King Mountain Tobacco Co. v. Alcohol, CV–11–3038–RMP.

Citation996 F.Supp.2d 1061
Decision Date24 January 2014
Docket NumberNo. CV–11–3038–RMP.,CV–11–3038–RMP.
CourtUnited States District Courts. 9th Circuit. Eastern District of Washington
PartiesKING MOUNTAIN TOBACCO COMPANY, INC., et al., Plaintiffs, v. ALCOHOL AND TOBACCO TAX AND TRADE BUREAU, et al., Defendants.

OPINION TEXT STARTS HERE

Randolph H. Barnhouse, Johnson Barnhouse & Keegan LLP, Los Ranchos Albuquerque, NM, Irwin H. Schwartz, Law Offices of Irwin Schwartz, Seattle, WA, John Adams Moore, Jr., Adam Moore Law Firm, Yakima, WA, for Plaintiffs.

W. Carl Hankla, US Department of Justice, Washington, DC, for Defendants.

ORDER GRANTING UNITED STATES' MOTION FOR SUMMARY JUDGMENT

ROSANNA MALOUF PETERSON, Chief Judge.

Before the Court is a motion for summary judgment filed by the United States, ECF No. 134. A similar motion was filed in the related case United States v. King Mountain Tobacco Co., Case No. 12–3089 at ECF No. 48. The Court heard oral argument on the motions in both cases. John Adams Moore, Jr., and Randolph Barnhouse represented the plaintiff, the Confederated Tribes and Bands of the Yakama Indian Nation. W. Carl Hankla, Trial Attorney for the Tax Division of the United States Department of Justice, represented the United States. The Court has reviewed the briefing and all supporting documents presented in this case and in Case No. 12–3089 and is fully informed.

BACKGROUND

The following facts are not in dispute. Plaintiff Confederated Tribes and Bands of the Yakama Nation (“Yakama Nation”) is a federally recognized Indian tribe. ECF No. 141 at 2. King Mountain Tobacco, Inc. (King Mountain) is a corporation organized, existing, and operating under the laws of the Yakama Nation. Id. Delbert Wheeler, Sr., is an enrolled member of the Yakama Nation and is the owner and operator of King Mountain. Id.

King Mountain's manufacturing facilities are located within the boundaries of the Yakama Nation Reservation on property held in trust by the United States for the beneficial use of Mr. Wheeler. ECF No. 141 at 2. King Mountain manufactures cigarettes and roll-your-own tobacco. ECF No. 103 at 2. The parties agree that the tobacco products at issue in this case are manufactured from a blend of tobacco grown on Yakama Nation trust land and tobacco grown elsewhere on non-trust land. ECF No. 141 at 2.

The amount of tobacco used in King Mountain's products is subject to some dispute. At the time that the Court previously entered its Order Denying Plaintiff's Motion for Partial Summary Judgment, uncontroverted evidence established that approximately twenty percent of the tobacco used by King Mountain in its manufactured products was grown on trust land. ECF No. 103 at 9. In responding to the instant motion for summary judgment, Yakama Nation asserts that King Mountain has increased the percentage of tobacco grown on trust land since 2012. ECF No. 141–1 at 3–4. Yakama Nation further asserts that as of the fourth quarter of 2013, fifty-five percent of the tobacco used in King Mountain's manufactured products is grown exclusively on trust land. Id.

Yakama Nation additionally asserts that King Mountain now produces “traditional use tobacco” that is “intended for Indian traditional and ceremonial use and [ ] consists entirely of (100 percent) tobacco grown exclusively on [trust land].” ECF No. 141–1 at 4. According to Yakama Nation, six shipments of King Mountain's “traditional use tobacco” have been subject to federal excise taxes since 2012. Id. However, Yakama Nation's First Amended Complaint raised only the issue of cigarettes and roll-your-own tobacco products, ECF No. 16 at 26, and did not state a claim relating to its “traditional use tobacco.” In addition, the parties presented little argument related to the “traditional use tobacco” in the course of litigating this case.

King Mountain, Mr. Wheeler, and the Yakama Nation brought this action seeking a declaration that King Mountain is not subject to payment of federal excise taxes on tobacco products; a declaration that the Yakama Nation is entitled to meaningful consultation and resolution of disputes with the executive branch; and an injunction against Defendant Alcohol and Tobacco Tax and Trade Bureau (TTB) prohibiting TTB from preventing the sale of King Mountain's products. ECF No. 16 at 53–54. In addition, Plaintiff seeks a refund or abatement of all monies paid under the excise tax requirements. Id.

Upon a motion from the United States, the Court dismissed King Mountain and Mr. Wheeler from this action for lack of jurisdiction. ECF No. 83. However, the Court held that it has jurisdiction to hear claims brought by the Yakama Nation. ECF No. 83. The Court further ruled that Yakama Nation may press claims on behalf of King Mountain and Delbert Wheeler, because the Yakama Nation's interests as a sovereign are implicated by the imposition of taxes upon its enrolled members. ECF No. 83 at 9–10.

