search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Carlson v. Commercial Fisheries Entry Commission (6/21/96), 919 P 2d 1337
NOTICE: This is subject to formal correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the
attention of the Clerk of the Appellate Courts, 303 K Street,
Anchorage, Alaska 99501, phone (907) 264-0607, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
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, )
) Supreme Court No. S-6590
) Superior Court No.
v. ) 3AN-84-5790 CI
STATE OF ALASKA, COMMERCIAL ) O P I N I O N
FISHERIES ENTRY COMMISSION, )
Appellee. ) [No. 4356 - June 21, 1996]
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Peter A. Michalski, Judge.
Appearances: Loren Domke, Loren Domke, P.C.,
Juneau, for Appellants. Stephen M. White,
Marie Sansone, Assistant Attorneys General,
and Bruce M. Botelho, Attorney General,
Juneau, for Appellee.
Before: Rabinowitz, Matthews, Compton and
Eastaugh, Justices. [Moore, Chief Justice,
RABINOWITZ, Justice, dissenting.
This is the second appeal from a class action challenging
the State of Alaska's practice of charging nonresident commercial
fishers licensing and limited entry permit fees which are three
times greater than the fees charged resident commercial fishers.
The class is comprised of "all persons who participated in one or
more Alaska commercial fisheries at any time who paid non-resident
assessments to the State for commercial or gear licenses or
permits." Carlson v. State, 798 P.2d 1269, 1270 (Alaska 1990)
(Carlson I). In this appeal the class challenges the superior
court's grant of summary judgment to the State. The class contends
that the superior court misinterpreted our mandate on remand and
that the fee differential violates the Commerce Clause (EN1) and
Privileges and Immunities Clause (EN2) of the United States
Constitution. We reverse and remand.
II. FACTS AND PROCEEDINGS
This appeal, like Carlson I, contests the
constitutionality of AS 16.05.480, AS 16.43.160 and Alaska
Administrative Code (AAC) 20.05.240. (EN3) Under AS 16.05.480 a
resident pays $30 per year for a commercial fishing license, while
a nonresident pays $90 per year for the same license. Similarly,
under 20 AAC 5.240(a)(1)-(4) nonresidents pay three times more for
limited entry permits. The fee for limited entry permits is
determined by the value of the permit; (EN4) the fee range, for
residents, is from $50 to $250. (EN5) See 20 AAC 5.240(a)(1)-(4).
In Carlson I the class alleged: (1) violations of the
Privileges and Immunities Clause and Commerce Clause; and (2) the
absence of State statutory authority to charge this type of fee
differential prior to January 1983. We rejected the class's second
contention that the statute did not authorize the 3:1 differential
prior to 1983. Carlson I, 798 P.2d at 1278-79. However, as to the
first issue we remanded the case and imposed on the State the
burden of persuasion in defending the Commerce Clause and
Privileges and Immunities challenges. Id. at 1274-78. With
regard to the Privileges and Immunities Clause question we held:
Commercial 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. . . . Thus
the questions here are whether the state has a
substantial reason for the discrimination, and
whether the 3:1 fee ratio bears a sufficiently
close relationship to the goal.
Carlson I, 798 P.2d at 1274 (citations omitted). In imposing the
burden of persuasion on the State on this issue we adopted the
Wisconsin Supreme Court's analysis. See Taylor v. Conta, 316
N.W.2d 814, 823 n.17 (Wis. 1982). In doing so we held that "the
burden of persuasion to demonstrate justification is properly on
the state."(EN6) Carlson I, 798 P.2d at 1276.
We framed the issue on remand as, "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." Carlson I, 798 P.2d at 1278.
We also held that the revenues derived by the State from petroleum
production are "analytically equivalent to 'taxes which only
residents pay.'" Carlson I, 798 P.2d at 1278.
On remand the parties cross-moved for summary judgment,
each proposing a different method by which to compare the fees
being paid by nonresidents with the expenditures of state revenues
to which the nonresidents make no contribution (the costs to
residents). The class proposed what it termed the per capita
formula. The per capita formula computes the contribution made by
each resident to the cost of maintaining the commercial fisheries
and compares this with the fee differential. The State proposed
what it termed the pro rata formula. The pro rata formula in
effect compares the total contributions made to the cost of
commercial fisheries by residents to the total fees paid by
nonresidents. The superior court concluded that under this method
of analysis, residents paid by way of taxes (or their analytical
equivalent) substantially more than nonresident fishers paid. In
reaching this conclusion, the superior court applied the State's
proposed formula to the categories of expenses accepted by us in
Carlson I. (EN7) As the licensing and permitting fees charged
nonresidents did not exceed the amount paid by residents, the
superior court concluded that the differential did not violate
either the Commerce Clause or the Privileges and Immunities Clause.
The class appeals.
