Amicus Curiae Brief — Wash. State Dep't of Licensing v. Cougar Den, Inc., 138 S. Ct. 294 (2017) (No. 16-1498)

No. 16-1498

—e———————————————

In the Supreme Court of the United States

WASHINGTON STATE DEPARTMENT OF LICENSING,

PETITIONER

vz

COUGAR DEN, INC.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE WASHINGTON SUPREME COURT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

EDWIN S. KNEEDLER

Deputy Solicitor

ANN O'CONNELL

Assistant to the Solicitor

General

ELIZABETH ANN PETERSON

RACHEL HERON

spaement yoy

promt C. 20530-0001

gov

(202) 514-2217

QUESTION PRESENTED

Article III of the Treaty of June 9, 1855, between the

United States and the Yakama Nation of Indians, 12 Stat.

952-953, secures to the Yakamas the “right, in common

with citizens of the United States, to travel upon all pub-

lie highways.” The question presented is:

Whether Article III precludes application to Yakama

tribal members of a tax imposed by the State of Wash-

ington on fuel purchased out-of-state and imported into

Washington, as part of a comprehensive state scheme

that also imposes the tax on fuel removed from an in-

state terminal or refinery.

(1D)

TABLE OF CONTENTS

Interest of the United States. ...............ccccccccceeeceneeenes

Statement

Discussion

A. Article III of the 1855 Treaty does not exempt

respondent from paying Washington's motor-fuel

tax

B. The decision below is in significant tension with

decisions of the Ninth Circuit interpreting

Article III of the 1855 Treaty 14

C. This Court’s review is warranted to correct the

TABLE OF AUTHORITIES

‘

/aBe8:

Choctaw Nation v. Oklahoma, 397 U.S. 620 (1970) ......... 6,9

Choctaw Nation of Indians v. United States,

318 U.S. 423 (1943) 9

Cree v. Flores, 157 F 3d 762 (9th Cir. 1998)........ 6, 14, 15, 18

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

989 (9th Cir. 2014), cert. denied, 135 S. Ct. 1542

(2015) 6, 7, 17, 18

Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1978) .......9

Minnesota v. Mille Lacs Band of Chippewa Indians,

526 U.S. 172 (1999) 9, 16

Moe v. Confederated Salish & Kootenai Tribes of the

Flathead Reservaticn, 425 U.S. 463 (1976) -

Okdahoma Taz Comm'n v. Chickasaw Nation,

515 U.S. 450 (1995) . 8, 10, 11

(IIT)

IV

Cases—-Continued: Page

Oregon v. Guzek, 546 U.S. 517 (2006) 2000......ccccccccccccecceceeneees 20

Ramsey v. United States, 302 F 3d 1074

(9th Cir. 2002), cert. denied, 540 U.S. 812 (2008)............. 18

Robinson v. Shell Oil Co., 519 U.S. 387 (1997) .........0c00 12

Squaazin Island Tribe v. Stephens, 400 F'. Supp. 2d

1250 (WD. Wath. 2008) .........ccccccccecseesenenesnerenennnennnnene 3, 11

Tulee v. Washington, 315 U.S. 681 (1942)... 1,9

United States v. Smiskin, 487 F 3d 1260

(9th Cir. 2007) passim

United States v. Winans, 198 U.S. 371 (1905) 9

Utility Air Reg. Grp. v. EP A, 1348. Ct. 2427 (2014) ........ 12

Wagnon v. Prairie Band Potawatomi Nation,

546 U.S. 965 (2005) 4,9, 11

Washington v. Confederated Tribes of the Colville

Reservation, 447 U.S. 134 (1980) » OF

Yakama Indian Nation v. Flores, 955 F . Supp. 1229

(E.D. Wash. 1997), aff’d sub nom. Cree v. Flores,

157 F.3d 762 (9th Cir. 1998) ........cccccceccereereeenees 2, 14, 15, 16

Treaties and statutes:

Treaty of June 9, 1855, between the United States

and the Yakama Nation of Indians, art. III,

12 Stat. 962-953 passim

Treaty of June 11, 1855, between the United States

and the Nez Pereé Indians, art. 111, 12 Stat. 958............ 21

Treaty of July 16, 1855, between the United States

and the Flathead, Kootenay, and Upper Pend

d’ Oreilles Indians, art. ITI, 12 Stat. 976 .............0ccccce 21

Contraband Cigarette Trafficking Act,

BD CR, Tp rcecnnnssesscsessrsnsesveseemessersenscsesssesnevssrenseee 15, 16

Statutes—Continued: Page

Wash. Rev. Code Ann.:

(West 2012):

GSI nccenssocnsiscenssenscansneseansenseteensesnenvunnenninnis 10

TIT cicrsinsnessensenssnsnscesnsnsmnsssepeininessecinens 10

§ 82.36.010010) 7 10

§ 82.36.010(12)... 2

§ 82.36.010(16) 4

OF etedeccescceseccresserecsceessneseesnesecen 2,3

PE ncosuninscccccnssenesenssccsessennesanesnmmnnenses 10, 18

§ 82.36.020(2)(a)-(b) 3

§ 82.36.020(2)(a)-(c) 10, 12

§ 82.36.020(2)(c) 3, 10

Tn 4, 13, 19, 20

Se ctrtetentimnestmmenemenntennns 10

(West 2008):

