Tribe Dodges Suit Over Cigarette-Taxing Deal

(CN) - The 9th Circuit on Tuesday rejected a cigarette seller's court-hopping challenge to a tax contract between the Puyallup Indian Tribe and the state of Washington.

Tribe member and store owner Paul Matheson had teamed up with two non-Indian customers to challenge a $30-per-carton tax on cigarettes sold on the Puyallup Indian Reservation in Tacoma. But Matheson's case failed in state court, tribal court, U.S. District Court and the 9th Circuit.

Along the way, both the Washington and U.S. Supreme Courts declined to review the issue. Opponents of a similar scheme between Washington and the Colville Tribes filed a similar suit that ultimately proved similarly unsuccessful.

Now, the 9th Circuit has doomed the Puyallup case yet again, affirming dismissal on the basis of sovereign immunity.

The tax contract allows the tribe to charge a cigarette tax similar to that levied by the state as long as the proceeds go to fund tribal services, such as health care. The Puyallup agreement requires Matheson and other Indian retailers to purchase cigarettes only from licensed Washington wholesalers.

Matheson and co-plaintiffs Daniel Miller and Amber Lanphere said the tax unconstitutionally restricts trade, and violates federal antitrust laws. They also claimed that the tribe and its leaders waived their sovereign immunity by agreeing to the contract's dispute resolution clause.

Rejecting all of these arguments, a three-judge appellate panel in Seattle ruled that the doctrine of res judicata nevertheless bars the case.

"This action fails for four reasons," Judge Johnnie Rawlinson wrote for the court. "First, the tribe has not waived its tribal sovereign immunity. Neither the cigarette tax contract nor the dispute resolution clause in the contract constitutes a waiver by the tribe. Second, contrary to Miller's, Lanphere's, and Matheson's argument, federal antitrust law does not abrogate tribal sovereign immunity. Third, the tribe's sovereign immunity extends to the tribal officials who were acting in their official capacities and pursuant to the tribe's authority. Fourth, the District Court correctly held that res judicata bars this action in light of the prior litigation in state and tribal courts."

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