COUGAR DEN, INC., а Yakama Nation corporation, Respondent, v. WASHINGTON STATE DEPARTMENT OF LICENSING, Appellant.
No. 92289-6
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
MAR 16 2017
JOHNSON, J.; FAIRHURST, C.J. (dissenting)
En Banc
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JOHNSON, J.—Article III of the Yakama Nation Treaty of 1855 provides in pertinent part:
[I]f necessary for the public convenience, roads may be run through the said reservation; and on the other hand, the right of way, with free access from the same to the nearest public highway, is secured to them; as also the right; in common with citizens of the United States, to travel upon all public highways.
Treaty with the Yakamas, 12 Stat. 951, 952-53 (1855).
The issue in this case centers on the interpretation of the “right to travel” provision in the treaty, in the context of importing fuel into Washington State. The Washington State Department of Licensing (Department) challenges Cougar Den Inc.‘s importation of fuel without holding an importer‘s license and without paying
An administrative law judge (ALJ) ruled in favor of Cougar Dеn, holding that the right to travel on highways should be interpreted to preempt the tax. The Department‘s director, Pat Kohler, reversed. On appeal, the Yakima County Superior Court reversed the director‘s order and ruled in favor of Cougar Den. We affirm.
FACTS AND PROCEDURAL HISTORY
Cougar Den is a Confederated Tribes and Bands of the Yakama Nation (Yakama Nation) corporation that transports fuel from Oregon to the Yakama Indian Reservation, where it is sold. Kip Ramsey, Cougar Den‘s owner and president, is an enrolled member of the Yakama Nation.
Cougar Den began transporting fuel in 2013 from Oregon to the Yakama Indian Reservation. Cougar Den contracted with KAG West, a trucking company, to transport the fuel into Washington from March 2013 to October 2013.
On December 9, 2013, the Department issued assessment number 756M against Cougаr Den, demanding $3.6 million in unpaid taxes, penalties, and licensing fees for hauling the fuel across state lines. Cougar Den appealed the assessment to the Department‘s ALJ, who held in his initial order that the assessment was an impermissible restriction under the treaty. The Department sought review of the
The director held that the Yakama treaty did not preempt the taxes, license requirements, and penalties sought against Cougar Den. Cougar Den then petitioned for review of the final order by the Department. The Yakima County Superior Court, sitting in an appellate capacity, reversed the director‘s order and held that the taxation violated the tribe‘s right to travel. The Department appealed the superior court‘s decision and sought direct review under RAP 4.2(a)(2). We granted direct review.
ANALYSIS
This case began as a challenge to an administrative order; therefore, review is governed by chapter
Washington State law imposes a tax on fuels used for the propulsion of motor vehicles on the highways of the state. In 2013, when Cougar Den transported fuel into the state, chapter
The Yakama Indian Reservation is a federally recognized Indian tribal reservation located within the state of Washington. Outside an Indian reservation, Indian citizens are subject to state tax laws, “[a]bsent express federal law to the contrary.” Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148, 93 S. Ct. 1267, 36 L. Ed. 2d 114 (1973). A treaty constitutes an express federal law. There is no dispute that
The United States Supreme Court has established a rule of treaty interpretation: Indian treaties must be interpreted as the Indians would have understood them.
The Indian Nations did not seek out the United States and agree upon an exchange of lands in an arm‘s-length transaction. Rather, treaties were imposed upon them and they had no сhoice but to consent. As a consequence, this Court has often held that treaties with the Indians must be interpreted as they would have understood them.
Choctaw Nation v. Oklahoma, 397 U.S. 620, 630-31, 90 S. Ct. 1328, 25 L. Ed. 2d 615 (1970).
It is our responsibility to see that the terms of the treaty are carried out, so far as possible, in accordance with the meaning they were understood to have by the tribal representatives at the council, and in a spirit which generously recognizes the full obligation of this nation to protect the interests of a dependent people.
Tulee v. Washington, 315 U.S. 681, 684-85, 62 S. Ct. 862, 86 L. Ed. 1115 (1942).
The Ninth Circuit has recognized this rule of treaty construction. See United States v. Smiskin, 487 F.3d 1260, 1264 (9th Cir. 2007); Cree v. Flores, 157 F.3d 762, 769 (9th Cir. 1998) (Cree II). Treaties are broadly interpreted, with doubtful or ambiguous expressions resolved in the Indians’ favor.
