maybe seated good morning ladies and gentlemen good to see all of you here we have a number of cases that were submitted on the breeze in the st case on the oral argument calendar a specific choice seafood company versus ross may proce obviously has the briefing in front of it i think this case has been very thoroughly briefed before the court i'd like to take this opportunity to emphasize a few points related to the manner in which nimbus determined the two point seven percent maximum share that's at the center of this case the st point i'd like to make there is the manner in which names did that guts that statutory term of any real meaning the statute directs the agency to quote establish a maximum share expressed as a percentage of the total limited access privileges that a limited access privilege holders preprinted permitted to hold acquire or use but if you look at the briefing submitted by names in this case they justify that maximum share on a whole bunch of other provisions in the magnusson act except for that specific limit so for example they justify the limit based on social considerations and social objectives such as sixteen u s c eighty five thousand three hundred and fifty three bear with me here a c five a which other provisions that require names to take into account certain factors to determine the initial allocation that's different than the maximum share provision they also cite to eighty five thousand three hundred and fifty three a c five c which are measures that the agency is allowed to take to assist small communities and small vessel owners that's also not the maximum share provision council i take it you don't dispute the the that our analysis of the agency's interpretation of this provision is subject to chevron is that right now that correct you are  what is it in c five d and the reference to excessive share of the directly speaks to the question of what factors the agency may consider in deciding what's excessive so chevron step one i will admit that the term maximum share could be characterized as ambiguous what is maximum share mean but when you look at the structure of the statute it must mean something different than all of it directs names two as an and implement other measures to address an inequitable concentration factors addressing small vessels in communities are addressed in the provision immediately before that c five subsidy capital c and so the agency had a bunch of other tools to use in addition to its obligation to identify a maximum share in that word maximum has to have some meaning and so i would submit that it's chevron step one it is clear from the statute that maximum share must mean something other than those other social factors and that maximum has to have some meaning that maximum by itself only means maximum that is to say to top number the maximum doesn't tell you what goes into the top number so saying that maximum excludes just by saying the word maximum doesn't get you where you need to get i think in so it it's step one then maximum is if you just take the word maximum isolation outside of the context of the statute is subject to different meanings but if you go to shop on step two whether that's what the agency did as a reasonable interpretation the share that it arrived at here or two seven percent is has its root the only analysis of where that comes from in the record is from a council subcommittee that evaluated how it's going to come up with something that could be in this maximum share and so it prepared a report that was presented as a kind of tentative in for the council's further feedback and consideration where they presented a range of numbers and said the maximum share should be in that committee's view the share that would allow every vessel owner in the fishery to have a chance at achieving a reasonable profit nothing to do with market power just what are we going to allow people to have a chance to do that went to the next committee over and they picked out of that range a mid point which was the two point seven percent and the only rationale they gave was it's a midpoint between the numbers that was then rubber stamped by the council and rubber stamped by noon so if maximum here is a limit that has nothing to do with market power on the record and i think it is undisputed that market power has to have some role in determining the maximum share but if two seven percent doesn't consider market power at all and based on the record before us it's a midpoint between a range of numbers that also didn't consider market power at chevron step two that's not entitled to deference it's not a reasonable interpretation of the statute how can something that's a midpoint of numbers there are far below the number that was identified elsewhere in the record ten percent as the limit or you could even have a chance at market power how can that be a maximum share i know you say they didn't they didn't consider market power and i'm have may have some questions about that but it to be clear is that your position that market power is the only consideration they take and they can take into account or do you think it's just that they have to take it into account and maybe they can consider other things as well so i think they can consider both the other things play a larger role in those other provisions i referred to that allow them to come up with measures to address the needs of small vessel owners in small communities and end to that allows them to come up with other measures to address an equitable concentration when you're left with the maximum share the driving force behind that if you look d at the structure of the magnuson act and how the agency has applied that is market power now can they consider other factors we would submit that yes they can but they can't just ignore the market power which is what the record would suggest happened here the two point seven percent had nothing to do with market power and that's what we're arguing the agency has gone wrong they had to at least had to play a role in coming up with a maximum limit but they did i mean in  notice of proposed rule making they did identify market power as one of the factors that they recognized they needed to consider and then they did an analysis of you know a concentration in the in the industry why isn't that sufficient consideration of market power so just because they generally cite to market power as a reason