in the united states court of appeals for the ......hart v. massanari, 266 f.3d 1155 (9th cir. 2001)...

No. 12-35479________________________________________________________________

IN THE UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

________________________________________________________________JESSICA MAE MATHESON, dba JESS’S WHOLESALE;

Plaintiff-Appellant,

v.

LEE SMITH and DOYLE McMINN, Agents or Employees of the Washington State Department of Revenue, JOHN OR JANE DOE,Supervisor to Doyle McMinn, DOES 2 - 6, Other Unknown Agentsor Employees of the Washington State Department of Revenue, andthe Washington State Liquor Control Board; THE WASHINGTONSTATE DEPARTMENT OF REVENUE; THE WASHINGTON STATELIQUOR CONTROL BOARD, and THE STATE OF WASHINGTON;

Defendants-Respondents.________________________________________________________________ON APPEAL FROM THE UNITED STATES DISTRICT COURT FORTHE WESTERN DISTRICT OF WASHINGTON, NO. 3:11-cv-05946-RBL - THE HONORABLE RONALD B. LEIGHTON, UNITED STATESDISTRICT COURT JUDGE________________________________________________________________

REPLY BRIEF OF APPELLANT________________________________________________________________

Aaron L. Lowe, WSBA #15120Attorney for Appellant1403 W. Broadway AvenueSpokane, WA 99201(509) 323-9000

Case: 12-35479 11/28/2012 ID: 8418265 DktEntry: 18 Page: 1 of 47

TABLE OF CONTENTS

TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

I. OBJECTION TO APPELLEE’S STATEMENT OF CASE. . . . . . . .1

II. OBJECTION TO STATEMENT OF FACTS. . . . . . . . . . . . . . . . .3

III. ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

A. The Tax Injunction Act does not apply to penalties. . . . 10

B. A State Remedy does not prevent Federal Jurisdiction forthe reason that Federal Preemption, Discrimination andPersonal liability is alleged thereby creating § 1983liability. It also involves violation of FederalConstitutional Principles of Indian and InterstateCommerce, State Employees acting beyond theirauthority and other issues. The Federal Court hasExclusive Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . 11

C. Eleventh Amendment Immunity does not apply. . . . . .14

D. This suit involves Federal Preemption, not inconsistentState Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

E. This Case is brought under 28 U.S.C. § 1343, 42 U.S.C.§ 1983 for Gender and Racial Discrimination by StateEmployees acting beyond their authority under color ofState Law; for Immunity from Tax pursuant to FederalPreemption; for Systemic Discrimination, Harassmentand Unlawful Collection. The Tax Injunction Act doesnot deny Federal Jurisdiction to a Female, EnrolledTribal Indian who claims Discriminatory Treatment. . 29

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F. 28 U.S.C. § 1341 does not Bar Jurisdiction where StateCigarette Taxes on Indians is the Issue. . . . . . . . . . . . 30

G. The Tax Injunction act does not apply where thecollection of the tax is from Third Parties. . . . . . . . . . . 32

H. The Motion to file a Supplemental Complaint allegedfacts that occurred after the Judgment was entered inthis Case. It was an abuse of discretion to deny it. . . . 33

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

-ii-


TABLE OF AUTHORITIES

Cases

281 Care Committee v. Arneson, 638 F.3d 621, 632 (8 Cir. 2011) th

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Agua Caliente Band of Cahuilla Indians v. Hardin, 223 F.3d 1041,1049 (9 Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12, 21th

Akhtar v. Mesa, 2012 WL 5383038, page 8 (9 Cir. 2012). . . . . 7, 34th

American Trucking Associations v. Scheiner, 483 U.S. 266, 107 S.Ct.2829, 97 L.Ed.2d 226 (1987). . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Arizona v. U.S., 132 S.Ct. 2492, 183 L.Ed.2d 351 (2012) . . . . . . .19

Associated Grocers v. State, 787 P.2d 22, 25 (Wash. 1990). . . . . . 16

Benson v. JP Morgan Chase Bank N.A., 673 F.3d 1207,1218 (9 Cir.th

2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Bowman v. Chicago NW Ry Co., 125 U.S. 465, 8 S.Ct. 689, 31 L.Ed700 (1888). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Cabazon Band of Mission Indians v. Smith, 388 F.3d 691, 701 (9th

Cir. 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Chudacoff v. University Medical Center of Southern Nevada, 649 F.3d1143, 1152 (9 Cir. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . 28, 35th

Coalition to Defend Affirmative Action v. Brown, 674 F.3d 1128, 1134(9th Cir. 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Coeur d’Alene Tribe of Idaho v. Hammond, 384 F.3d 674, 681 (9th

Cir. 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

-iii-


Comenout v. State, 722 F.2d 574 (9 Cir. 1983). . . . . . . . . . . . . . 14th

Cree v. Flores, 157 F.3d 762, 774 (9 Cir. 1998). . . . . . . . . . . . . . 24th

Crowe & Dunlevy P.C. v. Stidham, 640 F.3d 1150, 1154-6 (10 Cir.th

2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Dennis v. Higgins, 498 U.S. 439, 451, 111 S.Ct. 865, 112 L.Ed.2d969 (1991). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Department of Taxation and Finance of New York v. Milhelm Attea &Bros., 512 U.S. 61, 64, 114 S.Ct. 2028, 129 L.Ed.2d 52 (1994). . .5

Dillon v. Montana, 634 F.2d 463 (9 Cir. 1980). . . . . . . . . . . . . . . 14th

Dodds v. Richardson, 614 F.3d 1185, 1193 (10th Cir. 2010). . . . .13

Eid v. Alaska Airlines, 621 F.3d 858, 874 (9 Cir 2010). . . . . . . . 34th

Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed 714 (1908). .13

Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100, 102S.Ct. 177, 70 L.Ed.2d 271 (1981). . . . . . . . . . . . . . . . . . . . . . . . . 18

Fitzpatrick v. Bitzer, 427 U.S. 445, 456, 96 S.Ct. 2666, 49 L.Ed.2d614 (1976). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Gilbertson v. Albright, 381 F.3d 965 (9 Cir. 2004). . . . . . . . . . . . 20th

Gomez v. Toledo, 446 U.S. 635, 100 S.Ct. 1920, 64 L.Ed.2d 572(1980). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Griffin v. School Bd. of Prince Edward County, 377 U.S. 218, 225, 84S.Ct. 1226, 12 L.Ed.2d 256 (1964). . . . . . . . . . . . . . . . . . . . . . . .34

Grizzle v. Kemp, 634 F.3d 1314, 1319 (11 Cir. 2011). . . . . . . . .14th

-iv-


Hart v. Massanari, 266 F.3d 1155 (9 Cir. 2001) . . . . . . . . . . . . . 21th

HCI Distribution Inc. v. New York State Police, 948 N.Y.S.2d 542, 548(S.C.N.Y. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Hemi Group LLC v. City of New York, 130 S.Ct. 983, 990, 175L.Ed.2d 943 (2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Hibbs v. Winn, 542 U.S. 88, 108, 124 S.Ct. 2276, 159 L.Ed.2d 172(2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Idaho v. Coeur d’ Alene Tribe of Idaho, 521 U.S. 261, 117 S.Ct. 2028,138 L.Ed.2d 438 (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Jefferson County v. Acker, 527 U.S. 423, 119 S.Ct. 2069, 144L.Ed.2d 409 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 21, 29

Lindauer v. Rogers, 91 F.3d 1355 (9 Cir. 1996). . . . . . . . . . . . . .34th

Louisville N.R. Co. v. F.W. Coors Brewing Co., 223 U.S. 70, 32 S.Ct.189, 56 L.Ed 355 (1912). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Mahoney v. State Tax Commission, 524 P.2d 187 (Idaho 1973). . . .3

Mark v. Groff, 521 F.2d 1376, 1378 (9 Cir. 1975). . . . . . . . . . . . 12th

Maxwell v. County of San Diego, 679 F.3d 941 (9 Cir. 2012). . . . .13th

McClanahan v. State Tax Commission, 411 U.S. 164, 93 S.Ct. 1257,36 L.Ed.2d 129 (1973). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Mescalero Apache Tribe v. Jones, 411 U.S. 145, 150, 93 S.Ct. 1267,36 L.Ed.2d 114 (1976). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Miller Bros v. Maryland, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed 744(1954). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

-v-


Moe v. Confederated Salish and Kootenai Tribes of FlatheadReservation, 425 U.S. 463, 480, 96 S.Ct 1634, 48 L.Ed.2d 96(1976). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 8, 31

National Federation of Independent Businesses v. Sebelius, ___ U.S.___,132 S.Ct. 2566, 2583, 183 L.Ed.2d 450 (2012). . . . . . . . . 10, 19

Parker v. Franklin County Community School Corp., 667 F.3d 910,972 (7 Cir. 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29th

Paul v. Department of Revenue, 40 P.3d 1203 (2002). . . . . . . . . . .3

Pauline v. State of Hawaii Dept. of Public Safety, 773 F.Supp.2d 914(D. Hawaii 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Plains Commerce Bank v. Long Family Land and Cattle Co., 554 U.S.316, 327, 128 S.Ct. 2709, 171 L.Ed.2d 457 (2008). . . . . . . . . . .21

Pueblo of Santa Ana v. Nash, 854 F.Supp.2d 1128 (D.C.N.M. 2012).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Quackenbush v. Allstate Insurance Co., 517 U.S. 706, 719, 116 S.Ct.1712, 135 L.Ed.2d 1 (1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Red Earth LLC v. U.S., 657 F.3d 138 (2 Cir. 2011). . . . . . . . . . . 17nd

Rowe v. New Hampshire Motor Transport Ass’n, 552 U.S. 364, 374,128 S.Ct. 989, 169 L.Ed.2d 933 (2008). . . . . . . . . . . . . . . . . . . .17

Schware v. Board of Bar Examiners of the State of New Mexico, 353U.S. 232, 239, 77 S.Ct. 752, 1 L.Ed.2d 796 (1957). . . . . . . . . . . . 29

Seneca Tribe of Oklahoma v. Thompson, 874 F.2d 709, 714 (10 Cir.th

1989). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

State v. Atcitty, 215 P.3d 90, 98 (N.M. 2009). . . . . . . . . . . . . . . . . .16

-vi-


State v. Union Pacific Railroad Company, 823 P.2d 539 (Wyo. 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Ward v. New York, 291 F.Supp.2d 188, 206 (W.D.N.Y. 2003). . . . 25

Washington v. Confederated Tribes of the Colville Reservation, 447U.S. 134, 142, fn.9, 100 S.Ct. 2069, 65 L.Ed.2d10 (1980). . . . . . .5

Washington State Bldg and Trades Council AFL-CIO v. Spellman, 684F.2d 627, 631 (9 Cir. 1982). . . . . . . . . . . . . . . . . . . . . . . . . . . . .28th

Weimerskirch v. C.I.R., 596 F.2d 358, 362 (9 Cir. 1979). . . . . . . .8th

Weste v. Atkins, 487 U.S. 42, 48, 108 S.Ct. 2250, 101 L.Ed.2d 40(1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 144, 100S.Ct. 2578, 65 L.Ed.2d 665 (1980) . . . . . . . . . . . . . . . . . . . . . . . .24

Wolfson v. Brammer, 616 F.3d 1045, 1066 (9 Cir. 2010). . . . . . . 13th

Wright v. Riveland, 219 F.3d 905, 911 (9 Cir. 2000). . . . . . . . . . .10th

Yick Wo v. Hopkins, 118 U.S. 356, 6 S.Ct. 1064, 30 L.Ed 220 (1886).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Statutes

26 U.S.C. § 7421 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 3128 U.S.C. § 1341 . . . . . . . . . . . . . . . . . . . . . . . . . .10, 29, 30, 31, 3228 U.S.C. § 1343 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 29, 3342 U.S.C. § 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29, 33

-vii-


Federal Constitution

U.S.Const. Art I § 8 cl. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19U.S.Const. Art I § 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

State Statutes

Wash.Rev.Code § 82.24.010. . . . . . . . . . . . . . . . . . . . . . . . . . .2, 28Wash.Rev.Code § 82.24.020. . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 27Wash.Rev.Code § 82.24.040. . . . . . . . . . . . . . . . . . . . . 3, 4, 6, 8, 18Wash.Rev.Code § 82.24.080. . . . . . . . . . . . . . . . . . . . . . . . . 4, 6, 24Wash.Rev.Code § 82.24.110. . . . . . . . . . . . . . . . . . . . . . .3, 4,18, 26Wash.Rev.Code § 82.24.250. . . . . . . . . . . .2, 3, 4, 15, 16, 17, 24, 26Wash.Rev.Code § 82.24.260. . . . . . . . . . . . . . . . . . . . . . . . . 2, 3, 4Wash.Rev.Code § 82.24.300. . . . . . . . . . . . . . . . . . . . . . . . 2, 24, 26Wash.Rev.Code § 82.24.500. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Wash.Rev.Code § 82.24.550 . . . . . . . . . . . . . . . . . . . . . . . . . .27, 30Wash.Rev.Code § 82.24.900 . . . . . . . . . . . . . . . . . . . .10, 18, 27, 30Wash.Rev.Code § 82.32.150. . . . . . . . . . . . . . . . . . . . . . . . . . 26, 27Wash.Rev.Code § 82.32.180. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Wash.Rev.Code § 82.32A.020. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

State Constitution

Wash.Const. art I § 2; art IV § 28. . . . . . . . . . . . . . . . . . . . . . . . 10Wash.Const. art 26, Second. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

State Regulations

WAC 458-20-192(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16WAC 458-20-186(303) and 602(a). . . . . . . . . . . . . . . . . . . . . . . .16

Other

Fed.R.Civ.P. 15(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Fed.R.Civ.P. 60(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

-viii-


No. 12-35479________________________________________________________________

IN THE UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

________________________________________________________________JESSICA MAE MATHESON, dba JESS’S WHOLESALE;

Plaintiff-Appellant,

v.

LEE SMITH and DOYLE McMINN, Agents or Employees of the Washington State Department of Revenue, JOHN OR JANE DOE,Supervisor to Doyle McMinn, DOES 2 - 6, Other Unknown Agentsor Employees of the Washington State Department of Revenue, andthe Washington State Liquor Control Board; THE WASHINGTONSTATE DEPARTMENT OF REVENUE; THE WASHINGTON STATELIQUOR CONTROL BOARD, and THE STATE OF WASHINGTON;

Defendants-Respondents.________________________________________________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FORTHE WESTERN DISTRICT OF WASHINGTON, NO. 3:11-cv-05946-RBL, THE HONORABLE RONALD B. LEIGHTON, UNITED STATESDISTRICT COURT JUDGE________________________________________________________________

I. OBJECTION TO APPELLEE’S STATEMENT OF CASE

Appellees, including the State of Washington, conclude in the

first sentence of their statement of the case that Matheson

“purchased” the cigarettes and “has been unable to account for how

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she disposed of them.” There is no proof in the record that she1

purchased any cigarettes and there is no proof because she did not

purchase any cigarettes. The Complaint (ER 179,191) states that

she only transports tobacco products to her father and brother.

Matheson’s witnesses testified in state court proceedings that the

cigarettes were delivered to either the business of her Native

American father or Native American brother, both of whom are fully

qualified as Indian tribal organization businesses on their respective

Indian reservations.

Wash.Rev.Code § 82.24.010(6) defines all three Mathesons as

Indian tribal organizations. Jessica Matheson had dual exemptions

from the State’s cigarette tax both as a wholesaler (Wash.Rev.Code

§ 82.24.260(a)), and as an Indian transporting to qualified Indians.

Wash.Rev.Code § 82.24.260(c), 82.24.250(1)(a). Both relatives were

exempt from the State of Washington cigarette tax. Paul Matheson’s

Puyallup Indian business was also exempt as the Puyallup

Tribe/State Compact was in effect. Wash.Rev.Code § 82.24.300.

For convenience, hereafter the reference to Appellees’ brief is to “the State” but is meant to include all1

Appellees.

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Nick Matheson’s Coeur d’Alene Reservation business was exempt

under Wash.Rev.Code § 82.24.260(c); 82.24.250(5). Wash.Rev.Code

§ 82.24.110(1)(a), (m) and especially sub-paragraph (n)(iii) exempts

a wholesale shipper like Jessica Matheson to “possess or transport”.

Wash.Rev.Code § 82.24.040(3); Mahoney v. State Tax Commission,

524 P.2d 187 (Idaho 1973) and Paul v. Department of Revenue, 40

P.3d 1203 (Wash. 2002) both hold that cigarettes destined out-of-

state to other Indian reservations need not have tax stamps and

thereby these products are not taxable by the State. There is no

evidence that cigarettes were destined for any taxable location or

that these products were “sold” or disposed of by Plaintiff.

Matheson never wholesaled to non-Indians. ER 179-80.

II. OBJECTION TO STATEMENT OF FACTS

Page 3 of the State’s brief states, “Ms. Matheson was the first

taxable person” and “Ms. Matheson or her employees possessed

unstamped cigarettes outside of Indian country.” The State admits,

however, at page 4 of its brief and throughout that Matheson was

a licensed wholesaler. The Complaint alleges a continuous

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wholesale license from 2006 through at least November 2011. ER

176-7. Matheson, as a licensed wholesaler, can legally possess

unstamped cigarettes anywhere in the United States including

Washington State. See; e.g., Wash.Rev.Code § 82.24.110(l)(e) and

(n)(iii). Wash. Rev.Code § 82.24.040(1) states, “except as authorized

by this chapter, no person other than a licensed wholesaler, shall

possess in this state unstamped cigarettes.”

Wash.Rev.Code § 82.24.250(1) in part provides “. . . no person

other than (a) a licensed wholesaler in the wholesaler’s own vehicle.”

Wash.Rev.Code § 82.24.260(1) states, “. . . other than (a) a

wholesaler required to be licensed under this chapter.” Matheson

raised the licensed wholesaler issue at pages 11, 31-2, of her brief.

The State admits that, “the wholesaler can sell unstamped

cigarettes to (1) another wholesaler . . . . or (4) a tribally licensed

wholesaler or retailer on an Indian reservation.” (State’s Br. p. 4).

Unless she sells to a taxable consumer, no stamping or tax

collection is required. Wash.Rev.Code § 82.24.080(1) and (2),

Appellant’s Opening Brief pgs. 30-33 reviews the issue. There is

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absolutely no evidence, nor even an inference, that a taxable sale

was ever made by Matheson. Therefore, the ruling of the trial court

must be reversed.

Another reason the “first taxable person” factual statement is

incorrect is that the statement ignores the undisputed fact that all

three Mathesons were enrolled Indians living on and whose

businesses were located on federally recognized Indian reservations.

ER 179, 191, 192. The State of Washington cigarette tax never

applies to enrolled Indians, whether on or off their reservations.

McClanahan v. State Tax Commission, 411 U.S. 164, 93 S.Ct. 1257,

36 L.Ed.2d 129 (1973); Department of Taxation and Finance of New

York v. Milhelm Attea & Bros., 512 U.S. 61, 64, 114 S.Ct. 2028, 129

L.Ed.2d 52 (1994); Moe v. Confederated Salish and Kootenai Tribes

of Flathead Reservation, 425 U.S. 463, 480, 96 S.Ct 1634, 48

L.Ed.2d 96 (1976); Washington v. Confederated Tribes of the Colville

Reservation, 447 U.S. 134, 142, fn.9, 100 S.Ct. 2069, 65 L.Ed.2d10

(1980).

On page 3 of the State’s Brief, the argument that a wholesaler

-5-


is the first taxable person unless she sells in an exempt sale all

referring to “Wash.Rev.Code § 82.24.020-080” is misleading as

wholesalers can keep stock unstamped indefinitely. Wash. Rev.Code

82.24.040(2)(b). Wash.Rev.Code § 82.24.020(4)allows Indian sales,

“. . . (4) in accordance with federal law and rules prescribed by the

department, an enrolled member may purchase cigarettes from an

Indian tribal organization.” Wash.Rev.Code § 82.24.040(b)(5) also

allows Matheson unlimited possession over any period of time.

Wash.Rev.Code § 82.24.080(2) completely refutes presumed

sales. It states:

the tax shall be imposed at the time and place of the firsttaxable event and upon the first taxable person withinthis state. Any person whose activities would otherwiserequire payment of the tax imposed by subsection (1) ofthis section but who is exempt from the tax neverthelesshas a precollection obligation for the tax that must beimposed on the first taxable event within this state.

When the sale is to a taxable person the tax is imposed only on

the first taxable event of sale. Under Appellee’s theory, all

wholesalers must stamp all cigarettes immediately with no

exceptions, but this theory of the case is not supported by the Act.

-6-


Matheson’s Opening Brief at pages 31-32, also refutes this material

misstatement, especially the recent case of HCI Distribution Inc. v.

