FOR PUBLICATION



### UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

C HINATOWN N EIGHBORHOOD A SSOCIATION , a nonprofit corporation; A SIAN A MERICANS F OR P OLITICAL A DVANCEMENT , a political action committee,

Plaintiffs

- Appellants

,

v.

K AMALA H ARRIS , Attorney General of the State of California; C HARLTON H

. B ONHAM , Director, California Department of Fish and Game,

Defendants

-

Appellees

,

H UMANE S OCIETY OF T HE U NITED S TATES ; M ONTEREY B AY A QUARIUM F OUNDATION ; A SIAN P ACIFIC A MERICAN O CEAN H ARMONY A LLIANCE
, Intervenor

- Defendants

–

Appellees

. No. 14

- 15781

D.C. No.
3:12

- cv

- 03759

- WHO

OPINION

Appeal from the United States District Court
for the Northern District of California William Horsley Orrick III, District Judge, Presiding

Argued and Submitted March 18, 2015

— San Francisco, California 

# FILED

JUL 27 2015

MOLLY C. DWYER, CLER K
U.S. COURT OF APPEAL S2 C HINATOWN N EIGHBORHOOD A SS ’ N V

. H ARRIS

Filed July 27, 2015

Before: Stephen Reinhardt, John T. Noonan,
and Andrew D. Hurwitz, Circuit Judges.

Opinion by Judge Hurwitz ; Dissent by Judge Reinhardt

SUMMARY *

Civil Rights

The panel affirmed the district court’s dismissal of plaintiffs’ amended complaint challenging California’s
“Shark Fin Law,” which makes it “unlawful for any person to possess, sell, offer for sale, trade, or distribute a shark fin” in the state.

The panel rejected plaintiffs’ claim that the Shark Fin Law is preempted by the Magnuson

- Stevens Fishery Conservation and Management Act. The panel held that plaintiffs failed to identify any actual conflict between federal authority under the Magnuson

- St evens Act to manage shark fishing in the ocean off the California coast and the California Shark Fin Law. The panel further held that the district court did not abuse its discretion by failing

* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.C HINATOWN N EIGHBORHOOD A SS ’ N V

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to sua sponte grant plaintiffs leave to amend so they could pl ead additional facts to support the preemption claim. The panel held that even assuming that plaintiffs preserved the argument for appeal, leave to amend would be futile.

The panel rejected plaintiffs ’ claim that the Shark Fin Law is per se invalid under the Commerce Clause because
it interferes with the interstate commerce in shark fins. The panel held that even when state law has significant extraterritorial effects, it passes Commerce Clause muster when, as here, those effects result from the regulation of in

state conduct. The panel further determined that the Shark Fin Law does not interfere with activity that is inherently national or that requires a uniform system of regulation, and that, accordingly, there is no significant interference
with inters tate commerce.

Judge Reinhardt dissented in part because he believes that plaintiffs must be granted leave to amend the complaint with respect to their preemption claim.

COUNSEL

Michael Tenenbaum (argued), The Michael Tenenbaum Law Firm, Santa Monica, California; Joseph M. Breall, Breall & Breall LLP, San Francisco, California, for
Plaintiffs

- Appellants.

Kamala D. Harris, Attorney General of California, Douglas J. Woods, Senior Assistant Attorney General, Tamar Pachter, Supervising Deputy Attorney Gener al, Alexandra Robert Gordon (argued), Deputy Attorney General, San Francisco, California, Attorneys for Defendants

- Appellees.4 C HINATOWN N EIGHBORHOOD A SS ’ N V

. H ARRIS

Bruce A. Wagman, Schiff Hardin LLP, San Francisco, California; Ralph E. Henry (argued), The Humane Society of the United States, W ashington, DC, Attorneys for
Intervenors

- Defendants

- Appellees The Humane Society of the United States, Monterey Bay Aquarium Foundation, and Asian Pacific Americans for Ocean Harmony Alliance.

Seth L. Atkinson, Natural Resources Defense Council, San
Franci sco, California, for Amicus Curiae Natural Resources
Defense Council.

OPINION

HURWITZ, Circuit Judge:

California’s “Shark Fin Law” makes it “unlawful for any person to possess, sell, offer for sale, trade, or distribute a shark fin” in the state. Cal. F ish & Game Code § 2021(b). The plaintiffs in this action claim that the Shark Fin Law violates the Supremacy Clause by interfering with the national government’s authority to manage fishing in the ocean off the California coast, and the dormant
Commerce C lause by interfering with interstate commerce in shark fins. The district court dismissed the plaintiffs’ amended complaint with prejudice, and we affirm.

I.

A.

The Magnuson

- Stevens Fishery Conservation and Management Act (“MSA”), 16 U.S.C. §§ 1801

- 1884, “was
enacted to establish a federal

- regional partnership toC HINATOWN N EIGHBORHOOD A SS ’ N V

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manage fishery resources.” Nat’l Res. Def. Council, Inc. v. Daley , 209 F.3d 747, 749 (D.C. Cir. 2000). Under the MSA, the federal government exercises “sovereign rights and exclusive fishery management authority over all fish, and all Continental Shelf fishery resources, within the exclusive economic zone” (“EEZ”), 16 U.S.C. § 1811(a),
which extends from the seaward boundary of each coastal state to 200 miles offshore, 1 id. § 1802(11); City of Charleston v. A Fisherman’s Best, Inc. , 310 F.3d 155, 160 (4th Cir. 2002). The MSA expressly preserves the jurisdiction of the states over fishery management within
their boundaries. See 16 U.S.C. § 1856(a)(1).

