response to plaintiff’s objections to report and recommendation … › 2019 › 02 ›...

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK THE STATE OF NEW YORK, Plaintiff, -against- Civil No.: 14-cv-00910 GRAND RIVER ENTERPRISES SIX NATIONS, LTD. and NATIVE WHOLESALE SUPPLY COMPANY INC. Defendants.

RESPONSE TO PLAINTIFF’S OBJECTIONS TO REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE FOSCHIO

WEBSTER SZANYI LLP Attorneys for Defendant Native Wholesale Supply Company

Kevin A. Szanyi Nelson Perel Jeremy A. Colby 1400 Liberty Building Buffalo, New York 14202 (716) 842-2800

Case 1:14-cv-00910-RJA-LGF Document 102 Filed 11/23/16 of 27

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TABLE OF CONTENTS

PRELIMINARY STATEMENT ......................................................................................... 1 STANDARD OF REVIEW ............................................................................................... 2 ARGUMENT .................................................................................................................... 3 Point I –The State’s Arguments Are Procedurally Barred................................................ 3

A. The State Makes New Arguments Not Made to Judge Foschio ........................... 3

B. The State Did Not Comply with Local Rule 72 ...................................................... 4 Point II – Judge Foschio Correctly Recommended Dismissal of the PACT Act Claim .... 5

A. The State Does Not Allege Any “Delivery Sale” by NWS .................................... 6

B. The State Does Not Allege That NWS Shipped Tobacco Into Indian Country Of A Tribe That Taxes The Sale Or Use Of Such Tobacco ................................. 7

C. The State’s Alleged Transactions Are Not “Interstate Commerce” Under The PACT Act ............................................................................................................ 12

Point III – Judge Foschio Correctly Recommended Dismissal of the CCTA Claim Because That Statute Bars Civil Actions Against “an Indian in Indian country” ......................................................................................................... 15

A. NWS is an “Indian” ............................................................................................. 15

B. NWS is in “Indian country” .................................................................................. 19

Point IV – Judge Foschio Correctly Recommended Dismissal With Prejudice .............. 21 CONCLUSION .............................................................................................................. 22


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TABLE OF AUTHORITIES

CASES PAGE(S)

Braden v. 30th Judicial Circuit Court of Kentucky, 410 U.S. 484 (1973) ....................... 20 Bryan v. Itasca County, 426 U.S. 373 (1976) ................................................................ 17 Camardo v. Gen. Motors Hourly-Rate Employees’ Pension Plan, 806 F. Supp. 380 (W.D.N.Y. 1992) .............................................................................................................. 3 Citizens Against Casino Gambling in Erie County v. Hogen, 2008 WL 2746566 (W.D.N.Y. 2008) ............................................................................................................ 20 Citizens Against Casino Gambling in Erie County v. Stevens, 945 F. Supp. 2d 391 (W.D.N.Y. 2013) ..................................................................................................... 17 Choate v. Trapp, 224 U.S. 665 (1912) .......................................................................... 18 City of New York v. Wolfpack Tobacco, 2013 WL 5312542 (S.D.N.Y. 2013) ................ 15 Cohen v. JP Morgan Chase Co., 498 F.3d 111 (2d Cir. 2007) ...................................... 10 County of Yakama v. Confederated Tribes and Bands of Yakama Indian Nation, 502 U.S. 251 (1992) ............................................................................................................. 17 Davis v. Comm'r of Soc. Sec., 2016 WL 3453452 (S.D.N.Y. 2016) ................................ 3 Flat Ctr. Farms, Inc. v. Mont. Dep’t of Rev., 49 P.3d 578 (Mont. 2002) ......................... 19 Gregory v. Stewart’s Shops Corp., 2016 WL 5409326 (N.D.N.Y. 2016) ......................... 2 Jo v. JPMC Specialty Mortg., LLC, 135 F. Supp. 3d 54 (W.D.N.Y. 2015) ....................... 3 Knox v. Agria Corp., 613 F. Supp. 2d 419 (S.D.N.Y. 2009) ........................................... 14 Leason Ellis LLP v. Patent & Trademark Agency LLC, 2014 WL 3887194 (S.D.N.Y. 2014) ............................................................................................................... 5 Liu Meng-Lin v. Siemens AG, 763 F.3d 175 (2d Cir. 2014) ........................................... 13 Loughrin v. United States, 134 S. Ct. 2384 (2014) .......................................................... 7 McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164 (1973) ................................ 18


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Montana v. Blackfeet Tribe of Indians, 471 U.S. 759 (1985) ......................................... 17 Parks v. Smith, 2011 WL 4055414 (N.D.N.Y. 2011), aff'd, 505 F. App'x 42 (2d Cir. 2012) .................................................................................................................. 2 Pourier v. S.D. Dep’t of Rev., 658 N.W.2d 395 (S.D. 2003) .......................................... 19 Riehl v. Martin, 2014 WL 1289601 (N.D.N.Y. 2014) ........................................................ 2 Sanchez v. Town of Greece, 2004 WL 1964505 (W.D.N.Y. 2004) .......................... 11, 18 Seneca Nation of Indians v. Paterson, 2010 U.S. Dist. Lexis 109525 (W.D.N.Y. 2010) .............................................................................................................. 8 Seneca Nation of Indians v. Paterson, 2010 WL 4027796 (W.D.N.Y. 2010), aff'd sub nom. Oneida Nation of N.Y. v. Cuomo, 645 F.3d 154 (2d Cir. 2011) ................ 8 Smith v. Campbell, 2013 WL 8183469 (W.D.N.Y. 2013), report and recommendation adopted as mod, 2014 WL 1338803 (W.D.N.Y. 2014)......................... 4 Smith v. United States, 508 U.S. 223 (1993) ................................................................... 9 Stager v. New Beginnings Home Care Inc., 2016 WL 5374118 (N.D.N.Y. 2016) ........... 3 State St. Bank & Trust Co. v. Salovaara, 326 F.3d 130 (2d Cir. 2003) ........................ 14 Wachovia Bank v. Schmidt, 546 U.S. 303 (2006) ......................................................... 17 Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (1980) ................................................................................................................... 20 Yencho v. Chase Home Fin. LLC, 2015 WL 127721 (S.D.N.Y. 2015) .......................... 18 RULES AND STATUTES PACT Act

15 U.S.C. §375(4)(B) .......................................................................................... 19

15 U.S.C. §375(7) ............................................................................................... 13

15 U.S.C. §375(9)(A) .......................................................................................... 12

15 U.S.C. §375(9)(B) .................................................................................. 7, 8, 11


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15 U.S.C. §375(10) ............................................................................................ 17

15 U.S.C. §376(a) ............................................................................. 5, 6, 7, 10, 11

15 U.S.C. §377 ..................................................................................................... 6

15 U.S.C. §377(b) ................................................................................................. 6

15 U.S.C. §377(b)(1)(A)-(B) ................................................................................. 6

15 U.S.C. §377(b)(3) ............................................................................................ 6

CCTA

18 U.S.C. §2346 ................................................................................................. 18 18 U.S.C. §2346(b)(1) ....................................................................... 1, 15, 18, 20

Other Statutes

18 U.S.C. §1151 ............................................................................................................ 20

Pub. L. 95–575, § 1 (Nov. 2, 1978), 92 Stat. 2465 ........................................................ 18 Rules

Local Rule 72 .......................................................................................................... 3, 4, 5


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PRELIMINARY STATEMENT

This Memorandum of Law is submitted on behalf of Defendant Native Wholesale

Supply Company, Inc. (“NWS”), in response to the Objections (Docket No. 100) filed by

Plaintiff State of New York (“State”) to the Report & Recommendation of Magistrate

Judge Foschio dated August 30, 2016 (Docket No. 97) (“R&R”).1 The R&R

recommends that Defendants’ motions to dismiss (Docket Nos. 79, 81) be granted, and

that Plaintiff’s federal claims should be dismissed with prejudice, and that the state law

claims should be dismissed without prejudice. Docket No. 97, at 4.

The State’s two federal claims are asserted under the Contraband Cigarette

Trafficking Act (“CCTA”) and the Prevent All Cigarette Trafficking Act (“PACT Act”). The

R&R correctly concluded that the CCTA claim should be dismissed because 18 U.S.C.

§ 2346(b)(1) bars the State from bringing a civil enforcement action against “Indians in

Indian country.” The R&R also correctly concluded that the PACT Act does not apply to

NWS because the alleged shipments do not constitute “interstate commerce” as defined

by the PACT Act. Moreover, some of the State’s arguments were never raised before

Judge Foschio, and are thus not properly raised at this time.

1 The State has also asserted claims against Grand River Enterprises Six Nations, Ltd. (“GRE”).


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Standard of Review

Objections must be specific and cannot simply renew the same arguments

rejected by the Magistrate Judge. Where a party’s objections “do not point out any

specific shortcomings in the R & R, and, instead, regurgitate earlier-raised arguments,

review for clear error is warranted.”2 Parties cannot simply refer to arguments

previously asserted before the magistrate because, “[g]eneral or conclusory objections,

or objections which merely recite the same arguments presented to the magistrate

judge, are reviewed for clear error.”3

2 Riehl v. Martin, 2014 WL 1289601, at *1 (N.D.N.Y. 2014). 3 Gregory v. Stewart’s Shops Corp., 2016 WL 5409326, at *2 (N.D.N.Y. 2016); Parks v. Smith, 2011 WL 4055414, at *1 (N.D.N.Y. 2011), aff'd, 505 F. App'x 42 (2d Cir. 2012).


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ARGUMENT

POINT I

The State’s Arguments Are Procedurally Barred

The State is procedurally barred because it makes new arguments not raised

before Judge Foschio and fails to comply with Local Rule 72. In other words, the

State’s Objections should be rejected before this Court even reaches the merits (which

also require dismissal).

A. The State Makes New Arguments Not Made to Judge Foschio

The State’s new arguments must be rejected because they were not raised

before Judge Foschio. This Court should not consider these arguments because “[n]ew

arguments and factual assertions cannot properly be raised for the first time in

objections to the [R & R], and indeed may not be deemed objections at all.”4 Indeed, it

“is established law that a district judge will not consider new arguments raised in

objections to a magistrate judge's report and recommendation that could have been

raised before the magistrate but were not.”5 In Camardo v. Gen. Motors Hourly-Rate

Employees’ Pension Plan, this Court held that it “is improper for an objecting party to

attempt to relitigate the entire content of the hearing before the Magistrate Judge by

submitting papers to a district court which are nothing more than a rehashing of the

same arguments and positions taken in the original papers submitted to the Magistrate

Judge [because] . . . parties are not to be afforded a ‘second bite at the apple’ when

4 Davis v. Comm'r of Soc. Sec., 2016 WL 3453452, at *1 (S.D.N.Y. 2016). 5 Jo v. JPMC Specialty Mortg., LLC, 135 F. Supp. 3d 54, 62 (W.D.N.Y. 2015); see also Stager v. New Beginnings Home Care Inc., 2016 WL 5374118, at *1 (N.D.N.Y. 2016) (“It is generally inappropriate to consider new arguments or evidence after an R&R has been filed.”).