Ee 10

§ 82.38.020(5) 10

§ 82.38.020(12) 2, 10

§ 82.38.0380 - 2, 3, 10

§ 82.38.080(7) 3, 10, 12

§ 82.38.080(7)(c) 3, 10

§ 82.38.0381 ens 4, 13, 19, 20

In the Supreme Court of the Anited States

No. 16-1498

WASHINGTON STATE DEPARTMENT OF LICENSING,

PETITIONER

v.

COUGAR DEN, INC.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE WASHINGTON SUPREME COURT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

INTEREST OF THE UNITED STATES

This brief is submitted in response to the Court’s or-

der inviting the Solicitor General to express the views

of the United States. In the view of the United States,

the petition for a writ of certiorari should be granted.

STATEMENT

1. In the mid-nineteenth century, the United States

entered into a series of treaties with Indian tribes in

what is now the State of Washington. Tulee v. Wash-

ington, 315 U.S. 681, 682-683 (1942). A group of Indians

now known as the Yakama Indian Nation (the Tribe)

agreed in one of those treaties to cede vast tracts of land

within that territory to the United States, reserving for

itself a much smaller reservation. /bid. One of the

United States’ major aims in entering into the treaty

was to enable the construction of public highways and

railroads in the region, including through the Tribe’s

(1)

2

reservation. Yakama Indian Nation v. Flores, 955

F. Supp. 1229, 1240-1241 (E.D. Wash. 1997), aff'd sub

nom. Cree v. Flores, 157 F.3d 762 (9th Cir. 1998). To

secure from the Tribe the concession that roads could

be built through the reservation, the United States

made certain representations regarding the Tribe’s ac-

cess to and use of public roads. Specifically, Article III of

the Treaty provides:

[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 of June 9, 1855, between the United States and

the Yakama Nation of Indians (1855 Treaty), art. III,

12 Stat. 952-953.

2. a. The Washington state law at issue imposes a

per-gallon motor-fuel tax on “licensees,” a category of

persons that includes suppliers, exporters, blenders,

distributors, and—as relevant here—importers of motor-

vehicle fuel. Wash. Rev. Code Ann. §§ 82.36.010(12),

82.36.020 (West 2012), 82.38.020(12), 82.38.030 (West

2008).' The tax applies both to fuel originating in the

State (for example, when a tanker truck is filled with

fuel from a refinery or bulk storage facility) and to fuel

brought into the State after being removed from a re-

finery or bulk storage facility outside of Washington.

For fuel removed from an in-state refinery or terminal,

' Citations are to the 2008 and 2012 Revised Code of Washington

Annotated, which was in effect when the relevant conduct took

place. The State has recodified the cited provisions without sub-

stantive change. See Pet. 4 n.1; Br. in Opp. 7 n.3.

3

the State imposes the tax at the time of removal (with cer-

tain exceptions not relevant here). Jd. §§ 82.36.020(2)(a)}(b)

(West 2012), 82.38.030(7) (West 2008). For fuel that “en-

ters into” Washington from another State, the tax is im-

posed upon entry. /d. §§ 82.36.020(2)(c) (West 2012),

82.38.030(7)(c) (West 2008). Those who bring wholesale

fuel into the State via the highways must pay the same

per-gallon tax as those who bring fuel into the stream

of commerce through other means. /d. §§ 82.36.020

(West 2012), 82.38.030 (West 2008).

b. Before the current motor-fuel tax was enacted, a

federal court had determined that a previous version of

the tax placed the incidence of the tax on fuel retailers

(ie., gas stations). See Squaxin Island Tribe v. Ste-

phens, 400 F. Supp. 2d 1250, 1262 (W.D. Wash. 2005).

That court had therefore held that the previous fuel-tax

regime, as it pertained to Indian retailers operating on

Indian lands, ran afoul of the rule that States generally

may not tax Indian activities in Indian country absent

congressional authorization. /d. at 1261-1262; see Ok-

lahoma Tax Comm’n v. Chickasaw Nation, 515 U.S.

450, 458-459 (1995); Moe v. Confederated Salish & Koo-

tenai Tribes of the Flathead Reservation, 425 U.S. 463,

475-480 (1976).

In Chickasaw Nation, this Court held that a State

could not apply its motor-fuel tax to fuel sold by a tribe

to non-Indians in Indian country, but it noted that “if a

State is unable to enforce a tax because the legal inci-

dence of the impost is on Indians or Indian tribes, the

State generally is free to amend its law to shift the tax’s

legal incidence.” 515 U.S. at 460. Following that guid-

ance, the Washington Legislature moved the incidence

of its motor-fuel tax up the supply chain to entities that

supply fuel to retailers, imposing the tax before the fuel

4

arrives on Indian reservations. See Pet. 5-6; see also

Wagnon v. Prairie Band Potawatomi Nation, 546 U.S.

