Petition for Writ of Certiorari — Carlson, Individually and on Behalf of All Others Similarly Situated v. Alaska Commercial Fisheries Entry Commission
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O02 73 Ju 11 208
Supreme Court of the Anited States
DONALD H. CARLSON, WARREN HART, GERARD HASKINS,
STEPHEN R. LIBBY, EARL WEESE, AND LYLA C. WEESE,
INDIVIDUALLY AND AS CLASS REPRESENTATIVES ON BEHALF
OF ALL PERSONS SIMILARLY SITUATED,
- Petitioners,
V.
STATE OF ALASKA, COMMERCIAL
. FISHERIES ENTRY COMMISSION,
Respondent.
On Petition for Writ of Certiorari
to the Supreme Court of Alaska
PETITION FOR A WRIT OF CERTIORARI
LOREN DOMKE BETH HEIFETZ
LOREN DOMKE, P.C. GREGORY A. CASTANIAS
2201 North Jordan Avenue (Counsel of Record)
Juneau, Alaska 99801 JULIA C. AMBROSE
(907) 790-2844 JONES DAY
51 Louisiana Avenue, N.W.
Washington, D.C. 20001
(202) 879-3939
Counsel for Petitioners
QUESTIONS PRESENTED
1. Whether the Alaska Supreme Court erred in holding
that only the Privileges and Immunities Clause, and nor the
Commerce Clause, is implicated by Alaska’s imposition of
fees on nonresident commercial fishermen that are three
times greater than those imposed on resident commercial
fishermen.
2. Whether the Aiaska Supreme Court erred in holding
that the constitutional limits on “compensatory” taxes under
the Commerce Clause do not apply to allegedly
compensating taxes under the Privileges and Immunities
Clause, thereby permitting Alaska to impose on nonresident
commercial fishermen the general costs of state government.
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PARTIES TO THE PROCEEDINGS
Other than the unnamed members of the plaintiff class, all
of whom are individual commercial fishermen who are not
residents of Alaska, there are no petitioners or respondents in
addition to those named in the caption.
iil
TABLE OF CONTENTS
Page
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PETITION FOR A WRIT OF CERTIORARI..............0..0000. I
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CONSTITUTIONAL AND STATUTORY
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1. The Alaskan License and Permit Tax
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REASONS FOR GRANTING THE WRIT...................0008 9
I. ©THE DECISION BELOW CONFLICTS WITH
COMMERCE CLAUSE DECISIONS OF
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A. The Commerce Clause Applies Because
Nonresident Commercial Fishermen Are
Engaged In Interstate Commerce.....................05: 1]
B. The Commerce Clause Applies To
Discrimination Based On Residency.................. 14
II. THE DECISION BELOW AUTHORIZES
DISCRIMINATION THAT NONE OF THIS
COURT’S DECISIONS WOULD
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A. The Carlson Formula Authorizes A
Compensatory Tax That Would Violate
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TABLE OF CONTENTS
(Continued)
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B. The Carlson Formula Sanctions A
Discriminatory Fee That Toomer Does Not
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Il. THE DECISION BELOW RAISES
SIGNIFICANT CONSTITUTIONAL
QUESTIONS WITH NATIONWIDE
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TABLE OF AUTHORITIES
Page
Case
Alaska v. Arctic Maid, 366 U.S. 199 (1961) ..cccecccccccccccecceeee 2
Allenberg Cotton Co. v. Pittman, 419 U.S. 20 (1974)....... 12
Anderson v. Mullaney, 191 F.2d 123 (9th Cir.
1951), aff'd, 342 U.S. 415 (1952)... eee 16,21, 27
Armco Inc. v. Hardesty, 467 U.S. 638 (1984).......c0.000. 19,21
Baldwin v. Fish & Game Comm'n of Montana,
IP SEA. B78 Ce icsecicicennnadaaiea ss 13, 15
Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827)........ 14
Camps Newfound/Owatonna, Inc. v. Town of
Harrison, 520 U.S. 564 (1997) .0......cecccesceeeeee 8,9, 11, 12
Carlson v. State of Alaska, 798 P.2d 1269
EEE ON Te TEN 1,4, >, ae
Carlson v. State of Alaska, 919 P.2d 1337
CRI Se eiiciciitencines ae erie cee passim
Carlson v. Alaska Commercial Fisheries Entry
Comme ‘nt, 519 U.S. 1101 (1997). .....cc0ccserscorvsveccsovesseceeves 8
Commonwealth Edisen Co. v. Montana, 453 U.S.
Fe CA Privsheisintaepranindaan ae ee 13
Complete Auto Transit, Inc. v. Brady,
Te Se eT Pe iccint dinate 13,18
Douglas v. Seacoast Prod., Inc., 431 U.S. 265 (1977)... 12
Edwards v. California, 314 U.S. 160 (1941) w..cccccecccecseees 1]
Fulton Corp. v. Faulkner, 516 U.S. 325 (1996).......... passim
Gov't Suppliers Consolidating Servs., Inc. v. Bayh,
Fie Tae CET Ce Ce SO cicbiinnma ee 19
H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525
NI Hic iccicconiicinlesshecbidaseadonnseudiesmesdbiditta: tata nae 12
Heisler v. Thomas Colliery Co., 260 U.S. 245 (1922)....... 13
Henneford v. Silas Mason Co., 300 U.S. 577
STIS Reitiinscinuscneiigiananinunbiattiasi alia ne nea 19, 21
Hicklin v. Orbeck, 437 U.S. 518 (1978).......00.. 12, 15, 16, 27
Hillside Dairy, Inc. v. Lyons, 123 S. Ct. 2142
CD ss ccssinticciuceiivapenvibssiuateiien aphedaniiaaanea ieee: 16
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Page
Hope Natural Gas Co. v. Hall, 274 U.S. 284
SFE FP nadsnsiiehstosscinnncesseniaceeainaniddatinalieasemsianieanainbemmenmannll 13
Mullaney v. Anderson, 342 U.S. 415 (1952).......... 16, 26, 27
Oliver Iron Mining Co. v. Lord, 262 U.S. 172 (1923)....... 13
Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality,
DEE Cr otix Fe Eo ee iristonseinsvndescinitaeetiantvacsincsectaanentl passim
Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869),
overruled in part on other grounds, United States
v. South-Eastern Underwriters Ass'n, 322 U.S.
FID CEP ccusicsescieinitesensncsiniiaeaaeininbaaeiaviamacmeaammnsael 17
Pharm. Research & Mfrs. of Am. v. Walsh,
LoD Wie: RRs. ACID CU Divokcesotlecnnissnasbiseciasdsaciiemsatalicmanbidaiaal 14
Sheley v. Alaska Bar Asz’n, 620 P.2d 640 (Alaska
SSID P svoxcesecsisesnsesersbbsenasennaceunsionensstdaselidancnliosemuanisesiamamenal 27
Sosna V. Fowa, 419 U.S. SHS CUS 73) oserescoveccsescessrccesoncsoscoes 15
State of Alaska v. Carlson, 65 P.3d 851 (Alaska
PTS} nvinreecrensneinscnicbiaaiaianadaaaaianiaee passim
Supreme Court of New Hampshire v. Piper,
STO US. £79 Ua iiisiseeiaiiaintcnnidadenming 16
Toomer v. Witsell, 334 U.S. 385 (1948)... passim
United Bldg. & Constr. Trades Council v. Mayor &
Council of Camden, 465 U.S. 208 (1984)................ 15, 16
Walling v. Michigan, 116 U.S. 446 (1886) ..................00008 14
Ward v. Maryland, 79 U.S. (12 Wall.) 418 (1870)............ 15
LOG V. Wittiames, 4ST UB. SSD CEB e picsevvsccessevecceceseeeseecove 28
Statutes
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20 UA... | Uke Fel dndgcnninisieimaaeadiaame I
Aim. Cae § Da 1 2B. cescrceceveserecesnsessis scndneselpicapiepalanicaalaeiiaieaii 28
Alaska Admin. Code tit. 20, § 05.240.................csssssssesseeeees 4
Adee DR. TR, 0G, FBR. Gaiancinniincnmiccinonananan 2
ASRERIMSUIR, § BGG i recnccerscsessicuiccemnncnamionia 2, 3,4
Asmeee GRRE: 6 BGS. BOD vesnisticassarvimasieninninnaians 2
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Alaska Stat. § 16.43.020........ccccccsccscscesscssesecesseeceesecececeecec.. 2
Alaska Stat. § 16.43.100(a) .....ccccccccccsccsccsceecerececececeececeeeen. 2
Alaska Stat. § 16.43.160....0.cccccccccccccccsecccoccoeeeceeceeee. 3, 4. 25
Alaska Stat. § 16.43.160(€) .....eccccccccccccccccsceccececeececeececece. 3,4
Alaska Stat. § 43.75.015.......ccccccsscscsscssssssecsesesecsceesecesecce., 25
Alaska Stat.§ 43.75.130.......cccccccscsssscssssesecsesececseceseceecece., 25
Code Ark. R. 002 00 001 41.13 .oocccccccccccccccececececesececececcceee. 28
Cal. Fish & Game Code § 7852 oooccceccccccccccccecececceeeeeceeecccee, 28
Conn. Gen. Stat. § 26-1428 (C)...cccccccccccccsesecsesesecececeeeececece. 28
Del. Code Ann. tit. 7 § 914 .occccccccccccccceececeseeeececsesececccn, 28
Fla. Stat. Ann. § 370.06(2).......cccccccccccsecseccesecececcececeececccn. 28
X50, Coe Asam. § 27-2-23 ...ccecccccerscceccocsssesnccecesareseseseeseee.. 28
MMS COGS § BGG 1G ces cceceessccveccvsnesesscenesereseceseceeeseees, 28
S15 Tl. Comp. Stat. 5/20-45.00.. cc cccccccccsscscccccosesesececceseces, 28
Ind. Code Ann. § 14-22-14-6......cccccccccccccsececcoceseceeeecececcece. 28
cnthtipestie ce Lee ig LE, 28
Kan. Admin. Regs. § 115-21 ooccccccccccceccccscessesececececeeeeces, 28
301 Ky. Admin. Regs. 3:022..........ccccccccccoseccesecececeeceeeecece., 29
La. Rev. Stat. Ann. § 56:303..0.......cccccccccccocescocececeeceesecee... 29
Md. Code Ann., Natural Resources § 4-701 .occceccccccccceceee-. 29
Me. Rev. Stat. Ann. tit. 12, § 650] ......ccccccccccccccscccoccecceceees. 29
Mich. Comp. Laws § 324.47330(2) cocccccccccccecceceeeccoceeeeceec.. 29
Minn. Stat. Ann. §§ 974.461, 475 vo.cccccccccccceccccecesccceeee. ar
Miss. Code Ann. §§ 49-15-80, 49-15-30 .....ccccccccccccc----. 29
Mo. Code Regs. tit. 3, § 10-10.720 ....ccccccccccccsssescscseececeeeees 29
N.C. Gen. Stat. § 113-168.2 0.0... cccccccccccccesccseseceseoseceeeeses, 29
N.D. Cent. Code, § 20.1-03-12 oo.c.cccccccccccccccececececcececeececees, 29
N.J. Stat. Arn. § 23:5-24.2..0oocccccccccssssscsccecesececcececoccesees, 29
Neb. Rev. Stat. § 37-4, 104 o.o....ccccccccccccccccecessesessececseeees.. 29
Okla. Stat. Ann. tit. 29, § 4-103 ooocccccccccccccecccsececcccececeeceeee, 29
| RE SA. TIMUR. 1 SEA wsncrnecncenceerenrcinsnsnrnnemnaeessmenesantesencs: 29
: Fe PO, COMID, TARE. GB ZOD occas csexsisevecccecrcessesressencsreceeseece cc 29
R.I. Gen. Laws §§ 20-2.1-5, 20-2.1-6....cccccccccccccsssecececececes 29
S.C. Code Ann. §§ 50-5-300, 50-5-3 10 .oceccccccccececececececeees. 29
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pO FO 8 eee 29
Pe rs FR, Gee 0 ee iertnteeninilasicntsenninnceimninnien 29
4 Va. Admin. Code §§ 20-730-20, 20-920-30................... 29
Wash. Rev. Code Ann. §§ 77.65.160, 77.65.200............... 29
es is eee EE F cnkiiccnstcccinrnvicstntennnsiaacsanneseeuniinel 30
Miscellaneous
Commercial Fisheries Entry Comm’n, 2001 Annual
ET OW
National Oceanic and Atmospheric Administration,
Fisheries of the United States (2001) .............ccceeceeeeeee es 27
fe ee De eee ae ee eee
PETITION FOR A WRIT OF CERTIORARI
Donald H. Carlson, Warren Hart, Gerard Haskins,
Stephen R. Libby, Earl Weese, and Lyla C. Weese,
individually and as class representatives on behalf of all
persons similarly situated (“Petitioners’’), respectfully
petition for a writ of certiorari to review the judgment of the
Supreme Court of Alaska in this case.
OPINIONS BELOW
The opinions of the Supreme Court of Alaska are reported
as follows: State of Alaska v. Carison (Carlson IIT), 65 P.3d
851 (Alaska 2003) (App. la-52a); Carlson v. State of Alaska
(Carlson IT), 919 P.2d 1337 (Alaska 1996) (App. 56a-82a);
and Carlson v. State of Alaska (Carlson 1), 798 P.2d 1269
(Alaska 1990) (App. 88a-112a). The unreported final orders
of the Superior Court of the State of Alaska are reproduced
in the Appendix to this Petition as follows: “Findings of
Fact and Law” (August 8, 2000) (App. 53a-55a): “Decision
and Final Order on Reconsideration of the Court’s August
12, 1993 Order and Final Decision Granting the State’s
Motion for Summary Judgment” (July 25, 1994) (App. 83a-
87a); “Final Order” (Feb. 21, 1989) (App. 1 13a).
JURISDICTION
The Supreme Court of Alaska entered its judgment on
March 14, 2003. On June 5, 2003, Justice O’Connor granted
Petitioners’ application to extend the time in which to file the
petition for writ of certiorari to and including July 12, 2003.
This Court’s jurisdiction is invoked under 28 U.S.C
§ 1257(a).
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
The relevant constitutional and Statutory provisions are
located in the Appendix to this Petition at App. 114a-126a.
STATEMENT
The case presents important questions as to whether,
consistent with the Commerce Clause and the Privileges and
2
Immunities Clause, Alaska may discriminate against
nonresident commercial fishermen by charging them three
times the licensing and permitting fees it charges resident
commercial fishermen for access to the State’s fisheries.
The Supreme Court of Alaska analyzed the fee differential
under the Privileges and Immunities Clause but concluded
that the Commerce Clause has no application to the State’s
commercial-fishing-license scheme. The Alaska court’s
analysis led it to endorse under the Privileges and
Immunities Clause a facially discriminatory fee that would
be invalidated under this Court’s long-standing Commerce
Clause and compensatory-tax jurisprudence.
1. The Alaskan License and Permit Tax Schemes.
Because Alaska controls the waters within three miles of its
shore,! the state has the power to impose licensing and
permitting fees for access to its fisheries. See Alaska v.
Arctic Maid, 366 U.S. 199, 203 (1961); Toomer v. Witsell,
334 U.S. 385, 393 (1948); Alaska Stat. §16.43.100(a)(18).
Fishermen seeking to operate fishing gear in the most
intensively used Alaska commercial fisheries must purchase
a limited entry permit.> Alaska Stat. § 16.43.140(a). A
crewman working on the vessel of a gear license operator
does not need a permit but must purchase a commercial
fishing license. Alaska Stat. § 16.05.480 (App. 115a-117a).
See 16 U.S.C. § 5102(6) (establishing an “Exclusive Economic Zone”
(EEZ) in the area running three nautical miles to 200 nautical miles from
shore; waters within the EEZ are, in general, regulated by the federal
government, while the area from the shore out to three nautical miles is
generally regulated by the states).
The limited entry permit program is designed to maintain the
“stability” of Alaska’s fisheries resources by “regulating and controlling
entry” into its commercial fisheries. See Title 16, Art. 43, Alaska Stat.;
Commercial Fisheries Entry Comm’n, 2001 Annual Report at 1,
available at http://www.cfec.state.ak.us/annrpts/ar2001.pdf. Respondent
Commercial Fisheries Entry Commission (“CFEC”) is the regulatory
body created to manage that program. Alaska Stat., § 16.43.020.
2a a ee er ea ea...
: 7 ,
Until 2001, a nonresident permit holder or nonresident
crewman paid three times the fee residents paid. App. 117a,
22a. In actual dollars, residents annually paid between $50
and $250 for limited entry permits; nonresidents paid $150 to
$750 for the same permit. App. 122a. Nonresidents
therefore were required to pay as much as $500 more than
residents for the same permit, year after year. Resident
crewmen were charged $30 for a commercial license, while
nonresidents paid $90 for the same license. App. 117a.
Beginning in 2001, in response.to the Carlson decisions,
Alaska amended its statutes to equalize resident and
nonresident permit and license fees, setting a uniform “base
fee” but continuing to impose a surcharge on all
nonresidents, both permit holders and crewmen, a fee
differential based solely on their nonresident status. Alaska
Stat. §§ 16.05.480(h), 16.43.160(e) (App. 116a, 118a).* This
differential is calculated from a formula first advanced in
Carlson II. Based on Alaska’s discovery responses,
petitioners estimate that the nonresident surcharge under the
Carlson II formula will vary between $150 and $200
annually, and could be significantly higher, depending on
how the state defines its fisheries costs under the formula.