A. Standard of Review
Both parties correctly argue that the Commerce Clause and
the Privileges and Immunities Clause challenges to AS 16.05.480,
AS 16.43.160 and 20 AAC 5.240 present questions of constitutional
law which we review de novo. See Wright v. Black, 856 P.2d 477,
479 (Alaska 1993). The issue of whether the superior court erred
in adopting the pro rata formula to calculate the contribution to
commercial fisheries management made by residents is also an issue
of law which we review de novo. Langdon v. Champion, 745 P.2d
1371, 1372 n.2 (Alaska 1987).
B. The Challenged Fee Differential under the Commerce Clause
The class contends that two recent Supreme Court
decisions require that the different fees charged to residents and
nonresidents under AS 16.05.480, AS 16.43.160 and 20 AAC 5.240 be
analyzed under the Commerce Clause. (EN8) See Oregon Waste Systems
v. Dep't of Envtl. Quality, 114 S. Ct. 1345, 1350 (1994); Chemical
Waste Management, Inc. v. Hunt, 504 U.S. 334 (1992). The class
argues that the fee differentials in these statutes and regulations
violate the negative Commerce Clause. (EN9) The class argues
AS 16.05.480, AS 16.43.160 and 20 AAC 5.240 are per se invalid
under the Commerce Clause. A substantial portion of the class's
briefs is devoted to analogizing the different commercial licensing
and permit fees charged residents and nonresidents to surcharges
the states of Oregon and Alabama imposed on out-of-state waste.
The Supreme Court struck down these surcharges. Oregon Waste
Systems, 114 S. Ct. at 1355; Chemical Waste, 504 U.S. at 334. The
class contends that under the reasoning employed in Oregon Waste
Systems and Chemical Waste, the 3:1 fee differential is tantamount
to "differential treatment of in-state and out-of-state economic
interests that benefits the former and burdens the latter." Oregon
Waste Systems, 114 S. Ct. at 1350.
Oregon Waste Systems does not require that the fee
differential challenged herein be evaluated under the Commerce
Clause. In both Oregon Waste Systems and Chemical Waste, the
Court found taxes imposed on out-of-state waste which were greater
than the taxes imposed on in-state waste violated the negative
Commerce Clause. In applying the negative Commerce Clause analysis
in Oregon Waste Systems, the Court emphasized that the Commerce
Clause prohibits states from unjustifiably discriminating against
or burdening the interstate flow of articles of commerce. Oregon
Waste Systems, 114 S. Ct. at 1349. The Court went on to hold that
"[i]t is well-established, however, that a law is discriminatory if
it 'tax[es] a transaction or incident more heavily when it crosses
state lines than when it occurs entirely within the State.'"
Oregon Waste Systems, 114 S. Ct. at 1350 (quoting Chemical Waste,
504 U.S. at 342).
Unlike 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. The Supreme Court has consistently analyzed statutes
which purportedly classify on the basis of residency under the
Privileges and Immunities or the Equal Protection Clauses. (EN10)
In Toomer v. Witsell, 334 U.S. 385 (1948), the Court evaluated
South Carolina shrimping license fees, which were one hundred times
greater for non-residents than for residents, under the Privileges
and Immunities Clause. There the Court observed that the
Privileges and Immunities Clause "was designed to insure to a
citizen of State A who ventures into State B the same privileges
which the citizens of State B enjoy."(EN11) Toomer, 334 U.S. at
395. C. The Challenged Fee Differential under the
Privileges and Immunities Clause
The class contends also that the nonresident fee
differential violates the Privileges and Immunities Clause of the
United States Constitution. The Privileges and Immunities Clause
is not absolute. "[I]t does not preclude disparity of treatment
[of citizens of other states] in the many situations where there
are perfectly valid independent reasons for it." Toomer, 334 U.S.
at 396. A claim that a residency classification violates the
Privileges and Immunities Clause requires a two-step inquiry:
First, the activity in question must be
sufficiently basic to the livelihood of the
Nation . . . as to fall within the purview of
the Privileges and Immunities Clause. . . .
Second, if the challenged restriction deprives
nonresidents of a protected privilege, we will
invalidate it only if we conclude that the
restriction is not closely related to the
advancement of a substantial state interest.
Supreme Court of Virginia v. Friedman, 487 U.S. 59, 64-65 (1988)
(internal quotations and citations omitted).
We determined in Carlson I that commercial fishing is
a sufficiently important activity to come within the purview of the
Privileges and Immunities Clause. 798 P.2d at 1274. However, the
class claims that for us to find for the State on the relatedness
prong of the inquiry, the State "must demonstrate that behind the
nonresident surcharge or differential is a [sic] (1) substantial
reason advancing a legitimate State policy and (2) the means
employed by the statutory scheme must be closely tailored and have
a substantial relationship to a legitimate interest served by the
statute." Appellant's Brief at 27.
