The National Association of Home Builders, Southern Arizona Home Builders Association, and the Home Builders Association of Central Arizona (collectively Home Builders) brought suit against the Environmental Protection Agency (EPA) challenging the designation of the Arizona population of the cactus ferruginous pygmy owl (Glaucidium brasilianum cactorum) as a distinct population segment (DPS) under the Endangered Species Act (ESA).[1] The Ninth Circuit, finding the Arizona pygmy owl population distinct but not significant, reversed the district court grant of summary judgment for the United States Fish and Wildlife Service (FWS) and remanded the case to district court.

The cactus ferruginous pygmy owl occupies territory stretching east to west from Texas to Arizona and north to south from central Arizona to central Mexico. FWS determined that although these owls were once common in Arizona, that state now is home to only 20 to 40 individuals. FWS further concluded that Arizona's population of pygmy owls comprises a DPS that should be listed as endangered under the ESA. To qualify as a DPS, a population must be both discrete and significant "in relation to the remainder of the species to which it belongs."[2] Home Builders challenged the designation of the Arizona pygmy owls as a separate DPS, but the district court upheld the listing. On appeal, Home Builders alleged that the designation of Arizona pygmy owls as a DPS violated FWS's DPS Policy[3] governing DPS listings.

Home Builders' suit in district court included a claim against the designation of critical habitat as well as the claim against the listing of the Arizona owl as a separate DPS. The district court remanded the critical habitat portion of the claim to FWS and certified the DPS designation as a final judgment under Rule 54(b) of the Federal Rules of Civil Procedure.[4] Rule 54 (b) states, "when more than one claim for relief is presented in an action, . . . the court may direct the entry of a final judgment as to one . . . of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment."[5] The Ninth Circuit had earlier remanded the case to the district court because that court had failed to make an express determination that there was no just reason for delay. On remand, the district court stated there was no just reason for delay because the listing rule was a different administrative action from the critical habitat designation and was based on a different administrative record.

The Ninth Circuit reviewed the district court's grant of summary judgment de novo, construing the evidence in the light most favorable to Home Builders as the nonmoving parties in the district court case. As part of its de novo review, the Ninth Circuit reviewed the actions of FWS to determine whether they were "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law."[6] In determining whether FWS's actions were arbitrary or capricious, the court looked to whether FWS had "considered the relevant factors and articulated a rational connection between the facts found and the choice made."[7]

FWS used the DPS designations "to provide different levels of protection to different populations of the same species"[8] as the need required. Because the ESA does not define the term "distinct population segment," FWS, in conjunction with the National Marine Fisheries Service (NFMS) promulgated a set of rules, the DPS Policy, to define the term. To include only populations necessary to conserve a species's genetic diversity, the DPS Policy limits the designation of a DPS to those populations that are both discrete and significant.

FWS found the Arizona population of the pygmy owl to be discrete because "[i]t is delimited by international governmental boundaries within which differences in . . . conservation status . . . exist that are significant in light of section 4(a)(1)(D) of the [ESA]."[9] The Ninth Circuit concurred, noting that an agency is entitled to deference in the interpretation of its own regulations unless the interpretation is "plainly erroneous." As a result, the Ninth Circuit deferred to FWS's interpretation in this case that "differences in conservation status" means "differences in the number of owls" on either side of the U.S.-Mexican border.[10]

FWS gave two reasons for finding the Arizona population of the pygmy owl to be significant. First, loss of the Arizona population would result in a significant gap in the range of the species that the remaining population would not fill. The Ninth Circuit agreed that the void created by the loss of the Arizona population would qualify as a gap, even though it is at one end of the owl's range. The court found, however, that this gap would not be significant. In making this determination the court evaluated four factors: 1) decrease in the genetic variability of the species, 2) reduction in the current range of the species, 3) reduction in the historic range of the species, and 4) extirpation of the species from the United States.

Looking at the first factor, the court found that FWS failed to provide evidence in the listing rule for genetic differences between the Mexico and Arizona populations of the pygmy owl. Therefore, the court had no basis for determining that the loss of the Arizona owls would decrease the genetic variability of the species. The court dismissed the second factor by concluding that the Arizona portion of the owl's range is a small portion of the owl's total range, and the number of Arizona owls is small in proportion to the total number of owls, so losing the Arizona population would not constitute a significant reduction in the species's current range.

Looking at the third factor, the court determined that loss of historical range means loss of "major geographical areas in which [a species] is no longer viable but once was."[11] The court noted that FWS failed to provide a reasoned basis for finding Arizona to be a major geographical area in the historical range of the pygmy owl, characterizing it rather as at the "periphery of the western pygmy-owls' historical range."[12] The court therefore refused to "make up for deficiencies in the agency's decision"[13] or, given the lack of evidence, to defer to FWS. Finally, the court determined that extirpation of the pygmy owl from the United States is not itself significant unless some other factor renders the loss significant to the species as a whole. In this case the court found no such other factor. Having rejected all four arguments, the court found that the gap left by the loss of the Arizona owl population would not be significant and therefore would not provide a basis for finding the Arizona owl population significant.

The second reason FWS put forth for the significance of the Arizona owl population is that it "differs markedly from other populations of the species in its genetic characteristics."[14] The court looked to the evidence FWS introduced in the listing rule, which showed little or no genetic differences between the Arizona population of pygmy owls and the Mexico population and only "[t]he potential for genetic distinctness" between the Arizona population and the Texas population.[15] The court ruled that this lack of evidence of actual, appreciable genetic differences between the Arizona owls and other populations made it impossible to use genetic differences as a basis for finding the Arizona population significant.

Thus, citing Congress's admonition that "the authority to list DPS's [sic] be used '. . . sparingly,'"[16] the Ninth Circuit determined that the Arizona population of the ferruginous pygmy owl is not a significant population and does not merit protection under the ESA as a distinct population segment. With this ruling, the court reversed the district court's grant of summary judgment for FWS and remanded the case "for further proceedings consistent with this opinion."[17]