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they file objections to a Report and Recommendation, as the ‘goal of the federal statute

providing for the assignment of cases to magistrates is to increas[e] the overall

efficiency of the federal judiciary.’”6 Indeed, “a proceeding before the Magistrate Judge

is not a meaningless dress rehearsal.”7

The State also submitted new materials not included in the record before Judge

Foschio, which must also be disregarded (nor are they properly considered on a motion

to dismiss).8 For example, the State proffers for the first time exhibits that purportedly

establish Sac & Fox law.9 Not only is it improper to cite materials that are dehors the

record, but such Native law has no bearing on what Congress intended when drafting

the CCTA. As a result, the Sprague Declaration should be stricken and the new

arguments must be disregarded.

B. The State Did Not Comply with Local Rule 72 The State fails to comply with Local Rule 72(c), which requires a party to certify

“that the objections do not raise new legal/factual arguments, or identifying the new

arguments and explaining why they were not raised to the Magistrate Judge.” The

State, in an effort to look like it was complying, without really doing so, instead made the

following certification: “that the objections do not raise new legal or factual arguments,

6 806 F. Supp. 380, 382 (W.D.N.Y. 1992). 7 Montalvo v. Barnhart, 457 F. Supp. 2d 150, 154 (W.D.N.Y. 2006) (citations omitted). 8 Smith v. Campbell, 2013 WL 8183469, at *8 (W.D.N.Y. 2013), report and recommendation adopted as mod, 2014 WL 1338803 (W.D.N.Y. 2014). 9 Docket No. 100, at 14; Docket 101, Exhibits A-D. The State also cites a 2011 GAO report, despite Judge Foschio’s rejection of a 2002 GAO report, and the fact that the 2011 report is a new argument based on new material that is not even referenced in the Second Amended Complaint. Docket No. 93, at 34; Docket No. 97 at 4, 37. The 2011 GAO report was issued after the PACT Act was enacted, and by a body other than Congress, and is thus irrelevant to congressional intent.


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other than those necessary to address legal and factual issues raised by Magistrate

Judge Foschio in the Report and Recommendation.”10 In other words, the State

acknowledges that it raised new arguments and factual issues, but failed to identify

them. The State also failed to explain why new matters were raised, aside from the

amorphous suggestion that it was “necessary to address” the R&R, which is not an

explanation as required by Local Rule 72(c). Accordingly, for these additional reasons,

this Court should only review the State’s Objections for clear error.

Point II

Judge Foschio Correctly Recommended Dismissal of the PACT Act Claim

This Court should adopt Judge Foschio’s R&R recommending dismissal of the

State’s PACT Act claim. The R&R correctly concluded that: (A) the filing or reporting

requirement of 15 U.S.C. § 376(a) does not apply to NWS because the State did not

allege that tobacco was shipped into “Indian country of an Indian tribe taxing the sale or

use of cigarettes”; and (B) the State did not allege “interstate commerce” as defined by

the statute. The R&R also correctly concluded that the State did not allege a viable joint

venture, and that any claims predicated upon such a theory are also properly dismissed.

The State confirmed that it did not allege any “delivery sales” by NWS under 15

U.S.C. § 376a.11 Rather, the sole basis of its PACT Act claim against NWS is that it

10 Docket No. 100, at 26 (emphasis added). 11 Docket No. 93, at 34-35. As a result, the R&R did not address “delivery sales.” Docket No. 97, at 31-32. Such a claim would nonetheless fail for the reasons previously set forth by NWS. Docket No. 79-3, at 15-17; Docket No. 95-2, at 6-14. Moreover, the State waived such a claim by confirming that no such claim was asserted by the Second Amended Complaint. Leason Ellis LLP v. Patent & Trademark Agency LLC, 2014 WL


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purportedly failed to satisfy the filing or reporting requirements of 15 U.S.C. §376(a).

This admission alone is fatal to the State’s PACT Act claims.

A. The State Does Not Allege Any “Delivery Sale” by NWS Although the R&R did not address the State’s concession that it alleges no

“delivery sale” by NWS, this omission is nonetheless fatal to the State’s PACT Act claim

because the statute is only directed at “delivery sales.” The PACT Act does not

establish an independent “reporting” requirement; rather, the reporting obligation exists

to facilitate enforcement of the prohibition against “delivery sales.”

Section 377 “Penalties” does not establish any penalty for violation of the

purported reporting obligation set forth in §376(a). Rather, §377(b) only establishes

penalties for a “delivery seller” or “common carrier” under §377(b)(1)(A)-(B). Section

377(b)(3), which addresses “Exceptions,” only sets forth categories for “delivery

violations” and “other limitations” (addressing common carriers). No language in §377

suggests that there is any penalty for any purported violation of §376(a).

Aside from the State’s failure to allege any “delivery sale” by NWS – which is the

conduct proscribed by the PACT Act – the State’s PACT Act claim also fails for the

reasons set forth in the R&R, namely that the reporting requirement was never triggered

and NWS’ alleged shipments were not made within “interstate commerce.”

3887194, at *4 (S.D.N.Y. 2014) (“plaintiff waived any such claim when it expressly represented it was not pursuing such a claim in its opposition brief”).


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B. The State Does Not Allege That NWS Shipped Tobacco Into Indian Country Of A Tribe That Taxes The Sale Or Use Of Such Tobacco

The R&R noted that, under §376(a), reporting obligations arise if two conditions

are met: tobacco is (1) sold, transferred, or shipped in interstate commerce and (2)

“shipped into a [i] State, [ii] locality, [iii] Indian country of an Indian tribe taxing the sale

or use of cigarettes or smokeless tobacco, or [iv] where a person advertises or offers

“for such a sale . . . .” §376(a) (emphasis added). The R&R correctly held that the

State failed to allege (A) that NWS shipped tobacco “into” one of the three enumerated

destinations; and (B) that NWS’ alleged shipments were made in “interstate commerce”

as defined by the PACT Act. Given the State’s failure to allege (A) and one of the

destinations set forth in (B) above, such failure is fatal to the PACT Act claim.12

Under §375(9)(B), a shipment of tobacco in interstate commerce is “deemed to

have been made into the State, place, or locality in which such cigarettes or smokeless

tobacco are delivered.” (emphasis added). In other words, “deliver” means sending

something to a destination.13 Accordingly, to trigger §376(a)’s reporting requirements,

NWS must ship tobacco into a State, locality, or Indian country of a tribe that taxes such

tobacco. The R&R correctly concluded that the State does not allege that the

destination of the shipments, the Seneca Nation, is a tribe that taxes the tobacco.14

12 Loughrin v. United States, 134 S. Ct. 2384, 2390 (2014) (“To read the next clause, following the word ‘or,’ as somehow repeating that requirement, even while using different words, is to disregard what ‘or’ customarily means. As we have recognized, that term's “ordinary use is almost always disjunctive, that is, the words it connects are to be given separate meanings.”) (citation omitted). 13 http://www.merriam-webster.com/dictionary/deliver (meaning No. 5). 14 Docket No. 97, at 32-33.


http://www.merriam-webster.com/dictionary/deliver

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Although the State suggests in its brief that the Seneca Nation taxed tobacco,15 such is

not alleged in the Second Amended Complaint. And even if the State were permitted to

amend to so allege, the claim nonetheless fails because the alleged shipments do not

fall within the statute’s definition of “interstate commerce” as set forth below.

The State also argues that “State” and “Indian country” are not mutually

exclusive, which simply rehashes arguments rejected by the R&R.16 First, the State

relies on the existence of a joint venture,17 which should be rejected for the reasons set

forth in the R&R and by GRE’s papers (which NWS incorporates by reference).

Second, the State makes the conclusory assertion that NWS shipments are made “into

New York State,” which it describes as a jurisdiction that “tax[es] the sale . . . of

cigarettes.18 The State, however, ignores that the “taxes the sale” language only

modifies “Indian country”, not “State” or “locality.” The State overlooks that the statute

defined three destinations, only one of which is qualified by the “taxing the sale”

language. The State also overlooks that the NWS shipments are not allegedly made

“into” New York, they are made from and into Indian country. The State ignores that the

PACT Act defines “Into a State, place, or locality” in §375(9)(B) as meaning the

destination to which tobacco is “delivered.”19 The State also ignores the disjunctive use

15 Docket No. 97, at 7, n.4 (citing Seneca Nation of Indians v. Paterson, 2010 U.S. Dist. Lexis 109525, at *4 (W.D.N.Y. 2010)). The tax described in Paterson, however, was required “before being sent to Nation retailers for resale to the public.” Seneca Nation of Indians v. Paterson, 2010 WL 4027796, at *1 (W.D.N.Y. 2010), aff'd sub nom. Oneida Nation of N.Y. v. Cuomo, 645 F.3d 154 (2d Cir. 2011). Here, on the other hand, the State alleges that NWS sells to Nations, not tribal retailers, and thus fails to show that the tax is applicable to the alleged shipments. 16 Docket No. 100, at 4-5. 17 Docket No. 100, at 4. 18 Docket No. 100, at 4. 19 Docket No. 100, at 4-5.


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of “or.” The State does not identify any error purportedly made by the R&R in applying

the express statutory language.

The State also criticizes Judge Foschio for presuming that tobacco was shipped

to NWS in the Seneca Nation, instead suggesting that tobacco was shipped to “Free

Trade Zones and custom bonded warehouses, both on reservations in Western New

York.”20 It was the State’s burden to allege the necessary factual predicates to support

its claim; it cannot fault Judge Foschio for its failure. In any event, even if the State

were to allege what it now asserts in a brief (i.e., that shipments are made to other

destinations in the Seneca Nation), that does not change that the destination was the

Seneca Nation – which was the crux of Judge Foschio’s analysis.21

The State ignores the canon of construction that requires any ambiguities in

statutes dealing with Indians to be resolved in NWS’ favor.22 Instead, the State cites

Smith v. United States for the proposition that statutory context is applied when

construing statutes governing “pervasively regulated and potentially dangerous

commodities such as firearms, or tobacco.”23 Smith, however, stands for no such thing,

instead generically discussing the use of statutory context – but not having any special

application in cases involving firearms (let alone tobacco). The fact that the State would

make such an argument suggests that it has no on-point cases to cite in support of its

position. And the fact remains that, where the statutory language is not ambiguous, as

20 Docket No. 100, at 5, n.3. 21 Docket No. 97, at 33. 22 Docket No. 97, at 5-6; see note 50 infra. 23 Docket No. 97, at 5 (citing 508 U.S. 223, 229 (1993)).