New York State Police, 948 N.Y.S.2d 542, 548 (S.C.N.Y. 2012)

holding, “it is pure speculation that an Indian transporting

cigarettes would sell them off-reservation.”

A wholesaler is never the taxable person, but only has to

collect the tax when the sale is taxable.

A further misstatement is made at page 5 of the State’s Brief,

“The department determined that Ms. Matheson had not purchased

state tax stamps for the 703,400 packs.” The Complaint (ER 172)

quotes Defendant Lee Smith under oath stating that no one knew

whether stamps were on the cigarettes. The “determination” is

speculation without any factual basis. The factual assertions

throughout refer to the state tax false determinations. Page 6 of the

State’s Brief that Matheson “failed to pay the tax” is an example.

The state transcript has not been introduced into evidence. This

appeal is on a motion to dismiss. The facts of the Complaint at this

time are taken as true. Akhtar v. Mesa, 2012 WL 5383038, page 8

-7-


(9 Cir. 2012). This is a § 1983 federal case. At this stage of theth

case, no credibility determinations are made.

The Complaint (ER 171-2), provides that Matheson doesn’t

transport or sell to anyone but two Indian tribal organizations, her

Indian brother or father. ER 179. The State’s Brief at 6 also

misstates the finding of the Board of Tax Appeals. There is no

evidence to “weigh” as no presumption, under Ninth Circuit law,

can prevail unless admissible evidence is introduced. Weimerskirch

v. C.I.R., 596 F.2d 358, 361-2 (9 Cir. 1979). “The Commissionerth

offered no evidence. . . there was no evidence from which it could

only be inferred that he engaged in those activities. . . A deficiency

determination which is not supported by the proper foundation of

substantive evidence is clearly arbitrary and erroneous.”

Federal law, especially Moe v. Confederated Salish and Kootenai

Tribes of Flathead Reservation, 425 U.S. 463, 480, 96 S.Ct. 1634, 48

L.Ed.2d 96 (1976) holds, “. . . the cigarette sales tax, as applied to

on-reservation Indians, conflict with the congressional statutes.”

Wash.Rev.Code § 82.24.040(1) allows a wholesaler to possess

-8-


unstamped cigarettes. . .050(1) states the same. Further, Matheson

is an Indian trial organization and can possess cigarettes under that

classification. Wash.Rev.Code § 82.24.040(b)(5).

The wholesale license was granted by the State and

substantive due process was provided by the State if the wholesaler

violated the license. Wash.Rev.Code § 82.24.500, 550. Matheson’s

Complaint alleges, “Plaintiff is discriminated by defendants as they

refuse to recognize her wholesaler’s license.” ER 187. The

allegations in the Complaint allege a systemic violation of Indian

rights. ER 169-173. The state actors ignored Matheson’s wholesale

license and her right to due process and equal treatment for alleged

violations. This is the epitome of the case. A female Indian

wholesaler, who alleges that she is probably the only Washington

State female on-reservation Indian wholesaler, was discriminated

against by constant supervision and harassment. ER 179-183.

There was no discovery conducted in this matter. It is highly

doubtful if all wholesalers get such constant supervision. For all of

the above reasons, the decision of the trial court must be reversed.

-9-


III. ARGUMENT

A. The Tax Injunction Act does not apply to penalties.

The State’s Brief at page 11 and throughout presumes that it

was a tax, but the assessment was not a tax. This issue is reviewed

in Matheson’s Opening Brief at pages 25-28. National Federation of

Independent Businesses v. Sebelius, ____ U.S. ____, 132 S.Ct. 2566,

2583, 183 L.Ed.2d 450 (2012) held that a penalty is not a tax. 26

U.S.C. § 7421(a) states, “assessment and collection of any tax.” 28

U.S.C. § 1341 states, “collection of any tax.” Federal law determines

whether the tax is an assessment within both 28 U.S.C. § 1341 and

26 U.S.C. § 7421(1). This issue is reviewed at page 31 of this Reply

Brief. Wright v. Riveland, 219 F.3d 905, 911 (9 Cir. 2000).th

Wash.Const. art I § 2; art IV § 28, U.S.Const. Art I § 10,

Wash.Rev.Code § 82.24.900 all support federal law to determine

whether an assessment is a tax. If it is not a tax, 28 U.S.C. § 1341

does not apply and federal jurisdiction is obtained.

The State also contends at page 11 of its brief, that “this case

is not a collection action.” The State contradicts its statement in

-10-


footnote 5 at page 7. “While the Department has filed tax warrants

as a result of Ms. Matheson’s failure to pay the assessment and has

collected against Ms. Matheson’s off-reservation bank account.”

Arguments cannot change the facts. Collection has been

undertaken and will continue. ER 184.

The State has already taken Matheson’s money from her bank

account. If the case is decided on the basis of non-collection, all the

State has to do is continue collection. The attempt to distinguish

Jefferson County v. Acker, 527 U.S. 423, 119 S.Ct. 2069, 144

L.Ed.2d 409 (1999) fails. This suit, like Acker, supra, seeks an

injunction against tax collection. ER 198, 201. Acker Id., 435, “In

sum, we hold that the Tax Injunction Act does not bar collection

suits, nor does it prevent taxpayers from urging defenses in such

suits that the tax for which collection is sought is invalid.”

B. A State Remedy does not prevent Federal Jurisdictionfor the reason that Federal Preemption, Discriminationand Personal liability is alleged thereby creating § 1983liability. It also involves violation of FederalConstitutional Principles of Indian and InterstateCommerce, State Employees acting beyond their authorityand other issues. The Federal Court has ExclusiveJurisdiction.

-11-


In reviewing this issue, Matheson, at page 11 of her Opening

Brief cites Agua Caliente Band of Cahuilla Indians v. Hardin, 223

F.3d 1041, 1049 (9 Cir. 2000). The Court, reviewing Idaho v.th

Coeur d’ Alene Tribe of Idaho, 521 U.S. 261, 117 S.Ct. 2028, 138

L.Ed.2d 438 (1997), stated:

Justice Kennedy stated in the principal opinion that“[w]here there is no available state forum the Young rulehas special significance,” Id. at 271, 117 S.Ct. 2028, andconcluded that one instance in which Young applies is ifthere is “no state forum available to vindicate federalinterests,” id. at 270, 117 S.Ct. 2028. He ultimatelyacknowledged, however, that “[e]ven if there is a promptand effective remedy in a state forum, a second instancein which Young may serve an important interest is whenthe case calls for the interpretation of federal law.” Id. at274, 117 S.Ct. 2028. . . we conclude that the existence ofa remedy at law in state court is not a bar to the Young

exception. (Underlining supplied).

Coalition to Defend Affirmative Action v. Brown, 674 F.3d 1128,

1134 (9th Cir. 2012) upheld jurisdiction for declaratory and

injunctive relief against a state officer for failure to enforce the State

Constitution. Mark v. Groff, 521 F.2d 1376, 1378 (9th Cir. 1975)

holds that damage actions are allowable against federal employees

who harass individuals on tax audits. The action also applies to

-12-


state tax officials. Matheson alleged constitutional violations under

color of state law willfully beyond the named individuals authority

ER 169, 173, 178, 180-85. They were sued personally. ER 178.

