Friday, July 5, 2019
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$8.1 Million Judgment Against Company Chartered by Tribe Is Affirmed
Court of Appeal Says ‘Indian Commerce Clause’ Doesn’t Apply
By a MetNews Staff Writer
The Third District Court of Appeal has upheld a $8.1 million judgment in favor of the State of California in an action against a company chartered by Indian tribes for selling bootlegged cigarettes in the state, rejecting the contention that the suit was barred by the federal “Indian Commerce Clause.”
The Office of Attorney General obtained civil penalties amounting to $4,292,500, as well as $3,853,100.50 in attorney fees and costs, totaling $8,145,600.50, in an action against Native Wholesale Supply Company (“NWS”), chartered by a tribe with a reservation in New York. NWS sold more than one billion cigarettes to a tribe in California, which in turn sold them to the general public.
The cigarettes, manufactured in Canada, were contraband because the maker is not listed on the California Attorney General’s Tobacco Directory, established by Revenue and Taxation Code §30165.1, known as the “Directory Act.”
Health Fund
The list includes the nation’s four largest manufactures of tobacco products, which entered into a master settlement agreement in 1998 with California and 45 other states, agreeing to provide moneys to a health-care fund, in light of the deleterious effects of their products, and also includes other tobacco product manufacturers which have contributed to the fund.
NWS argued on appeal, as it did in the Sacramento Superior Court and in actions in other states, that the “Indian Commerce Clause” bars the state litigation against it. The Commerce Clause— Art. 1, §8, Clause 3 of the U.S. Constitution—vests in Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian.”
Wednesday’s Third District opinion was written by Justice Ronald Robie, who declared:
“NWS has provided no legitimate basis for concluding it qualifies as a tribal member. It is thus considered a non-Indian for purposes of the Indian Commerce Clause analysis.
“NWS’s non-Indian status does not, however, dispose of the preemption defense. If the liability-creating conduct occurred on-reservation, we must further conduct a balancing-of-the-interest analysis….”
Off-Reservation Activity
He went on to say:
“To determine whether a transaction is off-reservation or on-reservation for purposes of analyzing the applicability of the Indian Commerce Clause, we must determine where the party bearing the legal incidence of the regulation conducted the liability-creating conduct….
“We agree with the Oklahoma and Idaho Supreme Courts that the Indian Commerce Clause was not intended to cloak in sovereignty the type of transactions at issue here…. NWS’s activity in this case involved violations of the Directory Act occurring off-reservation.”
An equal protection argument was also rejected. Roble said there is no support for the proposition that NWS, a company, is an Indian, and, he noted, the Equal Protection Clause applies to persons.
The case is People v. Native Wholesale Supply Co., C084031.
Copyright 2019, Metropolitan News Company