Ho-Chunk, Inc. et al v. Lynch et al

Cross MOTION for Summary Judgment Combined Cross-Motion/Opposition

D.D.C.December 21, 2016

1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, CROSS MOTION FOR SUMMARY JUDGMENT, AND REQUEST FOR ORAL HEARING Plaintiffs Ho-Chunk, Inc.; Woodlands Distribution Company; HCI Distribution Company; and Rock River Manufacturing Company oppose Defendants’ October 21, 2016 Motion for Summary Judgment and cross-move for summary judgment. Plaintiffs’ Statement of Genuine Issues in Opposition to Defendants’ Statement of Material Facts, Plaintiffs’ Statement of Material Facts not in Genuine Dispute, a Memo- randum of Points and Authorities, one exhibit, and a Proposed Order are filed herewith. Plaintiffs’ request an oral hearing on the parties’ cross motions. LCvR 7(f). Respectfully submitted this 21st day of December, 2016, /s/ B Benjamin Fenner DC Bar No. 1011266 John M. Peebles (DC Bar No. NE15730) Patricia A. Marks (DC Bar No. 446702) FREDERICKS PEEBLES & MORGAN LLP 401 9th St. NW, Suite 700 Washington, DC 20004 (212) 450-4887 HO-CHUNK, INC., WOODLANDS DISTRIBUTION COMPANY, HCI DISTRIBUTION COMPANY, and ROCK RIVER MANUFACTURING COMPANY, Plaintiffs, v. LORETTA LYNCH, UNITED STATES DEPARTMENT OF JUSTICE, THOMAS E. BRANDON, and UNITED STATES BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES Defendants. Case No. 1:16-CV-1652-CRC Case 1:16-cv-01652-CRC Document 11 Filed 12/21/16 Page 1 of 1 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA PLAINTIFFS’ STATEMENT OF GENUINE ISSUES IN OPPOSITION TO DEFENDANT’S STATEMENT OF MATERIAL FACTS In accordance with LCvR 7(h), Plaintiffs Ho-Chunk, Inc. (“HCI”), Woodlands Distribution Company (“Woodlands”), HCI Distribution Company (“HCID”), and Rock River Manufacturing Company (“Rock River”) (collectively “Tribal Entities”) submit this statement of genuine issues in opposition to Defendants’ Statement of Material Facts Not in Genuine Dispute. 1. Plaintiffs are located on the Winnebago Tribe of Nebraska’s Reservation. Defendants’ Alleged Fact: 4) On June 24, 2016, pursuant to the inspection authority under the record keeping provisions of the Contraband Cigarette Trafficking Act, (CCTA), 18 U.S.C. §§2343(a) and (c), Keith Krolczyk, Chief, Alcohol, Tobacco Enforcement Branch, Bureau of Alcohol, Tobacco Firearms and Explosives (ATF), sent letters to HCI Distribution, 701 Buffalo Trail, Winnebago, Nebraska, 68071; Rock River HO-CHUNK, INC., WOODLANDS DISTRIBUTION COMPANY, HCI DISTRIBUTION COMPANY, and ROCK RIVER MANUFACTURING COMPANY, Plaintiffs, v. LORETTA LYNCH, UNITED STATES DEPARTMENT OF JUSTICE, THOMAS E. BRANDON, and UNITED STATES BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES Defendants. Case No. 1:16-CV-1652-CRC Case 1:16-cv-01652-CRC Document 11-1 Filed 12/21/16 Page 1 of 4 2 Manufacturing, 505 Ho-Chunk Plaza, Winnebago, Nebraska 68071; and Woodlands Distribution, One Mission Drive, Winnebago, Nebraska 68071. See Declaration of Ellen V. Endrizzi (Endrizzi Decl.) ¶3, Gov’t Ex. 1; Compl. ¶24. These three companies, which are located on the Ho-Chunk Indian reservation in Nebraska, commercially distribute cigarettes in the United States. These companies currently, primarily distribute Native American manufactured cigarettes. 2. Defendants’ cite an obsolete version of HCID’s website. HCID’s website was updated for form and content and the quote, taken out of context by Defendants’ and which in full related to sales of Native brands to Indian country, is no longer on the website. http://hochunktrading.com/hci.html (last visited December 15, 2016). Whether Plaintiffs “cut” the prices of cigarettes sold or “distribute cigarettes without payment of state taxes and distribute cigarettes without state tax stamps” is not ripe for judicial determination, is beyond the scope of the Complaint and the actions on which the Complaint is based, and is a genuine issue necessary to be litigated. Defendants’ Alleged Fact: 5) HCID states on its public website that “[d]ue in part to tribal ownership, we market select brands of cigarettes at lower prices than competitors. That means you can sell quality products from HCI Distribution at lower costs and higher profit margins.” http://www.hcidistribution.com/aboutus.html (last visited October 6, 2016). One means for distributors to cut the prices of cigarettes sold is to distribute cigarettes without payment of state taxes and distribute cigarettes without state tax stamps. 3. The CCTA does not set forth records to maintain, that is left to the “rule or regulation” prescribed by the “Attorney General.” 18. U.S.C. §2343(a). The Tribal Case 1:16-cv-01652-CRC Document 11-1 Filed 12/21/16 Page 2 of 4 3 Entities are not required to maintain records under the regulations. The decisions identified in the letters from ATF did not address the applicability of the CCTA. Defendants’ Alleged Fact: 6) The letters stated ATF’s intent to inspect and copy the records these entities must maintain under the CCTA and requested that each company schedule with ATF a date for such inspection. See Endrizzi Decl., Gov’t Ex. 1. The letters identified circuit court decisions that held that the CCTA is applicable to Native Americans and also set forth the applicable statutory language of the CCTA. Id. 4. The Tribal Entities did not refuse to allow ATF access to the three locations and ATF did not demand such access. Rather the Tribal Entities compiled the records related to shipments outside of Indian country in paper format and by electronic copy for ATF at HCI’s business location in Bellevue, Nebraska. Defendants’ Alleged Fact: 8) Plaintiffs refused to allow ATF access to the three locations to inspect the records, but noted that “the Winnebago Tribe intends to provide the ATF with the requested information regarding its off-reservation transactions and initiate an appropriate action in federal court … to clarify, among other issues, whether or not it is obligated to provide its records on its inter-tribal trades.” Govt. Ex. 2, Peebles Ltr. at 4. 5. The applicability of the CCTA is not ripe for judicial determination, is beyond the scope of the Complaint and the actions on which the Complaint is based, and is a genuine issue necessary to be litigated. Defendants’ Alleged Fact: 9) On August 4, 2016, ATF Associate Chief Counsel Jeffrey A. Cohen responded to Mr. Peebles’ letter indicating that it was ATF’s view that the CCTA applied to all businesses engaged in commercial cigarette transactions, including Native American businesses. Endrizzi Decl. at ¶ 5, Gov’t Ex. 3, Jeffrey A. Cohen Ltr., Case 1:16-cv-01652-CRC Document 11-1 Filed 12/21/16 Page 3 of 4 4 dated Aug. 4, 2016. 6. ATF is attempting to enforce its inspection authority through court order by its current Motion for Summary Judgment. Defendants’ alleged fact: 11) On August 16, 2016, Plaintiffs filed the instant Complaint alleging that the CCTA recordkeeping provisions did not apply in Indian country. Case no. 1:16- CV-1652-CRC, D.E. 1. In light of this litigation, ATF has not attempted to enforce its inspection authority under the CCTA of the Plaintiffs’ corporations through an in-person demand, court order, or search warrant. Endrizzi Decl. at ¶ 7. Respectfully submitted this 21st day of December, 2016, /s/ B Benjamin Fenner DC Bar No. 1011266 John M. Peebles (DC Bar No. NE15730) Patricia A. Marks (DC Bar No. 446702) FREDERICKS PEEBLES & MORGAN LLP 401 9th St. NW, Suite 700 Washington, DC 20004 (212) 450-4887 Case 1:16-cv-01652-CRC Document 11-1 Filed 12/21/16 Page 4 of 4 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA PLAINTIFFS’ STATEMENT OF MATERIAL FACTS NOT IN GENUINE DISPUTE In accordance with LCvR 7(h), Plaintiffs Ho-Chunk, Inc. (HCI); Woodlands Distribution Company (Woodlands); HCI Distribution Company (HCID); and Rock River Manufacturing Company (Rock River) submit this statement of material facts not in genuine dispute in support of its cross motion for summary judgment. 