Omaha Tribe of Nebraska v. Miller

Decision Date27 February 2004
Docket NumberNo. 4:03-CV-40400.,4:03-CV-40400.
Citation311 F.Supp.2d 816
PartiesOMAHA TRIBE OF NEBRASKA, Plaintiff, v. Thomas J. MILLER, Defendant.
CourtU.S. District Court — Southern District of Iowa

Chip J. Lowe, Howe Cunningham & Lowe PLC, Urbandale, IA, Michael J. Leahy, Lyman L. Larsen, Stinson Morrison Hecker LLP, Omaha, NE, Allison F. Eklund, Henry M. Buffalo, Jr., Jacobson Buffalo Law Firm, Saint Paul, MN, for Plaintiff.

Donald D. Stanley, Jr., Attorney General of Iowa, Des Moines, IA, for Defendant.


GRITZNER, District Judge.

This matter comes before the Court on Defendant's Motion to Dismiss. The matter was submitted on the briefs and the transcript of a hearing held before Hon. Joseph Bataillon in the United States District Court for the District of Nebraska.1

I. Summary of Material Facts and Procedure

Iowa, along with several other states, sued several tobacco manufacturers and tobacco trade organizations in the mid-1990s. The states and the tobacco companies eventually settled these suits, creating a Master Settlement Agreement ("MSA"). The MSA, dated November 23, 1998, is between the major tobacco product manufacturers (the "Participating Manufacturers" or "PMs") and forty-six states,2 the District of Columbia, Puerto Rico, and four other U.S. territories. Each settling state approved of the settlement, entering a Consent Decree and Final Judgment consistent with the MSA.

In addition to placing restrictions upon the advertising and marketing of tobacco products, the MSA also provided that the PMs would agree to make cash payments to the settling states in perpetuity. These cash payments are intended in part to compensate for state expenditures for tobacco-related public health measures and to reimburse states for the health care costs they incur as providers of last resort for any of their citizens who may suffer from smoking-related illnesses. In exchange for these cash payments, the settling states agreed to release specified past and future tobacco-related claims against the PMs (but not claims of individual smokers).

Various tobacco companies (known as "Non-Participating Manufacturers" or "NPMs") have declined to participate in the MSA. NPMs have no obligations under the MSA; the public health provisions and financial obligations imposed by the MSA do not apply to NPMs. The settling states therefore expressly preserved in the MSA all of their past and future claims against NPMs.

The settling states became concerned that the NPMs could escape future liability to the states through financial management that would render them judgment proof or otherwise unable to satisfy future judgments if called upon to pay damages for harm caused by their tobacco products. The settling states were also concerned that since NPMs were not required to make cash payments to the states, as were PMs, NPMs could expand their markets and unfairly compete with PMs due to their lower costs and commercial freedom. "Escrow" or "qualifying" statutes were passed by the states in response to these concerns.

Iowa's escrow statute is codified in Iowa Code § 453C.2. The statute provides as follows:

Any tobacco product manufacturer selling cigarettes to consumers within the state, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, on or after May 20, 1999, shall do one of the following:

1. Become a participating manufacturer as that term is defined in section II(jj) of the master settlement agreement and generally perform its financial obligations under the master settlement agreement.

2.a. Place into a qualified escrow fund by April 15 of the year following the year in question, the following amounts, as such amounts are adjusted for inflation: (1) For 1999: $.0094241 per unit sold on or after May 20, 1999.(2) For 2000: $.0104712 per unit sold .(3) For each of 2001 and 2002: $.0136125 per unit sold. (4) For each of 2003 through 2006: $.0167539 per unit sold. (5) For 2007 and each year thereafter: $.0188482 per unit sold.

Iowa Code § 453C.2. Thus, in short, the statute requires NPMs to either participate in the MSA or deposit into an escrow account a cash amount based on tobacco product sales to Iowa consumers. Under the statute, the annual deposits are to be held in escrow by the State; after 25 years, any funds that have not been released from escrow shall be returned to the NPM. Iowa Code § 453C.2(2)(b)(3). The NPM will receive the interest on the funds it places into its escrow account. Iowa Code § 453C.2(2)(b) ("A tobacco product manufacturer that places funds into escrow pursuant to paragraph `a' shall receive the interest or other appreciation on such funds as earned.").

