thank your honor i would like to reserve ten minutes of my time to respond to the two government arguments please the court i am randolph barn house and i prepared appeared today on behalf of king mountain tobacco company in these two consolidated cases one of these cases involves a federal excise or privileged tax imposed by the us department of treasury alcohol tobacco tax and trade bureau i will refer today to that case as the tax case nt in the same district court judge decided both cases against king mountain tobacco and summary judgment both of these cases require application of the akam a treaty although they share the treaty issue each case involves additional and separate issues unique to the individual case but because they share the treaty issue i'd like to start there today there's no dispute the native american citizen ordinary affairs of life are not governed by treaties or media legislation are subject to federal taxes there's also no dispute that both statutes entreaties meigs native americans from federal taxes and federal fees the question this court and others have wrestled with is what treaty language is sufficient to support an exemption analysis of the acme treaty issues in this case requires the court to first determine which of two conflicting rules it should apply to the required treaty interpretation here the first of those rules is the i will refer to as the express exempt of language rule to my knowledge its rule is only applied in this circuit and was the rule adopted in ramsey and it requires as it says express exempt of language in the treaty the second rule that's a bit adopted in six circuits including this circuit is the language which can reasonably be so construed rule the eighth circuit in whole to be commissioner articulated this rule in one thousand nine hundred sixty six this court has adopted this second language which can reasonably be so construed ruled was or and the tenth circuit in chalk chickasaw specifically discussed and rejected the ninth circuit's express exempt of language rule only in some cases in this circuit has  been a move away from holds reasonably be construed test at the approach hasn't even been uniform in the circuit came out or just this court to apply the the analysis of determines there is language that can reasonably be construed to support an exemption the court must go to a second step in treaty analysis which is application of the indian canons of construction which favor the indian party something the district court didn't do in either of these cases the second step requires a determination of how the indians understood the treaty promises made to them in the treaty that requires a factual analysis of things like the minutes of the treaty testimony from yakima elders and other evidence that's available to help the court determine the indians understanding of the treaty came out and doesn't necessarily lose the express exempt of language analysis because this court in ramsey held that the free access to public highways language is express the court felt in ramsey that that wasn't the piece of the treaty that was at issue in that in that tax on federal fuels that were travelling on the public highways but rather the second promise in article three free access on the public high access and travel on the public highways language was sufficient and that the key here is this is the to the extent the court the district court relied on the ramsey case in the express exempt of language test involved the state of washington's rule that it was a pre notification rule imposed by the state of washington by the federal government and is there anywhere i just didn't see where the treaty language that you're talking about applying here was implicated there but maybe you can it's like well so it isn't so then i can't figure out why why then cements can would tell us the answer unless there is a part of the case you want to point me to that i had to take another look at well smits can provide the answer because of just what you know to judge mchugh and the the rule said that before the washington state rule said that before cigarettes could be transported there had to be pretty notification the federal government was relying on the failure to comply with the state rule in the prosecution of mr smith's the federal prosecution so although it was a federal case they were applying a state rule and the smithsonian court looks decree and florists which were both state rule cases in determining that this issue had been decided that the state rule could not could not stand in the face of a treaty challenge so i'm still having some trouble when i have a state rule here we all have a federal role yet so that's why i'm having trouble with why smith again can really tell us anything it's miskin tells you in my opinion your honour's miskin tells you a lot about application of the treaty particularly if this court adopts the can reasonably be so construed rule and that's why i started with that discussion because ramsey a case that was involved a federal tax as does this one not the federal prosecution of activities under state law in ramsey the court adopted this express exempted language rule and that started back in andersen and warm springs were both cases that adopted that criticize their what would we do then went up how and which was looking at article two hard how it was because article two of the treaty but there it was clear that it with income that was derived directly article three's exclusive use our i'm sorry article to use exclusive use and benefit in the context of income taxes and this is not an income tax case this is a privileged tax and a fee and the problem with the income tax cases is they look at the source of income whether it's directly derived from the land that's not required under either the general allotment act or under