author: PREGERSON, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Frank F. COLACURCIO, Sr., Defendant-Appellant.
    No. 95-30362.
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted April 8, 1996.
    Decided May 17, 1996.

      Floyd G. Short and Andrew R. Hamilton, Assistant United States Attorneys, Seattle, Washington, for the plaintiff-appellee.
    Sheryl Gordon McCloud, Law Offices of Irwin H. Schwartz, Seattle, Washington, for the defendant-appellant.
    Appeal from the United States District Court for the Western District of Washington; John C. Coughenour, District Judge, Presiding.
    Before PREGERSON and TASHIMA, Circuit Judges, and JONES, District Judge.

       The Honorable Robert E. Jones, United States District Judge for the District of Oregon, sitting by designation.

   PREGERSON, Circuit Judge:

Defendant Frank F. Colaeurcio appeals the district court’s order revoking his probation in a felony case and sentencing him to 36 months imprisonment. A federal magistrate judge held a probation revocation hearing under a district court local rule without defendant’s consent. After .the hearing, the magistrate judge filed a report and recommendation, which the district court adopted. The district court had jurisdiction under 18 U.S.C. § 3231 (1996). We have jurisdiction under 28 U.S.C. § 1291 (1996).

We must decide whether a magistrate judge has authority under the Federal Magistrates Act, 28 U.S.C. § 636 (1996), to conduct a probation revocation hearing without defendant’s consent. We reverse and remand. We hold that a magistrate judge has authority to conduct a probation revocation hearing only with defendant’s consent and only for probation imposed in a misdemeanor case. On remand, the district court is instructed to conduct a new probation revocation hearing.

BACKGROUND

The underlying facts are not in dispute. On April 12, 1991, the defendant plead guilty to a felony, aiding and assisting in the preparation and presentation of false corporate tax returns for 1984. The district court placed the defendant on probation for a period of five years. The probation order prohibited defendant from violating any federal, state, or local laws and from participating in the operations of various businesses, including the Talents West nightclub.

On May 16, 1995, defendant’s probation officer filed a violation report with the district court. The report alleged that the defendant had violated his probation by being involved with Talents West and also by committing the crime of “indecent liberties” under Washington law.

An evidentiary hearing was set before a magistrate judge under the Western District of Washington’s Local Rule 9(f). The defendant filed written objections to the magistrate judge conducting the hearing and requested a hearing before the district court. Defendant’s request was denied, and the magistrate judge conducted a hearing to decide whether defendant had violated the conditions of his probation.

At the hearing, both the government and the defendant presented about three hours of conflicting testimony. The magistrate judge resolved the credibility issues in favor of the. government and recommended to the district court that defendant’s probation be revoked. The magistrate judge filed his report and recommendation with the district court.

In district court, the defendant objected to the magistrate judge’s report and recommendation. The defendant maintained that the district court was required to conduct a new hearing and make its own determination whether the defendant had violated his probation. The district court, however, adopted the magistrate’s factual findings, without conducting an evidentiary hearing of its own, revoked defendant’s probation, and sentenced him to 36 months in prison. This appeal followed.

STANDARD OF REVIEW

Whether the district court’s delegation of authority to a magistrate judge to conduct a probation revocation hearing is proper under the Federal Magistrates Act and Article III of the U.S. Constitution raises questions of law subject to de novo review. See United States v. Foster, 57 F.3d 727, 731 (9th Cir.1995); United States v. Carr, 18 F.3d 738, 740 (9th Cir.), cert. denied, — U.S. -, 115 S.Ct. 82, 130 L.Ed.2d 35 (1994).

DISCUSSION

The authority of federal magistrate judges is limited to those matters authorized by Congress. As we recently explained:

[Fjederal magistrates are creatures of statute, and so is their jurisdiction. We cannot augment it; we cannot ask them to do something Congress has not authorized them to do. We need not and must not reach the constitutional question if we can first determine that the magistrate had no statutorily-created jurisdiction to handle the referral we gave it.

NLRB v. A-Plus Roofing, Inc., 39 F.3d 1410, 1415 (9th Cir.1994).

Thus, we must begin with the Federal Magistrates Act (the “Act”), 28 U.S.C. § 636, which establishes the jurisdiction of federal magistrate judges. To determine whether magistrate judges have authority to conduct probation revocation hearings, we must construe two separate provisions of the Act, § 636(a)(3), which grants magistrate judges authority over misdemeanor cases, and § 636(b)(3), which grants magistrate judges authority over “additional duties.” 28 U.S.C. § 636.

A. Authority under 28 U.S.C. § 636(a)(3).

Section 636(a)(3) provides, in relevant part, that a magistrate judge has “the power to conduct trials under section 3401, title 18, United States Code, in conformity with and subject to the limitations of that section.” 28 U.S.C. § 636(a)(3). Therefore, to determine what authority magistrate judges have under 28 U.S.C. § 636(a)(3), we must look to 18 U.S.C. § 3401.

Section 3401 grants magistrate judges authority over misdemeanor cases only subject to defendant’s consent:

Any person charged with a misdemeanor may elect, however, to be tried before a judge of the district court for the district in which the offense was committed. The magistrate shall carefully explain to the defendant that he has a right to trial, judgment, and sentencing by a judge of the district court.... The magistrate shall not proceed to try the case unless the defendant, after such explanation, files a written consent that specifically waives trial) judgment, and sentencing by a judge of the district court.

18 U.S.C. § 3401(b) (1996) (emphasis added). In addition, subsection (d) specifically provides that a magistrate judge only has authority “to revoke, modify, or reinstate the probation of any person granted probation by a magistrate judge." 18 U.S.C. § 3401(d) (emphasis added).

Thus, under a plain reading of 18 U.S.C. § 3401, a magistrate judge has authority to conduct a probation revocation hearing only if the following three conditions are satisfied: (1) defendant’s probation was imposed for a misdemeanor; (2) the defendant consented to trial, judgment, and sentence by a magistrate judge; and (3) the defendant initially was sentenced by a magistrate judge.

These three conditions have not been satisfied in this case. Defendant’s probation was imposed for a felony. There is no evidence that the defendant consented to trial, judgment, and sentence by a magistrate judge. The defendant was sentenced to probation by the district court. In these circumstances, the magistrate judge did not have authority under 28 U.S.C. § 636(a)(3) and 18 U.S.C. § 3401 to conduct defendant’s probation revocation hearing.

The fact that the district court conducted an independent review of the magistrate judge’s report and recommendation before making the decision to revoke defendant’s probation does not cure the problem that the probation revocation hearing was conducted without defendant’s consent. As we have previously recognized, the statute explicitly provides that a defendant must consent to a magistrate judge handling all phases of a criminal proceeding: “trial, judgment, and sentencing.” A-Plus Roofing, 39 F.3d at 1416 (quoting 18 U.S.C. § 3401(b)). An independent review by the district court of a magistrate judge’s report and recommendation “does not grant United States magistrates the power to conduct ... non-consensual criminal” hearings and trials. Id.

The circumstances in A-Plus Roofing are analogous to this case. There, we referred a petition for civil and criminal contempt to a magistrate judge in a ease in which an employer had disregarded an order from this court enforcing an NLRB order. A-Plus Roofing, 39 F.3d at 1414. After conducting a hearing on the contempt motion, the magistrate judge filed his report and recommendation with this court. Id. The employer objected to the magistrate’s report and recommendation, arguing that the magistrate judge did not have authority under the Federal Magistrates Act to conduct a criminal contempt hearing. Id.

We agreed and held that a magistrate judge only has authority under 18 U.S.C. § 3401 to conduct a criminal evidentiary hearing with defendant’s consent. A-Plus Roofing, 39 F.3d at 1416. As we explained:

Even though it is we who would render judgment and, if necessary, sentence Wesson, that involvement does not cure the fact that the trial itself [the criminal contempt hearing] was conducted by a magistrate without Wesson’s consent- [A]l-though our referral did not grant to the magistrate judge the power to enter judgment, we did permit him to conduct a criminal trial. However, a “magistrate’s criminal trial jurisdiction depends on the defendant’s specific, written consent.” ... No specific, written consent was obtained. Therefore, the magistrate had no jurisdiction, and we cannot rule based on his recommendations.

Id.

Similarly, here we hold that the magistrate judge did not have authority to conduct a probation revocation hearing, and that, as a result, the district court could not adopt the magistrate’s report and recommendation. A probation revocation hearing is, for all practical purposes, a trial to determine whether a ■defendant has violated his probation. Because the outcome of the probation revocation hearing will affect defendant’s sentence, the magistrate judge must obtain defendant’s consent before conducting the revocation hearing.

The Supreme Court’s recent decisions on the Federal Magistrates Act further compel this conclusion. See Peretz v. United States, 501 U.S. 923, 111 S.Ct. 2661, 115 L.Ed.2d 808 (1991); Gomez v. United States, 490 U.S. 858, 109 S.Ct. 2237, 104 L.Ed.2d 923 (1989). In Peretz and Gomez, the Supreme Court recognized that in expanding the magistrates’ authority over civil and criminal matters Congress repeatedly has required the consent of the parties. Peretz, 501 U.S. at 931, 111 S.Ct. at 2666; Gomez, 490 U.S. at 870, 109 S.Ct. at 2245. As the Supreme Court observed in Gomez:

A critical limitation on this expanded jurisdiction is consent. As amended in 1979, the Act states that “neither the district judge nor the magistrate shall attempt to persuade or induce any party to consent to reference of any civil matter to a magistrate.” 93 Stat. 643, 28 U.S.C. § 636(c)(2). In criminal cases, the Government may petition for trial before a district judge. “Defendants charged with misdemeanors can refuse to consent to a magistrate and thus effect the same removal,” S.Rep. No. 96-74, p. 7 (1979), for the magistrate’s criminal trial jurisdiction depends on the defendant’s specific, written consent.

490 U.S. at 870-871, 109 S.Ct. at 2245 (footnotes omitted). Because the defendant in this case never consented to being tried by a magistrate judge, the magistrate judge did not have authority under the Federal Magistrates Act to conduct a probation revocation hearing.

