Northern Wind, Inc. v. Daley

• Court: Court of Appeals for the First Circuit
• Decided: December 29, 1999
• Docket: 99-1526
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 99-1526



                       NORTHERN WIND, INC.,



                      Plaintiff, Appellant,



                                v.



WILLIAM M. DALEY, SECRETARY OF COMMERCE; UNITED STATES DEPARTMENT

 OF COMMERCE, NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION;

                 AND UNITED STATES OF AMERICA,



                      Defendants, Appellees.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                FOR THE DISTRICT OF MASSACHUSETTS



         [Hon. Edward F. Harrington, U.S. District Judge]


Before



                      Selya, Circuit Judge,

                 Coffin, Senior Circuit Judge,

                   and Stahl, Circuit Judge.


Michael A. Collora, with whom Eve Slattery and Dwyer &

Collora, LLP, were on brief for appellant.

     Todd S. Kim, Attorney, with whom Richard Monikowski, Attorney,

Robert L. Klarquist, Attorney, Lois J. Schiffer, Assistant Attorney

General, Department of Justice, Environment & Natural Resources

Division, and Joel La Bissonniere, National Ocean and Atmospheric

Administration, Office of General Counsel, were on brief for

appellees.


December 29, 1999


STAHL, Circuit Judge.  Plaintiff Northern Wind, Inc.

("Northern Wind") appeals the district court's grant of summary

judgment for Defendant, the National Oceanic and Atmospheric

Administration ("NOAA").  The decision upheld a civil penalty

assessed against Northern Wind pursuant to 16 U.S.C.  1858, and a

finding by an Administrative Law Judge ("ALJ") that Northern Wind

was liable for the possession of nonconforming Atlantic sea

scallops under the Magnuson-Stevens Fishery Conservation and

Management Act ("Magnuson Act"), 16 U.S.C.  1857, as implemented

by 50 C.F.R.  650.7(a).  Because the ALJ's decision is supported

by substantial evidence, we affirm.

                               I.

                           Background

  Northern Wind, the owner of a seafood processing plant in

New Bedford, Massachusetts, entered into an agreement with Ocean

Obsession, Ltd. ("Ocean Obsession"), a seafood supplier, for the

storage of Atlantic sea scallops.  The agreement gave Ocean

Obsession the right to offload and store at Northern Wind's

refrigerated facilities its catches of sea scallops. Ocean

Obsession warranted that all of the scallops it stored in the

cooler would be in conformance with the Magnuson Act and othermaritime regulations.  In exchange, Ocean Obsession gave Northern

Wind a right of first refusal on the scallops stored in its cooler. 

  Ocean Obsession's storage area was located in a locked,

alarmed, and partitioned off portion of Northern Wind's seafood

cooler with a separate entrance.  This arrangement allowed Ocean

Obsession employees unlimited access to the cooler at any time. 

The only other person with access to this separate portion of the

cooler was the owner of Northern Wind.  Ocean Obsession often would

deliver scallop stock to the facility after Northern Wind's regular

business hours.  On these occasions, Northern Wind would view the

stock stored in the cooler on the next business day.  Nevertheless,

Northern Wind had access to the cooler at all times, even if a

representative of Ocean Obsession was not present.  If Northern

Wind found the stock acceptable, it would negotiate a price with

Ocean Obsession for its purchase; if not, Northern Wind would

reject the product and Ocean Obsession was free to seek other

buyers.

  On September 28, 1992, members of the National Marine

Fisheries Service ("NMFS"), part of the NOAA, arrived at Northern

Wind's facilities to inspect its stock for conformity with the

Magnuson Act.  The previous night, Ocean Obsession had offloaded

and stored 12,439 pounds of scallops at Northern Wind's facilities. 

This harvest was made up of one hundred bags ("the Canton bags")

that were shucked in the United States and two hundred bags ("the

Weymouth bags") that were shucked at sea.  The NMFS agents took ten

random samples of scallops from these three hundred bags, to

determine whether they conformed with the applicable regulations.

See 50 C.F.R.  650.7(a) (making it unlawful to possess scallops

that are too small "at or prior to [their] first [mixing, sorting,

or processing] transaction in the United States").  At the time,

the maximum allowable weight for Atlantic sea scallops was thirty

meats per pound, which means that any sample of scallops weighing

one pound could contain no more than thirty shucked scallops. 

However, the samples the NMFS took from both sets of bags and

measured at Northern Wind had an average weight of 75.8 meats per

pound.  The NMFS thus seized all of the scallops, notified the NOAA

of the violation, and fined Northern Wind $35,000.

  Subsequently, the NOAA issued to Northern Wind a Notice

of Violation and Assessment, charging it with the possession of

nonconforming Atlantic sea scallops in violation of 50 C.F.R.   

650.7(a).  Northern Wind requested a hearing to challenge whether

the NMFS seized the scallops after the first transaction in the

United States, contending that the scallops had been shucked on

land prior to being stored, thus they were not be subject to the

regulation because the shucking was the first transaction in the

United States. Northern Wind also challenged whether it actually

"possessed" the scallops within the meaning of the statute.  An

ALJ held a three-day administrative hearing on these issues, but

retired prior to issuing an opinion.  A second ALJ issued an

initial decision two years later based upon the existing record. 

That ALJ found that while the NMFS seized scallops from both the

Canton bags and the Weymouth bags, only those from the Weymouth

bags evidenced a violation because they were shucked at sea and had

not been mixed, sorted, or processed after they landed in the

United States.  The deciding ALJ ordered the NOAA to reimburse

Ocean Obsession for the improperly seized Canton bags and further

found that Northern Wind did possess all of the offending scallops

within the meaning of the statute.  The ALJ thus upheld the fine

imposed for the Weymouth bags.  

  Both the NOAA and Northern Wind appealed the ALJ's

decision to the Deputy Undersecretary of the NOAA.  The NOAA

challenged its obligation to pay compensation for the Canton

scallops, and Northern Wind alleged various procedural errors. 

Northern Wind also raised a new argument on appeal, asserting that

because the ALJ found that only the Weymouth scallops were

nonconforming and because the Weymouth and Canton scallops were

"mixed" together in the cooler, it follows that all of the random

samples had been mixed, meaning they had been through their first

transaction in the United States and were not subject to the

regulation at issue.  The Deputy granted the NOAA's challenge to

the compensation order and summarily denied Northern Wind's

petition for discretionary review.  The Deputy did not reach the

merits of Northern Wind's appeal.  

  Northern Wind then filed suit in the District of

Massachusetts, seeking judicial review of the issues it raised in

the original administrative hearing, but did not reassert the

mixing argument that the Deputy denied.  Both Northern Wind and the

NOAA filed cross-motions for summary judgment, and after a hearing,

the district court remanded the case to the ALJ to rule as a matter

of law on whether 50 C.F.R.  650.7(a) requires "knowing"

possession of nonconforming scallops.  On remand, the ALJ

determined that the regulatory offense imposed strict liability and

did not require scienter.  The case returned to the district court,

which granted summary judgment for the NOAA.  Northern Wind

appeals.

                              II.

                       Standard of Review

  We review a district court's grant of summary judgment de

novo.  See Associated Fisheries of Maine, Inc. v. Daley, 127 F.3d

104, 109 (1st Cir. 1997); Massachusetts Dep't of Pub. Welfare v.

Secretary of Agric., 984 F.2d 514, 520 (1st Cir. 1993).  Here,

however, the review is further limited because "the Magnuson Act

incorporates the familiar standard of review associated with the

Administrative Procedure Act (APA)."  Associated Fisheries, 127

F.3d at 109; see also 16 U.S.C.  1855(b).  That standard accords

great deference to agency decision-making; the agency's decision is

presumed valid, and judicial review is solely to determine whether

substantial evidence in the record supports the decision.  See

Associated Fisheries, 127 F.3d at 109; see also Citizens To

Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16 (1971). 