As a result of this case, the state amended Section 16.05.480 to
provide that a resident adult will be charged $60 for a crewmember
fishing license, while a nonresident must pay “$60 plus an amount,
established by the [Commercial Fisheries Entry Commission] by
regulation, that is as close as is practicable to the maximum allowed by
law.” Alaska Stat. §16.05.480(g)-(h) (App. 116a). The “maximum
allowed by law” refers to the fee differential formula approved by the
Alaska courts in this case, discussed in detail infra. Like the commercial
fishing license fee statute, the statute governing limited entry permit fees
was similarly amended during the Carlson litigation. It now provides
that the base fee for a limited entry or interim-use permit “may not be
less than $10 or more than $300”; the fee for nonresidents ‘shall be
higher than the annual base fee by an amount, established by the [CFEC]
by regulation, that is as close as is practicable to the maximum allowed
by law.” Alaska Stat. § 16.43.160(e) (App. 118a) (emphasis added).
4
The resulting economic disadvantage to nonresident
commercial fishermen, and the adverse impact on interstate
commerce, 1s both obvious and significant.
2. The Proceedings Below. Petitioners are a class of
nonresident commercial fishermen who have been required
to pay at least three times as much as Alaska residents to
obtain fishing licenses and permits to fish in Alaska’s
territorial waters. App. la-2a, 88a-89a. In 1984, Petitioners
filed suit in Alaska Superior Court, challenging Alaska’s
discriminatory commercial-fishing-license fee statutes and
regulations, specifically Alaska Stat. §§ 16.05.480 and
16.43.160(b), and Alaska Admin. Code tit. 20, § 05.240, as
violative of the Interstate Commerce and Privileges and
Immunities Clauses of the United States Constitution. App.
2a-3a, 88a-89a. This case has now gone to the Alaska
Supreme Court three times.
Carlson I. On cross-motions for summary judgment, the
Alaska Superior Court held that both Clauses apply to the
discriminatory Alaska license scheme. The court
nonetheless found no Commerce Clause violation because
the “legitimate local purpose” of “ensuring that nonresidents
pay their fair share of [fisheries] management costs .. .
justified the discrimination, assuming the fee differential
bore a substantial relationship to the purpose.” App. 96a.
The Superior Court also found no violation of the Privileges
and Immunities Clause because the state had demonstrated a
“permissible” reason for the discriminatory fee: “to have the
non-resident [fishermen] pay a part of their fair share of the
costs of enforcement, management and conservation of the
fisheries of the state, which costs are largely borne by the
residents through general fund expenditures.” App. 95a.
The Superior Court ultimately determined that the figures
submitted by the state reflected the costs to Alaska of
managing its commercial fisheries, and that the fee
differential fairly reflected nonresidents’ “fair share” of those
costs. App. 95a-96a, 97a.
5
On appeal, the Alaska Supreme Court agreed with the
Superior Court that commercial fishing “license fees which
discriminate against non-residents are prima fucie a
violation” of the Privileges and Immunities Clause, App.
98a, but remanded for consideration of “whether all fees and
taxes which must be paid to the state by a nonresident to
enjoy the state-provided benefit are substantially equal to
those which must be paid by similarly situated residents
when the residents’ pro rata shares of state revenues to
which nonresidents make no contribution are taken into
account.” App. 105a-106a. Only if the “higher fees charged
nonresidents are excessive” in comparison to the economic
burden borne by state residents to support the state’s
fisheries would the aifferential be unconstitutional. App.
106a. Alaska residents pay no state income tax. Instead, the
majority of the state’s budget was derived from petroleum
taxes and state oil royalties. See App. 106a (for fiscal year
1986, 86 percent of state revenues derived from oil
production). The Alaska Supreme Court treated each
resident’s share of oil revenues as equivalent to a tax
payment, on the theory that revenues allocated to fisheries
management that could have been put to other uses reflect
“benefits foregone” by each resident. App. 106a.
With respect to the Commerce Clause, the Alaska
Supreme Court stated that the analysis, “assuming [the
Clause] is implicated,” would be similar to the analysis
under the Privileges and Immunities Clause. App. 103a.
The court noted that early cases from this Court “suggested
that the Commerce Clause does not come into play until the
fish are actually harvested . . . ,” although “{d]ictum in more
recent cases suggests the contrary.” App. 103a n.4. The
Alaska Supreme Court reached no firm conclusion about the
applicability of the Commerce Clause in Carlson J.
Carlson II. On remand, the parties were required to
propose a method by which to compare the fees paid by
nonresidents with the expenditures of state revenues “to
which non-residents make no contribution.” App. 59a. The
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Superior Court rejected Petitioners’ formula, which
compared each Alaska resident’s per capita contribution
toward maintaining Alaska’s commercial fisheries with the
fee differential, and instead adopted the state’s proposed
approach, which “in effect compares the total contributions
made to the cost of commercial fisheries by residents to the
total fees paid by non-residents.” App. 59a. Applying that
analysis, the Superior Court concluded that the
discriminatory fees did not violate the Constitution because
“(rjesidents pa[id] by way of taxes, or the economic
equivalent of taxes, i.e., benefits foregone, substantially
more than non-resident fishers pay toward the benefits
received....” App. 86a.
On appeal, the supreme court held that the higher license
cost for nonresidents did not implicate the Commerce
Clause. According to the court in Carlson II, harvested fish
only become articles of commerce when they cross state
lines. Because “the fee differentials at issue in this case are
not predicated upon the movement of articles of commerce
across state lines, but rather upon the residency status of
those applying for permits,” App. 62a, the court concluded
that the Commerce Clause does not apply. App. 62a-63a.
As to the Privileges and Immunities Clause, the Alaska
Supreme Court refused to apply this Court’s longstanding
“compensatory tax” jurisprudence, then most recently
articulated in Oregon Waste Systems, Inc. v. Department of
Environmental Quality of Oregon, 511 U.S. 93 (1994), in
which this Court held that the Commerce Clause does not
permit states to consider residents’ contributions to general
tax revenues as compensating for higher fees imposed on
out-of-state competitors. App. 65a. Instead, the Alaska
Supreme Court held that the Alaska fee differential “merely
balances out ‘any conservation expenditures from taxes
which only residents pay,’” a result the court found
permissible under the Privileges and Immunities Clause in
light of Toomer v. Witsell, 334 U.S. at 399. App. 66a.
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Aithvtth 6 ASANO cane
7
The Alaska Supreme Court in Carlson II approved
Petitioners’ proposed per capita formula, which had been
rejected by the trial court, and rejected the pro rata method
proposed by the state and adopted by the trial court. App.
67a-69a. The court conceded that the comparison advocated
by the state-the total fisheries-related expenditures made by
the state verses the total contribution made by nonresident
fishermen—would violate the Oregon Waste prohibition on
compensatory taxes. App. 68a & n.16. The court believed,
however, that the per capita formula avoided this problem
by comparing each Alaska resident’s individual contribution
toward fisheries management with the fee differential
assessed against each individual nonresident fisher. The
Carlson II court thus remanded the case to the Superior
Court for application of the per capita formula in order to
determine whether any nonresidents were due a partial
refund of fees paid. App. 69a."
Justice Rabinowitz dissented. App. 76a-82a. He would
have applied the compensatory tax analysis of Oregon Waste
to the Privileges and Immunities analysis of the Alaska fee
differential. App. 78a. Justice Rabinowitz explained that the
distinction drawn by the Alaska Supreme Court between the
per capita and pro rata formulae is meaningless and does
not save the discriminatory fee from invalidity under the
compensatory tax rationale: “The approach authorized by
[Carlson II] seems to place greater emphasis on the
theoretical equality of individual contributions than the
Under the per capita formula, the state’s fisheries budget is divided
by the Alaska population. That amount then is multiplied by the
percentage of the state’s budget derived from oil revenues, to determine
each *.laska resident’s per capita contribution to the management and
conservation of the state’s fisheries (by virtue of benefits foregone).
App. 72a-73a. The resulting figure is compared to the nonresident fee
differential to determine whether the differential is constitutionally
excessive. App. 69a.
8
Oregon tax did. There is, however, no indication that the
Oregon tax was designed to im,» e on out-of-state interests
their ‘entire share’ of solid waste uisposal costs nor, for that
matter, that the shares of disposers of in-state waste . . . were
to be borne by the entire population.” App. 79a n.3. And
even “[m]Jore importantly, the decision in Oregon Waste
Systems did not turn on the fact that the surcharge was
excessive but rather on the conclusion that any surcharge
was constitutionally offensive under the circumstances.” /d.
This Court denied certiorari. Carlson v. Alaska
Commercial Fisheries Entry Comm'n, 519 U.S. 1101 (1997).
Carlson III, On remand, the Alaska Superior Court held
an evidentiary hearing to determine what state expenditures
comprised the components of the formula approved by the
Carlson II court. The Superior Court adopted virtually
wholesale the state's proposed method for computing both its
annual fisheries budget and the percentage of the total state
budget derived from oil revenues for fiscal year 1996, and
accepted without further inquiry the figures supplied by the
state in making its calculations. Using the state's figures, the
court determined a maximum allowable fee differential that
could be charged to nonresidents in 1996 consistent with the
Carlson II formula, App. 53a-55a, and directed the parties to
use the court’s methodology to calculate the allowable fee
differential for each year going back to 1984. Rather than
perform this accounting, both parties appealed.
On appeal, the Alaska Supreme Court in Carlson III
declined to reconsider its Carlson I] Commerce Clause
holding, despite two then-recent decisions of this Court:
Fulton Corp. v. Faulkner, 516 U.S. 325 (1996), and Camps
Newfound/Owatonna, Inc. v. Town of Harrison, Maine, 520
U.S. 564 (1997). App. 14a-24a. Reiterating its Carlson II
reasoning, the court declared Fulton Corp. inapplicable
“because commercial fishing licenses are not objects of
interstate commerce” and because the Alaska fee
differentials “relate not to commerce but rather to the
Pel Bei BES NAB RAE, AIA iA AI HSB I 9
9
opportunity to utilize Alaska’s natural resources.” App. 20a-
21a. The court likewise distinguished Camps Newfound by
noting that this Court had likened the charitable camp there
at issue to a hotel, which the Alaska Supreme Court viewed
as “a sufficient distinction from commercial fishing licenses
and permits to allay concerns about the constitutionality of
the fee differential.” App. 22a. The court offered no further
analysis than that. In a footnote, the court declared that.
even if Alaska’s fee differential implicated the Commerce
Clause, it would nevertheless satisfy this Court’s rigorous
compensatory tax jurisprudence, citing Fulton Corp., 516
U.S. at 331. App. 21an.78. But see App. 68a & n.16.
The Alaska Supreme Court then reviewed the components
of the state’s fisheries budget approved by the Superior
Court and the calculation of the percentage of the state
budget derived from oil revenues. App. 27a-37a. The
Alaska Supreme Court found no clear error in the Superior
Court’s determination that the “direct and- indirect operating
expenditures’ calculated by the state should be included in
the fisheries budget. App. 29a. The court also agreed with
the Superior Court that categories of costs described by the
state as “general governmental expenditures” and “foregone
revenues’ from commercial fishery resources cannot be
included. App. 3la-33a, 34a-35a. However, the court
reversed the Superior Court’s determination that “capital
costs” directly supporting the commercial fishing industry
and the state’s “hatchery loan fund subsidy” should be
excluded from the fisheries budget. App. 33a-34a. Carlson
If left “to the superior court on remand to determine
whether proportionality exists [between Alaska residents’
per capita contribution as calculated by the Carlson II
formula and the fee differential imposed for a given year]
and whether a refund is due.” App. 26a.
REASONS FOR GRANTING THE WRIT
This case presents important and far-reaching questions
concerning the application and relationship of the Commerce
10
Clause and the Privileges and Immunities Clause. At issue
here are discriminatory license fees that favor state residents
over nonresidents who seek~to pursue their trade in the
licensing state, and the constitutional limitations on a state’s
ability to assess such discriminatory fees.
Alaska requires all commercial fishermen to purchase
licenses and permits to fish in Alaska’s territorial waters.
Nonresidents are required to pay at least three times as much
as residents. Despite this facially discriminatory surcharge,
the Alaska Supreme Court held that higher costs charged to
out-of-state residents for commercial fishing licenses do not
even implicate the Interstate Commerce Clause. It concluded
that Alaska’s discriminatory ccommercial-fishing-license
scheme warrants scrutiny only under the Privileges_ and
Immunities Clause, and that the overcharge of nonresidents
is permissible under that Clause so long as it does no more
than compensate the state for fisheries-related expenditures
made from revenues to which only state residents contribute.
Although it expressly refused to apply the Commerce
Clause to Alaska’s fee differential, the Alaska Supreme
Court selectively borrowed the Commerce Clause’s
“compensatory tax” doctrine to justify imposing higher fees
on nonresidents; even so, it refused to apply the rule of strict
equality that is the essence of that doctrine. See, e.g.,
Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S.
93 (1994); Fulton Corp. v. Faulkner, 516 U.S. 325 (1996).
The Carlson III holding thus invites states to justify, under
the rubric of the P*ivileges and Immunities Clause, patently
discriminatory taxes and fees imposed disproportionately on
nonresidents. If not reversed, the decision below would
sanction, under the auspices of the Privileges and Immunities
Clause, a plainly discriminatory tax on a commercial activity
that could not possibly survive scrutiny under this Court’s
Commerce Clause jurisprudence.
IRR OR NIE ERIS omit oe
11
I. THE DECISION BELOW CONFLICTS WITH
COMMERCE CLAUSE DECISIONS OF THIS
COURT
A. The Commerce Clause Applies Because Nonresi-
dent Commercial Fishermen Are Engaged In
Interstate Commerce
The Alaska Supreme Court refused to analyze the
discriminatory license-fee scheme under the Commerce
Clause based on its cramped view that the Commerce Clause
applies only to “the interstate flow of articles of commerce.”
Carlson II, 919 P.2d at 1340 (emphasis in original). The
court distinguished between fee differentials “predicated
upon the movement of articles of commerce across state
lines” and those based on “the residency status of those
applying for permits,” believing only the former to be
subject to the Commerce Clause. /d. That holding cannot be
reconciled with precedent, nor with common sense.
Under the Commerce Clause, “commerce” is defined far
more broadly than the Alaska Supreme Court acknowledged.
In Camps Newfound/Owatonna v. Town of Harrison, 520
U.S. 564 (1997), this Court held that a charitable camp
located in Maine that enrolled campers who resided in “all
parts of the Nation” was engaged in interstate commerce:
“The attendance of these campers necessarily generates the
transportation of persons across state lines that has long been
recognized as a form of ‘commerce.’” Jd. at 573. This
holding was neither novel nor surprising: Over sixty years
ago, in Edwards vy. California, 314 U.S. 160 (1941), this
Court declared it “settled beyond question that the
transportation of persons is ‘commerce,’ within the meaning
of” the Commerce Clause. /d. at 172. The nonresident
fishermen who travel to Alaska to fish (and pay a
disproportionate price for that privilege) generate the same
sort of interstate “commerce” as the campers in Camp
Newfound and the indigent who traveled to California in
Edwards.
12
Indeed, this Court has long recognized that commercial
fishing is by its very nature an interstate, commercial
enterprise:
The business of commercial fishing must be conducted by
peripatetic entrepreneurs moving, like their quarry,
without regard for state boundary lines. . . . A number of
coastal States have discriminatory fisheries laws, and with
all natural resources becoming increasingly scarce and
more valuable, more such restrictions would be a likely
prospect, as both protective and retaliatory measures.
Each State’s fishermen eventually might be effectively
limited to working in the territorial waters of their
residence, or in the federally controlled fishery beyond the
three-mile limit. Such proliferation of residency require-
ments for commercial fishermen would create precisely
the sort of Balkanization of interstate commercial activity
that the Constitution was intended to prevent.
Douglas v. Seacoast Prod., Inc., 431 U.S. 265, 285-86
(1977) (footnotes omitted) (citing the Commerce Clause
decisions in H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S.
525, 532-39 (1949), and Allenberg Cotton Co. v. Pittman,
419 U.S. 20 (1974)). ©
And because that interstate commercial enterprise
depends upon access to natural resources, the Commerce
Clause applies with particular force. See, e.g., Hicklin v.
Orbeck, 437 U.S. 518, 533-34 (1978) (“the Commerce
Clause circumscribes a State’s ability to prefer its own
citizens in the utilization of natural resources found within its
borders, but destined for interstate commerce.”); Camps
Newfound, 520 U.S. at 578 (“[b]y encouraging economic
isolationism, prohibitions on out-of-state access to in-state
resources serve the very evil that the dormant Commerce
Clause was designed to prevent’). The natural resource at
issue here—Alaska’s fishing waters and the fish that swim in
them—is made available to Alaska residents on a far more
favorable _ basis. And _ that favoritism impacts not
13
nonresidents’ use and enjoyment of the state’s fishing waters
for recreation, cf. Baldwin v. Fish & Game Comm'n of
Montana, 436 U.S. 371, 388 (1978) (higher licensing fees
imposed on nonresidents for recreational elk hunting license
did not implicate category of rights protected by Privileges
and Immunities Clause), but their access to the very resource
upon which their commercial interests depend. ‘
The Alaska Supreme Court’s original holding to the
contrary-that the Commerce Clause has no application to
the discriminatory license fee—was apparently premised on
the fact that the license and permitting fees are imposed prior
to any fish being harvested. See Carlson II, 919 P.2d at 1340
n.8. That rationale, however, has been soundly discredited.
The Carlson court’s reasoning was derived from the
Commerce Clause holding of Toomer v. Witsell, that a non-
discriminatory South Carolina tax imposed on the taking of
shrimp within the state’s territorial waters did not violate the
Commerce Clause because the taxable event—the taking of
the shrimp-—occurred before the shrimp “entered the flow of
interstate commerce.” 334 U.S. 385, 394-95 (1948).