To manage fishing in the EEZ, the MSA calls for the creation of regional Fishery Management Councils (“FMCs”), composed of state and federal officials and experts appointed by the Secretary of the National Ma rine Fisheries Service (“NMFS”). 16 U.S.C. § 1852(b)(1)

- (2). With the cooperation of “the States, the fishing industry, consumer and environmental organizations, and other interested persons,” id. § 1801(b)(5), the NMFS and FMCs develop and promulgate Fi shery Management Plans (“FMPs”) to “achieve and maintain, on a continuing basis, the optimum yield from each fishery,” id. § 1801(b)(4). 2 In

1 In California, the seaward boundary is three miles offshore. Vietnamese Fishermen Ass’n of Am. v. Cal. Dep’t of Fis h & Game

, 816 F. Supp. 1468, 1470 (N.D. Cal. 1993).

2 See, e.g.

, Fishery Management Plan for U.S. West Coast Fisheries for Highly Migratory Species, Pacific Fishery Management Council6 C HINATOWN N EIGHBORHOOD A SS ’ N V

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the MSA, “optimum yield” means the amount of fish that “will provide the greatest overall benefit to the Nation,

p articularly with respect to food production and recreational opportunities, and taking into account the protection of marine ecosystems.” Id. § 1802(33); see also 50 C.F.R. § 600.310(e)(3).

B.

Shark finning is the practice of removing the fins from
a livi ng shark. The primary market for shark fins is to make shark fin soup, a traditional Chinese dish.

Even before the Shark Fin Law was passed, federal and state law prohibited finning in the waters off the California coast. In 1995, the California legislat ure made it “unlawful to sell, purchase, deliver for commercial purposes, or possess on any commercial fishing vessel

. . . any shark fin or shark tail or portion thereof that has been removed from the carcass.” Cal. Fish & Game Code § 7704(c); see 1995
C al. Legis. Serv. ch. 371, § 1 (S.B. 458). In 2000, Congress added finning prohibitions to the MSA, which, as amended in 2011, make it unlawful to remove the fins from a shark at sea, possess detached fins aboard fishing vessels,
transfer them from one ves sel to another, and land them
onshore. See 16 USC § 1857(1)(P); Conservation of Sharks, Pub. L. No. 111

- 348, § 103(a)(1), 124 Stat. 3668, 3670 (2011); Shark Finning Prohibition Act, Pub. L. No.
106

- 557, § 3, 114 Stat. 2772 (2000).

(July 2011), available at http://www.pcouncil.org/wp

content/uploads/ HMS

- FMP

- Jul11.pdf.C HINATOWN N EIGHBORHOOD A SS ’ N V

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In 2011, after finding t hat shark finning nonetheless continued to “cause[] tens of millions of sharks to die each year,” thereby threatening a critical element of the ocean ecosystem, and that “California is a market for shark fin” that “helps drive the practice of shark finning ,” 2011 Cal. Legis. Serv. ch. 524, § 1(d), (f) (A.B. 376), the California legislature passed the Shark Fin Law, which makes it a misdemeanor to possess, sell, trade, or distribute detached shark fins in California, see Cal. Fish & Game Code §§ 2021(b), 120 00.

C.

The plaintiffs are associations whose members previously engaged in cultural practices and commerce involving shark fins. They claim that the Shark Fin Law is preempted by the MSA because it interferes with federal management of shark fishing in th e EEZ, and with the federal government’s prerogative to balance the various statutory objectives of the MSA. They also claim the law runs afoul of the dormant Commerce Clause by interfering
with commerce in shark fins between California and other
states, and by stemming the flow of shark fins through California into the rest of the country. 3

In August 2012, the plaintiffs moved the district court to preliminarily enjoin the enforcement of the Shark Fin Law. The district court denied the motion, and we

3 The plaintiffs also claimed below that the Shark Fin Law violates the Equal Protection Clause, but they abandoned this claim at oral argument.8 C HINATOWN N EIGHBORHOOD A SS ’ N V

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aff irmed, agreeing that the plaintiffs had failed to show a likelihood of success on the merits of their preemption and
dormant Commerce Clause claims. 4 See Chinatown Neighborhood Ass’n v. Brown , 539 F. App’x 761, 762

- 63 (9th Cir. 2013) (mem.). On December 9, 2013, the plaintiffs filed an amended complaint. The district court granted the defendants’ motion to dismiss with prejudice on March 24, 2014.

4 The federal government raised tentative preemption concerns in an untimely amicus br ief filed with this Court while the appeal from the denial of the preliminary injunction was before us. See Chinatown Neighborhood Ass’n v. Brown , 539 F. App’x 761, 763 (9th Cir. 2013) (mem.). That brief relied in part on an NMFS notice of proposed
rulem aking

— which proposed regulations that have not been adopted

— suggesting that under certain circumstances, the MSA would preempt state laws that have the effect of regulating fishing within the EEZ. See Magnuson

- Stevens Act Provisions; Implementation of the Shark Conservation Act of 2010, 78 Fed. Reg. 25,685, 25,687 (May 2, 2013). We declined to consider the federal government’s position on preemption in determining whether the district court had abused its discretion in denying preliminary injunctive relie f because that position was first presented in an untimely amicus brief on appeal, but said that the federal government could “rais[e] these arguments in the permanent injunction proceedings.” Chinatown Neighborhood Ass’n , 539 F. App’x at 763. The federa l government did not file an amicus brief in connection with the motion to dismiss or the present appeal, but the defendants have submitted correspondence from the NMFS stating that the Shark Fin Law “is not preempted by the Magnuson

- Stevens Act, as
amende d.” In light of our conclusions below, we need not rely on this position.C HINATOWN N EIGHBORHOOD A SS ’ N V

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II.