1. The Winnebago Tribe of Nebraska (Tribe) is a federally-recognized Indian tribe exercising sovereign jurisdiction over its lands located in Northeastern Nebraska. The Tribe is located on the federally-recognized Winnebago Indian Reservation, a Reservation included within the federal definition of Indian Country. Compl., ¶ 20; Defs’ Motion for Summary Judgment at 6. 2. Under the Tribe’s Constitution and Bylaws, the Tribal Council has the power to “manage all economic affairs and enterprises of the Tribe” and to “charter subordinate organizations for economic and political purposes . . . .” Decl. of Lance Morgan (Morgan Decl.) at ¶ 4. 3. As an exercise of its sovereign power, the Tribe created HCI as a wholly-owned tribal HO-CHUNK, INC., WOODLANDS DISTRIBUTION COMPANY, HCI DISTRIBUTION COMPANY, and ROCK RIVER MANUFACTURING COMPANY, Plaintiffs, v. LORETTA LYNCH, UNITED STATES DEPARTMENT OF JUSTICE, THOMAS E. BRANDON, and UNITED STATES BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES Defendants. Case No. 1:16-CV-1652-CRC Case 1:16-cv-01652-CRC Document 11-2 Filed 12/21/16 Page 1 of 4 2 corporation to serve as the Tribe’s primary economic development arm. As a wholly-owned tribal corporation, HCI is bestowed under tribal law with all of the rights, privileges and immunities of the Tribe. Morgan Decl., ¶ 4. 4. Before HCI’s creation, the Winnebago Reservation experienced chronic and severe unemployment reaching as high as sixty-five percent. This was due in large part to the unavailability of capital. Much of the Tribe’s land is held in trust by the United States government or has been diminished through allotment leaving the Tribe unable to fund its governmental programs through property tax revenue. Compounding these difficulties is the fact that the Tribe’s trust land may not be used as collateral for conventional loans. The historic attrition and legal form of tribal land holdings denies tribes the major source of funding available to virtually every other government. Tribes, including the Winnebago Tribe of Nebraska, are required to provide essential governmental services but do not have the real-property-tax base available to other governments to fund those services. Compl., ¶ 21; Morgan Decl, ¶ 8. 5. In order to address this lack of capital, the Tribe created HCI. HCI’s main purpose is to foster economic development on the Winnebago Reservation, create economic opportunities for Tribal members, and provide revenue directly to the Tribal government. Compl., ¶ 21.; Morgan Decl., ¶ 11. 6. HCI’s approximately 30 subsidiary corporations have created hundreds of jobs on the Reservation for Tribal members. Between 2000-2013, the average payroll per Reservation worker soared by 167.6%. The share of the Winnebago Reservation living in poverty decreased by 5.1% while increasing in surrounding states with the percentage of children living in poverty declining from 44.2% to 33.1% in 2013. From 2000 to 2014, HCI produced $8.1 million in wages and salaries on the Reservation. Compl., ¶ 22; Morgan Decl., ¶ 12. Case 1:16-cv-01652-CRC Document 11-2 Filed 12/21/16 Page 2 of 4 3 7. In addition to creating jobs and alleviating poverty on the Reservation, 100% of the profits earned by HCI are owned by the Tribe. The Tribe uses these funds to support Tribal social welfare programs such as elder and child care, as well as basic government services. The Tribe has also used this money to fund special programs, such as down payment assistance for Tribal members seeking to buy a home. Compl., ¶ 23; Morgan Decl., ¶ 13. 8. HCI operates through numerous subsidiary corporations. Operating through subsidiary corporations is a necessary part of HCI’s business for two reasons. First, given the myriad of HCI’s different types of business, this is required for efficient management. Second, HCI engages in contracting with the Federal government and a separate organization is required by many of the regulations governing such contracting. Compl., ¶ 9; Defs’ Motion for Summary Judgment at 6; Morgan Decl., ¶15. 9. HCID, Woodlands, and Rock River are three of these subsidiary corporations. All were created by the Tribe and are organized under Tribal law. HCID, Woodlands, and Rock River are wholly owned by HCI and all of their profits are owned by HCI (and thus the Tribe). Compl., ¶ 9, 23; Defs’ Motion for Summary Judgment at 6; Morgan Decl., ¶ 16-18. 10. On or about June 24, 2016, Rock River, Woodlands, and HCID received identical letters from Keith Krolczyk, Chief, Alcohol and Tobacco Enforcement Branch of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Compl., ¶ 24; Defs’ Motion for Summary Judgment at 6. 11. The purpose of the letters was to “schedule a date, within 15 days of the receipt of this letter, for ATF officers to inspect and copy (electronic copy preferred) the Contraband Cigarette Trafficking Act (CCTA) records that are required to be maintained by your business.” Each Case 1:16-cv-01652-CRC Document 11-2 Filed 12/21/16 Page 3 of 4 4 of the letters then goes on to cite to the record keeping language of the CCTA, contained in 18 U.S.C. §2343; the implementing regulations of the CCTA found in 27 C.F.R. Part 646; and the Unlawful Acts and Penalties sections of the CCTA found in 18 U.S.C. §§2342(b) and 2344(b). Compl., ¶ 24; Defs’ Motion for Summary Judgment at 7. 12. After the Tribal Entities enunciated their positions on the inapplicability of the CCTA record keeping requirements in “Indian country,” and requested that ATF not take civil or criminal action until the Tribal Entities obtained judicial interpretation of whether or not it is obligated to provide its records under the CCTA implementing regulations as demanded in the June 24th Letters, ATF responded by stating that it would not accede to the Tribal Entities’ request and stated that it intends to confer with the United States Attorney’s Office for the District of Nebraska. Compl., ¶ 35; Defs’ Motion for Summary Judgment at 7. Respectfully submitted this 21st day of December, 2016, /s/ B Benjamin Fenner DC Bar No. 1011266 John M. Peebles (DC Bar No. NE15730) Patricia A. Marks (DC Bar No. 446702) FREDERICKS PEEBLES & MORGAN LLP 401 9th St. NW, Suite 700 Washington, DC 20004 (212) 450-4887 Case 1:16-cv-01652-CRC Document 11-2 Filed 12/21/16 Page 4 of 4 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND IN SUPPORT OF PLAINTIFFS’ CROSS MOTION FOR SUMMARY JUDGMENT Plaintiffs Ho-Chunk, Inc. (“HCI”); Woodlands Distribution Company (“Woodlands”); HCI Distribution Company (“HCID”); and Rock River Manufacturing Company (“Rock River”) (collectively “Tribal Entities”) oppose Defendants’ Loretta Lynch; United States Department of Justice; Thomas E. Brandon; and United States Bureau of Alcohol, Tobacco, Firearms and Explosives (collectively “AG”) October 21, 2016 Motion for Summary Judgment (“MSJ”), and Cross-moves for Summary Judgment in favor of the Tribal Entities. Specifically, the Tribal Entities do not argue the general applicability of the Contraband Cigarette Trafficking Act, 18 U.S.C. §2341, et seq. (“CCTA”) or of “State or local” taxes to Indian country. The Tribal Entities merely seek an order that the rules prescribed implementing the record keeping requirements of 18 U.S.C. §2343(a) do not apply to “Indian country.” HO-CHUNK, INC., WOODLANDS DISTRIBUTION COMPANY, HCI DISTRIBUTION COMPANY, and ROCK RIVER MANUFACTURING COMPANY, Plaintiffs, v. LORETTA LYNCH, UNITED STATES DEPARTMENT OF JUSTICE, THOMAS E. BRANDON, and UNITED STATES BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES Defendants. Case No. 1:16-CV-1652-CRC Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 1 of 20 2 FACTUAL BACKGROUND The Winnebago Tribe of Nebraska (“Tribe”) is a federally-recognized Indian tribe exercising sovereign jurisdiction over its lands located in