May 13, 2020

Washington State Department of Licensing v. Cougar Den, Inc.

INDIAN LAW

The Right to Travel to Bring Goods to Market: Treaty Interpretation in the 21st Century

CASE AT A GLANCE

This case examines whether the Yakama Treaty of 1855 allows Yakama tribal members and Yakama tribal businesses to be exempt from state-imposed taxes on the importation of motor vehicle fuel, where the conduct in question (1) occurs on land ceded by the Yakama Nation in the 1855 Yakama Treaty; (2) is performed by a tribal entity acting as agent for the Yakama Nation tribal government; (3) is performed in order to bring fuel to the Yakama Reservation; and (4) occurs along traditional trading routes used by tribal ancestors.

Docket No. 16-1498
Argument Date: October 30, 2018
From: The Supreme Court of Washington
by Amy Kullenberg
Ann Arbor, MI

ISSUE 

Does the Yakama Treaty of 1855 provide a right for tribal members and entities to avoid state taxes on off-reservation commercial activities that make use of public highways? 

FACTS 

Petitioner is the Washington State Department of Licensing. Respondent is Cougar Den, Inc., a corporation formed under the laws of the Confederated Tribes and Bands of the Yakama Nation (Yakama Nation), a federally recognized Indian tribe. Cougar Den’s owner and agent, Kip Ramsey III, is an enrolled member of the Yakama Nation. 

The Yakama Nation is presently situated on a reservation inside the boundaries of what is now recognized as the state of Washington. The Yakama Reservation was created by the Yakama Treaty of 1855 (Treaty) and is surrounded by what once was the ancestral territory of the Yakama people, approximately 12 million acres of land which was ceded to the U.S. government in the Treaty. The Yakama Reservation is nearly equidistant from Seattle, Washington (about 200 miles to the northwest), and Portland, Oregon (about 200 miles to the southwest). From the reservation, Portland can be reached via US-97 (running north-south) and I-84 (running east-west). Most of this distance is covered by I-84, with the US-97 portion composing about 27 miles. US-97 provides entry into, and runs through, the Yakama Reservation. 

In March 2013, Cougar Den began bringing motor vehicle fuel from Oregon to the Yakama Reservation, where it was sold at tribal gas stations. Cougar Den used the US-97 route for this transport. Cougar Den had obtained an import license from the Yakama Nation and was paying applicable federal and tribal taxes on the fuel sales. Cougar Den had not obtained an import license from the state of Washington, nor had it remitted any taxes on its imported fuel. In December 2013, petitioner issued an assessment against Cougar Den for approximately $3.6 million, pursuant to chapters 82.36 and 82.38 of the Revised Code of Washington (RCW), alleging that Cougar Den had failed to pay a mandatory state excise tax on fuel imported into Washington. Cougar Den challenged this assessment, and the matter went before a Departmental Administrative Law Judge (ALJ), who ruled in favor of Cougar Den, finding that the state tax assessment constituted an impermissible restriction under the Yakama Treaty of 1855. 

The department’s director issued an order reversing the ALJ, finding that the Treaty did not preempt the state from assessing taxes, license requirements, and penalties against Cougar Den. The case was then brought to the Yakima County Superior Court, which (sitting in an appellate capacity) reversed the director’s order. Petitioner then appealed to the Washington Supreme Court, which granted direct review. 

The Washington Supreme Court opinion was filed on March 16, 2017, holding that, absent express federal law to the contrary, Indian citizens are generally subject to state laws when engaging in activity outside of a reservation; a treaty qualifies as express federal law; and treaties with Indians must be interpreted as Indians would have understood them, with ambiguities to be resolved in the Indians’ favor. The state court found that the Yakama Treaty of 1855 guaranteed that Yakama tribal members would retain the right to travel outside reservation boundaries and to trade their goods, without conditions or restrictions imposed by the state.

Petitioner promptly filed a petition for writ of certiorari, which was granted on June 25, 2018.

CASE ANALYSIS

This case concerns the interpretation of a federal treaty to determine whether state tax laws apply to a tribal member’s off-reservation activity. 

The state laws in question are contained in Revised Code of Washington chapters 82.36 and 82.38, which together require fuel suppliers and distributors to acquire a state license, and to pay an excise tax, for motor vehicle fuel distributed within or imported into the state of Washington.

The federal treaty provisions at play are found in Article III of the Yakama Treaty of 1855:

And provided that, if 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.

The exclusive right of taking fish in all the streams, where running through or bordering said reservation, is further secured to said confederated tribes and bands of Indians, as also the right of taking fish at all usual and accustomed places, in common with citizens of the Territory, and of erecting temporary buildings for curing them; together with the privilege of hunting, gathering roots and berries, and pasturing their horses and cattle upon open and unclaimed land. 