We have already made the first inquiry. In Carlson I, we
held that equalizing the burden of fisheries management, "where
residents pay proportionately more in foregone benefits than
nonresidents for fisheries management,"was a substantial State
interest. Id. at 1278. However, we concluded that the record did
not contain sufficient evidence to determine whether the
differential in fees charged residents and nonresidents was
sufficiently related to this interest to justify such disparate
treatment. Id. at 1278.
The class questions the relatedness of the fee
differential to the burden of fisheries management borne by
residents. It analogizes this case to other Supreme Court cases,
and challenges our conclusion in Carlson I that petroleum revenues
are the analytical equivalent of taxes. The class argues that
Oregon Waste Systems prohibits the State from arguing that the fee
differentials do not discriminate against nonresidents because they
merely impose on nonresidents their share of the costs of fisheries
management. It claims that under the reasoning of Oregon Waste
Systems, neither general tax revenues nor oil royalty revenues can
be viewed as the residents' contributions to fisheries management.
There are two flaws with the class's argument. First,
Oregon Waste Systems was a Commerce Clause case. See Oregon Waste
Systems, 114 S. Ct. at 1349. Although the reasoning in Privileges
and Immunities Clause cases has been used in Commerce Clause cases,
it is not analytically sensible to do the reverse in this case. In
this case the Privileges and Immunities Clause question turns on
whether there is a sufficient relationship between the higher fees
charged nonresidents and the State's interest in imposing on
nonresidents their share of the costs for managing the State's
commercial fisheries. In Oregon Waste Systems, the issue was
whether the interstate and intrastate taxes are imposed on
sufficiently equivalent events such that they could be considered
proxies for each other. See Id. at 1352-53. These are different
inquires for which the analysis is not interchangeable. (EN13)
Second, the class's argument demonstrates a lack of
understanding of our holding in Carlson I. Contrary to the class's
contentions, we did not advocate the kind of fee-shifting denounced
by the Supreme Court in Oregon Waste Systems. In Carlson I we did
not advance a compensatory tax doctrine which would impose on
nonresidents their entire share of the costs of commercial
fisheries management, while resident fishers' share of these costs
was borne by the entire population of the State. Rather, we held
that the issue is
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
Carlson I, 798 P.2d at 1278. The disparate fees charged to
nonresidents will not offend the Privileges and Immunities Clause
if the differential does not exceed the contribution made by
residents, because the differential will be justified as imposing
on nonresidents their share of the costs of commercial fisheries.
The fee differential merely balances out "any conservation
expenditures from taxes which only residents pay." Toomer, 334
U.S. at 399. (EN14) In Carlson I we held that the State bore the
burden of persuasion on this issue. 798 P.2d at 1276. This burden
should be met by calculating the contribution made by residents and
comparing it with the challenged fee differentials.
D. The State's Pro Rata Method of Calculating the Amount
Residents Contribute to Fisheries Management
To establish "practical equality"between residents and
nonresidents, the State must demonstrate that the higher fees
charged nonresidents are equivalent to the burden borne by
residents as measured by the "residents' pro rata shares of state
revenues to which nonresidents make no contribution." Carlson I,
798 P.2d at 1278. The per capita formula propounded by the class
is the correct method for calculating the contribution made by
Under the per capita formula the resident contribution is
calculated in the following manner: (Fisheries Budget/Alaska
Population) X (percentage of State Budget from oil revenues/1.0).
See Appendix A. Once this computation is made the resident
contribution can be compared to the difference in fees paid by
nonresidents to determine if the fee differential is
The State advocates a different formula for computing the
resident contribution. The State's formula utilizes a three-step
approach. The State would (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. See Appendix A.
The State's formula differs from the class's when it
comes to deciding how to determine the numbers to be used in steps
two and three. Although the formulae are theoretically different
and are calculating different quantities, the significant
difference between the two proposed formulae concerns how the
residents' pro rata share is calculated. As discussed above, the
class argues that the amount used as the divisor of the commercial
fisheries expenditures from taxes which only residents pay must be
the total number of Alaskans. It correctly asserts that using this
number will allow the court to determine the per capita
contribution actually being made by each of the resident permit
holders. On the other hand, the State argues that the holdings in
Toomer and Carlson I mandate that the residents' contribution
should be determined by dividing the fisheries' expenditures from
taxes by the number of resident permits issued in any given year.
(EN15) The State is wrong. As stated above, in Carlson I we held
that the relevant inquiry was "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." Carlson I, 798 P.2d at 1278. Thus, we
ordered the superior court to compare the relative burden placed on
resident and nonresident commercial fishers. The per capita method
does just this. Had Carlson I mandated a comparison of the
expenditures made by the State to the contribution made by
nonresident fishers, the State's theory would be correct. (EN16)
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. See Carlson I, 798 P.2d at 1278. (EN17)
As we have concluded that the resident contribution must
be calculated using the class's per capita formula, we remand the
case for the application of this formula. If under the formula the
fee differential exceeds the resident contribution, 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.