Northeastern Nebraska. See 81 Fed.Reg. 5019, 5023 (Jan. 29, 2016); United States v. Holiday, 70 U.S. 407, 419 (1865) (holding that recognition of a tribe by the political branches of the Federal government must be respected by the court). The Tribe is located on the federally-recognized Winnebago Indian Reservation, a Reservation which is “Indian country” under the statutory definition. See 18 U.S.C. §1151. Under the Tribe’s Constitution and Bylaws, the Tribal Council has the power to “manage all economic affairs and enterprises of the Tribe” and to “charter subordinate organizations for economic and political purposes . . . .” Winnebago Tribal Constitution, Art. IV sec 1(e), (o).1 As an exercise of its sovereign power, the Tribe created HCI as a wholly-owned tribal corporation. Declaration of Lance G. Morgan (“Morgan Decl.”), ¶ 4. As a wholly-owned tribal corporation, HCI is bestowed under tribal law with all of the “rights, privileges and immunities of the Tribe concerning federal, state, or local taxes, regulations and jurisdiction . . . to the same extent that the tribe would have such rights, privileges and immunities if it engaged in the activities undertaken by the corporation.” Winnebago Tribal Code Section 11-1003(3).2 Before HCI’s creation, the Winnebago Reservation experienced chronic and severe unemployment reaching as high as sixty-five percent. Morgan Decl., ¶8. This was due in large part to the unavailability of capital. Much of the Tribe’s land is held in trust by the United States government or has been diminished through allotment leaving the Tribe 1 The Winnebago Tribal Constitution is available at http://www.winnebagotribe.com/images/joomlart/corporate/tribe/bylaws/2009-03-10-Winnebago-Tribal-Constitution- Bylaws-As-Amended.pdf 2 The Winnebago Tribe of Nebraska Tribal Code is available at http://www.winnebagotribe.com/images/joomlart/corporate/tribe/court/tribalcode/2015-WTN-TITLE-11-Business- Corporations.pdf Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 2 of 20 3 unable to fund its governmental programs through property-tax revenue. Kelly S. Croman, Johathan B. Taylor, Why Begger Thy Indian Neighbor? The Case for Tribal Primacy in Taxation in Indian Country, Joint Occasional Papers on Native Affairs, 5 (May 4, 2016), http://nni.arizona.edu/application/files/8914/6254/9090/2016_Croman_why_beggar_thy_Ind ian_neighbor.pdf. Similarly, trust land may not be used as collateral for conventional loans. The historic attrition and legal form of tribal land holdings denies tribes the major sources of funding available to virtually every other government. Id. Tribes, including the Winnebago Tribe of Nebraska, are required to provide essential governmental services but do not have the real-property-tax base or collateral available to other governments to fund those services. In order to address this lack of capital, the Tribe created HCI. HCI’s main purpose is to foster economic development on the Winnebago Reservation, create economic opportunities for Tribal members, and provide revenue directly to the Tribal government. Morgan Decl., ¶4. HCI’s approximately 30 subsidiary corporations have created hundreds of jobs on the Reservation for Tribal members. Morgan Decl., ¶12. Between 2000-2013, the average payroll per Reservation worker soared by 167.6%. Id. The share of the Winnebago Reservation living in poverty decreased by 5.1% while increasing in surrounding states with the percentage of children living in poverty on the Reservation declining from 44.2% to 33.1% in 2013. Id. From 2000 to 2014, HCI produced $8.1 million in wages and salaries on the Reservation. Id. In addition to creating jobs and alleviating poverty on the Reservation, 100% of the profits earned by HCI are owned by the Tribe. See Winnebago Tribal Code, §11-1030(2). The Tribe uses these funds to support Tribal social welfare programs such as elder and child care, as well as basic government services. Morgan Decl., ¶13. The Tribe has also used this money to fund special programs, such as down payment assistance for Tribal members seeking to buy a home. Id. See also Ho-Chunk Village Video Tour, available at Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 3 of 20 4 http://hochunkinc.com/village-tour.php. HCI operates through numerous subsidiary corporations. Operating through subsidiary corporations is a necessary part of HCI’s business for two reasons. Morgan Decl., ¶15. First, given the myriad of HCI’s different types of business, this is required for efficient management. Id. Second, HCI engages in contracting with the Federal government and a separate organization is required by many of the regulations governing such contracting. Id. HCID, Woodlands, and RRMC are three of these subsidiary corporations. Id. at ¶16. All were created by the Tribe and are organized under Tribal law. Id. at ¶17. HCID, Woodlands, and Rock River are wholly owned by HCI and all of their profits are owned by HCI (and thus the Tribe). Id. at ¶18. See also Winnebago Tribal Code § 11-1030 (Assets; distribution of income). On or about June 24, 2016, Rock River, Woodlands, and HCID received identical letters from Keith Krolczyk, Chief, Alcohol and Tobacco Enforcement Branch of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). The purpose of the letters was to “schedule a date, within 15 days of the receipt of this letter, for ATF officers to inspect and copy (electronic copy preferred) the Contraband Cigarette Trafficking Act (CCTA) records that are required to be maintained by your business.” Each of the letters then goes on to cite to the record keeping language of the CCTA, contained in 18 U.S.C. §2343; the implementing regulations of the CCTA found in 27 C.F.R. Part 646; and the Unlawful Acts and Penalties sections of the CCTA found in 18 U.S.C. §§2342(b) and 2344(b). These letters will be referenced to collectively herein as the “June 24th Letters.” Copies of the June 24th Letters were attached to the Tribal Entities’ Complaint as Exhibit 1. After the Tribal Entities enunciated their positions on the inapplicability of the CCTA record keeping requirements in “Indian country,” and requested that ATF not take civil or criminal action until the Tribal Entities obtained adjudication of this issue, ATF responded Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 4 of 20 5 by stating that it would not accede to the Tribal Entities’ request and stated that it intends to confer with the United States Attorney’s Office for the District of Nebraska. A copy of the August 4th Letter was attached to the Tribal Entities’ Complaint as Exhibit 2. The Tribal Entities filed this lawsuit seeking declaratory judgment on the CCTA record keeping requirements on August 15, 2016. STANDARD OF REVIEW Summary judgment is appropriate when there is no genuine issue as to the material facts, and the moving party demonstrates it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). “Judicial intervention,” whether through considering a motion for summary judgment or otherwise, is not proper “on problems that are hypothetical rather than actual.” Nat'l Automatic Laundry & Cleaning Council v. Shultz, 443 F.2d 689, 699 (D.C. Cir. 1971). “Aversion to hypothetical inquiries relates to the essence of the judicial function, restricted by the Constitution to cases and controversies, and to restraint in its exercise even when the minimum of constitutional authority is established.” Id. ARGUMENT The AG’s MSJ should be denied and the Tribal Entity’s Cross Motion for Summary Judgment should be granted. By their plain language, the outdated regulations purporting to implement 18 U.S.C. §2343(a) do not apply to “Indian country.” Additionally, the legislative history of the CCTA expressing the intent of Congress to protect tribal governments and tribal sovereignty makes clear that this is the correct interpretation of the regulations. Finally, the Tribal Entities do not argue the general applicability of the CCTA to “Indian country” and the issue of what constitutes a violation of the CCTA’s substantive provisions is neither argued nor ripe for adjudication or developed sufficiently to be decided on the limited record presented here. I. The Language, Purpose, and History Show That the Regulations Prescribed Which Implement the Record Keeping Provisions Do Not Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 5 of 20 6 Apply to Indian Country Statutory construction begins with the language of the statute itself. If a statute’s language is plain and unambiguous, it should be applied according to its terms. A provision that seems ambiguous in isolation can be clarified by the remainder of the statutory scheme if the same terminology is used elsewhere in a context that makes its meaning clear, or if only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law and its purpose. United Savings Ass’n v. Timbers of Inwood Forest Associates, 484 U.S. 365, 371 (1988). When construing ambiguous phrases in statutes enacted for the benefit of Indians, a special interpretive rule known as the Indian canon of construction applies. Under the Indian canon, “ambiguities in federal statutes are to be read liberally in favor of the Indians.” City of Roseville v. Norton, 348 F.3d 1020, 1032 (D.C. Cir. 2003), citing County of Yakima v. Confederated Tribes & Bands of Yakima Indian Nation, 502 U.S. 251, 269 (1992); Montana v. Blackfeet Tribe, 471 U.S. 759, 766 (1985). See also Chickasaw Nation v. United States, 534 U.S. 84, 99 (2001) (statutes to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit). This canon applies to federal laws enacted for the benefit of Indians as well as to laws of general applicability that impair tribal rights. See, e.g., Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 17 (1987) (refusing to read diversity jurisdiction grant of 28 U.S.C. § 1332 as imposing limits on tribal sovereignty); United States v. Dion, 476 U.S. 734, 739 (1986) (general laws that abrogate treaty rights do not apply to Indians without showing of Congressional intent to abrogate treaty). While the CCTA is a law of general applicability, Section 2346 of the Act contains exclusions expressly enacted for the benefit of Tribes and Tribal governments. Section 2346 also contains rules for interpreting the CCTA. It states that nothing “in this chapter shall be deemed to abrogate or constitute a waiver of any sovereign immunity of Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 6 of 20 7 . . . an Indian tribe against any unconsented lawsuit under this chapter, or otherwise to restrict, expand, or modify any sovereign immunity of a State or local government, or an Indian tribe.”3 As discussed below, the CCTA’s goal of not altering tribal and state immunities is supported by the Act’s legislative history. A. By its Plain Language, the “Territorial Extent” of the Recordkeeping Regulations Does Not Apply Those Regulations to “Indian Country” Initially, unlike the remainder of the section, the recording keeping provision of 18 U.S.C. §2343(a) is not self-contained or effective by its own terms. This is evident from the language of the statute, which provides the Attorney General with authority and discretion on the recordkeeping provisions of 18 U.S.C. §2343(a). The law specifically states that the Attorney General may “prescribe by rule or regulation” the records to maintain “as the Attorney General considers appropriate for purposes of enforcement of this chapter . . . .” Id. Other provisions of the statute reinforce the role of the Attorney General in implementing the recordkeeping requirements and the central role those regulations have in enforcing the statute. The “Penalties” provision states that “whoever knowingly violates any rule or regulation promulgated under section 2343(a) [recordkeeping] . . . of this title or violates section 2342(b) [reporting] of this title” shall be subject to fines and imprisonment. 18 U.S.C. §2344(b) (emphasis supplied). Likewise, the Attorney General, in enforcing the CCTA, is subject to section 2343(a) and hence the regulations prescribed under and effectuating that section. 18 U.S.C. §2346(a). Thus, Defendant’s argument for a broad application of the CCTA is irrelevant. The record keeping requirement, the only issue before the Court, is not set out in the statute. It is defined by the regulations. The regulations establish a “territorial extent” at 27 C.F.R. §646.142. This section 3 The cases relied on by the AG for the proposition that the CCTA applies in Indian country are distinguishable. MSJ at 9-10. First, and most importantly, they do not address the “Territorial extent” of 27 CFR §646.142. Id. Additionally, none of them discuss the general applicability of the CCTA as revised to corporations wholly owned by a tribe and trading in native tobacco products. Id. Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 7 of 20 8 reads as follows: “The provision of the regulations in this part apply in the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the Virgin Islands.” Id. This territorial extent is specific in its application and does not include “Indian country.” Additionally, applicable law makes clear that “Indian country” may not be read into the regulations as the AG urges. This is especially true when such expansion would be “contrary to all other textual and contextual evidence of congressional intent.” Burns v. United States, 501 U.S. 129, 136 (1991) (overruled on other grounds). In the CCTA, Congress protects tribal sovereignty through explicit statutory language, and states that nothing in the statute (including the regulations prescribed implementing the recordkeeping provisions of the statute) “shall be deemed to . . . restrict, expand, or modify any sovereign immunity of . . . an Indian tribe. 18 U.S.C. §2346(b)(2). Congress clearly recognized the difference between “Indian country” and “States” and explicitly used these terms of art to protect tribal sovereignty. Compare 18 U.S.C. §2341(4) (defining “State”) with 18 U.S.C. §2346(b)(1) (incorporating the definition of “Indian country”). As the AG’s regulations as applied here do not carry forward this distinction, they fail to implement Congressional intent and their interpretation must fail under the statute as currently written. See MSJ at 5, fn2 (“the regulations have not yet been amended . . . .”) This is crucial as the 2006 amendments altered the statute to explicitly include tribal protections. The AG nevertheless asks this Court to rely on an outdated regulatory interpretation attempting to assert the unlawful position that the “Territorial extent” of the regulations subsume “Indian country” within “States.” This would alter “the fundamental details of a regulatory scheme in vague terms or ancillary provisions” - like Congress, the Attorney General cannot “hide elephants in mouseholes.” Whitman v. American Trucking Assoc., Inc., 531 U.S. 457, 468 (2001). This is doubly true when the interpretation sought to Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 8 of 20 9 be upheld violates the very statute being implemented. As recognized in federal statutory and case law and the CCTA itself, “Indian country” is something distinct from and cannot be included into the “Territorial extent” of 27 C.F.R. §646.142. Stated simply, and despite the AG’s unsupported protestations otherwise, “Indian country” is not one of “the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the Virgin Islands.” 27 C.F.R. §646.142. No Indian tribe or tribal entity in Indian country can be expected to understand the term to include them. Additionally, reading the regulations as urged by the AG to allow “Indian country” to be subsumed in “States” violates the very statute the regulations seek to implement by “expand[ing]” a sovereign immunity of a State government while “restrict[ing]” a sovereign immunity of an Indian tribe. 