Ar Tobacco Control v. Santa Fe Nat Tobacco

• Decision Date: 09 December 2004
• Docket Number: No. 04-273.,04-273.
• Citation: 199 S.W.3d 656
• Parties: ARKANSAS TOBACCO CONTROL BOARD, Appellant, v. SANTA FE NATURAL TOBACCO COMPANY, INC., Appellee.
• Court: Arkansas Supreme Court

199 S.W.3d 656

ARKANSAS TOBACCO CONTROL BOARD, Appellant, v. SANTA FE NATURAL TOBACCO COMPANY, INC., Appellee.

No. 04-273.

Supreme Court of Arkansas.

December 9, 2004.

COPYRIGHT MATERIAL OMITTED

Mike Beebe, Att'y Gen., by: Arnold M. Jochums, Ass't Att'y Gen., Little Rock, for appellant.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: Leigh Anne Shults, Little Rock; and Enns & Archer LLP, by: Rodrick J. Enns, Winston-salem, for appellee.

ANNABELLE CLINTON IMBER, Justice.

This case involves the judicial review of a decision by Appellant Arkansas Tobacco Control Board ("the Board") to deny the petition of Appellee Santa Fe Natural Tobacco Company ("Santa Fe") for a retail cigarette and tobacco permit for its New Mexico and North Carolina locations. The Board based its denial on its interpretation of Ark.Code. Ann. § 26-57-203(11)(Repl.1997) as requiring a physical location in Arkansas for the sale of cigarettes. The only issue in this case is the propriety of the Board's interpretation of that statutory provision, which issue is a matter of first impression for this court. Thus, we have jurisdiction pursuant to Ark. Sup.Ct. R. 1-2(b)(1).

The Arkansas Tobacco Control Board issues and renews retail cigarette licenses pursuant to The Tobacco Act, Ark.Code. Ann. §§ 26-57-201 et seq. (Repl.1997). As Santa Fe is a licensed wholesaler of cigarettes in Arkansas, it sells cigarettes to retailers in Arkansas, who then sell the cigarettes to consumers. Since 1996, Santa Fe has also been licensed as a retailer in Arkansas and has sold cigarettes to Arkansas smokers by direct mail. In 2001, however, the Board denied Santa Fe's application for renewal of its retail cigarette permits, stating that the Board staff had discovered that Santa Fe's locations were not in Arkansas, and the company was in violation of the Board's interpretation of § 26-57-203(11) as requiring a physical counter location in Arkansas. Santa Fe filed an action in Pulaski County Circuit Court seeking judicial review of the Board's decision and a declaratory judgment on the constitutionality of the statute. The circuit court found that the Board incorrectly interpreted the statute as limiting retail sales to physical locations in the state. The court further held that an interpretation of the statute as barring direct-to-consumer sales of cigarettes would violate the dormant Commerce Clause of the United States Constitution. The Board filed a timely notice of appeal. We agree with the Board's interpretation of section 26-57-203(11) and reverse the circuit court.

This case turns on an analysis of Ark.Code Ann. § 26-57-203(11) (Repl. 1997), which defines retailer as "any person who purchases tobacco products from licensed wholesalers for the purpose of selling them over the counter at retail to consumers." The Board contends the phrase "over the counter" in this provision requires cigarette retailers to sell from a physical location in Arkansas. Sante Fe, on the other hand, argues that such an interpretation is contrary to the common interpretation of the phrase "over the counter" and is a violation of the dormant Commerce Clause. We review issues of statutory interpretation de novo. Brewer v. Fergus, 348 Ark. 577, 79 S.W.3d 831 (2002).

1. Statutory Construction

The basic rule of statutory construction to which all interpretive guides must yield is to give effect to the intent of the Legislature. American Casualty Company v. Mason, 312 Ark. 166, 848 S.W.2d 392 (1993). Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Bank of Eureka Springs v. Evans, 353 Ark. 438, 109 S.W.3d 672 (2003). We construe the statute so that no word is left void, superfluous, or insignificant; and meaning and effect are given to every word in the statute if possible. When a statute is ambiguous, we must interpret it according to the legislative intent. Id. Our review becomes an examination of the whole act. We reconcile provisions to make them consistent, harmonious, and sensible in an effort to give effect to every part. We also look to the legislative history, the language, and the subject matter involved. Id.

