Circuit Unlikely to Give Tribe Pass on Settlement

     SEATTLE (CN) - Insisting that the Yakima Nation must contribute to a master settlement with tobacco manufacturers, an attorney for Washington said the tribe's treaty does not give it carte blanche on tobacco sales.
     Otherwise tribal members could go to the state fair and hand out free cigarette samples to minors "because they have this treaty," David Hankins with the Washington Attorney General's office told a three-judge panel of the 9th Circuit.
     "Where does it end," he asked.
     The Wednesday hearing stems from a Master Settlement Agreement (MSA) that Washington and 45 other states entered the with big tobacco companies in 1998 to settle smoking-related illness claims. Any tobacco manufacturer that sells products in an MSA state and was not a party to the settlement is required under the deal to pay into an escrow account. It is possible for manufacturers to recover the money if no product-liability claims occurred after 25 years.
     The Yakima Nation's King Mountain Tobacco Co. started operating in 2006 and in 2010 requested a ruling from the tribal council as to whether the company was subject to paying the escrow funds. The council deemed King Mountain exempt under the Yakima Treaty of 1855, which prohibits the state from collecting tobacco-related fees.
     When Washington's attorney general declined to give the company a release, the Yakama and King Mountain filed suit in 2011.
     U.S. District Judge Lonny Suko sided with the state, however, finding that "a number of cases" support having tribes pay into the MSA or escrow.
     "King Mountain has not met its burden of showing express federal law exempting its business from state regulation nor does it offer case authority invalidating application of any state's escrow statute based on an Indian Treaty or any other federal law," Suko wrote.
     At Wednesday's hearing, the tribe's attorney Randolph Barnhouse called this a misinterpretation of the 1855 treaty. In siding with the state, the court found the treaty is not express federal law despite "over a hundred years of precedent," Barnhouse said.
     "Washington regulatory authority is limited by the Yakima Treaty," he added.
     Judge Susan Graber asked Barnhouse what specifically in the treaty related to the tobacco settlement statute.
     Barnhouse said the tribe can't take their products to market and trade as provided for in the treaty.
     "Who says they can't take them to market to trade?" Graber asked.
     "The state of Washington says unless you comply with our regulations," the attorney replied.
     Judge Judge Morgan Christen countered that "this doesn't seem to prevent them from bringing goods to market."
     Barnhouse argued that the tribe cannot bring their goods - in this case, cigarettes - to sell in Seattle because the Yakima are not listed in the state directory of approved tobacco manufacturers.
     Graber said she had difficulty seeing the treaty "had anything to do" with the tobacco regulations. She said the whole scenario "was never imagined" in 1855.
     "They weren't manufacturing cigarettes then."
     Hankins, arguing for the state, told the panel: "Nothing in the treaty suggests that cigarettes can be sold coast to coast free from any regulation."
     While Washington cannot impose a tax or fee on the reservation, "anytime a tribal member goes beyond the reservation boundaries they are subject to all state non-discriminatory laws," Hankins said.
     "At a minimum" the Yakima read treaty rights guaranteeing transportation of goods to market too broadly, Hankins continued. "What you can't do is be free from any regulation or restriction," he said.