The Department‘s interpretation of the treaty provision ignores the historical significance of travel to the Yakama Indians and the rule of treaty interpretation established by the United States Supreme Court. In ruling in Cougar Den‘s favor, both the ALJ and the Yakima County Superior Court based their decisions on the history of the right to travel provision of the treaty, relying on the findings of fact and conclusions of law from Yakama Indian Nation v. Flores, 955 F. Supp. 1229 (E.D. Wash. 1997).
The factual record regаrding the treaty interpretation of the historical meaning of the right to travel relied on below was developed in a federal action, Cree II.3
At the time the treaty was drafted, agents of the United States knew of the Yakamas’ reliance on travel. During negotiations, the Yakamas’ right to travel off reservation had been repeatedly broached, and assurances were made that entering into the treaty would not infringe on or hinder their tribal practices. Promises were made to protect the Indians from “‘bad white men‘” if the tribes agreed to live within
In reliance on these vital promises, the Yakamas forever cеded 90 percent of their land in exchange for these rights. Yakama Nation thus understandably assigned a special significance to each part of the treaty at the time of the signing and continues to view the treaty as a sacred document today. It is important to note that although the United States negotiated with many Northwest tribes, only the treaties with the Yakamas and Nez Perce contained highway clauses like this one. Cree II, 157 F.3d at 772.
Nine years later, the Ninth Circuit considered the right to travel in another context in Smiskin. In that case, agents of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives suspected the Smiskins, members of Yakama Nation, of transporting unstamped cigarettes from smoke shops on an Idaho Indian reservation to smoke shops on various Indian reservations in Washington. In June 2004, the agents seized 4,205 cartons of unstamped cigarettes from the Smiskins’ residence and
Washington State requires wholesalers to affix either a “tax paid” or “tax exempt” stamp to cigarette packaging prior to sale. See
Again, to determine whether the treaty precluded the State from prosecuting the Smiskins’ violation of the State‘s prenotification requirement, the Ninth Circuit looked to the right to travel provision of the treaty. The court held that the Smiskins were not required to notify anyone prior to transporting goods to market because the
The court noted the “tremendous importance” of the right to travel provision and “refuse[d] to draw what would amount to an arbitrary line between travel and trade.” Smiskin, 487 F.3d at 1265-66. “[W]hether the goods at issue are timber or tobacco products, the right to travel overlaps with the right to trade under the Yakama Treaty such that excluding commercial exchanges from its purview would effectively abrogate our decision in Cree II and render the Right to Travel provision truly impotent.” Smiskin, 487 F.3d at 1266-67 (footnote omitted).
Of importance in the decision is the court‘s discussion of the regulatory exception. In resolving conflicts between state laws and Indian treaties, the United States Supreme Court has stated that pure regulatory restrictions may be validly applied to tribal members. The State in Smiskin argued that the State‘s tax collection effects had a regulatory purpose. However, the court found that Washington‘s stated purpose for requiring cigarette stamps, and hence for requiring notice before unstamped cigarettes are transported within the State, was to “‘enforce collection of
More reсently, in 2014, the Ninth Circuit addressed the right to travel provision again. The Department relies on King Mountain Tobacco Co. v. McKenna, 768 F.3d 989 (9th Cir. 2014), to assert that the trial court interpreted the right to travel provision too broadly. In King Mountain, the plaintiff was a private tobacco company owned by Delbert Wheeler, an enrolled member of the Yakama Nation. King Mountain sought relief from application of Washington‘s escrow statute, which required King Mountain to place money into escrow to reimburse the State for health care costs related to the use of tobacco products. The court analyzed the treaty again and held that the plain text reserved to the Yakamas the right “‘to travel upon all public highways,‘” not the “right to trade.” King Mountain, 768 F.3d 997, 998 (quoting 12 Stat. 953). The court distinguished King Mountain from the Cree cases by noting that the Cree cases involved “the right to travel (driving trucks on public roads) for the purpose of transporting goods to market.” King Mountain, 768 F.3d 998. The court affirmed judgment in favor of the State and rejected King Mountain‘s reliance on the treaty right to travel.
The Department argues that this case is analogous to King Mountain because both companies “claim[] a right to engage in trade in addition to or above and beyond a right to travel upon the highways.” Appellant‘s Opening Br. at 27. The Department
The Department‘s argument is unpersuasive. Smiskin is nearly identical to this case. In both cases, the State placed a condition on travel that affected the Yakamas’ treaty right to transport goods to market without restriction. The difference between Smiskin and King Mountain is that in King Mountain, travel was not at issue. In King Mountain, the court held under the facts that “there is no right to trade in thе Yakama
In addition, the tax does not, as the State argues, fall under the regulatory exception. In Smiskin, the purpose of the notice requirement was the collection of taxes on the transported goods. The prenotification requirement was triggered by the transportation of cigarettes into the state. Likewise, here, the Department requires that companies obtain a license prior to hauling goods into the state: the purpose of the licensing requirement is to collect taxes. We hold that the right to travel provision in the treaty protects the Tribe‘s historical practice of using the roads to engage in trade and commerce.
Finally, the Department argues that applying the Ninth Circuit‘s reasoning would lead to “unimagined and unintended preemption of fundamental state powers.” Appellant‘s Opening Br. at 32. The Department noted that the superior court‘s reasoning “could allow Yakama tribal members to avoid state laws that regulate goods by simply contriving to possess the goods on public highways.” Appellant‘s Opening Br. at 33. An example the Department gave was that Yakama tribal members
“The Yakama Nation is a sovereign nation, with its own government, laws and courts, not a rogue organization or menace to civil order. The Yakama Nation does not and never has asserted that its membеrs have a right under its treaty to traffic in narcotics. For the government of the United States to be suggesting otherwise is irresponsible.
“The Yakama Nation must and will intercede as litigant or amicus to protect its members’ treaty right to travel when the federal government overreaches, as it has here. But the Nation has no interest in promoting, condoning, or protecting activities by its members that pose real dangers to public health, public safety, natural resources, or public infrastructure. The Nation has no such interest not only because irresponsible overreaching on its part would likely prompt Congress to exercise its constitutional/ political power to abrogate or limit the treaty right to travel, but also because the Yakama Nation and its members share the interest all citizens have in public health, public safety, conservatiоn and equitable exploitation of natural resources, and adequate public infrastructure.”
We also note that this case does not present the “parade of horribles” concern raised by the State. In interpreting the treaty, we are bound to read the provisions as the Tribe understood them. As noted, the right to travel provision appears to be unique to the Yakama and Nez Perce tribes. If the State has concerns about this treaty provision, only Congress can revise or restrict the provisions, not this court.
As determined by the federal courts, any trade, traveling, and importation that requires the use of public roads fall within the scope of the right to travel provision of the treaty. The Department taxes the importation of fuel, which is the transportation of fuel. Herе, it was simply not possible for Cougar Den to import fuel without traveling or transporting that fuel on public highways. Based on the historical interpretation of the Tribe‘s essential need to travel extensively for trade purposes, this right is protected by the treaty.4
JOHNSON, J.
WE CONCUR:
MADSEN, J.
STEPHENS, J.
GONZÁLEZ, J.
YU, J.
Cougar Den, Inc. v. Dep‘t of Licensing
No. 92289-6
Fairhurst, C.J. (dissenting)
I. ANALYSIS
“Absent express federal law to the contrary, Indians going bеyond reservation boundaries have generally been held subject to nondiscriminatory state law.” Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148-49, 93 S. Ct. 1267, 36 L. Ed. 2d 1114 (1973). This includes state fuel excise taxes. Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 97, 126 S. Ct. 676, 163 L. Ed. 2d 429 (2005) The
A. Former chapters 82.36 and 82.38 RCW represent a tax on the wholesale possession, not transportation, of fuel
The majority reaches its holding after finding that Washington‘s fuel excise tax regime “taxes the importation of fuel, which is the transportation of fuel.” Majority at 16. But “import,” as used here, is a term of art not requiring transportation of any kind. Former
Washington first levied an excise tax on motor vehicle fuel in 1921. Auto. United Trades Org. v. State, 183 Wn.2d 842, 845, 357 P.3d 615 (2015) (citing LAWS OF 1921, ch. 173, § 2). Until 1999, rеtailers were primarily responsible for paying the tax. Id. at 847. To improve compliance and reduce administrative costs, Washington shifted the reporting and collection burden to the suppliers at the top of the fuel supply chain in 1999. S.B. REP. ON SUBSTITUTE H.B. 2659, at 1-2, 55th Leg., Reg. Sess. (Wash. 1998).2
Refiners and terminal operators were now charged with collecting, reporting, and remitting excise tax when fuel was removed “from a terminal ... at the rack,”
In 2007, the legislature revised the statute to address the opportunity Squaxin Island Tribe, 400 F. Supp. 2d at 1250, gave tribal retailers operating on Indian lands
The legislature made another change in 2007 that reinforces this notion. From 1999 through 2007, tax applied to imported motor vehicle fuel only when that fuel was imported for purposes of “sale, consumption, use, or storage” within Washington. LAWS OF 1998, ch. 176, § 7(2)(c) (formatting omitted). Beginning in 2007, all imported motor vehicle fuel would be subject to tax, regardless of the purpose for which it was imported.8 LAWS OF 2007, ch. 515, § 2(2)(c); former
This history further demonstrates the legislature‘s intent—to impose tax at the highest level possible in the supply chain. For importation activities, this would be
B. The Yakama Nation‘s treaty right to travel applies to trade only when it cannot be meaningfully separated from travel, not when travel is merely necessary for trade
Both Smiskin and King Mountain provide that a treaty right to travel applies to trade only when Washington law imposes a limitation on travel and trade, and the two cannot be meaningfully separated. United States v. Smiskin, 487 F.3d 1260, 1266 (9th Cir. 2007); King Mountain Tobacco Co. v. McKenna, 768 F.3d 989, 997-98 (9th Cir. 2014). Such is not the case with Washington‘s fuel excise tax. The majority fails to see this distinction and, instead, concludes that Cougar Den‘s trading activity is exempt from Washington‘s fuel excise tax merely because travel is necessary for trade. But neither Smiskin nor King Mountain held this to be a relevant consideration.
At issue in Smiskin was the application of the contraband cigarette trafficking act (CCTA),
In ruling for Smiskin, the United States Court of Appeals for the Ninth Circuit held that his treaty right to travel preempted Washington‘s transportation notice requirement because the right includes the right to “‘transport goods to market’ for ‘trade and other purposes‘” and the notice requirement burdened such transport. Smiskin, 487 F.3d at 1266 (quoting Cree v. Flores, 157 F.3d 762, 769 (9th Cir. 1998)). The court noted that when “the right to travel overlaps with the right to tradе ... such that excluding commercial exchanges ... would effectively abrogate our [prior decisions] and render the Right to Travel provision truly impotent,” it should not “draw what would amount to an arbitrary line between travel and trade.” Id. at 1266-67. But Smiskin does not stand for the proposition the majority asserts—the Yakama Nation‘s treaty right to travel is a de facto right to trade simply because travel is necessary for trade. Indeed, a reading of King Mountain confirms the opposite to be true. 768 F.3d at 989. Travel was necessary for the trade at issue in King Mountain, yet the Ninth Circuit found the state obligation burdened only trade,
The state obligation in King Mountain arose from a Washington statute requiring tobacco product manufacturers to place into escrow funds to reimburse Washington for health care costs associated with the tobacco products they sold to Washington consumers. Id. at 991-92;
Cougar Den and amicus make similar arguments as King Mountain attempted to make—the treaty applies equally to tradе and travel. Resp‘t‘s Br. at 24-26; Amicus Curiae Br. of Yakama Nation at 12-13; see King Mountain, 768 F.3d at 992 (King Mountain asserts treaty right applies to “state economic regulation“). But this is not
The escrow payment in King Mountain had nothing to do with travel, other than to impose a financial burden on the products King Mountain sought to bring to market in Washington.10 Id. at 991; see
Without travel, most goods have no market. But as King Mountain demonstrates, necessity of transport, without an inextricable link between travel and trade, is not sufficient for preemption. 768 F.3d at 997-98. The necessity to bring its burdened goods to market did not entitle King Mountain to an exemption on its escrow obligation. Nor should Cougar Den be entitled to such an exemption.
C. The implications of the majority‘s holding extend beyond this tax regime
The majority is too quick to dismiss the “‘parade of horribles‘” the State claims could arise from the majority‘s ruling. Majority at 16. True, felons will not avoid firearm possession charges as a result of this holding, even if they are Yakama Nation members traveling on public highways. Nor would Washington be precluded from regulating the transportation of restricted goods by tribal members. The regulatory exception covers such instances. Smiskin, 487 F.3d at 1271.
Ours is a case in point. Cougar Den delivers almost all of its fuel to retail gas stations in Washington. Those gas stations, in turn, sell not just to tribal members, but the general public.12 Cougar Den seeks an exemption from Washington‘s fuel
For the reasons stated above, I dissent. The Yakama Nation‘s treaty right to travel on public highways does not preclude taxation of Cougar Den‘s off-reservation fuel distribution activities pursuant to former chapters
Fairhurst, C.J.
Wiggins, J.