B. The Subsection (i) Amendment to 18 U.S.C. § 3401.

Despite the unambiguous language in 18 U.S.C. § 3401 requiring defendant’s consent before a magistrate judge can conduct a probation revocation hearing, the government contends that, through a recent amendment, Congress granted magistrate judges authority to conduct probation revocation hearings without defendant’s consent. In 1992, Congress added two new subsections dealing with supervised release to 18 U.S.C. § 3401. Federal Courts Administration Act of 1992 (“1992 Administration Act”), Pub.L. 102-572, § 301, 1992 U.S.C.C.A.N. (106 Stat.) 4506, 4507 (codified at 18 U.S.C. § 3401(h)-®).

Subsection (h) provides that a “magistrate judge shall have power to modify, revoke, or terminate supervised release of any person sentenced to a term of supervised release by a magistrate judge.” In addition, subsection (i) provides:

A district judge may designate a magistrate judge to conduct hearings to modify, revoke, or terminate supervised release, including evidentiary hearings, and to submit to the judge proposed findings of fact and recommendations for such modification, revocation or termination by the judge, including, in the case of revocation, a recommended disposition under section 3583(e) of this title.

18 U.S.C. § 3401® (emphasis added). Section 3583(e) specifically relates to supervised release. 18 U.S.C. § 3583(e).

The government asserts that, because there is no real distinction between supervised release and probation, Congress meant both supervised release and probation when using the term “supervised release” in subsections (h) and (i). The government cites to two cases, United States v. Carper, 24 F.3d 1157 (9th Cir.1994); United States v. Crane, 979 F.2d 687, 690 (9th Cir.1992), in support of its assertion. These cases, however, do not stand for the proposition that probation and supervised release should be treated the same.

We decided Crane before Congress added subsection (i) to 18 U.S.C. § 3401. Crane says nothing about whether supervised release and probation mean the same thing. The defendant in Crane challenged a magistrate judge’s revocation of his sentence for supervised release. 979 F.2d at 688. The defendant argued that the magistrate judge did not have authority to revoke his supervised release because 18 U.S.C. § 3401 did not explicitly provide that a magistrate judge could revoke supervised release. Id. at 689. We rejected defendant’s argument and held that a magistrate judge has authority to revoke a defendant’s supervised release, so long as the defendant consents to being tried and sentenced by a magistrate judge. Id. at 690. However, because the defendant in this case never consented to the magistrate judge conducting his probation revocation hearing, Crane is inapposite.

Carper also does not help the government. In Carper, we noted that our holding—that defendant had a right to allocution under Federal Rule of Criminal Procedure 32(a)(1)(C) before a district court could revoke his sentence for supervised release— would not change if probation were involved. 24 F.3d at 1158 n. 2. Nothing we said in Carper suggests that supervised release and probation are interchangeable.

The terms “supervised release” and “probation” are not interchangeable. In fact, Congress has treated them separately under different statutes. Supervised release is governed by 18 U.S.C. § 3583 and, like parole, is imposed after imprisonment. Probation, in contrast, is governed by 18 U.S.C. §§ 3561-3566 and usually is imposed in lieu of imprisonment.

The fact that Congress referenced only the statute governing supervised release under subsection (i) of § 3401 means that Congress intended subsection (i) to apply only to supervised release. Had Congress intended to grant magistrate judges the authority to conduct revocation hearings for probation under subsection (i), Congress would have referenced the statutes governing probation. Because Congress did not do so, we read subsections (h) and (i) as only providing authority for magistrate judges to conduct evi-dentiary hearings to revoke supervised release.

The legislative history supports this reading of subsection (i). According to the House Judiciary Committee’s Report, the purpose for adding subsections (h) and (i) to 18 U.S.C. § 3401 was to overrule United States v. Williams, 919 F.2d 266 (5th Cir.1990), which held that, even though magistrate judges have explicit authority to revoke a defendant’s probation under § 3401(d), they lacked authority under § 3401 to revoke the supervised release of a defendant. H.R. No. 102-1006, 102nd Cong., 2d Sess. (1992), reprinted in 1992 U.S.C.C.A.N. (138 Stat.) 3921, 3927-3928.

Moreover, when Congress added subsections (h) and (i), magistrate judges already had authority under § 3401(d) to revoke a defendant’s probation. See 18 U.S.C. § 3401(d). In fact, in 1992, Congress also amended subsection (d). 1992 Administration Act, U.S.C.C.A.N. at 4507. Thus, to construe subsections (h) and (i) as granting a magistrate judge separate authority to conduct probation revocation hearings would render § 3401(d) meaningless. As wé have stated before, we cannot construe “one provision ... in a way which is internally contradictory or that renders other provisions of the same statute inconsistent or meaningless.” United States v. Powell, 6 F.3d 611, 614 (9th Cir.1993).

Even assuming that somehow we could read subsections (h) and (i) as granting magistrate judges separate authority under § 3401 to conduct probation revocation hearings, we still would require defendant’s consent. Although subsection (i) does not explicitly require defendant’s consent, we must construe provisions of a statute “in context of the statute as a whole and with regard to its object in policy.” Crane, 979 F.2d at 690. See also Tellis v. Godinez, 5 F.3d 1314, 1316 (9th Cir.1993), cert. denied, — U.S. —, 115 S.Ct. 354, 130 L.Ed.2d 309 (1994) (stating that a “statute is to be read as a whole, since the meaning of statutory language, plain or not, depends on context”). Because Congress placed subsections (h) and (i) in § 3401, we conclude that Congress intended subsection (b), which requires defendant’s consent, to apply to hearings conducted under subsections (h) and (i). There is simply no evidence in the legislative history that Congress meant to dispense with the consent requirement under subsection (b) when it added subsections (h) and (i) to the statute.

C. Authority under the “catchall” provision of 28 U.S.C. § 636(b)(3).

We now turn to 28 U.S.C. § 636(b)(3), to determine whether this “catch-all” provision grants magistrate judges the statutory authority to conduct probation revocation hearings. Section 636(b)(3) provides that “[a] magistrate may be assigned such additional duties as are not inconsistent with the Constitution and the laws of the United States.” 28 U.S.C. § 636(b)(3) (emphasis added). We, therefore, must determine whether probation revocation hearings are “additional duties” within the meaning of § 636(b)(3).

The Supreme Court has suggested that 28 U.S.C. § 636(b)(3) should be construed narrowly. As the Supreme Court explained in Gomez:

The district court retains the power to assign to magistrates unspecified “additional duties,” subject only to conditions or review that the court may choose to impose. By a literal reading this additional duties clause would permit magistrates to conduct felony trials. But the carefully defined grant of authority to conduct trials in civil matters and of minor criminal cases should be construed as an implicit withholding of the authority to preside at a felony trial. The legislative history, with its repeated statements, that magistrates should handle subsidiary matters to enable district judges to concentrate on trying cases, and its assurances that magistrates’ adjudicatory jurisdiction had been circumscribed in the interests of policy as well as constitutional constraints, confirms this inference.

490 U.S. at 871-872, 109 S.Ct. at 2246 (footnotes omitted).

With this cautionary note in mind, we follow the Sixth and Seventh Circuits and conclude that a magistrate judge does not have authority under 28 U.S.C. § 636(b)(3) to conduct probation revocation hearings without defendant’s consent. United States v. Curry, 767 F.2d 328 (7th Cir.1985); Banks v. United States, 614 F.2d 95 (6th Cir.1980). As the Sixth Circuit explained:

[T]he legislative history suggests that this provision was meant to apply only to procedural and administrative matters.... In our view, a probation revocation hearing was not meant to be included as one of the duties which could be delegated to a magistrate. The revocation hearing, while informal, necessarily requires fact-finding and credibility assessment. The issues adjudicated at the hearing are not procedural or administrative and do not turn on pure matters of law.

Id. at 97-98 (citing H.R. No. 1609, 94th Cong., 2d Sess. 12 (1976), reprinted in 1976 U.S.C.C.A.N. 6162, 6172)).

Our conclusion is also compelled by our recent decisions interpreting 28 U.S.C. § 636(b)(3). In Carr, we held that in a felony ease defendant’s consent is not required only where the magistrate judge is handling “subsidiary matters.” 18 F.3d at 740 (citing Gomez, 490 U.S. at 872-873, 109 S.Ct. at 2246-2247). In Foster, we held that, where a magistrate judge is handling a “critical stage” of a criminal proceeding, defendant’s consent is required to fall within the “catchall” provision of § 636(b)(3). 57 F.3d at 731 (citing A-Plus Roofing, 39 F.3d at 1415).

There is no question that a probation revocation hearing is a “critical stage” of a criminal proceeding. As discussed above, a probation revocation hearing seriously affects the defendant’s rights — the defendant’s probation may be revoked and a jail sentence may be imposed. See, e.g., A-Plus Roofing, 39 F.3d at 1415. In this case, the magistrate judge concluded, after conducting a contentious three-hour hearing, that the defendant had committed “indecent liberties,” which is a crime under Washington law, and that the defendant had violated the special conditions of his probation. Thus, a probation revocation hearing cannot be considered a “ministerial task which ha[s] no effect on the outcome of the case.” Foster, 57 F.3d at 732.

Even assuming that a probation revocation hearing could be considered a “subsidiary matter,” we must still conclude that Congress did not intend to delegate probation revocation hearings to magistrate judges as an “additional duty” under 28 U.S.C. § 636(b)(3). The “additional duty” provision cannot be interpreted in such a way as to swallow up the whole statute. Congress intended the authority for probation revocation hearings to be prescribed and limited by § 636(a)(3) not § 636(b)(3). As we explained in A-Plus Roofing:

... [Section] 636(a)(3) expressly addresses the issue of magistrates’ criminal trial jurisdiction, subject to certain conditions. It is a well-settled canon of statutory interpretation that specific provisions prevail over general provisions.... If we read the § 636(b)(3) catchall section as including those criminal ... [matters] that § 636(a)(3) excludes, we nullify § 636(a)(3)’s exclusions and violate each of these canons.