doesn't mean that that's what actually happened when you look at how two seven percent was calculated it was based on  analysis of what was required to allow every vessel owner in the fishery to have a chance at generating a reasonable profit there was a separate market analysis performed and that's the person doll index report that's referred to in the briefing that was a true analysis of market power and it concluded that you could have a share anywhere up to ten percent that absolutely would not result in any kind of market control or market power in the fishery and that from between ten and eighteen percent concentration wasn't guaranteed but became possible there was no distress is it isn't that consistent with you know you just said that they looked at it they they thought about market power and then they said well we're also going to look at some other things and so you were going to go below the ten percent based on the other things if it's not consistent with it because there's no discussion of the market power report in the report that came up with the two point seven percent number it had nothing to do with the two seven percent number so two seven percent could have been prevented market power three five percent could have prevented market power seven five percent could have been prevented marcum power but there was no analysis of any numbers other than this two seven percent that could have still accomplish this goal of having a maximum share and just to as an example to show a way that this could have been done properly is this is this examples provided in the briefing it's the program for the new england multi species fishery so in that case the agency directed an outside contractor to perform a similar market power analysis report and it directed them to look at the levels at which the prices of the fisheries output or the prices paid for lease quota could be used to somebodies advantage which was also called market power they explain in their proposed rule what they did explain how they were interpreted in excess of share to be market power and they explained this report that was done that report was given to the center for independent experts for review names then consider that and in its final rule the agency itself presented its analysis of that report its interpretation of the term excessive share and determined that the share for the fishery on quotas should be fifteen point five percent and they also imposed a limit on permits but that that's an example of how this should have been done but none of that was done here and when you really look at the record for the two seven percent it has nothing to do with market power and it is soley about what can we how can we socially engineer the specialty to allow every boat owner to have a chance at a reasonable profit and that's that's the nut of the morning your honor i'm david gunter from the department of justice here on behalf of the national marine fisheries service limited access privilege programs are a mechanism that congress created in the magnusson act to solve the chronic problem of too many people chasing too few fish but this lucius that problem  not solely economic congress directed the councils on the service to consider other factors in designing limited access privilege programs and some of those factors relate to market power some of them relate to social issues the reason this court has to affirm the judgment of the district court is that congress commanded the service to take all of those factors into account when promulgating any fishery management measure under the magnusson act and that's why it gives so much responsibility to the councils they're made up of stakeholders that can provide input on social factors economic factors biological and wildlife factors that the service can then use to probably get regulations i'll start by talking about this question of how to interpret the phrase excessive share in the mag services interpret that phrase in a number of places i would point the court to supplemental excerpts eleven thousand which is in the us where the service says what constitutes excessive shares may be socially determined or maybe economically determined and that's really the question before the court today is that s commands the service to take into account only market power in setting that maximum share i think you would agree though that you have to take into consideration market power correct yes the way that i had the way so explain to me  this record aside from the notice how to how did the agency take into consideration market the best place is the memo that references the her football index which is as mr seen said the maximum share that would that would not pose market concentration problems and it's as if her friend all says ten percent and above eighteen percent might be an issue right that's right and the range of options the council was looking at here were all well below that so to give you an example we started out with about one hundred and seventeen vessels in this issue if we install if we had set a ten percent accumulation limit that means that that fishery could go down to as many as ten vessels before you started having economic  problems related to market power but the service didn't want this fishery to be only ten vessels it has a statutory mandate to consider the effect that its rules will have on single vessel owner operators on the structure of fishing communities and so it had to balance the interests of consolidation which it wanted to have some consolidation that's how you realize the biological and economic benefits of a quota program but it didn't want to have so much consolidation that you would be down to a number of vessels that would essentially destroyed some of the fishing communities that are at issue and that's coming directly from the statute section eight hundred and fifty three a says that limited access privileged programs must ensure fair and equitable communicate allocation taking into account the historic participation of fishing communities and include message measures to assist small vessel owner operators that's all before you get to the maximum share provision and it goes into the interpretation of the maximum share provision and then that provision has two par one is simply that the service has to set a maximum share expressed as a percentage there's no substantive value associated with that