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Robert Gordon v. Eric Holder

December 5, 2011


The opinion of the court was delivered by: Royce C. Lamberth, Chief Judge


Robert Gordon ("Gordon") brings suit against Eric Holder, Attorney General of the United States, the United States Department of Justice, the Bureau of Alcohol, Tobacco, Firearms and Explosives and its Acting Director, B. Todd Jones,*fn1 the United States Postal Service, and Postmaster General John Potter (collectively, "defendants" or "the Government") seeking a declaration that the Prevent All Cigarette Trafficking Act ("PACT Act" or "the Act"), Pub. L. No. 111-154, 124 Stat. 1087 (2010) violates the Fifth and Tenth Amendments of the United States Constitution. Before the Court are Gordon's renewed application for a preliminary injunction [Dkt. #16] and the Government's motion to dismiss Gordon's complaint for failure to state any claim upon which relief can be granted [Dkt. #17]. Upon consideration of both motions, the oppositions thereto, and the arguments of counsel at a hearing,*fn2 the Court concludes that each motion should be granted in part and denied in part.


1. The PACT Act

The PACT Act"significantly amended its predecessor, the Jenkins Act," and "was aimed primarily at combating three evils: tobacco sales to minors, cigarette trafficking, and circumvention of state taxation requirements." Gordon v. Holder, 632 F.3d 722, 723 (D.C. Cir. 2011). In the case before the Court, Gordon challenges two of the means Congress chose to achieve its goals. First, the Act makes it unlawful to deliver cigarettes and smokeless tobacco products through the United States Mail. 18 U.S.C. § 1716E(a).*fn3 Second, the Act prohibits remote sales of cigarettes and smokeless tobacco unless the applicable state and local taxes are paid in advance. 15 U.S.C. § 376a(a)(3)--(4), (d).*fn4 The Act includes other provisions that Gordon does not challenge, including new registration, shipping, record-keeping, and age-verification requirements, as well as new penalties and enforcement mechanisms.

2. Plaintiff Robert Gordon

Gordon, an enrolled member of the Seneca Indian tribe in New York State, owns a store and mail order business that sells cigarettes and other tobacco products, and as such, is a "delivery seller" under the PACT Act. 15 U.S.C. § 375(5)--(6). Gordon previously accepted orders through an internet website and by mail, but since the summer of 2010 he has only sold his products in his store and accepted orders over the telephone. Although customers can no longer place orders on his website, it can still be visited and directs would-be purchasers to contact the business by telephone. Gordon's states that "[a]s a Sovereign Nation, we do not pay state taxes on cigarettes and tobacco products, we then pass this savings on to all of our customers nationwide by offering discount cigarettes, chewing tobacco, pipe tobacco and domestic cigars online." See (last visited Nov. 28, 2011). Before the PACT Act went into effect, 95% of Gordon's sales were shipped by U.S. mail. Since the Act became effective, he has used a small shipping company that delivers to certain zip codes in six states.

3. Procedural History

The PACT Act became effective on June 29, 2010. On June 28, 2010, Gordon filed this suit alleging that two of the Act's provisions are unconstitutional, along with a motion for a temporary restraining order that sought to enjoin the enforcement of those two provisions. After Judge Henry H. Kennedy, Jr. denied the motion, Gordon appealed, and the D.C. Circuit remanded the case for "appropriate consideration" of the factors that a plaintiff seeking a preliminary injunction must demonstrate. Gordon, 632 F.3d at 726.

The D.C. Circuit made three "observations" to guide the Court's analysis on remand. Id. at 725. First, the Circuit stated that the Court "will need to separate its analysis of Gordon's likelihood of success on each of his constitutional claims." Id. On this point, the Circuit noted that "[t]he government's suggestion that there can be no Due Process violation when Congress authorizes state levies based on minimum contacts collapses the Due Process and Commerce Clause aspects of Gordon's claims," despite the fact that "the inquiries are analytically distinct and should not be treated as if they were synonymous." Id. Although national legislation "can permissibly sanction burdens on interstate commerce," it "cannot violate the Due Process principles of 'fair play and substantial justice.'" Id. at 726 (citing Quill Corp. v. North Dakota, 504 U.S. 298, 307 (1992)). The Circuit stated that "Quill's analytical approach is instructive" as to the "open question of whether a national authorization of disparate state levies on e-commerce renders concerns about presence and burden obsolete." Id.

Second, the Circuit found that this Court would need to resolve the "potential standing issue with respect to Gordon's Tenth Amendment claim." Id.*fn5 Third, "to the extent Gordon's Due Process argument turns on his minimum contacts with the states, the rules governing minimum contacts may need to be addressed" by the Court. Id. (citing Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 512 (D.C. Cir. 2002)).

After remand, Gordon renewed his application for a preliminary injunction, which the Government opposes in addition to moving to dismiss his complaint for failure to state any claim upon which relief can be granted.*fn6


In his renewed application, Gordon asks the Court to "enjoin the United States Postal Service from refusing to accept and deliver packages containing cigarettes and other tobacco products, and the United States Department of Justice from pursuing criminal sanctions against Mr. Gordon for alleged violations of the mailing ban and state taxation provisions of the PACT Act." P.I. Mot. at 1.*fn7

A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Gordon, 632 F.3d at 724 (quoting Winter, 555 U.S. at 20). The application of each of these factors to Gordon's claims is considered in turn.