95, 99, 115 (2005) (holding that Chickasaw Nation’s bar

on imposing state excise tax on a tribe or tribal mem-

bers for sales in Indian country did not apply to a state

tax imposed on the off-reservation receipt of fuel by a

non-Indian distributor who subsequently delivered the

fuel to a tribally owned gas station on the reservation).

The Washington Legislature’s intent and purpose set

forth in the statute is to impose a per-gallon tax on mo-

tor fuel “at the time and place of the first taxable event

and upon the first taxable person within thie] state.”

Wash. Rev. Code Ann. §§ 82.36.022 (West 2012), 82.38.03 1

(West 2008).

3. Respondent, Cougar Den, Inc., is a business in-

corporated under Yakama Nation law. Its owner and

president is an enrolled member of the Tribe. Pet. App.

2a. Beginning in 2013, respondent used public highways

to transport fuel from Oregon to the Tribe’s reservation

in Washington. /bid. Respondent contracted with a

trucking company, KAG West, to have the fuel trans-

ported over the Oregon-Washington border. [bid.* Re-

spondent sold more than 90% of its fuel to Yakama-

owned retail gas stations on the Tribe’s reservation,

which in turn sold the fuel to customers. /d. at 50a-5la.

Respondent did not obtain a fuel-importer license or

pay the Washington motor-fuel tax when either it or

KAG West brought fuel into Washington. /d. at 2a. In

December 2013, petitioner, the Washington State De-

* Under the Washington statute, where an entity importing fuel

into the State is acting as an agent, “the person for whom the agent

is acting is the importer.” Wash. Rev. Code Ann. § 82.36.010(16)

(West 2012).

5

partment of Licensing (the Department), issued an as-

sessment against respondent, demanding payment of

$3.6 million in unpaid taxes, penalties, and licensing

fees. Ibid.

Respondent appealed the assessment to an adminis-

trative law judge in the Department, who held that the

assessment violated Article III of the 1855 Treaty,

which secures to the Yakamas the “right, in common

with citizens of the United States, to travel upon all pub-

lie highways.” 12 Stat. 952-953; see Pet. App. 2a-3a.

The Department’s director overturned the administra-

tive law judge’s order. Pet. App. 44a-61a. The director

reasoned that Article III did not exempt respondent

from paying the state motor-fuel tax because respond-

ent “is not being taxed for using public highways”; ra-

ther, respondent “is being taxed for importing fuel.” /d.

at 58a. The director concluded that respondent “needs

a Washington fuel importer license to bring fuel into

this state.” Jbid.

4. Respondent petitioned for review in Yakima

County Superior Court, and the Superior Court set

aside the director’s order. Pet. App. 30a-43a. The court

concluded that respondent’s transport of fuel into

Washington “falls within its [rlight to [t]ravel” under

the 1855 Treaty, and that because the Washington tax

“places a restriction on the [rjight to [t]ravel,” the

“taxes, penalties, interest, and licensing requirements”

imposed by the state law “are preempted and barred by

the Treaty.” /d. at 34a.

5. The Washington Supreme Court granted direct

review and affirmed. Pet. App. la-29a.

a. The Washington Supreme Court rejected peti-

tioner’s contention that Article III of the 1855 Treaty

permits the State to restrict or regulate a specific good

6

that is incidentally brought over a highway. Pet. App.

6a. The court reasoned that petitioner’s interpretation

of Article III “ignores the historical significance of

travel to the Yakama Indians” and the established rule

of treaty interpretation that “Indian treaties must be

interpreted as the Indians would have understood

them.” /d. at 5a-6a (citing Choctaw Nation v. Okla-

homa, 397 U.S. 620, 630-631 (1970)).

The Washington Supreme Court observed that when

the Treaty was signed, the Tribe “exercised free and

open access to transport goods as a central part of a

trading network running from the western coastal

tribes to the eastern plains tribes,” and it concluded

that the Treaty was intended to preserve the Tribe’s

ability to travel on the public highways to engage in

trade. Pet. App. 7a-8a. The court found support for its

conclusion in cases in which the Ninth Circuit had held

that a Washington law imposing license and overweight-

permit fees on persons who hauled logs from the Tribe’s

reservation to off-reservation mills (see Cree, supra),

and a Washington law that required individuals other

than licensed wholesalers to give notice to the state liq-

uor control board before transporting “unstamped” cig-

arettes within the State (see United States v. Smiskin,

487 F.3d 1260, 1264 (9th Cir. 2007)), could not be en-

forced against members of the Tribe. Pet. App. 9a-11a.

The Washington Supreme Court distinguished the

Ninth Circuit’s decision in King Mountain Tobacco Co.

v. McKenna, 768 F.3d 989 (2014), cert. denied, 135 S. Ct.