18 U.S.C. §2346(b)(2). The tribal immunities sought to be restricted by Defendant’s overbroad MSJ are both territorial and tax-based. Tribal sovereignty was recognized in settlers’ earliest dealings with tribes and is enshrined in Article I, section 8 of the United States Constitution (giving Congress the power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes . . . .”) and some of the earliest Indian law cases. In 1832, Chief Justice John Marshall wrote one of the first and most formative Indian-law decisions: Worchester v. Georgia, 31 U.S. 515 (1832). That decision held that the “Cherokee nation . . . is a distinct community, occupying its own territory, with boundaries accurately described, in which the law of Georgia can have no force.” Id. at 520. Like states, the territorial-based sovereignty of tribes has changed over the years as the country grew. But such sovereignty remains a “bedrock principle of federal Indian law.” See City of Sherrill, N.Y. v. Oneida Indian Nation of N.Y., 544 U.S. 197, 224 (2005) (J. Stevens dissenting). Indeed, without it, “Indian tribes within ‘Indian country’” would be little more than “private, voluntary organizations.” U.S. v. Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 9 of 20 10 Mazurie, 419 U.S. 544, 557 (1975)(J. Rhenquist). See also Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 140 (1982)(J. Marshall). While the Tribal Entities do not challenge the authority of the United State to regulate tribes and tribal activities through acts of Congress, this authority does not allow a federal agency the unilateral authority to act in violation of statutory text or explicit Congressional intent. Eliminating tribal sovereign rights over their lands through outdated and illegal regulatory interpretation runs counter to at least 184-years of federal Indian law. The AG urges, through a “simply repeated” definition of “State” in the 1978 version of the Act, and in violation of the CCTA as currently written, to allow a restriction or modification of a tribal sovereign immunity by including “Indian country” in “States” for the purpose of 27 C.F.R. §646.142. MSJ at 15. 4 Such inclusion, however, must be by the hand of Congress-it is not within the discretion of an administrative agency or the courts. State of N.Y. v. Mountain Tobacco Co., No. 12-CV-6276(JS)(SIL), 2016 WL 3962992, at *7 (E.D.N.Y. July 21, 2016) (“the Court is not empowered to legislate; its sole charge is to interpret and apply the CCTA as drafted by Congress.”) Congress has plenary authority over tribes (Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2030 (2014)) and “only Congress has the power to diminish or disestablish a tribe’s reservation.” City of Sherrill, N.Y. v. Oneida Indian Nation of N.Y., 544 U.S. 197, 224 (2005) (J. Stevens dissenting). Congress did not attempt to exercise its authority to regulate tribal recordkeeping activities by subsuming “Indian country” within the definition of “States” in the CCTA. In fact, the CCTA explicitly recognizes tribal sovereignty and distinguishes between “States” and “Indian country.” 18 U.S.C. §2346(b)(1)-(2). Congress 4 Several definitions in the regulations are either not contained in the statute or are different from the statue. For example, unlike the CCTA, the regulations define “disposition” and “distributor.” 27 C.F.R. 646.143. They also define “exempted person” in terms borrowed from and more carefully parsed then the statute. Id. The argument that the regulations “simply repeat[]” the statute on the point pressed by the AG in the context of this litigation is thus suspect. MSJ at 15. Cf. De La Mota v. U.S. Dep’t of Educ., 412 F.3d 71, 80 (2d Cir. 2005) (holding that an agency position adopted during the course of litigation “lack[s] the thoroughness required for Skidmore respect.”) Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 10 of 20 11 clearly knows how to distinguish “Indian country” and did so in the enforcement section of the CCTA. 18 U.S.C. §2346(b)(1)(citing 18 U.S.C. §1151). It did not include “Indian country” in the definition of “State” which definition (albeit outdated) Defendant’s claim to be carrying forward here. 18 U.S.C. §2341(4). The court must presume that such omission was purposeful. See Am. Forest & Paper Ass’n v. FERC, 550 F.3d 1179, 1181 (D.C. Cir. 2008) (“[W]here Congress includes particular language in one section of a statute but omits it in another section of the same [a]ct, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” (quoting Russello v. United States, 464 U.S. 16, 23 (1983)). Concomitant with territorial sovereignty is the sovereign power to tax. This is no less true in Indian country than in any other jurisdiction. The power to tax is an essential attribute of Indian sovereignty because it is a necessary instrument of self-government and territorial management. This power enables a tribal government to raise revenues for its essential services. . . . [It derives] from the tribe’s general authority, as sovereign, to control economic activities within its jurisdiction, and to defray the cost of providing governmental services by requiring contributions form persons or enterprises engage in such activities. Merrion v. Jicarilla, 1982, p 130. see also Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024, 2043 (2014) (Sotomayor, J., concurring) (determining that “[a] key goal of the Federal Government is to render Tribes more self-sufficient, and better positioned to fund their own sovereign functions, rather than relying on Federal funding”). What the AG seeks in hertheir MSJ is to restrict, as relevant here through outdated regulations implementing an outdated version of the statute, the Tribal Entities’ reserved tax and territorial sovereign rights. The AG’s interpretation is unlawful and must be rejected. A recent analogous case examined virtually identical language and found that the argument that “‘Indian Country’ . . . is somehow subsumed within the definition of ‘state’ is belied by a plain reading of the statute.” State of New York v. Mountain Tobacco Co., No. Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 11 of 20 12 12-CV-6276(JS)(SIL), 2016 WL 3962992, at *8 (E.D.N.Y. July 21, 2016). Mountain Tobacco Co. applied the CCTA “Indian in Indian Country” exemption in 18 U.S.C. §2346 to hold that King Mountain, a tribal corporation owned by an individual tribal member, is exempt from state enforcement efforts under that paragraph. 2016 WL 3962992, at *7. The court then examined the definitions of “State” and “Indian country” in the Prevent All Cigarette Trafficking Act, 15 U.S.C. §375 et seq. (PACT Act) to determine the contours of each within the statutory definition of “interstate commerce.” Id. at *7-8. 5 As here, the plaintiff in Mountain Tobacco Co. relied on Nevada v. Hicks, 533 U.S. 353 (2001) to argue “that King Mountain's sales were made in ‘interstate commerce,’ as defined by the PACT Act, because [o]rdinarily, ‘an Indian reservation is considered part of the territory of the State.’” Mountain Tobacco Co., 2016 WL 3962992, at *8 (quoting Nevada v. Hicks, 533 U.S. 353, 361-62 (2001)). The court rejected this argument. It found that the PACT Act “includes separate definitions for ‘State’ and ‘Indian country.’ ‘State’ is defined as ‘each of the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States.’ 15 U.S.C. § 375(11). ‘Indian Country’ is defined as including “all land within the limits of any Indian reservation under the jurisdiction of the United States Government [.]” 