Red Earth LLC, et al. v. United States of America, et al.

Plaintiffs, a group of Native Americans who are in the business of selling cigarettes and tobacco products via the Internet, mail and telephone, sued the US and Attorney General Eric Holder, Jr., claiming that the “Prevent All Cigarette Trafficking Act of 2009,” which requires retailers of cigarettes and smokeless tobacco who perform delivery sales to comply with all state and local laws in the jurisdiction where their products are delivered, violates their due process and equal protection rights. Plaintiffs also assert that the Act violates the Commerce Clause, the Tenth Amendment and is void for vagueness. The plaintiffs sought a preliminary injunction. Defendants argued that the plaintiffs failed to make the requisite showing necessary to enjoin enforcement of a federal statute. The Court granted plaintiffs’ motion for a preliminary injunction because there was: (1) a clear likelihood of success on the merits of their due process claim; (2) that they will suffer irreparable injury absent injunctive relief; and (3) that injunctive relief is in the public interest.

Red Earth LLC v. U.S., 728 F.Supp.2d 238 (W.D.N.Y. 2010).

  • United States
  • Jul 30, 2010
  • U.S. District Court, Western District of New York
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Parties

Plaintiff

  • Red Earth LLC
  • Aaron J. Pierce
  • Seneca Free Trade Association
  • Seneca Smokeshop

Defendant

  • Eric H. Holder, Jr., in his Official Capacity as Attorney General of the United States
  • United States of America

Legislation Cited

Related Documents

Type of Litigation

Tobacco Control Topics

Substantive Issues

Type of Tobacco Product

None

"Public interest also favors staying enforcement of the PACT Act for another reason. Plaintiffs assert (and defendants do not appear to dispute) that the Congressional expansion of state and local taxing schemes-as mandated under the PACT Act-is unprecedented. The Court is aware of no other federal statute requiring out-of-state retailers to be subject to taxing schemes for state and local governments into which they ship their goods, without regard to whether those retailers have minimum contacts required under the Due Process Clause. While legal commentators have pondered the scope of Congressional authority to enact such legislation,14 the Court believes that this is the first time it has actually been done. And if Congress possesses the authority to subject out-of-state retailers to every state and local taxing jurisdiction into which their products are delivered, then it has the authority to do so for all commercial products, not just cigarettes. Certainly, the public interest favors staying enforcement of a sweeping and unprecedented congressional mandate pending opportunity by this Court and others to fully consider the positions of all parties outside of the hurried context of a preliminary injunction motion."
"If this Act is permitted to take effect, remote cigarette retailers will be put out of business because they lack the financial resources needed to ensure compliance with the myriad of state and local ordinances to which they are now subject under the Act. Hence, they will face the Hobson's choice of ceasing what they believe to be lawful business activities, or continuing to engage in those activities while facing the threat of criminal prosecution if they are wrong. Because it is likely that most will chose the former, safer course of ceasing activities to avoid criminal prosecution, most retailers will be forced to shut down operations if injunctive relief is denied. Undoubtedly, this will have a significant adverse economic impact upon plaintiffs and their employees, all of whom presumably reside in the Western New York area and many of whom likely reside on the Seneca Nation reservation itself. According to an amicus curie brief submitted on behalf of the Seneca Nation, enforcement of the PACT Act would "devastate the livelihoods of scores of Seneca retailers and thousands of employees in Western New York." See Seneca Nation of Indians' Brief Amicus Curiae in Support of Plaintiffs' Motion for a Preliminary Injunction, Dkt. 42-3, at 2. In light of the severe economic consequence likely to befall those members of the Western New York community, public interest favors staying enforcement pending further litigation of plaintiffs' claims."