1542 (2015), in which a business owned by an enrolled

member of the Tribe claimed an exemption based on Ar-

ticle III of the 1855 Treaty from a Washington statute

that required the business to place money into escrow

to reimburse the State for health care costs related to

7

the use of tobacco products. Pet. App. 12a-13a. In King

Mountain, the Ninth Circuit concluded that the busi-

ness was not exempt from making the escrow payments

because the Treaty reserved to the Tribe the right “to

travel upon all public highways,” not the “right to

trade.” 768 F.3d 997-998. According to the Washington

Supreme Court, King Mountain stands for the propo-

sition that “|wlhere trade does not involve travel on

public highways, the right to travel provision in the

treaty is not implicated.” Pet. App. 13a. But here, the

court concluded, “travel on public highways is directly

at issue because the tax was an importation tax,” and it

“was impossible for [respondent] to import fuel without

using the highway.” /d. at 13a-14a; see id. at 16a.

b. Chief Justice Fairhurst dissented. Pet. App. 17a-

29a. She explained that the Tribe’s “right to travel”

protected by the treaty “is not a right to trade,” and the

motor-fuel tax could therefore be applied to members of

the Tribe because the tax “burdens trade[,|] *** not

fuel transport.” /d. at 17a. In her view, the Legisla-

ture’s clear intent was “to levy an excise tax on the first

instance of wholesale possession of fuel not distributed

through a refinery or importation terminal within the

state,” and that “[w]hether that fuel is then brought to

market within Washington is not necessary or relevant

for purposes of assessing tax due.” /d. at 18a-19a.

Chief Justice Fairhurst further concluded that the

treaty right “applies to trade only if inextricably linked

to travel,” which is not true of the Washington fuel tax.

Pet. App. 25a; see id. at 23a. She explained that in King

Mountain, the escrow payments required by state law

“had nothing to do with travel, other than to impose a

financial burden on the products King Mountain sought

8

to bring to market in Washington.” /d. at 26a. “Simi-

larly,” she continued, “Washington’s fuel excise tax on

importers, imposed on the first incidence of wholesale

possession of fuel within Washington, has nothing to do

with travel, other than to impose a financial burden on

the products fuel importers seek to bring to market in

Washington.” /bid. She acknowledged that in King

Mountain and in this case, “travel is necessary for

trade” and that “[wljithout travel, most goods have no

market.” /bid. But she concluded that “necessity of

transport, without an inextricable link between travel

and trade, is not sufficient for preemption.” /bid.

DISCUSSION

The Washington Supreme Court erred in concluding

that Article III of the 1855 Treaty exempted respond-

ent from paying Washington’s motor-fuel tax. The

“right, in common with citizens of the United States, to

travel upon all public highways” protected by the 1855

Treaty, 12 Stat. 952-953, is not violated by the tax at is-

sue here, which taxes the introduction of a good into the

state stream of commerce, no matter where the good

originates or how it enters the State. The Washington

Supreme Court’s decision is also in tension with deci-

sions of the Ninth Circuit interpreting the same treaty

provision.

The Washington Supreme Court’s decision will cause

a significant loss of tax revenue for the State, and it is

not immediately clear under that court’s interpretation

that the Washington Legislature could revise the stat-

ute in a way that would enable the State to collect an

excise tax on motor fuel imported into Washington from

another State before it arrives at the Tribe’s reserva-

tion. And in light of long-running disputes about the

scope of Article III of the 1855 Treaty, review by this

9

Court could also serve to bring needed clarity to the

meaning of Article I11. This Court’s review is therefore

warranted to correct the state court’s error.

A. Article U1 Of The 1855 Treaty Does Not Exempt

Respondent From Paying Washington’s Motor-Fuel Tax

1. “Absent express federal law to the contrary, Indi-

ans going beyond reservation boundaries have gener-

ally been held subject to nondiscriminatory state law.”

Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148-149

(1973). The legal incidence of Washington’s motor-fuel

tax occurs when wholesale fuel is brought into the

stream of commerce in Washington, which occurs out-

side of the Tribe’s reservation. See Wagnon v. Prairie

Band Potawatomi Nation, 546 U.S. 95, 99 (2005). Ac-

cordingly, respondent is subject to the tax unless Arti-

cle [Ll of the 1855 Treaty exempts members of the Tribe

from complying with the state law.

In determining the scope of an Indian treaty right,

courts must construe the treaty “as the Indians would

naturally have understood it at the time of the treaty,”

United States v. Smiskin, 487 F.3d 1260, 1264 (9th Cir.

2007), looking “beyond the written words to the larger

context that frames the [t}reaty, including ‘the history

of the treaty, the negotiations, and the practical con-

struction adopted by the parties.’” Minnesota v. Mille

Lacs Band of Chippewa Indians, 526 U.S. 172, 196

(1999) (quoting Choctaw Nation of Indians v. United

States, 318 U.S. 423, 432 (1943)); see Tulee v. Washing-

ton, 315 U.S. 681, 684-685 (1942); United States v.

Winans, 198 U.S. 371, 380-381 (1905). “[Djoubtful or

ambiguous expressions” are to be “resolved in the Indi-

ans’ favor.” Smiskin, 487 F.3d at 1264; see Choctaw

Nation v. Oklahoma, 397 U.S. 620, 630-681 (1970).

