Grand River Enterprises Six Nations, Ltd. v. Beebe

• Decision Date: 18 October 2006
• Docket Number: No. 06-2504.,06-2504.
• Citation: 467 F.3d 698
• Parties: GRAND RIVER ENTERPRISES SIX NATIONS, LTD., Plaintiff-Appellant, Southwestern Trading Co., Inc.; The Ritchie Grocer Co., Plaintiffs, Heber Springs Wholesale Grocery, Inc., Plaintiff-Appellant, v. Mike BEEBE, in his official capacity as Attorney General, State of Arkansas, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

467 F.3d 698

GRAND RIVER ENTERPRISES SIX NATIONS, LTD., Plaintiff-Appellant Southwestern Trading Co., Inc.; The Ritchie Grocer Co., Plaintiffs Heber Springs Wholesale Grocery, Inc., Plaintiff-Appellant, v. Mike BEEBE, in his official capacity as Attorney General, State of Arkansas, Defendant-Appellee.

No. 06-2504.

United States Court of Appeals, Eighth Circuit.

Submitted: September 26, 2006.

Filed: October 18, 2006.

Leonard Violi, argued, Mamaroneck, NY (John R. Elrod, Todd P. Lewis, P. Joshua Wisley, Conner & Winters, Fayetteville, AR, Bruce W. Freeman, Conner & Winters, Tulsa, OK, on the brief), for appellant.

Gary D. Wilson, argued, Washington, DC (Teresa Mars, Deputy Attorney General, Bradford J. Phelps and Eric Barkley Estes, Asst. Atty. Generals, Little Rock, AR, on the brief), for appellee.

Before MURPHY, HANSEN, and RILEY Circuit Judges.

MURPHY, Circuit Judge.

Grand River Enterprises Six Nations, Ltd., a Canadian cigarette manufacturer owned by members of the Iroquois Confederacy, and Heber Springs Wholesale Grocery,¹ an Arkansas distributor of tobacco products, moved for a preliminary injunction to enjoin Arkansas Attorney General Mike Beebe from removing Grand River from the state's Approved for Sale Tobacco Products Directory and from enforcing a ban on its products. The district court² denied the motion, concluding that the requested relief was barred by the Eleventh Amendment. Grand River and Heber Springs appeal, and we affirm.

This case arises out of Grand River's ongoing challenge to Arkansas's tobacco settlement legislation. In 1998 Arkansas, as well as 45 other states and several territories, settled claims against the four major tobacco companies in the United States for damages caused by smoking. The resulting agreement, known as the Master Settlement Agreement (MSA), requires the tobacco companies to make annual payments to the settling states and in return shields them from future liability to the states for costs associated with tobacco use. Other tobacco companies which were not parties to the original settlement were encouraged to join the MSA. The MSA also offered incentives to the settling states to enact "Escrow Statutes" regulating cigarette manufacturers who chose not to join the settlement.

In 1999 Arkansas enacted just such a statute, which requires all tobacco manufacturers doing business in the state either: (a) to join the MSA as a Participating Manufacturer or (b) as a Non-Participating Manufacturer (NPM), to deposit annually a sum of money into escrow based on the number of cigarettes sold in Arkansas. Ark.Code Ann. § 26-57-261. Funds deposited by NPMs are to be held in escrow for twenty five years, to satisfy any future judgment Arkansas might obtain against a manufacturer. Payments are capped at an upper limit, and NPMs are entitled to a refund of any deposits made in excess of this upper limit. A 2005 amendment, referred to as the Allocable Share Amendment, raised this upper cap, making Grand River ineligible to receive the refunds to which it had previously been entitled.

In March of 2005, Grand River and its Arkansas distributors (collectively Grand River) sued Attorney General Beebe in the Western District of Arkansas, seeking a declaratory judgment and injunctive relief against the application of the Allocable Share Amendment (the Amendment). They alleged that the Amendment's method for calculating escrow deposits violated numerous provisions of federal law, including the Sherman Act, the dormant Commerce Clause, and the Due Process Clause of the Fourteenth Amendment.

The Attorney General moved to dismiss the claims, and on March 6, 2006 the district court dismissed all claims for prospective relief. The only claim to survive was a challenge to the Amendment's retroactive imposition of increased escrow obligations based on cigarettes sold in 2004. Then on March 14 the district court denied as moot Grand River's motion for a preliminary injunction to enjoin application of the Amendment because the parties had agreed to maintain the status quo with respect to the disputed escrow deposit based on 2004 sales. Grand River appealed, seeking to have this court consider the merits of its underlying constitutional and antitrust claims, most of which had been dismissed by the district court in its March 6 order. Its appeal was dismissed for lack of a final reviewable order.

Having not obtained its desired relief and with the deadline for annual escrow deposits approaching, Grand River applied to join the MSA on April 3, 2006. Participation in the MSA would have put Grand River in compliance with the Escrow Statute and made escrow deposits unnecessary. Its application was not immediately granted, however, since approval by the settling states and the Participating Manufacturers was required. Grand River then offered to pay Arkansas a significantly reduced but nonrefundable lump sum in lieu of making its escrow deposit due on April 17. The Attorney General rejected this offer.

Arkansas law directs the Attorney General to remove Non-Participating Manufacturers from the Approved for Sale Tobacco Products Directory for failure to comply with the Escrow Statute. Ark. Code Ann. § 26-57-1303(b)(1). Once delisted, a company can no longer legally sell its products in Arkansas. Id. § 26-57-1303(c)(1)(B). The Attorney General's decisions with respect to delisting are "subject to review by the filing of a civil action for prospective declaratory or injunctive relief," and the Pulaski County Circuit Court has exclusive jurisdiction over such actions. Id. § 26-57-1307(a).

On April 27, 2006, Grand River again moved for a preliminary injunction, this time asking the district court to enjoin the Attorney General from delisting it or banning the sale of its products under § 26-57-1303 for failing to make its escrow deposit until its admission to the MSA could be secured. Grand River indicated that it did not intend to make the required escrow deposit, but argued that it was attempting to comply with the Escrow Statute by joining the MSA and that it would be irreparably harmed if its products were banned from the market. The district court denied the motion for preliminary injunction on May 3, 2006, ruling that the requested relief was barred by the Eleventh Amendment because Grand River's request rested solely on state law. It reasoned that although Ark.Code Ann. § 26-57-1307(a) could not strip the federal courts of jurisdiction over claims which they could otherwise properly hear, the legislation indicated Arkansas's intent to retain its sovereign immunity.

Grand River now appeals from the district court's denial of its second motion for preliminary injunction. In its briefs Grand River has restated its earlier challenges to the Allocable Share Amendment which were previously dismissed by the district court, without clearly explaining their relevance to the present appeal. It also suggests that the MSA application procedure is constitutionally defective and that the Arkansas legislature did not—and could not—deprive a federal court of jurisdiction by vesting review of delisting decisions exclusively...