July 29, 2013

Another court punts on the Constitution, slams courthouse doors to entrepreneurs

By Jonathan Wood Attorney

When regulations impinge the right to earn a living, the government’s actions are analyzed under the most deferential and unfair standard of review in our law—the rational basis “test.” Under this standard, a law is unconstitutional only if the plaintiff can prove that it is totally unreasonable. This makes defending economic liberty a near Sisyphean labor. It is not impossible, as multiple modern cases have shown. But this right can only be defended if the courts give entrepreneurs an opportunity to make their case.

Recently the courts have tried to get rid of economic liberty cases without giving plaintiffs a chance, by dismissing them before trial. Last year, PLF petitioned the Supreme Court to stop this abusive practice in Hettinga v. United States.  As we argued, the purpose of the dismissal procedure is to allow defendants to avoid the costs of litigation where the plaintiff, even if everything she alleges is true, would not be entitled to win her case—e.g., because the case was filed too late, the claims were waived, or the complaint doesn’t set out a cognizable claim. However, dismissal is not an appropriate procedure for getting rid of cases that concern rights that the judge doesn’t think are worth his time.

Yet that’s just what the judges did in Hettinga and a case decided last week in a federal district court in California. In Dairy v. Bonham, out-of-state crab fishermen alleged that the state was arbitrarily discriminating against them—and in favor of California fishermen—in awarding permits under the state’s permit regime to regulate Dungeness Crab trapping. They allege that this discrimination deprives them of their right to earn a living for the sole purpose of protecting California fishermen from legitimate competition. Under Merrifield v. Lockyer, economic protectionism for its own sake is not a constitutionally legitimate reason to regulate.

Despite this precedent and allegation, the Court dismissed the case, explaining:

Plaintiffs have failed to overcome the daunting burden of negating every conceivable basis identified by the Defendant. Specifically, Plaintiffs have failed to show that consideration of California landings exclusively is wholly irrational or completely devoid of a rational relationship to achieving any of the conceivable state interests. Plaintiffs’ contention that the statute’s only purpose is economic protectionism does not alter the Court’s conclusion nor relieve Plaintiffs of their burden. As noted above, under deferential rational basis review, any conceivable basis for the legislation may suffice. Plaintiffs’ reliance on Merrifield v. Lockyer is misplaced. There, the court found the state licensing scheme to be “economic protectionism for its own sake,” only after rebuffing other conceivable bases. Here, Plaintiffs have not negated the other conceivable bases.

The decision’s reasoning puts economic liberty plaintiffs in a bind. It’s not enough to allege that the regulation is wholly irrational or designed for economic protectionism. You must disprove every conceivable basis. But this must be done before the Court will allow you to gather and present the necessary evidence. Perhaps because of the obvious contradiction in this logic, the judge didn’t offer any explanation how any economic liberty plaintiff could ever survive a motion to dismiss.

The Court surmised that the regime might have conceivably been designed to protect the fishery and the marine environment, increase crab prices, and promote public safety. Each of these might explain the imposition of the Dungeness Crab trap limit (not that they’re all good reasons…). But in relying on these, the Court made a fundamental error; none explain the discrimination in the awarding of permits, they only explain the imposition of a limit.

The only remaining justification which might be relevant is preventing displacement of California crab fishermen—which is apparently a nicer way to say protecting California fishermen from competition. If the plaintiffs were allowed to prove their case, perhaps they could have made the judge see why his rationales were either irrelevant or impermissible. Now it’s up to the Ninth Circuit to protect access to the courts for economic liberty claimants. If it reverses the District Court’s decision, it will create a conflict with the D.C. Circuit’s decision in Hettinga and tee up the issue for the Supreme Court.

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