39 F.3d at 1415 (citations omitted).

Moreover, further assuming that probation revocation hearings could be delegated to magistrate judges as “additional duties” under § 636(b)(3), we would still require defendant’s consent to eliminate the constitutional problems that arise from having a non-Article III judge preside over a critical stage of a criminal case. As the Supreme Court recognized in Peretz:

[T]he defendant’s consent significantly changes the constitutional analysis.... [W]e have no trouble concluding that there is no Article III problem when a district court judge permits a magistrate to conduct voir dire in accordance with defendant’s consent. The absence of any constitutional difficulty removes one concern that motivated us in Gomez to require unambiguous evidence of Congress’s intent to include jury selection among a magistrate’s additional duties. Petitioner’s consent also eliminates our concern that a general authorization should not lightly be read to deprive a defendant of any important privilege.

501 U.S. at 932, 111 S.Ct. at 2667.

We also have recognized that “[t]he right to adjudication before an Article III judge is an important constitutional right.” Neville, 985 F.2d at 999 (construing 18 U.S.C. § 3401). But we have also recognized that a defendant can waive this constitutional right by consenting to being tried and sentenced by a magistrate judge. Id. at 1000. Because the defendant in this ease never consented to being tried by a magistrate judge, the district court violated defendant’s constitutional right to having an Article III judge preside over his probation revocation hearing.

CONCLUSION

As set forth above, magistrate judges do not have authority under the Federal Magistrates Act to conduct a probation revocation hearing without defendant’s consent. Because we find that a probation revocation hearing “constitutes a critical stage of the criminal proceeding, the absence of consent ... mandate[s] reversal.” Foster, 57 F.3d at 731. We, therefore, vacate the district court’s order revoking defendant’s probation and instruct the district court, on remand, to conduct a new probation revocation hearing for defendant.

REVERSED AND REMANDED.

      . See also Gomez v. United States, 490 U.S. 858, 871, 109 S.Ct. 2237, 2245, 104 L.Ed.2d 923 (1989) (“the magistrate’s criminal trial jurisdiction depends on the defendant's specific, written consent"); United States v. Neville, 985 F.2d 992, 999 (9th Cir.) (“[mjagistrate judge jurisdiction over misdemeanants is conditioned on consent of the parties”), cert. denied, 508 U.S. 943, 113 S.Ct. 2425, 124 L.Ed.2d 646 (1993).

      . But we held in A-Plus Roofing that the magistrate judge did have authority to conduct the civil contempt hearing. 39 F.3d at 1417. Under 28 U.S.C. § 636(b)(2), magistrate judges can be used as special masters in civil matters. Id.

      . As discussed above, in United States v. Crane, we declined to follow Williams. As we explained in Crane: "where, as here, a defendant has consented to trial, judgment and sentencing before a United States magistrate judge pursuant to 18 U.S.C. § 3401, the magistrate judge has jurisdiction to impose and to revoke a term of supervised release in accordance with 18 U.S.C. § 3583(a) and (e).” 979 F.2d at 690 (emphasis added). As noted above, however, the defendant in this case has not ever consented to trial, judgment, or sentencing by a magistrate judge.

      . Section 3401(d) provided: "The probation laws shall be applicable to persons tried by a magistrate under this section, and such officer shall have power to grant probation and to revoke or reinstate the probation of any person granted probation by him.” 18 U.S.C. § 3401(d). This section was amended to provide explicitly that a magistrate judge also had authority to "modify” a defendant’s probation. 1992 Administration Act, U.S.C.C.A.N. (106 Stat.) at 4507. Section 3401(d) now reads: "The probation laws shall be applicable to persons tried by a magistrate under this section, and such officer shall have power to grant probation and to revoke, modify, or reinstate the probation of any person granted probation by a magistrate judge."

      . See also Peretz, 501 U.S. at 955, 111 S.Ct. at 2679 (Scalia, J. dissenting) ("By specifically authorizing magistrates to perform duties in civil and misdemeanor trials, and specifying the manner in which parties were to express their consent in those situations, the statute suggested absence of authority to preside over felony trials through some (unspecified) mode of consent. The cannon of ejusdem generis keeps the ‘additional duties’ clause from swallowing up the rest of the statute.”).


source: Caselaw Access Project

author: FERGUSON, Circuit Judge: WALLACE, Circuit Judge,

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellant, v. Hosep Krikor BAJAKAJIAN, aka: Joe Bajakajian, Defendant-Appellee.
    No. 95-50094.
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted Feb. 6, 1996.
    Decided May 20, 1996.

      Ronald L. Cheng, Assistant United States Attorney, Los Angeles, California, for the plaintiff-appellant.
    James E. Blatt, Encino, California, for the defendant-appellee.
    Ronald L. Cheng, Asst. U.S. Atty., Los Angeles, CA, for plaintiff-appellant.
    James E. Blatt, Encino, CA, for defendant-appellee.
    Before: WALLACE, FERGUSON, and T.G. NELSON, Circuit Judges.
   FERGUSON, Circuit Judge:

The United States appeals the decision of the district court following the defendant’s guilty plea to failure to report currency in violation of 31 U.S.C. § 5316(a)(1)(A). Specifically, the United States appeals the district court’s determination that the defendant was required to forfeit only $15,000 of the $357,144 at issue. We affirm the decision of the district court.

I. Factual and Procedural Background

On June 9, 1994, Bajakajian was attempting to board an Alitalia Airways flight leaving Los Angeles, destined for Cyprus. While Bajakajian was waiting to board his flight, U.S. Customs discovered approximately $140,000 concealed in four pieces of Bajakaji-an’s checked luggage and $90,000 concealed in a false bottom of one of his bags. After discovering the hidden currency, a Customs inspector stopped the defendant and his family at the airport and informed them that they were required to report all money in both their personal possession and baggage which exceeded $10,000, irrespective ■ of whether the money belonged to them. Baja-kajian told the Customs inspector that he had $8,000 with him and that his wife had an additional $7,000. Bajakajian informed the inspector that his family had no additional money to report.

Customs inspectors discovered a total of $357,144 in United States currency in the earry-on baggage, cheeked-in baggage, wallet, and purse of the defendant and his wife. After being advised of his rights, Bajakajian admitted to Customs agents that he knowingly and wilfully failed to report the currency which was discovered.

On July 8, 1994, a grand jury returned a three count indictment against the defendant. Count One charged the defendant with violation of 31 U.S.C. §§ 5316(a)(1)(A) and 5322(a) for transporting currency of more than $10,-000 outside of the United States without filing a report with the United States Customs Service. Count Two charged the defendant with making a false material statement to the United States Customs Service in violation of 18 U.S.C. § 1001. Count Three sought the forfeiture of the $357,144 discovered by Customs under 18 U.S.C. § 982(a)(1).

On October 27, 1994, pursuant to a plea agreement, the defendant entered a guilty plea as to Count One of the indictment and waived a jury trial as to Count Three. The government agreed to dismiss Count Two at the time of sentencing. On December 20, 1994, a bench trial was held for Count Three. The district court found that the entire $357,-144 discovered by Customs agents was subject to criminal forfeiture pursuant to 18 U.S.C. § 982(a)(1). However, at sentencing, the district court ordered the defendant to forfeit only $15,000 of the $357,144. The district court concluded that forfeiture of more than $15,000 would be disproportionate to Bajakajian’s culpability, and therefore unconstitutional under the Excessive Fines Clause of the Eighth Amendment. In calculating the amount of forfeiture, the district court recognized that all of the money at issue had come from a lawful source, and was to be used for a lawful purpose.

II. Discussion

A district court’s interpretation of federal forfeiture law is reviewed de novo. United States v.1980 Lear Jet, 38 F.3d 398, 400 (9th Cir.1994).

The government alleges on appeal that the district court erred in requiring forfeiture of only $15,000 because the entire $357,144 at issue should have been forfeited. In the alternative, the government requests forfeiture of $170,000, the amount of currency which Bajakajian asked a friend to lie about to Customs agents.

The forfeiture statute relevant to this litigation, 18 U.S.C. § 982(a)(1), provides in pertinent part: “The court, in imposing sentence on a person convicted of an offense in violation of section 5313(a), 5316 or 5324 of title 31 ..., shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property.”

Therefore, pursuant to 18 U.S.C. § 982(a)(1), the entire $357,144 at issue in the present ease is potentially forfeitable. However, a forfeiture is unconstitutional unless it survives scrutiny under the Excessive Fines Clause of the Eighth Amendment. “The Excessive Fines Clause limits the Government’s power to extract payments, whether in cash or in kind, ‘as punishment for some offense.’ ” Austin v. United States, 509 U.S. 602, 609-10, 113 S.Ct. 2801, 2805, 125 L.Ed.2d 488 (1993) (citation omitted). See also Alexander v. United States, 509 U.S. 544, 557-60, 113 S.Ct. 2766, 2775-76, 125 L.Ed.2d 441 (1993) (holding that criminal forfeiture is a form of monetary punishment subject to the Eight Amendment’s Excessive Fines Clause); United States v. Sarbello, 985 F.2d 716, 717-18 (3d Cir.1993) (holding that a court may reduce an otherwise mandatory 100% statutory criminal forfeiture on the basis of the Excessive Fines Clause of the Eighth Amendment). Therefore, forfeiture in the present ease must be subjected to analysis under the Excessive Fines Clause.

The Supreme Court, in Austin, declined to enumerate the factors to be considered in determining whether a forfeiture violates the Excessive Fines Clause. Austin, 509 U.S. at 621-23, 113 S.Ct. at 2812. We recently addressed this issue and established a two-pronged test for determining whether a forfeiture is -unconstitutionally excessive under the Eighth Amendment. United States v. Real Property Located in El Dorado County, 59 F.3d 974, 982 (9th Cir.1995).

Pursuant to this court’s Excessive Fines Clause test, a forfeiture is constitutional if: (1) the property forfeited is an “instrumentality” of the crime committed; and (2) the value of the property is proportional to the culpability of the owner. Id. at 982. Therefore, Bajakajian cannot be ordered to forfeit any currency unless forfeiture in the present case would satisfy both the instrumentality and proportionality prongs of our recently established Excessive Fines Clause test.

Application of the instrumentality prong of the Excessive Fines test to a 31 U.S.C. § 5316 violation was recently discussed by this court in United States v. $69,292 in United States Currency, 62 F.3d 1161 (9th Cir.1995). The court questioned whether the currency involved in a § 5316 violation could ever be considered the instrumentality of the crime of failure to report. The court explained that it was not persuaded “that currency lawfully acquired and possessed has that necessarily close relationship to the crime simply because it has not been reported. The crime is the withholding of information, 31 U.S.C. § 5316, not the possession or the transportation of the money.” Id. at 1167. The court further explained that the money at issue in a § 5316 violation is not contraband, and the money is presumed under the statutory scheme to be lawfully acquired and possessed. The statute does not impose a limit on the amount of U.S. currency which may be exported to foreign jurisdictions. Persons leaving the United States are free, as they have always been, to take with them such amounts of cash as they so choose. Id.

This court, in $69,292, also rejected the argument that the currency in a § 5316 violation satisfies the instrumentality requirement based upon the notion that the currency’s existence was a precondition to the reporting requirement of 31 U.S.C. § 5316.

Simply put the existence of the currency as a precondition does not make it an instrumentality. For example, we would not characterize lawfully earned income an instrumentality forfeitable as such simply because a taxpayer wilfully failed to report that income on his tax return in violation of the tax code. The government would have us stretch the fiction of an “instrumentality” to the breaking point.

Id. at 1167-68 (citation omitted). See also Austin v. United States, 509 U.S. 602, 619-21, 113 S.Ct. 2801, 2811, 125 L.Ed.2d 488 (1993) (rejecting expansive definitions as to what qualifies as the instrumentality of a particular crime).

The government argues that the majority opinion in $69,292 conflicts with the Supreme Court’s decision in One Lot Emerald Cut Stones v. United States, 409 U.S. 232, 93 5.Ct. 489, 34 L.Ed.2d 438 (1972). There, the Court upheld the forfeiture of imported goods pursuant to 19 U.S.C. § 1497, where the defendant failed to declare one lot of emerald cut stones and a ring upon his entry into the United States. Id. at 233, 93 S.Ct. at 491.

However, $69,292 and One Lot Emerald Cut Stones are not in conflict. One Lot Emerald Cut Stones involved the smuggling of contraband. When a defendant is convicted for failure to report currency pursuant to 31 U.S.C. § 5316, the crime is not the illegal possession, transportation, or smuggling of dutiable items. Rather, the crime is merely the failure to provide information. Money in lawful possession, as it was here, is not contraband. Moreover, the currency at issue in a § 5316 violation is not contraband, is presumed to be lawfully possessed and is not subject to duty. It is not illegal to take currency out of the country. The key difference is that a violation of § 5316 merely deprives the government of information, whereas the smuggling of goods across the border deprives the government of revenue. $69,292, 62 F.3d at 1167. Therefore, there is a much tighter instrumentality connection between property sought to be forfeited and the crime when the crime committed is the failure to pay a duty.

We hereby adopt the logic of the court in $69,292. Forfeiture of currency is unconstitutional when the crime to which the forfeiture is tied is a mere failure to report pursuant to 31 U.S.C. § 5316. In such situations, there simply is not an instrumentality relationship between the currency and the crime to satisfy the instrumentality prong of the Excessive Fines test.

Therefore, the district court erred in ordering Bajakajian to forfeit $15,000. Forfeiture of any amount would be unconstitutionally excessive under the El Dorada Excessive Fines Clause test. However, Bajaka-jian failed to file a cross-appeal requesting a modification of the district court’s order that he forfeit $15,000. If an appellee seeks a modification of the district court’s judgment, he must file a cross-appeal requesting the modification. Unless an appellee files a cross-appeal, “the appellee may not attack the [district court’s] decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary, whether what he seeks is to correct an error or to supplement the decree with respect to a matter not dealt with below.” United States v. One 1964, MG, 584 F.2d 889, 890 (9th Cir.1978) (quoting United States v. American Ry. Express Co., 265 U.S. 425, 435, 44 S.Ct. 560, 563-64, 68 L.Ed. 1087 (1924)).

Although pursuant to the Excessive Fines Clause Bajakajian cannot be ordered to forfeit any of the unreported currency, he is nonetheless forced to accept the decision of the district court. Bajakajian failed to file a cross-appeal, and therefore, this court lacks jurisdiction to set aside the district court’s forfeiture order of $15,000.

III. Conclusion

The decision of the district court is AFFIRMED.

WALLACE, Circuit Judge,

concurring:

The majority takes our dicta in United States v. $69,292.00 in U.S. Currency, 62 F.3d 1161 (9th Cir.1995) ($69,292), to an illogical extreme. In so doing, the majority strikes down a portion of 18 U.S.C. § 982(a)(1), thereby unduly limiting the government’s forfeiture powers. I agree only with the majority’s ultimate decision to affirm the $15,000 forfeiture. Because I would do so for entirely different reasons, I concur in result only.

We are not bound by the dicta in $69,292. In $69,292, we explained the analysis used to determine whether a forfeiture violates the Eighth Amendment. $69,292, 62 F.3d at 1166-67, citing United States v. Real Property Located in El Dorado County, 59 F.3d 974 (9th Cir.1995) (El Dorado). To satisfy the Eighth Amendment’s prohibition against excessive fines, forfeited property must be instrumental to the crime and proportional in value to the culpability of the owner. El Dorado, 59 F.3d at 982. In $69,292, the district court did not analyze the forfeiture in terms of our intervening decision in El Dora-do. Thus, we remanded to enable the district court to make appropriate findings. $69,292, 62 F.3d at 1168.

The majority would read $69,292 as holding that currency involved in a section 5316 violation is never an instrumentality of the crime. Majority at 337 & n.6. The majority’s reading of $69,292 renders all forfeitures of currency in such circumstances unconstitutional under our test in El Dorado. But if in $69,292 we had held that all forfeitures of currency involved in reporting violations necessarily fail El Dorado, we would not have written that, “[w]e make no assessment as to whether the forfeiture meets the El Dorado test.” $69,292, 62 F.3d at 1168. As Judge Rymer accurately wrote in dissent, $69,292’s instrumentality discussion is dicta. Id. at 1168 (Rymer, J., dissenting).

Not only is this $69,292 discussion clearly dicta, but there are two additional interrelated problems — one with the majority’s interpretation of the dicta in $69,292 and one with the $69,292 dicta itself.

First, the majority misreads our remarks in $69,292. We asserted there that we were not “persuaded that currency lawfully acquired and possessed has the necessarily close relationship to the crime simply because it has not been reported.” Id. at 1167 (emphasis added). Our remarks were focused on the source of the defendants’ funds, and we suggested that legally obtained funds might not be instrumental. See id. (explaining that “the reporting requirement applies to all currency, whether it is lawfully gained or not,” and suggesting that we should analyze forfeiture based in part on the source of the funds). If on remand the district court in $69,292 had found that the defendants acquired the funds illegally, nothing in $69,-292 would have precluded forfeiture.

The majority, purporting to “adopt the logic of the court in $69,292,” maj. op. at 337, overlooks $69,292’s underlying rationale. The majority holds that “[forfeiture of currency is unconstitutional when the crime to which the forfeiture is tied is a mere failure to report pursuant to 31 U.S.C. § 5316.” Id. Thus, even if a district court finds that money was illegally acquired, the majority does not allow forfeiture. Or, even if a defendant’s failure to report is combined with another violation of United States law (and the other law does not independently allow forfeiture), the majority would still not allow forfeiture. Nothing in $69,292’s dicta supports this result.

Second, it is precisely $69,292’s focus on lawfully acquired funds that makes $69,292’s instrumentality dicta problematic. $69,292 suggests that instrumentality should turn, at least in part, on the source of the funds. However, I interpret the instrumentality inquiry as being completely divorced from the source of the funds. After all, why is currency any more instrumental when the currency is legally obtained as opposed to when it is illegally obtained? See United States v. $145,139.00, 18 F.3d 73, 75 (2d Cir.) (Currency was “an instrument of the crime [of failure to report]. It was the ‘means’ by which the crime was committed.... Indeed, it was the very sine qua non of the crime.”), cert. denied, — U.S. —, 115 S.Ct. 72, 130 L.Ed.2d 27 (1994); Austin v. United States, 509 U.S. 602, 627-29, 113 S.Ct. 2801, 2815, 125 L.Ed.2d 488 (1993) (Scalia, J., concurring) (explaining the instrumentality inquiry as being whether “property has been ‘tainted’ by unlawful use ... [in other words,] whether the confiscated property has a close enough relationship to the offense” (emphasis omitted)), quoted in El Dorado, 59 F.3d at 982. In this case, the crime was Bajakajian’s failure to report $357,144 that he had secretly stashed. I cannot agree with the majority that there is an insufficient nexus between the acquired currency and the offense — without the currency, there can be no offense.

Of course, the source of the acquired funds does have a place in our Eighth Amendment inquiry under El Dorado. However, the inquiry into the source of the funds is part of the proportionality analysis, not the instrumentality inquiry. El Dorado, 59 F.3d at 985-86 (explicitly requiring district court to consider, as part of proportionality determination, the “culpability of the owner”); see also id. at 983 (adopting “the proportionality test as a check on the instrumentality approach” because of the instrumentality prong’s “potentially harsh results, when applied alone”). If, as the district court held, Bajakajian’s funds were lawfully obtained from friends and family and were not tó be illegally used, then these facts might warrant a reduced forfeiture to avoid an excessive fine.

I therefore disagree with the majority’s conclusion that the currency was not instrumental as a matter of law. I would hold that the district court properly found that the entire amount of currency was potentially forfeitable. The currency was instrumental. As to proportionality, I would review for clear error the district court’s factual findings underpinning its decision to forfeit only $15,000. See United States v. Alcaraz-Garcia, 79 F.3d 769, 772 (9th Cir.1996) (findings of fact underlying forfeiture reviewed for clear error). The district court found that the funds were lawfully acquired and were to be lawfully used. The district court next found that forfeiture of only $15,000 was proportional to Bajakajian’s culpability. I do not believe that the district court’s findings were clearly erroneous; therefore, I would affirm the $15,000 forfeiture.

      . 31 U.S.C. § 5316(a) provides in pertinent part: a person or an agent or bailee of the person shall file a report under subsection (b) of this section when the person, agent, or bailee knowingly—
      (1) transports, is about to transport, or has transported, monetary instruments of more than $10,000 at one time—
      (A) from a place in the United States to or through a place outside the United States....

      . In addition to appealing the district court's decision regarding the amount of currency which Bajakajian should be required to forfeit, the government has also appealed the district court's calculation of Bajakajian's base offense level and the district court’s failure to enhance Bajakaji-an's sentence for obstruction of justice. However, this opinion only addresses the government’s appeal of the district court's forfeiture calculation. The remaining issues will be resolved in a separate disposition.

      . The district court bypassed the instrumentality prong of the two part El Dorado Excessive Fines test and examined only the proportionality of forfeiture in the present case. This is probably due to the fact that the Ninth Circuit’s decision in El Dorado was handed down subsequent to the district court’s decision.

      . 19 U.S.C. § 1497 has since been amended, but at the time of One Lot Emerald Cut Stones, it provided:
      Any article not included in the declaration and entry as made, and, before examination of the baggage was begun, not mentioned in writing by such person, if written declaration and entry was required, or orally if written declaration and entry was not required, shall be subject to forfeiture and such person shall be liable to a penalty equal to the value of such article.

      . Such a distinction is not new. See Austin v. United States, 509 U.S. 602, 619-23, 113 S.Ct. 2801, 2811-12, 125 L.Ed.2d 488 (1993) (The Supreme Court distinguished cases involving drug forfeitures from cases involving customs violations.).

      . The government alleges that the reasoning of the majority in $69,292 with respect to the Excessive Fines Clause and 31 U.S.C. § 5316 is dicta because the district court might not have needed to address this issue on remand. However, this portion of $69,292 is not dicta. "[Direction to the district on how to proceed continues to be binding precedent, even if characterized as an alternative holding." Operating Eng’rs Pension Trust v. Charles Minor Equip. Rental, Inc., 766 F.2d 1301, 1304 (9th Cir.) (explaining that it was not dicta for the Ninth Circuit in Sapper v. Lenco Blade, Inc., 704 F.2d 1069 (9th Cir.1983) to direct the district court on how to resolve an issue on remand which might only arise, depending upon the resolution of another issue), modified, 778 F.2d 538 (9th Cir.1985).

      . The government argues that United States v. One 1985 Mercedes-Benz, 14 F.3d 465 (9th Cir.1994) provides support for forfeiture in the present case. In One 1985 Mercedes-Benz, the court held that vehicles used to export currency in violation of 31 U.S.C. § 5316 are subject to forfeiture under 18 U.S.C. § 982. However, One 1985 Mercedes-Benz does not provide support for forfeiture in the present case for two reasons. First, a car used to transport money is clearly the instrumentality of a § 5316 violation because the car itself is used to export and conceal the currency. Second, One 1985 Mercedes-Benz was decided prior to both El Dorado, which established the two-pronged Excessive Fines test, and $69,292, which applied the El Dorado test for the first time to a § 5316 violation. Therefore, the facts of One 1985 Mercedes-Benz are not analogous to the facts of the present case, and its logic is questionable due to the recent decisions handed down by this court in El Dorado and $69,292.


author: NOONAN, Circuit Judge:

text:
    In re James Delbert McCONVILLE, Debtor. Tevis T. THOMPSON, Jr., Trustee, Plaintiff-Appellee, v. David MARGEN; Lawton Associates, Defendants-Appellants.
    No. 95-15122.
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted April 9, 1996.
    Decided May 21, 1996.
    Jay-Alien Eisen, Eisen & Johnston, Sacramento, California, for the defendants-appellants.
    Irving J. Komfield, Kornfield, Paul & Bupp, Oakland, California, for the plaintiff-appellee.
    Before: BROWNING and JOHN T. NOONAN, Jr., Circuit Judges, and MERHIGE, District Judge.

       Honorable Robert R. Merhige, Jr., Senior U.S. District Judge for the Eastern District of Virginia, sitting by designation.

   OPINION

NOONAN, Circuit Judge:

David Margen and Lawton Associates (the Lenders) appeal a judgment of the district court in favor of Tevis Thompson, Jr., (the Trustee), trustee in bankruptcy of James D. and Clara M. McConvihe (the Debtors). The judgment held void a deed of trust given by the Debtors to the Lenders after the Debtors had filed for bankruptcy. Applying § 362(a)(4) of the Bankruptcy Code, we affirm the judgment of the district court.

FACTS

The Debtors dealt in distressed real property. On July 8,1993, the Debtors agreed to purchase from Bayview Federal Bank (Bay-view) eight apartments at 725 Elmhurst, Oakland, California (the property) for $122,-000. They paid $10,000 down to Bayview, nonrefundable. The closing was set no later than 30 days from July 8. The Debtors counted on funding to be furnished by Robert Kamp. However, Kamp was unable to provide the funds by the closing date. The Debtors obtained an extension to August 13, 1993 and for this extension paid to the Bank an additional nonrefundable $5,000.

On July 14,1993 the Debtors filed a Chapter 11 petition in bankruptcy. There is no evidence in the case that they disclosed this filing to Bayview, Kamp, or Lawton Associates, who had arranged with Kamp for him to make the loan on the property. When Kamp did not come up with the cash, Lawton Associates in conjunction with David Margen (collectively, the Lenders) agreed to make a bridge loan to the Debtors to tide them over till Kamp came through. The Lenders believed that the property was worth more than $122,000. They were told by Kamp that the Debtors’ credit was good and that he was looking for other opportunities to lend to the Debtors. The Lenders had no information that the Debtors had already filed for bankruptcy. They did not require a loan statement from the Debtors and had no representation from them as to their assets and liabilities.

On August 12 the Debtors executed a note and deed of trust on the property in favor of the Lenders in the principal amount of $107,-000. The note was payable in 30 days. The Lenders retained $10,000 of the loan as a fee. With the balance the Debtors acquired the property on August 13, 1993. On the same date the Lenders recorded the trust deed.

PROCEEDINGS

The Debtors’ bankruptcy case was converted to a Chapter 7 proceeding on September 13, 1993 and the Trustee was appointed. The Lenders sought relief from the automatic stay to foreclose the deed of trust. The bankruptcy court denied the relief. The Trustee then filed a complaint to void the lien created by the deed of trust as an unauthorized, post-petition transfer, voidable under Bankruptcy Code § 549(a). After hearing, the bankruptcy court held that the Lenders were purchasers in good faith, but that both the execution of the deed of trust and its recordation violated the automatic stay of "Bankruptcy Code § 362(a)(4) and that the transfer was not a transfer of real property to a good faith purchaser as provided in the exception created by Bankruptcy Code § 549(c). The bankruptcy court entered judgment for the Trustee, declaring that the Lenders had no lien against the proceeds of the sale of the property.

The Lenders appealed to the district court which held that a lender who acquired a lien on real property was not a “purchaser” within the meaning of § 549(c). The judgment of the bankruptcy court was affirmed.

The Lenders appeal.

ANALYSIS

The transfer of any interest after the filing of the bankruptcy petition is in literal violation of 11 U.S.C. § 362(a)(4), according to which a petition “operates as a stay, applicable to all entities, of ... any act to create, perfect, or enforce any lien against property of the estate.” Section 362(b)(1) through (18) creates explicit exceptions to the automatic stay. No exception is provided for the creating, perfecting or enforcing of a hen obtained by a simple lender to the estate.

This prohibition needs to be reconciled with the exception created by § 549(e), according to which:

The trustee may not avoid under subsection (a) of this section a transfer of real property to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value unless a copy or notice of the petition was filed, where a transfer of such real property may be recorded to perfect such transfer, before such transfer is so perfected that a bona fide purchaser of such property, against whom applicable law permits such transfer to be perfected, could not acquire an interest that is superior to the interest of such good faith purchaser. A good faith purchaser without knowledge of the commencement of the case and for less than present fair equivalent value has a lien on the property transferred to the extent of any present value given, unless a copy or notice of the petition was so filed before such transfer was so perfected.

The Lenders argue that a transfer of property occurred because a transfer is “every mode, direct or indirect, absolute or conditional ... of disposing of or parting with property or with an interest in property, including retention of title as a security interest.” 11 U.S.C. § 101(54); that they are purchasers, because a purchaser “means transferee of a voluntary transfer,” id. § 101(43); and that the bankruptcy court found as a matter of law that they took the transfer in good faith, so they must be good faith purchasers. Consequently, they contend, the deed of trust executed in their favor falls within the exception of section 549(c) and trumps the prohibition of section 362(a)(4). Their argument is not without force but is refuted by our precedents.

In In re Schwartz, 954 F.2d 569, 573 (9th Cir.1992) we recognized a conflict that “appears troublesome” between § 549(c) and § 362. It was unnecessary for us to resolve the conflict in In re Schwartz, which decided only that a tax assessment in violation of § 362 was void. Id. at 572. Nonetheless in dicta we ventured to say that the conflict was only apparent because “Section 362’s automatic stay does not apply to sales or transfers of property initiated by the debtor.” Id. at 574. We cited no authority for this explanation. If it were true, it might decide our case in favor of the Lenders whose deed of trust could be argued to be a transfer of property initiated by the Debtors. We find it, however, not necessary to pass upon the truth of the explanation because under In re Schwartz itself, the Lenders’ execution of the deed of trust was not “a transfer of the property.”

It is long-established California law that deeds of trust are “practically and substantially only mortgages with a power of sale.” Bank of Italy v. Bentley, 217 Cal. 644, 657, 20 P.2d 940, cert. denied 290 U.S. 659, 54 S.Ct. 74, 78 L.Ed. 571 (1933). All that execution of a deed of trust accomplishes in California is the creation of a lien in favor of the creditor. St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1534 (9th Cir.1994), modified 46 F.3d 969 (1995), citing Monterey S.P. Partnership v. W.L. Bangham, Inc., 49 Cal.3d 454, 460, 261 Cal.Rptr. 587, 777 P.2d 623 (1989). The mere creation of a lien, we held in In re Schwartz, 954 F.2d at 574, does “not actually transfer the property itself for purposes of section 549.” Accord, In re Shamblin, 890 F.2d 123, 127 (9th Cir.1989). Under these precedents, section 549(c) has no application and the automatic stay voids the attempted lien.