Petitioner contends that because Cougar Den travels to Oregon to acquire its fuel, and then brings this fuel across state lines into Washington, Cougar Den is clearly an importer of fuel and therefore subject to the licensing and tax requirements of RCW 82.36 and 82.38. Respondent acknowledges that it acquires the fuel in Oregon, but denies that it imports the fuel into Washington; asserting instead that it imports this fuel into the Yakama Nation, using a 27-mile route through Yakama ceded land, which was historically a Yakama trade route. Cougar Den invokes Article III of the Yakama Treaty of 1855 to assert that this conveyance of fuel is a protected tribal activity which is immune from state interference.

Petitioner denies that Cougar Den is exempt from Washington State law, because (1) Cougar Den possesses and carries the fuel on off-reservation, state land; (2) Washington’s fuel tax attaches to the first possession of fuel, which occurs within the state of Washington; (3) tribal members are subject to state laws governing activity that occurs off-reservation, absent express federal law to the contrary; and (4) the Treaty merely protects a tribal member’s right to travel in common with others upon public roads, but does not protect the right to engage in unregulated trade or commerce.

The parties are divided on two key points of law: (1) how the Treaty language should be interpreted and (2) which line of cases provides the proper precedent for resolving the current dispute.

Respondents and its amici invoke canons of construction uniquely applied to the interpretation of federal treaties made with Indian tribes, which require that (1) Indian treaties be interpreted as the Indians themselves would have understood them in the historical and social context in which they were made; (2) ambiguities be resolved in favor of the Indian signatories; and (3) treaties be interpreted with regard to the federal government’s ongoing fiduciary obligation to tribal nations. 

Respondent and its amici provide extensive briefing on the historical context of the Yakama Treaty of 1855 and assert that, although the treaty does not explicitly mention the word trade, Yakama custom at the time incorporated “travel” and “trade” as inherently connected activities. Therefore, Yakama tribal signatories would have understood the “right of free access” and the “right to travel” as including the right to possess and carry goods to and from markets without conditions or restrictions placed either on the travel or on the goods themselves. Respondent and amici emphasize that the Yakama, in particular, would have found this to be a critical provision, in light of the fact that they had for centuries established sophisticated trade routes through the 90 percent of tribal territory ceded in the Treaty.

Petitioner and its amici disagree with this interpretation and state that the Treaty must be interpreted according to its ordinary meaning, which provides tribal members a right to utilize public highways in the same manner as nontribal citizens do, but does not guarantee them a right to be free from the state’s authority to regulate and tax off-reservation commercial activities.

With regard to controlling precedent, petitioner relies on Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973); Oklahoma Tax Commission v. Chickasaw Nation, 515 U.S. 450 (1005); and King Mountain Tobacco Co. v. McKenna, 768 F. 3d 989 (9th Cir. 2014), cert. denied, 135 S. Ct. 1542 (2015). 

Petitioner cites Mescalero for the proposition that “[o]utside an Indian reservation, Indian citizens are subject to state tax laws, ‘[a]bsent express federal law to the contrary.’” Petitioner acknowledges that a treaty is federal law; however, it denies that the Yakama Treaty of 1855 provides the express statement of exemption that Mescalero requires.

Furthermore, petitioner invokes Oklahoma Tax Commission for the premise that an intent to provide exemptions from state taxes must be “clearly expressed” by the federal sovereign and “unambiguously proved” by the party seeking exemption. Petitioner argues that Cougar Den does not meet this burden, because the express language of the Treaty cannot be construed to have contemplated a future tax on goods, simply because these goods were transported by highway. 

Petitioner invokes King Mountain Tobacco because it also involved a Yakama-owned tribal business. In King Mountain, the Ninth Circuit considered whether the Treaty preempted a state escrow fee implemented to fund public health initiatives to address the deleterious effects of cigarette smoking. The court highlighted the regulatory purpose of the escrow fee and noted that King Mountain was a Yakama-owned tobacco manufacturer engaged in extensive interstate trade as part of its manufacturing process. The court held that the “right to travel” provision did not preempt application of the Washington escrow statute to King Mountain. Petitioner cites King Mountain for the proposition that, while the Treaty protects a tribal member’s right to travel, it does not, and cannot, provide an unfettered right to trade, where that trade occurs off-reservation and on land subject to the state’s legitimate regulatory and taxing authority. 

