United States v. Wilbur

• Decision Date: 06 April 2012
• Docket Number: 10–30186,Nos. 10–30185,10–30188.,10–30187,s. 10–30185
• Citation: 12 Cal. Daily Op. Serv. 3830,2012 Daily Journal D.A.R. 4418,674 F.3d 1160
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. C. Marvin WILBUR, aka Marvin Wilbur, Sr., Defendant–Appellant.United States of America, Plaintiff–Appellee, v. Joan C. Wilbur, Defendant–Appellant.United States of America, Plaintiff–Appellee, v. April M. Wilbur, Defendant–Appellant.United States of America, Plaintiff–Appellee, v. Brenda R. Wilbur, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

12 Cal. Daily Op. Serv. 3830

2012 Daily Journal D.A.R. 4418

674 F.3d 1160

UNITED STATES of America, Plaintiff–Appellee,

v.C. Marvin WILBUR, aka Marvin Wilbur, Sr., Defendant–Appellant.United States of America, Plaintiff–Appellee,

v.Joan C. Wilbur, Defendant–Appellant.United States of America, Plaintiff–Appellee,

v.April M. Wilbur, Defendant–Appellant.United States of America, Plaintiff–Appellee,

v.Brenda R. Wilbur, Defendant–Appellant.

Nos. 10–30185

10–30186

10–30187

10–30188.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 8, 2011.Filed April 6, 2012.

James E. Lobsenz, Carney Badley Spellman, P.S., Seattle, WA, for the appellants.

Helen J. Brunner, Richard Edward Cohen, Mary K. Dimke, J. Tate London, Office

of the United States Attorney, Seattle, WA, for the appellee.

Appeal from the United States District Court for the Western District of Washington, Marsha J. Pechman, District Judge, Presiding. D.C. Nos. 2:09–cr–00191–MJP–1, 2:09–cr–00191–MJP–2, 2:09–cr–00191–MJP–3, 2:09–cr–00191–MJP–4.

Before: STEPHEN REINHARDT, WILLIAM A. FLETCHER, and JOHNNIE B. RAWLINSON, Circuit Judges.

Opinion by Judge WILLIAM A. FLETCHER; Partial Concurrence and Partial Dissent by Judge RAWLINSON.

OPINION

W. FLETCHER, Circuit Judge:

Marvin, Joan, April, and Brenda Wilbur (collectively “Defendants” or “the Wilburs”) were indicted for an eight-year conspiracy to violate the Contraband Cigarette Trafficking Act (“CCTA”) by trafficking in “contraband cigarettes.” They were also indicted for several substantive counts of violating the CCTA and several counts of money laundering based on transfers of their earnings from the allegedly contraband cigarettes. Contraband cigarettes, as defined in relevant part by the CCTA, are cigarettes “which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found.” 18 U.S.C. § 2341.

The Wilburs moved to dismiss the indictment. They argued that the state of Washington retroceded its cigarette taxation to the Swinomish Tribe during the period of a cigarette tax contract it entered into with the Swinomish Tribe. They argued that the only cigarette taxes applicable to their activities were thus tribal taxes, not the “State or local cigarette taxes” referred to in the CCTA. The Wilburs also argued that their indictment was based on ambiguous tax laws and therefore violated due process, and that their right to trade in untaxed cigarettes is guaranteed by the Treaty at Point Elliott. The district court denied the motion to dismiss the indictment. The Wilburs then pled guilty to the eight-year conspiracy to violate the CCTA, conditioned on their right to appeal the district court's denial of their motion to dismiss.

For the reasons that follow, we agree with the Wilburs that during the period from 2003 to 2005, when they were licensed to sell tobacco by the Swinomish Tribe, there were no “applicable State or local cigarette taxes” under the CCTA. We also agree with the Wilburs that the five-year statute of limitations for CCTA violations bars any charges based on activity from 1999 to 2003. We conclude, however, that after their tribal tobacco license expired in 2005, the Wilburs' activities ceased to be covered by the Swinomish cigarette tax contract (“CTC”), and that the state's retrocession therefore ceased to apply. The unstamped cigarettes the Wilburs transported and sold during this period were thus “contraband” under the CCTA. We reject the Wilburs' due process and treaty arguments.

We affirm in part, reverse in part, and remand for resentencing consistent with this opinion.

I. Background

The CCTA makes it unlawful to knowingly “ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes.” 18 U.S.C. § 2342(a). The CCTA defines contraband cigarettes as:

a quantity in excess of 10,000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes, and which are in the possession of any person....

18 U.S.C. § 2341(2). Thus, “[a] violation of the state cigarette tax law is a predicate to a CCTA violation.” United States v. Gord, 77 F.3d 1192, 1193 (9th Cir.1996).

The Washington cigarette tax laws at issue in this case are complicated, especially as they apply to Indian tribes. We first provide an overview of the relevant Washington cigarette tax scheme. We then describe the specific facts and procedural history of this case.

A. Washington Cigarette Tax Scheme

Washington imposes a sales tax, a use tax, and a separate cigarette tax on cigarettes. Rev.Code of Wash. (“RCW”) §§ 82.08.020 (retail sales tax), 82.12.020 (use tax), 82.24.020(1) (cigarette tax). To enforce its cigarette tax, Washington requires that cigarette packages bear a stamp demonstrating compliance with Washington law. According to RCW § 82.24.030(1):

The stamps must be affixed on the smallest container or package that will be handled, sold, used, consumed, or distributed, to permit the department to readily ascertain by inspection, whether or not such tax has been paid or whether an exemption from the tax applies.

See also Wash. Admin. Code (“WAC”) § 458–20–186(201)(a). The stamps must either represent that the tax has been paid or indicate that the cigarettes are exempt from the tax.¹ RCW § 82.24.030(2). Cigarette wholesalers are responsible for affixing stamps. Id. Wholesalers must be licensed by the state. Id. § 82.24.040(1). Various rules govern wholesalers' obligations concerning when and how to affix the stamps. See id. § 82.24.040.

Cigarette retailers are generally prohibited from possessing unstamped cigarettes within the state of Washington. Id. § 82.24.050(1). Retailers must obtain cigarettes from licensed wholesalers. Id. § 82.24.050(2). Unauthorized receipt, shipment, and sale of unstamped cigarettes by non-wholesalers is a crime under Washington law. Id. § 82.24.110.

In general, only licensed wholesalers can transport unstamped cigarettes within the state. WAC § 458–20–186(401). Licensed wholesalers can transport unstamped cigarettes only in their own vehicles, unless they give prior notice to the liquor control board. Id. Anyone other than a licensed wholesaler who intends to transport unstamped cigarettes in the state must first give notice to the liquor control board. RCW § 82.24.250(1); WAC § 458–20–186(402). Anyone other than a licensed wholesaler transporting unstamped cigarettes must be transporting them to a licensed wholesaler or to a person or organization that has given notice to the liquor control board of their intended possession of unstamped cigarettes. RCW § 82.24.250(2)–(3), (7).

There has been a long-standing dispute about the state's power to tax cigarette sales by tribal retailers on Indian reservations to non-Indians. In Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 159–60, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980), the Supreme Court held that the state could impose a cigarette tax on cigarette sales by Indian retailers on reservations to non- Indians. The Court reasoned that the incidence of a tax on sales to non-Indians falls on the non-Indian customer, not on the Indian retailer. It held that the state can impose the “minimal burden[ ]” on the Indian retailer of only selling stamped cigarettes to non-Indians. Id. at 159, 100 S.Ct. 2069.

As the Court recognized in Colville, one of the underlying issues in the cigarette taxing dispute between the state and the tribes is the ability of the tribes to impose their own cigarette tax. Id. at 154–55, 100 S.Ct. 2069. The tribes had argued that if the state could enforce its cigarette tax, the tribes would be forced to drop their own tax or else their tribal retailers would be forced to sell at higher prices than off-reservation sellers. The state argued that because the tribal taxes were often significantly lower than the state taxes, what the tribes really wanted was to allow tribal retailers to undercut off-reservation retailers. This would seriously undermine the state's cigarette tax regime because non-Indian cigarette purchasers could travel to the reservations in order to avoid the state tax. Id.

After Colville, in an attempt to resolve this underlying issue, Washington passed legislation authorizing the Governor to enter into cigarette tax contracts (“CTC”) with various tribes. RCW §§ 43.06.450, 43.06.460. A CTC is typically an agreement by the state to retrocede its cigarette taxes to the tribe for transactions covered by a CTC in exchange for the tribe's agreement to impose a cigarette tax equal to the state's and to use the proceeds to fund essential tribal government services. This case concerns the state's tax retrocession under the CTC it signed with the Swinomish Tribe.

The CTC legislation provides that “[a]ll cigarette tax contracts shall meet the requirements for cigarette tax contracts under this section.” Id. § 43.06.455(1). The tax contracts “shall be in regard to retail sales in which Indian retailers make delivery and physical transfer of possession of the cigarettes ... within Indian country.” Id. § 43.06.455(2). For this and all other statutory provisions, there are three definitions of “Indian retailer.” These are:

(i) a retailer wholly owned and operated by an Indian tribe,

(ii) a business wholly owned and operated by a tribal member and licensed by the tribe, or

(iii) a business owned and operated by the Indian person or persons in whose name the land is held in trust[.]

Id. § 43.06.455(14)(b).

The legislation describes conditions a tribe must accept to enter into a CTC. The CTC “shall provide that the tribal cigarette tax rate be one hundred percent of the state cigarette and state and local sales and use...