The Lenders have a fall-back position, arguing that under the second sentence of section 549(c) they have at least “a lien on the property transferred to the extent of any present value given.” Their fall-back argument has an equitable appeal but it encounters the same difficulty as their principal contention: the statute refers to “the property transferred,” but under In re Schwartz and In re Shamblin no property was transferred. There is, therefore, no property on which the lien of the second sentence of section 549(c) may operate. No transfer was made. The attempted creation of a lien was void.

AFFIRMED.


author: KLEINFELD, Circuit Judge:

text:
    ALLIANCE AGAINST IFQs; Lady Blackie, Inc.; Mako Haggerty; Mathew Donohoe; Nancy L. Lande; Adrian Lecornu; Howard Carlough; Jere Murray; Paul K. Seaton; William Sullivan; Don Hall, Plaintiffs-Appellants, v. Ronald H. BROWN, Secretary of Commerce; Clarence G. Pautzke, Executive Director North Pacific Fishery Management Council; Western Alaska Fisheries Development Association, Defendants-Appellees, and Peter M. Knutsen; Edwin Fuglvog; Robert J. Wurm; Andrew Scalzi; Nancy Phillips, et al., Defendants-Intervenors-Appellees.
    No. 95-35077.
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted Aug. 9, 1995.
    Decided May 22, 1996.

      Susan E. Reeves, Rubini & Reeves, Anchorage, Alaska, for plaintiffs-appellants.
    Martin W. Matzen, United States Department of Justice, Washington, D.C., for defendants-appellees.
    Donald Craig Mitchell, Anchorage, Alaska, for defendants-appellees Western Alaska Fisheries Development Association.
    George J. Mannina, Jr., O’Connor & Han-nan, Washington, D.C., for intervenor-defen-dant Knutsen.
    Before: HALL, WIGGINS, and KLEINFELD, Circuit Judges.
   OPINION

KLEINFELD, Circuit Judge:

The only issue in this case is whether regulations for implementing a fishery management plan in and near Alaska waters was arbitrary and capricious, or violative of the authorizing statute. We conclude that the regulations were a permissible exercise of authority by the Secretary of Commerce.

I. FACTS AND REGULATORY FRAMEWORK

Commercial ocean fishing combines difficult and risky labor with large capital investments to make money from a resource owned by no one, the fish. Unlimited access tends to cause declining fisheries. The reason is that to get title to a fish, a fisherman has to catch it before someone else does. Pierson v. Post, 3 Caines 175, 2 Am. Dec. 264 (N.Y.1805). This gives each fishermen an incentive to invest in a fast, large boat and to fish as fast as possible. As boats and crews get more efficient, fewer fish escape the fishermen and live to reproduce. “The result is lower profits for the too many fishermen investing in too much capital to catch too few fish.” Terry L. Anderson and Donald R. Leal, Free Market Environmentalism, 123 (1991).

Congress made findings in the Magnuson Fishery Conservation and Management Act (“Magnuson Act”), 16 U.S.C. § 1801 et seq., that “certain stocks of such fish have been overfished to the point where their survival is threatened,” 16 U.S.C. § 1801(a)(2)(A), and that “[a] national program for the conservation and management of the fishery resources of the United States is necessary to prevent overfishing, to rebuild overfished stocks, to ensure conservation, and to realize the full potential of the Nation’s fishery resources.” 16 U.S.C. § 1801(a)(6). Among the purposes of the Magnuson Act were providing for “fishery management plans which will achieve and maintain, on a continuing basis, the optimum yield from each fishery,” 16 U.S.C. § 1801(b)(4), and “establish[ing] Regional Fishery Management Councils to ... prepar[e], monitor[ ] and revis[e] such plans.” 16 U.S.C. § 1801(b)(5). The Secretary of Commerce, pursuant to the Magnu-son Act and the Northern Pacific Halibut Act of 1982 (“Halibut Act”), 16 U.S.C. § 773 et seq., promulgated regulations to limit access to sablefish and halibut fisheries in the Gulf of Alaska and the Bering Sea and Aleutian Islands area. See 50 C.F.R., Part 676.

The Secretary of Commerce implemented by regulation a management plan for sablefish and pacific halibut fishing. 50 C.F.R. §§ 676.10-676.25. The basic scheme is that any boat that fishes commercially for the regulated fish in the regulated area must have an individual quota share (IFQ) permit on board, specifying the individual fishing quota allowed for the vessel, and anyone who receives the regulated fish must possess a “registered buyer permit.” 50 C.F.R. § 676.13(a). The regulated area consists of portions of the Gulf of Alaska, Bering Sea, and waters off the Aleutian Islands. 50 C.F.R. § 676.10(b).

The regional director of the National Marine Fisheries Service (NMFS) in the Department of Commerce assigns to each owner or lessee of a vessel which made legal landings of halibut or sablefish during 1988, 1989, or 1990, a quota share (QS) based on the person’s highest total legal landings of halibut and sablefish during 1984 to 1990. 50 C.F.R. § 676.20(b). Each year, the regional director allocates individual fishing quotas (IFQs) by multiplying the person’s quota share by the annual allowable catch. 50 C.F.R. § 676.20(f)(1). Subject to some restrictions, the quota shares and individual fishing quotas can be sold, leased and otherwise transferred. 50 C.F.R. § 676.21. If someone who did not fish in the regulated waters during 1988 to 1990 wants a quota share, he has to buy it from someone who did.

Like any governmental regulatory scheme, this one substitutes a governmental decision for myriad individual decisions to determine who shall be permitted to make money in the regulated industry. The plaintiffs are people who suffer from the economic impact of the regulation. Some have invested in fishing vessels and fished in the regulated waters for halibut or sablefish, but not during the critical three years which would give them a quota share.. Some have consistently fished for the regulated fish in the regulated waters, but did not own or lease the boats. Of those who acquired quota shares under the scheme, some probably never fished, and just invested in fishing boats to get investment tax credits and depreciation. The regulatory scheme has the practical effect of transferring economic power over the fishery from those who fished to those who owned or leased fishing boats. For these reasons, among others, the case is troubling and difficult.

II. ANALYSIS

The district court granted summary judgment in favor of the government and dismissed the complaint. We review a grant of summary judgment de novo. Washington Crab Producers, Inc. v. Mosbacher, 924 F.2d 1438, 1440 (9th Cir.1990). Where we review regulations promulgated by the Secretary of Commerce under the Magnuson Act, our only function is to determine whether the Secretary “has considered the relevant factors and articulated a rational connection between the facts found and the choice made.” Id. at 1440-41 (quotation omitted). We determine only if the Secretary acted in an arbitrary and capricious manner in promulgating such regulations. Id. at 1441. See also 16 U.S.C. § 1855(b)(1)(B); 5 U.S.C. § 706(2)(A)-(D). We cannot substitute our judgment of what might be a better regulatory scheme, or overturn a regulation because we disagree with it, if the Secretary’s reasons for adopting it were not arbitrary and capricious.

Plaintiffs urge us to adopt a more onerous standard of review and cite Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317 (9th Cir.1995), as support. Atwood is distinguishable, because we were reviewing an ERISA plan fiduciary’s duty, not those of the Secretary of Commerce, and were doing so in light of facts indicating a conflict of interest.

A. “Present Participation in the Fishery.”

Congress erected various conditions on the Secretary’s discretion to establish a limited access system for the fishery. Among the factors which the Council and Secretary must “take into account” is “present participation in the fishery.” 16 U.S.C. § 1853(b)(6)(A):

(b) Discretionary provisions. Any fishery management plan which is prepared by any Council, or by the Secretary, with respect to any fishery, may—
(6) establish a system for limiting access to the fishery in order to achieve optimum yield if, in developing such system, the Council and the Secretary take into account—
(A) present participation in the fishery,
(B) historical fishing practices in, and dependence on, the fishery,
(C) the economics of the fishery,
(D) the capability of fishing vessels used in the fishery to engage in other fisheries,
(E) the cultural and social framework relevant to the fishery, and
(F) any other relevant considerations;

The Halibut Act provides that limited access regulations “shall be consistent with the limited entry criteria set forth in section [303(b)(6) of the Magnuson Fishery Conservation and Management Act].” 16 U.S.C. § 773c(e).

The final rule was promulgated November 9,1993. 58 Fed.Reg. 59,375 (1993). But the years during which people had to own or lease vessels and land halibut or sablefish, to obtain qualifying shares, were 1988,1989 and 1990. 50 C.F.R. § 676.20(a)(l)(i). Plaintiffs argue that this violates the Congressional command to take into account “present” fishing. As they correctly observe, a person who last fished in 1988 would get a qualifying share, but someone who had fished only in 1991, 1992 and 1993 would not. Indeed, the complaint alleges that one of the plaintiffs fished for halibut in the regulated waters in 1975,1977 through 1987, and 1992, but fished for salmon in Cook Inlet, not part of the regulated waters, during the three quota share years.

Substantial time was taken up between formulation of the plan and promulgation, by such activities as preparing environmental impact statements on the plan. In a 1992 environmental impact statement, the Council gave several reasons for using a 1990 cutoff. Perhaps the most persuasive was that if participation in the fishery while the rule was under consideration had been considered, then people would have fished and invested in boats in order to obtain quota shares, even though that would have exacerbated overcapacity and made no economic sense independently of the regulatory benefit:

There are two reasons why the end of the qualifying periods is 1990. First, extending it beyond that would have provided an incentive both for additional fishermen to enter the fishery and for previous entrants to adopt extreme fishing methods in order to increase their landings and, therefore, the [quota shares] they would receive if an IFQ program is implemented. This speculative activity would have intensified the race for fish and imposed substantial costs on the fishery in 1991. Second, it would have made it more difficult for a person to calculate what his [quota share] and IFQ would be by area for each of the alternatives being considered.
Extending the qualifying period past 1990 would benefit those who participated in 1991 compared to those who only participated prior to 1991. It would reward those who increased their participation in the 1991 fishery in the hope that the qualifying period would be extended. It could decrease the credibility of the Council process to the extent that potential or actual participants were led to believe that the period would not be extended. It would result in a broader dispersion of [quota shares] and increase the [quota shares] given to current participants. Finally, it would increase the cost of determining the [quota share] to be given to each person because it would require the use of an additional year of landing records and the resolution of the associated additional discrepancies between agency data and vessel owner data.