the  under the treaty analysis in this case because what happens here is there is the united states government promised free access to the nearest public highway that's not that is not offered here by the united states government it's in breach of that promise because the minute you start moving goods towards the public highway they impose both the tax issue and the feet issue though we hear the choose between two standards are interpreted yes or i'm just thinking about the way that you were presenting your argument you express exemption which would seem to me to lead to more certainty than reasonably construed which which may depend on who is looking at the at the issues and that's exactly right right and that's exactly the holding and was or and when the third circuit and the holding in chickasaw on the tenth circuit which rejected the rule precisely for those reasons it simply makes it impossible rejected which which of the ninth circuit express exempted language from and adopted instead the hold eight circuit may reason with these consumers so construed and that's critical to the street an which you say we should apply the reasonably construed yes all right my comment is that he would lead to less certainty and express exemption it certainly leads for less to less certainty for the government because they would they are more likely  was or and chickasaw said and it ignores the supreme court's guidance in this court's earlier guidance about application of the indian treaties these were people who the treaty language used here was only a few hundred words it was a jargon that was used for trade and the one thing the akam indians made clear was we are a trading nation they've been described as inveterate traitors in this missing case and without the ability to have free access to the highways and free access to bring their goods to market they couldn't do the things that the treaty negotiators promised both for the u s and the native americans i've been cutting into my own no i sometimes reading this wrong i still have plenty of time this  about as you say you can't have a tax exemption unless the language can be reasonably so construed and then it says the intent to exempt from taxation must be clearly expressed so i'm not sure that the ninth circuit has embraced a rule that is somehow internally inconsistent it's like this continuum of construed if this court adopts the express exempt of language the let me just rephrase that the third circuit in the tenth didn't feel it was to these are two separate tests which is judge went as points out at least two completely different treatment of the indians depending on which circuit they're in the can reasonably be construed language just needs to find some basis and what was or said was and these are all really tests that were developed to implement supreme court rulings on this very issue and it was or said and i quote we interpret the supreme court statement that an exemption must derive plainly from a treaty together with its conclusion and sho sotto that treaties cannot support an exemption without a provision concerning the what liability of an individual to pay a tax upon income to stand for the proposition that an exemption must be rooted in the text of a treaty furthermore because all indian treaties were entered into long before the passage of the income tax the fact that the parties to a treaty did not negotiate with the federal gov income tax in mind is immaterial source ultimately all of the circuits need to follow this guidance by the supreme court in the words they've chosen were derived plainly and i'm sorry that's atlas or that i just read eleven f third eleven eighty eleven eighty four what's the best supreme court case that we should look to for your proposition i would say that the court cases that was or cited the chickasaw case that the united states supreme court affirmed out of the tenth circuit the tenth circuit applied the can reasonably be construed language of the supreme court affirmed the tenth circuit but did not discuss the two tests and so i think the best cases are those are cited and addressed by liz or at that eleven f third site that i gave the court you're down to your ten minutes if you would like to reserve i would dollars or the rest of my time for thank you i think it please the court patrick gerda and abby write for the united states your honour's the district court correctly granted summary judgment both as to king mountains tax liabilities and as to its federal obligations ms right and i will be splitting time i'll be addressing the tax issues and ms wright will be addressing the federal issues and i'd like to begin by turning straight to the have many proposed time splitter and he does want to work that out i think that we're going to let it be equally but i only say that because the other person always looks a little uncomfortable as you the first person sort of bleeds into their time so i'll try to help you i will i will try to sit down just as quickly as possible judge that's not the point i'd like to begin where opposing counsel left off talking about that chickasaw nation from the supreme court and i think it's a helpful case to to to frame what opposing counsel was talking about in that case the supreme court said that the canons don't apply when nothing in the language of the underlying statute or treaty suggests that the that the tribe should be exempt and and that's out one hundred one in chickasaw nation and that's really what we're talking about here because under either standard under the ramsey standard or the more generous standard that opposing counsel is arguing for there is no exempt of language of course ramsey is the governing standard in this court so this panel is bound to apply it but what's important is that this court's decision in mckenna resolves any uncertainty as to whether there would be a discrepancy between the two standards plainly there isn't in ramsey to this the end result is no matter which standard you apply and we think that ramsey is the correct standard because it's a federal tax issue and this court has explained that federal taxes are assessed under the ramsey standard that either way we get to the same result and it's important to know that we get to the same result because there is no ambiguity in the language as this court observed in mckenna where it considered both article two and article three article two according to the court and mckenna simply stands for the establishment of the physical boundaries and excluding non indians from using land and there is nothing in article two that would suggest that a company is tax exempt simply because it's on indian land so there is nothing in  article two that would provide a tax exemption that the tribe is is asking for here there is no express exempt of language and there is no ambiguity according to this court likewise in article three is it  and if they are addressing products that are taken from the land derived from from the physical property subject to the treaty that's that's a great question your honor because in this court's decision and hop to it the court said to the extent that there might be a tax exemption that's as far as the tax exemption would apply it would apply to the land and  income directly derived obviously the tax that we're talking about here which is an excise tax on the manufacture of tobacco products is wholly outside that framework it's not directly derived income or a tax on the land itself instead it's a tax on the privilege of doing something manufacturing tobacco products like cigarettes even though the raw material comes from the that's correct so as this court noted in mckenna this is a multi step process king mountain ships there tobacco and combines it with other tobacco to be processed and then the tobacco is returned to be odd to be manufactured into tobacco products which is the act that's being that's being taxed and  so it's not something where you're taxing either the income from the land or the land itself something like the tobacco crop would get would your answer change i lackey well and again just to be clear for all proprietors right and we're talking about again the general allotment act no it would not change because the excise tax is not either a tax on the property or a tax on income directly derived it's a tax on the privilege of being allowed to manufacture type tobacco products so under the general allotment act that does not reach this tax and does not exempt this tax of course as judg mccune pointed out king mountain is not the a lottie so the general allotment act does not shield now going back to the treaty language article three also does not exempt a tax that issue article three instead talks at its greatest extent in ramsey about the tax exemption for the right to travel here there is no travel that's being taxed what's being taxed as again the manufacture of tobacco products just to be clear there's some there's some hint in the briefs that the that there's a transportation aspect of that that's what i'm asking ok so that is actually the moment in which the tax is determined the tax attaches when the tobacco product is you had the crop so crops for example would under hop to its assumption of an exemption would probably be in that income directly derogate so if you sold your crop under the hop to it reading which said we're going to ascribe the same meaning as in the poem and case interpret in the general law an act then doubt that income would seem to fit within that exemption but that's not what we have here obviously what we have here and the other broncs right and the question of where movable what does removal mean removal is simply the point in which the tax is determined so the manufacturer tobacco products which have already been metaphysical sense are then kept in a bonded warehouse for accounting accounting purposes it's when the the back o products are removed from bond whether that's just a portion of the warehouse and the tobacco products are taken out of that portion that's when the tax is determined so that's under fifty seven zero three of the code so really the tax attaches to the manufacturer of the tobacco products that's fifty seven a one of the code and then fifty zero three is when the tobacco products tax is determined now that has nothing to do with transportation and it has nothing to do with travel on highways so the article three of the treaty does not apply to exempt that the manufacturers excise tax nor does article six of the treaty apply this was a an argument first raised in in this court and it's waived even so this court's decision and deal one indicated the non alien alien ability and non tax ability are distinct concepts and that article six does not provide an exemption for taxation it's a little confusing here because the government owns the land correct or has title to the land but they are arguing in effect  on that sure thing so there are a couple of different responses first of all the general allotment act very specifically shields from fianna cumberlands a lot of land ok so king mountain ok so forfeiture is of course a drastic remedy and the government believes that the general allotment act controls that doesn't implicate the tax the tax is a good tax the tax is valid it just means that we can't and then it also go the forfeiture question also if you got past the general allotment act which we don't think you need to run into this court's precedent about only property being used as an active aid is subject to forfeiture here to the extent that the misstatement of tax would constitute a violation of the internal revenue laws that would subject someone to forfeiture which is of course an incredibly broad reading for such a drastic remedy then we would say that the real property is not used as an activated the tax and the statement of the tax have to do with the manufacture of cigarettes in the factory and so the real property is just where the factory is located it's not an activated of the violation of the internal revenue laws so even if the general allotment act didn't apply this court's precedent regarding act of aid would apply and again this is all consistent with the way that the treasury regulations deal with this indian trust property is not subject to lean levy which is what the i r s usually uses to collect taxes and quite frankly the internal revenue manual also cited in our brief notes that forfeiture statute even though it has broad language is not intended to be a substitute for collection so just because somebody gets their taxes wrong doesn't mean that it's a violation of the internal revenue loss that would subject them to forfeiture and certainly better is unconstitutional the district court correctly rejected that argument relying in part on the eleventh circuit decision of swisher that decision was issued ten years ago and rejected arguments that were virtually identical to those advanced here  are applied to the grosser volume of sales that every tobacco manufacturer has while they were applied the program is over it just impose an obligation to pay money i mean your obligation to pay money does not make a taking claim so it most king mountain has here asserted the substantive due process claim for the reasons the district court in the swisher court explained fetcher does not pose any substantive due process problems it's not retroactive which was  products that were manufactured on the treaty point in the united states is wrong on the treaty point with respect to the excise tax is the same result then in order to the process of responding the complaint became clear that came out had not been given the hearing they were supposed to get under the under federal law and so it was remanded back to the agency at that point the agency provided came out with additional information created excel spreadsheets that  gave sort of a lay person's understanding of how the systems were calculated and then at the telephonic hearing counsel said that he didn't have any he didn't have any objections or further questions about the amount so when it came back to this record i think the district court quite reasonably said there's substantial evidence in this record and even in this court they haven't explained what kind of information they're looking for what they think discovery might come cover my final point on that is that this is an administrative record case so th  court is looking at whether the administrative record contains substantial evidence and the district court correctly concluded that it did not use your producer there you have nothing else to provide there related to the care that's right they haven't they haven't in this court said you know we think it was wrong for this reason so give us more information about that there were some questions about offsets and so c c c gave a very detailed you know accounting and we put in our supplemental excerpts of record a couple sample quarterly assessments so this court can take a look and see that they are quite detailed and and the calculations are very straightforward there based on the amount of excise taxes paid and your share of the market will you be addressing whether the imposition of  issue in our case doesn't give rise to taking analysis unless it's tied to a specified property interests and so when king mountain specifies the property interests are talking about that goes back to the akamai treaty and so as we explained in our brief i think this court needs to first decide the what was the purpose of the underlying purpose of the future attacks so the veteran two thousand and five the tobacco farmers were transition from a historical decades long practice of quotas and price supports to a new system free market system and so it's expected and it in fact occurred that tobacco prices dropped pretty significantly congress was concerned about that and so wanted to transition make a gradual transition from that historical quota system very highly regulated  life the market i think there was a concern that if prices drops too quickly you would have the bottom fall out of the tobacco market and so the focus is to the benefit from that were cigarette manufacturers because the prices were going to be lowered so congress imposed a fee an assessment on cigarette manufacturers to fund the gradual transition and as the eleventh circuit held and swisher this doesn't you know it's not retroactive and it does not pose any kind of constitutional problem canons of construction and capote and that was in a court case where this ninth circuit ruled the same way as did the district court component was a general a lot and case and it was what it had to do with income the courts have looked at this directly drive's issue in the context of income but this is not an income tax case this is not a privilege to manufacture case if my client export it every cigarette they made they wouldn't pay this tax it's not on the manufacturer it's on the movement of goods imported cigarettes pay it the move the when they're moved out of bond so it's they could call it he they're quite released i suppose that's a computer transaction that's also incorrect or other that's incorrect yes you ok and tell us why they are imposed the moon the minute they are moved they are transported out of bond whether it's right but by that time the  the product itself that the tobacco itself has been manufactured into a product ready to sell such is a cigarette right or tobacco for the pipes or absolutely any any other retail sellable product right your honor so