Toomer’s Commerce Clause holding, and the cases upon
which that holding rested, id. at 394-95 n.22. including
Heisler v. Thomas Colliery Co., 260 U.S. 245 (1922): Oliver
Iron Mining Co. v. Lord, 262 U.S. 172 (1923); and Hope
Natural Gas Co. v. Hall, 274 U.S. 284 (1927), have long
since been recognized as unsound. This Court has expressly
disapproved “Heisler and its progeny” insofar as they
Suggest that the Commerce Clause has no application until
an article of commerce has entered “the stream of interstate
commerce.” Commonwealth Edison Co. v. Montana, 453
U.S. 609, 614, 617 (1981). And the last vestiges of the rule
that states could, without Commerce Clause limitation, freely
tax certain purely local activities that occurred prior to the
commencement of “interstate” commerce were eradicated in
Complete Auto Transit v. Brady, 430 U.S. 274 (1977).
In short, the Alaska court’s decision that the Commerce
Clause has no application to Alaska’s discriminatory fee
=
ignores the reality of the interstate commercial interests—the
“interstate commerce directly affected by the state’s
licensing scheme. The discriminatory fee “impose[s] a
disparate burden on any [nonresident] competitors’ who
travel to Alaska to fish in the state’s commercial fisheries.
Pharm. Research & Mfrs. of Am. v. Walsh, 123 S. Ct. 1855,
1871 (2003). And it is precisely such discriminatory
measures protective of loca! commercial interests at the
expense of nonresident competitors that the Commerce
Clause forbids.
B. The Commerce Clause Applies To Discrimination
Based On Residency
In holding that discrimination based on residency simply
is not cognizable under the Commerce Clause, the Alaska
Supreme Court boldly announced that this Court has instead
“consistently analyzed statutes which purportedly classify on
the basis of residency under the Privileges and Immunities or
the Equal Protection Clauses.” Carlson I], 919 P.2d at 1340-
41. While the Privileges and Immunities Clause is of course
implicated when states discriminate on the basis of
residency, this Court has long recognized that the Commerce
Clause also reaches such discrimination where interstate
commerce is involved: “The distinction between a tax on the
thing imported, and on the person of the importer, can have
no influence on this part of the subject. It is too obvious for
controversy, that they interfere equally with the power to
regulate commerce.’ Brown v. Maryland, 25 U.S. (12
Wheat.) 419, 448 (1827); see also Walling v. Michigan, 116
U.S. 446 (1886) (tax imposed only on nonresidents selling
liquor in the state violated the Commerce Clause).
The Alaska Supreme Court’s error is borne out by the fact
that none of the decisions it cited (App. 62a-63a & n.10)
even suggest that discrimination against commercial interests
based on residency is not cognizable under the Commerce
Clause. The wholly discredited Commerce Clause holding
of Toomer v. Witsell did not relate to the higher license fees
15
imposed on nonresidents that were at issue in that case, but
rather to a wholly separate and nondiscriminatory tax on the
taking of shrimp. 334 U.S. at 394. In United Building &
Construction Trades Council v. Mayor & Council of
Camden, 465 U.S. 208, 213 (1984), a municipal resident
hiring preference was not subject to the Commerce Clause
because Camden was acting as a market participant; absent
that fact, the Commerce Clause would have applied. In
Hicklin v. Orbeck, 437 U.S. 518, 531 (1978), the parties did
not raise a Commerce Clause challenge to an Alaska hiring
law giving a preference to state residents. Sosna v. lowa,
419 U.S. 393 (1975), concerned residency limitations on a
state court’s divorce jurisdiction; no commercial interests
were advanced. And Baldwin v. Fish & Game Commission
of Montana, 436 U.S. 371 (1978), involved recreational, not
commercial, hunting, and the nonresident plaintiffs raised no
Commerce Clause challenge.
It is of course true that the Privileges and Immunities
Clause protects the right of a citizen of one state to enter
another state for the purpose of engaging in lawful
commerce. See, e.g., Hicklin, at 524 (noting body of
“decisions holding violative of the [Privileges and
Immunities] Clause state discrimination against nonresidents
seeking to ply their trade, practice their occupation, or pursue
a common calling within the State.”); Baldwin, 436 U.S. at
383 (citing Ward v. Maryland, 12 Wall. 418, 20 L. Ed. 449
(1871)); United Bidg. & Const. Trades Council, 465 U.S. at
219. That principle applies equally where, as here, pursuit of
the common calling depends upon access to natural
resources found within the state: “[A] State’s interest in its
wildlife and other resources must yield when, without
reason, it interferes with a nonresident’s right to pursue a
livelihood in a State other than his own, a right that is
protected by the Privileges and Immunities Clause.”
Baldwin, 436 U.S. at 386 (citing Toomer, 334 U.S. 385).
When a common calling involves interstate as opposed to
pureiy intrastate commerce, however, there is no basis for
16
concluding that the Commerce Clause is not also implicated.
While the Privileges and Immunities Clause and the
Commerce Clause “have different aims and set different
standards for state conduct,” United Bldg. & Constr. Trades
Council, 465 U.S. at 220 (“It 1s discrimination against out-
of-state residents on matters of fundamental concern which
triggers the [Privileges and Immunities] Clause, not
regulation affecting interstate commerce.”), nothing in the
Court’s jurisprudence precludes the application of both
clauses when both concerns—a regulation that both affects
“matters of fundamental concern” and impacts interstate
commerce—are implicated. Indeed, just last Term in
Hillside Dairy, Inc. v. Lyons, 123 §S. Ct. 2142 (2003), this
Court held that claims by _ nonresidents challenging
California’s milk pricing and pooling regulations are
cognizable under both the Commerce Clause and the
Privileges and Immunities Clause. This of course 1s
appropriate, given “the mutually reinforcing relationship
between the Privileges and Immunities Clause of Art. IV,
§ 2, and the Commerce Clause~a relationship that stems
from their common origin in the Fourth Article of the
Articles of Confederation and their shared vision of
federalism.” Hicklin, 437 U.S. at 531-32 (footnote omitted);
see also Supreme Court of New Hampshire v. Piper, 470
U.S. 274, 279-80 & n.8 (1985).°
> As the Alaska Supreme Court noted (App. 63a n.11), the Ninth
Circuit struck down an earlier version of Alaska’s discriminatory
commercial-fishing-license scheme under the Commerce Clause.
Anderson v Mullaney, 191 F.2d 123 (9th Cir. 1951). This Court
affirmed the unconstitutionality of the discriminatory license scheme on
Privileges and Imraunities Clause grounds without reaching the Ninth
Circuit’s Commerce Clause holding. Mullaney v. Anderson, 342 U.S.
415 (1952). The Ninth. Circuit’s Commerce Clause holding therefore
remains intact and conflicts with the Alaska Supreme Court’s holding
that the Commerce Clause has no application to such discriminatory
license fees.
2
9
3
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|
a
a
;
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2
2
17
The flaw in the Alaska Supreme Court’s reasoning
. becomes apparent when it is applied to a slight factual
variation: If the applicant for a commercial fishing license
were an out-of-state corporation (which employs individual
fishermen and pays the Alaska license fees on behalf of its
employees) rather than an individual, the Privileges and
Immunities Clause, which protects only “citizens,” would
have no application. Paul v. Virginia, 75 U.S. (8 Wall.) 168,
180-82 (1868), overruled in part on other grounds, United
States v. South-Eastern Underwriters Ass ‘n, 322 U.S. 533
(1944). But the Commerce Clause surely would protect the
National marketplace against such patent local favoritism.
Fulton Corp. v. Faulkner, 516 U.S. 325 (1996). It is
unfathomable that the Commerce Clause would not be
implicated (and violated) by such obvious favoritism.
ll. THE DECISION BELOW AUTHORIZES DIS-
CRIMINATION THAT NONE OF THIS COURT’S
DECISIONS WOULD COUNTENANCE
The Alaska Supreme Court, extrapolating from a fragment
of a dictum in Joomer vy. Witsell, endorsed under the
Privileges and Immunities Clause a surcharge imposed solely
on nonresidents that could not possibly pass Commerce
Clause muster. The court justified that surcharge on the
ground that it “equalizes” expenditures made from Alaska’s
general revenues. Even if the decision below were correct
that only the Privileges and Immunities Clause applies,
which Petitioners dispute, see Part I, supra, just as this Court
has prohibited states under the Commerce Clause from
shifting to nonresidents “charges purportedly included in
general forms of intrastate taxation... . anytime the entities
involved in interstate commerce happened to use facilities
supported by general state tax funds,” Oregon Waste, 511
U.S. at 105 n.8, so too Alaska should be precluded from
shifting such general costs of state government to
nonresidents under the Privileges and Immunities Clause.
18
A. The Carlson Formula Authorizes A Compensatory
Tax That Would Violate The Commerce Clause
Carlson II approved a formula for determining whether
the “differential in fees charged residents and nonresidents
was sufficiently related” to the state’s asserted goal of
“equalizing the burden of fisheries management” to justify
the disparate treatment. App. 64a. According to Carlson I],
the nonresident fee differential is allowable under the
Privileges and Immunities Clause so long as the amount of
the differential does not “substantially exceed” each Alaska
resident’s per capita contribution (via expenditures from the
state’s oil revenues, see n.4, supra) toward the maintenance
and operation of Alaska’s fisheries, as calculated by the
Carlson IT formula, in any given year. App. 72a-73a. While
the description of the formula may seem complicated, it boils
down to this: whether nonresidents pay, through license and
permit fees, roughly the same amount residents “contribute”
through state oil revenues. The fee differential sanctioned by
Carlson II thus operates in theory as a compensatory tax—
that is, a tax “designed simply to make interstate commerce
bear a burden already borne by intrastate commerce.”
Fulton Corp., 516 U.S. at 331 (citation omitted). But a
compensatory tax is valid under the Commerce Clause—and,
it should follow, under the Privileges and Immunities
Clause-only if it satisfies this Court’s strict test for
substantial equality. The Alaska surcharge plainly does not.
This Court has acknowledged that “interstate commerce
may be made to ‘pay its way.”” Oregon Waste, 511 U.S. at
102 (quoting Complete Auto Transit, Inc. v. Brady, 430 U.S.
at 281). A state’s ability to exact from nonresidents a “fair
share” of the state’s costs related to a particular transaction
or course of commerce is, however, subject to “the strictest
scrutiny, Oregon Waste. 511 U.S. at 100-01 (citation
omitted), because
permitting discriminatory taxes on interstate commerce to
compensate for charges purportedly included in general
19
forms of intrastate taxation “would allow a state to tax
interstate commerce more heavily than in-state commerce
anytime the entities involved in interstate commerce
happened to use facilities supported by general state tax
funds.”
Id. at 105 n.8 (quoting Gov't Suppliers Consolidating Servs.,
Inc. v. Bayh, 975 F.2d 1267, 1284 (7th Cir. 1992)); see also
Fulton Corp., 516 U.S. at 335 (noting “the danger of treating
general revenue measures as relevant intrastate burdens for
purposes of the compensatory tax doctrine’”’).
Accordingly, the Court has invalidated state laws
imposing higher taxes on out-of-state commercial interests
than those imposed on purely in-state commerce unless (1)
the state identifies the specific intrastate tax burden for
which it is attempting to compensate, (2) the tax on interstate
commerce roughly approximates but does not exceed the tax
on intrastate commerce, and (3) the in-state and out-of-state
levies are imposed on substantially equivalent events.
Fulton Corp., 516 U.S. at 332-33 (invalidating state
intangibles tax on corporate stock that authorized residents to
take deduction equal to percentage of corporation’s income
subject to North Carolina income tax); see also Armco, Inc.
v. Hardesty, 467 U.S. 638, 643 (1984) (invalidating gross
receipts tax imposed on out-of-state wholesalers from which
in-state manufacturers were exempt); Oregon Waste, 511
U.S. at 104-05. Under this strict test, “use taxes on products
purchased out of state are the only taxes [the Court] ha[s]
upheld in recent memory under the compensatory tax
doctrine.” Jd. at 105; see Henneford v. Silas Mason Co., 300
U.S. 577 (1987) (upholding tax on use of any article of
tangible personal property within the state unless article had
already been subject to state sales tax in an equal or greater
amount; although tax was facially discriminatory, the
combined effect of the sales and use taxes was to impose
equivalent burdens on interstate and intrastate commerce).
20
The surcharge Alaska has imposed on_ out-of-state
commercial fishermen ostensibly to “equalize” expenditures
from the state’s general oil revenues plainly fails under this
Court’s compensatory tax jurisprudence.
First, Oregon Waste makes clear that costs paid out of a
state’s general tax revenues cannot support the imposition of
allegedly “equivalent” taxes on out-of-state commerce. In
Oregon Waste, this Court rejected, on Commerce Clause
grounds, an Oregon surcharge imposed on the disposal in
Oregon of waste generated in another state. The state
defended the facial discrimination inherent in the surcharge
by categorizing it as a “‘compensatory tax’ necessary to
make shippers of [out-of-state] waste pay their ‘fair share’ of
the costs imposed on Oregon by the disposal of their waste in
the State.” 511 U.S. at 102. This Court soundly rejected the
state’s attempted justification, noting that Oregon had not
imposed “a specific charge” on the disposal of waste
generated in-state for which the surcharge was intended to
compensate. Instead, Oregon premised the surcharge on the
theory that “intrastate commerce does pay its share of the
costs underlying the surcharge through general taxation,” id.
at 104, a theory that the Court rejected as incompatible with
the Commerce Clause. Indeed, this Court has repeatedly
“decline[d] . . . to open such an expansive loophole in [its]
carefully confined compensatory tax jurisprudence.” Oregon
Waste, 511 U.S. at 105 n.8. Carlson, however, opens
precisely such a loophole, allowing the state to impose a
discriminatory fee on out-of-state commercial fishermen to
“compensate” for expenditures from the state’s general
reveriues.
Second, this Court’s compensatory tax jurisprudence
requires that the purportedly compensating taxes “fall on
substantially equivalent events.” See Fulton Corp., 516 U.S.
at 338-39 (citing cases). While refusing to apply this test,
the Alaska Supreme Court in Carlson III nevertheless
claimed that the Alaska fee differential satisfied this rigorous
equivalence requirement, because “the event being taxed,
21
namely the license to use state fisheries, is the same for
residents and nonresidents.” App. 21a n.78. This superficial
analysis contradicts this Court’s teachings. In Oregon
Waste, the Court rejected the Oregon Surcharge as a
compensatory tax in part because “earning income and
disposing of waste at Oregon landfills are even less
equivalent than manufacturing and wholesaling,” the taxable
incidents compared in Armco, Inc. v. Hardesty, 467 U.S. 638
(1984). Oregon Waste, 511 U.S. at 105. Here, too, “the
events being taxed” are not substantially equivalent: The tax
on nonresidents falls on the privilege of fishing alone, but the
State seeks to justify that higher tax on nonresidents by a
combination of two “taxable events” for local residents—the
lower cost of their fishing license, plus the local residents’
alleged share of the monies generated by petroleum
production. These are not “substantially equivalent events.”
Finally, many discriminatory taxing schemes that states
attempt to justify as “compensatory taxes,” like the surcharge
in Oregon Waste, fail for lack of proof that the tax is in fact a
rough approximation of costs actually borne by state
residents. See, e.g., Fulton Corp., 516 U.S. at 336-38.
Alaska’s discriminatory surcharge is even further afield from
the compensatory taxes that this Court rejected in Oregon
Waste and Fulton Corp., however, given that the “burden”
supposedly borne by Alaska residents does not even involve
the payment of taxes in the first place.
In evaluating whether a state is free to assess a
“compensatory tax” against nonresidents in order to equalize
a tax burden unfairly borne by state residents, it is significant
that residents face a direct burden as a result of the obligation
to contribute to the state’s tax fund, from which general
expenditures are made. See, e.g., Henneford, 300 U.S. at
579-80 (direct tax of two percent imposed on retail sales
within the state). An individual (or, as in Fulton Corp., a
corporation) obligated to pay a tax on income “spends”
personal funds in support of the state. No Alaska resident,
however, makes- such a contribution to Alaska’s general
22
revenues, and none of the conservation (or other)
expenditures cited by the state are made from “taxes which
only residents pay,’ Toomer, 334 U.S. at 399, because
Alaska does not impose an income tax on state residents.
Instead, the expenditures the state seeks to recoup from
nonresidents are made from “oil revenues’ generated by
petroleum production within the state, which has been the
primary source of Alaska’s revenues. See, e.g., App. 106a
(in fiscal year 1986, 86 percent of state revenues derived
from oil production). Carlson I nevertheless proclaimed the
state’s oil revenues to be “analytically equivalent” to taxes
paid only by state residents, without further analysis. App.
106a. In effect, the Alaska Supreme Court has allowed the
state to use its natural oil bounty, the proceeds from which
are themselves reserved for the residents of Alaska, as a
justification for further, iHegal favoritism of its own residents
with respect to the state’s natural bounty in fish.
In treating expenditures from state oil revenues as
tantamount to expenditures from state income tax
revenues—because Alaska residents “pay proportionately
more by way of foregone benefits then nonresidents for
fisheries management,’ id—the Alaska Supreme Court
vastly expanded the reach of, and the justification for, the
compensatory tax doctrine. The Alaska Supreme Court’s
analysis would allow virtually any tax to be imposed
disproportionately on nonresidents: Following the Carlson
reasoning, any expenditure from a state’s general revenues,
whether or not derived from taxes imposed directly on
residents, can be offset by imposing a “compensatory” tax or
fee on any nonresident who seeks access to any resource or
service located in or provided by the state.