Moreover, although an agency's answers to questions of law require

somewhat greater scrutiny, the court owes "substantial deference to

an agency's interpretation of its own regulations."  Thomas

Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994).

                              III.

                           Discussion

  Northern Wind raises three arguments on appeal.  First,

it contends that Ocean Obsession mixed together the two shipments

of scallops before the NMFS measured them, and that this mixing

puts them beyond the reach of the applicable regulations.  See 50

C.F.R.  650.7(a), 650.2.  Second, Northern Wind contends that it

did not "possess" the scallops within the meaning of those

regulations.  Finally, Northern Wind contends that only "knowing"

possession is proscribed by the regulations, and it did not

"knowingly" possess the scallops.  We will address each contention

in turn. 

                               A.

  As we have noted, Northern Wind originally argued to the

ALJ that by the time the NOAA inspected the allegedly nonconforming

scallops, they already had been shucked on land, making it

impossible to determine if prior to shucking they conformed to the

regulations.  As Northern Wind concedes in its brief, the "primary

issue" before the ALJ was "whether the seized scallops originated

from shell stock shucked at sea," in which case they would be

subject to regulation, "or on land," in which case they would not. 

However, Northern Wind presented a different theory in its petition

for discretionary review of the ALJ's decision.  Rather than

arguing to the Deputy that the scallops had been shucked on land,

Northern Wind claimed that Ocean Obsession's combined carriage of

the Canton and Weymouth bags to its facilities constituted a mixing

transaction that put the scallops outside of the regulations'

reach.

  The failure to raise this argument to the ALJ constitutes

an administrative waiver, which precludes its assertion on appeal. 

See 15 C.F.R.  904.273(d) (rendering issues of law or fact waived

unless "they were raised for the first time in the initial

decision, or could not reasonably have been foreseen and raised by

the parties during the hearing"). Under most circumstances, courts

will not consider issues that were not raised in prior

administrative proceedings.  See Massachusetts Dep't of Pub.

Welfare, 984 F.2d at 523.  This rule preserves "judicial economy,

agency autonomy, and accuracy of result" by requiring full

development of issues in the administrative setting to obtain

judicial review.  Eagle Eye Fishing Corp. v. United States Dep't of

Commerce, 20 F.3d 503, 505 (1st Cir. 1994).  The only exceptions to

this rule are for significant issues of law that are jurisdictional

in nature, constitutional in magnitude or otherwise so compelling

as to require judicial review.  See Eagle Eye, 20 F.3d at 505;

Massachusetts Dep't of Pub. Welfare, 984 F.2d at 524.

    Northern Wind concedes that its mixing argument does not

fall within any exception to the waiver rule, but maintains that

the issue was not waived because it sufficiently was raised in the

original ALJ hearing and reasserted in the administrative appeal. 

We disagree.  The record of the original administrative hearing

indicates that Northern Wind only raised issues of where the

scallops were harvested, whether the scallops were shucked at sea

or on land, and whether Northern Wind had actual possession of

them.  The first mention of the mixing argument came, and failed,

at the discretionary administrative appeal.  Northern Wind advances

no reason why it could not have raised the mixing issue at the

administrative hearing before the original ALJ, who allowed

testimony regarding the two separate shipments.  The deciding ALJ

also made a specific finding in his decision based upon the record

of the hearing, that there were two separate shipments at the

storage facility.  Because Northern Wind failed to raise the mixing

argument in the appropriate administrative venue, we find it

administratively waived. 

                               B.

  Northern Wind also argues that it never had possession of

the offending scallops.  More specifically, Northern Wind contends

that possession requires dominion or control over an object,

creating a possessory property right in that object.  It asserts

that its agreement to allow Ocean Obsession to store scallop stock

at its facilities was merely a lease or other contractual right,

which did not create a possessory right in the scallops or

otherwise amount to possession.   

