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State ex rel. Wasden v. Native Wholesale Supply Co.

Supreme Court of Idaho, Boise

October 15, 2013

STATE of Idaho by and through Lawrence G. WASDEN, Attorney General, and the Idaho State Tax Commission, Plaintiffs-Respondents,
v.
NATIVE WHOLESALE SUPPLY COMPANY, a corporation, Defendant-Appellant.

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[Copyrighted Material Omitted]

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Eberle, Berlin, Kading, Turnbow & McKlveen, Chartered, Boise, for appellant. Samuel A. Diddle argued.

Hon. Lawrence G. Wasden, Attorney General, Boise, for respondents. Brett T. DeLange argued.

SUBSTITUTE OPINION, THE COURT'S PRIOR OPINION DATED AUGUST 16, 2013 IS HEREBY WITHDRAWN.

HORTON, Justice.

This appeal arises from Native Wholesale Supply Company's (NWS) cigarette sales to Warpath, Inc. NWS is an Indian retailer organized under the tribal laws of the Sac and Fox Nation. It operates on the Seneca reservation in New York. Warpath is an Idaho corporation that operates on the Coeur d'Alene reservation. The State of Idaho brought suit against NWS for acting as a cigarette wholesaler without a permit and for selling cigarettes that are unlawful for sale in Idaho. The district court enjoined NWS from selling wholesale cigarettes in Idaho without a wholesale permit and assessed civil penalties in the amount of $214,200. NWS appealed that decision, arguing the State did not have subject matter jurisdiction or personal jurisdiction. We affirm in part, reverse in part, and remand to the district court for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Idaho law requires any entity importing cigarettes into the state to obtain a wholesale permit. Furthermore, only cigarettes manufactured by companies that comply with the Master Settlement Agreement Act (MSAA), and the Complementary Act may be sold in Idaho. I.C. § 39-8403(3). The MSAA and Complementary Act were enacted to put the cost of tobacco-related healthcare on the tobacco manufacturers doing business in Idaho. To do that, the MSAA requires tobacco manufacturers to either join the tobacco Master Settlement Agreement or establish a qualified escrow account and deposit into escrow a statutorily prescribed amount " per unit sold," a term defined by the MSAA. See State, ex rel. Wasden v. Maybee, 148 Idaho 520, 529, 224 P.3d 1109, 1118 (2010). The Complementary Act requires every tobacco manufacturer that sells cigarettes in Idaho to annually certify compliance with the requirements of the MSAA. The State of Idaho maintains a registry of such compliant manufacturers. It is unlawful to sell cigarettes from a non-compliant manufacturer within the state of Idaho.

Beginning in 2004, NWS sold over 100 million cigarettes wholesale to Warpath. NWS is a corporation organized under the tribal code of the Sac and Fox Nation. However, it is owned by a member of the Seneca tribe and is operated on the Seneca reservation. Warpath is an Idaho corporation owned by a member of the Coeur d'Alene tribe, and is operated solely on the Coeur d'Alene reservation. NWS purchased cigarettes manufactured in Canada. These were

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then stored in a foreign trade zone in Nevada. The cigarettes were then shipped from Nevada to the Coeur d'Alene reservation. NWS has never held a wholesale permit. All the cigarettes it sold to Warpath were either Opal or Seneca brand, both of which are produced by a manufacturer that was non-compliant at all times relevant to this litigation.

The State brought suit against NWS seeking a permanent injunction and civil penalties. NWS moved to dismiss the case for lack of subject matter jurisdiction and personal jurisdiction. NWS argued that because it was owned solely by a member of the Seneca tribe, was operated on the Seneca reservation, and its only business in Idaho was with a tribal-owned retailer on the Coeur d'Alene reservation, Idaho courts did not have jurisdiction. Its motion was denied. The State was granted a preliminary injunction prohibiting NWS from selling non-compliant cigarettes in Idaho. The State then moved for, and was granted, summary judgment. The State was granted a permanent injunction based upon I.C. § 48-606(1)(b) (the Idaho Consumer Protection Act) and I.C. § 63-2519 (relating to taxation of cigarettes) and was awarded $214,200 in civil penalties for NWS's sale of non-compliant cigarettes, a violation of the Complementary Act. The injunction prohibits NWS from selling non-compliant cigarettes and from acting as a wholesaler in Idaho without first obtaining a valid wholesaler permit.

II. STANDARD OF REVIEW

This Court reviews an appeal from summary judgment using the same standard employed by the trial court; namely, summary judgment shall be granted if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Doe v. City of Elk River, 144 Idaho 337, 338, 160 P.3d 1272, 1273 (2007); I.R.C.P. 56(c). This Court exercises free review regarding whether the prevailing party was entitled to judgment. Andersen v. Prof'l Escrow Servs., Inc., 141 Idaho 743, 745-46, 118 P.3d 75, 77-78 (2005). This Court also exercises free review over questions of jurisdiction. State v. Doe, 147 Idaho 326, 327, 208 P.3d 730, 731 (2009).

In Intermountain Bus. Forms, Inc. v. Shepard Bus. Forms Co., 96 Idaho 538, 531 P.2d 1183 (1975), this Court discussed the standard we employ when reviewing a district court's decision on a motion to dismiss in which all evidence has been submitted by way of affidavit. We considered the " evidentiary presumptions" that " should apply to appellate review of the factual questions presented by the ...


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