15 U.S.C. § 375(7); 18 U.S.C. § 1151.” Mountain Tobacco Co., 2016 WL 3962992, at *8. Thus the “notion that a qualified Indian reservation--which falls squarely within the definition of ‘Indian Country’--is somehow subsumed within the definition of ‘state’ is belied by a plain reading of the statute.” Id. Similarly, the court rejected any “purported general rule that Indian reservations are 5 The PACT Act defines “interstate commerce” as: (1) “commerce between a State and any place outside the State,” (2) “commerce between a State and any Indian country in the State,” or (3) “commerce between points in the same State but through any place outside the State or through any Indian country.” 15 U.S.C. §375(9)(A). Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 12 of 20 13 parts of the states in which their located” given the distinct statutory definition of “State” and “Indian country.” Id. As in Mountain Tobacco Co., the AG here relies on Nevada v. Hicks (533 U.S. 353 (2001)) to claim that an Indian reservation is “ordinarily” considered part of the territory of the State. MSJ at 10. Like the PACT Act, however, the CCTA contains separate definitions for “State” and “Indian country.” 18 U.S.C. §§2341(4), 2346(b)(1). Therefore, as in Mountain Tobacco Co., the AG’s position here is “belied by a plain reading of the statute.”6 Because a plain reading of the CCTA belies the AG’s argument that “Indian country” is somehow subsumed within the statutory definition of “State,” its attempt to expand the “territorial extent” of 27 C.F.R. §646.142 beyond what the statute allows must fail and the MSJ should be denied. B. The CCTA Legislative History and Statutory Purpose Support the Plain Meaning of “Territorial Extent” in the Recordkeeping Regulations Interpreting the “Territorial extent” of 27 C.F.R. §646.142 to exclude “Indian country” is consistent with the CCTA’s purpose, which is to stop the funding of terrorists and other criminal organizations who purchase cigarettes in states with a low excise tax and resell them in states with a high excise tax. 151 CONG. REC. H6273-04, (daily ed. July 21, 2005) (Statement of Rep. Coble), 2005 WL 1703380, at *H6284. The legislative history to the 2006 amendment to the CCTA notes that, “[a]s initially drafted, the amendment could have had the unintended effect of targeting tribal governments who are legitimately involved in the retailing of tobacco products.” Id. The amendment, however, “incorporated language that will go a long way to protecting tribal governments 6 As both the CCTA and the PACT Act regulate trafficking in cigarettes and smokeless tobacco, and as the PACT Act was introduced in the Senate in 2007 and became law in 2010, shortly after passage of the 2006 CCTA amendments, “it is appropriate to presume that Congress intended the text to have the same meaning in both statutes.” Philip Morris USA Inc. v. United States Food & Drug Admin., No. 15-CV-1590 (APM), 2016 WL 4378970, at *17 (D.D.C. Aug. 16, 2016) (quoting City of Jackson, 544 U.S. 228, 233 (2005)). Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 13 of 20 14 and tribal sovereignty.” Id. The legislative history goes on to note that “[s]upport for tribal sovereignty is a bi-partisan issue and collectively the Congress will continue to defend that fundamental principal of law.” Id. The AG argues that because tribal governments are exempt under the reporting requirements of section 2343(b), they are not exempt from the recordkeeping requirements of 2343(a). MSJ at 14. Accepting this position, however, effectively reads the tribal governmental exception out of 2343(b) by requiring tribal governments to report. See June 24th Letters (seeking electronic copies of records). But again, this argument serves only to distract from the real issue, which is the AG’s attempt to interpret 27 C.F.R. §646.142 contrary to the CCTA’s statutory text and purpose. The AG also appears to urge that applying 27 C.F.R. §646.142 as written would render the Tribal Entities a “supersovereign” free from all but self-imposed regulation. MSJ at 12. This is wrong. The Tribal Entities actually argue, and the CCTA supports, the position that neither tribes nor states are “supersovereigns.” See 18 U.S.C. 2346(b)(2)(“Nothing in this chapter shall be deemed to . . . restrict, expand, or modify any sovereign immunity of a State or local government, or an Indian tribe.”) The Tribal Entities do not challenge the authority of the United State to regulate tribes through acts of Congress. What is not allowed, however, is for ATF to get the information it is prohibited from demanding under section 2343(b) by illegally expanding the “territorial extent” of the regulations purporting to implement an old version of section 2343(a). Because the language of the regulations and the purpose and legislative history of the CCTA show that 27 C.F.R. §646.142 does not apply the record keeping requirements to “Indian country,” the AG’s MSJ should be denied and the Tribal Entities’ Cross Motion for Summary Judgment should be granted. C. Chevron Deference Does Not Apply to the AG’s Interpretation of “State” Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 14 of 20 15 The AG argues that it is entitled to deference under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). MSJ at 16-17. As the Tribal Entities have shown, however, the CCTA explicitly distinguishes between “State” and “Indian country” and must be enforced according to its plain, unambiguous terms. Even if the Court does find ambiguity, the AG is not entitled to Chevron deference. As addressed above, courts “typically do not apply full Chevron deference to an agency interpretation of an ambiguous statutory provision involving Indian affairs.” California Valley Miwok Tribe v. United States, 515 F.3d 1262, 1266 n. 7 (D.C.Cir.2008). Instead, “the canon of construction in favor of Indian tribes can trump the deference to agencies' interpretations courts ordinarily give under Chevron and its progeny.” Maniilaq Ass'n v. Burwell, 72 F.Supp.3d 227, 232 (2014). The Indian canon also trumps an agencies interpretation of its own regulations (Cobell v. Norton, 240 F.3d 1081, 1103 (D.C.Cir.2001) (“‘Whenever doubt or ambiguity exists in federal statutes or regulations, such doubt is resolved in favor of the tribes.’” (emphasis added and brackets omitted) (quoting Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 1555, 1563 (10th Cir.1984) (Seymour, J., concurring in part and dissenting in part)); see also Navajo Health Found.-Sage Mem'l Hosp., Inc. v. Burwell, 100 F.Supp.3d 1122, 1175-76 (D.N.M.2015) (holding that the Secretary is not entitled to deference when construing the Act's implementing regulations)). This is especially true here where the AG seeks to enforce outdated regulations keyed to an impermissible interpretation of the statute. See Auer v. Robbins, 519 U.S. 452, 463 (1997) (holding that the secretary is “free to write the regulations as broadly as he wishes, subject only to the limits imposed by the statute.”). Even if the defined terms “State” and “Indian country” were found to be ambiguous and Chevron applied, because the CCTA unambiguously forbids an interpretation that would “restrict, expand, or modify any sovereign immunity of a State or local government, Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 15 of 20 16 or an Indian tribe;” including “Indian country” in “State” “exceeds permissible bounds” and should be rejected. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984). II. The Applicability of the CCTA in Indian Country is Not at Issue or Ripe for Review, and the AG’s MSJ Must Be Denied The mandate contained in Article III of the Constitution and prudential standing concerns require a court to consider whether a case has matured into a controversy worthy of adjudication before it can hear the case. A case is ripe when the “effects of the administrative action challenged have been felt in a concrete way by the challenging parties . . . .” Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 57 (1993) (quotations omitted). In disputes, such as here, involving regulations or decisions promulgated by administrative agencies, a controversy is not considered ripe until the agency's decision has been formalized and the challenging parties have felt its effects. See Shultz, 443 F.2d at 698 (finding that “final” agency actions reviewable under the APA are those agency pronouncements or communications to which conformance is expected). The Administrative Procedure Act (APA) allows for judicial review of “final agency action.” 5 U.S.C. §704. “Agency action” is defined to include “an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.” 5 U.S.C. §551(4). As “agency action” includes an agency’s interpretation of the law, it is the “finality” of that action that often determines whether judicial review is proper. Schultz, 443 F.2d at 698). “Finality” under the APA is determined “in a pragmatic way.” Id. (internal quotations omitted)(quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 149). “The [United States Supreme] Court has found final action in a wide array of pronouncements and communications having the contemplation and likely consequence of ‘expected conformity.’” Shultz, 443 F.2d at 698 (citing cases). Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 16 of 20 17 Here, the only final agency action formalized which effects the Tribal Entities is the document demand in the June 24th Letters. The issue of whether the substantive provisions contained in the CCTA apply to the Tribal Entities is not formalized or challenged here. The ATF has neither determined that the Tribal Entities trade in “contraband cigarettes” nor attempted to apply the trade restrictions on them. It has merely sought records under the regulations implemented pursuant to an old version of 18 U.S.C. §2343 and the Tribal Entities have challenged the ability to obtain those records under those regulations. The AG states that the Tribal Entities “theoriz[e] that the CCTA does not apply in Indian country . . . .” MSJ at 1. This is wrong. The Tribal Entities assert no such theory. They merely argue that the recordkeeping provision of 18 U.S.C. §2343(a), as implemented in 27 C.F.R. 646 et seq., does not apply in “Indian country.” Whether the CCTA trade restrictions apply in “Indian country” is simply not at issue. Regardless, whether native tobacco products in tribe-to-tribe trade are “contraband” and thus subject to the CCTA trade restrictions is highly fact dependent and hence may not be dismissed at the current stage of proceedings. The MSJ cites to cases such as Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 483 (1976); Dept. of Tax and Finance of New York v. Milhelm Attea and Bros. Co., 512 U.S. 61 (1994); Washington v. Confederated Tribes Of Coleville, 447 U.S. 134 (1980) for the proposition that states can regulate Native American tobacco distributors in Indian Country. This, however, is not at issue. No state is attempting to regulate or tax the Tribal Entities here. The Complaint seeks a declaratory judgment solely on the record keeping demand in the June 24th Letters. Whether a “State” has tax and regulatory jurisdiction in “Indian country,” a question which is not before this Court in this case, is an entirely distinct question from whether 27 C.F.R. §646.142 as drafted extends the record keeping provisions of the CCTA to “Indian tribes” in “Indian country.” 18 U.S.C. §2346(b)(1)-(2). While the question of “State” tax and regulatory jurisdiction over “Indian tribes” in “Indian Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 17 of 20 18 country” may go to whether there is a substantive violation under 18 U.S.C. §2342 for failing to pay an “applicable” tax, 18 U.S.C. §2341(2)(defining “contraband cigarette”, in part, as being one not bearing “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 . . . .”), the cases cited by the AG do not even address the CCTA, much less the AG’s authority to unilaterally extend the “territorial extent” of the CCTA implementing regulations contrary to statutory text and legislative purpose. Quite simply, this case raises no question involving a substantive violation of the CCTA as no such violation has been threatened, and the Complaint does not seek a declaration on this issue. The only matter presently before the Court is whether the outdated regulations promulgated by the Attorney General regarding records inspections under the CCTA apply to “Indian tribes” in “Indian country.” 18 U.S.C. §2346(b)(1)-(2). Should the Court nonetheless find that the issue must be decided on whether a State or locality can regulate or tax HCID’s sales, summary judgment is not appropriate at this early stage as such analysis requires “a particularized inquiry” into the “interests at stake” in the “specific context” presented. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 145 (1980). The CCTA defines “Contraband cigarettes” as those which “bear no evidence of the payment of applicable State or local cigarette taxes . . . .” 18 U.S.C. §2341(2) (emphasis supplied). The CCTA does not separately define “State or local cigarette taxes” or make State or local taxes applicable in “Indian country” by its own force. It only provides that where a State or locality can tax such sales, the taxes must be paid subject to exemptions. Whether and what State, local and Indian tribal cigarette taxes are applicable to native cigarette sales by Indian tribes in “Indian country” is a fact-intensive analysis which goes far beyond the scope of this case. State regulations are “generally inapplicable” to the on-reservation conduct of Indians, except where Congress has expressly provided that state laws shall apply. Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 18 of 20 19 Nevada v. Hicks, 533 U.S. 353, 362 (2001), quoting White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 144 (1980); Bryan v. Itasca County, Minn., 426 U.S. 373, 376 n.2 (1976); McClanahan v. State Tax Comm’n of Arizona, 411 U.S. 164, 170-71 (1973). The same is true of taxes: when the legal incidence of a state tax falls on an Indian tribe or tribal member conducting business within Indian country, the tax is unenforceable except where Congress expressly provides otherwise. Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 459-460 (1995) (“[A] ‘legal incidence’ test . . . provide[s] a reasonably bright-line standard which, from a tax administration perspective, responds to the need for substantial certainty as to the permissible scope of state taxation authority.”) Even where the activity on tribal lands involves non-Indians, the ability of a state to tax or regulate that activity is limited. Bracker, 448 U.S. at 145. Such determination is subject to a particularized inquiry into the facts of each matter; facts which are neither pled nor required to decide the narrow issue before the Court. Id. Additionally, where a tribe adds value to a product in Indian Country, a state typically does not have the power to tax or regulate such activity. California v. Cabazon Band of Mission Indians, 480 U.S. 202, 220 (1987). These determinations simply cannot be made on the present record. See Petition of Bloomfield S. S. Co., 298 F. Supp. 1239, 1242 (S.D.N.Y. 1969), judgment aff'd on other grounds, 422 F.2d 728 (2d Cir. 1970) (“in cases posing complex issues of fact and unsettled questions of law, sound judicial administration dictates that the court withhold judgment until the whole factual structure stands upon a solid foundation of a plenary trial where the proof can be fully developed, questions answered, issues clearly focused and facts definitively found.”) The Tribal Entities only manufacture on tribal lands. See Morgan Decl. at ¶ 19. They sell in a myriad of Indian Country jurisdictions. Morgan Decl., ¶ 20. Some state jurisdictions attempt to tax Indian Country sales, some do not. Morgan Decl., ¶ 21. Some state jurisdictions have compacts with tribes on taxes, some do not. Morgan