessels actually catch fish, which are then pumped

onto the processing vessel. Once the mother ship processes the fish they

are shipped to the final destination.

* This type of vessel is known as a freezer trawler. A freezer

trawler has the capacity to catch all its own fish. The fish are then frozen,

or processed, on board the vessel. After the fish are processed, they are

offloaded to be shipped to their final destination.

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Mrs. Torgersen was president and sole shareholder of

Atlantic Star Fishing Company (“ASFC”). ASFC was

formed in November of 1996 for ease of financing the

purchase of a vessel designed solely for the Atlantic fishery.

Mrs. Torgersen was also the president, secretary and majority

shareholder of Pelagic Management Inc. (“PMI”), which was

formed to manage the vessel ASFC purchased. Initially,

ASFC and PMI joined as partners in APFC, with PMI as the

general partner and ASFC as a limited partner. ASFC and

PMI were then joined in APFC by Dutch partners, American

Pelagic Combination, V.O.F., as APFC sought additional

financing for its venture. American Pelagic Combination,

V.O.F., owned by Parlevliet and Van der Plas, gained a 49%

interest in APFC.’ APFC eventually obtained financing from

ING Bank in The Netherlands to purchase an existing vessel

and convert it into a high volume mackerel and herring

trawler. APFC was the corporate entity which purchased the

Atlantic Star.

7 American Pelagic Combination, V.O.F. would later withdraw

from APFC when the Atlantic Star was sold to Parlevliet and Van der

Plas.

* As a condition to gain financing, plaintiff obtained a $23 million

political risk insurance policy from Lloyd’s of London. The premium for

the insurance policy was $290,000. Mrs. Torgersen testified that plaintiff

did not receive any proceeds from this policy. The policy provided

coverage, in part, “in the event that ‘any of the permissions are revoked,

cancelled or not renewed * * *” Directly as a result of: (i) a Change in

Law (as defined herein) and/or (ii) any change to the Open Access Policy

relating to the Herring and/or Mackerel Fisheries in the North East

Region * * *.” Instead, lenders with mortgages on the Atlantic Star

received a payment from Lloyd’s of London in a settlement.

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2. Facilities of the Atlantic Star

Upon securing financing for the venture, plaintiff sought

a United States hull for purchase. Procuring an existing

United States hull was necessary in order to receive the

appropriate U.S. flag, as well as any U.S. fishing licenses.

Plaintiff purchased a vessel, which was then named Apollo II,

for $1.7 million. At the time of purchase, the Apollo IT was

outfitted as an incinerator ship. APFC determined that the

vessel] was large enough to convert to a freezer trawler.

Plaintiff concluded that the cheapest and fastest way to outfit

the vessel for pelagic fishing in the western Atlantic was to

have it towed to Norway and overhauled.

a. Outfitting the Atlantic Star

Mrs. Torgersen ensured that there was enough capacity to

achieve profitable economies of scale when choosing fishing

and freezing equipment. Additionally, APFC took great care

to outfit the Atlantic Star with the best, most appropriate

equipment for the East Coast herring and mackerel fisheries.

The vessel was designed and outfitted as a high volume

herring and mackerel trawler.

Capt. Robert Hempstead testified for plaintiff. Capt.

Hempstead was the former captain of the Atlantic Star during

the time that it fished in Mauritanian waters. Capt.

Hempstead has been employed in the maritime industry since

1973, serving as captain, first mate and first officer on a

variety of vessels. Capt. Hempstead showed comprehensive

knowledge of vessels of the same size and capacity as the

Atlantic Star, as well as the fishing industry in general. In

particular he had a detailed understanding of the outfitting of

the Atlantic Star. The court found Capt. Hempstead to be a

highly reliable witness. He explained that the vessel was

“purpose-built” for the East Coast fishery.

The Atlantic Star was outfitted with a single, large net,

approximately 369 feet in length. It was attached to the boat

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by lines about 1000 meters long. The net was held open by

two large steel doors attached to the back of the Atlantic Star,

known as trawl doors. It could safely hold 400 to 500 metric

tons of fish in what is known as the “codend.” Capt.

Hempstead testified that the boat could, in one five hour tow,

catch at least 300 tons of fish. If it had been allowed to fish

in United States waters, APFC would have outfitted the

Atlantic Star’s net with a sorting grid. The grid would have

allowed smaller fish to escape, enabling the Atlantic Star to

consistently catch a larger size of herring and mackerel.