These factual allegations support federal jurisdiction for damages.

Weste v. Atkins, 487 U.S. 42, 48, 108 S.Ct. 2250, 101 L.Ed.2d 40

(1988); Dodds v. Richardson, 614 F.3d 1185, 1193 (10th Cir. 2010).

Maxwell V. City of San Diego, 697 F.3d 941, 953 (9 Cir. 2012)th

denies Eleventh Amendment immunity in a § 1983 case where

personal liability is alleged. Here personal liability of Smith and

McMinn is alleged. ER 169, 178, 186. Injunctive and declaratory

relief is allowed even if only official capacity is alleged. Wolfson v.

Brammer, 616 F.3d 1045, 1066 (9 Cir. 2010).th

Crowe & Dunlevy P.C. v. Stidham, 640 F.3d 1150, 1154-6 (10th

Cir. 2011) notes that an ongoing violation of federal law eliminates

sovereign immunity pursuant to Ex Parte Young, 209 U.S. 123, 28

S.Ct. 441, 52 L.Ed 714 (1908). Matheson alleges that the interstate

commerce clause of the U.S. Constitution invalidates the notice

statute and it also discriminates against Indians. ER 170-1. The

-13-


regulations required out of state reporting. ER 182.

Comenout v. State, 722 F.2d 574 (9 Cir. 1983) and Dillon v.th

Montana, 634 F.2d 463 (9 Cir. 1980), cited throughout the State’sth

brief, are easily distinguishable as neither had a state wholesaler’s

license, and were not subject to systemic discrimination, state tax

penalties or unconstitutional collection.

Grizzle v. Kemp, 634 F.3d 1314, 1319 (11 Cir. 2011) and 281th

Care Committee v. Arneson, 638 F.3d 621, 632 (8 Cir. 2011) upholdth

§ 1983 declaratory relief if constitutional violations are proven.

Pueblo of Santa Ana v. Nash, 854 F.Supp.2d 1128 (D.C.N.M. 2012)

holds that if the question involves lack of state jurisdiction on

federal Indian law, the issue is primarily federal and declaratory

judgment against a state court judge named individually is available

in federal court.

C. Eleventh Amendment Immunity Does Not Apply.

At page 27 of its brief, the State contends that it has Eleventh

Amendment immunity against the State and its officials “acting in

their official capacities”. This argument overlooks the allegations in

-14-


Matheson’s Complaint that, “The individual Defendants have acted

far beyond their delegated authority in a willfully wanton, reckless

and intentional attempt to destroy Plaintiff’s wholesale license and

drive Plaintiff out of business.” ER 169. The facts alleged support

this contention. ER 172, 180-5, and throughout.

Matheson alleged denial of equal rights, thereby violating the

Fifth Amendment of the Federal Constitution. ER 174. The detailed

systematic disparate treatment of military bases could sell as many

cigarettes as they wanted, but Indian retailers were given quotas by

the state. The State also denied her the use of her valid wholesaler’s

license based on her Indian status and sex. ER 168-9. The state

law requires wholesale licensed Indians to call in, even if out of

state, before they ship cigarettes to a reservation Indian retailer. ER

186-7. Military bases are not required to call in. Wash.Rev.Code §

82.24.250 (7)(b). However, shipments to Indian reservations require

a call in. Wash.Rev.Code § 82.24.250(c). Exceptions to state

taxation are invalid if they violate a wholesaler’s equal protection

rights, provided by the fourteenth amendment to the United States

-15-


Constitution and also the State of Washington Constitution, art. 1

§ 12. Associated Grocers v. State, 787 P.2d 22, 25 (Wash. 1990).

As an enrolled Indian living on her reservation, Jessica

Matheson, even if she was unlicensed, had no duty to comply with

the State’s notice or registration law as it infringes on tribal

sovereignty. State v. Atcitty, 215 P.3d 90, 98 (N.M. 2009).

Wash.Rev.Code § 82.24.250(7)(b) allows military cigarettes delivered

without notice but requiring shipments by non-wholesalers onto

Indian reservations to give advance notice. Wash.Rev.Code §

82.24.250(c). The same discrimination applies to the state

regulations by WAC 458-20-192(9) apply quotas to Indians but not

purchasers from military base stores. WAC 458-20-186(303) and

602(a). Invalidity and injunctive relief from these statutes and rules

are requested on the Complaint. ER 195, 197. Related to the issue

of inconvenience is State v. Union Pacific Railroad Company, 823

P.2d 539 (Wyo. 1992) holding that filing papers by a construction

company declaring that its equipment was not going to be used in

state taxable situations held up the equipment for several hours

-16-


and was moot a “minimum burden.” Id. at 542. The State’s assertion

that collection of the tax is minimal ignores the notice provision of

Wash.Rev.Code § 82.24.250(1)(a); (7)(c) and Red Earth LLC v. U.S.,

657 F.3d 138 (2 Cir. 2011). nd

Jessica Matheson was engaged in interstate or Indian

commerce. She was merely picking up within the state on a round

trip between reservations. Rowe v. New Hampshire Motor Transport

Ass’n, 552 U.S. 364, 374, 128 S.Ct. 989, 169 L.Ed.2d 933 (2008)

holds that a trucker of cigarettes in interstate commerce is not

required to deliver to only state licensed tobacco retailers and also

does not have to ascertain that the person who takes delivery is over

21. Federal preemption invalidates the law. This has been the law

for at least 125 years, since 1888 when Bowman v. Chicago NW Ry

Co., 125 U.S. 465, 8 S.Ct. 689, 31 L.Ed 700 (1888) was decided. It

held that a Chicago brewer could ship beer by rail to itself from

Chicago, Illinois to Marshalltown, Iowa, a dry state at the time. The

court held until the beer was to be delivered to a person who had

authority to receive it, it did not violate the state non-alcohol laws.

-17-


The interstate transportation was not at end and the state could not

prohibit importation from another state. Louisville N.R. Co. v. F.W.

Coors Brewing Co., 223 U.S. 70, 32 S.Ct. 189, 56 L.Ed 355 (1912)

holds the same way. Until the transportation is concluded, the

commodity is not subject to state regulation.

The state law, Wash.Rev.Code § 82.24.110(1)(a), 82.24.040(1)

and 82.24.900, allow interstate transportation by a licensed

wholesaler. The State violated the law as Matheson only delivered

on round-trips. Miller Bros v. Maryland, 347 U.S. 340, 74 S.Ct. 535,

98 L.Ed 744 (1954). Dennis v. Higgins, 498 U.S. 439, 451, 111 S.Ct.

865, 112 L.Ed.2d 969 (1991) upholds a challenge to a state law

violating the commerce clause and confers § 1983 jurisdiction.

American Trucking Associations v. Scheiner, 483 U.S. 266, 107 S.Ct.

2829, 97 L.Ed.2d 226 (1987) prohibits state taxes on interstate

trips.