Courts may not, however, ignore “clear * * * limit{s]”

10

appearing in the treaty. Oklahoma Taz Comm'n v.

Chickasaw Nation, 515 U.S. 450, 466 (1995).

2. Under these principles, respondent is not exempt

from paying Washington’s motor-fuel tax. The tax is

not properly viewed as a violation of respondent's

“right, in common with citizens of the United States, to

travel upon all public highways.” 1855 Treaty, art. III,

12 Stat. 952-953. The incidence of the tax is not on the

use of public highways, and imposition of the tax does

not depend upon a taxpayer's use of the highways. To

the contrary, fuel licensees must pay the tax regardless

of whether they remove the fuel from an in-state termi-

nal or refinery or import fuel into the State—and, if

they import, regardless of what means of transport they

use. Wash. Rev. Code Ann. §§ 82.36.020(2)(a)-(c) (West

2012), 82.38.030(7) (West 2008).* The tax is assessed per

gallon of fuel, at a set rate, without regard to how the

fuel enters the stream of commerce. /d. §§ 82.36.020(1),

82.36.025 (West 2012), 82.38.030 (West 2008). The tax is

thus appropriately viewed as an excise tax on “the first

instance of wholesale possession of fue! within Washing-

ton,” Pet. App. 17a (Fairhurst, C.J., dissenting) (em-

phasis omitted), not as a tax on the use of a public high-

way within the meaning of Article III of the 1855

Treaty. Article III does not exempt goods from taxa-

tion outside the Tribe’s reservation simply because they

are, or could be, transported by highway.

The history of Washington’s motor-fuel tax further

demonstrates that it is designed as an excise tax on the

* The tax does not apply to fuel imported into the State by pipeline

or vessel operated by a “licensee” and bound for a “terminal” or “re-

finery.” Pet. App. 18a (Fairhurst, C.J., dissenting) (citing Wash.

Rev. Code Ann. §§ &2.36.010(3), (4), (10), and &2.36.020(2)(c) (West

2012); id. §§ 82.38.020(4), (5), (12), and &2.38.030(7)(c) (West 2008)).

11

fuel itself, not as a tax on highway travel. As explained

above (pp. 3-4, supra), before the Washington Legisla-

ture enacted the current version of the fuel tax, a fed-

eral court had concluded that a previous iteration of the

tax had placed the incidence of the tax on fuel retailers,

which posed a problem with respect to on-reservation

Indian retailers due to the established rule that States

generally may not tax Indian activities in Indian coun-

try. Squaxin Island Tribe v. Stephens, 400 F. Supp. 2d

1250, 1262 (W.D. Wash. 2005); see Pet. 5; Pet. App.

20a-22a.

In Oklahoma Tax Commission v. Chickasaw Na-

tion, supra, this Court held that although a state cannot

impose a tax on fuel sold by a tribe in Indian country,

“the State generally is free to amend its law to shift the

tax’s legal incidence.” 515 U.S. at 460. Following that

guidance, the Washington Legislature amended the

previous version of the motor-fuel tax by shifting its le-

gal incidence up the supply chain to entities that supply

fuel to retailers before the fuel arrives on an Indian res-

ervation. /bid.; Pet. 5-6. The Washington tax thus op-

erates in the same way as the tax upheld by this Court

in Wagnon, 546 U.S. at 99-100 (upholding Kansas tax

imposed on fuel distributors upon “their initial receipt

of motor fuel,” where the distributors were permitted

but not required to pass the tax down the distribution

chain to retailers). That the State now taxes fuel when

it is first possessed by a distributor in the State—

whether when removed from a refinery or terminal rack

at a bulk storage facility in the State, or brought in from

out of State—thus reflects the State’s effort to ensure

that the incidence of the tax is not on Indian retailers

operating on Indian reservations. It likewise does not

12

reflect an effort to impose any conditions or restrictions

on using public highways.

3. The Washington Supreme Court concluded that

the State motor-fuel tax is a tax on use of the highways

because it “taxes the importation of fuel, which is the

transportation of fuel.” Pet. App. 16a. In reaching that

conclusion, the court focused on the fact that, in re-

spondent’s case, the tax was triggered when respondent

moved fuel across the state line inside a truck’s tank.

See id. at 13a-14a. The court recognized that the tax

would be assessed “regardless of whether [respondent]

uses the highway.” /bid. But the court considered that

feature “immaterial” because “in this case, it was im-

possible for [respondent] to import fuel without using

the highway.” /d. at 14a. That analysis of the state fuel

tax for purposes of Article III of the 1855 Treaty does

not withstand scrutiny.

Characterizing a tax based on only one of the types

of events that trigger it improperly severs that trigger

from the larger statutory context. Cf. Utility Air Reg.

Grp. v. EPA, 1348. Ct. 2427, 2442 (2014) (“| Rjeasonable

statutory interpretation must account for both ‘the spe-

cifie context in which ... language is used’ and ‘the

broader context of the statute as a whole.’”) (quoting

Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)).

