Court Opinion

ID: 4303370
Source: CourtListenerOpinion
Date Created: 2018-08-13 20:00:25.895818+00
Date Added: 2024-06-11T09:24:23.945583
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       AUG 13 2018
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                       No.    16-35956

                Plaintiff-Appellee,             D.C. No. 1:14-cv-03162-RMP

 v.
                                                MEMORANDUM*
KING MOUNTAIN TOBACCO
COMPANY, INC.,

                Defendant-Appellant.

                   Appeal from the United States District Court
                     for the Eastern District of Washington
                Rosanna Malouf Peterson, District Judge, Presiding

                      Argued and Submitted March 15, 2018
                           San Francisco, California

Before: FERNANDEZ, McKEOWN, and FUENTES,** Circuit Judges.

      King Mountain Tobacco Company, Inc. (“King Mountain”) appeals the

district court’s order granting summary judgment in favor of the United States in

an action to collect $6,425,683 in overdue fees under the Fair and Equitable

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Julio M. Fuentes, United States Circuit Judge for the
U.S. Court of Appeals for the Third Circuit, sitting by designation.
Tobacco Reform Act (“FETRA”), Pub. L. No. 108-357 §§ 611–612, 118 Stat.

1521, 1522–24 (2004), codified at 7 U.S.C. §§ 518–519. Because the parties are

familiar with the facts, we do not repeat them here. We have jurisdiction under 28

U.S.C. § 1291, and we affirm.

      A. The district court did not abuse its discretion by denying King
         Mountain discovery.

      “Broad discretion is vested in the trial court to permit or deny discovery, and

its decision to deny discovery will not be disturbed except upon the clearest

showing that denial of discovery results in actual and substantial prejudice to the

complaining litigant.” Goehring v. Brophy, 94 F.3d 1294, 1305 (9th Cir. 1996).

The district court denied discovery after holding that the administrative record

demonstrates the accuracy of the agency’s determinations of liabilities owed by

King Mountain under FETRA. See Friends of the Earth v. Hintz, 800 F.2d 822,

828 (9th Cir. 1986) (“With a few exceptions . . . judicial review of agency action is

limited to a review of the administrative record.”). King Mountain did not contest

the accuracy of those determinations before the agency, and indicated that it was

“satisfied with the accounting of assessments provided by [the agency] and was not

further challenging the accuracy of the FETRA assessments.” The agency thus

affirmed the amounts owed. The district court did not abuse its discretion when it

denied King Mountain further discovery on judicial review.

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      B. The Treaty with the Yakamas does not prohibit the imposition of
         FETRA assessments.

      Whether FETRA assessments are “taxes” or “fees,” the test for King

Mountain’s exemption is the same. The “express exemptive language” test applies

to federal laws generally, not just to federal taxes. King Mountain Tobacco Co.,

Inc. v. McKenna, 768 F.3d 989, 994 (9th Cir. 2014); see id. (describing “the

‘express exemptive language’ test for determining whether a federal law applies to

[Indians]”). As we have explained, see United States v. King Mountain Tobacco

Co., Inc., Nos. 14-36055 & 16-35607, — F.3d — (9th Cir. 2018), the Treaty with

the Yakamas contains no “express exemptive language” that would entitle King

Mountain to an exemption from a federal excise tax on tobacco products. For the

same reasons, the Treaty does not entitle King Mountain to exemption from

FETRA assessments.

      C. The FETRA assessments imposed on King Mountain are
         constitutional.

      1. FETRA assessments do not violate the Takings Clause.

      The Takings Clause of the Fifth Amendment provides that “private

property” shall not “be taken for public use, without just compensation.” U.S.

CONST. amend. V. Because the Constitution “protects rather than creates property

interests, the existence of a property interest” is the threshold question of any

takings analysis, and it is “determined by reference to ‘existing rules or

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understandings that stem from an independent source such as state law.’” Phillips

v. Wash. Legal Found., 524 U.S. 156, 164 (1998) (quoting Bd. of Regents of State

Colleges v. Roth, 408 U.S. 564, 577 (1972)).

      FETRA does not effect a “classical” taking by seizing physical property.

Instead, it requires King Mountain to pay quarterly assessments in the form of

money. As we have cautioned, “money differs from physical property in respects

significant to [a] takings analysis.” Wash. Legal Found. v. Legal Found. of Wash.,

271 F.3d 835, 854 (9th Cir. 2001) (en banc).

      In Koontz v. St. Johns River Water Management District, 570 U.S. 595,

(2013) the Court affirmed that confiscations of money, “despite their functional

similarity to a tax,” 570 U.S. at 615, are only treated as a taking when the

confiscation operates upon or alters an identified property interest. See, e.g.,

Phillips, 524 U.S. at 165 (recognizing the principal owner’s property right to

interest earned thereon); Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S.

155, 162–64 (1980) (holding that a state statute taking, for the government’s own

use, the interest accruing on a privately owned interpleader fund deposited in the

registry of the county court was unconstitutional under the Takings Clause, and

that the state could not avoid the constitutional violation by legislatively or

judicially recharacterizing the principal as “public money”). King Mountain fails

to identify a property interest that a given FETRA assessment “operate[s] upon or

                                           4
alters.” See Koontz, 579 U.S. at 623. At best, King Mountain purports to locate

such an interest in the Treaty with the Yakamas, arguing that FETRA interferes

with King Mountain’s property interest in “the ‘exclusive benefit’ of . . . activities

conducted on Yakama reservation” land guaranteed by Article II of the Treaty. As

explained above, however, no provision of the Treaty bars the Government from

imposing FETRA assessments on King Mountain.

      FETRA simply requires King Mountain to pay a sum of fungible money

based on its market share. That requirement, without more, is not a taking.

      2. King Mountain’s FETRA assessments do not violate the Due Process
         Clause.

       “It is by now well established that legislative Acts adjusting the burdens and

benefits of economic life come to the Court with a presumption of

constitutionality, and that the burden is on one complaining of a due process

violation to establish that the legislature has acted in an arbitrary and irrational

way.” Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976). In conducting

a review of legislation under the Due Process Clause, “federal courts are not

assigned the task of making policy, determining a fair outcome, or determining the

actual state of facts.” Commonwealth Edison Co. v. United States, 271 F.3d 1327,

1342 (Fed. Cir. 2001). Rather, we “are charged simply with determining whether

the congressional action was rational.” Id. FETRA was a rational response to the

unworkability of the Depression-era quota and price-support system governing

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tobacco production, which by the 1990s had drastically inflated the price of

American tobacco past the point of competitiveness. The wisdom of that decision

is a policy judgment the Constitution leaves to Congress, not the judiciary.

      FETRA was prospective and imposed assessments on King Mountain—and

indeed, on all manufacturers of tobacco products—based on current market

participation. See Swisher, 550 F.3d at 1058. Therefore, FETRA does not raise

retroactivity issues implicating the due process clause. See Eastern Enters. v.

Apfel, 524 U.S. 498, 534–36 (1998) (plurality opinion).

      3. King Mountain’s FETRA assessments do not violate any other
         constitutional provision.

      King Mountain’s unconstitutional conditions challenge fails because FETRA

assessments do not “deny a benefit to [King Mountain] because [it] exercises a

constitutional right.” See Koontz, 570 U.S. at 604. King Mountain’s equal

protection challenge also fails because FETRA, by its express terms, applies to all

manufacturers of tobacco products and apportions quarterly assessments according

to market share.

      AFFIRMED.

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