Massachusetts Candy & Tobacco v. Golden Distrib.

• Decision Date: 29 April 1994
• Docket Number: Civ. A. No. 92-12913-ZRK.
• Citation: 852 F. Supp. 63
• Parties: MASSACHUSETTS CANDY & TOBACCO DISTRIBUTORS, INC., et al., Plaintiffs, v. GOLDEN DISTRIBUTORS, LTD., d/b/a Golden-Capital Distributors; NCC L.P. d/b/a NCC Limited Partnership et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

852 F. Supp. 63

MASSACHUSETTS CANDY & TOBACCO DISTRIBUTORS, INC., et al., Plaintiffs, v. GOLDEN DISTRIBUTORS, LTD., d/b/a Golden-Capital Distributors; NCC L.P. d/b/a NCC Limited Partnership et al., Defendants.

Civ. A. No. 92-12913-ZRK.

United States District Court, D. Massachusetts.

April 29, 1994.

Damian R. LaPlaca, LeBoeuf, Lamb, Leiby & MacRae, H. Glenn Alberich, Mahoney, Hawkes & Goldings, Boston, MA, for Massachusetts Candy & Tobacco Distributors, Inc., A.H. Notini & Sons, Inc., Auburn Merchandise Distributors, Inc., Geo Melhado & Co. Inc., James J. Duffy, Inc., Joseph J. Braga, Inc., Lesco Distributing Co., Inc., M. Berman & Sons, Inc., N.E. Wholesale Tobacco Co, Inc., and Taunton Tobacco, Inc.

John K. Markey, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, MA, for Golden Distributors, Ltd. d/b/a Golden-Capital Distributors.

John K. Markey, Robert S. Steinberg, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, MA, for NCC L.P. d/b/a NCC Ltd. Partnership.

Thomas O. Bean, Atty. General's Office, Boston, MA, for Mitchell Adams.

MEMORANDUM AND ORDER REGARDING DEFENDANT NCC LIMITED PARTNERSHIP'S MOTION FOR JUDGMENT ON THE PLEADINGS (DOCKET NO. 42)

KAROL, United States Magistrate Judge.

I. INTRODUCTION

Plaintiffs are several companies that sell cigarettes at wholesale within the Commonwealth of Massachusetts, as well as an incorporated trade association, Massachusetts Candy & Tobacco Distributors, Inc. ("Mass. Candy"), of which each plaintiff company is a member. Defendant NCC L.P. d/b/a NCC Limited Partnership ("NCC") is also a cigarette wholesaler and is alleged to be a member of Mass. Candy and subject to its bylaws. It is based in Georgia, but it operates a division within the Commonwealth of Massachusetts that sells cigarettes at wholesale in competition with Mass. Candy's other member companies. Also named as defendants in plaintiffs' First Amended Complaint are Mitchell Adams, as Commissioner of Revenue of the Commonwealth of Massachusetts (the "Commissioner"), and a bankrupt cigarette wholesaler by the name of Golden Distributors, Ltd., d/b/a Golden-Capital Distributors ("Golden"). Golden has discontinued all operations and has not filed an appearance. NCC acquired Golden's assets, including its trade name, out of bankruptcy and now operates its Massachusetts division under the trade name "Golden-Capital." Def. NCC Limited Partnership's Opp. to Pl.'s Req. Default at 2 (Docket # 25). Jurisdiction is based on diversity of citizenship. See 28 U.S.C.A. § 1332 (West 1993).

The plaintiff companies and NCC are all subject to the Massachusetts Cigarette Excise Law, M.G.L. ch. 64C (the "Cigarette Act"). The Cigarette Act, among other things, prohibits wholesalers from selling cigarettes at prices which are below the "cost to the wholesaler," as that term is defined in Section 13 of the Act. See Mass Gen.Laws Ann. ch. 64C, §§ 13(c), 14 (West 1988). The thrust of plaintiffs' claim is that NCC is offering various promotional incentives to retail dealers which result in lowering NCC's wholesale prices below its costs. Plaintiffs further allege that NCC's incentive programs are accomplishing their intended effect of causing plaintiffs' customers to defect to NCC. Plaintiffs seek several forms of relief, including a declaration that NCC's programs violate the Cigarette Act and constitute a breach of the contract established between plaintiffs and NCC by Mass. Candy's bylaws; an injunction to restrain NCC from continuing to offer those programs; damages under the Cigarette Act; and treble damages and attorneys' fees under M.G.L. ch. 93A ("93A").

Before the court is NCC's motion under Fed.R.Civ.P. 12(c) for judgment on the pleadings. This motion asserts that the amended complaint should be dismissed in its entirety because (1) there is no private right of action under the Cigarette Act; (2) in the absence of an independent source of substantive rights, the Massachusetts Declaratory Judgments Act, M.G.L. ch. 231A, §§ 1-9, does not provide a basis for relief; (3) plaintiffs' claim under 93A is preempted by the Cigarette Act; and (4) plaintiff's breach of contract claim is similarly preempted. Def. NCC Limited Partnership's Mot. J. Pleadings ¶¶ 1-4 (Docket # 42).

