HCI Distribution, Inc. v. Peterson
| Decision Date | 07 April 2021 |
| Docket Number | 8:18CV173 |
| Parties | HCI DISTRIBUTION, INC., and ROCK RIVER MANUFACTURING, INC., Plaintiffs, v. DOUGLAS J. PETERSON, Nebraska Attorney General; and TONY FULTON, Nebraska Tax Commissioner; Defendants. |
| Court | U.S. District Court — District of Nebraska |
This matter is before the Court on Defendants' Motion to Compel and Motion for a Protective Order (Filing No. 85). For the reasons explained below, the motion will be granted, in part, as set out below.
BACKGROUND
This action was filed on April 20, 2018. Plaintiffs HCI Distribution, Inc. ("HCID") and Rock River Manufacturing ("Rock River") (collectively, "Plaintiffs") seek a declaration of rights pursuant to 28 U.S.C. § 2201 and injunctive relief pursuant to 28 U.S.C. § 2202 regarding the enforcement of Nebraska's statutes regulating tobacco product manufacturing and distribution. Specifically, Plaintiffs, who claim to be tribal entities, seek to prevent Defendants from enforcing Nebraska's escrow and directory laws against them.
On March 22, 2019, Defendants served requests for production ("RFP") on HCID and Rock River. On May 22, 2019, Plaintiffs responded and objected to the RFPs. Following a meet and confer process, the parties were able to resolve Plaintiffs' objections to several of the RFPs, but the parties were unable to resolve Plaintiffs' objections to Defendants' RFP Nos. 11 (to HCID) and 13 (to Rock River). These RFPs request information regarding cigarette tax stamps. The parties were also unable to resolve Plaintiffs' objections to Defendants' RFP Nos. 14 (to HCID) and 16 (to Rock River). These requests seek information regarding tribal regulation.
The parties participated in a conference call with the Court to discuss the ongoing discovery dispute on October 16, 2020. Defendants were granted leave to file this motion.
DISCUSSION
Pursuant to Federal Rule of Civil Procedure 26(b)(1), "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case." Fed. R. Civ. P. 26(b)(1). Relevancy is broadly construed, and "[d]iscovery requests should be considered relevant if there is any possibility the information sought is relevant to any issue in the case and should ordinarily be allowed, unless it is clear the information sought can have no possible bearing on the subject matter of the action." Met-Pro Corp. v. Industrial Air Technology, Corp.,
No. 8:07CV262, 2009 WL 553017, *3 (D. Neb. Mar. 4, 2009). "The proponent of discovery must make a threshold showing of relevance before production of information, which does not reasonably bear on the issues in the case, is required." Id. "Mere speculation that information might be useful will not suffice; litigants seeking to compel discovery must describe with a reasonable degree of specificity, the information they hope to obtain and its importance to their case." Id.
Defendants request that Plaintiffs be compelled to produce documents responsive to RFP Nos. 11 and 13 regarding the purchase and application of cigarette tax stamps, and RFP Nos. 14 and 16 regarding tribal regulation of cigarettes.1 RFP No. 11 to HCID requests "[a]ll documents related to HCID's purchase and application of cigarette tax stamps from January 1, 2014 to the present." RFP No. 13 to Rock River similarly requests "[a]ll documents related to [Rock River's] purchase and application of cigarette tax stamps from January 1, 2014 to present." RFP No. 14 to HCID seeks "[a]ll documents related to HCID's communications with, requests to, authorizations by, denials from, or prohibitions by any tribal governmental entity located withinNebraska pertaining to the manufacture, distribution, transport, wholesale, stamping, possession, sale, or retail of cigarettes." RFP No. 16 to Rock River likewise seeks "[a]ll documents related to [Rock River's] communications with, requests to, authorizations by, denials from, or prohibitions by any tribal governmental entity located within Nebraska pertaining to the manufacture, distribution, transport, wholesale, stamping, possession, sale, or retail of cigarettes."