We have jurisdiction over this appeal under 28 U.S.C. § 1291. We review a district court’s grant of a motion to dismiss de novo, Cousins v. Lockyer , 568 F.3d 1063, 1067 (9th Cir. 2009), and the denial of leave to amend for abuse of discretion, Toth v. Trans World Airlines, Inc. , 862 F.2d 1381, 1385 (9th Cir. 1988).

III.

The MSA does not have an express pr eemption provision. Even absent such a provision, however, a federal statute has preemptive effect if it conflicts with state law. This can occur when “compliance with both federal and state regulations is a physical impossibility,” Fla. Lime
& Avocado G rowers, Inc. v. Paul , 373 U.S. 132, 142

- 43 (1963), or when a state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” Arizona v. United States , 132 S. Ct. 2492, 2501 (2012). 5 In assessing the p reemptive force of a federal statute, the purpose of Congress, as “discerned from the language of the pre

- emption statute and the statutory framework surrounding it,” is the “ultimate
touchstone.” Medtronic, Inc. v. Lohr , 518 U.S. 470, 485

- 86 (1996) (quot ation marks omitted).

5 Under the doctrine of “field preemption,” state law is preempted if it regulates “conduct in a field that Congress, acting within its proper authority, has determined must be r egulated by its exclusive governance.” Arizona , 132 S. Ct. at 2501. The plaintiffs have abandoned any claim of field preemption.10 C HINATOWN N EIGHBORHOOD A SS ’ N V

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A presumption against preemption applies generally, but is especially strong when, as here, “Congress has legislated in a field which the states have traditionally occupied.” McDaniel v. Wells Fargo Invs., LLC , 717 F.3d 668, 674 (9th Cir. 2013); see also Bayside Fish Flour Co. v. Gentry , 297 U.S. 422, 426 (1936) (explaining the historic control of states over fish in state waters); N.Y. State Trawlers Ass’n v. Jorling , 16 F.3d 1303, 1309

- 10 (2d Cir. 1994) (“The interest of a state in regulating the taking of its fish and wildlife resources has been long established.”). Thus, the California statute cannot be set aside absent “clear evidence” of a conflict. Geier v. Am. Honda Motor
Co. , 529 U.S. 861, 885 (2000); see also McClellan v. I

Flow Corp. , 776 F.3d 1035, 1039 (9th Cir. 2015) (“[T]he historic police powers of the States were not to be superseded unless that was the clear and manifest purpose of Congress.” (alteration omitted)).

A.

Although the plaintiffs argue the Shark Fin Law
i nterferes with the federal government’s authority under the MSA to manage shark fishing in the EEZ, they do not identify any “actual conflict between the two schemes of regulation.” Fla. Lime , 373 U.S. at 141. To be sure, the California statute restricts certain economically viable uses for sharks that are lawfully harvested from the EEZ and
landed in California. But the MSA does not mandate that a given quantity of sharks be harvested from the EEZ

— and even if it did, detached fins are not the only viable use for harvested sharks. As the plaintiffs recognize, “[t]he use of approximately 95% of any legally fished shark for shark oil, shark meat, shark skin, etc. is still permitted” under the California regime. The plaintiffs point to no “clear and manifest” intent of Congress to preempt regulation such asC HINATOWN N EIGHBORHOOD A SS ’ N V

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the Shark Fin Law, McClellan , 776 F.3d at 1039; rather, they have alleged nothing more than the prospect of a “modest impediment” to genera l federal purposes, Pharm. Research & Mfrs. of Am. v. Walsh , 538 U.S. 644, 667 (2003). This does not suffice to overcome the presumption against preemption. See Sprietsma v. Mercury Marine

, 537 U.S. 51, 67 (2002) (finding no preemption in the
absence of conflict with an “authoritative message” from Congress); P.R. Dep’t of Consumer Affairs v. Isla Petrol. Corp. , 485 U.S. 495, 501 (1988) (same); Fla. Lime

, 373 U.S. at 146

- 52 (same). 6

6 The cases relied upon by the plaintiffs that invalidate state regulations with effects on fishing in the EEZ are unpersuasive because in each case, the invalidated regulations either directly proscribed what federal law affirmatively allowed, see A Fisher man’s Best , 310 F.3d at
173

- 76 (Fourth Circuit case finding preempted a city resolution forbidding access to ports for vessels using longline tackle, which was the only fishing method authorized by the applicable FMP), or directly banned activity within th e EEZ that was legal under federal law, see Vietnamese Fishermen Ass’n , 816 F. Supp. at 1475 (concluding an FMP permitted the use of gill nets in certain places within the EEZ, and invalidating a California proposition banning the use of gill nets in the
E EZ); Bateman v. Gardner , 716 F. Supp. 595, 597

- 98 (S.D. Fla. 1989) (finding preempted a Florida statute that banned fishing in portions of the EEZ where federal law allowed it), aff’d , 922 F.2d 847 (11th Cir. 1990) (mem.). In Southeast Fisheries Associati on v. Chiles , a case cited in the dissent, the Eleventh Circuit suggested in dicta that state

law daily quotas on landing Spanish Mackerel would interfere with a federal annual quota on catch of that fish in the EEZ. 979 F.2d 1504,
1509

- 10 (11th Cir. 1992 ). There too, state law directly conflicted with
what federal law allowed.12 C HINATOWN N EIGHBORHOOD A SS ’ N V

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B.

The plaintiffs emphasize that even when state and federal purposes overlap, a conflict in the method of achieving those purposes can be grounds for setting aside a
state law. See Arizona , 132 S. Ct. at 2505 (“[C]onflict in technique can be fully as disrup tive to the system Congress enacted as conflict in overt policy.”). They discern in the MSA a balancing of competing objectives in fishery management and a corresponding congressional intent to preclude state legislation that promotes one of these objecti ves

— conservation

— over others. See, e.g.

, id. (finding state law preempted from interfering “with the careful balance struck by Congress with respect to unauthorized employment” of undocumented workers).