Plaintiff Omaha Tribe of Nebraska is a federally recognized Indian Tribe located in northeastern Nebraska and a small portion of western Iowa. Omaha Nation Enterprises, Inc. ("ONE"), is an economic enterprise that was incorporated by the Omaha Tribe Tribal Council on December 3, 1993.3 In 1997, ONE began operating a cigarette manufacturing company under the trade name Omaha Nation Tobacco Company ("Omaha Nation"). Defendant asserts that Omaha Nation manufactures and sells cigarettes in the state of Iowa; however, Plaintiff disputes this presumption, demanding documentation to show past and present sales in the state. Whether Omaha Nation has sold cigarettes in the state of Iowa or not, it is clear that Omaha Nation has not become a participating manufacturer or placed the mandatory amounts into an escrow account.

In early 2002, Iowa, through its Attorney General, Thomas Miller, filed suit in Polk County District Court seeking to enforce Iowa's escrow statute against Omaha Tribe, ONE, ONE's corporate officers and licensed distributors, and various individual tribal council members. The state court petition seeks declaratory and injunctive relief against all defendants and an order requiring ONE to place funds in an escrow account and pay civil penalties consistent with Iowa law.4

On March 14, 2002, Plaintiff Omaha Tribe filed a complaint in the U.S. District Court for Nebraska, asserting that the Attorneys General of South Dakota, Missouri, and Iowa exceeded their authority by imposing each state's relative tobacco escrow statute on the Tribe, a federally recognized sovereign Indian tribe that Plaintiff alleges is immune from taxation and regulation by the states as a matter of law. In its complaint, Plaintiff requested the Court to declare the tobacco escrow statutes unconstitutional or otherwise ultra vires as applied to the Tribe, issue a preliminary injunction to stay the pending state court proceedings, and issue a permanent injunction to enjoin Defendants from imposing the escrow statutes against the Tribe. Plaintiff also requests an award of attorney's fees and costs incurred in bringing this action under 42 U.S.C. § 1988.5

On May 3, 2002, the Defendants moved to dismiss Plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. In the motion, Defendants asserted that the statutes at issue, as well as the enforcement actions brought by each Defendant in his official capacity, do not violate the Commerce or Supremacy Clauses of the United States Constitution and were not preempted or barred by any act of Congress or by any principle of Indian law recognized by the United States Supreme Court. On May 9, 2002, the Defendants moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3) for lack of personal jurisdiction and improper venue. Hearing was held on November 21, 2002, before the Honorable Joseph Bataillon. On February 24, 2003, Judge Bataillon denied Defendants' 12(b)(6) motion to dismiss as moot and granted Defendants' motion to dismiss based on lack of personal jurisdiction and improper venue.

On March 6, 2003, Plaintiff moved for transfer of venue to the Southern District of Iowa as to Defendant Thomas Miller only and stipulated to the dismissal without prejudice as to the remaining Attorneys General. On April 1, 2003, an order was entered transferring the case to the Southern District of Iowa as to Defendant Thomas Miller; the case was dismissed without prejudice as to all remaining defendants. The Court further ordered that the Fed.R.Civ.P. 12(b)(6) motion to dismiss for failure to state a claim, which had previously been denied by the Court, be vacated as to Defendant Thomas Miller, and such motion was to be deemed currently pending, to be adjudicated by the United States District Court for the Southern District of Iowa.6

II. Standard of Review

"A motion to dismiss should not be granted unless the plaintiff can prove no set of facts entitling him to relief." Kottschade v. City of Rochester, 319 F.3d 1038, 1040 (8th Cir.2003). The Court must accept as true all of the Tribe's factual allegations and view them in the light most favorable to the Tribe when analyzing the adequacy of the complaint's allegations under Fed.R.Civ.P. 12(b)(6). Schaller Telephone Co. v. Golden Sky Systems, Inc., 298 F.3d 736, 740 (8th Cir.2002). The complaint must reveal an insuperable bar to relief on its face to warrant a Rule 12(b)(6) dismissal. Id. (citing United States v. Aceto Agric. Chem. Corp., 872 F.2d 1373, 1376 (8th Cir.1989)).

"[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In construing the facts, the Court shall "reject conclusory allegations of law and unwarranted inferences." Silver v. H & R Block, Inc., 105 F.3d 394, 397 (8th Cir.1997). If a motion to dismiss is pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must only consider the pleadings in determining whether the Plaintiff has stated a claim upon which relief may be granted....

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