The State’s repeated reliance in Fair Assessment in Real Estate

Ass’n v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271

(1981), throughout its brief, ignores the facts that Fair Assessment

-18-


was a damage suit based on the amount of the tax assessment, not

immunity from tax. Fair Assessment predates National Federation

of Independent Business v. Sebelius, ___ U.S. ___, 132 S.Ct. 2566,

183 L.Ed.2d 450 (2012) holding that if the assessment is not a tax,

the federal court has jurisdiction. It is also distinguished by the

constitutional principles of the Washington Constitution Art 26,

Second, giving exclusive jurisdictional control of Indians and their

reservations to the U.S. Congress. The U.S. Const. Art I § 8 cl. 3

retains exclusive control to regulate Indian commerce to Congress

as does the Supremacy Clause. Art VI cl 2. Congress retains the

power to immunize on-reservation Indians from state tax. Mescalero

Apache Tribe v. Jones, 411 U.S. 145, 150, 93 S.Ct. 1267, 36 L.Ed.2d

114 (1976), U.S.Const. art I § 8 cl. 3, Wash.Const. art 26, Second.

Arizona v. U.S., ___ U.S. ___, 132 S.Ct. 2492, 2501, 183

L.Ed.2d 351 (2012) recognizes express preemption and also is

“precluded from regulating conduct in a field that Congress acting

within its proper authority, has determined must be regulated by it

exclusive governance.” Seneca Tribe of Oklahoma v. Thompson, 874

-19-


F.2d 709, 714 (10 Cir. 1989) holds that federal Indian lawsth

predominate on Indian conduct on reservations, thus federal

abstention is inappropriate.

Fair Assessment has been limited by Quackenbush v. Allstate

Insurance Co., 517 U.S. 706, 719, 116 S.Ct. 1712, 135 L.Ed.2d 1

(1996). “. . . But we have subsequently indicated that Fair

Assessment was a case about the scope of the § 1983 cause of

action, . . . not the abstention doctrines.” The limitation was not

abstention but limited to tax cases that are dependant on holding

the tax statute unconstitutional.

The Ninth Circuit in an en banc opinion has recognized the

limitation of Fair Assessment in Gilbertson v. Albright, 381 F.3d 965,

984 (9 Cir. 2004) holds that when damages are at issue, § 1983th

actions, deference not dismissal is the proper method. Matheson

seeks damages. ER 196. She also seeks many other remedies

against discrimination, invalid collection violating due process, State

employees acting beyond their scope and other relief. At the least,

Fair Assessment has been limited to a stay, not dismissal. En banc

-20-


opinions are binding. Hart v. Massanari, 266 F.3d 1155, 1171 (9th

Cir. 2001).

Independent Article III jurisdiction exists as Matheson alleges

that she was damaged by failure of the state to bring the collection

action in tribal court. ER 174, 184, 196. A damage action for

discrimination confers Article III jurisdiction. Plains Commerce Bank

v. Long Family Land and Cattle Co., 554 U.S. 316, 327, 128 S.Ct.

2709, 171 L.Ed.2d 457 (2008). Here, collection of a penalty is also

involved. Jefferson County v. Acker, 527 U.S. 423, 438, 119 S.Ct.

2069, 144 L.Ed.2d 409 (1999) involved federal immunity for

impermissible and discriminatory license fees. The Court held that

the federal court had jurisdiction. Acker applies here.

Agua Caliente Band of Cahuilla Indians v. Hardin, 223 F.3d

1041 (9 Cir. 2000) also controls “. . .the existence of a remedy atth

law in state court is not a bar to the Young exception”. id at 1050.

Matheson alleges that Defendants Lee Smith and Doyle

McMinn were informed of Matheson’s exempt status (ER 169), had

no evidence of any unstamped transportation on sales to taxable

-21-


persons (ER 172, 183), were informed of the exemption by case

citations (ER 181-2) and knowingly tried to put Matheson out of

business. They were named personally, “as they acted far beyond

the scope of their delegated authority by willfully ignoring the

Plaintiff’s rights as a tribal Indian and discriminated against her

gender.” (ER 178). These allegations are sufficient to find federal

jurisdiction and to overcome a motion to dismiss. Gomez v. Toledo,

446 U.S. 635, 640, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980).

Matheson also relies on 28 U.S.C. § 1343(a)(3) confirming original

jurisdiction of § 1983 cases in federal court. In the state court

proceedings, no jury was allowed. Matheson seeks a jury

determination. ER 168, 200.

Federal law determines legal incidence of state tax. Coeur

d’Alene Tribe of Idaho v. Hammond, 384 F.3d 674, 681 (9 Cir.th

2004). Discriminatory treatment of Indians, an exemption from

state laws, is subject to federal preemption. Cabazon Band of

Mission Indians v. Smith, 388 F.3d 691, 701 (9 Cir. 2004). th

Cabazon applies factually and legally for the reason that the

-22-


statute in Cabazon required Indian tribal police to cover the light

bars on top of their vehicles when traveling off the Cabazon

reservation. The Cabazon Reservation is separated by 13 miles of

off-reservation roads between four noncontiguous reservation

sections. “. . . “it is not possible to drive between the different

sections without leaving reservation land and driving on public

roads.” Id. at 693. The tribal police, even in hot pursuit, had to stop

the police car, open the trunk and cover the light bars. All other

non-Indian vehicles, including private ambulances, only had to turn

off the lights but did not have to cover them. This procedure was

required by California law. Since the Indian police were not

“authorized,” they did not fit the requirement to only turn the lights

off. The court held that the state statute discriminated against on-

reservation Indians traveling off-reservation and there was no

rational basis to discriminate.

The Complaint alleges that Matheson is a tribal Indian living

all her life on Indian reservations. ER 158-9, 177. She only hauled

cigarettes to her father and brother on round trips to and from the

-23-


reservation. Cree v. Flores, 157 F.3d 762, 774 (9 Cir. 1998) deniedth

the State’s attempt to require licenses and overnight fees on Yakama

Indians off reservation round trip travel. The Yakama treaty had

specific language. However, the Puyallup exemption from state

cigarette tax is analogous. Wash.Rev.Code § 82.24.300.

Additionally, the State admits at page 4 that, “the wholesaler can

sell unstamped cigarettes to another wholesaler”. Even if purchase

is presumed, the purchase was wholesaler to wholesaler and exempt

by Wash.Rev.Code § 82.24.250(3) and 82.24.080(1) and (2). The

State has no off reservation contact to sustain the motion to dismiss

except that the wholesaler delivered off reservation to Matheson in

a tax exempt delivery. The State alleges purchases off reservation

without facts or a taxable person. It is beyond dispute that

Matheson’s only off reservation conduct and conduct with non

Indians is wholesaler to wholesaler. The rest of the facts alleged in

the Complaint are Indian to Indian, close relative to close relative,

on Indian reservations or between on-reservation Indians. White

Mountain Apache Tribe v. Bracker, 448 U.S. 136, 144, 100 S.Ct.

-24-


2578, 65 L.Ed.2d 665 (1980), states:

When on-reservation conduct involving only Indians isat issue, state law is generally inapplicable, for theState’s regulatory interest is likely to be minimal and thefederal interest in encouraging tribal self-government isthe strongest. See Moe v. Salish & Kootenai Tribes supraat 480, 481, 90 S.Ct. At 1644-1645; McClanahan v.Arizona State Tax Comm’n.

