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Issue 2. Taxability of Settlement Proceeds From Fishing Lawsuit
On June 7, 1986, Mr. Norton was fishing for herring on Norton
Sound by means of a beach seine. The open period for herring
fishing on that date was 3 hours. While Mr. Norton and his crew
were hauling in herring, they were informed by State Trooper John
Harman (Officer Harman) that because the lead line was not fully on
the beach as of the end of the 3-hour fishing period, they had to
release their catch. Despite vigorously disputing Officer Harman’s
claim, Mr. Norton complied. As a result, Mr. Norton was
dispossessed of approximately 150 tons of herring valued in excess
of $100,000 and was denied “fish tickets”, which are used for the
subsequent assignment of limited entry fishing permits. (These
permits are awarded by the Alaska Limited Entry Fisheries
Commission (the commission) based upon the amount of fish landed
and allow commercial fishermen to maintain and expand their fishing
privileges.)
On June 2, 1988, Mr. Norton filed a lawsuit against Officer
Harman (both individually and as a trooper of the State of Alaska
Department of Public Safety, Division of Fish and Wildlife
Protection) and the State of Alaska (the Harman lawsuit), seeking
monetary and declaratory relief. The complaint contained six
counts: (1) Trespass to chattels; (2) conversion; (3) negligence;
(4) punitive damages; (5) deprivation of civil rights; and (6) a
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