The Atlantic Star had two engines with a total of more

than 13,000 horsepower, far in excess of other pelagic

trawlers on the East Coast. Almost 7,000 of this horsepower

ran the generators for the freezing plant. The remaining

horsepower was used to propel the ship. Plaintiff's witnesses

testified that horsepower is extremely important when

considering how much fish a particular vessel could catch, in

part because the net of a vessel is designed around its

horsepower. Capt. Hempstead explained that a vessel with

more horsepower could tow a bigger net with bigger trawl

doors at a higher rate of speed. High speed is important

when catching mackerel, because the vessel must be able to

keep up with the fish. A larger net and greater speed would,

therefore, lead to more fish caught.

Mr. Arne Uhlen, plaintiff's expert on processing plants,

testified that the Atlantic Star was outfitted with the best

freezing equipment available, possibly better than any other

ship at that time. He oversaw the operation of the Atlantic

Star’s processing plant during the time it fished in

Mauritania. Mr. Uhlen has worked in the fish processing

industry since the late 1970s, and displayed extensive

knowledge about the industry. The court finds his testimony

highly credible. He took pains to make his testimony

accurate. Mr. Uhlen knowledge on the subject of processing

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was obviously based on extensive technical understanding, as

well as personal experience.

Mr. Uhlen described the processing plan of the Atlantic

Star as follows. Once caught, the fish were pumped on

board, as opposed to hoisted onto the deck still in the net.’

The Atlantic Star could pump 300 tons of fish into the hull in

a matter of minutes. As the fish were pumped aboard they

were sent through a dewatering tank. The fish were then

pumped into the refrigerated seawater tanks (“RSW tanks”).

The vessel was outfitted with six RSW tanks. Each tank

could hold up to 150 metric tons of fish. As with the fishing

equipment, plaintiff incurred extra expense to purchase the

maximum freezing capacity for the Atlantic Star. Once in the

RSW tanks, chilled sea water was used to cool the fish. After

they were cooled, the fish were pumped through a sorting

machine.

The sorting machine, consisting of a system of rollers,

would separate the fish into different sizes and send them

into bins filled with chilled water.'° After the fish were

sorted according to size, they were pumped through a tube

and into plate freezers. Once inside the freezers, the fish

were frozen into solid blocks. The frozen blocks then

® Pumping on board was safer, as the stability of the vessel was

not jeopardized by a large net of fish coming on board. Additionally, the

fish would remain alive longer while in the codend, instead of being

crushed by other fish if brought on deck in the net.

'0 Although the vessel ultimately never fished for herring, the court

found the testimony of Ms. Torgersen, Mr. Torgersen and Mr. Uhlen

highly credible that the sorting machines were sophisticated enough to

sort herring with roe from herring without roe.

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traveled along a conveyor belt to machines which placed the

blocks in cartons and strapped the cartons shut. Workers

would then stack the cartons on wooden pallets.

The plan put forward by plaintiff is not a mere

speculation. As explained infra, although the vessel was

barred from United States waters, efforts were made to fish

elsewhere. The Atlantic Star fished in Mauritania, the only

fishery available without causing the loss of its status as an

American-flagged vessel. Mrs. Torgersen put the mechanics

of this plan for the ship fully into operation when it was in

Mauritania."

b. Plans to Offload at Sea

APFC intended to offload 90% of its frozen fish at sea.

This approach was more profitable than going to- shore to

offload because the vessel would be able to stay at sea,

eliminating transit and searching time. The ship was

outfitted with everything necessary to remain at sea for

months at a time. The Atlantic Star had two custom-made

cranes. They were designed to lift eight tons and intended to

aid the vessel in offloading in whatever weather conditions

the vessel might face. The ship carried sufficient fuel, food

and parts for an extended trip, and could have been re-

equipped by other ships. Further, Capt. Hempstead testified

that weather would not play a significant role in the ability of

the Atlantic Star to fish or remain at sea.'* The Atlantic Star

'! Plaintiff provided the court with a DVD containing a tour of the

vessel as it operated in Mauritania.