In Ward v. New York, 291 F.Supp.2d 188, 206 (W.D.N.Y. 2003),

a case granting restraining orders against the State of New York,

preempting that state’s cigarette tax laws, the Court stated:

However, the Court has been reluctant to allow stateregulation of on-reservation commerce between tribemembers. See Moe, 425 U.S. at 475-79, 96 S.Ct. 1634(holding that Montana could not collect cigarette salestaxes with respect to on-reservation sales by tribemembers to tribe members); . . . Based upon the currentrecord, it does not appear that those interests areimplicated by on-reservation transactions between tribemembers. Further, to the extent that it regulates on-reservation transactions between tribe members, theStatute is not tailored to account for actual off-reservation ef-fects.

The general presumption is that state law is inapplicableto on-reservation conduct involving only tribe members. Hicks, 533 U.S. at 362,f 121 S.Ct. 2304. At this stage ofthe litigation, it does not appear that Defendants are ableto overcome that presumption. As such, this Court findsthat Plaintiffs are likely to succeed on the merits of their

-25-


claim that the Statute is unconstitutional insofar as itrestricts the shipment or transportation of cigarettes froma tribe member on the reservation to another tribemember on the reservation.

When the thicket the State’s rhetoric is cleared away, the only

facts are that an Indian person, beset by non-applicable laws of a

state, has intentional injury inflicted on her by huge illegal

assessments so that Matheson cannot accommodate her on-

reservation Indian relatives on their reservations. Burke’s, the non

Indian wholesaler who delivered to Matheson, could deliver on the

respective reservations without state tax. Wash.Rev.Code §

82.24.300, § 82.24.250(7)(a) and § 82.24.110(1)(n). The

discrimination is obvious.

D. This suit involves Federal Preemption, notinconsistent State Statutes.

At pages 25-6 of its brief, the State contends that Matheson

could pay the tax and proceed under Wash.Rev.Code § 82.32.150

and 82.32.180. This argument ignores the fact that Matheson filed

an Affidavit that she lived in Idaho, could not pay the tax and that

Defendant Doyle McMinn threatened revocation of her license if she

-26-


didn’t pay the tax. ER 156-160. The argument ignores

Wash.Rev.Code § 82.24.550(3); that the assessment was a tax not

a penalty and that Wash.Rev.Code § 82.32A.020(3) and 82.32.150

excepts payment when constitutional grounds are asserted. Neither

statute cross refers to the state laws cited above. The cigarette tax

does not apply if its application violates the Federal Constitution.

Wash.Rev.Code § 82.24.900.

In this Circuit, injunctive relief and declaratory judgment, at

the very least, apply when an injunction is sought and federal

Indian law preempts state taxes. The State’s conclusion at page 13

of it’s Brief, that state remedies bar this federal suit, ignores the law

Wash.Rev.Code § 82.24.900 and federal preemption. The State’s

Brief also failed to respond to Matheson’s argument at 38-40 that

exhaustion does not apply to failure to allow a pre-deprivation

hearing.

The Washington cigarette tax law provides that federal law

preempts the state statutes. Wash.Rev.Code § 82.24.900. At

Wash.Rev.Code § 82.24.020(4), the statutes incorporate “federal

-27-


law” when purchases are from Indian tribal organizations which

includes Matheson. Wash.Rev.Code § 82.24.010(6).

Matheson also alleges interstate commerce violations. ER 176,

179, 186-187. Washington State Bldg and Trades Council AFL-CIO

v. Spellman, 684 F.2d 627, 631 (9 Cir. 1982) grants federalth

jurisdiction if unequal treatment is an issue, as here. ER 186-189.

The discrimination, harassment and failure to follow state

statutes by state actors is the epitome of this case.

Unconstitutional deprivation of a state protected property interest

by state actors supports § 1983 federal jurisdiction. Matheson

pleads systematic audit harassment in her Complaint. ER 190-192.

She alleges systemic harassment of herself and her family. ER 169-

170; 180-85, 188-190; 192-3. Chudacoff v. University Medical Center

of Southern Nevada, 649 F.3d 1143, 1152 (9 Cir. 2011) upholds §th

1983 jurisdiction where the state actors did not hold a hearing

before the Plaintiff doctor’s hospital privileges were suspended.

Exclusion of state licensing privileges based on irrational

discrimination is unconstitutional. Schware v. Board of Bar

-28-


Examiners of the State of New Mexico, 353 U.S. 232, 239, 77 S.Ct.

752, 1 L.Ed.2d 796 (1957). Yick Wo v. Hopkins, 118 U.S. 356, 6

S.Ct. 1064, 30 L.Ed 220 (1886). Applicable treaties and federal law

define the limits of state taxation of Indians. Violation of a state

statute that creates a right deprived without due process establishes

a § 1983 claim.

Jefferson County v. Acker, 527 U.S. 423, 435, 119 S.Ct. 2069,

144 L.Ed.2d 408 (1999) also holds that, “differences in such suits

that the tax for which collection is sought is invalid”, are not

prohibited by 28 U.S.C. § 1341.

E. This Case is brought under 28 U.S.C. § 1343, 42 U.S.C.§ 1983 for Gender and Racial Discrimination by StateEmployees acting beyond their authority under color ofState Law; for Immunity from Tax pursuant to FederalPreemption; for Systemic Discrimination, Harassment andUnlawful Collection. The Tax Injunction Act does notdeny Federal Jurisdiction to a Female, Enrolled TribalIndian who claims Discriminatory Treatment.

Parker v. Franklin County Community School Corp., 667 F.3d

910, 922 (7 Cir. 2010) denies the defense of sovereign immunity toth

a government where the complaint alleged a systemic denial of equal

protection. The court held that a 42 U.S.C. § 1983 violation was

-29-


sufficiently alleged allowing the suit to go forward on gender

discrimination by systemic discriminatory treatment. The court

upheld jurisdiction on equal protection grounds and held that the

Eleventh Amendment does not grant immunity to suit by a citizen

of another state. The Eleventh Amendment does not apply to equal

protection granted by the Fourteenth Amendment. Therefore, the

damage suit could proceed. The applicable case is Fitzpatrick v.

Bitzer, 427 U.S. 445, 456, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976).

This case holds that an express enactment to implement the 14th

Amendment eliminates the Eleventh Amendment. Here

Wash.Rev.Code § 82.24.900 incorporates the Federal Constitution.

The State’s brief never disputes Appellant’s argument at page

21 of its opening brief, that the most that the State could do was

suspend Matheson’s license for 30 days. Wash.Rev.Code §

82.24.550(3). Assessment of the penalty violates due process. This

issue was never addressed in the State’s brief.