Conversely, if the superior court finds that the fee differential
is not greater than the resident contribution, the State has
successfully carried its burden of proving that the means employed
by its statutory scheme are substantially related to the legitimate
interest served by the statute. On remand the superior court shall
address issues relating to the additional budget figures presented
by the State. It will need to determine whether to accept these
new figures and decide whether it should grant a stay and reopen
discovery in order to allow the class to respond to the State's
presentation of these new figures.
E. Prejudgment Interest of the Unlawful Portion of the
License Fees from the Date the Class Action Was Filed
The class seeks a refund under AS 43.10.210, (EN18) of
all unlawfully exacted fees from the date of filing the lawsuit
with statutory prejudgment interest calculated under AS 45.45.010.
In Carlson I we held that AS 43.15.010 would govern any refund in
this case, and that if the class succeeded on its constitutional
claims it could only recover unlawfully collected fees if it could
satisfy the protest requirement of AS 43.15.010. 798 P.2d at 1279-
80. We remanded for further findings on whether the State had
waived the protest requirement, thereby allowing a refund of all
fees not barred by the statute of limitations. Id. The superior
court found that the State had not waived the protest requirement.
The class admits that it could not have satisfied the
protest requirement for the taxes paid prior to the filing of the
lawsuit, and thus does not seek a refund of any unlawfully assessed
fees paid prior to June 22, 1984. However, the class claims that
the filing of the complaint in the case at bar fulfills the protest
Although the State does not address this issue in its
brief, 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. This does not
mean that the State concedes that any refund would be due if the
class succeeds. The State argued below that it only had conceded
that the protest requirement of AS 43.10.210 had been met, and that
this "is merely one precondition to the '[r]ecovery of overpayments
and protested payments.'" Because the State does not brief this
issue, it is impossible to know whether it would still make this
If on remand the superior court determines that the class
has prevailed, the superior court must also decide whether the
filing of this suit constituted notice sufficient to comply with
the protest requirement of AS 43.10.210(a), and whether prejudgment
interest is due under AS 45.45.010.
We conclude that this appeal does not implicate the
Commerce Clause. We REVERSE the superior court's approval of the
State's pro rata formula of calculating and comparing the taxation
burden placed on resident and nonresident commercial fishers, and
we REMAND for application of the class's per capita formula. We
also order that on remand the superior court address the unresolved
issues concerning the appropriate budget items to be considered in
determining the State's expenditures (i.e., resident
contributions). Additionally, if the superior court finds for the
class, it must determine the date from which the class should be
given a refund, and what, if any, interest is due on that refund.
The following is a comparison of the two proposed
formulae which uses the statistics proffered by the State for the
years 1982 through 1989. It is difficult to compare the State's
and class's formulae because they calculate and compare different
quantities in an attempt to measure what residents and nonresidents
are paying. The class's formula calculates the fee differential
which would be allowable, while the State's formula computes the
respective percentages of costs of running the commercial fisheries
which residents and nonresidents could pay and still be "treated
A. Application of the Class's Per Capita Formula
The class's per capita formula: Fisheries Budget/Alaska
Population X Percentage State Budget from Oil Revenues.
1982: $29,000,000 / 500,000 (EN19) X 83% = $48.14
1983: $31,000,000 / 500,000 X 81% = $50.22
1984: $34,000,000 / 500,000 X 82% = $55.76
1985: $34,800,000 / 500,000 X 82% = $57.07
1986: $34,500,000 / 500,000 X 86% = $59.34
1987: $29,600,000 / 500,000 X 76% = $44.99
1988: $29,300,000 / 500,000 X 83% = $48.64
1989: $29,900,000 / 500,000 X 82% = $49.04
Under the per capita formula the allowable fee
differential will vary from year to year. For example, in 1982 the
difference between a resident and nonresident permit could not
substantially exceed $48.14, while in 1986 the difference could not
substantially exceed $59.34.
B. Application of the State's Pro Rata Formula
The State's formula calls for the comparison of two
calculations: (1) Fair Share of Resident Costs = (Residents' Pro
Rata Share (EN20)) X (Fisheries Budget X Percentage of State
Revenue from Oil); and (2) Fair Share Nonresident Costs =
(Nonresidents' Pro Rata Share (EN21)) X (Fisheries Budget X
Percentage of State Revenue from Oil).
The following two tables are the application of these
formulae.Percentage of State's Commercial Fishery Expenditures Paid By Residents:
Rata Share of
% of the Total
% Paid By
Percentage of State's Commercial Fishery Expenditures Paid by Nonresidents:
% of Limited Entry
Permits Held By
By Four Agencies
Rata Share of
Total ExpendituresColumn 4
Paid For Licenses
and PermitsColumn 5
% Paid By
Their Pro Rata
Share of State
Under the pro rata formula the differential is
constitutional as long as the percentage of fair costs nonresidents
are paying does not exceed the percentage of fair costs that
residents are paying. Thus, the fee differential was
constitutional in 1983 because residents paid 86% of their share
and nonresidents only paid 24% of their share. As stated in the
text of the opinion, the flaw with this formula is that it treats
the resident fishers as if they alone are paying the tax equivalent
(percentage of revenues to which nonresidents make no
contribution). For this formula to accurately calculate the
resident fishers' contribution, it would need to divide the
residents' pro rata fair share by the population of Alaska and then
multiply by the number of resident fishers.
RABINOWITZ, Justice, dissenting.
The majority concludes that since Oregon Waste Systems v.
Department of Environmental Quality, 114 S. Ct. 1345 (1994), was
decided under the Commerce Clause as opposed to the Privileges and
Immunities Clause, its reasoning is inapposite here. I cannot
The United States Supreme Court has long acknowledged
"the mutually reinforcing relationship between the Privileges and
Immunities Clause of Art. IV, sec. 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 v. Orbeck, 437 U.S. 518, 531-32
(1978). It has, in fact, endorsed the methodology of referring to
Commerce Clause precedent in deciding claims based solely on the
Privileges and Immunities Clause. Id. See also Sestric v. Clark,
765 F.2d 655, 664 (7th Cir. 1985) ("The two clauses are part of the
same document, drafted by very intelligent and careful men; why
would they have wanted the same discrimination against nonresidents
to be tested by a different standard, depending on which clause was
cited in the complaint?").
I do not mean to suggest that the two clauses are
completely interchangeable. The differences between them, however,
appear to primarily involve matters of scope as opposed to content.
For example, the market regulator - market participant doctrine can
shield a state from Commerce Clause attack but not from a claim
based on the Privileges and Immunities Clause. United Bldg. &
Constr. Trades Council v. Mayor, 465 U.S. 208, 221-22 (1984). On
the other side of the equation, the Commerce Clause protects
corporations, while the Privileges and Immunities Clause does not.
Paul v. Virginia, 75 U.S. (8 Wall) 168 (1869).
In this way discrimination predicated somehow on state
affiliation can fall within the scope of the Privileges and
Immunities Clause alone, the Commerce Clause alone, both clauses,
or, for that matter, neither. (EN1) Once it has been determined
that a discriminatory policy falls within the purview of one or
both of these clauses, however, I am not persuaded that the
methodology of the two should diverge in any significant respect.
The extent to which the interpretation of these two clauses has
historically been interwoven confirms this assessment.
Further, the level of scrutiny triggered by a
discriminatory policy that falls within the scope of either of
these clauses appears to be very nearly identical. Professor Tribe
has observed that the standard of review employed in Privileges and
Immunities cases is "almost as demanding as that elaborated by the
Warren Court in equal protection and first amendment strict
scrutiny."(EN2) Similarly, in Oregon Waste Systems, the Supreme
Court observed that Commerce Clause cases "require that
justifications for discriminatory restrictions on commerce pass the
■strictest scrutiny.■" Oregon Waste Systems, 114 S. Ct. at 1351.
Under both clauses, the burden is placed on the state to provide a
sufficient justification for its discriminatory policy.
Considering the significant similarities between the two
clauses, it not surprising that in Carlson I we simply referenced
our Privileges and Immunities Clause analysis in order to dispose
of the Commerce Clause issue, concluding that "[t]he analysis under
Article I, section 8, clause 3 of the United States Constitution
(the Commerce Clause) is quite similar, assuming that it is
implicated." Carlson I, 798 P.2d at 1276. Indeed, we went on to
state that "[i]t would be anomalous . . . to conclude that a law
facially discriminating against interstate commerce could pass
muster under the Privilege and Immunities Clause yet fail under the
Commerce Clause; both clauses have a common origin in the fourth
article of the Articles of Confederation." Id. at 1277 n.5. In
the wake of the United States Supreme Court's ruling in Oregon
Waste Systems, however, the majority has reconsidered this position
and concluded that, in fact, "the analysis is not interchangeable."
It is obvious that the fee discrepancy in this case
implicates the Privileges and Immunities Clause. The policy is
facially discriminatory, and it impairs an interest that is
"fundamental"for purposes of Privileges and Immunities Clause
analysis. Given the exceptionally close relationship between this
clause and the Commerce Clause, I cannot, as noted above, join in
the majority's summary rejection of the United States Supreme
Court's reasoning in Oregon Waste Systems.
The justification offered by Oregon for discriminating
against out-of-state interests in Oregon Waste Systems is very
similar, if not identical, to the justification advanced by the
State in the case at bar. The primary rationale is that out-of-
state interests ought to be made to bear their "fair share"of the
costs that their activities impose on the state. Oregon Waste
Systems, 114 S. Ct. at 1351; Carlson I, 798 P.2d at 1272. In both
cases, the "share"or contribution of in-state interests is
augmented by general state tax revenues, or their analytical
equivalent, in order to justify the tax or fee discrepancies. (EN3)
In Carlson I, we concluded that this kind of augmentation
was acceptable under the holding of Toomer v. Witsell, 334 U.S. 385
(1948). In Toomer, the Supreme Court stated, in dicta, that a
state could "charge non-residents a differential which would merely
compensate the State . . . for any conservation expenditures from
taxes which only residents pay." Id. at 399. The Supreme Court in
Oregon Waste Systems, however, expressing its reluctance to "plunge
. . . into the morass of weighing comparative tax burdens by
comparing taxes on dissimilar events[,]"explicitly rejected this
type of justification for state discrimination in the Commerce
Clause context. Oregon Waste Systems, 114 S. Ct. at 1353
(citations and internal quotation marks omitted).
The majority correctly observes that the compensatory tax
doctrine, focusing on whether or not the taxes which allegedly
cancel each other out are imposed on "substantially equivalent
events,"finds its origins in Commerce Clause cases. It does not
follow from this observation, however, that the doctrine has no
place in Privileges and Immunities analysis. There is nothing
inherent in this doctrine, or the policy concerns behind it, that
indicates that it should only apply to discriminatory state
taxation challenged under the Commerce Clause.
In Armco, Inc. v. Hardesty, 467 U.S. 638 (1984), the
Supreme Court struck down a discriminatory tax on the grounds that
"manufacturing and wholesaling are not ■substantially equivalent
events■"on which compensating taxes might be imposed. Id. at 643.
In that case, West Virginia had imposed a wholesale gross receipts
tax from which local manufacturers were exempt. The policy
underlying the exemption was that it would put in-state
manufacturers who were wholesaling their products in West Virginia
on equal footing with their out-of-state competitors who were
functionally exempt from West Virginia's manufacturing tax. (EN4)
The Court rejected this justification, observing that
[i]f Ohio or any of the other 48 States
imposes a like tax on its manufacturers --
which they have every right to do -- then
Armco and others from out of state will pay
both a manufacturing tax and a wholesale tax
while sellers resident in West Virginia will
pay only the manufacturing tax.
Id. at 644.
Likewise, the Supreme Court in Oregon Waste Systems
observed that Oregon's compensatory tax theory "ignore[s] the fact
that shippers of waste from other States in all likelihood pay
income taxes in other States, a portion of which might well be used
to pay for waste reduction activities in those States." Oregon
Waste Systems, 114 S. Ct. at 1353 n.7.
In this respect the "substantially equivalent events"
test essentially serves to identify a significant logical flaw that
often infects "fair share"justifications for discriminatory taxes.
I can see no reason to assume that this flaw is any less serious
when it is exposed through litigation based upon the Privileges and
Immunities Clause than it is when challenged under the Commerce
The justification advanced by the State in this case
suffers from precisely the same defect alluded to in both Armco and
Oregon Waste Systems. Specifically, a fisher from Oregon who
purchases a commercial license in Alaska will no doubt be under an
obligation to pay Oregon income taxes, a portion of which probably
will have been used for conservation costs in that state.
Accordingly, the fee discrepancy places the Oregon fisher, as a
nonresident, at a competitive disadvantage. In other words, both
the Alaska fisher and the Oregon fisher are obliged to contribute
to a general tax fund (EN6) from which their respective States may
draw monies to support local fisheries, but only the Oregon fisher
is being called upon to pay enhanced fees.
Restating our holding in Carlson I, the majority
concludes that "[t]he disparate fees charged to nonresidents will
not offend the Privileges and Immunities Clause if the differential
does not exceed the contribution made by residents, because the
differential will be justified as imposing on nonresidents their
share of the costs of commercial fisheries." Implicit in this
analysis is that a share of this state's petroleum revenues, the
analytical equivalent to general tax revenues, should be attributed
to the resident fishers in calculating their contribution. Since
I believe that the United States Supreme Court's holding in Oregon
Waste Systems effectively forecloses this method of justifying a
discriminatory tax, I cannot agree.
On the basis of the Supreme Court's reasoning in Oregon
Waste Systems, I conclude that the fee discrepancies authorized by
AS 16.05.480, AS 16.43.160 and 20 AAC 05.240 violate the Privileges
and Immunities Clause of the Constitution of the United States of
1. The United States Constitution provides: "The Congress shall
have power . . . To regulate commerce with foreign nations, and
among the several States and with the Indian Tribes." U.S. Const.
art. I, sec. 8, cl. 3.
2. The Privileges and Immunities Clause of United States
Constitution provides: "The citizens of each state shall be
entitled to all privileges and immunities of citizens in the
several states." U.S. Const. art. IV, sec. 2.
3. AS 16.43.160 is the authority under which the Commercial
Fisheries Entry Commission (CFEC) adopted 20 AAC 5.240.
4. The profitability of the different fisheries, and hence the
value of permits, varies dramatically. For example, the average
gross earnings per permit for the Chignik salmon seine fishery
ranged from $88,709 to $265,525 for the years 1983 through 1993.