provision instead you go onto the next provision where it authorizes service to to include any other limitations are necessary met measures necessary to prevent an inequitable concentration of fishing privileges and inequitable concentration is the only substantive value judgment that is stated in that statutory provision that requires a maximum share so if we think about this at step one the statute definitely places an upper limit on the excessive share provision a higher percentage allows more consolidation and service can't let that percentage get so high that it consolidates to an inequitable degree but there is nothing in the statute that unambiguous that commands the service also to put a lower limit on the excessive share provision there's nothing that commands the service that is to allow any particular degree of consolidation before the accumulation limits are reached instead that's an issue that's simply left to the services expert discretion it's a as you know a highly technical issue that requires a lot of inputs and it's the kind of thing that the councils with their different stakeholders they're able to come together and discuss these issues are able to work out and then recommend to the council for a resolution asked ok but where does this two point seven percent number come from i think there are two particular places in the record that i would direct the court's attention on that question one is the ground fish management team memo which is that you are five hundred and fifty five and the other is  discussion of accumulation limits which is that supplemental excerpts one hundred and thirty seven that's critically important because it's a long discussion of how the accumulation limits and the grandfather clause and the control rules all relate to each other as the services trying to balance the social considerations and the economic considerations that congress committed to balance in the act and what's more well that section in particular explicitly talks about how limits need to preserve the small business owner owner operator structure of these fisheries there's a section there s e r one hundred and fifteen called how accumulation limits help communities and so the service started with a range of accumulation limits about  presented to about three percent that would approximate the historical average annual catch her permit that's how it took into account its mandate to preserve the historical structure of the communities and then it did two kinds of economic analysis based on those limits one is the her final index which we already discussed to talk about market power and the other is about the services other potential management objectives like managing the structure of the fishery as a whole as i mentioned before the service  to allow some consolidation because this fishery was barely breaking even it had more than one hundred dollars vessels and each had an average annual revenue of about two hundred thousand dollars which was not enough to be profitable and so the service wanted to set accumulation limits that would allow some consolidation up to about thirty  dollars vessels with an average annual revenue about seven hundred dollars seven hundred thousand dollars which it thought was a fully rationalized fishery based on its economic analysis but then it said accumulation and it's higher than that allowing revenues of more than a one million dollars in some cases in order to preserve the briony efficient strategies that already exist in the community that is that's a is that want to specialize in a particular species so that they can have economies of scale and focus on one kind of fish in particular but the ground fish management team did an economic analysis of all this and sent it to the ground fish advisory sub panel which is made up of industry representatives now they did pick a midpoint in that range of values but that midpoint doesn't represent an arbitrary choice there's a spectrum here where the low end of the percentage allows less consolidation and more boats to operate in the fishery and at the upper end a higher percentage allows more consolidation has the potential to drive more people out of the fishery and the ground fish advisory some panel in choosing a medium value out of that out of those options was explicitly i'm sorry not explicitly but i was balancing those two values and saying we're essentially going to be neutral between these values and choose a reasonable value in the middle and this court's precedent in san luis and ultimately the water authority allows that it says that you can have a choice that is in a sense arbitrary in that the record that the agency has could justify a number slightly higher or slightly lower but that's not the kind of arbitrariness that's captured by the administrative procedure act and that's the kind of submission we're making here this record could potentially have allowed the service to choose three percent or to choose two five percent and yet the record shows that the service took all of the relevant factors into account considered market power realized it wasn't a problem considered its other management objectives considered what its various options might do to the structure of this issue and chose one that would meet its overall goals in order for those accumulation was to work though you need to have a control rule that avoids loopholes that would allow one entity to control too much of the quota share through different corporate entities that may or may not be related whether the control rules here are consistent magnussen act is another question of statutory interpretation and again the statute says two things it says that the service has to establish the maximum share the privilege holder is permitted to hold acquire or use and it authorizes the service to establish any other limitations or measures necessary to prevent an equitable concentration so the court has two places to look to decide whether the services rule which is a simple rule about the amount of quota share that one entity can own or control fits within that congressional mandate here the phrases the phrase hold acquire or use contains the several overlapping terms that together suggest that congress had a broad view of how a quota share should be deemed to be held by entities and the services regulatory phrase own or control captures the sense of hold acquire or use but also the