Petitioner argues that its fuel tax laws are nondiscriminatory in purpose and implementation, serve the legitimate state interest of raising revenue to support public infrastructure, do not interfere with respondent’s right to travel, and are an allowable tax on goods that respondent voluntarily possesses off-reservation within the state of Washington. Petitioner and its amici urge the Court to reinforce bright-line rules, which make clear that states have the authority to regulate and tax commercial activity that takes place off-reservation, absent express federal statements providing for preemption.

Respondent distinguishes King Mountain on the basis that the escrow tax there was based on the sale of cigarettes and was not inextricably related to the transportation of the cigarettes. Respondent acknowledges that, under Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95 (2005), the Ninth Circuit’s decision in King Mountain was correct and that the “right to travel” Treaty provision was not implicated. By contrast, respondent argues that the fuel tax at issue in Cougar Den is inherently associated with a tribal agent’s travel for the purpose of bringing the fuel to the reservation for use by tribal members. Therefore, this is activity that tribal signatories would have understood to be protected by the Treaty’s “right to travel” provisions.

Respondent and its amici rely primarily on Tulee v. Washington, 315 U.S. 681 (1942); the Cree cases (Cree v. Flores, 157 F. 3d 762 (9th Cir. 1998) and Cree v. Waterbury, 873 F. Supp. 404 (E.D. Wash. 1994)); and 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).

To begin with, respondent and its amici state that the extensive findings of fact made by the district court in Yakama Indian Nation are conclusive with respect to the historical context of the Yakama Treaty of 1855 and, particularly, with respect to the manner in which the Yakama signatories would have understood the Treaty provisions at the time when they were endorsed. Respondent argues that petitioner is, as a matter of law, estopped from challenging these findings and that these findings must be afforded deference in interpreting the Treaty in the current dispute. Respondent highlights this point, in part, because the litigation in Yakama Indian Nation also involved the Treaty’s right-to-travel provision and also involved tribal member Kip Ramsey, who is the owner and operator of Cougar Den. This argument is strongly corroborated by amicus briefing offered by the Yakama Nation itself, as well as by the National Congress of American Indians, the Nez Perce Tribe, and the Confederated Salish and Kootenai Tribes (CSKT). 

Secondly, respondent acknowledges that, while the Court has never yet construed the Treaty’s right-to-travel provision, the Court has interpreted similar language, the right-to-fish provision, which follows immediately after the right-to-travel provision in Article III of the Treaty (see the statute text above). 

In Tulee, the Court held that the right-to-fish provision bars the state from charging the Yakama “for exercising the very right their ancestors intended to reserve” and therefore prohibited the state from imposing a fishing-license fee on Yakama fishermen. Respondent argues that by bringing fuel from Oregon onto the Yakama Reservation for use by tribal members, over a 27-mile stretch of road that lies in territory ceded by the Yakama to the state of Washington and adjacent to the current reservation, Cougar Den is engaging in a Treaty-protected activity and is therefore exempt from the state’s tax and licensing requirements. 

Respondent further emphasizes that the Yakama Nation identified Cougar Den as its sole agent “for the purpose of obtaining petroleum products for sale and delivery to its members” and that, therefore, under Washington’s own statute, the Yakama Nation is the actual “importer” of fuel and, as such, cannot be taxed or regulated by the state in its capacity as independent sovereign.

Respondent argues that the Treaty contains four bedrock propositions that should be affirmed by the Court: (1) the Treaty protects the right to transport goods for purposes of trade; (2) the Treaty secures preexisting rights, including the right to be free from fees and taxes arising from treaty-protected travel; (3) the Treaty applies even to nondiscriminatory fees and taxes; and (4) the Treaty preempts taxes and fees, but does not preempt certain regulatory provisions. Respondent states that these four concepts represent what the Yakama people would have understood they were securing in exchange for what they were ceding at the time the Treaty was negotiated.

Respondent acknowledges that the subject of taxes is not addressed in the language of the Treaty. However, respondent states this is not unusual, as many state taxing authorities did not yet exist when treaties were negotiated. However, respondent explains, the creation of reservations by treaties has itself been held to implicitly bar a state from taxing reservation lands. McClanahan v. Tax Commission of Arizona, 411 U.S. 164 (1973). Therefore, respondent argues, even though taxes are not explicitly mentioned in these treaties, the right to be exempt from certain taxes is a right that a Treaty may nonetheless confer.

Finally, respondent addresses petitioner’s concerns about potential negative consequences by distinguishing between a state’s authority to engage in bona fide regulatory measures—to protect and preserve the public health and welfare, for example—and the state’s authority to assess taxes for the purpose of raising revenue. Respondent states that the former will not be prohibited, but the latter will, when and where it interferes with the exercise of Treaty-protected rights. Amicus Yakama Nation itself states:

[T]he 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. [T]he Yakama Nation and its members share the interest all citizens have in public health, public safety, conservation and equitable exploitation of natural resources, and adequate public infrastructure. 