The MSA indeed recognizes various competing values.
See 16 U.S.C. § 1801(b) (listing “conserv[ing] and manag[ing] the fishery resources found off the coasts of the United States,” “promot[ing] domestic commercial and recreational fishing under sound conservation and management principles,” and “encourag[in g] the development by the United States fishing industry of fisheries which are currently underutilized or not
utilized

. . . in a non

- wasteful manner” as objectives of the MSA). Among them, however, conservation is paramount. See Nat. Res. Def. Council, Inc. v. Nat’l Marine Fisheries
Serv. , 421 F.3d 872, 879 (9th Cir. 2005) (“The purpose of the Act is clearly to give conservation of fisheries priority
over short

- term economic interests.”); Daley , 209 F.3d at 753 (“[U]nder the

. . . [MSA], the Service mus t give priority to conservation measures.”). Indeed, in the particular context of shark fishing, the amendments to the MSA addressing finning make the primacy of conservation unambiguous. See 16 U.S.C. § 1857(1)(P). This is,C HINATOWN N EIGHBORHOOD A SS ’ N V

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accordingly, not the rare ci rcumstance in which a state law interferes with a “deliberate effort to steer a middle path,” Crosby v. Nat’l Foreign Trade Council , 530 U.S. 363, 378 (2000) (quotation marks omitted), or to strike a “careful balance,” Arizona , 132 S. Ct. at 2505.

The MSA’ s provision for broad state

- level participation in the implementation of the statutory objectives further undermines any inference of interference with Congress’s
method. See, e.g. , 16 U.S.C. § 1852(a)(2) (“Each [FMC] shall reflect the expertise and inter est of the several
constituent States in the ocean area over which such Council is granted authority.”); see also id. § 1853(b)(3)(B) (permitting FMPs to limit commerce in fish caught within the EEZ “consistent with any applicable

. . . State safety and qu ality requirements”); id. § 1856(a)(1) (“[N]othing in this chapter shall be construed as extending or diminishing the jurisdiction or authority of any State within its boundaries.”); Daley , 209 F.3d at 749 (“The Fishery Act
was enacted to establish a feder al

- regional partnership to manage fishery resources.”). Courts have found conflicts between state and federal schemes with overlapping purposes when the federal scheme is comprehensive and exclusive, see, e.g. , Arizona , 132 S. Ct. at 2504

- 05 (immigration); Crosby , 530 U.S. at 380

- 88 (international sanctions), but not when, as here, the federal scheme is cooperative, see Wyeth v. Levine , 555 U.S. 555, 575 (2009) (“The case for federal pre

- emption is particularly weak where Congress has indic ated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to stand by both concepts and to tolerate whatever tension there is between them.” (alteration omitted)); DeHart v. Town of Austin, Ind.

, 39 F.3d 7 18, 722 (7th Cir. 1994) (“[G]iven the clear14 C HINATOWN N EIGHBORHOOD A SS ’ N V

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expressions of Congressional intent to foster cooperation with state and local governments and the different, albeit overlapping, purposes behind the [federal] Act and the

. . . Ordinance, we discern no Congressi onal intent to ban state or local legislation

. . . .”).

C.

The plaintiffs’ attempt to draw a negative inference from Congress’s failure in the MSA to address on

- land activities related to finning, see 18 U.S.C. § 1857(1)(P) (referring to activities at sea , aboard fishing vessels, and during landing), is similarly meritless. Silence, without more, does not preempt

— “a clear and manifest purpose of

pre

- emption is always required.” Isla Petrol. , 485 U.S. at 503 (quotation marks omitted). There is no “author itative federal determination” that on

- land activities are “best left

un regulated.” Id

. 7 To the contrary, the federal scheme

7 The plaintiffs rely on regulations that limit the circumstances under which sharks may be sold on land. See 50 C.F.R. § 635.31(c)(1), (5). But these regulations limit , rathe r than encourage, commerce in sharks. Cf. 16 U.S.C. § 1853(b)(3) (permitting FMPs to “establish specified
limitations which are necessary and appropriate for the conservation and management of the fishery on the

. . . sale of fish caught during
commercial , recreational, or charter fishing” (emphasis added)). The plaintiffs also rely on a statement by Representative George Miller during floor debates on the federal finning prohibition act that the “Act will not prevent United States fishermen from harvesti ng sharks, bringing them to shore, and then using the fins or any other part of the shark.” 146 Cong. Rec. H11571 (Oct. 30, 2000). But a lone statement in the legislative history is not a “clear and manifest” expression of Congress’s intent to preempt, a nd in any event, this statement merely
describes the limits of federal law.C HINATOWN N EIGHBORHOOD A SS ’ N V

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expressly preserves the ability of states to regulate fishing

related activities within their boundaries. See 16 U.S.C. § 1856(a )(1).

D.

The plaintiffs amended their original complaint after we remanded the case upon affirming the denial of a preliminary injunction. At the hearing on the motion to dismiss the amended complaint, the district court asked plaintiffs’ counsel during t he discussion of the preemption claim whether “you’ve got the complaint where you want it,” and counsel responded affirmatively. Based on this representation, the court found that a second round of amendments would be futile and granted the motion to
dism iss with prejudice.