In short, although it explicitly disclaimed any intent to
authorize the imposition of a “compensatory tax” upon
nonresident commercial fishermen, App. 66a, close analysis
reveals that the Alaska Supreme Court has done precisely
that, but without any of the rigorous limits this Court has
imposed on application of the doctrine. The Alaska court
i a etd SARA LS eb ps nas ee
Pat Vie ae Ree POLE P RIS CS
23
sanctioned under the Privileges and Immunities Clause
precisely the sort of generalized tax-shifting that Oregon
Waste prohibited under the Commerce Clause, on the theory
that the fee differential does nothing more than “impos[e] on
nonresidents their share of the costs of commercial
fisheries,” thereby “balanc[ing] out ‘any conservation
expenditures from taxes which only residents pay.”” App.
66a (quoting Toomer, 334 U.S. at 399). Semantics do not
disguise the fact that Alaska has done what Oregon Waste
forbids. if the Alaska license fee system is constitutionally
permissible as a “compensatory fee,” there are no real limits
on surcharges a state may impose on nonresidents in the
name of equalizing expenditures from the state’s general
revenues.
B. The Carlson Formula Sanctions A Discriminatory
Fee That Toomer Does Not Authorize
The Toomer dictum can be read to crack an exceedingly
narrow window under the Privileges and Immunities Clause
for nonresident fee differentials that do no more than
“compensate the state for any added enforcement burden
[nonresidents] may impose or for any conservation
expenditures from taxes which only residents pay.” Toomer,
334 USS. at 399. In light of the Toomer dictum and similar
language with respect to the Commerce Clause in Oregon
Waste, see 511 U.S. at 102, it is possible that perfect equality
of treatment of nonresidents is not mandated by the
Constitution, but that states may take into account limited
enforcement and conservation expenses when imposing fees
on nonresidents. Yet the Alaska Supreme Court’s rationale
for upholding the state’s nonresident fee differential, which
was imposed without reference to any such costs (and in the
absence of any “taxes” paid by residents), would vastly
expand upon Toomer and would permit far more
discrimination than absolutely necessary to compensate the
State for any additional “enforcement burden” generated by
nonresidents or “conservation expenditures” from state
funds. In fact, Alaska has conceded that nonresident
24
commercial fishermen do not impose any greater costs on the
state than do residents. See State of Alaska v. Carlson, No.
S-10091/10101, Joint Excerpt of Record on Appeal at 119
(Alaska Supreme Ct., filed Sept. 17, 2001).
Most alarmingly, the Alaska court’s approach would
allow a state to shift to nonresidents a wide range of
generalized costs of state government—a result plainly
prohibited by this Court’s compensatory tax cases, see supra
pp. 20-21; Oregon Waste, 511 U.S. at 105 n.8, and clearly
beyond the extraordinarily limited category of
“enforcement” and “conservation” expenditures that the
Privileges and Immunities Clause allows to be taken into
account, Toomer, 334 U.S. at 399. The decision below
invites such post hoc accounting abuses, as a liriitless array
of costs can be (and has been) characterized as sufficiently
related to a particular state program or service to warrant
inclusion in the category of costs shifted to nonresidents.
Here, Alaska seeks to pass along to nonresident commercial
fishermen far more than the costs of any “added enforcement
burden” imposed by the presence of nonresidents in the
state’s commercial fisheries (Alaska has cited none) or even
“conservation expenditures” made from Alaska’s revenues.
Toomer, 334 U.S. at 399. The Alaska Supreme Court
reasoned that the appropriate calculation instead derives
broadly from “what the State spends from its general funds
on its commercial fisheries.” App. 27a.
Relying upon that expansive premise, Alaska included in
its submission to the court significant components that can
only be described as general costs of state government, such
as “mechanical inspection[s]” performed by the Department
of Labor, occupational safety inspections, and legal costs
associated with “statehood defense/federal relations” and
“Environmental-Exxon Valdez.” App. 127a. Indeed,
Alaska’s breakdown of its fisheries expenditures includes
such all-encompassing categories as “Public Safety-
Administration Services” and “Community & Regional
Affairs-Community Development Quota Program.” App.
25
127a-128a. The state also included costs of the Department
of Fish and Game attributable to “sport fish,” App. 128a, a
recreational category that by definition should not be
charged to commercial fishermen. And the state’s budget
includes “shared fish taxes,” see Alaska Stat. §§ 43.75.015,
43.75.130, which are business taxes collected by the state
from fish processors and then passed through to municipal
governments for general uses. App. 128a. In fact, these
broad categories of costs are now enumerated in the permit
fee statute, which notes that nonresident permit fees may
reflect, among other things, “the “direct operating
expenditures’ of a variety of state agencies and institutions
including the Office of the Governor, the. Department of
Community and Economic Development, the Department of
Labor, the Alaska court system, and others, and “capital
expenditures to support the commercial fishing industry as
measured t, annual depreciation of public facilities and
infrastructure.” Alaska Stat. § 16.43.160(e) (App. 118a-
120a).
The state has been given such leeway in calculating its
fisheries budget that it can—and perhaps did—include costs
directly related to this very litigation (under such broad
categories as “Law/Civil” or “CFEC”). The costs to the state
of preparing the accounting used to calculate the state’s
fisheries budget may also be included within the broad
categories of fisheries-related legal or administrative costs
the state seeks to pass along to nonresidents. In essence, the
state could shift a portion of its legal fees to the very class of
nonresident fishermen who challenged the discriminatory fee
that prompted this case. Such a perverse result cannot be
intended by the Toomer dictum.
There is no hint in Toomer (much less in the Court’s
compensatory tax cases) that the constitutionality of a
facially discriminatory fee turns on this sort of line-item
accounting of every conceivable general cost associated with
the operation of Alaska’s commercial fisheries, much less a
post hoc accounting prepared by the state and accepted
26
virtually wholesale by the courts. This Court has made clear
that “[c]Jonstitutional issues affecting taxation do not turn on
even approximate mathematical determinations.” Mullaney,
342 U.S. at 418. The open-ended invitation to Alaska to
define and calculate its fisheries budget encouraged the state
to inflate its fisheries-related costs (in ways the Alaska
legisiature never considered) to justify the substantial
differential. Indeed, under the Carlson formula, Alaska can
attempt to impose a fee differential greater than the current
three-to-one surcharge, so long as the state can assemble a
sufficiently large “fisheries budget” after the fact. The
potential for abuse-at the expense of out-of-state
commercial interests—is virtually limitless.
The Alaska Supreme Court erred by failing to recognize
that, apart from the specific “enforcement” and
“conservation” expenditures discussed in Toomer, the
Privileges and Immunities Clause does not sanction the
expansive cost-shifting approved by the court below. When
a state defends a facially discriminatory fee on the ground
that it compensates for a variety of expenditures from
general revenues that otherwise would be borne by state
residents alone, this Court’s compensatory tax jurisprudence
provides the appropriate analytical framework—and requires
strict equality of treatment of residents and nonresidents.
Ill. THE DECISION BELOW RAISES SIGNIFICANT
CONSTITUTIONAL QUESTIONS WITH
NATIONWIDE CONSEQUENCES
Alaska’s commercial fishing industry is vital, both within
the state and to the Nation as a whole. “The commercial
fishing industry is a major component of [the] statewide
economy and the economic backbone of Alaska’s fishing
communities.” Commercial Fisheries Entry Commission,
2001 Annual Rpt. at 1 (“2001 Annual Report”). Beyond the
state’s borders, fish caught in Alaska’s waters account for
more than half of the Nation’s total commercial catch. In
2001, commercial landings—quantities of fish bought and
27
sold—at Alaskan ports slightly exceeded 5 billion pounds of
fish, valued at $869.9 million; total commercial landings at
all United States ports in 2001 were 9.5 billion pounds of
fish with a value of $3.2 billion.° Thus, in 2001, commercial
landings at Alaskan ports represented more than half of the
total national catch of fish, in pounds, and almost 30 percent
of the value of fish caught and landed at United States ports.
Given the sheer size of the fish pool in Alaskan waters, it is
not surprising that !arge numbers of nonresident commercial
fishermen travel to Alaska to participate in its many
fisheries. ’
Alaska’s prominent role in the Nation’s commercial
fishing industry makes the constitutional issues presented by
this case all the moie pressing: The state that controls many
of the country’s most abundant and profitable commercial
fisheries has erected barriers to entry that favor local
commercial fishermen over nonresidents. And the
discriminatory fee challenged here is hardly Alaska’s first
attempt to favor state residents over nonresidents. See, e.g.,
Anderson v. Mullaney, 191 F.2d 123, 125 (9th Cir. 1951),
aff'd, 342 US. 415 (1952) (striking down Alaska’s
imposition of $5 commercial-fishing-license fee on resident
fishermen and $50 license fee on nonresidents): Hicklin, 437
U.S. at 533-34 (challenge to hiring preference law requiring
the employment of Alaska residents in connection with oil
and gas projects within the state); Sheley v. Alaska Bar
Ass'n, 620 P.2d 640 (Alaska 1980) (striking down Alaska’s
rule requiring applicant for the Alaska bar to establish
domicile in the state at least 30 days before bar examination
National Oceanic and Atmospheric Administration, Fisheries of the
United States, at iv, vii, 6 (2001). The state with the next highest level of
commercial landings in 2001 was Louisiana, with }.? billion pounds, less
than one-fourth of the Alaska landings. /d.
. As of 2001, nonresidents held 4,910 of 23,339 permits issued by the
State, a total of 21 percent. 2001 Annual Report, at 17.
28
under Privileges and Immunities Clause); cf. Zobel v.
Williams, 457 U.S. 55 (1982) (Equal Protection challenge to
Alaska Permanent Fund dividend distribution plan, which
calculated amount of dividend based on length of time an
individual resided in Alaska).
Although the Alaska legislature has been historically
aggressive in acting to protect the state’s residents against
competition from outsiders, it is not alone: At present, 34
states (aside from Alaska) discriminate against nonresidents
by imposing additional fees on them or by banning their
access to commercial fishing altogether." Allowing the
5 See Ala. Code § 9-12-80 (non-residents charged at least as much as
their state charges non-residents but not less than twice as much as
Alabama residents, unless the non-resident’s state has entered into a
reciprocity agreement with Alabama); Ark. Code Ann. § 002 00 001
41.13 (excluding nonresidents from commercial fishing activities, with
exceptions for residents of Mississippi, Missouri and Tennessee,
according to reciprocal agreements); Cal. Fish & Game Code § 7852
(non-resident crew members charged three times as much as residents;
non-resident vessel operators charged sixty-six percent more than
residents); Conn. Gen. Stat. § 26-142a (c} (non-residents charged fees
ranging from thirty-three percent more to five times more than residents,
depending on devices used); Del. Code Ann. tit. 7 § 914 (non-residents
charged ten times more than residents, with exceptions for New Jersey
residents fishing certain portions of Delaware River); Fla. Stat. Ann.
§ 370.06(2) (non-residents charged four times as much as residents for
standard license and five times as much for special activity license); Ga.
Code Ann. § 27-2-23 (non-residents charged more than ten times as
much as residents); Idaho Code § 36-416 (non-residents charged twice as
much as residents); 515 Ill. Comp. Stat. 5/20-45, 5/20-55 (non-residents
charged more than four times as much as residents for licenses and twice
as much as residents for each 100 yards of seine and each line, trap, or
net device); Ind. Code Ann. § 14-22-14-6 (excluding non-resident
individuals and corporations with non-resident shareholders); lowa Code
§ 482.4 (non-residents charged twice as much as residents for licenses
and each unit of gear; non-resident mussel fishers and mussel helpers
charged twenty-five times and four times more, respectively, than
residents); Kan. Admin. Regs. § 115-2-1 (non-residents charged more
than twelve times as much as residents for commercial mussel fishing
times as much as residents); La. Rev. Stat. Ann. § 56:303 (non-residents
charged more than eight times as much as residents); Me. Rev. Stat. Ann.
tit. 12, § 6501 (non-residents charged ten times as much as residents);
Md. Code Ann., Natural Resources § 4-701 (non-residents charged twice
as much as residents as well as surcharge of either $350 or the difference
between total fees charged Maryland residents for like activities in
applicant’s domicile state and toval fees charged applicant in Maryland,
whichever is greater); Mich. Conip. Laws § 324.47330(2) (non-residents
charged five times as much as residents); Minn. Stat. Ann. §§ 97A.461,
475 (nonresidents excluded from commercial fishing); Miss. Code Ann.
§§ 49-15-80, 49-15-30 (non-residents charged four times as much as
residents, except that residents of other states bordering on Gulf of
Mexico charged same fees as their domicile states charge Mississippi
residents in order to promote reciprocal arrangements); Mo. Code Regs.
tit. 3, § 10-10.720 (non-residents charged eight times as much as
residents); Neb. Rev. Stat. § 37-4, 104 (non-residents charged two times
as much as residents); N.J. Stat. Ann. § 23:5-24.2 (non-residents charged
ten times as much as residents, unless their domicile state charges New
Jersey residents the same amount as residents for a similar license); N.Y.
Comp. Codes R. & Regs tit. 6, § 35.1 (d) (non-residents charged ten
times as much as residents); N.C. Gen. Stat. § 113-168.2 (non-residents
charged four times as much es residents or amount equal to the non-
resident fee charged by non-resident’s state, whichever is less, but in no
event less than North Carolina resident’s fee); N.D. Cent. Code, § 20.1-
03-12 (non-residents charged four times more than residents for
commercial frog licenses and ten times more for commercial clam
licenses); Okla. Stat. Ann. tit. 29, § 4-103 (non-residents charged more
than twice as much as residents); Or. Rev. Stat. § 508.285 (non-residents
charged twice as much as residents); 30 Pa. Cons. Stat. § 2903 (b) (5)
(non-residents charged two times as much as residents); R.I. Gen. Laws
§§ 20-2.1-5, 20-2.1-6 (non-residents charged four times as much as
residents); S.C. Code Ann. §§ 50-5-300, 50-5-310 (non-residents charged
twelve times as much as residents); Tenn. Code Ann. § 70-2-205 (non-
residents charged four times as much as residents for fishing only and six
times as much for mussels only); 31 Tex. Admin. Code § 53.6 (non-
residents charged four times as much as residents); 4 Va. Admin. Code
§§ 20-730-20, 20-920-30 (non-residents charged additional $350 per
vessel); Wash. Rev. Code Ann. §§ 77.65.160, 77.65.200 (non-residents
charged eighty percent more than residents for limited entry salmon
30
decision below to stand will only encourage states to engage
in impermissible economic protectionism.
* * * * *
“In its negative aspect, the Commerce Clause prohibits
economic protectionism-that is, regulatory measures
designed to benefit in-state economic interests by burdening
out-of-state competitors.” Fulton Corp., 516 U.S. at 330.
Alaska’s discriminatory nonresident commercial-fishing fee
does just that: It ensures that state residents who make their
living as commercial fishermen need not face the degree of
competition from nonresidents engaged in the same
commercial endeavors that would prevail in a completely
free market. That Alaska expressly bases its surcharge on
residency makes undeniable the state’s intent to protect its
residents from out-of-state competition. Such a facially
discriminatory law should be held unconstitutional under
both the Commerce and the Privileges and Immunities
Clauses.
CONCLUSION
For these reasons, the petition for writ of certiorari should
be granted.
licenses and fifty to sixty percent more for other species, gear, or area
licenses); Wis. Stat. §§ 29.523-537 (nonresidents excluded from
commercial fishing).
LOREN DOMKE
LOREN DOMKE, P.C.
2201 North Jordan Avenue
Juneau, Alaska 99801
(907) 790-2844
July 11, 2003
31 .
Respectfully submitted,
BETH HEIFETZ
GREGORY A. CASTANIAS
(Counsel of Record)
JULIA C. AMBROSE
JONES DAY
51 Louisiana Avenue, N.W.
Washington, D.C. 20001
(202) 879-3939
Counsel for Petitioners
|
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APPENDIX
la
65 P.3d 851
Supreme Court of Alaska.
STATE of Alaska, COMMERCIAL FISHERIES ENTRY
COMMISSION, Appellant/Cross-
Appellee,
v.
Donald H. CARLSON; Warren Hart; Gerard Haskins;
Earl Weese; and Lyla C.
Weese, Individually and as Class Representatives on
Behalf of All Persons
_ Similarly Situated, Appellees/Cross-Appellants.
Nos. S-10091, S-10101.
March 14, 2003.
Before: FABE, Chief Justice, MATTHEWS, EASTAUGH,
BRYNER, and CARPENETI, Justices.
OPINION
FABE, Chief Justice.
I. INTRODUCTION
This is the third appeal arising out of a lawsuit centering on
whether Alaska can charge nonresidents more for commercial
fishing licenses than it charges resident commercial fishers. The
case is brought as a class action by a group of nonresident
commercial fishers. In previous rulings in this case, we held that
different rates can be charged for resident and nonresident
commercial fishers, and we derived a formula for calculating the
acceptable difference. The components of this formula, including
various budget expenditures and oil revenues, are in dispute in
this appeal. We conclude that direct and indirect costs
associated with the fisheries budget and costs associated with the
2a
hatcheries loan fund can be included in the calculation of the
allowable fee differential. We further hold that at an earlier stage
in this litigation the State conceded that the protest requirement
for recovery of overpayment of taxes has been satisfied. Finally,
we hold that prejudgment interest will be applicable if on remand
it is determined that a refund of a portion of fees is required.