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is the case here, there is no need to address “context” or legislative purpose.24 Rather,

this Court must apply the statute as drafted. And even if the Court were to find the

statute ambiguous, it would first resort to canons of construction (which the State

ignored) before looking to legislative history.25

The State appears to argue that the three destinations set forth in §376(a) are

ambiguous and require reference to other parts of the statute.26 The State lists the

three destinations, but omits the following underlined language “Indian country of an

Indian tribe taxing the sale or use of cigarettes or smokeless tobacco.”27 The State

appears to suggest, without authority and contrary to the punctuation contained in the

statute, that the language underlined above qualifies each of the three destinations, as

opposed to just “Indian country.” If Congress had intended that this language apply to

each of the destinations, then it would have included a comma after “tribe” and before

“taxing.” But it did not do so. And “Indian country” is a term of art that was modified in

the PACT Act to clarify that the third statutory destination is Indian country of a tribe that

taxes tobacco. The State’s interpretation would render the phrase “of a tribe” redundant

and unnecessary because “Indian country” by definition references tribal territory. The

24 Cohen v. JP Morgan Chase Co., 498 F.3d 111, 117 (2d Cir. 2007) (“To ascertain Congress's intent, we begin with the statutory text because if its language is unambiguous, no further inquiry is necessary. If the statutory language is ambiguous, however, we will “resort first to canons of statutory construction, and, if the [statutory] meaning remains ambiguous, to legislative history, to see if these “interpretive clues” permit us to identify Congress's clear intent,”) (citations omitted). 25 Id.; see note 50 infra. Although Judge Foschio did not find the statute ambiguous, he nonetheless referenced the canon of interpretation that requires resolution in NWS’ favor in the event of any ambiguity. Docket No. 97, at 17-18. 26 Docket No. 97, at 6. 27 Docket No. 97, at 6 (referencing 15 U.S.C. §376(a)) (emphasis added).


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only reason to add “of a tribe” to “Indian country” is to distinguish between tribes that tax

tobacco and those that do not.

The State’s attempt to “illustrate” its interpretation fails because it seeks to apply

the language qualifying “Indian country of an Indian tribe” to the other destinations:

“State” and “locality.”28 The “illogical result” of requiring no report where a locality does

not tax tobacco is only illogical because of the State’s illogical interpretation. Rather,

reporting is only required for transactions covered by the statute (i.e., delivery sales).

The State also overlooks the fact that, to trigger reporting requirements, a

shipment must be both (1) made in “interstate commerce” and (2) made into one of the

three enumerated destinations. Section 376(a) is not ambiguous, and the State is not

permitted to point to other provisions in an effort to make it so. The reporting provisions

simply define where reports are to be filed if the two aforementioned requirements are

first satisfied. The State confuses “into” with “through,” as recognized by the R&R.29

Section 375(9)(B), however, shows that “into” means the destination to which

“cigarettes . . . are delivered,” not a jurisdiction through which shipments travel. The

State, however, does not even reference this statutory definition – which shows that it is

unable to do so while still offering its interpretation. This omission alone requires

rejection of the State’s Objections to this part of the R&R.30

28 Docket No. 97, at 7. 29 Compare Docket No. 100, at 6, 8 with Docket No. 87, at 37. 30 Cf. Sanchez, 2004 WL 1964505, at *4.


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Finally, the State argues that the PACT Act did not alter federal common law

establishing state authority to regulate Indian tobacco trade in Indian country.31 This

argument, however, must be rejected as irrelevant. First, the PACT Act does not even

address this common law rule, nor does the common law provide the statutory definition

of “interstate commerce” or “Into a State, place, or locality.” Rather, those definitions

are expressly provided for in the statute, and do not rely on any common law

“understandings” concerning the Indian tobacco trade. The common law referenced by

the State involves the sale of tobacco to non-Indians (or non-members). Here, on the

other hand, the State does not allege any such transactions; it only alleges on-

reservation sales by Indians to Indian tribal entities.

C. The State’s Alleged Transactions Are Not “Interstate Commerce” Under The PACT Act

The R&R correctly concluded that the alleged shipments “do not fall within the

four-corners of the PACT Act’s definition of interstate commerce.”32 The R&R properly

rejected the State’s interpretation, which would render meaningless parts of the statute

by failing to give distinct meanings to “State” and “Indian country.”33 Judge Foschio

pointed out that the State’s interpretation also overlooks Congress’ use of “through”

where it alleges that shipments were made “into” not “through” “Indian country.”34 The

31 Docket No. 100, at 8-9. 32 Docket No. 97, at 37. Under the PACT Act, “interstate commerce” must move between: (1) “a State and any place outside the State”; (2) “a State and any Indian country in the State”; (3) “points in the same State but through” (a) “any place outside the State”; or (b) “any Indian country.” 15 U.S.C. §375(9)(A). 33 Docket No. 97, at 37-38. 34 Docket No. 97, at 37.


13

R&R was correct that, to be viable, the PACT Act would require a fourth type of

commerce “or between any Indian country within the same State.”35

The State fails to identify any error by Judge Foschio. Rather, the State simply

disagrees with the fact that the R&R rejected the argument that “State” and “Indian

country” lack distinct statutory meanings.36 The State repeatedly refers to its opposition

papers to reiterate arguments made to and rejected by Judge Foschio.37 Incredibly, the

State continues to argue that NWS’ shipments fall within the first statutory type of

interstate commerce: “commerce between a State and any place outside the State”

even though the commerce here involves another statutory destination, “Indian country.”