The plaintiffs assert for the first time on appeal that they could plead additional facts to support the preemption claim, and ask us to find that the district court abused its discretion in failing to grant leave sua sponte. Even
maki ng the charitable assumption that this argument was preserved for appeal, see Alaska v. United States , 201 F.3d 1154, 1163

- 64 (9th Cir. 2000) (“Where a party does not ask the district court for leave to amend, the request on appeal
to remand with instructi ons to permit amendment comes too late.” (alterations and quotation marks omitted)); Reyn’s Pasta Bella, LLC v. Visa USA, Inc. , 442 F.3d 741, 749 (9th Cir. 2006) (relying on Alaska for the proposition that “we generally will not remand with instructions to grant leave to amend unless the plaintiff sought leave to16 C HINATOWN N EIGHBORHOOD A SS ’ N V

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amend below”), we cannot conclude on this record that the district court abused its discretion in dismissing with prejudi ce. 8

“Although leave to amend ‘shall be freely given when justice so requires,’ it may be denied if the proposed amendment either lacks merit or would not serve any purpose because to grant it would be futile in saving the plaintiff’s suit.” Universal Mor tg. Co. v. Prudential Ins.
Co. , 799 F.2d 458, 459 (9th Cir. 1986) (quoting Fed. R. Civ. P. 15(a)). The first amended complaint makes no allegations of a direct conflict between the California statute and any unambiguous federal mandate. At oral argument on this appeal, plaintiffs’ counsel asserted that the plaintiffs could remedy this defect by alleging that state bans on commerce in shark fins affect the ability of commercial fishers to reap the optimum yields prescribed
in FMPs for shark harvests. But the MSA does not preempt a state law simply because it may affect the realization of optimum yields

— if that were so, a wide array of state regulations affecting commercial fishing, such as taxes or labor laws, would be potentially suspect. Indeed, Congres s expressly foreclosed any interpretation of optimum yield that would have such a broad preemptive effect by

8 The dissent correctly notes the “strong showing” required in the district court to justify dismissal with prejudice, but ignores the
deferential abuse

- of

- discretion standard g overning our review of the district court’s failure to grant leave to amend. At the very least, it is even more difficult to perceive an abuse of discretion when the plaintiffs never sought leave to amend below.C HINATOWN N EIGHBORHOOD A SS ’ N V

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preserving state jurisdiction over commerce in fish products within state borders. See 16 U.S.C. § 1856(a)(1).

The plaintiffs concede that no prov ision of federal law affirmatively guarantees the right to use or sell shark fins onshore, and they do not dispute that there are commercially viable uses for sharks besides their detached
fins . That resolves the preemption issue. See Fla. Lime

, 373 U.S. at 146

- 47 (“[W]e are not to conclude that Congress legislated the ouster of this California statute

. . . in the absence of an unambiguous congressional mandate to that effect.”). Leave to amend would therefore be futile. Cf. ReadyLink Healthcare, Inc. v. State Comp. Ins. Fund

, 754 F.3d 754, 761

- 62 (9th Cir. 2014) (“Preemption is almost always a legal question, the resolution of which is rarely aided by development of a more complete factual record.” (quotation marks omitted)). 9

IV.

“The Supreme Court ha s adopted a two

- tiered approach to analyzing state economic regulation under the

9 Our conclusion is bolstered by the pos ture in which the request to amend was made. The original complaint was filed three years ago, since then, there has been ample opportunity to explore the scope of the preemption claim, including in litigating the preliminary injunction and the appeal fro m the denial of the preliminary injunction. The plaintiffs had the benefit of this litigation, and its resolution, before filing the first amended complaint. Cf. AmerisourceBergen Corp. v. Dialysist W.,
Inc. , 465 F.3d 946, 953

- 54 (9th Cir. 2006) (affirmi ng denial of leave to amend based on delay between learning of basis for amendment and seeking leave).18 C HINATOWN N EIGHBORHOOD A SS ’ N V

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Commerce Clause.” Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris , 729 F.3d 937, 948 (9th Cir. 2013) (quotation marks omitted), cert. denied , 135 S. Ct. 398 (2014 ). If a state statute “directly regulates or discriminates against interstate commerce, or

. . . its effect
is to favor in

- state economic interests over out

- of

- state interests,” it is “struck down

. . . without further inquiry.”
Brown

- Forman Distillers C orp. v. N.Y. State Liquor Auth.

, 476 U.S. 573, 579 (1986). When, however, a state statute has only indirect effects on interstate commerce and regulates evenhandedly, it violates the Commerce Clause only if “the burdens of the statute so outweigh the puta tive benefits as to make the statute unreasonable or irrational.” UFO Chuting of Haw., Inc. v. Smith , 508 F.3d 1189, 1196 (9th Cir. 2007) (alteration omitted).

A.

The plaintiffs claim the Shark Fin Law is per se invalid
under the Commerce Clause because i t regulates extraterritorially by curbing commerce in shark fins
between California and out

- of

- state destinations, and by preventing the flow of shark fins through California from

one out

- of

- state destination to another. But a state may regulate commercia l relationships “in which at least one party is located in California.” Gravquick A/S v. Trimble Navigation Int’l, Ltd. , 323 F.3d 1219, 1224 (9th Cir. 2003). And even when state law has significant extraterritorial effects, it passes Commerce Clause must er when, as here, those effects result from the regulation of in

- state conduct. See Rocky Mtn. Farmers Union v. Corey , 730 F.3d 1070,
1101

- 04 (9th Cir. 2013) (upholding California statute imposing fuel standards that affect out

- of

- state fuel producers bec ause the standard applies only to fuels consumed in California), cert. denied , 134 S. Ct. 2875C HINATOWN N EIGHBORHOOD A SS ’ N V

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(2014); Ass’n des Eleveurs , 729 F.3d at 948

- 51 (upholding California statute banning sale of products from force

- fed birds, even though it affected out

- of

- state producers and exports from California); cf. Sam Francis Found. v.
Christies , 784 F.3d 1320, 1323

- 24 (9th Cir. 2015) (en banc) (invalidating a California statute that “facially regulates a commercial transaction that takes place wholly outside of
the State’s borders” (quotation marks omitted)). Thus, nothing about the extraterritorial reach of the Shark Fin Law renders it per se invalid.

