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Ho-Chunk, Inc. v. Sessions

United States Court of Appeals, District of Columbia Circuit

July 3, 2018

Ho-Chunk, Inc., et al., Appellants
v.
Jeff Sessions, in his official capacity, et al., Appellees

          Argued March 15, 2018

          Appeal from the United States District Court for the District of Columbia (No. 1:16-cv-01652)

          B. Benjamin Fenner argued the cause for appellants. With him on the briefs were Patricia A. Marks and Joseph V. Messineo. Peter D. Lepsch entered an appearance.

          William E. Havemann, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Jessie K. Liu, U.S. Attorney, and Mark B. Stern, Attorney. R. Craig Lawrence and Benton G. Peterson, Assistant U.S. Attorneys, entered appearances.

          Before: Rogers and Pillard, Circuit Judges, and Randolph, Senior Circuit Judge.

          OPINION

          RANDOLPH SENIOR CIRCUIT JUDGE.

         Historically, the "Ho-Chunk" Tribe occupied portions of what are now several midwestern states. In the 1800's the Tribe entered into treaties with the United States and divided into two branches: the Ho-Chunk Nation of Wisconsin and the Winnebago Tribe of Nebraska. Both are federally-recognized Indian tribes with federal reservations. See 83 Fed. Reg. 4, 235, 4, 237, 4, 239 (Jan. 30, 2018).

         The four appellants in this case - a parent corporation and three of its subsidiaries - are incorporated under the laws of the Winnebago Tribe of Nebraska. Ho-Chunk, Inc., the parent corporation, is the Tribe's wholly-owned economic development arm. Among its wholly-owned subsidiaries are the three corporations who are also parties here. They are involved in the manufacture and distribution of cigarettes. Each corporation's principal place of business is the Tribe's reservation in Winnebago, Nebraska.

         Appellant Rock River Manufacturing Company, one of these corporations, manufactures and imports tobacco products, including cigarettes. Rock River sells its products to another subsidiary corporation, HCI Distribution Company, as well as to state-licensed distributors. HCI Distribution resells these products to businesses owned or licensed by other Indian tribes. Woodlands Distribution Company, the third subsidiary corporation, sells tobacco products to off- and on-reservation companies.

         In 2016, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives sent letters to Rock River, HCI Distribution, and Woodlands. The letters notified the companies that the Bureau intended to inspect and copy their records of tobacco transactions and asked them to name a mutually-acceptable inspection date within fifteen business days from receipt of the letters.

         The companies and their parent responded with a complaint seeking a declaratory judgment that they are not subject to federal recordkeeping laws dealing with the distribution of cigarettes. The district court entered summary judgment against them. Ho-Chunk, Inc. v. Sessions, 253 F.Supp.3d 303, 304 (D.D.C. 2017). Their appeal presents a question of statutory interpretation - do the federal recordkeeping laws cover these corporations?

         ATF, as the Bureau is commonly known, issued its inspection notices pursuant to the Contraband Cigarette Trafficking Act of 1978, as amended. See 18 U.S.C. § 2343(c). The Act sought to remedy the "problem of organized crime and other large scale operations of interstate cigarette bootlegging and to help provide law enforcement assistance and relief to cities and States." S. Rep. 95-962, at 3 (1978).[1] To this end, "[a]ny person who ships, sells, or distributes any quantity of cigarettes in excess of 10, 000 . . . in a single transaction . . . [must] keep such information as the Attorney General considers appropriate . . .." 18 U.S.C. § 2343(a). This may include identifying information about cigarette purchasers and declarations of the purchasers' purposes in receiving the cigarettes. Id. § 2343(a)(1)-(3).

         Rock River, HCI Distribution, and Woodlands claim that they are exempt from the Act's recordkeeping requirements. They are exempt, they say, because the statute and the regulations do not cover wholly-owned corporations of a federally-recognized Indian tribe.

         Over the years, the Supreme Court has dealt with issues regarding Indian tribes and their sale of cigarettes. The law, as the Court has developed it, now stands as follows. Indians and Indian tribes may sell untaxed cigarettes on their reservations to tribal members for their personal consumption. See Moe v. Confederated Salish & Kootenai Tribes of the Flathead Reservation, 425 U.S. 463, 480-81 (1976). States, however, retain the authority to tax non-Indian customers of Indian cigarette distributors on the reservation. See Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 150-51 (1980). Under Moe and Colville, "a State may require Indian retailers to collect a tax imposed on non-Indian purchasers of cigarettes." Dep't of Taxation & Fin. of N.Y. v. Milhelm Attea & Bros., Inc., 512 U.S. ...


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