For reasons explained more fully below, NCC's motion must be DENIED, because plaintiffs may maintain this action at least for a declaratory judgment and injunctive relief. It is unlikely that plaintiffs may sue for damages under the Cigarette Act, and open questions exist about whether they may do so under 93A or for common law breach of contract. It is, however, unnecessary to decide these questions in order to resolve NCC's present motion. Full consideration of the damages issues is therefore deferred until those issues become ripe for decision.

II. THE CIGARETTE ACT AND RELATED LEGISLATION

The Cigarette Act was first enacted in 1945, see 1945 Mass.Acts ch. 547, § 1, and has since been amended several times. From its inception, a substantial portion of the Cigarette Act has been concerned with the establishment and administration of a system for the collection of an excise on cigarettes. For example, Sections 2 and 10 of the Cigarette Act require that all vendors be licensed; Sections 5 and 11 establish elaborate record keeping requirements; Section 6 imposes an excise on cigarettes; Sections 8, 12, 26, and 29-39 establish systems for collection and enforcement of the excise; and Section 28 provides for the disposition of revenues collected. Substantial responsibility for administration and enforcement is delegated to "the commissioner," who is defined in M.G.L. ch. 62C, §§ 1-2 to be the Commissioner of Revenue. See, e.g., Mass.Gen.Laws Ann. ch. 64C §§ 5, 6, 8, 10-12 (West 1988 & Supp.1994). Taking all these provisions into account, it is not at all surprising that the Supreme Judicial Court (the "SJC") recently characterized the Cigarette Act as "a taxation statute that describes how the Commonwealth administers its cigarette excise tax to ensure accurate collection." Take Five Vending, Ltd. v. Town of Provincetown, 415 Mass. 741, 744-45, 615 N.E.2d 576, 579 (1993).

The amended complaint alleges that NCC's conduct violates the so-called fair pricing provisions of the Cigarette Act, §§ 13-21 inclusive (the "Fair Pricing Provisions"). The Fair Pricing Provisions include definitions of terms such as "cost to the wholesaler" (§ 13) and a prohibition against below-cost sales of cigarettes, where such sales are made "with intent to injure competitors, destroy substantially or lessen competition" (§ 14). Violations are punishable by a fine of up to five hundred dollars. Mass.Gen. Laws Ann. ch. 64C, § 14(a) (West 1988). Section 14's prohibition against below-cost sales to some extent mirrors prohibitions set forth in § 12, which provides:

No person shall be permitted to sell cigarettes as "loss-leaders" with intent to injure competitors or to destroy competition, and the commissioner shall enforce sections thirteen to twenty-one, inclusive, in order to prohibit such sales and stabilize and increase collections under this chapter.

Mass.Gen.Laws Ann. ch. 64C, § 12 (West 1988).

The Commissioner has promulgated regulations entitled "Fair Pricing of Cigarettes" for the purpose of "promoting the effective administration of the fair pricing provisions of M.G.L. c. 64C, §§ 13 through 21...." Mass.Regs.Code tit. 830, § 64C.14.1(1) (1993). The regulations provide for the suspension or revocation of the license of any person who violates the Fair Pricing Provisions, see id. § 64C.14.1(5)-(6), and include a provision that permits persons who wish to report violations to do so, see id. § 64C.14.1(11). The regulations, like the Cigarette Act itself, are silent on the question of whether there is a private right of action to enforce the Fair Pricing Provisions.

No discussion of the Cigarette Act or the Fair Pricing Provisions would be complete without consideration of their relationship to another law enacted seven years earlier in 1938, the Unfair Sales Act, M.G.L. ch. 93, §§ 14E-14K, 1938 Mass.Acts, ch. 410, § 1. In language that was later incorporated almost verbatim into the Cigarette Act, the Unfair Sales Act proscribes below-cost sales by any retailer or wholesaler of "any item of merchandise," when the retailer's or wholesaler's intent is "to injure competitors or destroy competition." Mass.Gen.Laws Ann. ch. 93, § 14F (West 1984).

The Unfair Sales Act does not define "merchandise." The plain meaning of that term would seem to include cigarettes, however, and there is no reason to doubt that this is exactly what the legislature intended when it enacted the Unfair Sales Act some seven years before the Cigarette Act existed. Indeed, Section 14I of the Unfair Sales Act, as amended in 1958, confirms that the Unfair Sales Act applies to cigarettes. Section 14I provides, in relevant part: "If any provision of the Unfair Sales Act conflicts with the Cigarette Act, the provisions of the Cigarette Act shall prevail." Mass.Gen.Laws Ann. ch. 93, § 14I (West 1984). This provision would have been unnecessary — indeed, it would make no sense at all — if the Unfair Sales Act did not apply to cigarettes, since it is logically impossible to have a conflict between two statutes which do not both apply to the same subject matter.

Moreover, if the legislature, prospectively, did not want cigarettes to be covered by the Unfair Sales Act, it would have been simple enough for it to have clearly expressed that intent in the 1958 amendment. The legislature might, for example, have stated in the 1958 amendment that the Unfair Sales Act henceforth did not apply at all to cigarettes, or decreed that the term "merchandise" no longer included cigarettes. The Massachusetts legislature did neither. Instead, it enacted a provision that leaves no doubt, assuming there ever was any, that the Unfair Sales Act applies to cigarettes, except to the extent it actually...