Yakama Nation previously filed a motion for partial summary judgment, ECF No. 52. In ruling on that motion, the Court held that: 1) King Mountain was not exempt from taxation under the General Allotment Act for manufacturing cigarettes and roll-your-own tobacco; and 2) Article II of the 1855 Yakama Treaty did not contain express language exempting the manufacture of tobacco products from federal taxation. ECF No. 103.1

The United States now seeks summary judgment, contending that as a matter of law that it is entitled to dismissal of all claims pressed by the remaining plaintiff, Yakama Nation.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A key purposeof summary judgment “is to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is “not a disfavored procedural shortcut,” but is instead the “principal tool[ ] by which factually insufficient claims or defenses [can] be isolated and prevented from going to trial with the attendant unwarranted consumption of public and private resources.” Celotex, 477 U.S. at 327, 106 S.Ct. 2548.

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The burden then shifts to the non-moving party to “set out ‘specific facts showing a genuine issue for trial.’ Id. at 324, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56(e)).

A genuine issue of material fact exists if sufficient evidence supports the claimed factual dispute, requiring “a jury or judge to resolve the parties' differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). At summary judgment, the court draws all reasonable inferences in favor of the nonmoving party. In re Oracle Corp. Secs. Litig., 627 F.3d 376, 387 (9th Cir.2010) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The evidence presented by both the moving and non-moving parties must be admissible. Fed.R.Civ.P. 56(e). The court will not presume missing facts, and non-specific facts in affidavits are not sufficient to support or undermine a claim. Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888–89, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990).

DISCUSSION

As citizens of the United States, enrolled members of federally recognized Indian tribes are generally liable to pay federal taxes. See Squire v. Capoeman, 351 U.S. 1, 6, 76 S.Ct. 611, 100 L.Ed. 883 (1956). Federal law imposes an excise tax on the manufacturing of tobacco products to be calculated against the manufacturer at the time of the removal of the tobacco products from the manufacturer's facilities. 26 U.S.C. §§ 5701–5703. Yakama Nation contends that their tobacco products are exempt from excise taxes under the General Allotment Act, Articles II and III of the 1855 Yakama Treaty, and Section 4225 of the Internal Revenue Code pertaining to Indian handicrafts.2 Each of these issues is examined in turn.

General Allotment Act

Under the General Allotment Act, individual Indians were allotted lands to be held in trust by the United States for the benefit of that individual Indian. Capoeman, 351 U.S. at 3, 76 S.Ct. 611. After twenty five years, absent extension of the trust period by the President, the land would be conveyed in fee simple to the allottee. Id. Part of the Act states:

[T]he Secretary of the Interior may, in his discretion, and he is authorized, whenever he shall be satisfied that any Indian allottee is competent and capable of managing his or her affairs at any time to cause to be issued to such allottee a patent in fee simple, and thereafter all restrictions as to sale, incumbrance, or taxation of said land shall be removed and said land shall not be liable to the satisfaction of any debt contracted prior to the issuing of such patent ....

25 U.S.C. § 349 (emphasis added).

In Capoeman, the Supreme Court held that the language “all restrictions as to ... taxation of said land shall be removed,” implied that trust land that was not yet patented in fee was not subject to taxation. 351 U.S. at 8–10, 76 S.Ct. 611. The Supreme Court noted, however, that the restriction on taxation was limited to “the trust and income derived directly therefrom.” Id. at 9, 76 S.Ct. 611. Income that was not derived directly from trust land but was derived from earlier income from the land, also known as “reinvestment income,” was not exempt from taxation. Id. (discussing F. Cohen, Handbook of Federal Indian Law 265–66 (1942)). In Capoeman, the taxes at issue were capital gains assessed as income tax on the sale of timber. Id. at 4, 76 S.Ct. 611. The Court held that the income resulting from the sale of the timber was derived directly from the trust land and, therefore, not subject to federal income tax. Id. at 9–10, 76 S.Ct. 611.

Cases decided after Capoeman have identified sources of...

To continue reading

Request your trial
2 cases
  • United States v. King Mountain Tobacco Co.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 13 Agosto 2018
    ...the imposition of the federal tobacco excise tax on King Mountain’s products. See King Mountain Tobacco Co., Inc. v. Alcohol & Tobacco Tax and Trade Bureau , 996 F.Supp.2d 1061 (E.D. Wash. 2014) (the " Yakama case"), vacated and remanded sub nom. Confederated Tribes and Bands of the Yakama ......
  • United States v. King Mountain Tobacco Co., : 1:14-CV-3162-RMP
    • United States
    • United States District Courts. 9th Circuit. Eastern District of Washington
    • 27 Julio 2015
    ...to the United States' action to recover those unpaid taxes, King Mountain Tobacco Co. v. Alcohol and Tobacco Tax and Trade Bureau, 996 F.Supp.2d 1061, 1068-70 (E.D. Wa. 2014) [hereinafter "King Mountain II"], appeal docketed, No. 14-35165 (9th Cir. Mar. 5, 2014). In those cases, this Court ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT