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HO-Chunk, Inc. v. Sessions

United States District Court, District of Columbia

May 24, 2017

HO-CHUNK, INC., et al., Plaintiffs,
v.
JEFF SESSIONS, [1] in his official capacity as Attorney General of the United States,, Defendants.

          MEMORANDUM OPINION

          CHRISTOPHER R. COOPER, United States District Judge

         Plaintiffs, tribal-owned corporations engaged in the distribution of cigarettes, seek a declaration clarifying whether certain recordkeeping requirements of the Contraband Cigarettes Trafficking Act apply to Indian tribal entities like them. The Court concludes that the relevant requirements do so apply, and will therefore grant summary judgment for Defendants.

         I. Background

         A. Statutory Background

         Nearly forty years ago, Congress enacted the Contraband Cigarettes Trafficking Act (“CCTA”), 18 U.S.C. §§ 2341-46, to remedy “the serious problem of organized crime and other large scale operations of interstate cigarette bootlegging”-i.e., untaxed cigarette trafficking- and to “provide law enforcement assistance and relief to cities and states” in support of that effort. S. Rep. 95-962, at 3, reprinted in 1978 U.S.C.C.A.N. 5518, 5518; see also H.R. Conf. Rep. 95-1778, 8, reprinted in 1978 U.S.C.C.A.N. 5535, 5536. The Act makes it a crime for “any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes or contraband smokeless tobacco.” 18 U.S.C. § 2342(a). “[C]ontraband cigarettes, ” in turn, are “a quantity in excess of 10, 000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication . . . [of] payment of cigarette taxes.” 18 U.S.C. § 2341(2). The cigarettes must also be “in the possession of any person other than” a person falling within one of four exceptions, none of which apply to tribal entities. Id.

         The Act also permits the Attorney General to establish recordkeeping requirements: “Any person who ships, sells, or distributes any quantity of cigarettes in excess of 10, 000” must “maintain . . . information about the shipment, receipt, sale, and distribution of cigarettes, ” such as the “name, address, destination . . . vehicle license number, driver's license number, signature of the person receiving [the] cigarettes, and the name of the purchaser.” 18 U.S.C. § 2343(a); see also 27 C.F.R. §§ 646.141-143, 646.146-47, 646.150, 646.153-55 (Attorney General's implementing regulations).[2] To ensure compliance with these recordkeeping requirements, and for the purpose of inspecting cigarette distributors' inventory, the Act authorizes officers of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) to enter distributors' premises during normal business hours. 18 U.S.C. § 2343(c)(1). Denying access to ATF officers seeking to conduct such inspections can result in civil penalties as high as $10, 000. 18 U.S.C. § 2343(c)(3).

         The CCTA is silent as to whether the Act's original enforcement provisions apply in Indian territory or as to tribal entities. See generally Pub. L. No. 95-575, § 1, 92 Stat. 2463 (1978). A “State, ” for instance, is defined as “a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or the Virgin Islands, ” but the definition does not expressly include or exclude tribal reservations. 18 U.S.C. § 2343(4). However, reasoning that the statute was one “of general applicability, ” courts have unanimously held-beginning with a Ninth Circuit decision more than two decades ago-that the Act “appl[ies] with equal force to Indians, ” and is therefore enforceable on Indian land and against tribal entities and individuals. United States v. Baker, 63 F.3d 1478, 1484-86 (9th Cir. 1995); see also United States v. Morrison, 686 F.3d 94, 96 (2d Cir. 2012) (affirming application of CCTA to on-reservation cigarette seller in New York); Grey Poplars, Inc. v. 1, 371, 100 Assorted Brands of Cigarettes, 282 F.3d 1175, 1177 (9th Cir. 2002) (“[T]he CCTA is a federal statute of general applicability and it applies equally to Indians, even on the reservation, as it does to others.”); United States v. Gord, 77 F.3d 1192, 1194 (9th Cir. 1996) (applying CCTA to manager of a tribal smoke shop); United States v. Parry, No. 4:13-CR-00291-07-BCW, 2015 WL 631979, at *6 (W.D. Mo. Feb. 13, 2015) (“[T]he law is settled that Indians are not exempt from the CCTA.”); United States v. 1, 920, 000 Cigarettes, No. 02-CV-437A, 2003 WL 21730528, at *4 (W.D.N.Y. Mar. 31, 2003) (rejecting argument that the CCTA exempts Indians as “without merit”).

         In 2006, Congress amended the CCTA, primarily to add further enforcement provisions. See Pub. L. 109-177, Title I, sec. 121, Mar. 9, 2006, 120 Stat. 233. Two amendments are material here. First, Congress added a new reporting requirement-a subsection (b) inserted after the recordkeeping requirements set forth at 18 U.S.C. § 2343(a). See 18 U.S.C. § 2343(b). That provision requires certain cigarette sellers and distributors to submit a report to the U.S.

         Attorney General, Treasury Secretary, and relevant state attorneys general and tax administrators, including various types of information about their cigarette and tobacco inventory. Id. § 2343(b), (d). Notably, while the new reporting provision specifically excluded “tribal government[s]” from its reach, id. § 2343(b), the preceding recordkeeping provision included no such exception-nor was one added, see id. § 2343(a). The other relevant 2006 amendment allowed states and local governments a share in enforcing the Act: They were now permitted to “bring an action in the United States district courts to prevent and restrain” CCTA violations, id. § 2346(b)(1), and to “obtain any other appropriate relief for [such] violations . . . including civil penalties, money damages, and injunctive or other equitable relief, ” id. § 2346(b)(2). The new language specified, however, that such state and local-government enforcement actions, could not be brought “against an Indian tribe or an Indian in Indian country.” Id. § 2346(b)(1). Similarly, the amendment provided that “[n]othing in this chapter shall be deemed to abrogate or constitute a waiver of any sovereign immunity of a State or local government, or an Indian tribe against any unconsented lawsuit under this chapter.” Id. § 2346(b)(2).

         B. Factual Background and Procedural History

         As alleged in the complaint, Plaintiff Ho-Chunk, Inc. (“HCI”) is a wholly tribal-owned entity established by the Winnebago Tribe of Nebraska under its tribal law, and “acts as the [tribe's] economic development arm.” Compl. ¶ 9. Plaintiffs Rock River Manufacturing Company (“Rock River”), Woodlands Distribution Company (“Woodlands”), and HCI Distribution Company (“HCI Distribution”), are wholly owned subsidiaries of HCI. Id. All three subsidiary companies are located on the Winnebago reservation in Nebraska, and have a role in either purchasing, manufacturing, distributing, or selling tobacco products. Id. ¶¶ 10-12.

         In June 2016, pursuant to the CCTA's inspection provisions, see 18 U.S.C. § 2343(c), ATF Chief Keith Krolczyk sent letters to Rock River, Woodlands, and HCI Distribution, stating the agency's intent to inspect and copy relevant records and seeking to schedule a date for that inspection. Def.'s Mem. Supp. Mot. Summ. J. (“MSJ”), Declaration of Ellen V. Endrizzi (“Endrizzi Decl.”), ¶ 3; Def.'s MSJ, Ex. 1. On August 3, ATF received a letter from Plaintiffs' counsel, who outlined his view that “there is some serious doubt surrounding the applicability of the CCTA and its regulations.” Endrizzi Decl. ¶ 4; Def.'s MSJ, Ex. 2, at 4. Counsel went on to explain that the Winnebago Tribe would “provide . . . the requested information regarding its off-reservation transactions, ” but urged ATF to “suspend any further demands for the records of the inter-tribal trade transactions” so that it could “initiate an appropriate action in federal court . . . to clarify” its obligations under the CCTA. Def.'s MSJ, Ex. 2, at 4. The following day, ATF sent a letter reasserting its authority to inspect under the CCTA, and responding point-by-point to the various legal issues Plaintiffs' counsel had identified. See Def.'s MSJ, Ex. 3. On August 9, 2016, ATF agents met with counsel for HCI at an off-reservation facility, but were provided only with records related to “non-native sales.” Endrizzi Decl. ¶ 6.

         One week later, Plaintiffs filed a complaint in this Court under the Administrative Procedure Act (“APA”) and the Declaratory Judgment Act, seeking “a Declaration that [the recordkeeping requirements of] the CCTA, 18 U.S.C. § 2243(a), as implemented by the Attorney General, [are] not applicable to the Plaintiffs, ” and therefore “cannot be used to compel ATF's access to the business records . . . requested in [ATF's above-described] letters.” Compl. ¶ 37. In light of the suit, ATF has refrained from enforcing its inspection authority under the CCTA “through in-person demand, district court order, or search warrant.” Endrizzi Decl. ¶ 17. The parties now cross-move for summary judgment. The sole issue is the applicability of CCTA's recordkeeping requirements to tribal entities, with the lion's share of the briefing addressing Plaintiffs' argument that “Indian country” does not fall within the territorial scope of the Act's recordkeeping provisions. In supplemental briefing, Plaintiffs advanced a new line of argument: They claim to be instrumentalities of a tribal government, and assert that such entities are not “persons” covered by the Act.

         II. ...


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