Ii. FACTS AND PROCEEDINGS
Litigation in this case began in 1984. At the time this case was
first before this court, nonresident commercial fishers were
charged three times as much as resident fishers for fishing license
fees.' The relevant statute at the time, AS 16.05.480(a), dealt
primarily with authorizing the establishment of fees for commercial
fishing: “A person engaged in commercial fishing shall obtain a
commercial fishing license. The fee for the license is $30 for
residents, and $90 for nonresidents.” The relevant current
statute, AS 16.05.480(h), establishes: “For a crewmember
fishing license” issued for calendar year 2002 and following years,
a nonresident engaged in commercial fishing who is 11 years of
age or older and who does not hold an entry permit or an interim-
use permit shall pay an annual base fee of $60 plus an amount,
established by the department by regulation, that is as close as is
practicable to the maximum allowed by law.” The principal
difference is that the current statute does not set the amount
' Carlson v. State, Commercial Fisheries Entry Comm'n (Carlson 1), 798
P.2d 1269, 1270 (Alaska 1990).
“Crewmember fishing license” and “commercial fishing license” are used
interchangeably in AS 16.05.480 with no apparent distinction made
between the two. A “commercial fisherman” is elsewhere defined to
include crewmembers. AS 16.05.940(4).
3a
which nonresidents can be charged, but rather allows this amow t
to be set at the maximum legal amount.°
A similar fee structure is established for entry permits and
interim-use permits where the creation of limited use zones is
deemed necessary for controlling, through the permitting process,
the number of people who can fish in a given geographic area.’
However, in 2001 the fees for nonresidents were three times the
amount for residents.” Crewmembers are not required to have
* This amount is to be set by the Alaska Commercial Fisheries Entry
Commission. AS 16.43.100(16) (authorizing commission to “establish
reasonable user fees for services”).
* See generally AS 16.43.200-225.
* The relevant sections of former 20 Alaska Administrative Code (AAC)
05.240(a) (1), (2), (4) (2002) provide:
(a) For 2001, the commission will determine the annual fee for the issuance
or renewal of an entry permit or interim-use permit according to the
following:
(1) the resident annual fee for the issuance or renewal of an entry permit
or interim-use permit in a limited fishery is .25 percent of the estimated
value of the entry permit, rounded to the nearest fee class amount
established in (4) of this subsection; the non-resident annual fee is three
times this amount, as set out in (4) of this subsection; ...
(2) the resident annual fee for the issuance or renewal of an interim-use
permit in an unlimited fishery is .25 percent of the estimated average gross
earings per permit in the most recent three years for which data are
available, rounded to the nearest fee class amount established in (4) of
this subsection; the non-resident fee is three times this amount, as set out
in (4) of this subsection;
(4) the resident and non-resident annual fees are:
FEE CLASS ANNUAL FEE
Resident Non-resident
4a
entry or interim-use permits, although they are required to have a
commercial (crewmember) fishing permit to work on a permit
vessel.° The class never specifically stated in its brief that it is
challenging both commercial fishing licenses and entry permit fees,
but one of the challenged superior court orders states that it
applies to both “commercial licenses and limited entry permits.”
Furthermore, Carlson I defined the class as consisting of “all
persons who participated in one or more Alaska commercial
fisheries at any time who paid non-resident assessments to the
I $250 $750
II 200 600
Il 150 450
IV 100 300
Vv 50 150
° See AS 16.43.140(b) (“A permit is not required of a crewmember or other
person assisting in the operation of a unit of gear engaged in the
commercial taking of fishery resources as long as the holder of the entry
permit or the interim-use permit for that particular unit of gear is at all
times present and actively engaged in the operation of the gear.”); AS
16.05.480(a) (2001) (“A person engaged in commercial fishing shall obtain
a commercial fishing license and shall retain the license in possession and
readily available for inspection during fishing operations. An entry permit
or interim-use permit entitles the holder to participate as a gear operator in
the fishery for which the permit is issued and to participate as a
crewmember in any fishery.”); AS 16.05.940(4) (“ ‘[C]ommercial fisherman’
means an individual who fishes commercially for, takes, or attempts to
take fish, shellfish, or other fishery resources of the state by any means,
and includes every individual aboard a boat operated for fishing purposes
who participates directly or indirectly in the taking of these raw fishery
products, whether participation is on shares or as an employee or
otherwise.”); AS 16.05.940(5) (“* ‘{C]ommercial fishing’ means the taking,
fishing for, or possession of fish, shellfish, or other fishery resources with
the intent of disposing of them for profit, or by sale, barter, trade, or in
commercial channels.”).
1h ERE ER SE NOU GO Tae oie mes nen Osta oh i te “3
EA ALN RE OPAL RE RTL
Sa
State for commercial or gear licenses or permits.” This language
was taken directly from the initial complaint. We therefore find it
appropriate to address both commercial fishing licenses and entry
permit fees. For the sake of simplicity, the two will be referred to
collectively as “commercial fishing fees,” except in those
instances where it is necessary to differentiate between the two.
A. Prior Case History Before the Alaska Supreme
Court
Before proceeding with the issues in the present case, it is
helpful to review the decisions in the previous appeals before this
court. In Carlson I, we held that different fees for residents and
nonresidents did not automatically violate either the Privileges and
Immunities Clause or the Commerce Clause of the United States
Constitution." We noted that “[I]ess favorable treatment by the
State towards nonresidents runs afoul of the Privileges. and
Immunities Clause if: 1) the activity in question is ‘sufficiently
basic to the livelihood of the Nation... as to fall within the
purview of the [clause], and 2)fit] is not Closely related to the
advancement of a substantial state interest.” We proceeded to
determine that “[c]ommercial fishing is a sufficiently important
activity to come within the purview of the Privileges and
Immunities Clause, and license fees which discriminate against
nonresidents are prima facie a violation of it.”'° We recognized
that states may “charge non-residents a differential which would
merely compensate the State for any added enforcement burden
they may impose or for any conservation expenditures from taxes
” Carlson I, 798 P.2d at 1270.
8 Id. at 1274-78.
° Id. at 1274 (quoting Supreme Court of Virginia v. Friedman, 487 US.
59, 64-65 (1988) (citations omitted)).
© Carlson I, 798 P.2d at 1274.
6a
which only residents pay.”'' Because the appropriateness of a
3:1 fee differential had not been addressed, we remanded the
case for such a determination, placing the burden of persuasion
on the State.’
We conducted a similar analysis with regard to the Commerce
Clause. Noting that the Commerce Clause “limits the power of
the States to erect barriers against -interstate trade,”'? we
concluded that if a law is shown to discriminate against interstate
commerce, either in its wording or in its effect, the burden is on
the State “to demonstrate both that the statute ‘serves a legitimate
local purpose,’ and that this purpose could not be served as well
by available nondiscriminatory means.”* We held that the
superior court improperly relied upon Salorio v. Glaser'> in
granting summary judgment to the State.'° We determined that
applying Salorio, in which New Jersey imposed additional fees
on nonresidents to pay for transportation facilities,'’ to the
present case would result in nonresidents subsidizing the activities
of residents because nonresidents could then be required “‘to pay
up to 100% of their pro rata share of expenditures regardless of
what percentage of their pro rata share residents are in fact
paying.”"* However, because the majority of the state revenues
are derived from petroleum production, a source to which
'! Id. at 1274-75 (quoting Toomer v. Witsell, 334 U.S. 385, 399 (1948)).
Carlson I, 798 P.2d at 1276, 1278.
'? Id. at 1277 (quoting Maine v. Taylor, 477 US. 131, 137 (1986)).
'* Carlson I, 798 P.2d at 1277 (quoting Maine v. Taylor, 477 U.S. at 138).
'® 82 N.J. 482, 414 A.2d 943, cert. denied, 449 U.S. 874 (1980).
'® Carlson I, 798 P.2d at 1278.
'7 414 A.2d at 953.
'§ Carlson I, 798 P.2d at 1278.
7a
nonresident fishers make no contribution, we ruled that the State
could recoup conservation expenditures from nonresidents in the
form of differential fees.'? We reasoned that the oil revenues
spent on conservation “could have been used to benefit residents
through various other programs and they are, analytically,
equivalent to ‘taxes which only residents pay.””° In that the
extensive use of oil revenues as a source for state expenditures
created a greater financial burden on nonresidents than residents, —
a fee differential based upon residency was justified!
Consequently, “the state may equalize the economic burden of
fisheries management; where residents pay proportionately more
by way of foregone benefits than nonresidents for fisheries
management, nonresidents may be charged higher fees to make
up the difference.” This is the same conclusion that was
reached in the Privileges and Immunities Clause analysis.
Consequently, we remanded the case for a further determination
of the appropriateness of the fees.”
; 9 Id.
” Id.
q "Id.
' a
‘
* Id. We made two other rulings in Carlson I: We held that the
Commercial Fisheries Entry Commission was authorized by statute to
impose different commercial fishing fees, assuming that the ratio itself was
constitutional. /d. at 1278-79. We also remanded on the issue of whether
the protest requirement in AS 43.15.010(a) had been met. /d. at 1279-80.
We further noted on this issue that a two-year statute of limitations from
the time the tax was paid governed instead of the six-year limit assume¢
by the superior court. /d. at 1280.
EE is
8a
In Carlson II, we addressed the question of what would be an
acceptable fee differential for nonresidents to pay.** We first
affirmed our decision in Carlson J that neither the Commerce
Clause nor the Privileges and Immunities Clause prevented the
imposition of an increased fee for nonresident commercial
fishers. The class had argued that two cases, which held that
states violated the negative (also known as dormant) Commerce
Clause by charging greater taxes on out-of-state waste than on
in-state waste, decided by the United States Supreme Court after
Carlson I but before Carlson II, were applicable to the present
case.”° We distinguished these two cases by holding that the
facts in the present case did not involve the “interstate flow of
- articles of commerce.”*’ In response to the class’s Privileges
and Immunities Clause argument, we stated that we did not in
‘Carlson I advance the type of fee-shifting arrangement
denounced in Oregon Waste Systems, but rather explicitly held
that nonresidents could be required to pay only that amount that
would make their contribution to state-provided benefits
substantially equal to the contribution of similarly situated
residents.”*
Accepting the constitutionality of the fee differences, we next
determined a formula for allowable differences. We adopted the
per capita fee differential formula advocated by the class as
* Carlson v. State, Commercial Fisheries Entry Comm'n (Carlson II ),
919 P.2d 1337 (Alaska 1996). Certiorari was subsequently requested but
denied. 519 U.S. 1101 (1997).
25 Id. at 1340-42.
© Carlson II, 919 P.2d at 1340 (citing Oregon Waste Sys., Inc. v. Dep't of
Envtl. Quality, 511 U.S. 93, 99 (1994); Chemical Waste Mgmt., Inc. v.
Hunt, 504 U.S. 334, 340-41, (1992)).
27 Carlson II, 919 P.2d at 1340 (citing Oregon Waste Sys., 511 U.S. at 98).
8 Carlson II, 919 P.2d at 1340.
AA The ALES GA ANAEES. LA IEG OM EA I PINEAL AMIE RAT PROSCAR: Rares
9a
opposed to the pro rata formula offered by the State, holding that
the allowable fee differential could be determined by: (Fisheries
Budget/Alaska Population) X (percentage of State Budget from
oil revenues/1.0).”” We rejected the State’s proposed formula?”
because it improperly compared the contributions made by
nonresident commercial fishers to those made only by resident
commercial fishers, rather than viewing the resource expenditures
benefitting the nonresidents in terms of the population of the state
as a whole?!
Resident commercial fishers are paying the license and permit
fees they are charged plus their per capita share of oil revenues
which are diverted to fisheries management from other benefits or
State services. It is this quantity which must be equivalent to the
fee differential for the fees to be constitutional under the Carlson
I analysis.**
We remanded the case to the superior court to determine if,
under the formula adopted, the nonresident fee differential
exceeded the resident contribution, including the forgone oil
2 Id. at 1342-43.
* The State had advocated the following pro rata formula: “(1) calculate
the expenditures or costs of the commercial fisheries (enforcement and
conservation); (2) determine the resident and nonresident commercial
fishers’ respective pro rata shares of those expenditures; and (3) compare
the percentage of its respective pro rata share each group is paying.” /d.
at 1343.
*' A similar plan was rejected by the Fourth Circuit, which overturned a
Virginia law that required all fishers to pay a fee determined by dividing
the state costs of fishing funded by all taxpayers by the number of fishers
in the state, requiring as a result that nonresident fishers pay an
additional $1,150 fee. Tangier Sound Waterman's Ags’n v. Pruitt, 4 F.3d
264, 268 (4th Cir.1993).
® Carlson II, 919 P.2d at 1343.
10a
revenues of the average Alaska resident.’ The superior court on
remand was also to address what budget figures should be
included in executing the formula.*
On the issues of refunds to the class and prejudgment interest,
we recognized that “the record indicates that the State agrees that
those fees which were paid after June 22, 1984, were paid under
protest sufficient to permit a refund under AS 43.10.210.”*° The
class admitted that it could not have satisfied the protest
requirement before then and thus would not seek a refund for any
fees prior to that date.°° We remanded the case to determine if
the action of filing suit constitutes sufficient notice to satisfy the
requirements of AS 43.10.210(a)*’ and to determine whether, if
the class ultimately prevails, prejudgment interest is due.**
B. Recent Case History After Remand to the Alaska
Superior Court
On July 17, 1998, Superior Court Judge Peter A. Michalski
issued an opinion addressing class decertification and
prejudgment interest. Judge Michalski denied the State’s motion
® Id. at 1344.
Id.
8 Id.
* Id.
” The statute provides: The Department of Administration shall, with the
approval of the attorney general and the Department of Revenue, refund
to a taxpayer the amount of a tax paid to the Department of Revenue
under protest and deposited in the treasury if (1) the taxpayer recovers
judgment against the Department of Revenue for the return of the tax; or
(2) in the absence of a judgment, it is obvious to the Department of
Revenue that the taxpayer would obtain judgment if legal proceedings
were prosecuted by the taxpayer.
8 Carlson II, 919 P.2d at 1344.
SILT 61 DERM RMR si ass BY
lla
for class decertification because all four components of class
certification— numerosity, commonality, typicality, and adequacy
of representation—were met. The State had argued that because
the class shifted its legal theory from common law theories of
assumpsit to a statutory argument, the original class certification
under Alaska Civil Rule 23(b) (2) must be reexamined. The
State further argued that numerosity did not exist because only
the named parties actually protested the fee differential; conceded
that commonality existed; asserted that because different permits
and fees were involved, there was no typicality of claims; and
contended that the variety of remedies that the legislature could
adopt if the fees were found to be unconstitutional rendered it
impossible for there to be adequacy of representation. The
superior court held that the State did not provide a sufficient
change in circumstances to justify decertifying the class and noted
that speculation as to how the legislature might react to a ruling
was also not grounds for decertification. Judge Michalski further
tuled that the status of a class as a “unified legal entity” overrode
the State’s interest in making distinctions between class members.
Consequently, the superior court concluded that “no distinctions
will be made among class members when determining whether
the state waived the protest requirement or whether the class met
the protest requirement.”
In addition, the superior court held that notice to the State
existed as of December 13, 1984. The State had argued that
every member of the class was required to protest to obtain any
refund. However, Judge Michalski, quoting Principal Mutual
Life Insurance v. State, Division of Insurance,” stated that the
purpose of the protest requirement was to provide the State
“with notice of the claimed tax illegality, the grounds advanced in
support of the claimed illegality, and [to] afford[ ] the state the
*” 780 P.2d 1023, 1030-31 (Alaska 1989).
12a
opportunity to fashion budget appropriations, or expenditures,
taking into account the magnitude of the claimed tax illegality.”
Because the class was defined extensively enough to include all
commercial license and permit holders, Judge Michalski held that
the State should have known the magnitude of the potential claims
and budgeted appropriately. It was therefore not necessary for
each class member to protest the fee differential because to
impose such a requirement would be a mere technicality. Judge
Michalski thus held that the protest requirement of AS
43.10.210(a) was satisfied by the certification of the class in the
suit.
As to prejudgment interest, the State asserted that AS
45.45.010, which had been invoked in Carlson II as the basis
for a determination of whether prejudgment interest was due,”
only set the maximum interest rate and did not specifically
authorize prejudgment interest. The superior court conceded that
the State’s interpretation of AS 45.45.010 was correct, but
concluded that this court intended the superior court to look
beyond just that statute in addressing the issue of prejudgment
interest. Looking to AS 43.05.280, the superior court
determined that interest was allowed on an overpayment of taxes.
Because we held in Carlson I that Title 43 applied to the present
case even though fees, and not taxes, were involved,*' Judge
Michalski held that the class could recover prejudgment interest
on their overpaid commercial fishing fees were they ultimately to
prevail on their claim.
Left undecided was the issue of what comprised the different
components of the formula derived in Carlson II. This was
resolved by the superior court at an evidentiary hearing held
919 P.2d at 1344.
4! 798 P.2d at 1280.
piaaete Dai eter a cece Pate a DMN NE MS RES a acts RSPR DPE Rg re) —
se
13a
June 12-14, 2000. The court adopted the State’s methodology
for computing the fisheries budget with regard to both direct and
indirect operating expenditures, but agreed with the class that
general government costs, capital costs, the hatcheries loan fund
subsidy, and forgone revenue from fishery resources could not be
included when computing the fisheries- budget. The resulting
fisheries budget for fiscal year 1996 was $127,289,000. Both
sides agreed on the methodology for determining Alaska’s
population, namely the yearly estimate made by the Alaska
Department of Labor, yielding a state population of 605,212 in
fiscal year 1996. The superior court agreed with the State that
the oil revenues component should “include general fund
petroleum revenues, the draw on the constitutional budget
reserve, and the net income from the Alaska Permanent Fund
appropriated each year.” In fiscal year 1996 this resulted in a
calculation that seventy-four percent of the state budget came
from oil revenues. From these figures, a maximum fee differential
of $155.64 was calculated for fiscal year 1996. The parties were
then ordered to use the methodologies adopted by the superior
court to calculate the allowable fee differential back to
December 13, 1984 and any corresponding refund that may be
necessary. This accounting has not yet been made. The State
appealed and Carlson cross-appealed.
fil. STANDARD OF REVIEW
The constitutionality of a statute and matters of constitutional
or statutory interpretation are questions of law to which we apply
our independent judgment.*” We adopt the rule of law “that is
most persuasive in light of precedent, reason, and policy.”?