Decl., ¶ 21. The Defendant has offered no evidence regarding these facts that would support summary judgement on this issue and the Tribal Entities Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 19 of 20 20 have not raised the issue at all. The Court must not enter any judgement regarding whether the Tribal Entities’ sales are in substantive violation of the CCTA or whether there is an applicable state tax on any of the Tribal Entities’ sales and the AG’s MSJ should be denied. CONCLUSION The statutory text and legislative history of the CCTA indicate that “State” as used in 27 C.F.R. §646.142 cannot include “Indian country” and the Tribal Entities’ Cross Motion for Summary Judgment should be granted. As the applicability of the CCTA as a whole or state taxes in “Indian country” is simply not at issue, and as “State” as defined in the regulations simply do not include “Indian country,” the AG’s MSJ should be denied. Respectfully submitted this 21st day of December, 2016, /s/ B Benjamin Fenner DC Bar No. 1011266 John M. Peebles (DC Bar No. NE15730) Patricia A. Marks (DC Bar No. 446702) FREDERICKS PEEBLES & MORGAN LLP 401 9th St. NW, Suite 700 Washington, DC 20004 (212) 450-4887 Case 1:16-cv-01652-CRC Document 11-3 Filed 12/21/16 Page 20 of 20 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA HO-CHUNK, INC., WOODLANDS DISTRIBUTION COMPANY, HCI DISTRIBUTION COMPANY, and ROCK RIVER MANUFACTURING COMPANY, Plaintiffe, v. LORETTA LYNCH, UNITED STATES DEPARTMENT OF JUSTICE, THOMAS E. BRANDON, and UNITED STATES BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES Defendants. I, Lance G. Morgan, declare as follows: Case No. 1: 16-CV-1652-CRC 1. I am a lifelong member of the Winnebago Tribe of Nebraska. 2. I am a 1993 graduate of Harvard Law School. 3. In 1995, the Winnebago Tribal Council appointed me CEO of Ho-Chunk, Inc. 4. Ho-Chunk, Inc. was created by the Tribe under its Constitution and Bylaws, which give the Tribal Council the power to manage economic affairs of the Tribe and "charter subordinate organizations for economic and political purposes." Ho- Chunk, Inc. is wholly owned by the Tribe and is bestowed under tribal law with all of the rights, privileges and immunities of the Tribe. It is the Tribe's primary economic development arm. 1 Case 1:16-cv-01652-CRC Document 11-4 Filed 12/21/16 Page 1 of 4 5. As CEO of Ho-Chunk, Inc., I am responsible for keeping myself informed of and understanding the economic conditions on the Winnebago Reservation of Nebraska. 6. I am familiar with Winnebago Tribal law and all aspects of Ho-Chunk, Inc. 's; HCI Distribution Company's (HCID); Rock River Manufacturing Company's (Rock River); and Woodlands Distribution Company's (Woodlands) organization and operations. 7. Ho-Chunk, Inc. submits an annual business plan to the Winnebago Tribal Council for its approval. It submits quarterly reports and monthly financial statements as well. These submissions are made so that the Tribal Council can keep abreast of the condition of Ho-Chunk, Inc. in order to exercise ultimate control over its business. 8. Before Ho-Chunk, Inc. began is economic development plans for the Winnebago Reservation, unemployment on the Reservation was chronically high. In the 1980's, unemployment peaked at an astounding sixty-five percent. There was very little commercial enterprise on the Reservation. 9. In 1995, Ho-Chunk, Inc. began operating in earnest, stmiing its first business venture-a hotel. Since 1995, Ho-Chunk, Inc.'s business has steadily grown. Ho- Chunk, Inc. now owns a broad array of companies, including retail stores, distribution warehouses, home manufacturing, general constrnction, government contracting, vm'ious real estate interests, fmming, and marketing. It now employs approximately 300 people on or near the Winnebago Reservation. 2 Case 1:16-cv-01652-CRC Document 11-4 Filed 12/21/16 Page 2 of 4 10. In 2011, unemployment rates on the Winnebago Reservation were approximately 10 percent. 11. All of Ho-Chunk, Inc.'s profits are owned by the Winnebago Tribe ofNebraska. 12. HCI's approximately 30 subsidiaty corporations have created hundreds of jobs on the Reservation for Tribal members. Between 2000-2013, the average payroll per Reservation worker soared by 167.6%. The share of the Winnebago Reservation living in poverty decreased by 5 .1 % while increasing in surrounding states with the percentage of children living in poverty declining from 44.2% to 33.1% in 2013. From 2000 to 2014, HCI produced $8.l million in wages and salaries on the Reservation. 13. A portion of Ho-Chunk, Inc. 's annual profits are provided to the Winnebago Tribe as an owner dividend. These profits constitute a large portion of the Tribe's operating budget. This money is used to fund the Tribe's general fund and is used to pay for items such as social welfare programs for elder or child care; it also funds basic government functions, such as court employee salaries. The Tribe has also created special programs, such as one to help Tribal members make a down payment to purchase a house. The Tribe has dedicated six percent of Ho-Chunk, Inc.'s profits over the next five years to build 100 housing units and the infrastructure for an additional 100 homes on the Winnebago Reservation. 14. The remaining profits are reinvested in Ho-Chunk, Inc.'s various businesses to maintain competitiveness and grow the business. 15. In order to be in compliance with regulations on obtaining federal government contracts, Ho-Chunk, Inc. operates all of its business ventures through subsidiary 3 Case 1:16-cv-01652-CRC Document 11-4 Filed 12/21/16 Page 3 of 4 corporations. Ho-Chunk, Inc. also utilizes subsidiary corporations as its businesses are so varied having all of them operate as a single entity would simply be inefficient. 16. Three of Ho-Chunk, Inc.'s subsidiary corporations are HCID, Rock River, and Woodlands. 17. HCID, Rock River, and Woodlands were created by the Winnebago Tribe and organized under Tribal law. They are all wholly owned by Ho-Chunk, Inc. 18. All of the profits garnered by HCID, Rock River, and Woodlands are owned by Ho-Chunk, Inc. As with all of Ho-Chunk, Inc. ' s profits, this money is likewise owned by the Tribe and serves the purposes outlined in paragraphs 13 and 14 above. 19. Rock River manufactures solely on the Winnebago Indian Reservation. 20. HCID sells tribal tobacco products in a myriad oflndian-country jurisdictions. 21 . Some state jurisdictions attempt to tax Indian country sales and some to not. Some state jurisdictions have compacts with tribes on taxes and some to not. I declare under penalty of pe1jury that the foregoing is true and correct. Executed this~ day of December, 2016. Lance G. Morgan 4 Case 1:16-cv-01652-CRC Document 11-4 Filed 12/21/16 Page 4 of 4 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA [PROPOSED] ORDER Upon consideration of Defendants’ Motion for Summary Judgment, Plaintiffs’ Opposition and Cross-motion for Summary Judgment, and any opposition and replies thereto, it is hereby ORDERED that Defendants’ Motion is DENIED, and it is further ORDERED that Plaintiff’s Motion is GRANTED, and it is further ORDERED that Defendants’ are permanently enjoined from enforcing 18 U.S.C. §2343(a) as implemented in 27 C.F.R. §646.141 et seq. on Plaintiffs, and it is further ORDERED that Plaintiffs are eligible for, and entitled to, recover reasonable costs and attorneys’ fees and expenses incurred in this matter. Date: _____________________ United States District Judge HO-CHUNK, INC., WOODLANDS DISTRIBUTION COMPANY, HCI DISTRIBUTION COMPANY, and ROCK RIVER MANUFACTURING COMPANY, Plaintiffs, v. LORETTA LYNCH, UNITED STATES DEPARTMENT OF JUSTICE, THOMAS E. BRANDON, and UNITED STATES BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES Defendants. Case No. 1:16-CV-1652-CRC Case 1:16-cv-01652-CRC Document 11-5 Filed 12/21/16 Page 1 of 1