court needs to look at in equitable concentration and in particular  authorization to the service to establish any other limitations or measures necessary that's a classic delegation of authority to an agency that the court has to evaluate at chevron step two and the service here reasonably interpreted that phrase to prevent  agencies i'm sorry to prevent energies from taking advantage of loopholes based on their corporate structure one thing i want to emphasize though is that that doesn't mean that these entities have to stop fishing the service said in the us that we understand  limits may require owners of multiple permits eventually to divest some of their quota share but they can always leaseback quota pounds from other owners so they can too can continue their historical fishing effort and the reason for that is economic if they are the most efficient fish for the species that they're targeting then they should be able to lease quota pounce from somebody else so that the most efficient vessel goes out and does the fishing but what that does is it requires those entities to get their quota pounds at a market rate that will distribute the benefits of this public good throughout the participants in the fishery rather than concentrating those benefits in the hands of one entity that can get a sweetheart deal from its corporate partners unless the court has questions about any of these issues i'll just close with the idea that this accumulation of this two seven percent limit is one of dozens of accumulation moments in this rule and the accumulation limits themselves are only a small part of the trial rationalization program that amendment twenty represents congress couldn't make all of those decisions itself about how all of these factors should be balanced and what the different percentages exactly should mean left that job to the council and the service i think here the court has a deep and broad record in which the counsel on the service both go into a significant amount of detail about the factors that they took into account in making their decisions the public input they receive and how they balance the factors that to address a few points on rebuttal the st is that i think it helps to highlight the problem here is when you look at the initial allocation provisions of the statute which are founded eight hundred and fifty three a c five clients here were given an initial allocation of a little over five percent of the share of the fishery which is well below anything that that market power analysis that was done would create any kind of control or market power that initial allocation by statutory mandate was considered fair and equitable it later our clients later had to divest about half of that amount as a result of the maximum share so how can something that on one hand is by statutory definition fair and equitable on the other hand be excessive and a product of an inequitable concentration nowhere is that explained in the record if what the agency's purpose here was to say that our clients already had an equitable concentration of fishing privileges in this fishery then what it should have done is it should have said initial allocation is going to be something less than what you already have based on these four factors current in historical harvest employment in the processing and harvesting sectors investments in the fishery and current in historical participation of fishing communities those are the factors that go into initial allocation didn't do that it awarded an initial allocation presumably based on these factors and then separately identified a maximum share that didn't take into account at all this market power analysis and that had the result of our clients having to divest over half of the amount that they had built up in this fishery over decades through harvesting investment in the fishery employment in the fishery but you're not making the argument that or are you though that the initial allocation engendered some sort of reliance interest such that the agency could and later the by itself the the agency couldn't later say a lower maximum share are  you arguments not that it created a reliance but our argument here is that it shows how what they did is not a reasonable interpretation of the statute because to me there seems to be just an inherent disconnect between an initial allocation that's fair an equitable again far below anything that the record suggests would be market power in an equitable concentration and then on the other hand five years later to have to divest half of that because it's above the maximum share limit there's no explanation of why the initial allocation isn't fair and equitable based on the four factors and all the reasons the agency is giving the court today for why the maximum share should be where it is are those same types of social factors that are taken into account the initial allocation the personal index report is in the record but the court has to look at how the agency actually considered it in the record just because it appears in there doesn't mean that the agency charged with approving this program gave it any kind of real consideration and there's nothing in the record that will show that any analysis by names the e i a s that that opposing counsel referred to just describes the rules in a general context it doesn't do any additional analysis of two point seven percent of the market power analysis or anything it's exist as an independent document in this record that's not considered in conjunction with the two seven percent or otherwise analyzed so there's no indication that the council or nymphs looked at this problem and said ok we have a report saying market power only exist possibly until after ten percent how are we go rationalize that against the number that we came up with how are we going to rationalize that against the fact we're going to award an initial allocation that's above what the maximum share is and that's that's ultimately our argument here is that the record that supports been presented with just defeats the purpose of record review in the court has to have some role here and we submit that the role of that the agency's analysis and its interpretation and its application can be reasonably discerned and i see my time's up so thank you your honor thank you johnson thank you both three arguments this morning the case just starting to be submitted for a decision