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Grand River Enterprises Six Nations Ltd v. Sullivan

United States District Court, D. Connecticut

September 26, 2018

KEVIN B. SULLIVAN, Commissioner of Revenue Services of the State of Connecticut, Defendant.



         Plaintiff Grand River Enterprises Six Nations LTD alleges that defendant Kevin B. Sullivan, as Commissioner of Revenue Services, threatens to revoke plaintiff's license to have its tobacco products sold in Connecticut based upon plaintiff's inability to reconcile nationwide sales with federal interstate shipping reports. Plaintiff asserts that removal from the State's Tobacco Directory under these circumstances would violate its constitutional right to due process, as well as the Supremacy Clause and the Commerce Clause of the United States Constitution.

         Defendant has moved to dismiss plaintiff's second amended complaint in its entirety. For the following reasons, defendant's motion will be granted.


         The following background is taken from plaintiff's second amended complaint, which is accepted as true for purposes of this decision.

         Plaintiff's claims focus principally on recent amendments to Conn. Gen. Stat. § 4-28m(a)(3). The amendments first took effect with respect to plaintiff's Connecticut state regulatory filings that were submitted on April 30, 2016. The amendments purport to authorize revocation of plaintiff's right and license to have its tobacco products sold in Connecticut if plaintiff's regulatory filings cannot reconcile the number of products sold nationwide by importers of its products (as measured by the importer's national federal excise tax returns) with the number of products shipped by these importers throughout the United States in Interstate Commerce (as evidenced by federal shipping reports required under federal law). The amendments thus purport to permit revocation of plaintiff's license in Connecticut based on the ability to reconcile two sets of federal regulatory filings of independent, third parties (importers), under two separate federal laws that federal law itself does not require to be reconciled.

         The federal tax laws measure the volume of cigarettes entered into U.S. commerce nationwide, while the federal shipping laws require reporting of tobacco products shipped or sold nationwide in “Interstate Commerce, ” which does not include products shipped intrastate or within or among Indian Country (as that term is defined under federal law) after importation into the United States. The federal shipping law at issue requires that Connecticut receive certain reports each month for sales and shipments into Connecticut, and Connecticut may use the information contained in such reports only for the purpose of enforcing that federal law. The information received must be kept confidential according to the federal law's confidentiality requirements.

         Without prejudice to its rights and in accordance with the amendments, plaintiff has provided defendant with federal tax returns and federal shipping reports filed by those importers in 2015 and 2016 that operated outside of Native American land (as requested by defendant); however, the numbers of cigarettes reported in each set of reports cannot be reconciled with the total number of cigarettes imported into the U.S., because three importers do not file shipping reports (as they distribute plaintiff's products solely within Indian Country); and a number of plaintiff's products after entering U.S. commerce are sold and shipped exclusively intrastate (for which no federal shipping report is required) or are held in inventory that carries over from prior years or is carried over until the next calendar year.

         Plaintiff alleges that defendant's threat of revocation of plaintiff's license under these circumstances violates its right to substantive due process, the Commerce Clause, and the Supremacy Clause of the United States Constitution, as well as the Connecticut Constitution equivalent.


         At the outset, defendant argues that plaintiff lacks standing because it has alleged no concrete injury. Citing to paragraphs 9 and 32 of its second amended complaint, plaintiff responds that it has pleaded factual allegations of particularized injury in the form of substantial costs expended in complying with the Commissioner's demands, which are allegedly based on unconstitutional interpretation of § 4-28m(a)(3)(C). Although the second amended complaint does allege that plaintiff “has expended over $300, 000 in seeking and obtaining approval to be listed on the Tobacco Directory, ” it does not specifically attribute any portion of that cost to compliance with the statutory provision at issue, Conn. Gen. Stat. § 4-28m(a)(3)(C). Plaintiff maintains that a “fair reading” of the second amended complaint should presume that plaintiff's alleged economic injuries are fairly traceable to complying with § 4-28m(a)(3)(C). Assuming that plaintiff has adequately alleged standing, or that it could amend its complaint to do so, the second amended complaint will nevertheless be dismissed for the reasons that follow.

         Due Process

         Defendant argues that plaintiff's due process claim should fail because plaintiff has no protected property or liberty interest in being listed on the State's Tobacco Directory. Moreover, defendant contends that plaintiff can seek review of any future denial in both state administrative and judicial fora. Finally, defendant submits that, regardless of plaintiff's property interest in a license or its available remedies upon a denial, § 4-28m(a)(3)(C) satisfies the rational basis standard of review.

         Plaintiff responds that it has a due process interest in its license to sell tobacco based upon the issuing authority's lack of discretion to deny the benefit. See Mordukhaev v. Daus, Fed.Appx. 16, 18 (2d Cir. 2012) (“[T]he existence of an entitlement turns on whether the issuing authority lacks discretion to deny [the benefit], i.e., is required to issue it upon ascertainment that certain objectively ascertainable criteria have been met.”). Plaintiff asserts that the entire process is unconstitutional, regardless of state administrative and judicial remedy. Plaintiff argues that regardless of the State's proffered motives for § 4-28m(a)(3)(C), the statute is an irrational and arbitrary means of achieving ...

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