The Secretary agreed that using a fishing year during the period that the plan was under consideration would exacerbate the overcapitalization problem the scheme was intended to mitigate. Here is his explanation in the Federal Register of November 9, 1993 (the day the final rule was promulgated), under the subtitle “Present participation in the fishery”:

Consideration of later years was abbreviated because the Council, which was formulating this policy in 1991, did not want to exacerbate overcapacity in the fishery by allowing speculative fishing in that year and subsequent years to qualify for an initial allocation of [quota share].

C.F.R. Parts 204, 672, 675, and 676.

This explanation does not fully answer the plaintiffs’ argument. They point out that the Secretary did not comply with the statutory timetable for issuing regulations. The Secretary of Commerce has statutory deadlines for every step of the process after receipt of a plan from a Council. 16 U.S.C. § 1854(a). The Secretary violated every time requirement except perhaps the first. The Secretary received the plan from the Council October 26, 1992. 16 U.S.C. § 1854(a)(1)(C) requires that after receipt of the plan, the Secretary “immediately publish” in the Federal Register a notice stating that the plan is available and requesting comments. Notice was published on November 3, 1992. See 57 Fed.Reg. 49,676 (1992). On December 3, 1992, thirty-nine days after the receipt date, the Secretary published the proposed regulations, violating the 15-day requirement in 16 U.S.C. § 1854(a)(1)(D). Instead of allowing sixty days for public comment on the proposed plan, 16 U.S.C. § 1854(a)(1)(C), the Secretary only allowed 38 days. 58 Fed.Reg. 59,375 (1993). The final rule was not promulgated until November 9, 1993, 379 days after the receipt date. Cf. 16 U.S.C. § 1855(a) (“[t]he Secretary shall promulgate each regulation that is necessary to carry out a plan ... within 110 days after the plan ... was received”).

Plaintiffs do not contend these procedural violations deprived the Secretary of jurisdiction to adopt the plan. Cf. Brock v. Pierce County, 476 U.S. 253, 259-60, 106 S.Ct. 1834, 1838-39, 90 L.Ed.2d 248 (1986); Idaho Farm Bureau Fed’n v. Babbitt, 58 F.3d 1392, 1399-1401 (9th Cir.1995). They argue, rather, that the Secretary’s violations pushed what was supposed to be “present” participation in the fishery further into the past. The Secretary’s nine-month delay in promulgating the final regulations, which helped create a three-year period between the last fishing considered and promulgation of those regulations, adds to our concern about whether the Secretary adequately considered “present participation in the fishery,” as required by 16 U.S.C. § 1853(b)(6)(A). The question is closer because a portion of this delay is attributable to the Secretary’s violation of the statutory timetables.

In the circumstances of this particular regulatory scheme, however, we do not think this delay should change the result. Congress left the Secretary some room for the exercise of discretion, by not defining “present participation,” and by listing it as only one of many factors which the Council and the Secretary must “take into account.” While the “participation” that the Council actually considered was admittedly in the “past” judged from the time when the final regulations were promulgated, it was roughly “present” with the time when the regulations were first proposed: The Council began its process on this plan in 1990, and considered participation in 1988, 1989, and 1990. The process required to issue a regulation necessarily caused substantial delay. The process of review, publication, public comments, review of public comments, and so forth, had to take a substantial amount of time, see 16 U.S.C. § 1854(a), and the environmental impact review also was lengthy, as it typically is, see 42 U.S.C. § 4332(2)(C). “Present” cannot therefore prudently be contemporaneous with the promulgation of the final regulations.

We further believe that the Secretary had a good reason for disregarding participation in the fishery during this lengthy process, because the alternative would encourage the speculative over-investment and overfishing which the regulatory scheme was meant to restrain. Under the regulations, eligibility for quota shares depends on fishing during the years 1988, 1989, and 1990. Whatever years are used necessarily recede into the distant past. Even in 2005, assuming the regulatory scheme lasts that long, the quota shares will be based on fishing prior to 1991. Future generations of fishermen will continue to be governed by these pre-1991 allocations. Had the Secretary extended the 1990 cutoff, the incentive to pour money and time into the fishery in order to get a bigger quota share, for those who could afford a long term speculation, would have been enormous.

Thus, while the length of time between the end of the participation period considered and the promulgation of the rule pushed the limits of reasonableness, we are unable to characterize use of a 1988 through 1990 period as so far from “present participation” when the regulation was promulgated in 1993 as to be “arbitrary or capricious.” Washington Crab, 924 F.2d at 1441. See also 16 U.S.C. § 1855(b)(1)(B); 5 U.S.C. § 706(2)(A)-(D).

B. The “Fair and Equitable Standard.”

Plaintiffs argue that the allocation of quota shares to vessel owners and lessees violates the statutory requirement that allocation be “fair and equitable to all such fishermen.” 16 U.S.C. § 1851(a)(4). The statute requires that a fishery management plan comply with a number of national standards:

(a) In general. Any fishery management plan prepared, and any regulation promulgated to implement any such plan, pursuant to this subchapter [16 U.S.C. §§ 1851 et seq.] shall be consistent with the following national standards for fishery conservation and management.
(1)Conservation and management measures shall prevent overfishing while achieving, on a continuing basis, the optimum yield from each fishery for the United States fishing industry.
(2) Conservation and management measures shall be based upon the best scientific information available.
(3) To the extent practicable, an individual stock of fish shall be managed as a unit throughout its range, and interrelated stocks of fish shall be managed as a unit or in close coordination.
(4) Conservation and management measures shall not discriminate between residents of different States. If it becomes necessary to allocate or assign fishing privileges among various United States fishermen, such allocation shall be (A) fair and equitable to all such fishermen; (B) reasonably calculated to promote conservation; and (C) carried out in such manner that no particular individual, corporation, or other entity acquires an excessive share of such privileges.
(5) Conservation and management measures shall, where practicable, promote efficiency in the utilization of fishery resources; except that no such measure shall have economic allocation as its sole purpose.
(6) Conservation and management measures shall take into account and allow for variations among, and contingencies in, fisheries, fishery resources, and catches.
(7) Conservation and management measures shall, where practicable, minimize costs and avoid unnecessary duplication.

16 U.S.C. § 1851(a) (emphasis added).

Plaintiffs make the sensible argument that a crew member is just as much of a fisherman as a vessel owner. If all the quota shares go to vessel owners and lessees during that period, and none to the crew, as the Secretary’s approved plan provides, then this violates the statutory command of fairness and equity to “all” the fishermen.

As the quoted section of this statute shows, the Secretary’s duty was not solely limited to allocating quota shares fairly and equitably among the fishermen. The plan also had to “prevent overfishing while achieving, on a continuing basis, the optimum yield,” 16 U.S.C. § 1851(a)(1), be “reasonably calculated to promote conservation,” 16 U.S.C. 1851(a)(4), “promote efficiency,” 16 U.S.C. § 1851(a)(5), “minimize costs and avoid unnecessary duplication,” 16 U.S.C. 1851(a)(7), and achieve several other criteria. There is a necessary tension, perhaps inconsistency, among these objectives. The tension, for example, between fairness among all fishermen, preventing overfishing, promoting efficiency, and avoiding unnecessary duplication, necessarily requires that each goal be sacrificed to some extent to meeting the others.

The Council and Secretary directed their attention to the fairness problem plaintiffs raise, but decided that the other standards imposed by the statute required allocation of quota shares to boat owners and lessees as opposed to all the fishermen. The Council thought that equity to people who had invested in boats, and the greater ease of ascertaining how much fish boats, as opposed to individual fishermen, had taken, favored allocating quota shares according to owner and lessees of boats:

There is no question that the IFQ program will restructure the current fixed gear fishery for halibut and sablefish. Some fishermen will be better off and some will be worse off under the IFQ program.... In brief, those persons benefited by receiving an initial allocation are vessel owners or lease holders.... The Council’s rationale for this particular allocation is that vessel owners and lease holders are the participants who supply the means to harvest fish, suffer the financial and liability risks to do so, and direct the fishing operations.
The advantaging of one group to the detriment of another is inherent in alloca-tion_ The Council considered allocating [quota share] to crew members but decided against it because of the practical difficulties of documenting crew shares. Instead, the Council decided to give eligibility for initial allocations only to vessel owners and lease holders because they have a capital investment in the vessel and gear that continues as a cost after crew and vessel shares are paid from a fishing trip.

58 Fed.Reg. 59,375, 59,378, 59,386 (1993) (final rule, codified at 50 C.F.R. Parts 204, 672, 675, and 676).

The Secretary thought that the problem of overfishing resulted more from investment in boats than occupational choices of fishermen, so the administrative remedy should be measured by ownership and leasing of boats:

The Council’s consideration of “present participation” also included the form of involvement in the fishery (e.g., as a vessel owner, crew member, or processor). As explained under national standard 4, above, the Council perceived vessel owners and lease holders as the most directly involved persons in terms of capital investment. The conservation and management problems resolved by this program stem largely from excess capital in the fisheries. Therefore, it is reasonable to define the group of persons who make the capital investment decision to either enter or exit a fishery as “present participants” for initial allocation purposes.

58 Fed.Reg. 59,375, 59,380 (1993) (final rule, codified at 50 C.F.R. Parts 204, 672, 675, and 676). The Secretary promulgated a regulation requiring that allocations be “rationally connected with the achievement of [optimum yield] or with the furtherance of a legitimate [fishery management plan] objective.” 50 C.F.R. § 602.14(c)(3)(i)(A). In consideration of the fact that “[i]nherent in an allocation is the advantaging of one group to the detriment of another,” the regulation provided:

The motive for making a particular allocation should be justified in terms of the [fishery management plan]; otherwise, the disadvantaged user groups or individuals would suffer without cause....
(B) An allocation of fishing privileges may impose a hardship on one group if it is outweighed by the total benefits received by another group or groups. An allocation need not preserve the status quo in the fishery to qualify as fair and equitable, if a restructuring of fishing privileges would maximize overall benefits.