“ Tesoro Petroleum Corp. v. State, 42 P.3d 531, 535 (Alaska 2002);
Sampson v. State, 31 P.3d 88, 91 (Alaska 2001).
“’ State v. Planned Parenthood of Alaska, 35 P.3d 30, 34 (Alaska 2001)
(quoting Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979)).
~
14a
Findings of fact are reviewed for clear error, a standard that
requires that great deference be given to the findings of the
superior court.*°
IV. DISCUSSION
A. We Decline To Readdress the Constitutional Issues
Already Raised and Resolved in Carlson II.
The constitutionality of charging nonresidents more for
commercial fishing licenses and permits has already been
addressed, first in Carlson I° and then reaffirmed in Carlson
11.“’ Whether we should readdress the issue here is a threshold
question. In Pratt & Whitney Canada, Inc. v. Sheehan, we
noted the importance of stare decisis but also recognized the
“ See Vezey v. Green, 35 P.3d 14, 19-20 (Alaska 2001) (citations omitted)
(“We review the trial court’s findings of fact under the clearly erroneous
standard. Under this standard, we will reject a factual finding only if we
are ‘left with the definite and firm conviction on the entire record that a
mistake has been committed.’ In addition, we have stated that ‘[w]hen a
trial court’s decision of a factual issue depends largely on conflicting oral
testimony, the trial court’s competence to judge credibility of witnesses
provides even a stronger basis for deference by the reviewing court.’”);
see also Rockstad v. Global Fin. & Inv. Co., Inc., 41 P.3d 583, 586 (Alaska
2002) (“[W]hen the trial court relies on extrinsic testimonial evidence to
provide a factual basis for its interpretation of a contract, we apply the
clearly erroneous standard in reviewing the court’s background findings
of fact.”).
*° See Matanuska Elec. Ass'n, Inc. v. Rewire the Bd., 36 P.3d 685, 700-01
(Alaska 2001) (noting that use of clearly erroneous standard of review for
factual findings in contempt proceedings “is consistent with the
deferential review used by courts in other jurisdictions”).
4© 798 P.2d at 1274-78.
47 919 P.2d at 1340-42.
PRENSA RE A ONS EEE DE a eee
lSa
need occasionally to deviate from existing precedent*® We
Stated that we “will overrule a prior decision only when ‘clearly
convinced that the rule was originally erroneous or is no longer
sound because of changed conditions, and that more good than
harm would result from a departure from precedent”? A prior
ruling may be “originally erroneous” if it proves to be
“unworkable in practice.”*° Changed conditions exist where
“related principles of law have so far developed as to have left
the old rule no more than a remnant of abandoned doctrine, [or]
facts have so changed or come to be seen so differently, as to
have robbed the old rule of significant application.”*' This law of
the case doctrine™’ maintains that issues previously adjudicated
can only be reconsidered where there exist “exceptional
circumstances”? presenting a “clear error constituting a manifest
“8 852 P.2d 1 173, 1175 (Alaska 1993) (“When a common ‘law court is asked
to overrule one of its prior decisions, the principle of stare decisis is
implicated. . . . [S]tare decisis is a practical, flexible command that balances
our Community’s competing interests in the stability of legal norms and
the need to adapt those norms to society’s changing demands.”).
® Id. at 1176 (quoting State v. Dunlop, 721 P.2d 604, 610 (Alaska 1986)).
” Pratt & Whitney Canada, 852 P.2d at 1176.
*' Id. (quoting Planned Parenthood v. Casey, 505 U.S. 833, 855 (1992)).
” Wolff v. Arctic Bowl, Inc., 560 P.2d 758, 763 (Alaska 1977) (“The doctrine
of the law of the case prohibits the reconsideration of issues which have
been adjudicated in a previous appeal in the same case. Even issues not
explicitly discussed in the first appellate opinion, but directly involved
with or ‘necessarily inhering’ in the decision will be considered the law of
the case. This doctrine is akin to the doctrine of res judicata, in that it
requires that a final judgment be rendered with respect to the issues at
hand.”) (citations omitted).
*® Patrick v. Sedwick, 413 P.2d 169, 173-74 (Alaska 1966).
l6a
injustice.”* Once a case has been heard,” there are strong
policy reasons for refusing to rehear it.”°
The State accuses the class of rearguing the same case they
brought in 1996, particularly with regard to the class’s
interpretation of Oregon Waste Systems, Inc. v. Department of
Environmental Quality, which the United States Supreme Court
decided in 1994.°’ The State dismisses the only two post-
Carlson II cases cited by the class— Fulton Corp. v.
Faulkner’® and Camps Newfound/Owatonna, Inc. v. Town of
Harrison, Maine®-as inapplicable to the present case. © The
class counters that there is no final judgment necessary to invoke
** Alaska Diversified Contractors, Inc. v. Lower Kuskokwim Sch. Dist.,
778 P.2d 581, 583 (Alaska 1989).
°° US. v. Hatter, 532 U.S. 557, 566 (2001) (“The law of the case doctrine
_ presumes a hearing on the merits.”).
°° See Pratt & Whitney Canada, 852 P.2d at 1175 (“[N]o judicial system
could do society’s work if it eyed each issue afresh in every case that
raised it.”) (quoting Planned Parenthood, 505 U'S. at 854).
7 511 US. 93 (1994).
8 516 US. 325 (1996).
*° 520 U.S. 564 (1997).
© The State further argues that if there were anything questionable about
the constitutionality of the fee differentials, the United States Supreme
Court could have taken the case on certiorari but refused to do so. 519
U.S. 1101 (1997). However, the United States Supreme Court can deny
certiorari for a variety of reasons. Therefore, denial of certiorari should
not be taken as a judgment on the merits of the case. See Bridgers v.
Texas, 532 U.S. 1034 (2001). It is easily conceivable that the Court refused
certiorari because Carlson II was partially remanded and the Court
wanted to wait to see what the final resolution of that case would be.
17a
the law of the case doctrine as delineated in Wolff-°' The class
further asserts that the law of the case doctrine is only a general
principle and not an unyielding prohibition on revisiting prior
decisions.” We agree with the State that our previous decisions
on this issue preclude its reconsideration.
The question before us is whether any legal precedent has
arisen subsequent to Carlson II to indicate that that decision was
somehow in error. A. United States Supreme Court decision
ee ee ome tae ye ie ct
3 contradicting our holding in Carlson II would indicate a clear
: error and require us to revisit the issue of the constitutionality of
: the fee differentials. We interpret Fulton and Camps Newfound
: as Clarifying the Supreme Court’s position in Oregon Waste
° Systems; these two cases do not, however, alter the law in a way
i that would cause us to rethink our decision in Carison I We
Hq therefore do not believe that such a contradiction exists, nor do
i we find any other reason to revisit our holding in Carlson II.
*' The class asserts that the law of the case doctrine is meant primarily as
a restraint on trial courts. While this may be one of the functions, it is
certainly not the exclusive purpose of the doctrine.
See Smith v. Cleary, 24 P.3d 1245, 1248 (Alaska 2001) (“The doctrine of
the law of the case is a matter of judicial policy and describes ‘the practice
of courts generally to refuse to reopen what has been decided,’ but does
not limit their power to do so.”) (quoting West v. Buchanan, 981 P.2d 1065,
1067 (Alaska 1999)) (citations omitted).
* See Smith, 24 P.3d at 1248 (“[T]he policy against reconsidering issues
adjudicated in a prior appeal or issues ‘directly involved with or
necessarily inhering’ in a prior decision applies only if there has been ‘a
final judgment ... with respect to the issues at hand.’”) (citations
omitted); Brandon v. State, 839 P.2d 400, 403-04 (Alaska App. 1992) (“The
doctrine of the law of the case prohibits the reconsideration of issues that
this court has adjudicated in a previous appeal in the same case.”).
ee ee
18a
1. Fulton Corp. v. Faulkner ™
Fulton Corp. v. Faulkner addressed an intangibles tax by the
state of North Carolina on corporate stock. The tax was
assessed on the fair market value of corporate stock owned by
North Carolina residents.©° However, residents were allowed to
take a tax deduction equal to the percentage of the corporation‘s
income that was subject to tax in North Carolina.” This resulted
in an inverse relationship between the tax that North Carolina
residents were required to pay and the extent to which the
company did its business in North Carolina, such that, for
example, if the company did all of its business within the state, a
resident owning its stock would not be required to pay any
intangibles tax on that stock.°’ The Court rejected this tax as a
violation of the Commerce Clause.“ The Court explicitly
recognized the applicability of the dormant Commerce Clause-to
the case,” but further acknowledged that a tax that facially
discriminates against interstate commerce may be constitutional if
the effect on interstate commerce is incidental” or if the tax is
* 516 US. 325 (1996).
® Td. at 327.
© Id. at 328.
®7 Id.
$8 Id. at 346.
® Jd. at 330 (“In its negative aspect, the Commerce Clause prohibits
economic protectionism—that is, regulatory measures designed to benefit
in-state economic interests by burdening out- of-state competitors.”)
(internal quotations omitted).
” Id. at 331 (“In evaluating state regulatory measures under the dormant
Commerce Clause, we have held that the first step .. . is to determine
whether it regulates evenhandedly with only incidental effects on
interstate commerce, or discriminates against interstate commerce.”)
ee ee
1 . . TT Ore sarees EE Tn ‘t ‘ EEOSRO AOR care
ilihiihCietiicisehlceat lbh dha ic tina Uda cy bdemeomiiaeaann dane cee meer ene cece :
19a
designed to make those engaged in interstate commerce bear the
same economic burden as_ those engaged in_ intrastate
commerce.’' The Court then outlined a three-part test for
determining if a compensatory tax was constitutional: (1) the
State must identify the intrastate tax burden being compensated;
(2) the tax must be shown to approximate but not exceed the
burden on intrastate commerce; and (3) the events which are
being taxed must be shown to be substantially equivalent between
interstate and intrastate commerce.”
Although Fulton will be relevant in our analysis of what
expenses can be included in the “fisheries budget,” it has no
bearing on the basic allowability of fee differentials for
(quoting Oregon Waste Sys., Inc. v. Dep't of Envtl. Quality, 511 US. 93, 99
(1994) (internal quotations and citation omitted)).
” Fulton, 516 U.S. at 331 (“[A] facially discriminatory tax may still survive
Commerce Clause scrutiny if it is a truly compensatory tax designed
simply to make interstate commerce bear a burden already borne by
intrastate commerce.”) (internal quotations and citation omitted).
” Id. at 333. The Court, however, found that none of these conditions
was satisfied by North Carolina’s intangibles tax. Jd. at 333-44. North
Carolina attempted to argue that the intangibles tax “compensates for the
burden of the general corporate income tax paid by corporations doing
business in North Carolina.” /d. at 334. North Carolina further argued
that one of the services supported through a general corporate income tax
“is the maintenance of a capital market for corporations wishing to sell
stock to North Carolina residents.” Jd. at 335. The Court found this
argument to be “unconvincing.” Jd. Drawing on Oregon Waste Systems,
the Court found the use of a tax on interstate commerce to compensate for
general revenues to be an “expansive loophole.” Jd. (quoting Oregon
Waste Sys., Inc. v. Dep't of Envtl. Quality, 511 US. 93, 105 n.8 (1994)). The
Court proceeded to reject the specific application of the intangibles tax
because of doubts that North Carolina used the tax proceeds to maintain
an intrastate capital market, and the state’s failure to detail the proportion
of the corporate income tax used to support the capital market, as well as a
lack of equivalence between out-of-state corporations and resident
shareholders. Fulton, 516 U.S. at 336-40.
20a
nonresidents because commercial fishing licenses are not objects
of interstate commerce. We held in Carlson II that “{ujnlike the
fee differentials in Oregon Waste Systems and Chemical
Waste,”> the fee differentials at issue in this case are not
predicated upon the movement of articles of commerce across
state lines, but rather upon the residency status of those applying
for permits.”’* Consequently, we held that the negative or
dormant Commerce Clause did not apply to the present case, but
rather that the fee differentials were properly analyzed under the
Privileges and Immunities Clause.”” Nothing in Fulton causes us
to abandon this position. The tax in Fulton was tied directly to
whether the corporation in question engaged in interstate or
intrastate commerce.’° It was therefore clearly “predicated upon
the movement of articles of commerce across state lines.””’ No
similar situation exists here, with the fee differential for
nonresident commercial fishers relating not to commerce but
3 Chemical Waste Mgmt., Inc. v. Hunt, 504 U.S. 334 (1992).
919 P.2d at 1340.
75 Id. at 1340-41. The Privileges and Immunities Clause does allow for
nonresidents to be taxed on their business enterprises within a state. See
Shaffer v. Carter, 252 U.S. 37, 52-53 (1920) (“That a state, consistently
with the federal Constitution, may not prohibit the citizens of other states
from carrying on legitimate business within its borders like its own
citizens, of course is granted; but it does not follow that the business of
nonresidents may not be required to make a ratable contribution in taxes
for the support of the government. On the contrary, the very fact that a
citizen of one state has the right to hold property or carry on an
occupation or business in another is a very reasonable ground for
subjecting such nonresident, although not personally, yet to the extent of
his property held, or his occupation or business carried on therein, to a
duty to pay taxes not more onerous in effect than those imposed under
like circumstances upon citizens of the latter state.”).
Fulton, 516 U.S. at 327-28.
” Carlson II, 919 P.2d at 1340. -
2la
rather to the Opportunity to utilize Alaska’s natural resources.
Consequently, Fulton does not provide a reason to revisit an
issue decided in Carlson I/.”8
2. Camps Newfound/Owatonna, Inc. y. T, own of
Harrison, Maine”
In Camps Newfound, the United States Supreme Court
stuck down a local Maine Property tax exemption for a
ATOR GES EME Te AN TREE BY ORONO NI TEs"
t charitable camp that primarily served state residents, ® -A Maine
: town had attempted to argue that the business of the camp did
H not involve articles of commerce because the services of the
; camp were “delivered and ‘consumed’ entirely within Maine.”*!
The Court noted that “[t]he attendance of these campers
necessarily generates the transportation of persons across state
” Even if we were to reach this issue, the fee differential would fall under
the exception listed in Fulton whereby states can impose a facially
discriminatory tax as long as it “make[s] interstate commerce bear a
burden already borne by intrastate commerce.” 516 U.S. at 331. We
reached this conclusion in Carlson J, where we stated that “the state may
equalize the economic burden of fisheries management; where residents
Pay proportionately more by way of foregone benefits than nonresidents
for fisheries management, nonresidents may be charged higher fees to
make up the difference.” 798 P.2d at 1278. We affirmed this decision in
Carlson II. 919 P.2d at 1341-42. Furthermore, the fee differential Satisfies
the three-part test laid out in Fulton: (1) the fee differential is
compensating for a clearly defined intrastate burden: (2) the fee
differential is limited such that it does not exceed the burden borne by
State residents; and (3) the event being taxed, namely the license to use
State fisheries, is the same for residents and nonresidents. See Fulton,
516 U.S. at 333, Carlson II, 919 P.2d at 1342-44. Therefore, even if the fee
differential were held to bear on interstate commerce, it would fall under
one of the exceptions to the negative Commerce Clause.
” 520 US. 564 (1997).
*° Id. at 568-95.
*! Td. at 572.
22a
lines that has long been recognized as a form of ‘commerce.””*”
We find there to be no direct analogy between the campers in
Camps Newfound and the movement of commercial fishers into
Alaska. The Court in Camps Newfound drew a comparison of
the summer camps to hotels.*’ This comparison indicates a
sufficient distinction from commercial fishing licenses and permits
to allay concerns about the constitutionality of the fee differential.
The Court in Camps Newfound further compared the summer
camps to a natural resource.’ The Court pointed out that there
is a long history of allowing residents and nonresidents alike equal
access to natural resources in a state.** Quoting from New
England Power Co. v. New Hampshire,” a case in which the
Court struck down a New Hampshire law attempting to place
restrictions on a public utility’s sales of hydroelectric energy
generated in the state to out-of-state consumers, the Court stated
that “w]e have ‘consistently . . . held that the Commerce Clause
. . . precludes a state from mandating that its residents be given a
preferred right of access, over out-of-state consumers, to natural
resources located within its borders or to the products derived
therefrom.””’ The Court considered the two situations
analogous because in both cases “the burden fell on out-of-state
®2 Id. at 573.
83 Id. at 573.
* Id. at 576-77: see also Hughes v. Oklahoma, 441 U.S. 322, 337-38 (1979)
(striking down as violation of Commerce Clause Oklahoma law that placed
no limits on number of minnows that could be caught and used within
state but prohibited transportation of minnows out of state for sale
because regulation of natural resources does not allow state to
circumvent Commerce Clause).
*° Camps Newfound, 520 U.S. at 576.
* 455 U.S. 331, 338 (1982).
*’ Camps Newfound, 520 U.S. at 576.
Be tte. ey int, Hb Ys 4
23a
access both to a natural resource, and to related services
provided by state residents.”*® The Court explained that “[bly
encouraging economic isolationism, prohibitions on out-of-state
access to in-state resources serve the very evil that the dormant
Commerce Clause was designed to prevent.”®°
The law in the present case, however, does not hinder or deny
access to Alaska’s natural resources, which in this case are the
fisheries. Rather, the law merely allows the State to recoup from
nonresidents the amount spent on maintaining the natural resource
of the fisheries that it would be able to recover from nonresidents
were they instead residents of Alaska. Nonresidents are being
provided with equal access to the resource on the condition that
they make a contribution to the maintenance of the resource equal
to that made by state residents.” The situation in the present
*8 Td. at 577.