The plaintiffs’ reliance on Healy v. Beer Institute

, Brown

- Forman Distillers Corp. v. New York State Liquor
Authori ty , and Baldwin v. G.A.F. Seelig, Inc. is misplaced. In each of those cases, the Supreme Court struck down price

- control or price

- affirmation statutes that had the effect of preventing producers from pricing products independently in neighboring states. See Healy , 491 U.S. 324, 326, 334 (1989) (Connecticut statute requiring beer distributors to affirm that Connecticut prices were at least as low as prices in other states); Brown

- Forman , 476 U.S. at 575, 582

- 83 (New York statutes barring distillers from

se lling liquor at prices higher than prices in other states);
Baldwin , 294 U.S. 519, 521

- 22 (1935) (New York statute prohibiting sale of milk in New York if acquired from Vermont farmers at price lower than price available to New York farmers). We have reco gnized the sui generis effect on interstate commerce of such price

- control regimes and the correspondingly limited scope of these cases. See Ass’n
des Eleveurs , 729 F.3d at 951 (“ Healy and Baldwin are not applicable to a statute that does not dictate the price of a product and does not tie the price of its in

- state products to

out

- of

- state prices.” (alteration and quotation marks omitted) (quoting Walsh , 538 U.S. at 669)). The Shark Fin20 C HINATOWN N EIGHBORHOOD A SS ’ N V

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Law does not fix prices in other states, require those states to adop t California standards, or attempt to regulate transactions conducted wholly out of state, and the price

control cases are therefore inapposite. See Rocky Mtn.

, 730 F.3d at 1102

- 03.

B.

The plaintiffs claim that even if the Shark Fin Law is not an impermis sible direct regulation of extraterritorial conduct, it should be struck down under Pike v. Bruce Church, Inc. , because “the burden [it] impose[s] on [interstate] commerce is clearly excessive in relation to the putative local benefits.” 397 U.S. 137, 142 (1970). Our precedents, however, preclude any judicial “assessment of the benefits of [a state] law[] and the

. . . wisdom in adopting” it unless the state statute either discriminates in
favor of in

- state commerce or imposes a “significant
burden on int erstate commerce.” Nat’l Ass’n of Optometrists & Opticians v. Harris , 682 F.3d 1144, 1156 (9th Cir. 2012); see also Ass’n des Eleveurs , 729 F.3d at
951

- 52. Here, the plaintiffs do not allege the Shark Fin Law has any discriminatory effect, and they canno t establish a significant burden on interstate commerce.

“[O]nly a small number of

. . . cases invalidating laws
under the dormant Commerce Clause have involved laws that were genuinely nondiscriminatory

. . . .” Nat’l Ass’n of Optometrists , 682 F.3d at 1 150 (quotation marks omitted). These cases address state “regulation of activities that are inherently national or require a uniform system of regulation,” id. at 1148

— most typically, interstate transportation, see, e.g. , Raymond Motor Transp., Inc. v.
Ri ce , 434 U.S. 429, 447

- 48 (1978) (state regulation of truck length); see also Ass’n des Eleveurs , 729 F.3d at 952C HINATOWN N EIGHBORHOOD A SS ’ N V

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(“[E]xamples of courts finding uniformity necessary fall into the categories of transportation or professional sports leagues.” (alteration and quotation marks omitted)).

The Shark Fin Law does not interfere with activity that is inherently national or that requires a uniform system of regulation. The purpose of the Shark Fin Law is to conserve state resources, prevent animal cruelty, and protect wildlife and public health

. See 2011 Cal. Legis. Serv. ch. 524, § 1 (A.B. 376) (listing purposes). These are legitimate matters of local concern. See, e.g.

, Merrifield v. Lockyer , 547 F.3d 978, 986 (9th Cir. 2008); UFO Chuting

, 508 F.3d at 1196. And to the extent the Shark Fin Law is effectively a means of ocean fishery management, fishery management is an inherently cooperative endeavor

— with state and federal jurisdiction over the oceans divided according to distance from shore, see 16 U.S.C. §§ 1802(11), 1811(a), 1856(a)(1), a nd with state and federal cooperation contemplated even in the management of federal waters, see, e.g. , id. § 1852(a)(2). There is, accordingly, no significant interference with interstate

commerce. See Ass’n des Eleveurs , 729 F.3d at 952; Nat’l Ass’n of Optometrists , 682 F.3d at 1156.

“Because the [Shark Fin Law does] not impose a significant burden on interstate commerce, it would be inappropriate for us to determine [its] constitutionality

. . . based on our assessment of the benefits of th[e] law[] an d the State’s wisdom in adopting [it],” or the availability of
less

- burdensome alternatives. Nat’l Ass’n of Optometrists

, 682 F.3d at 1156

- 57; see also Ass’n des Eleveurs , 729 F.3d22 C HINATOWN N EIGHBORHOOD A SS ’ N V

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at 952 (finding an inquiry into “whether the benefits of the challenged la ws are illusory” unwarranted because the regulation of the foie gras market is not inherently national). 10

V.

We AFFIRM the judgment of the district court.

10 Because none of the plaintiffs’ constitutional claims survive the motion to dismiss, the district court properly dismissed the claim under
42 U.S.C. § 1983. See West v. Atkins , 487 U.S. 42, 48 (1988).REINHARDT, Circuit Judge, dissenting in part:

I dissent in part because the plaintiffs must be granted leave to amend the complaint with respect to their preemption claim. 1 “[I]n a line of cases stretching back nearly 50 [now 65] years, we have held that in dismissing for failure to state a claim under Rule 12(b)(6), ‘a district court should grant leave to amend even if no request to amend the pleading was made , unless it determines that the pleading could not possibly be cured by the allegation of other facts.’” Lopez v. Smith , 203 F.3d 1122, 1127 (9th Cir. 2000) (emphasis added) (citations omitted); see also Sharkey v. O’Neal , 778 F.3d 767, 774 (9th Cir. 2015). In my view, the defects in plaintiffs’ preemption claim could be cured by amendment, and the majority’s other suggested reasons for affirming the denial of leave to amend are also
without merit.