Read as a whole, Washington’s motor-fuel tax does not

depend upon use of the highways, even if respondent

happens to be using a highway at the time application

of the tax to respondent is triggered. The regime as a

whole seeks to tax the first wholesale possession of fuel

in the State, regardless of how or where that possession

occurs. Wash. Rev. Code Ann. §§ 82.36.020(2)(a)-(c)

(West 2012), 82.38.030(7) (West 2008). As the statute

itself states, the Legislature’s purpose was to impose

13

the motor-fuel tax “at the time and place of the first tax-

able event and upon the first taxable person within th[e]

state.” Jd. §§ 82.36.022 (West 2012), 82.38.031 (West

2008). And the Washington Supreme Court did not ap-

pear to dispute that the Treaty would not bar applica-

tion of the tax to respondent if it obtained the motor fuel

from a refinery or terminal rack within the State, even

if the fuel was withdrawn from the refinery or terminal

rack into a tanker truck and respondent then used the

truck to transport the fuel over public highways to the

Tribe’s reservation. There is no reason for a different

result if respondent obtains the fuel from a refinery or

terminal rack outside the State and brings it by truck

into the State.

Thus, the fact that first possession for some regu-

lated parties will occur on a highway does not convert

an excise tax into a tax on the use of the highway—or a

burden on the “right, in common with citizens of the

United States, to travel upon all public highways,”

12 Stat. 952-953—any more than a state law banning the

possession of a certain product would be a ban on high-

way travel simply because the ban encompasses the sit-

uation in which the person has brought the product in

from out of state via a highway. In both the hypothet-

ical and the present case, the highway is only relevant

because someone has chosen it as the setting for under-

taking an act (here, possession of wholesale fuel) that is

subject to a general encumbrance, wherever the act

takes place. The Washington Supreme Court therefore

erred in concluding that Article III of the 1855 Treaty

exempts respondent from paying the state motor-fuel tax.

14

B. The Decision Below Is In Significant Tension With

Decisions Of The Ninth Circuit Interpreting Article III

Of The 1855 Treaty

1. The Washington Supreme Court’s decision in this

case is in significant tension with decisions of the Ninth

Circuit—the federal circuit that encompasses the Tribe’s

reservation and ceded lands. The Ninth Circuit has

held that Article III of the 1855 Treaty exempts mem-

bers of the Tribe from complying with state laws that

apply to and burden their right to use the public high-

ways to bring goods to market, but does not secure any

broader right.

a. In Cree v. Flores, 157 F.3d 762 (1998), the Ninth

Circuit considered whether members of the Tribe were

exempt from Washington laws that required registra-

tion and licensing of logging trucks along with payment

of fees according to gross weight, as well as log-tolerance

permits and an associated fee for overweight trucks. /d.

at 765. The Tribe and some of its members brought a

suit for declaratory and injunctive relief after state of-

ficials issued traffic citations to drivers employed by

tribal logging businesses that had refused to obtain the

necessary licenses or permits. Jbid. The Tribe con-

tended that Article III of the 1855 Treaty protected the

right of its members to haul timber from the reservation

to off-reservation markets without restriction and that

the State therefore could not impose licensing fees or

permit requirements on logging trucks owned by the

Tribe or its members. [bid.

To determine how Article [11 would have been un-

derstood by the Indians when the Treaty was adopted,

the district court conducted an extensive factual inquiry

into the Treaty’s history. Yakama Indian Nation v.

Flores, 955 F. Supp. 1229, 1236-1246 (E.D. Wash. 1997),

15

aff’d sub nom. Cree v. Flores, supra. The court deter-

mined that at the time of the Treaty, the tribal members

traveled extensively for the purpose of trade and played

a central role in a trade network stretching from the Pa-

cifie Northwest to the Great Plains. /d. at 1238. Based

on the language of the Treaty, the importance of travel

to the Tribe, and representations made by federal ne-

gotiators, the court held that tribal members would

have understood Article [II to secure a right to use pub-

lic highways without limitations such as fees. /d. at

1246-1249. The district court held, however, that the

Tribe and its members must comply with state registra-

tion requirements for purposes of identification, to the

extent the requirements did not impose a fee or sur-

charge on the treaty right. /d. at 1260.

The Ninth Circuit affirmed, holding that the 1855

Treaty exempted tribal logging companies from compli-

ance with state licensing and permitting requirements,

and payment of associated fees, for trucks hauling logs

on public highways. Cree, 157 F.3d at 769. The court

determined that the 1855 Treaty, read as the Tribe

would have understood it, secured for the Tribe “the

right to transport goods to market over public highways

without payment of fees for that use.” Jbid.

b. The Ninth Circuit again considered the scope of

Article III of the 1855 Treaty in United States v. Smis-

kin, supra. In Smiskin, the United States charged two

Yakama members with violating the federal Contra-

band Cigarette Trafficking Act, 18 U.S.C. 2342(a),

which makes it “unlawful for any person knowingly to

ship, transport, receive, possess, sell, distribute, or pur-

chase contraband cigarettes,” and incorporates state

law to define what is contraband. See 487 F.3d at 1263.