®° Id. at 578.
7 Oregon Waste Systems y. Department of Environmental Quality
specifically distinguishes the situation in that case, where a higher fee
was charged for the disposal of out-of-state waste than for in-state waste
even though the cost of disposal of waste was the same no matter where
the waste was generated, from a Situation such as the present one where,
absent a higher nonresident fee, the use of the fisheries and the cost of
maintaining them imposes a higher cost on residents than on
nonresidents. 511 U.S. 93, 101 (1994). Because the present case is
properly analyzed as a Privileges and Immunities ease, the primary
concern is “to insure to a citizen of State A who ventures into State B the
same privileges which the citizens of State B enjoy.” Toomer vy. Witsell,
334 U.S. 385, 395 ( 1948). While nonresidents cannot be disadvantaged by
their movement across state lines, there is nothing requiring that they
benefit by such movement either. Nonresidents can therefore be required
to compensate the state for the state resources they use. Complete Auto
Transit, Inc. v. Brady, 430 US. 274, 281 (1977) (“[T]he Court consistently
has indicated that ‘interstate commerce may be made to pay its way,” and
has moved toward a standard of permissibility of state taxation based
upon its actual effect rather than its legal terminology.”). The holding in
24a
case can therefore be distinguished from that in Camps
Newfound. Thus, there is no reason to revisit our decision in
Carlson II.
B. The Formula for Calculating the Allowable Fee
Differential for Nonresident Commercial Fishing
Fees
In Carlson II, we held the per capita formula advanced by the
class to be, in comparison to the pro rata formula proposed by
the State, “the correct method for calculating the contribution
made by residents.”' The formula calculates the per capita
resident contribution to the cost of fisheries management,
regardless of whether this person is a fisher, as follows: (Fisheries
Budget/Alaska Population) X (percentage of State Budget from
oil revenues/1.0).”” The figure determined by this formula for any
given year is then compared to the actual fee differential charged.
If the fee differential paid by the nonresident commercial fishers,
i.e., the nonresident fee minus the resident fee for the same
access, exceeds the resident contribution as calculated by the
formula, then “the State will have failed to demonstrate that the
means employed by its statute have a substantial enough
relationship to the legitimate interest of the statute to survive
Privileges and Immunities Clause review.””°
It should be noted that the formula advanced by the class and
adopted in Carlson II is not the only conceivable means for
calculating an allowable fee differential for nonresidents. The
United States Supreme Court requires only a “reasonable relation
Carlson II accomplishes this by limiting the fee differential to the per
capita resident contribution. Carlson II, 919 P.2d at 1343.
*! 919 P.2d at 1342.
* Id. at 1343.
% Id. at 1344.
25a
between the higher fees and the higher cost.” In Carlson II, we
found the per capita formula advanced by the class to be an
acceptable method for calculating the resident contribution to
fisheries management and hence the allowable nonresident fee
differential.” We continue to uphold the applicability of this
formula.
We should clarify, however, that a refund will only be
necessary if the difference between the actual fees charged to
** Mullaney v. Anderson, 342 US. 415, 418 (1952). It is worth noting in
passing that a multitude of other states allow nonresident commercial
fishers to be charged higher fees than resident commercial fishers without
any apparent reliance upon a formula to calculate the allowable fee
differential. Delaware charges $150 for a resident commercial food fishing
license and $1,500 for a comparable nonresident license. Del. Code Ann.
tit. 7, § 914 (2001). Florida requires residents to pay $50 for a saltwater
products license for an individual and $100 for a boat. Nonresidents are
required to pay twice these amounts. Fla. Stat. 370.06(2) (a) (West 2001).
Georgia charges $12 for a resident commercial fishing or crabbing license
and $118 for a nonresident fishing or crabbing license. Ga. Code § 27-2-23
(2001). Maine establishes a fee of $89 for a commercial fishing license for a
resident operator and all crewmembers and $334 for a commercial fishing
license for a nonresident operator and all crewmembers. Me. Rev. Stat.
Ann. tit. 12, § 6501 (West 2001). Michigan charges nonresidents five
times the amount charged a resident for the same license. Mich. Comp.
Laws Ann. § 324.47330 (West 2001). For commercial eel fishing licenses
New Jersey charges nonresidents the greater of the New Jersey fee or the
amount that the nonresident would pay in their state of residence. N.J.
Stat. Ann. § 23:3-72 (West 2001). In Oregon, a resident commercial fishing
license costs $50 and a nonresident commercial fishing license costs $100.
Or. Rev. Stat. § 508.285(d), (e) (2001). South Carolina charges
nonresidents five times the amount it charges residents for a variety of
commercial equipment licenses. S.C. Code Ann. § 50-5-325 (Law Co-op
2001). Texas charges nonresidents $100 for a general commercial
fisherman’s license as compared to $15 for residents and $125 as
compared to $65 for a commercial finfish fisherman’s license. Tex. Parks
and Wild. Code Ann. § 47.002-03 (Vernon 2001).
*° 919 P.2d at 1342-43.
26a
resident and nonresident commercial fishers is substantially in
excess of the allowable fee differential indicated by the formula,
such that the actual fees do not bear a reasonable relationship to
costs not otherwise paid by nonresidents.” We leave to the
superior court on remand to determine whether proportionality
exists in any particular instance and whether a refund is due.
These determinations are subject to review using an abuse of
discretion standard.”’
% See Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287, 297
(1998) (“[A]s a practical matter, the Privileges and Immunities Clause
affords no assurance of precise equality in taxation between residents and
nonresidents of a particular State. Some differences may be inherent in
any taxing scheme, given that, ‘[l]ike many other constitutional
provisions, the privileges and immunities clause is not an absolute,’ and
that ‘[a]bsolute equality is impracticable in taxation.’ Because state
legislatures must draw some distinctions in light of ‘local needs,’ they
have considerable discretion in formulating tax policy. Thus, ‘where the
question is whether a state taxing law contravenes rights secured by [the
federal Constitution], the decision must depend not upon any mere
question of form, construction, or definition, but upon the practical
operation and effect of the tax imposed.”” (citations omitted)); Maxwell v.
Bugbee, 250 U.S. 525, 543 (1919) (“{I]}nequalities that result not from
hostile discrimination, but occasionally and incidentally in the application
of a system that is not arbitrary in its classification, are not sufficient to
defeat the law.”); see also Shaffer v. Carter, 252 US. 37, 55 (1920)
(“[W]here the question is whether a state taxing law contravenes rights
secured by that instrument, the decision must depend not upon any mere
question of form, construction, or definition, but upon the practical
operation and effect of the tax imposed.”); Travelers’ Ins. Co. v.
Connecticut, 185 U.S. 364, 371 (1902) ( “It is enough that the state has
secured a reasonably[ ] fair distribution of burdens, and that no
intentional discrimination has been made against nonresidents.”).
” See Breck v. Moore, 910 P.2d 599, 606 (Alaska 1996) (“This court
reviews an award of damages for an abuse of discretion and
independently reviews the law applied by the trial court.”).
27a
1. Components of the Sisheries budget
The findings of fact and conclusions of law by the superior
court describe the fisheries budget as being comprised of the
State’s “direct operating expenditures” and the State’s “indirect
operating expenditures.” The State in its pre-trial brief contended
that the fisheries budget consists of six components: “(1) direct
operating expenditures; (2) indirect operating expenditures; (3)
general government expenditures; (4) capital costs; (5) hatchery
loan fund subsidy; and (6) foregone revenues from fishery
resources.” Judge Michalski only accepted the first two of these
items.
The concept of a fisheries budget goes well beyond what any
particular agency requests from the State. It is necessary, then,
to determine what the State spends from its general funds on its
commercial fisheries. The record must support the belief that a
rational relationship exists between the fee differential and the
average cost of fisheries management to the resident.®
In determining the fisheries budget, Judge Michalski found that
the figures the State provided for direct Operating expenditures
were justifiable and should be included in the final calculations.
This figure totaled $126,099,100 for fiscal year 1996. Judge
Michalski also held that indirect operating expenditures could be
included in the fisheries budget as “based upon the federal
formula for identifying indirect operating expenses[.]” The class
does not challenge these indirect costs, which totaled $1,189,900
% See T, angier Sound Waterman’s Ass’n v. Pruitt, 4 F.3d 264, 267 (4th Cir.
1993) (“[T]he record does not disclose that the Commonwealth of Virginia
has shown that it created any credible method of allocating costs as
between residents and nonresidents which places the burden equally or
approximately equally upon residents and nonresidents.”).
28a
in fiscal year 1996.” Judge Michalski rejected the State’s
proposed inclusion of general government expenditures, capital
costs, the hatchery loan fund, and forgone revenue from fisheries
resources in the fisheries budget. The State challenges each of
these exclusions.
The class challenged the list of fisheries expenditures provided
by the State for direct operating expenditures as overly broad.
The State sought to include in direct operating expenditures all
those expenditures which go directly to support the commercial
fishing industry as a whole. The Carlson cases hold that
nonresidents can be made to pay for their share of the costs of
fisheries management.'” There is no precedent for determining if
direct costs, indirect costs, general government expenditures,
capital costs, the hatchery loan fund, and forgone revenue from
fisheries resources in the fisheries budget are properly to be
included in the expenses for fisheries management. Because this
issue tums upon the legality of including different types of
expenses in the budget for fisheries management, we decide the
issue as a question of law.'°' Once the parameters of these
budget components are established, the issue of calculating the
exact amount of each component is a question of fact which is
reviewed for clear error.
® The class at trial did raise some objections to the way in which the State
calculated indirect expenditures, mostly having to do with a blurring of
the line between direct and indirect expenditures. On its cross-appeal, the
class seems satisfied with the stipulated indirect expenditures in the
findings of fact. However, if the amount of direct fisheries expenditures is
adjusted, the indirect expenditures will have to be adjusted accordingly.
10 Carlson I, 798 P.2d at 1278; Carlson II, 919 P.2d at 1342-43.
101 See Moody v. Delta Western, Inc., 38 P.3d 1139, 1140 (Alaska 2002)
(holding that in question of law that is coming to court as case of first
impression, de novo standard of review is applied).
29a
a. Judge Michalski was not clearly erroneous
in adopting the State’s budget figures for
direct and indirect costs.
Judge Michalski held that both direct and indirect operating
expenditures should be included in the fisheries budget. We
agree with this conclusion. In Carlson I, we stated that the State
may “equalize the economic burden of fisheries management” by
recovering from nonresidents the forgone revenues that residents
pay for this expense.'°’ The direct operating expenditures of
fisheries management are implicitly included in this holding. The
indirect operating expenditures are also contemplated by this
holding because without the direct Operating expenditures the
- indirect operating expenditures would not have been
generated.'™
The class does not challenge the general validity of either direct
or indirect operating expenditures, Rather, it challenges the
State’s methodology for determining these figures by arguing that
some of the amounts claimed by the State as direct operating
expenses are not in fact directly associated with the costs of
fisheries management.'“ However, following arguments by the
'? Carlson I, 798 P.2d at 1278.
° See State v. Northwestern Constr., Inc., 741 P.2d 235, 240 (Alaska 1987)
(allowing inclusion of overhead costs in breach of contract suit against
State).
'** As the class notes, the State in Carlson J identified four sources as the
“aggregate cost of fisheries management’-the annual operating budget
of the Commercial Fisheries Entry Commission, 40.6% of the annual
operating budget of the Department of Public Safety, the annual operating
budget of the Division of Commercial Fisheries of the Department of Fish
and Game, and the annual operating budget of the Fisheries Rehabilitation
Enhancement and Development Division of the Department of Fish and
Game. 798 P.2d at 1272. In Carlson IT, the State similarly provided a chart
in defense of its proposed pro rata formula listing “Expenditures By Four
Agencies For Commercial Fishery Management.” 919 P.2d at 1346. This
2 ale ae een
30a
parties on the appropriateness of the inclusion of different sub-
components within the direct operating expenditures, Judge
Michalski found that “the State’s methodologies for valuing
[direct and indirect operating expenditures] are appropriate.”
The class presents no persuasive argument on cross-appeal that
this determination by the superior court is clearly erroneous.
Judge Michalski agreed with the testimony by the State’s expert
witness that the disputed costs were directly related to the costs
of fisheries management.'® The testimony was sufficient to show
that Judge Michalski was not clearly erroneous in his findings.
Therefore, we affirm the findings of the superior court with regard
to the methodology for determining direct and indirect operating
expenditures and the corresponding calculations.
chart goes from 1982 to 1989 and ranges from $29.0 million to $34.8 million;
the amount in 1989 was $29.9 million. /d. The State presently seeks to
include in the direct operating costs expenses beyond those limited to the
four agencies it previously advanced. However, in the previous iterations
of this case, the State did not have the benefit of knowing the formula by
which the allowable fee differential is to be calculated. Therefore, the
State was justified in offering a different definition of the fisheries budget
than the one under which it previously operated since this earlier
definition had effectively been rendered moot. Judge Michalski was
consequently not in error to hear arguments on this matter.
'° For example, the second largest single expense for the direct operating
costs is that of the “shared fish taxes.” The class argues that these funds
should not be counted as revenues because they are provided to local
municipalities to defray fisheries-related impacts. The State responds that
the revenue from the taxes goes to the general fund and is only then
appropriated to municipalities. Judge Michalski did not rule explicitly on
this issue. We hold that there is no difference between the shared fish
taxes and other components of the fisheries budget. Judge Michalski
accepted in whole the State’s determination of the direct operating
expenditures, which included the shared fish taxes. While testimony was
offered that the taxes are essentially just a bookkeeping maneuver, it was
not clearly erroneous for Judge Michalski to find them otherwise.
3la
b. General governmental expenditures
cannot be included in the fisheries budget.
The State argues that it should be able to include “general
governmental expenditures,” such as “corrections, health care,
and education,” in determining the fisheries budget because if
these services were not provided “the commercial fishing industry
would either be inefficient or could not exist.” The State further
argues that these figures are tied to population and economic
growth in the sense that an increase in commercial fishing leads to
an increase in population, which results in a Corresponding growth
in state expenditures on basic services, !
Toomer v. Witsell, a United States Supreme Court case on
which the prior Carlson decisions rely, stated hypothetically that
a fee differential allowing the State to recover conservation
expenditures from taxes which only residents pay would be
permissible.'*’ Carlson I and Carlson II discussed allowing a
fee differential to “equalize the economic burden of fisheries
management.”"”* Neither conservation expenditures nor fisheries
Management is as expansive as the general governmental
expenditures that the State contends should be included in the
fisheries budget. Judge Michalski noted that “the laws that relate
to a particular case or the laws of the state are not necessarily the
Same as the economic laws and the rules that apply to things.”
While in economic terms the State may bear much of the cost of
goverment generated by the fishing industry, this does not
' The State and the class disagree as to the admissibility of expert
testimony on the issue of the inclusion or exclusion of general
governmental expenditures in the total fisheries expenditures; this,
however, is a question of law and thus does not turn on expert testimony.
We therefore need not address their dispute.
'°7 334 US. 385, 399 (1948).
'8 Carlson I, 798 P.2d at 1278; see also Carlson IT, 919 P.2d at 1342.
MEER, WCE 5 ow eee
32a
translate into a legal justification for including these costs in the
fisheries expenditures.
There is clear precedent against including the general costs of
government in any fee differential for nonresidents as part of a
compensatory tax scheme. Citing Oregon Waste Systems,
Fulton noted “the danger of treating general revenue measures as
relevant intrastate burdens for purposes of the compensatory tax
doctrine." And Camps Newfound described Chemical
Waste as holding that “special fees assessed on nonresidents
directly by the State when they attempt to use local services
impose an impermissible burden on interstate commerce.”"'® The
Supreme Court, rejecting the State’s claim that its surcharge on
out-of-state garbage was compensatory in nature, stated in
Oregon Waste Systems that permitting discriminatory taxes on
interstate commerce to compensate for charges purportedly
included in general forms of intrastate taxation “would allow a
state to tax interstate commerce more heavily than in-state
commerce anytime the entities involved in interstate commerce
happened to use facilities supported by general state tax funds.”
We decline respondents’ invitation to open such an expansive
loophole in our carefully confined compensatory tax
jurisprudence.”""'
Nonresident commercial fishers may be expected to reimburse
the State for a share of the costs of fisheries management. But to
include general governmental costs in the manner in which the
1 Fulton Corp. v. Faulkner, 516 US. 325, 335 (1996).
'!° Camps Newfound/Owatonna, Inc. v. Town of Harrison, Maine, 520
U.S. 564, 578 (1997) (citing Chemical Waste Mgmt., Inc. v. Hunt, 504 U.S.
334, 342 (1992)).
''! Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93, 105 n.8
(quoting Gov’t Suppliers Consolidating Servs., Inc. v. Bayh, 975 F.2d
1267, 1284 (7th Cir. 1992)).
-
33a
State suggests would expand the scope of the fisheries budget
beyond the bounds of constitutionality.
c. Capital costs directly supporting the
commercial fishing industry can be
included in the fisheries budget.
The State claims that both those capital expenditures that
directly support the commercial fishing industry and general
Capital expenditures driven by population growth should be
included in the fisheries budget. Judge Michalski rejected the
inclusion of all capital costs in the fisheries budget, and the State
has appealed.