1. Gordon's Likelihood of Success on the Merits

Gordon raises three distinct grounds for a preliminary injunction in his motion. First, Gordon argues that the ban on shipping cigarette and other smokeless tobacco products through the mails violates his due process rights by arbitrarily and irrationally banning the mailing of lawful tobacco products and violates his equal protection rights by irrationally preferring in-state tobacco merchants over out-of-state merchants. Second, Gordon contends that the tax provisions violate the Due Process Clause by requiring non-resident retailers to pay state and local taxes without regard to whether they have minimum contacts with the state or locality. Third, Gordon asserts that the PACT Act's tax provisions violate the Tenth Amendment by unconstitutionally commandeering state tax officials by requiring them to alter their own taxation laws and implement a federally-imposed taxation scheme for collecting prepaid excise taxes on remote sellers. The Government opposes Gordon's motion for a preliminary injunction on these grounds, and also moves to dismiss the claims under Federal Rule of Civil Procedure 12(b)(6). The Court addresses Gordon's likelihood of success as to each of these claims in turn.

A. The PACT Act's Mail Ban Does Not Violate Due Process or Equal Protection

Gordon argues that the PACT Act violates his due process rights under the Fifth Amendment by precluding him from following his chosen profession and by interfering with his property interest in his salary because he can no longer ship his legal products in a commercially viable way and is operating at a net loss. Gordon further claims that the Act violates his equal protection rights because the mail ban is aimed at delivery sellers and excludes sellers who engage in face-to-face transactions. The statute fails rational basis review,*fn8 he alleges, because the mail ban is not rationally related to any of the six stated purposes of the PACT Act*fn9 given that other provisions of the Act serve the goals-preventing underage tobacco use and increasing tax collection-that the mail ban purports to advance. Gordon contends the mail ban is also irrational in its "unprecedented" ban on a legal product that poses no danger to mail carriers or other mail, and further argues that forcing mail-order sellers out of business indicates that the true purpose of the mail ban is to protect the interests of "Big Tobacco" and convenience stores. In sum, Gordon's argument against the mail ban is that a complete mail ban does not rationally further any legitimate purpose not already achieved by the Act and at the same time destroys legitimate retailers, like himself, with rigorous age-verification procedures.

In response, the Government moves to dismiss Gordon's claim that the mail ban violates the Fifth Amendment on the ground that it fails to state a claim upon which relief can be granted. To start, Congress has the authority to ban the use of the mail for shipping tobacco products because the Constitution grants Congress plenary power over the postal system.Indeed, the Government states, Congress has already banned the mailing of numerous classes of items-not all of which endanger the mail or mail carriers, including motor vehicle master keys and locksmithing devices. The Government argues that the mail ban provisions are in fact rationally related to Congress's purposes, even if other PACT Act provisions also advance the same goals. The Government emphasizes that under rational basis review, the Court cannot second-guess Congress's legislative judgment, see FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 313 (1993), or the legislative means it selected to address underage smoking and the criminal enterprises that benefit from untaxed cigarettes. Further, the Court cannot invalidate the mail ban based on Gordon's allegation that protecting Big Tobacco was its true motivation because "'it is entirely irrelevant for constitutional purposes whether the conceived reason for the challenged distinction actually motivated the legislature.'"Gov't Opp'n to P.I. Motion at 13 (quoting Beach Commc'ns, Inc., 508 U.S. at 315).

The Court concludes that the Government has the better argument. "[R]ational-basis review 'is not a license for courts to judge the wisdom, fairness, or logic of legislative choices.'" Am. Bus Ass'n v. Rogoff, 649 F.3d 734, 742 (D.C. Cir. 2011) (quoting Beach Commc'ns, 508 U.S. at 313.)). "Nor does it authorize 'the judiciary [to] sit as a superlegislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines.'" Heller v. Doe, 509 U.S. 312, 319 (1993) (quoting New Orleans v. Dukes, 427 U.S. 297, 303 (1976) (per curiam)). "In the ordinary case, a law will be sustained if it can be said to advance a legitimate government interest, even if the law seems unwise or works to the disadvantage of a particular group, or if the rationale for it seems tenuous." Romer v. Evans, 517 U.S. 620, 632 (1996). Under rational basis review, "[a] statute is presumed constitutional, and the burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it." Heller, 509 U.S. at 320 (alterations, citations, and internal quotation marks omitted). The Court must uphold the mail ban under rational basis review "as long as there is a 'rational relationship between the disparity of treatment and some legitimate governmental purpose.'" Rogoff, 649 F.3d at 742 (quoting Heller, 509 U.S. at 320).

The mail ban passes rational basis review because it can be said to advance the legitimate government interests of reducing underage tobacco use and cigarette trafficking. Although the ban affects delivery sellers but not brick-and-mortar sellers, the ban has a rational relationship to the purposes of the Act, which include a desire to eliminate the problems associated with ...

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