The majority first states in dictum that the issue of the denial of leave to amend the complaint may have been
waived. As the foregoing statement of the law regarding dismissals with prejudice makes clear, however, whether the plaintiffs asked the district court for leave to amend is irrelevant. The majority incorrectly suggests that Alaska v.
United States , 201 F.3d 1154, 11 63

– 64 (9th Cir. 2000), broadly held that a party cannot raise the issue for the first time on appeal, Maj. Op. at 15

- 16 , but that case neither considered nor abrogated our longstanding rule regarding dismissals under Rule 12(b)(6). Rather, it merely held t hat

1 The plaintiffs do not contest the denial of leave to amend with respect to their Commerce Clause claim on this appeal.24 C HINATOWN N EIGHBORHOOD A SS ’ N V

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the government could not seek to amend its answer to the complaint on appeal from judgment on the pleadings where it had intentionally adopted its answer as a strategic litigating position. See Alaska , 201 F.3d at 1163. In so doing, Alaska relied on cases holding that a party cannot wait until an appeal of summary judgment to seek leave to amend a pleading, id . at 1163

– 64

— a rule that makes sense in light of the time and expense that a disposition at that stage entails. By contrast, there is a strong presumption that a plaintiff with a plausible legal claim who simply fails to
master the art of the well

- pleaded complaint must be allowed to cure pleading defects

— whether or not it makes a request to do so before the district court.

The majority also alludes in dictum to the fact that the plaintiffs voluntarily amended their complaint on one prior occasion and that it has been three years since the original complaint was filed. True, the presumption that a dismissal should be without prejudice ma y be rebutted by a finding of “undue delay, bad faith or dilatory motive .

. . , repeated failure to cure deficiencies by amendments previously allowed, [or] undue prejudice to the opposing party by
virtue of allowance of the amendment .

. . .” Sharkey

, 77 8 F.3d at 774 (internal citation and quotations marks omitted). However, absent prejudice to the opposing party

— which the district court did not find and the
defendants do not assert

— there must be a “ strong showing ” of one of the other factors to justify a dismissal with prejudice. Id . (emphasis added and citation omitted). A single, good

- faith prior amendment of the complaint cannot satisfy this high bar. Nor can the mere passage ofC HINATOWN N EIGHBORHOOD A SS ’ N V

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time. 2 More important, the district court relied solely on the purported f

utility of an amendment. We cannot affirm based on a finding of repeated failure to cure or undue delay that the district court did not make. See id . (holding that the district court must provide an explanation for dismissal with prejudice).

Nor are the ma

jority and the district court correct that the plaintiffs’ pleading defects could not possibly be cured by amendment. I agree that the plaintiffs’ complaint as currently drafted fails to “identify any actual conflict
between” the Shark Fin Law and “the fed eral government’s authority under the [Magnuson

- Stevens Act] to manage shark fishing in the [exclusive economic zone].” Maj. Op.

at 10 (quotation marks omitted). It includes nothing beyond “mere conclusory statements,” Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009), that the Shark Fin Law conflicts with “the [Magnuson

- Stevens Act], federal implementing regulations and federal [Fisheries Management Plans].” First Amended Complaint for Declaratory and Injunctive Relief at 12 ¶ 57, Chinatown Neighborhood Ass’n v. Harris , No. CV 12

- 03759 WHO (N.D. Cal. Dec. 9, 2013). However, the

2 This case is not akin to AmerisourceBergen Corp. v. Dialysist W.,
Inc

. , cited by the majority, in which the district court found that the defendant would be prejudiced by the plaintiff’s attempt “twelve months into the litigati on, .

. . [to] drastically change[ ] its litigation theory” without explanation. 465 F.3d 946, 953 (9th Cir. 2006). As explained below, the problem with the operative complaint in this case could be cured by the pleading of additional facts; unlike in
Amer isourceBergen , the plaintiffs do not seek to change their strategy altogether.26 C HINATOWN N EIGHBORHOOD A SS ’ N V

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plaintiffs assert that, if permitted to amend the complaint, they could plead additional facts demonstrating that (1) the federal government has adopted specific quotas for shark fishing p ursuant to the optimum yield provisions of the Magnuson

- Stevens Act and that (2) the Shark Fin Law poses an obstacle to achievement of those quotas because it significantly reduces otherwise legal shark fishing. 3 As outlined below, if such facts were prope rly pleaded, this would constitute a plausible claim for relief.

As relevant here, conflict preemption occurs where “the challenged state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,’” Ariz ona v. United States , 132 S. Ct. 2492, 2501 (2012), including where it “would interfere with the careful balance struck by Congress,” id . at 2505. A central purpose and objective of the Magnuson

- Stevens Act is to “achieve and maintain, on a continuing basi s, the optimum yield from each fishery,” 16 U.S.C. § 1801(b)(4),
which is the “amount of fish which

— (A) will provide the greatest overall benefit to the Nation, particularly with respect to food production and recreational opportunities, and taking into account the protection of marine ecosystems; [and] (B) is prescribed on the basis of the maximum sustainable yield from the fishery .