'2 In fact, Hempstead testified that in the Baltic Sea, a trip

discussed infra, where the weather conditions are notoriously bad, the

Atlantic Star was only kept from fishing approximately half a dozen days.

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demonstrated its capacity to off-load at sea during its tour in

Mauritanian waters.

We give little credence to the contrary testimony of

Michael Love. Mr. Love was a former employee of APFC.

He was hired to aid in the effort to lobby Congress to allow

the Atlantic Star to retain its fishing permits. He later served

on the crew of the Atlantic Star in Mauritania. Mr. Love

returned home to the East Coast after the first fishing trip and

was not recalled to the Atlantic Star. Mr. Love’s courtroom

demeanor made his unfavorable views of plaintiff clear.'°

Furthermore, it was apparent to the court that Mr. Love had

no knowledge of plaintiff's initial business plans, prior to

meetings with Congress. Mr. Love testified that he was not

present for the initial discussions regarding financing or

choice of equipment. Thus, any knowledge about whether

plaintiff intended to off load at sea came only after plaintiff

was making concessions in an effort to appease members of

Congress. The court finds his testimony unreliable. We

therefore find that plaintiff intended to offload 90% of its

cargo to tramper vessels at sea.'*

'3 Defendant attempted to show that Mr. Love was a part owner in

the Atlantic Star, in order to show that he was qualified to testify

regarding the value of the business. However, Mr. Love held, at most, a

de minimus interest, for which he never paid. The court, therefore, does

not rely on Mr. Love’s testimony with respect to APFC’s value.

7 - tramper vessel is a commercial fishing vessel which transports

cargo whenever it is hired to do so.

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3. Atlantic Star Precluded from Fishing in United States

Waters

While the Atlantic Star was being overhauled in Norway,

at a cost of approximately $34 million, plaintiff applied for

and obtained all necessary fishing permits.'* The permits

were reissued to the vessel on April 8, 1997 and April 12,

1997. In November 1997, as the Atlantic Star was poised to

begin fishing, its permits were retroactively voided. At the

same time, APFC was prospectively barred from obtaining

new permits.'° The details of the permitting process and

'S In order to fish for, possess, or land Atlantic mackerel in the

Exclusive Economic Zone of the United States, plaintiff was required to

apply for a permit under 50 C.F.R. § 648.4(a)(5). Because incidental by-

catch of nonregulated species was possible, plaintiff applied for a

Northeast Multispecies (Nonregulated) permit under 50 C.F.R. §

648.4(e)(1). Plaintiff requested an authorization letter from the Regional

Administrator in the Gulf of Maine/Georges Bank Regulated Area for

plaintiff's net, because the mesh size necessary for herring and mackerel

was smaller than normally required by 50 C.F.R. § 648.80(d). The

Northeast Regional Office of NMFS issued the following permits on

February 5, 1997:

1. Federal Fisheries Permit # 610018, for Atlantic mackerel and

Illex squid and for incidental Loligo squid and butterfish, with an

expiration date of December 31, 1997.

2. Federal Fisheries Permit # 610018, for Northeast Multispecies

(Nonregulated), with an expiration date of April 30, 1998.

Justice, and State, the Judiciary and Related Agencies Appropriations

Act, 1998, Pub.L. 105-119, 111 Stat 2440 (1997) (“1997 Appropriations

Act”), which had the initial effect of revoking plaintiff's permits and

barring their reissuance for one year. An identical provision was enacted

on October 21, 1998 as section 617 of the Department of Commerce,

(cont'd)

86a

subsequent loss of the permits are discussed in greater depth

in American Pelagic I, 49 Fed.Cl. at 40.

4. Trips Made by the Atlantic Star

a. Baltic Sea trip

Mrs. Torgersen testified that she tried to put the vessel to

some use during what she hoped would be a temporary

moratorium after passage of the 1997 Appropriations Act.

She took the Atlantic Star to the Baltic Sea to participate in a

research project. The Atlantic Star did none of its own

fishing, but operated as a mother ship, processing fish from

catching vessels. The vessel only remained in the Baltic Sea

for a few months, because the venture was not profitable.

b. Mauritania trip.

Plaintiff was able to utilize the Atlantic Star as a fishing

and processing vessel for the first time off the coast of

Mauritania, in west Africa. Mauritania does not have a

fishing fleet of its own and it imposes no restrictions on

foreign flagged vessels. Instead, vessels must simply

purchase fishing permits. The Atlantic Star thus was able to

purchase fishing rights while maintaining its status as a

United States flagged vessel.

