On February 28, 2012, a panel of the Tenth U.S. Circuit Court of Appeals published its opinion in the case Muscogee (Creek) Nation v. Pruitt, Case No. 11-7005, dismissing the Tribe’s challenge to Oklahoma’s tobacco laws, albeit on slightly different grounds than the lower court.
The Muscogee (Creek) Nation (“Tribe”) sued the Oklahoma Tax Commission (“OTC”), its three commissioners, and the Attorney General (collectively, the “State”), asking the federal courts to prohibit the State from enforcing three Oklahoma tobacco laws (collectively, the “Statutes”):
• The Excise Tax Statute imposed a tax on the sale of cigarettes and other tobacco products, and allowed for tribes to compact with the State for collection of State taxes on tobacco products sold in Indian country. Included is language that allows tribes to sell cigarettes tax-free to their members, but requiring that tribes collect taxes on sales to non-Indians and to Indians of other tribes.
• The Escrow Statute requires tobacco manufacturers that sell cigarettes in Oklahoma either to be party to the Master Settlement Agreement (“MSA”) between states and tobacco companies, or to pay into an escrow fund.
• The Complementary Act requires tobacco manufacturers that sell their products in Oklahoma certify to the Oklahoma Attorney General that either it is participating in the MSA or that it has made the payments required by the Escrow Statute.
The Tribe initially argued that the Statutes were preempted by the federal Indian Trader Statutes, that they violated the Indian Commerce Clause and the Supremacy Clause of the U.S. Constitution, that they violated the Tribe’s right to govern itself, and that they violated the Tribe’s rights to due process and equal protection. The U.S. District Court for the Eastern District of Oklahoma dismissed these claims, holding that the State was immune from suit under the Eleventh Amendment to the U.S. Constitution and that even if the State was not immune, the Tribe had failed to make a plausible case.
The Tenth Circuit rejected the district court’s Eleventh Amendment analysis, holding that the lower court was wrong to consider the strength of the Tribe’s case at this juncture. In other words, the Tribe was entitled to bring its case, regardless of how strong (or weak) a case it was. However, the Tenth Circuit also concluded that the lower court was correct in its analysis of the strength of the Tribe’s case, stating that the overwhelming weight of U.S. Supreme Court precedent was against the Tribe’s position.
Although it made six separate arguments in the lower court, the Tribe made only two of those arguments to the Tenth Circuit: first, that the Statutes were preempted by the federal Indian Trader Statutes, and second, that the Statutes interfered with the Tribe’s right to govern itself. However, the court noted that “[t]he Supreme Court has examined cigarette tax laws that are similar to Oklahoma’s on numerous occasions,” and has consistently held that such laws are neither preempted by federal law, nor infringements on tribal self-governance. The court also rejected the Tribe’s argument that the Escrow Statute and the Complementary Act improperly limit which brands of cigarette tribal members can buy in Indian country, stating that the Tribe failed to identify any brand of cigarette that its members could not purchase because of the Statutes. The court acknowledged that the Statutes might have some effects on the Tribe and its members, but said they were the kind of minimal burdens that the Supreme Court has routinely upheld.
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