. . .” Id

. § 1802(33). As the majority explains, the Magnuson

Stevens Act creates a framework under which regional

3 Federal law bans the inhumane practice of shark finning

— of removing the fin from a shark on a boat

— but it does not prohibit the landing of an intact shark carcass or the subsequent detachment and
sale of a fin. See 16 U.S.C. § 1857(1)(P).C HINATOWN N EIGHBORHOOD A SS ’ N V

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Fishery Management Councils comprised of federal and state stakeholders collaborate to adopt Fishery Management Plans designed to achieve optimum yield. Id . § 1851(a). In short, Fishery Management Plans seek to maximize the
commercial and recreational bene fits of fisheries in the exclusive economic zone without compromising the long

term sustainability of them. See id .; Natural Res. Def. Council, Inc. v. Daley , 209 F.3d 747, 753 (D.C. Cir. 2000).

One of the things a Fishery Management Plan may do
to achieve optimum yield is establish a quota for the amount of a particular species of fish that should be caught. A plaintiff states a cognizable preemption claim where a Fishery Management Plan has established such a quota and
a state law interferes with the achi evement of that quota. Se. Fisheries Ass’n v. Chiles , 979 F.2d 1504, 1510 (11th Cir. 1992) (holding that the plaintiffs stated a cognizable preemption claim where a Fishery Management Plan established an annual quota for the total catch of Spanish
Mackerel while state law established a daily limit on the number of Spanish Mackerel that a commercial vessel could bring into a state port). Notwithstanding the majority’s statement to the contrary, the Magnuson

- Stevens Act provision that preserves a state’s “jur isdiction or authority .

. . within its boundaries ,” 16 U.S.C. § 1856(a)(1) (emphasis added), does not authorize a state to adopt laws that pose an obstacle to the federal government’s authority to manage and maximize the productivity of fisheries
within i ts own respective territory

, see id . § 1811(a) (“the United States claims, and will exercise .

. . sovereign rights and exclusive fishery management authority over all fish

. . . within the exclusive economic zone.”). See also City of
Charleston v. A Fishe rman’s Best , 310 F.3d 155, 174

– 76, 179 (4th Cir. 2002) (holding that city resolution banning28 C HINATOWN N EIGHBORHOOD A SS ’ N V

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vessels that use longline tackle from docking at city marina was preempted by Fishery Management Plan designating “longline” as the authorized gear for catching sw ordfish).

Although the plaintiffs’ pleadings as presently drafted fail to point to a Fishery Management Plan regulating sharks or setting a shark quota, at oral argument defendants
and their amicus curiae admitted that there are a number of Fishery Managem ent Plans in place around the country that do so. Even if those Fishery Management Plans are silent with regard to the sale of shark fins (as the defendants and their amici represented at oral argument), the plaintiffs
could establish that the Shark Fin La w is preempted by adducing clear evidence that it poses an obstacle to the achievement of an optimum yield of sharks specified in an Fishery Management Plan because it results in a significant decrease in otherwise legal shark fishing. The plaintiffs

asser ted at oral argument that if permitted to amend their complaint, they would provide additional facts demonstrating that the number of sharks caught in the exclusive economic zone has dropped significantly and that they have lost millions in revenue due to the Shark Fin
Law. 4 If the fin is the main part of a shark that has

4 The plaintiffs did not, as the majority contends, concede that “there are commercially viable uses for sharks besides their detached fins.” Maj. Op. at 17 . The majority improperly relies on two statements in the record to hold that the plaintiffs conceded the matter. First, it cites plaintiffs’ counsel’s statement at oral argument that a letter from the Director of the California Department of Fish and Wildlife was not a “big deal.” That letter states that “revenue from the sale of sharks harvested in federal waters off California derives mostly from the saleC HINATOWN N EIGHBORHOOD A SS ’ N V

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commercial value and thus California fishermen largely cease catching sharks in exclusive economic zone fisheries, the federal objective of achieving optimum yield might be
unconstitutiona lly impaired by the state’s ban on the sale of
fins

— i.e., the balance between conservation and economic interests struck by the Fishery Management Council in adopting a quota could be upset. While I express no opinion on the likelihood that such a claim wo uld ultimately succeed on the merits, the command that “leave to amend shall be freely given” requires that the plaintiffs at least be given a chance to adequately plead their claim. Sharkey , 778 F.3d at 774 (citation omitted).

Finally, the majority’s asse rtion that in dismissing the complaint with prejudice the district court properly relied on a representation by the plaintiffs that amendment would be futile is erroneous. The comment on which the majority and the district court rely is ambiguous at best. In response to the district court’s inquiry, “you’ve got the complaint

of the meat of the shark, not from the sale of fins after the shark is legally harvested and landed with fins naturally attached.” Although that assertion may indeed prove true, our job at the motion to dismiss stage is to test the sufficiency of the plaintiffs’ allegations. We cannot simply accept as true a state government official’s position regarding a
factual matter.

Second, the majority relies on a footnote in the operative complaint stating that “[t]he use of approximately 95% of any legally fished shark

. . . is still permitted. ” This statement, however, says nothing about the relative commercial value of the parts of a shark or whether the ban on the sale of sharks is an obstacle to the achievement of optimum yield

— matters that involve factual questions that cannot be decided ag ainst the plaintiffs at the motion to dismiss stage.30 C HINATOWN N EIGHBORHOOD A SS ’ N V

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where you want it .

. . ?”, plaintiffs’ counsel responded “you are correct.” Counsel likely meant only that he believed that he had made sufficient averments to support
the claims at th e motion to dismiss stage, as the district court’s inquiry followed counsel’s lengthy argument to that effect. This is different from a representation that should the district court conclude that the allegations in the complaint were insufficient, the plai ntiffs could not provide further allegations. The district court and the majority err by treating counsel’s ambiguous representation as sufficient to dislodge “the presumption in favor of granting leave to
amend.” Id . It would have taken little effort by t he district court to clarify the matter before permanently depriving the plaintiffs of an opportunity to pursue their case.

I respectfully dissent.