F. 28 U.S.C. § 1341 does not Bar Jurisdiction where StateCigarette Taxes on Indians is the Issue.

At page 18 of its brief, the State attempts to distinguish

-30-


between 28 U.S.C. § 1341 and 26 U.S.C. § 7421. This contention

is rebutted by the Indian cigarette tax case of Moe v. Confederated

Salish and Kootenai Tribes of the Flathead Reservation, 425 U.S. 463,

96 S.Ct. 1634, 48 L.Ed.2d 96 (1976). In that case, 28 U.S.C. § 1341

was relied on by the State of Montana to prohibit federal

jurisdiction. The court held that 28 U.S.C. § 1341 did not bar

federal jurisdiction prohibiting federal courts from invalidating state

cigarette tax on Indians. Moe, Id. at 421, totally refutes the

application of 28 U.S.C. § 1341 to this case. It upheld the language

of the District Court, 392 F.Supp. 1297 at 1303:

While the exceptions to § 1341 have been expressed mostoften in terms of the Federal instrumentality doctrine, wedo not view the exceptions as limited to cases where thisdoctrine is clearly applicable. It seems clear from thedecided cases and the legislative history of § 1341 thatthis section does not bar federal court jurisdiction incases where immunity from state taxation is asserted onthe basis of federal law with respect to persons or entitiesin which the United States has a real and significantinterest.

The district court case also stated at 1303: “We conclude that

the United States could have brought this action in federal court,

-31-


irrespective of § 1341, based upon the interest of the United States

in protecting reservation Indians from state taxation and the fact

that the asserted tax immunity is based solely upon federal law.”

G. the Tax Injunction Act does not apply where thecollection of the tax is from Third Parties.

Related to the injunction issue is the principle that tax

collection from third parties is not within 28 U.S.C. § 1341. This

issue was discussed in Matheson’s Opening Brief at pages 28-30.

Hibbs v. Winn, 542 U.S. 88, 108, 124 S.Ct. 2276, 159 L.Ed.2d

172 (2004) holds that third parties may pursue constitutional

claims in federal courts.

When license violations are the only claim to require

wholesalers to pay the cigarette tax imposed on consumers, the

disconnect is too great to allow collection from the wholesaler. Hemi

Group LLC v. City of New York, 130 S.Ct. 983, 990, 175 L.Ed.2d 943

(2010).

The court upheld the trial court’s decision that when immunity

from state taxation is asserted on the basis of federal law, 28 U.S.C.

§ 1341 does not apply. The argument of the State at 22 of its brief,

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that only a tribe has jurisdiction, ignore the fact that § 1983 was not

at issue. 42 U.S.C. § 1983 and 28 U.S.C. § 1343(a)(3) establish

federal jurisdiction.

H. The Motion to file a Supplemental Complaint allegedfacts that occurred after the Judgment was entered in thisCase. It was an abuse of discretion to deny it.

The State, at page 27 of its brief, contends that the Complaint

was merely an Amended Complaint. The motion states that the

facts occurred after the original Complaint was filed and after 21

days had elapsed. ER 18. It was also a Supplemental Complaint.

The Supplemental Complaint alleges additional conduct of

Defendant Doyle McMinn on March 21, 2012 and May 24, 2012.

ER 47-8. These facts occurred after the judgment was entered. ER

4. The conduct of license revocation all occurred after the original

Complaint was filed. It alleges ongoing violations of right to cross

examine a party to an existing case. ER 48. The Supplemental

Complaint alleges that the license bonds have now been collected by

illegal methods. This is an additional material cause of action. ER

66. Fed.R.Civ.P. 15(d) applies to supplemental pleadings and gives

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complete discretion to the trial court. It applies when any event

happened after the date of the pleading. Facts occurring after the

original complaint, especially in civil rights cases, require liberal

construction in favor of the plaintiffs. Akhtar v. Mesa, 2012 WL

5383038, page 8 (9 Cir. 2012). Griffin v. School Bd. of Princeth

Edward County, 377 U.S. 218, 225, 84 S.Ct. 1226, 12 L.Ed.2d 256

(1964).

Matheson’s motion included a 15(d) allegation. The case cited

by the State, Lindauer v. Rogers, 91 F.3d 1355 (9 Cir. 1996),th

involved facts at the time the original Complaint was filed, not a

Supplemental Complaint.

Rule 15(d) provides a mechanism for parties to file additional

causes of action based on facts that did not exist when the original

Complaint was filed. Eid v. Alaska Airlines, 621 F.3d 858, 874 (9th

Cir 2010).

A § 1983 action seeking prospective relief against state officials

adding claims based on facts occurring after the original Complaint

was filed, should be allowed to supplement the original claims as

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the Eleventh Amendment immunity does not apply to prospective

relief. Pauline v. State of Hawaii Dept. of Public Safety, 773

F.Supp.2d 914 (D. Hawaii 2011).

Benson v. J.P. Morgan Chase Bank N.A., 673 F.3d 1207,1218

(9 Cir. 2012) was denied on the basis that the Motion to Amendth

should have been filed before a Fed.R.Civ.P. 60(b) motion. This fact

distinguishes the case. Benson also held that the amended pleading

did not include a claim against the third party on post purchase

facts. Chudacoff v. University Medical Center of Southern Nevada,

649 F.3d 1143, 1152 (9th Cir. 2011) applies. This Court held that

leave to amend should be granted only when bad faith, undue delay,

futility or undue prejudice exists. None exist here. The amendment

should have been allowed.

CONCLUSION.

The Tax Injunction Act is not involved in this case as the

amount sought by assessment was a penalty for perceived wholesale

license violations. It is an unconstitutional attempt to cancel the

only license ever granted to a tribal Indian and a tribal Indian

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female. Eleventh Amendment immunity does not apply to § 1983

cases seeking prospective relief and damages, especially when

individual liability is alleged. Damages are allowed if constitutional

violations are alleged. Collection action could be ongoing for several

years. Federal Indian law of express and implied preemption is at

issue. The case should be reversed and the Supplemental Complaint

allowed.

DATED this 28 day of November 2012.th

Respectfully Submitted,

s/ Aaron L. Lowe

AARON L. LOWE, #15120Attorney for Appellant1403 W. Broadway AveSpokane, Washington 99201(509) 323-9000

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BRIEF FORMAT CERTIFICATION PURSUANT TOCIRCUIT RULE 32(a)(7)

Pursuant to Fed.R.App.P. 32(a)(7), I hereby certify that the

REPLY BRIEF OF APPELLANT is: proportionately spaced, has a

typeface of 14 point or more, and contains 6,592 words.

DATED this 28 day of November 2012.th

s/ Aaron L. Lowe AARON L. LOWE, #15120Attorney for Appellant1403 W. Broadway Ave.Spokane, Washington 99201(509) 323-9000

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CERTIFICATE OF SERVICE

I certify that a copy of the Reply Brief was served on Counsel

for Appellee, by ECF and mailing the same by regular mail on

November 28, 2012, in a postage-paid envelope addressed as

follows:

David HankinsRebecca GlasgowAssistant Attorney GeneralP.O. Box 401237151 Cleanwater Dr. Olympia, WA 98504-0123

Dated this 28 day of November 2012.th

s/ Aaron L. Lowe AARON L. LOWE, #15120Attorney for Appellant1403 W. Broadway Ave.Spokane, Washington 99201(509) 323-9000

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in the united states court of appeals for the ......hart v. massanari, 266 f.3d 1155 (9th cir. 2001)...

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