  As we have mentioned, we accord substantial deference to

the agency's interpretation of its own regulations.  See Thomas

Jefferson, 512 U.S. at 512. "[T]he agency's interpretation must be

given 'controlling weight unless it is plainly erroneous or

inconsistent with the regulation.'" Id. (quoting Bowles v. Seminole

Rock & Sand Co., 325 U.S. 410, 414 (1945)).

  The regulation that implements the Magnuson Act makes it

unlawful to possess nonconforming scallops.  See 50 C.F.R. 

650.7(a).  The deciding ALJ read the term "possession" in the

regulation not to require ownership of the scallops and concluded

that Northern Wind possessed the scallops because it allowed them

to be stored at its processing facility.  This finding is clearly

not erroneous and is consistent with other NOAA cases interpreting

the term "possession" under these regulations.  See In re Whitney,

6 O.R.W. 479 (NOAA 1991) (including in the definition of

"possession" having and holding as property or having a "just

right" to); In re L.D. Amory & Co., 5 O.R.W. 100 (NOAA 1988)

(finding a seafood processor in "possession" of nonconforming

scallops because it allowed undersized scallops to be offloaded at

its facility and it assisted in packing and icing the scallops for

transport, storage, and resale); In re Axelsson & Johnson Fish Co.,

5 O.R.W. 51 (NOAA 1987) (finding seafood dealers to be in

possession of nonconforming scallops because they allowed scallops

to be offloaded at their docks with their equipment).  

  The evidence at the hearing demonstrated that Northern

Wind provided Ocean Obsession with storage space and unlimited

access to that space for the storage of its offloaded scallops. 

The evidence also established that Northern Wind could inspect the

scallops at will, could choose to take and purchase the scallops,

and had a "just right" to them because it could prevent Ocean

Obsession from taking any action on the scallops until it had

exercised its right of first refusal.  On the basis of this

evidence, we cannot say that the ALJ's interpretation of the term

"possession" was plainly erroneous or inconsistent with the NOAA's

regulations.  Nor can we say that the ALJ's application of the law

to the facts was not supported by substantial evidence.

                               C.

  Northern Wind's final argument is that the regulation

requires "knowing" possession before a civil penalty can be

imposed.  It claims that it did not know the scallops had been

delivered, that it had not had an opportunity to inspect them, and

that it was unaware of their nonconformance under the regulations,

or even of their presence.

         This argument fails.  As a general matter, scienter is

not required to impose civil penalties for regulatory violations

when the regulation is silent as to state of mind.  See Tart v.

Massachusetts, 949 F.2d 490, 502 (1st Cir. 1991).  Further, a mens

rea element is never presumed for regulatory offenses.  Id.; but

cf. Morissette v. United States, 342 U.S. 246 (1952) (finding that

mens rea is presumptively required for criminal offenses). 

Moreover, scienter never has been required for violations of public

welfare regulations because they "'are not in the nature of

positive aggressions or invasions, . . . but are in the nature of

neglect where the law requires care, or inaction where it imposes

a duty.'" United States v. White Fuel Corp., 498 F.2d 619, 622 (1st

Cir. 1974) (quoting Morissette, 342 U.S. at 255-56). Finally,

"'[s]cienter is not an element of a civil defense under the

[Magnuson Act].  Because conservation-related offenses under the

[Magnuson Act] are strict liability offenses, [Northern Wind]'s

protests as to [its] state of mind are irrelevant.'"  In re

Whitney, 6 O.R.W. at 483 (quoting In re Alba, 2 O.R.W. 670, 673

(NOAA 1982)); accord In re El Jefe, 5 O.R.W. 453, 455 (NOAA 1989);

In re Meredith Fish Co., 4 O.R.W. 66, 67 (NOAA 1985).

                              IV.

                           Conclusion

  For the reasons stated, the district court properly

entered summary judgment in favor of the NOAA.  Northern Wind

previously had waived its mixing argument by failing to argue it at

the first administrative hearing. Moreover, the deciding ALJ's

determinations that Northern Wind possessed the scallops and thatthe regulation has no scienter requirement were not plainly

erroneous and are consistent with the regulation.

  Affirmed.