The generai capital expenditures are rejected for the reasons
given in the previous section. As for the capital expenditures
directly related to the commercial fishing industry, such as for
boat harbors and salmon hatcheries, those costs should be
included in the fisheries budget to the extent that they are not
already included in the direct operating expenditures. These
direct capital expenditures are a Clearly identifiable result of the
costs of fisheries management and as such justify the contribution
of nonresidents to their payment thereof. Because the superior
court rejected outright the inclusion of all capital costs, no
differentiation was made between general capital costs and those
directly supporting the commercial fishing industry. Such a
determination will be necessary upon remand. If these costs are
already included in the direct operating expenditures, the State
will not be allowed to count them twice.
d. The hatchery loan fund subsidy should be
included in the fisheries expenditures.
The State operates a revolving loan fund to support
investments in developing and Operating fish hatcheries and other
fish enhancement projects. The legislature created the F ishing
Enhancement Revolving Loan Fund in 1977 to provide loans with
=. 2. a rer
34a
favorable interest rates and repayment terms to private fishing
corporations. By subtracting the present value of the future loan
returns from the amount presently loaned, the State’s expert was
able to calculate what he considered a subsidy for the hatchery
loan fund. However, testimony also was given that the funds
collected in loan repayments do not go into the general fund but
rather are used for new loans. Judge Michalski held that the
supposed deficit incurred by the hatcheries loan fund was not a
budgetary item “within the meaning of Carlson II” and thus could
not be included in the fisheries expenditures for the purpose of
determining nonresident contributions.
The State contends that the loan subsidy represents forgone
revenues that the State could otherwise spend at present value.
We agree. The hatcheries loan fund certainly benefits the
commercial fishing industry. As such, it can be included in the
costs of maintaining commercial fisheries. The State’s expert at
trial calculated the cost to the State attributed to the hatcheries
loan fund to be approximately $2.3 million for 1996. Because
there appears to be some confiision as to whether the State is
presently transferring any funds to the hatcheries loan fund and
because thé superior court did not make a ruling on what this
amount would be, we remand on this issue for a determination of
the yearly amount expended by the State to support this program.
As with the capital costs, the expenditure for the hatcheries loan
fund must not already have been included in the direct operating
expenditures.
e. Forgone revenues from commercial fishery
resources cannot be included in_ the
fisheries expenditures.
The State argues that because Alaska has the authority to
manage its fish resources and could manage them in a way that is
more profitable than the current method of fish management, it
incurs an opportunity cost that should be included in the fisheries
35a
expenditures. The State cites a District of Columbia Circuit case
in which the court remanded for consideration of whether a City
could include “the value [the City] could have obtained in the best
alternative use” in its calculation of the fair market value of the
airfield land for the Purpose of calculating user airplane landing
fees.''? That same court also held that opportunity costs can be
used in setting utility rates.''? Both of these property or energy
rate value assessments, however, are fundamentally different from
the State making a policy decision to allocate and utilize its
resources in a particular way. The State has consciously chosen
the manner in which it manages its fish, and has therefore decided
to forgo any revenues that could be obtained from alternate forms
of management. The State cannot recoup from nonresidents the
possible revenue it forgoes in making policy decisions regarding
its fisheries management. We therefore affirm the holding of
Judge Michalski to exclude forgone revenues from the cost of
commercial fisheries management. :
2. What can be included in oil revenues?
The class argues that the trial court erred by including interest
income deposited into state Savings accounts as a part of oil
revenues. The class contends that because nonresidents do not
benefit from deposits into the permanent fund and the
constitutional budget reserve, those amounts should not be
included in the calculation of oil revenues. However, because the
class proposes including deposits into the permanent fund and the
constitutional budget reserve in the figure for the total state
budget, by which the oil revenues would be divided, its
recommended calculation of the percentage of the state budget
derived from oil revenues is clearly unworkable. One cannot
112
City of Los Angeles Dep't of Airports v. United States Dep't of Transp.,
103 F.3d 1027, 1034 (D.C. Cir. 1997).
' See Pa. Elec. Co. v. FER C., 11 F.3d 207, 209-10 (D.C. Ci: 1993).
8 RRR. SRS iS ea a apes amapmara
36a
exclude deposits into state savings accounts from the numerator
of the formula determining the percentage of the state budget that
is derived from oil revenues but include such deposits in the
denominator, as this would inappropriately and dramatically
reduce the percentage of the state budget derived from oil
revenues.''* Apples must be divided by apples, not oranges.
The class alternately proposes that investment earnings be
removed from both the oil revenues and the total state budget
expenditures by which the oil revenues are divided to determine
the percentage of the budget funded by oil revenues. The class
supports its position by noting that we have previously relied
upon budget figures that included a variety of petroleum taxes,
royalties, and rents, but not any interest income, in determining
petroleum-related income.''* Furthermore, the State, in its bi-
yeatly REVENUE SOURCE BOOK, uses this methodology in
determining the percentage of unrestricted petroleum revenue as
compared to unrestricted general funds.''®
The State counters by arguing that because the source of the
funds that generates the interest income is ultimately petroleum-
derived, it should be included in the oil revenues component. It
should not matter, the State contends, how these funds are spent,
only how they are derived, even if the expenditure of the funds is
of no benefit to nonresidents. The State proceeds to demonstrate
how the 74% figure was calculated by including the petroleum-
derived revenues deposited in state savings accounts in both the
''* The class approach yields a figure of 29.7%, far less than the 74%
adopted by Judge Michalski.
"'S Trustees for Alaska v. State, Dep’t of Natural Res., 795 P.2d 805, 810
(Alaska 1990).
''® This calculation yie?ds the 86% figure previously relied upon by this
court in Trustees for Alaska. 795 P.2d at 810.
37a
numerator and denominator of the percentage of the state budget
derived from oil revenues.
Judge Michalski accepted the State’s methodology fer
calculating the percentage of the state budget derived from oil
revenues, resulting in a figure of 74%. This calculation includes
the interest income and permanent fund expenditures in both the
numerator and the denominator. As with the basic formula for
maximum allowable fee differential, there is no single correct
method by which to calculate the percentage of the state budget
derived from oil revenues. The key inquiry is that the
methodology adopted bear a reasonable relationship to the figure
to be calculated. The decision of the Superior court to adopt the ©
State’s method of calculation is therefore reviewed for an abuse
of discretion.''’ Because the State’s methodology provides a
reasonable means for calculating the percentage of the state
budget derived from oil revenues, we find there to be no abuse of
discretion and accordingly affirm the superior court.
'"” See Seattle Master Builders Ass'n v. Pacific Northwest Elec. Power &
Conservation Planning Council, 786 F.2d 1359, 1370 (9th Cir. 1986) (“The
choice of methodology is a highly technical question which falls within
the unique expertise of the Council. Unless an abuse of discretion is
demonstrated, this court will not substitute its judgment on particular
testing methodology.”); United States Steel Group-A Unit of USX Corp.
v. United States, 873 F. Supp. 673, 700 (Ct. Int’l Trade 1994) (holding that
choice of methodology by trade commission was subject to review by
abuse of discretion standard); see also Dansereau v. Ulmer, 955 P.2d 916,
919 (Alaska 1998) (holding that superior court did not abuse its discretion
in adopting particular methodology to calculate number of hours litigants’
attorneys worked for purpose of determining award of attorney’s fees);
Gallant v. Gallant, 882 P.2d 1252, 1257 (Alaska 1994) (reviewing for abuse
of discretion allocation of child support in novel case involving
nonparental custody).
38a
C. The State Has Previously Conceded that the Class
Met the Protest Requirement.
The class filed suit on June 22, 1984, questioning the “legality
of the State of Alaska’s discriminatory fees for nonresident
commercial fishing permits and licenses.” The class on behalf of
which the suit was filed was defined as “all persons who
participated in one or more Alaska commercial fisheries at any
time who paid nonresident assessments to [the] State for
commercial or gear licenses or permits.’ On December 10,
1984, the State entered its nonopposition to certification of the
case as a class action, though it did reserve the nght to request
that the class be divided into subclasses. On December 13,
1984, Superior Court Judge Milton M. Souter entered an order
certifying the class. A later motion to decertify the class was
denied by Judge Michalski on July 17, 1998. Judge Michalski
held that the elements of numerosity, commonality, typicality, and
adequacy of representation existed to justify continued
certification of the class.
Alaska Statute 43.10.210(a) requires that in order for a refund
to be given on an illegal tax, the tax must have been paid under
protest. We held in Carlson J that a license was a tax within the
meaning of the refund statute and that therefore the protest
requirement applied to the class.''* In Principal Mutual Life
Insurance Co. v. State, Division of Insurance, we held that
“(t]he protest requirement called for by AS 43.15.010(a)'"”
serves... as proof that the payment of the tax in question was
involuntarily made and it provides notice to the taxing authority
that the tax is claimed to be illegal as well as the basis of the
8 798 P.2d at 1280.
''? The statute has subsequently been renumbered as AS 43.10.210(a).
39a
taxpayer’s assertion.”'”” A requirement of protest provides the
State with notice of more than mere Opposition to the tax-it
provides the state with notice that it may soon be facing a lawsuit
to recover the allegedly illegal amount. Once on notice, the state
can budget accordingly to prepare for the possibility of losing at
trial and being forced to refund the disputed amount.!2!
Judge Michalski held that the purpose of the notice
requirement was met by the certification of the Class action suit.
The certification of a lawsuit over allegedly illegal taxes puts the
State on notice that the taxes are being protested and that future
tax recovery may be subject to being refunded. The State,
however, argues that notice of named plaintiffs does not translate
into notice of the entire class of plaintiffs and that at the very least
the class should not be entitled to retrospective relief !22 Judge
Michalski held that the expansive definition of the class as
containing all fee-paying commercial fishers gave the state
sufficient notice of the potential scope of the recovery. Judge
Michalski further held that the certification of a class action suit
obviated the need for individual protest by each class member,
'° 780 P.2d 1023, 1030 (Alaska 1989).
"" Id. at 1030-31 (“The burden of requiring a taxpayer to file a protest at
the time of payment of the tax is at most minimal. On the other hand the
requirement of a protest serves the important function of providing state
government with notice of the claimed tax illegality, the grounds
advanced in support of the claimed illegality, and affords the state the
opportunity to fashion budget appropriations, or expenditures, taking into
account the magnitude of the claimed tax illegality. We think these are
significant considerations which warrant the retention of the requirement
of a protest.”).
‘ The State asserts that an early superior court argument created an
estoppel argument against retroactive fees. The protest issue of this
superior court opinion, however, was remanded for further inquiry in
Carlson I, albeit without specifically addressing the estoppel argument
alluded to by the superior court. 798 P.2d at 1280.
40a
reasoning that “[rjequiring individual protest. for each class
member would do nothing to further inform the state. Instead, it
would be merely an exercise in formality and technicality.”
The State has long since conceded that, as to fees paid after
June 22, 1984, the protest requirement was met by the filing of
the class action suit and that sufficient notice had been given “for
purposes of AS 43.10.210(a).” In its reply brief in the superior
court, dated September 2, 1992, the State asserted:
Plaintiffs are wrong when they assert that the State has
conceded the right to a refund of any unconstitutional fees paid
after the date plaintiffs filed their lawsuit. While this point is
irrelevant to the issue immediately before the court, the State
concedes only that the lawsuit serves as an adequate notice of
protest for purposes of AS 43.10.210(a). In other words, all
fees paid after June 22, 1984, by nonresident commercial
fishers who ultimately elect to join the class, in excess of fees
paid by similarly situated resident commercial fishers, are
deemed to have been paid under protest. The protest
requirement of AS 43.10.210(a), however, is merely one
precondition to the “[rjecovery of overpayments and
protested payments.” [citing an earlier memorandum] The
State does not concede that plaintiffs have satisfied any other
procedural or substantive requirements that may apply. '”°
consistent with the State’s earlier admissions that it was provided
with sufficient notice. In an opposition to plaintiff's motion for a
'3 This statement was given in a reply brief opposing waiver of the
protest issue. The State made a similar statement on March 1, 1991 in a
memorandum in support of a motion for summary judgment: “The state
does not dispute here that the differential paid by nonresidents to engage
in commercial fishing since the date that this class action was filed,
June 22, 1984, have been paid under protest.”
4la
preliminary injunction, dated February 19, 1991, the State
asserted that
[w]ith regard to any nonresident differentials which have been
received by the state since this class action was filed, the state
views the lawsuit itself as a protest giving the state the
contemplated notice. Thus, for any differentials received
between now and the conclusion of this case, should any
portion of those be determined to be invalid, plaintiffs can avail
themselves of the statutory refund remedy identified by the
Supreme Court to obtain damages.
The State presently contends that prior to Judge Michalski’s
ruling in 1998 it had no reason to believe that it would be
required to pay a refund and thus should not be required to pay a
refund retrospectively all the way back to 1984. However, the
purpose of the protest requirement, as stated above, is to give the
State notice that it may eventually be required to pay a refund.!24
The fact that the litigation may take a long time to resolve and that
the refund may thus grow increasingly large does not absolve the
State of its eventual responsibility to pay. Thus, the only relevant
question is whether the filing of a class action gives the State
Sufficient notice that every member of the class may be due a
refund.'** We agree with Judge Michalski that it does.
'* See Principal Mutual Life Ins., 780 P.2d at 1030-31.
"°° The class argues that federal due process prevents the denial of
retroactive tax recovery under McKesson Corp. v. Division of Alcoholic
Beverages & Tobacco, 4% US. 18, 39 (1990) (“To Satisfy the
requirements of the Due Process Clause, therefore, in this refund action
the State must provide taxpayers with, not only a fair Opportunity to
challenge the accuracy and legal validity of their tax obligation, but also a
‘clear and certain remedy,’ for any ¢rroncous or unlawful tax collection to
ensure that the opportunity to contest the tax is a meaningful one.”)
(citations omitted). In McKesson, the United States Supreme Court
ordered that a refund be given for an illegal tax even though Florida
RAT IE MRT Reema amma
42a
The State cites Era Aviation in support of its claim that a
separate protest must be attached to each separate complaint.'°
Era Aviation involved a suit by several air carriers to protest
increased landing fees at rural airports.'’ After the original set of
plaintiffs were granted summary judgment, a different set of air
carriers tried to join the suit and recover fees retroactively.'”*
We held that the second set of air carriers did not satisfy the
necessary protest requirement at the time of the payment of the
fees, even though they had stated their opposition to the landing
fees on numerous occasions and even though the suit by the
original set of air carriers put the state on notice that the fees
might be illegal.'”? As the State is careful to point out, however,
in Era Aviation we expressly declined to answer the question
whether a class action suit would satisfy the protest
claimed this would cause the state serious economic injury. 496 U.S. at 51
n.35 (“We reject respondents’ intimation that the cost of any refund
considered by the State might justify a decision to withhold it. Just as a
State may not object to an otherwise available remedy providing for the
return of real property unlawfully taken or criminal fines unlawfully
imposed simply because-.it finds the property or moneys useful, so also
Florida cannot object to a refund here just because it has other ideas
about how to spend the funds.”). The class errs, however, when it
invokes Harper v. Virginia Department of Taxation, 509 US. 86, 97 (1993)
(holding that federal remedy for unlawful tax applies not only to case at
issue but also to parties in all other open cases). In the present case, the
class either exists as a whole or it does not exist at all for the purposes of
the protest requirement. There are thus no other open cases to which a
due process concern could apply.
26 Era Aviation, Inc. v. Campbell, 915 P.2d 606, 609 (Alaska 1996)
(“[U]nder common law as well as under statute, a protest at the time of
payment is a prerequisite for an action to recover taxes.”).
'27 Td. at 607. The original plaintiffs did not form a class.
'28 Id. at 607-08.
'29 Id. at 612.
43a
requirement.'"” Era Aviation is thus not dispositive of the
present situation.
In a further attempt to prove that the protest requirement
would not be satisfied by a class action, the State cites a series of
cases where class status has been denied for failure to satisfy the
proper administrative procedures for protest.'*' These cases,
however, are not applicable to the present case, where the class
has already been certified. The present class satisfied the
necessary procedural hurdles, and the State did not object to the
certification of the class. Furthermore, the State, because it was
the entity issuing the commercial fishing licenses and permits, had
ample opportunity to keep records of those to whom these
licenses and permits were being issued. It is therefore
disingenuous for the State to claim that it was somehow caught
unaware as to the ultimate size of the class or the potential
recovery. For this reason, we affirm the holding of Judge
Michalski that the protest and notice requirement was satisfied.
As to the date from which the fees can be measured, Judge
Michalski selected December 13, 1984, which was the day the
class was certified." The class does not challenge the date of
' Td. at 612-13 (noting that state’s ability to determine accurately its
potential liability for fee refunds “would be undermined if a single lawsuit
(which was not even a class action) were deemed sufficient notice to make
all payers under the regulation eligible for refunds”).
'3!' Aronson v. City of Pittsburgh, 98 Pa. Cmwith. 1, 510 A.2d 871, 873
(1986); Aronson v. Commonwealth, 401 Mass. 244, 516 N.E.2d 137, 144
(1987).
'? The class action suit was filed on June 22, 1984. In Carlson II, we held
that “the record indicates that the State agrees that those fees which were
paid after June 22, 1984, were paid under protest sufficient to permit a
refund under AS 43.10.210.” 919 P.2d at 1344. As noted above, the State
several times also stated that the protest requirement was met as of
June 22, 1984. These prior statements, however, do not require us to
44a
certification as the date from which fees can be measured. We
therefore affirm December 13, 1984 as the date from which fees
can be measured.
1. Named class members can sue for tax relief on
behalf of unnamed class members.
Even if a class action suit constitutes notice, there is a separate
question as to whether the named class members can sue on
behalf of the unnamed class members without the unnamed class
members themselves protesting the increased nonresident fees.
Judge Michalski held that the class was to be treated as a unified
legal entity and that therefore absent and non-protesting (i.e.,
unn
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