The State’s argument that “State” and “Indian country” are not “mutually

exclusive” and that “Indian country” falls within “State” is demonstrably incorrect. If

“Indian country” was also part of “State” for purposes of defining “interstate commerce,”

then categories 2 (“commerce between a State and any Indian country in the State”)

and 3 (“commerce between points in the same State but through any place outside the

State or through any Indian country”) would be intrastate, not interstate, in nature. The

State’s interpretation would require this Court to render certain terms meaningless,

while also rendering meaningless the distinction between interstate and intrastate.38

Judge Foschio’s interpretation, on the other hand, gives meaning to all statutory terms

35 Docket No. 97, at 37-38. 36 Compare Docket No. 100, at 9 with Docket No. 97, at 36-38 and 15 U.S.C. §§ 375(7), (9)(A), (11). 37 Docket No. 100, at 9-11 (citing its Opposition Brief five times, excluding footnote 7). 38 Liu Meng-Lin v. Siemens AG, 763 F.3d 175, 181 (2d Cir. 2014) (“[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”).


14

and avoids the State’s absurd interpretation.39 If Congress had intended “Indian

country” to be part of “State,” then there would have been no need to include the term

“Indian country” in the statutory definition of interstate commerce. Instead, the definition

makes clear that each term has a territorially distinct meaning.

The State makes the circular argument that PACT Act reporting requirements

would be meaningless if “interstate commerce” did not include shipments to Indian

country – despite the fact that none of the three scenarios that Congress adopted to

define “interstate commerce” included any transaction that ends in “Indian country.”40

As set forth in Point II(A) above, however, that is exactly what the PACT Act says (and

means). The PACT Act prohibits “delivery sales.” The State admits that it does not

allege any “delivery sales” by NWS (which would require NWS to sell to consumers).

The PACT Act includes reporting requirements designed to facilitate enforcement of the

PACT Act (i.e., prohibiting “delivery sales”). The PACT Act does not impose reporting

obligations that are independent of the enforcement of the “delivery sale” provisions.

The PACT Act is meaningless with respect to transactions that are not “delivery sales.”

Shipments into “Indian country” are not shipments “into a State” within the meaning of

that phrase as discussed above. The R&R correctly rejected the State’s tortured efforts

to place square pegs into round holes.

39 Docket No. 97, at 37-38; Knox v. Agria Corp., 613 F. Supp. 2d 419, 422 (S.D.N.Y. 2009) (“courts must interpret a statute to give meaning to each provision so as to ‘avoid statutory interpretations that render provisions superfluous.’”); State St. Bank & Trust Co. v. Salovaara, 326 F.3d 130, 139 (2d Cir. 2003) (“It is our duty to give effect, if possible, to every clause and word of a statute.”). 40 Docket No. 100, at 9-10.


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POINT III

Judge Foschio Correctly Recommended Dismissal of the CCTA Claim Because That Statute Bars Civil Actions against “an Indian in Indian country”

This Court should adopt Judge Foschio’s recommendation to dismiss the State’s

CCTA claim based on the “Indian in Indian country” exemption. This exemption is

contained in 18 U.S.C. §2346(b)(1), which provides that “[n]o civil action may be

commenced under this paragraph against an Indian tribe or an Indian in Indian

country.”41

The State’s sole objection to the R&R’s conclusion that NWS is exempt under the

CCTA’s “Indian in Indian country” is that Judge Foschio’s reasoning was flawed, but the

State does not provide any basis for finding fault with that reasoning. The State argues:

(1) that NWS is not an “Indian” and (2) that it is not “in Indian country.”

A. NWS is an “Indian”

The State raises several arguments that were not raised before Judge Foschio

and thus should be rejected for that reason alone. The State cannot treat the

proceedings before Judge Foschio as mere dress rehearsal.

The State does not refute that NWS is a Native American entity established

under Native American law, located and operating on Seneca Nation land.42 Rather,

the State’s only argument is that Indian corporations are not “Indians” within the

meaning of 18 U.S.C. § 2346(b)(1). This, however, must be rejected.

41 18 U.S.C. §2346(b)(1) (emphasis added); City of New York v. Wolfpack Tobacco, 2013 WL 5312542, at *2 n.1 (S.D.N.Y. 2013) (noting that no CCTA claim was asserted against defendants, who were located on the Allegany Reservation of the Seneca Nation). 42 2d Am. Compl., ¶¶ 9, 111, and Ex. D (at p. 9 of 47); Docket No. 97, at 18.


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First, Judge Foschio correctly recognized that the law generally extends

“personhood” to corporations and defines “person” to include corporate entities.43

Judge Foschio held that “Indian” is akin to “person,” which includes corporations as well

as individuals.44 Accordingly, Judge Foschio was correct in applying the CCTA’s

exemption to an Indian corporation.

The State argues that “Indian” is not “akin to the term ‘person.’”45 The State

argues that the Dictionary Act does not define “Indian,” while ignoring the expansive

definition given to “person.”46 The State does not suggest why Congress would treat

Indian corporations less favorably than non-Indian corporations. The State’s

interpretation of “Indian” as excluding corporations would be a step back for Native

American rights, essentially holding that non-natives may do business through a

corporation and have that corporation treated as a “person” for the purpose of

exercising personal rights, but that Native-owned corporations will not be given the

same treatment. The State’s position would relegate Native Americans to second-class

citizenship. There is no rational reason why Congress would bar a CCTA claim against

an Indian selling tobacco, while allowing the same claim to proceed against that same

individual if he/she instead elects to do business through a tribally chartered

corporation.