Defendants argue that the issue of the application and enforceability of the escrow and directory laws will be subject to review pursuant to the interest balancing test set out in White Mountain Apache Tribe v. Bracker,
448 U.S. 136 (1980)2 and, therefore, the Court needs full discovery to evaluate whether the escrow and directory laws "infringe on the right of reservation Indians to make their own laws and be ruled by them." HCI Distribution, Inc. v. Peterson, 360 F. Supp.3d 910, 922 (D. Neb. 2018) (). In support of their argument for broad discovery, Defendants point to a previous order in this case in which the Court stated that it anticipated "a full evidentiary record will be required before it may undertake a complete resolution of the parties' claims and contentions pursuant to the Indian Commerce Clause." Id.
Plaintiffs argue the discovery requests infringe upon their inherent tribal sovereignty and, in addition, burden other tribal entities' sovereignty. Plaintiffs contend the business records sought have nothing to do with the issue presented in this litigation, i.e., whether the State of Nebraska can require the Plaintiffs to comply with its escrow and directory laws. Plaintiffs argue Defendants are using the discovery process as a fishing expedition to obtain information to potentially use in a subsequent enforcement action. Plaintiffs maintain they should only have to produce records to determine whether they have complied with Nebraska's tax and escrow laws if the Court first concludes they must comply with those laws. Plaintiffs acknowledge that a protective orderprohibiting the disclosure of confidential information has been entered in this case but argue Defendants will not "magically forget" the information learned in this case if a subsequent enforcement action is brought.
Plaintiffs propose that rather than directly responding to Defendants' requests, they provide a detailed outline of their business model, with aggregate figures for sales in the following categories: (1) on tribal land sales to tribal members; (2) on tribal land sales to non-tribal members; and (3) off tribal land sales to non-tribal members. Plaintiffs contend this outline will allow the Court to determine whether and how Nebraska may impose its escrow and directory laws upon each of those types of sales. Plaintiffs maintain that because the issues involved in this litigation are purely legal in nature, this procedure would be proportionate, less expense, less burdensome, and respectful of tribal sovereignty.
Defendants argue that a dispute concerning the applicability of the escrow and directory laws requires an examination of cigarette tax compliance and tax stamping. Defendants maintain this is true because only cigarettes that are "units sold" must comply with Nebraska's escrow and directory laws. "Units sold" are defined by Nebraska law as cigarettes sold "in packs required to bear a stamp." Neb. Rev. Stat. § 69-2702. Defendants maintain that because Nebraska has an interest in ensuring compliance with its tax laws, "[a]n understanding of Plaintiffs' stamp purchases, stamp applications, and the cigarettes sold by Plaintiffs (with or without those stamps) . . . is integral to an understanding of when and how the escrow and directory laws may or may not apply to Plaintiffs." (Filing No. 86.) See HCI Distribution, Inc. v. Peterson,
360 F. Supp.3d 919-20 (D. Neb. 2018) (). Defendants contend this information is necessary for the Court to properly perform the Bracker interest balancing test.
Plaintiffs maintain the requests are overly broad and burdensome. Plaintiffs surmise that the requests seek to determine whether Plaintiffs purchased or applied for tax stamps. Plaintiffs claim that rather than request all records related to any such purchase or application, Defendants could simply ask this question in an interrogatory or during a deposition. Plaintiffs complain that Defendants have requested all records related to tax stamp purchases or applications without firstestablishing that Plaintiffs made any such purchases or applications. Plaintiffs agree with Defendants that an understanding of Plaintiffs' stamp purchases, stamp applications, and the cigarettes sold by Plaintiffs could be useful in determining when and how the escrow and directory laws may or may not apply to Plaintiffs. However, Plaintiffs contend that many of the records sought through these discovery requests would not further that understanding. As an example, Plaintiffs contend an interrogatory about whether, when, and from whom Plaintiffs applied for or purchased tobacco stamps would be reasonable, but that a request for all documents, including all communications between Plaintiffs and anyone else, regarding tobacco stamps is not.
The Court agrees with the parties that information regarding Plaintiffs' stamp purchases, stamp applications, and cigarettes sold by Plaintiffs is relevant to the...
To continue reading
Request your trial