The basis for the prosecution was that the defendants

16

had failed to comply with a Washington state law that

required persons other than licensed wholesalers to

give notice to state officials before transporting “un-

stamped” cigarettes—z.e., cigarettes without either a

“tax paid” or “tax exempt” stamp affixed to the packaging

—within the State. Jbid. The federal Bureau of Alco-

hol, Tobacco and Firearms (ATF) had seized 4205 car-

tons of unstamped cigarettes from one of the defend-

ant’s residences because ATF agents suspected the de-

fendants were transporting unstamped cigarettes from

smoke shops on an Idaho Indian reservation to smoke

shops on various Indian reservations in Washington.

Ibid. The Ninth Circuit held that the defendants’ viola-

tion of Washington’s pre-notification requirement could

not provide a valid basis for a federal prosecution under

Section 2342(a) because applying the requirement to

tribal members violated Article III of the 1855 Treaty.

Id. at 1264.

The Ninth Circuit again took as its interpretive base-

line this Court’s rule that “[t]he text of a treaty must be

construed as the Indians would naturally have under-

stood it at the time of the treaty, with doubtful or am-

biguous expressions resolved in the Indians’ favor.”

Smiskin, 487 F.3d at 1264 (citing Mille Lacs, 526 U.S.

at 196, 200). Based on the history of the Treaty de-

scribed in Yakama Indian Nation, supra, the court of

appeals concluded that the pre-notification requirement

was a restriction and condition on the right to travel

that violated Article III of the 1855 Treaty. Smiskin,

487 F.3d at 1266.

17

The United States continues to believe that Smiskin

was wrongly decided.‘ But in any event, the Ninth Cir-

cuit clarified the limits of its Smiskin decision in King

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

(2014), cert. denied, 135 S. Ct. 1542 (2015).

ce. In King Mountain, the court of appeals held that

Article ILI of the 1855 Treaty did not exempt members

of the Tribe from complying with a state law that required

cigarette companies to place money into an escrow ac-

count for every qualifying unit of tobacco sold subject to

the State’s cigarette tax, in order to reimburse the State

for public-health expenses related to the use of tobacco

products. 768 F.3d at 990-992. The court rejected the

Tribe’s argument that Article III of the 1855 Treaty

“prohibit{s] imposition of economic restrictions or pre-

conditions on the Yakama people’s Treaty right to engage

in the trade of tobacco products.” /d. at 997. The court

explained that while the treaty secures for the Tribe a

“right to travel * ** for the purpose of transporting

goods to market” without state interference, it does not

secure any right to trade beyond the right to transport

* The purpose of Washington’s pre-notification requirement was

to enforce the collection of the State’s tax on cigarettes. Such a tax

may be validly applied to on-reservation sales of cigarettes to non-

Indians, even by a tribe or its members, where the incidence of the

tax is on the non-Indian purchaser. See, eg., Washington v. Con-

federated Tribes of the Colville Reservation, 447 U.S. 134, 154-157

(1980). The pre-notification requirement under Washington law

was not directed to the use of public highways as such; it imposed

only a modest regulatory requirement as part of a comprehensive

cigarette-tax regime. merce earn me sat

not exempt from enforcement of the State’s overall

shaun, Gein & en Cama Ge eames Gas dats Uh of Om OS

Treaty exempted the Tribe from this one feature incidental to trans-

portation.

18

goods on the highways. /d. at 998 (emphasis added).

Unlike the state laws at issue in Cree and Smiskin, the

court reasoned, the escrow requirement did not apply

to the transport of particular goods, but rather required

cigarette companies to place money in escrow for each

unit of tobacco sold. Jd. at 991-992. Therefore, the court

held that Article III did not exempt Yakama members

from complying with the escrow law. /d. at 998.

2. The Washington Supreme Court’s decision is in

considerable tension with those Ninth Circuit cases

evaluating the preemption of state laws.° The state laws

in Cree and Smiskin required the Tribe to comply with

certain requirements in connection with use of the pub-

lie highways to transport its goods for trade. Tribal

members were required to obtain licenses and permits

and to pay fees as a precondition to operating logging

trucks on the highways, see Cree, 157 F.3d at 765, or to

pre-notify state officials when transporting unstamped

cigarettes, see Smiskin, 487 F.3d at 1262. Washing-

ton’s motor-fuel tax, by contrast, is levied on each gallon

of fuel withdrawn from a refinery or terminal rack in

the State or brought into the State, regardless of how

the import occurs. Wash. Rev. Code Ann. § 82.36.020(1)

(West 2012).

®* The Ninth Circuit applies a different framework to determine

whether Article III of the 1855 Treaty creates an exemption from

federal taxes. See Ramsey v. United States, 302 F.3d 1074 (2002),

cert. denied, 540 U.S. 812 (2003). The court stated in Ramsey that

the “applicability of a federal tax to Indians depends on whether ex-

press exemptive language exists within the text of the statute or

treaty.” Id. at 1078 The court concluded that Article III did not

exempt a tribal member who hauled logs on public highways using

diesel trucks from paying federal highway-use and diesel-fuel excise

taxes. Jd. at 1076.