The permit fee for this fishery is $250 for residents and $750 for
nonresidents. During the same time period the average gross
earnings per permit for the Bristol Bay herring spawn on kelp
fishery ranged from $847 to $1613. The permit fee for this fishery
is $50 for residents and $150 for nonresidents.
5. The State notes that there is no evidence that this fee
differential has discouraged nonresidents from participating in
Alaska's commercial fisheries. During the period between 1982 and
1992 the participation of nonresidents in Alaska fisheries
continued to increase. The State also emphasizes that virtually
every state that has a commercial fishing industry has higher
nonresident licensing and permitting fees. In many of these states
the differential between resident and nonresident fees exceeds the
one contested here.
6. We similarly imposed the burden of proof on the Commerce
Clause challenge on the State. We held:
[O]nce a state law is shown to discriminate
against interstate commerce "either on its
face or in practical effect,"the burden falls
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.
Carlson I, 798 P.2d at 1277 (quoting Main v. Taylor, 477 U.S. 131,
7. The State presented additional budget figures which included
an analysis of every state agency for the years 1981 through 1993.
The State claims that these figures included expenditures to which
only Alaska residents contributed and which benefitted only
commercial fishers. The class requested a stay and a reopening of
discovery to address these new figures. The superior court
determined that as it had not relied on the new figures in granting
summary judgment, any dispute over these figures was moot.
However, the court did reserve the right to reconsider this
decision if this court determined that the class's per capita
method should have been employed.
8. In Carlson I we left open the question of whether this case
was governed by the Commerce Clause. We noted that earlier Supreme
Court cases had suggested that the Commerce Clause does not apply
to fish until the fish are actually harvested. Carlson I, 798 P.2d
at 1276 n.4 (citing McCready v. Virginia, 94 U.S. 391, 396 (1876);
Toomer v. Witsell, 334 U.S. 385, 394-395, reh'g denied, 335 U.S.
9. The grant of regulatory power to Congress implicit in the
Commerce Clause has been interpreted to have a "negative"aspect
"that denies the States the power unjustifiably to discriminate
against or burden the interstate flow of articles of commerce."
Oregon Waste Systems, Inc. v. Dep't of Envtl. Quality, 114 S. Ct.
1345, 1349 (1994) (citing Wyoming v. Oklahoma, 502 U.S. 437
(1992)). A negative Commerce Clause analysis has two steps.
First, the court must determine whether the challenged statute
discriminates against interstate commerce or "regulates
evenhandedly with only 'incidental' effects on interstate
commerce." Oregon Waste Systems, 114 S. Ct. at 1350 (citations
omitted). Second, "[i]f the restriction is discriminatory -- i.e.,
favors in-state economic interests over their out-of-state
counterparts -- it is virtually per se invalid."Id. at 1347. A
restriction found to be per se invalid must be struck down unless
the state can "show that it advances a legitimate local purpose
that cannot be adequately served by reasonable nondiscriminatory
alternatives." Id. at 1351 (citations omitted). The justifica-
tions for a discriminatory tax or restriction must pass the strict-
est scrutiny. Id. at 1351. However, if the restriction is nondis-
criminatory it is valid unless the burden it imposes on interstate
commerce "is clearly excessive in relation to the putative local
benefits." Id. (quoting Pike v. Bruce Church, Inc., 397 U.S. 137,
10. See United Bldg. & Const. v. Mayor & Council of Camden, 465
U.S. 208, 215-19 (1984) (analyzing a municipal resident hiring
preference under the Privileges and Immunities Clause); Hicklin v.
Orbeck, 437 U.S. 518, 524 (1978) (evaluating under the Privileges
and Immunities Clause the Alaska Hire Law which preferenced Alaska
residents in hiring); Sosna v. Iowa, 419 U.S. 393, 406 (1975)
(reviewing Iowa's durational residency requirement for divorces
under the Privileges and Immunities Clause); see also Baldwin v.
Fish & Game Comm'n of Montana, 436 U.S. 371, 383 (1978) (stating
that the Privileges and Immunities Clause "has been interpreted to
prevent a State from imposing unreasonable burdens on Citizens of
other States in their pursuit of common callings within the State"
11. In Anderson v. Mullaney, 191 F.2d 123 (9th Cir. 1951), aff'd
342 U.S. 415 (1952), the Ninth Circuit struck down on Commerce
Clause grounds an Alaska territorial statute which charged non-
resident fishermen a higher license fee than resident fishermen.
On certiorari the Supreme Court affirmed on Privileges and
Immunities rather than Commerce Clause grounds, following Toomer v.
Witsell. Assuming that the Commerce Clause would also apply to
cases of this nature, it is difficult to believe that a license fee
differential which passes muster under the Privileges and
Immunities analysis would nonetheless be an unconstitutional
discrimination against interstate commerce.