43 Docket No. 97, at 17-18. 44 Docket No. 97, at 17-18; see also AMERICAN HERITAGE DICTIONARY, definition of “person” (“A human, corporation, organization, partnership, association, or other entity deemed or construed to be governed by a particular law”). 45 Docket No. 100, at 11-12. 46 Docket No. 100, at 11-12.


17

The State also argues that Congress has adopted distinct definitions for “Indian”

and “Indian-owned business.”47 This argument was never raised before Judge Foschio,

and is now being raised for the first time in this Court. Nonetheless, Congress did not

limit the ‘Indian in Indian country’ exemption to individuals. Congress could have easily

done so, and any resulting ambiguity must be construed in NWS’ favor under applicable

canons of statutory construction (see note 50 infra).

Judge Foschio’s interpretation is also supported by the CCTA’s companion

statute, the PACT Act, which should be construed in pari materia with the CCTA.48

Although the CCTA does not define “person,” the PACT Act defines “person” as “an

individual, corporation, company, association, firm . . . Indian tribal government,

governmental organization of such a government, or a joint stock company.”49

Second, even if “Indian in Indian country” were ambiguous, any such ambiguity

must be resolved in NWS’ favor under applicable canons of construction. The R&R

correctly held that a “unique canon of construction applies to statutory provisions

involving Indians” such that “[s]tatutes are to be construed liberally in favor of the

Indians, with ambiguous provisions interpreted to their benefit.”50 The State does not

47 Docket No. 100, at 13-14. 48 Wachovia Bank v. Schmidt, 546 U.S. 303, 315–16 (2006) (“under the in pari materia canon of statutory construction, statutes addressing the same subject matter generally should be read “‘as if they were one law.’”). 49 15 U.S.C. § 375(10). 50 Docket No. 97, at 18 (quoting Judge Skretny in Citizens Against Casino Gambling in Erie County v. Stevens, 945 F. Supp. 2d 391, 400 (W.D.N.Y. 2013)). See also County of Yakama v. Confederated Tribes and Bands of Yakama Indian Nation, 502 U.S. 251, 269 (1992) (“When we are faced with these two possible constructions, our choice between them must be dictated by a principle deeply rooted in this Court's Indian jurisprudence: ‘[S]tatutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit.’”); Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 766 (1985) (citing Bryan v. Itasca County, 426 U.S. 373, 393


18

even address this point, thus implicitly conceding an inability to do so.51 Therefore, any

ambiguity in the CCTA must be resolved in favor of NWS.

Third, the R&R’s interpretation is supported by the CCTA’s legislative history.

Interpreting “Indian,” like “person,” as including tribally-chartered business entities is

consistent with the legislative history of the “Indian in Indian country” provision

contained in §2346(b)(1). Section 2346 formed part of the CCTA when originally

enacted in 1978.52 Congress amended it in 2006 to add subsection 2346(b).53 When

introduced from the floor of the House in 2005,54 the language of the proposed

amendment was immediately opposed by legislative leaders who felt it would improperly

impose liability on tribes and tribal entities that were “legally involved” in tobacco

commerce.55 Rep. Kildee stated that these were “clearly not the types of entities we are

targeting with this provision.”56 By way of compromise, and to ensure the ability of

tribes and tribal members to engage in the tobacco economy, the “Indian in Indian

country” exemption in §2346(b)(1) was adopted.

(1976); McClanahan v. Arizona State Tax Comm’n, 411 U.S. 164, 174 (1973), Choate v. Trapp, 224 U.S. 665, 675 (1912)); id. at 766 n.4 (noting that “although tax exemptions generally are to be construed narrowly, in ‘the Government’s dealings with the Indians the rule is exactly the contrary. The construction, instead of being strict, is liberal.’”) (citation omitted). 51 Sanchez v. Town of Greece, 2004 WL 1964505, at *4 (W.D.N.Y. 2004) (holding that claim was abandoned where party failed to address it in memorandum opposing motion to dismiss); Yencho v. Chase Home Fin. LLC, 2015 WL 127721, at *2 (S.D.N.Y. 2015) (holding that failure to contest argument in opposition brief is a “fatal” omission). 52 Pub. L. 95–575, § 1 (Nov. 2, 1978), 92 Stat. 2465. 53 Pub. L. 109–177, title I, § 121(f) (Mar. 9, 2006) (“USA Patriot Improvement and Reauthorization Act of 2005”), 120 Stat. 223. 54 151 Cong. Rec. H6282 (July 21, 2005). 55 Id. at H6282, H6284-85 (remarks of Representatives John Conyers, Tom Cole, Jim Sennsenbrenner and Eric Cantor). 56 Id. at H6284 (remarks of Rep. Dale Kildee) (emphasis added).


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Similarly, interpreting “Indian” to include tribally-chartered business entities is

also consistent with Congress’ treatment of tribally-licensed manufacturers, distributors,

wholesalers and retailers of tobacco products under the PACT Act. The language of

what ultimately became the PACT Act, first introduced in 2003 in the 108th Congress

and enacted in 2009 by the 110th Congress, was also considered by the 109th

Congress, which added the “Indian in Indian country” exemption to the CCTA.57

Finally, interpreting “Indian” as including tribally-chartered business entities is

consistent with the understanding of state courts, which consider tribal corporations

“Indians,” even when incorporated under state law, and thus exempt from state

regulatory authority.58 NWS presents a stronger case because it is not incorporated

under state law.