Justice, and State, the Judiciary and Related Agencies Appropriations

Act, 1999, Pub.L. 105-277, 112 Stat. 2681 (1998) (“1998 Appropriations

Act”). Plaintiff was permanently barred from obtaining herring and

mackerel permits by § 3025 of the 1999 Emergency Supplemental

Appropriations Act, Pub.L. 106-31, 113 Stat. 57 (“1999 Appropriations

Act”).

87a

The equipment aboard the Atlantic Star performed

exactly as expected in Mauritania.'? The best day of

processing for the Atlantic Star was 14,872 blocks or

approximately 342 metric tons in one day.'® Within one

month, the ship was performing better than any other ship in

Mauritania. However, the lack of consistent quantities of fish

precluded the vessel from processing at its full capacity.

Thus, the Atlantic Star was unable to produce to its highest

level of 340 metric tons per day, nor at the rate of 250 metric

tons plaintiff proposes here, on a regular basis.

Not only was the Atlantic Star plagued by a lack of fish,

Mauritanian waters posed unique problems for processing.

The temperature both of the sea water and the fish in

Mauritania was significantly warmer than it would have been

in the western Atlantic. It took longer to chill the fish in the

RSW tanks, and longer to freeze them in plate freezers.

Mr. Uhlen testified that, in contrast, the water temperature on

the East Coast of the United States would have been perfect

'7 Arnie Uhlen did discuss some minor problems with a strapping

machine, which was used to close the cartons containing frozen blocks of

fish. He acknowledged that for a time only two machines worked.

However, the machines were promptly fixed.

'8 The figure 342 metric tons represents 14,872 blocks, multiplied

by 23 kilograms. Plaintiff explained that while in Mauritania it packaged

up to 23 or 24 kilograms of fish into each carton. These cartons would

normally hold 20 kilograms. Plaintiff explained that the fish from

Mauritania are often bound to west African markets where weight scales

are not available. Therefore, the cartons are packed full so that the buyer

knows that it has not been cheated. Plaintiff explained that full packing

was possible because there was no reporting regime in Mauritania, which

would have required accounting for the extra kilograms of fish.

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for the processing system of the Aflantic Star, especially in

wintertime. Although the conditions were not ideal in

Mauritania, Capt. Hempstead testified that the experience in

Mauritania showed that the Atlantic Star could have operated

extremely well in the western Atlantic.

Plaintiff lost money during its time in Mauritania despite

the fact that it outfished every other vessel. Mauritanian

waters simply did not offer enough fish for a long enough

period of time to allow the Atlantic Star to be profitable.

Other boats were able to supplement their catch by fishing

during prime season in Mauritania, but then spending the rest

of the year in European waters. The Atlantic Star was

, prohibited from doing the same because it could not fish in

European waters. By April 1999, APFC was operating at a

loss, and behind on payments. Suppliers were considering

arresting the vessel due to the nonpayment of invoices.

Attempts to secure additional financing by APFC were

unsuccessful. After considering and rejecting Chapter 11

bankruptcy, the partners of APFC, Parlevliet and Van der

Plas, agreed to take over both the payment of bills and the

revenue of the Atlantic Star. Parlevliet and Van der Plas

eventually purchased the Atlantic Star from APFC on July 6,

1999.'° From April until July, APFC continued to pay

corporate expenses, but Parlevliet and Van der Plas assumed

the revenues and expenses for the vessel.

'9 Plaintiff recorded a gain on the sale of the vessel. Ms. Wendy

Visconty, plaintiff's accounting expert, explained that this gain resulted

from the difference between removing the vessel from the books and the

liabilities associated with the vessel from the books. The gain was not,

according to Ms. Visconty, a cash gain to plaintiff.

89a

5. Other Profitable Options not Open to Plaintiff

a. Alternative Fishing Options

Defendant intimates that plaintiff could have fished for

herring alone, since permits were not required for herring in

the western Atlantic. Mrs. Torgersen testified that mackerel

is an inevitable by-catch when fishing for herring.”

Defendant concedes that a permit is required just to possess

mackerel. The 1997 Appropriations Act an

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