King Mountain Tobacco Co. v. Robert McKenna, 768 F.3d 989

Background

King Mountain Tobacco Co., owned by a Yakama tribal member, manufactures cigarettes partly using tobacco grown on Yakama reservation trust lands and sells products on- and off-reservation (including throughout Washington and ~16 other states).
Washington's escrow statute requires non‑MSA cigarette manufacturers (NPMs) to place per‑unit payments into escrow to cover potential future healthcare liabilities; funds earn interest and are releasable only under limited conditions.
King Mountain initially complied but sued the Washington Attorney General seeking declaratory and injunctive relief, claiming the 1855 Yakama Treaty is an "express federal law" exempting Yakama people from the escrow law.
The district court granted summary judgment for the State, finding (1) the escrow statute is a nondiscriminatory law of general application, (2) King Mountain’s activities are largely off‑reservation, and (3) the Treaty does not expressly exempt King Mountain from state regulation.
On appeal, the Ninth Circuit reviewed de novo, applied Mescalero’s framework (state nondiscriminatory laws apply to off‑reservation Indian activity absent an express federal exemption), and affirmed the district court.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Washington's escrow statute is discriminatory toward the Yakama	Escrow unlawfully burdens Yakama treaty rights (argues it effectively forces waiver)	Statute is nondiscriminatory and applies equally to in‑ and out‑of‑state manufacturers	Held nondiscriminatory; plaintiff failed to show discrimination
Whether King Mountain’s activities are on‑reservation (thus shielded)	King Mountain contends reservation ties (grows/manufactures on trust land) shield its commerce	State shows significant off‑reservation processing, blending, and interstate sales	Held activities are largely off‑reservation
Whether the Yakama Treaty (Art. II) reserves an express federal exemption for trade (sale of tobacco)	Art. II’s “exclusive use and benefit” preserves tribal right to grow and trade tobacco free of state regulation	Treaty defines reservation boundaries/use but says nothing about exempting trade from nondiscriminatory state regulation	Held Art. II does not create an express federal exemption
Whether the Yakama Treaty (Art. III right to travel) exempts tobacco commerce from state regulation	Plaintiff relies on precedent protecting travel to market (Cree cases, Smiskin) to bar state conditions on transporting/selling tobacco	State distinguishes travel rights from a free‑standing right to trade; Treaty does not expressly grant trade immunity	Held Article III’s travel right does not exempt King Mountain; no treaty‑based exemption applies

Key Cases Cited

Mescalero Apache Tribe v. Jones, 411 U.S. 145 (state nondiscriminatory laws apply to off‑reservation Indians absent express federal law to the contrary)
Confederated Tribes of Colville Indian Reservation v. Washington, 447 U.S. 134 (States may impose nondiscriminatory taxes on non‑Indian customers of Indian retailers)
Cree v. Flores, 157 F.3d 762 (9th Cir.) (interpretation of treaty text reviewed de novo; historical findings for ambiguity)
Cree v. Waterbury, 78 F.3d 1400 (9th Cir.) (treaty can constitute an express federal law preempting state regulation)
Ramsey v. United States, 302 F.3d 1074 (9th Cir.) (distinguishing federal/expression tests and applying Indian‑canon construction)
United States v. Smiskin, 487 F.3d 1260 (9th Cir.) (Yakama travel right overlaps with right to transport goods to market; restrictions may violate treaty travel right)
Oregon Dep’t of Fish & Wildlife v. Klamath Indian Tribe, 473 U.S. 753 (Indian‑canon cannot override clear treaty language)
South Carolina v. Catawba Indian Tribe, Inc., 476 U.S. 498 (clarifies limits of Indian‑canon when treaty language is clear)
Hunt v. Washington State Apple Advertising Comm’n, 432 U.S. 333 (cited on discrimination doctrine though inapposite here)