B. NWS is in “Indian country”

The State makes a half-hearted argument that NWS is not “in Indian country.”59

This, however, merely tweaks an argument already rejected by Judge Foschio.60 The

State attempts to import a standard for state regulation of tobacco sales into the CCTA

by arguing that NWS is only an Indian in the Sac & Fox Nation, but not in the Seneca

Nation, where it operates and despite that NWS’ sole owner is an enrolled Seneca

57 See, e.g., S. 3810 (109th Cong., 2d sess.), § 2(a) (defining “consumer” as excluding “any person lawfully operating as a manufacturer, distributor, wholesaler, or retailer of cigarettes or smokeless tobacco”). Compare 15 U.S.C. § 375(4)(B) (same). 58 Pourier v. S.D. Dep’t of Rev., 658 N.W.2d 395, 404 (S.D. 2003), vacated in part on other grounds, 674 N.W. 2d 314 (S.D. 2004); Flat Ctr. Farms, Inc. v. Mont. Dep’t of Rev., 49 P.3d 578, 580-82 (Mont. 2002). 59 Docket No. 100, at 16-17. 60 Docket No. 93, at 29 n.10; Docket No. 97, at 18.


20

Nation member on whose Seneca land NWS operates.61 The State points to nothing in

the CCTA in support, instead simply pointing to a Supreme Court decision decided

years after the CCTA was enacted, and which did not involve the CCTA in any event.62

Judicial decisions rendered after the CCTA was enacted, and which did not even

construe the CCTA, shed no guidance whatsoever concerning the “Indian in Indian

country” exemption.63

Under 18 U.S.C. §1151, “Indian country” is defined to include “all land within the

limits of any Indian reservation under the jurisdiction of the United States

Government.”64 The Cattaraugus Territory of the Seneca Nation falls within the

definition of Indian country.65 The State’s proposed carve-out from the exemption is

unsupported by the CCTA. And even if the meaning of “in Indian country” were

ambiguous, it would be resolved in favor of NWS (see note 50 infra). Again, the State

ignores this canon,66 and thus concedes the point. Therefore, any ambiguity in the

CCTA must be resolved in favor of NWS. Judge Foschio correctly held that NWS is an

Indian in Indian country and that New York State is prohibited by 18 U.S.C. § 2346(b)(1)

from asserting a claim under the CCTA.

61 Docket No. 100, at 16-17. 62 Docket No. 100, at 17 (citing Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134 (1980)). The CCTA was enacted in 1978. Docket #97 at 6. 63 Braden v. 30th Judicial Circuit Court of Kentucky, 410 U.S. 484, 502 (1973) (Rehnquist, J. dissenting) (“subsequent ‘developments' are simply irrelevant to the judicial task of ascertaining the legislative intent of Congress”). 64 See also Stevens, 945 F. Supp. 2d at 400 (“Generally speaking, primary jurisdiction over land that is Indian country rests with the Federal Government and the Indian tribe inhabiting it, not the States.”) (citation omitted). 65 Citizens Against Casino Gambling in Erie County v. Hogen, 2008 WL 2746566, at *42 (W.D.N.Y. 2008) (noting that Seneca Nation land, including Cattaraugus Reservation, constitutes Indian country). 66 Docket No. 95-2, at 5 (citing Docket 79-3 at 13 and Stevens, 945 F. Supp. 2d at 400).


21

POINT IV

Judge Foschio Correctly Recommended Dismissal With Prejudice

Judge Foschio correctly recommended dismissal of the State’s federal claims

with prejudice.67 The R&R noted that the State did not oppose NWS’ request for

dismissal with prejudice, thus waiving the opportunity to make the arguments that it now

seeks to make. The State also failed to refute the futility of its inability to establish

“interstate commerce” under the PACT Act, or that NWS is exempt from CCTA claims

under the “Indian in Indian country” provision. The State does not suggest any

information that could be pleaded to avoid these bars to its claims. Accordingly, Judge

Foschio correctly concluded that it would be futile for the State to file a third amended

complaint (i.e., its fourth pleading) since it has already had three bites at the apple.

67 Docket No. 97, at 41-42.


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CONCLUSION

For the foregoing reasons, this Court should adopt Judge Foschio’s R&R

recommending dismissal of Plaintiff’s federal claims with prejudice, dismissing the

State’s state law claim without prejudice, together with any further relief that this Court

deems just and proper.

Dated: November 23, 2016 WEBSTER SZANYI LLP Attorneys for Defendant Native Wholesale Supply Company By: /s/ Jeremy A. Colby Kevin A. Szanyi Nelson Perel Jeremy A. Colby 1400 Liberty Building Buffalo, New York 14202 (716) 842-2800 To: ERIC SCHNEIDERMAN Attorney General of the State of New York Joshua Sprague Attorneys for Plaintiff New York State Attorney General’s Office 120 Broadway, 3rd Floor New York, New York 10271 FRIEDMAN KAPLAN SEILER & ADELMAN LLP Eric Corngold Jeffrey R. Wang Attorneys for Defendant Grand River Enterprises Six Nations, Ltd. 7 Times Square New York, New York 10036


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