50 C.F.R. § 602.14(c).

Congress required the Secretary to exercise discretion and judgment in balancing among the conflicting national standards in section 1851. “[UJnless the Secretary acts in an arbitrary and capricious manner promulgating such regulations, they may not be declared invalid.” Alaska Factory Trawler Ass’n v. Baldridge, 831 F.2d 1456, 1460 (9th Cir.1987). Although the Secretary’s approval of the plan sacrificed the interest of nonowning crew members to boat owners and lessees, the Secretary had a reason for doing that which was consistent with the statutory standards. Controlling precedent requires that a plan not be deemed arbitrary and capricious, “[ejven though there may be some discriminatory impact,” if the regulations “are tailored to solve a gear conflict problem and to promote the conservation of sablefish.” Id. The Secretary is allowed, under this authority, to sacrifice the interests of some groups of fishermen, for the benefit as the Secretary sees it of the fishery as a whole. Id.

The plan adopted will undoubtedly have an adverse impact on the lives of many fishermen who have done nothing wrong. Their éntirely legitimate interest in making a living from the fishery has been sacrificed to an administrative judgment about conservation of fish and efficiency of the industry. That is, however, an unavoidable consequence of the statutory scheme. Despite the harshness to the fishermen who were left out, there is no way we can conclude on this record that the Secretary lacked a rational basis for leaving them out. The Secretary considered their interests, “considered the relevant factors and articulated a rational connection between the facts found and the choice made.” Washington Crab, 924 F.2d at 1441. Because this standard was met, we do not have the authority to substitute our judgment for the Secretary’s with regard to allocation of all the quota shares to boat owners and lessees.

C. Primary Port.

As part of the enforcement scheme, the Secretary has limited where fish can be unloaded and transferred from the harvest vessels. An “IFQ landing” is defined as “the unloading or transferring of any IFQ halibut, IFQ sablefish, or products thereof from the vessel that harvested such fish.” 50 C.F.R. § 676.11. The general scheme for landings involves vessels clearances, with National Marine Fisheries Service inspection of individual fishing quota permits, buyer permits, and regulated halibut and sablefish. “Unless specifically authorized on a case-by-case basis, vessel clearances will be issued only by NMFS enforcement officers at ... primary ports.” 50 C.F.R. § 676.17(a)(4). The regulations list as “primary ports” 16 towns in Alaska, and Bellingham, Washington. Plaintiffs argue that the inclusion of Bellingham, Washington, on the list was inappropriate. Listing Bellingham means, as a practical matter, that some vessels will harvest regulated fish in waters off Alaska, but the National Marine Fisheries Service will not clear the fish for sale until they get to Bellingham.

The regional fishery management council recommended that all clearances be at Alaska ports. Some of the federal fisheries regulators in Alaska, as well as fishermen in Alaska, were concerned that once the boats got away from Alaska, they could cheat by selling fish before they got to a non-Alaskan port. There is a lot of ocean between Alaska and Washington.

The Secretary added Bellingham to the list, despite this concern, for two reasons. First, the Secretary was concerned that if all fish had to be cleared at an Alaskan port, then the second sentence of the Ports Preference Clause of the United States Constitution would be violated. The Ports Preference Clause says:

No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State be obliged to enter, clear, or pay Duties in another.

Const, art I, § 9, para. 6. The Secretary did not make a finding that the clause would be violated, but rather chose to avoid possible litigation over the question by adding a non-Alaskan port. Second, the Secretary elected to put Bellingham on the list, because it was an historic port for selling Alaskan halibut and sablefish. 58 Fed.Reg. 59,375, 59,392.

Plaintiffs argue that the Secretary had no authority to amend the fishery management plan by adding Bellingham, and could only approve the plan, disapprove it, or partially disapprove it. Under their interpretation, the Secretary should have sent the plan back to the regional council rather than adding a non-Alaskan port on his own.

Congress distinguished the Secretary’s powers to alter the “fishery management plan” which the regional council submits, 16 U.S.C. § 1853(a), from his power to alter “regulations which the Council deems necessary or appropriate for purposes of carrying out a plan,” 16 U.S.C. § 1853(c). Congress specifically empowered the Secretary to “make such changes in the proposed regulations submitted for the plan ... as may be necessary for the implementation of the plan.” 16 U.S.C. § 1854(a)(l)(D)(i). The Secretary does not have the same powers over the plan: If “the Secretary determines that the plan ... is not consistent with the criteria, ... the Secretary shall notify the Council in writing of his disapproval or partial disapproval of the plan,” 16 U.S.C. § 1854(b)(2). That way, “the Council may submit a revised plan or amendment, accompanied by appropriately revised proposed regulations, to the Secretary.” 16 U.S.C. § 1854(b)(3)(A). Plaintiffs argue that the Secretary could not add Bellingham as a port because doing so changed the fishery management plan.

We have no difficulty reconciling subsection (b)(3), which empowers the council to submit a revised plan, with subsection (a)(l)(D)(i), which allows the Secretary to make changes on his own in the implementation regulations. Subsection (a)(l)(D)(i) authorizes the Secretary to change regulations which the Secretary deems necessary for implementation, without sending the plan back to the council. Designation of the locations for National Marine Fisheries Service vessel clearance was an enforcement concern which the Secretary could properly control in the implementation regulations. We therefore have no occasion to decide whether the Secretary could change the fishery management plan itself without sending it back to the council.

Plaintiffs argue that the practical effect of adding Bellingham to the implementing regulations is to make enforcement of the plan itself entirely impractical, so that the Secretary’s amendment of the regulations should be treated as a change in the plan itself. They cite a memorandum from the Director of the National Marine Fisheries Service, Alaska Enforcement Division, saying that enforcement could not be accomplished if a Washington port were added. This is a matter of judgment entrusted to the Secretary, and although he reached a conclusion contrary to the recommendation of a knowledgeable subordinate in his department, the Secretary’s judgment is not arbitrary and capricious.

D. Preemption Hearing.

The statute provides that “nothing in this [Act] shall be construed as extending or diminishing the jurisdiction or authority of any State within its boundaries.” 16 U.S.C. § 1856(a). If the Secretary finds “after notice and an opportunity for hearing” that “any state has taken any action ... which will substantially and adversely affect the carrying out of [his] fishery management plan,” then “the Secretary shall promptly notify such State and the appropriate Council of such finding and of his intention to regulate the applicable fishery within the boundaries of such State.” 16 U.S.C. § 1856(b)(1). This statute also provides that a state may later seek reinstatement of its authority over an area over which the Secretary has previously asserted jurisdiction. 16 U.S.C. § 1856(b)(2). Plaintiffs argue that the Secretary violated this state sovereignty provision of the statute by not giving notice and holding a preemption hearing before asserting jurisdiction over Alaskan waters.

Plaintiffs argue that the Secretary violated this state sovereignty provision of the statute, by not giving notice and holding a preemption hearing before determining that the fishery was “predominantly within the exclusive economic zone and beyond such zone,” 16 U.S.C. § 1856(b)(1)(A), and that the State of Alaska had taken or omitted to take action which would “substantially and adversely affect the carrying out of such fishery management plan.” 16 U.S.C. § 1856(b)(1)(B).

Plaintiffs argue that the State of Alaska did not protect the fishermen’s rights to a hearing on whether preemption of state authority was proper, so the fishermen should be enabled to enforce this statutory right themselves. In an amicus memorandum filed in district court, the State of Alaska said that it “joins with federal defendants and intervening defendants in countering plaintiffs’ attempts to invalidate the [IFQ] program.” However, “the state’s support of the current federal IFQ program does not represent a waiver of the state’s present and future fisheries management interests in state waters.” We assume without deciding, for purposes of this portion of the discussion, that the Secretary did violate the State of Alaska’s right to notice and a hearing before the federal government preempted the state’s authority to regulate fishing in its own waters.

The State of Alaska, as a sovereign, and not the plaintiffs, would be the party affronted by interference with its sovereignty. Federal regulation of fishing in state waters interferes with the state’s power to regulate conduct within its borders. The fishermen, being citizens of both the State of Alaska and the United States, and fishing within both, are subject to regulation by both. The invasion of the State of Alaska’s sovereign interest in the power to regulate an activity within its own territory is not “an invasion of a legally protected interest,” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992), of the fishermen. The state could have, had it prevailed in a preemption hearing, imposed greater burdens on the aggrieved fishermen than did the federal government. We intimate no view on whether the State of Alaska would have been entitled to a hearing under section 1856, had it demanded one. The State of Alaska elected not to take action to protect whatever sovereign rights the state might have in this regulatory regime, and the sovereign rights belong to the state, not the individual fishermen. Failure to hold the statutory preemption hearing created no infirmity of which the fishermen could take advantage in this litigation.

III. CONCLUSION

This is a troubling case. Perfectly innocent people going about their legitimate business in a productive industry have suffered great economic harm because the federal regulatory scheme changed. Alternative schemes can easily be imagined. The old way could have been left in place, where whoever caught the fish first, kept them, and seasons were shortened to allow enough fish to escape and reproduce. Allocation of quota shares could have been on a more current basis, so that fishermen in 1996 would not have their income based upon the fish they had caught before 1991. Quota shares could have been allocated to all fishermen, instead of to vessel owners and lessees, so that the nonowning fishermen would have something valuable to sell to vessel owners. But we are not the regulators of the north pacific halibut and sablefish industry. The Secretary of Commerce is. We cannot overturn the Secretary’s decision on the ground that some parties’ interests are injured. Government regulation of an industry necessarily transfers economic rewards from some who are more efficient and hardworking to others who are favored by the regulatory scheme. We have authority to overturn the Secretary’s decisions only if they are arbitrary and capricious, or contrary to law. In this case, they are not.

AFFIRMED.

      . In their reply brief, Plaintiffs argue that the Secretary’s final regulations violate §§ 1851(a)(1) and 1851(a)(3) as well. Because parties cannot raise a new issue for the first time in their reply brief, Thompson v. CIR, 631 F.2d 642, 649 (9th Cir.1980), we do not consider these arguments.