long as it's manufactured it sits in bond no tax it sits there tax free i see if it's transported in bond to another manufacture it sits there in that other end it c transported across the country to the seneca nation it sits there tax free it's only at the moment that it's transferred out of bond that it travels that the taxes imposed and the court this court in the supreme court have consistently said it doesn't matter how they describe the tax it sounds like it starts when it's ready to go to market it's it's not even in your honor it's taxed when it's moved in it's transported to the public highway that movement even if it then sits in a warehouse even if it's going from one reservation to another if it's going in bond it's not taxed if the minute it's removed from bond the minute it's transported is when they impose the tax and so they don't impose the tax on manufacturers in canada they impose the tax on the importer who brings it into the united states so it's just simply wrong to describe this as a tax on manufacturing tobacco that's not what it is it's a tax on removal as they've is they admitted today it in the beginning of the ark and that's the case whether it's been manufactured or nah yes sure on a show for example traditionally used to back o that goes out for retail sale as one hundred percent run on the leaf so once it's made and processed even for traditional use so it's not in the two it doesn't have a filter on my thinking has been confused because i you're suggesting that the you can take tobacco leaves put them on a truck move them out and and and what happens the if you just take a leaf and you send it to a blender no tax ok but if you take a leaf and you convert it into a cigarette and then put that out what's wrong with that if you if you can if you take it into your plant and turn it into a cigarette you first you have to isn't that the new factor you have to do well i don't know your honor we didn't it's unclear from the district court at what point and that's a very good point at what point along the the day they're basically saying you know the major value of this land which is the trees growing on the land you cut them down you ship them out it's all the same thing this is not the same thing because we're in the and we're talking about  manufactured high that someone in cap and they're not talking about i guess what i call boards in the timber industry they're talking about the raw logs and you're the same is because the as this court in andersen confirmed and as cappleman confirmed it's not this money that's the issue and it's the incumbrance and so when they say the general allotment act is not allowed the incumbrance that's exactly right the internal revenue service inc and kapil make a poem and was not the the interim the money had been paid the taxpayer had to pay their income to challenge that tax so there was no issue in capone in that whether the i r s was then going to come down and take that allotment the issue was whether that tax could impose a lien or forfeiture and because the sale of the logs if they hadn't paid they could if they could under the statute have imposed a leaner forfeiture now whether they would who have or whether they were likely to in component they were there it would not have been an issue because the tax have been paid the issue is whether under the tax structure a leaner forfeiture can occur and under the t g v tax it already has occurred it occurs immediately it's not up to the executive branch the statute says and it doesn't matter who produces if property used for the sale for the production of the product it does not pay if property is used for that and the tax is not paid that there are no more property interests in that and it shall be forfeited that's the statute and it's cited in the replies so it doesn't it so for them to say well we might not do it or we have a manual that says we won't do it or that we don't like a man they may not like him but it's the crop that we're tobacco leaves we have one situation we don't have to back a week as we don't have like capital men they're having pronounce  on the a lot of land it's day and night different your honor because in an income tax case so if i have income from a hotel that and i'm leasing the hotel my business is and i don't pay my income tax you cannot  place a lien or a letter or forfeiture on the property but if you if my client moves their tobacco out of bond and they don't pay the tax which a portion of they have it dark oh you mean that's who lives on just the trees you did you can't tax that but when you take that the tree the raw material you process it into boards then it's taxable i mean is that fairly accurate or no it's an income tax but this isn't an income tax case so so it doesn't matter if the cigarettes were ever sold if they were destroyed in transit and never sold in there was no income from the cigarettes the tax still had to be paid and if the tax wasn't paid under this statute as if it were sold then it's a sales tax because it was a sales tax is sales issue not a tax it was place and escrow so mckenna has no applicability because these are federal cases under different rules component is the case it's binding it's a u s supreme court case and it's binding on the court here as to the federal feel i want to just talk briefly about that it is retroactive as counsel just told you this was a this was payment for in the  system so in two thousand and four when king mountain opened their doors to make cigarettes and federal was set up came out they had to pay the historical costs that were implicated by a an earlier system of  it's a pleasure to have lawyers who know all the cases and are so knowledgeable in the area and also the briefing has been very good on all sides so thank you very much the case is submitted our next case for argument then will be