19

That the tax is imposed by reference to the moment

when motor fuel enters the State does not transform the

tax into an impermissible burden on the use of the high-

ways. To the contrary, for fuel that is imported, the tax

is imposed when the fuel enters the state because the

Legislature wanted to make clear that the tax was being

imposed at the first moment of wholesale possession of

motor fuel in Washington, <e., “at the time and place of

the first taxable event and upon the first taxable person

within th[e] state.” Wash. Rev. Code Ann. §§ 82.36.022

(West 2012), 82.38.031 (West 2008). The motor-fuel tax

is a general encumbrance of the same type as the escrow

requirement in King Mountain, which was imposed on

each unit of tobacco sold. The motor-fuel tax “has noth-

ing to do with travel, other than to impose a financial

burden on the products fuel importers seek to bring to

market in Washington.” Pet. App. 26a (Fairhurst, C.J.,

dissenting).

C. This Court’s Review Is Warranted To Correct The

Washington Supreme Court’s Determination That The

1855 Treaty Exempts Respondent From Paying Wash-

ington’s Motor-Fuel Tax

Whether this Court’s review is warranted to correct

the Washington Supreme Court’s erroneous decision is

a close question. On the one hand, both parties accept

the Ninth Circuit’s federal-law framework for evaluat-

ing whether a state law runs afoul of Article III of the

1855 Treaty; they simply disagree about where this par-

ticular Washington state tax falls within that frame-

work. Moreover, as respondent points out (Br. in Opp.

32-34), the Washington Supreme Court’s decision could

be viewed as an erroneous characterization of a state

law by the State’s highest court, which could be left to

20

the State’s political branches to correct and would not

necessarily warrant intervention by this Court.

On the other hand, the Washington Supreme Court

analyzed whether the state tax was a tax on the use of

the highways for the sole purpose of determining

whether the tax was preempted by a federal treaty, and

the court’s holding rests squarely on the federal ques-

tion whether Article III of the 1855 Treaty exempts re-

spondent from paying the state tax. Pet. App. 13a-14a;

ef. Oregon v. Guzek, 546 U.S. 517 (2006) (vacating deci-

sion of the Oregon Supreme Court which had held that

a state limitation on the introduction of evidence in cap-

ital proceedings violated the federal Constitution). And

although respondent and the Tribe contend (Br. in Opp.

35; Tribe’s Amicus Br. 10) that the state legislature is

free to amend its law in response to the Washington Su-

preme Court’s decision, it is not immediately apparent

that the Legislature could amend its law in a manner

that would satisfy the Washington Supreme Court

that the State is taxing the possession—and not the

transportation—of motor fuel. The Legislature already

made clear that it was moving the incidence of the tax

up the supply chain and imposing the tax either when

fuel is removed from an in-state source or when it

is brought over the border. Wash. Rev. Code Ann.

§§ 82.36.022 (West 2012), 82.38.031 (West 2008). If re-

spondent’s possession of fuel that it imports into the

State will always be in a truck on a highway, then it is

unclear whether the Washington Legislature could re-

write the law in a way that would cause the Washington

Supreme Court to reach a different conclusion about

preemption. And there could be a period of considera-

ble uncertainty if it sought to do so. In light of the long-

running disputes concerning invocation of Article III by

21

the Tribe and its members to claim exemptions from

various Washington statutes governing cigarettes and

motor fuels, review by this Court could serve to bring

clarity to these issues.

Furthermore, although the Washington Supreme

Court’s decision involves the applicability of a single

state tax to one tribally owned business, its reasoning

could extend to any tax on the possession of a good that

is imported into Washington by a member of the Tribe.

Moreover, petitioner states (Pet. 29-30) that respondent

has obtained or is seeking fuel exporter licenses in a

number of other States, and the Washington Supreme

Court’s decision could lead to a refusal by respondent to

pay a similar fuel-import tax in States into which it

transported fuel by highway.

Petitioner and its amici further point out (Pet. 30-31;

States’ Amicus Br. 18-19) that the United States en-

tered into treaties with tribes in Idaho and Montana

that contain identically worded right-to-travel provi-

sions. See Treaty of June 11, 1855, between the United

States and the Nez Percé Indians, art. III, 12 Stat. 958;

Treaty of July 16, 1855, between the United States and

the Flathead, Kootenay, and Upper Pend d’Oreilles In-

dians, art. III, 12 Stat. 976. The existence of those other

treaties could counsel in favor of allowing other state

courts to interpret the relevant treaty language before

this Court intervenes. In the meantime, however,

Washington would be unable to collect what it contends

would be a significant amount of tax revenue. Pet. 29-31.

On balance, the United States recommends that the

Court grant review of the Washington Supreme Court’s

errone»%us interpretation and application of Article III

of the 555 Treaty.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

MAY 2018