In this case, we must discern the meaning of the phrase "over the counter" as applied to cigarette sales. Although a definition of the phrase is not included in the Act, "over-the-counter" is defined in Webster's Third New International Dictionary (2002) as:

1 a: not traded on an organized securities exchange: traded in direct negotiations between buyers and sellers or their representatives: unlisted

b: not effected on an organized securities exchange

2: capable of being sold legally without the prescription of a physician, dentist, or veterinarian.

Id. at 1611. Clearly, the dictionary applies the phrase "over-the-counter" to only the sale of stocks or securities (in part 1) and drugs (in part 2).¹ These definitions, when applied to the sale of cigarettes, are ambiguous. Thus, we must try to discern what the legislature intended when it passed the statute.

To reiterate, in determining the legislative intent, we review the entire act and reconcile the provisions to make them consistent, harmonious, and sensible in an effort to give effect to every part. Bank of Eureka Springs v. Evans, supra. Notably, the statute repeatedly suggests retailers will be located within Arkansas. First, section 26-57-203(7) defines "manufacturer" as "any person who produces any tobacco product for sale and includes, but is not limited to, importers and distributors who deal in tobacco products as manufacturers and who are required under this sub-chapter to sell only to licensed wholesalers or licensed retailers located in Arkansas." Ark.Code Ann. § 26-57-203(7) (Repl.1997) (Emphasis added). Section 26-57-203(19) allows an Arkansan doing business in an adjoining city to qualify as a wholesaler if "that person is regularly engaged in the sale of tobacco products to licensed retailers within Arkansas ...." Ark.Code Ann. § 26-57-203(19) (Repl. 1997). Section 26-57-235(a)(6) directs the retailer to allow inspection of "his stock of merchandise and premises, including any room or building used in connection with his business." As such, the statute additionally indicates that the legislature intended for retailers to conduct sales from a location within the State, as inspection of merchandise and premises of retailers outside the state would be a difficult task for the Arkansas Tobacco Control Board. Ark.Code Ann. § 26-57-235(a)(6)(Repl.1997).

Furthermore, notwithstanding Santa Fe's argument to the contrary, the inclusion of an explicit residency requirement for wholesalers in the original drafting of the statute does not necessarily suggest that the legislature did not intend a residency requirement for retailers. In fact, noting the fundamental differences in retailers and wholesalers, the legislative silence actually lends more credibility to the Board's interpretation. The underlying rationales, such as the ability to collect taxes and inspect goods for contamination, which compelled the legislature to enact a residency requirement for wholesalers, are just as powerful when applied to retailers. However, arguably, the legislature could have assumed retailers would be physically located in Arkansas, making an explicit statement on the residency of a retailer unnecessary, and in fact redundant. In 1977, when the statute was enacted by the legislature, such an assumption would have made sense. It is only after the technological developments of the last twenty-five years that new and different avenues for the marketing of goods to consumers have emerged. In 1977, when the statute was originally drafted, consumers would simply drive to their local grocery store or gas station to purchase cigarettes. Unlike modern-day consumers, consumers in 1977 were not given the option to e-mail or fax an order to an out-of-state retailer. By contrast, the legislature would have been aware that it was possible and even probable that wholesalers would be located outside of the state and would ship goods into the state to retailers for sale. Thus, while the legislature made a specific residency requirement for wholesalers, we conclude based on our review of the entire statutory scheme that there is also an implied residency requirement for retailers.

2. Dormant Commerce Clause

Santa Fe also argues that a requirement making retailers sell cigarettes from physical locations within Arkansas violates the dormant Commerce Clause of the United States Constitution. The Commerce Clause of the Constitution empowers Congress to "regulate Commerce ... among the several states," U.S. Const. Art 1, § 8, cl. 2, and "has long been recognized as a self-executing limitation on the power of the States to enact laws imposing substantial burdens on [interstate] commerce." South-Central Timber Dev., Inc., v. Wunnicke, 467 U.S. 82, 87, 104 S.Ct. 2237, 81 L.Ed.2d 71 (1984). The United States Supreme Court has adopted a two-part test in analyzing state regulations under the dormant Commerce Clause. When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, the Supreme Court has generally struck down the statute without further inquiry. Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986). However, when the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. Pike v. Bruce Church, Inc., ...