12. The class calls this its "attribution of tax revenues"
13. Additionally, the Supreme Court in Oregon Waste Systems had
reasons other than the disparity between the events being taxed for
finding that the Department of Environmental Quality's compensatory
tax argument was disingenuous. For example, the Court expressed
concern over the fact that the out-of-state surcharge was actually
assessed on in-state shippers who already paid Oregon income taxes,
the very tax the surcharge supposedly balanced out. See Oregon
Waste Systems, 114 S. Ct. at 1353.
14. In Oregon Waste Systems, the Court gave no indication that it
intended to cast doubt on this aspect of Toomer.
15. This is not exactly accurate because the State's formula never
calculates the actual amount that each individual resident is
purported to contribute. Rather, the State's formula calculates
the percentages of their fair share of costs residents and
16. However, this would be just the kind of compensatory tax
rationale which the Supreme Court struck down in Oregon Waste
17. The State also argues that the per capita formula should be
rejected because it has never been used by any court in any
context. The State cites a string of equal protection cases to
support this assertion. See Baldwin, 436 U.S. 371 (1978); LCM
Enterprises, Inc. v. Town of Dartmouth, 14 F.3d 675 (1st Cir.
1994); Johns v. Redeker, 406 F.2d 878 (8th Cir. 1969). However,
these equal protection cases have no bearing on the suitability of
the per capita approach in this case. In Baldwin the comparison
being made was between the state's costs for maintenance of the
big-game populations, not the contributions made by resident big-
game hunters to the maintenance of big-game populations. Baldwin,
436 U.S. at 389. Additionally, in Baldwin the calculations were
being viewed under the rational basis test, a more lenient standard
than the intermediate scrutiny required in this case. Baldwin, 436
U.S. at 390-91. Similarly, LCM Enterprises is inapplicable because
it too involved the application of the rational basis test, which
only requires that the classification being challenged is
rationally related to the legitimate state interest. LCM
Enterprises, 14 F.2d at 679. Johns also has no relevance to the
issue at hand because the court in Johns does not discuss the
method the trial court used to determine the resident contribution
which was being compared with the higher fees charged to
nonresidents. Johns, 406 F.2d at 883.
18. AS 43.15.010 was renumbered 43.10.210. AS 43.10.210(a)
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
(1) the taxpayer recovers judgment
against the Department of Revenue for the
return of the tax . . . .
19. For the purpose of this example we will assume that the
population of Alaska is 500,000.
20. Residents' Pro Rata Share: (Percentage of Permits Held by
Residents) X (Fisheries Budget).
21. Nonresidents' Pro Rata Share: (Percentage of Permits Held by
Nonresidents) X (Fisheries Budget).
1. A well-recognized example of this last category would be
a policy of discriminating against nonresidents in the granting of
recreational game or fishing license fees. This kind of state
discrimination does not implicate the Commerce Clause since it does
not significantly burden interstate commerce, and it does not
implicate the Privileges and Immunities Clause because it does not
involve a fundamental right. See, e.g., Baldwin v. Fish and Game
Comm'n of Montana, 436 U.S. 371 (1978).
2. Lawrence H. Tribe, American Constitutional Law sec. 6-35,
at 544 (2d ed. 1988).
3. Although the majority asserts that the fee-shifting we
authorized in Carlson I is not the same kind of fee-shifting
denounced by the Supreme Court in Oregon Waste Systems, I think
that the similarities between the two far outweigh any potential
differences. The approach authorized by the majority seems to
place greater emphasis on the theoretical equality of individual
contributions than the Oregon tax did. There is, however, no
indication that the Oregon tax was designed to impose on out-of-
state interests their "entire share"of solid waste disposal costs
nor, for that matter, that the shares of disposers of in-state
waste, who paid an $0.85 per ton fee, were to be borne by the
entire population. More 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. Consequently,
the majority's endorsement of the class's per capita approach does
not sufficiently distinguish the fee discrepancies here from those
in Oregon Waste Systems.
4. Presumably the only reason that the Privileges and
Immunities Clause was not invoked in this case -- where it would
seem to be a natural choice -- is that the plaintiff was a
corporation not entitled to protection under that clause. As such,
the Armco case provides an excellent example of how the
"substantially equivalent events"test should apply with equal
force regardless of which clause is invoked.
5. A commentator has observed:
While differences exist between the purposes
and functions of the two constitutional
clauses, they clearly exert overlapping
spheres of influence. To hold the same tax
invalid under one clause because it does not
meet the substantially equivalent events
requirement of the compensatory tax test, but
valid under the other clause because it is
important . . . that a state have power to
preserve and regulate the exploitation of an
important resource through means of a
functionally compensatory tax, is surely to
elevate form over substance.
Jeffrey J. Lamontagne, Note, Oregon's Wasted Effort: The Supreme
Court's Inability to Adapt its Compensatory Tax Doctrine to Solid
Waste Regulations, 19 Wm. & Mary Envtl. L. & Pol'y Rev. 345, 360
(1995) (citations and internal quotation marks omitted).
6. The Alaskan fisher "contributes"in the form of foregone
benefits from petroleum revenues.