Furthermore, respondent argues that the impact of affirming the Washington State Supreme Court decision will not be as far-reaching as petitioner contends. Respondent notes the right-to-travel provision at play here appears in only three treaties and applies to tribes which are primarily located in the northwestern portion of the United States. 

SIGNIFICANCE

The outcome of this case has potential significance in several realms: practical, legal, historical, and political. Petitioner and its amici warn that if the Washington State Supreme Court’s decision is affirmed, states will lose their ability to create and implement taxing regimes, with a disastrous resulting loss of revenue for public infrastructure. They also caution that tribal businesses would be unfairly advantaged in the marketplace, causing an unhealthy disruption in commerce throughout the country. Finally, petitioner and its amici address public health concerns, which are related not to the importation of motor vehicle fuel itself, but rather the potential application of tax-exempt status to tribes trading in cigarettes. On this last point, the petitioner’s amicus group—which includes the American Cancer Society’s Cancer Action Network, the American Heart Association, and the American Lung Association—advances a grim prediction that the benefits of the 1998 Tobacco Master Settlement Agreement would be seriously undermined. Amici warn states may lose settlement proceeds and smoking rates could increase.

Respondent and its amici address the legal and historical implications: whether the Court will uphold or revise canons of construction historically applied to Indian tribes, and whether a tribe’s assessment of its own participation in Treaty negotiations will inform Treaty interpretations going forward. In the larger context, respondent urges fidelity to Treaty expectations even as tribal commercial activities become more modern, complex, and global. 

Finally, from a political perspective, this case is interesting merely from the standpoint of timing. Supreme Court Justice Brett Kavanaugh was confirmed and sworn in on October 6, 2018, to assume the seat vacated by retired Justice Anthony Kennedy. Oral argument in this case will be held on October 30, 2018. Justice Kavanaugh will have had a mere 24 calendar days to prepare, and his prior record on Indian law cases is not entirely conclusive. Although Senator Tom Udall, vice chairman of the Senate Committee on Indian Affairs, vigorously opposed Justice Kavanaugh’s nomination, his tenure on the D.C. Circuit Court provides scant information regarding his judicial philosophy regarding Indian law matters. Justice Kavanaugh’s participation is therefore likely to garner a great deal of scrutiny, both for Cougar Den and for other cases brought on in the first portion of the October 2018 term.

CONCLUSION

The Yakama Treaty was signed in 1855: 163 years ago, and 34 years before Washington was admitted to the Union as the 42nd state. Daily life has changed a great deal since then. The advent of the train, the automobile, the plane, the television, the computer, the Internet, and the smartphone have created new platforms for tribal engagement across personal, commercial, and public realms. State governance has expanded. Tribal businesses are exploring new arenas. The intersection of tribal-state-federal sovereignty is growing more complex as tribes recalibrate their tribal activities to comport with the demands of the 21st century. The challenge in this particular case is to identify the authentic expectations of the Treaty’s signatories and to apply those expectations to parties who now inhabit a very different world.




Amy Kullenberg is an attorney practicing in southeastern Michigan, with expertise in family, criminal, environmental, and Indian law. She can be reached at kullenberga@gmail.com. 

PREVIEW of United States Supreme Court Cases 46, no. 2 (October 29, 2018): 10–13. © 2018 American Bar Association 

ATTORNEYS FOR THE PARTIES

  • For Petitioner Washington State Department of Licensing (Noah Guzzo Purcell, 360.753.2536)

  • For Respondent Cougar Den, Inc. (Adam G. Unikowsky, 202.639.6041)

AMICUS BRIEFS 

In Support of Petitioner Washington State Department of Licensing 

  • Idaho et al. (Steven W. Strack, 208.334.4143)

  • Multistate Tax Commission and Federation of Tax Administrators (Helen Hecht, 202.660.1906)

  • Public Health Organizations (Mark Ely Greenwold, 202.481.9560)

  • United States (Noel J. Francisco, Solicitor General, 202.514.2217)

  • Washington Oil Marketers Association and the Washington Association of Neighborhood Stores (Philip Albert Talmadge, 206.574.6661)

In Support of Respondent Cougar Den, Inc.

  • Confederated Tribes and Band of the Yakama Nation (Ethan Andrew Jones, 509.865.7268)

  • National Congress of American Indians (Virginia Anne Seitz, 202.736.8000)

  • Nez Perce Tribe (David James Cummings, 208.843.7355)

  • Sacred Ground Legal Services (Jack Warren Fiander, 509.961.0096)