State ex rel. Pruitt v. Native Wholesale Supply

• Decision Date: 10 June 2014
• Docket Number: No. 111985.,111985.
• Citation: 2014 OK 49,338 P.3d 613
• Parties: STATE of Oklahoma, ex rel. E. Scott PRUITT, Attorney General of Oklahoma, Plaintiff/Appellee, v. NATIVE WHOLESALE SUPPLY, a Corporation chartered by the Sac and Fox Tribe of Oklahoma, Defendant/Appellant.
• Court: Oklahoma Supreme Court

338 P.3d 613

2014 OK 49

STATE of Oklahoma, ex rel. E. Scott PRUITT, Attorney General of Oklahoma, Plaintiff/Appellee

v.NATIVE WHOLESALE SUPPLY, a Corporation chartered by the Sac and Fox Tribe of Oklahoma, Defendant/Appellant.

No. 111985.

Supreme Court of Oklahoma.

June 10, 2014.

Rehearing Denied Oct. 27, 2014.

E. Clyde Kirk and Ryan R. Chaffin, Assistant Attorneys General, Oklahoma City, OK, for appellee, State of Oklahoma ex rel. E. Scott Pruitt, Oklahoma Attorney General.

David L. Kearney, Gregory T. Metcalfe, and Paula M. Williams, Oklahoma City, OK, for appellant, Native Wholesale Supply.

Opinion

TAYLOR, J.

¶ 1 The dispositive issue in this appeal is whether the appellee, the State of Oklahoma represented by the Attorney General of Oklahoma (AG), was entitled to summary judgment in the amount of $47,767,795.20, as a matter of law. In deciding the propriety of summary judgment, we must address two underlying questions: 1) whether the district court, on remand, was bound by the facts supporting our holdings in the earlier appeal, State ex rel. Edmondson v. Native Wholesale Supply, 2010 OK 58, 237 P.3d 199 (cert. denied, Native Wholesale Supply v. State of Okla., ––– U.S. ––––, 131 S.Ct. 2150, 179 L.Ed.2d 935 (2011) )(Native Wholesale Supply I ); and 2) whether the district court should have proceeded to a jury trial requested by the appellant, Native Wholesale Supply (NWS). We answer the first underlying question in the affirmative and the second in the negative. We conclude and hold that the AG was entitled to summary judgment in the amount of $47,767,795.20, as a matter of law.

I. The Tobacco Settlement and Related Legislation

¶ 2 In 1998, four of the largest tobacco product manufacturers and forty-six states entered into a Master Settlement Agreement (MSA) to settle litigation brought by the states to recoup health care expenses resulting from cigarette smoking.¹ In 1999, the Legislature required tobacco product manufacturers who do not join the MSA and whose cigarettes are sold in Oklahoma to make annual payments into escrow accounts to cover health care expenses resulting from cigarette smoking.² 1999 Okla. Sess. Laws, ch. 357(codified at 37 O.S.Supp.1999, §§ 600.21 –600.23 )(Escrow Statute). In 2004, the Legislature enacted the Master Settlement Agreement Complementary Act (Complementary Act) to maintain the integrity of the Master Settlement Agreement.³ 2004 Okla. Sess. Laws, ch. 266 (codified at 68 O.S.Supp.2004, §§ 360.1, et seq. ).

¶ 3 The Complementary Act requires all tobacco product manufacturers whose cigarettes are sold in Oklahoma to list the cigarette brand names with the AG and to certify that the required annual payment into an escrow account has been made. 68 O.S.Supp.2004, § 360.4(A). Each year the AG must publish on its website the list of cigarette brand names that may be sold in Oklahoma and the list of tobacco product manufacturers who have complied with the Escrow Statute. Id. at § 360.4(B). The AG's website directory, the Directory of Certified Tobacco Manufacturers/Brands Approved for Sale, is accessible to the public. Id. The Complementary Act declares that cigarettes not listed on the AG's directory are contraband and that it is unlawful for a person to sell or possess for sale cigarettes that are not listed on the AG's directory or where the AG's directory does not show the cigarette manufacturer has complied with the Escrow Statute. Id. at § 360.7. The MSA, Escrow Statute, and Complementary Act guarantee a source of compensation for the costs of health conditions associated with cigarette smoking and place the financial burden for the medical assistance on the tobacco product manufacturers based on the manufacturer's relative market share rather than on the State.

II. The Proceedings

¶ 4 In August of 2006, the AG removed both Seneca brand cigarettes and their manufacturer, Grand River Enterprises Six Nations, Ltd., from the AG's directory. In 2007 and 2008, NWS caused Seneca cigarettes to be brought into Oklahoma knowing that the tobacco product manufacturer did not comply with the Escrow Statute or the Complementary Act and that the Seneca cigarette manufacturer and Seneca cigarettes were not on the AG's directory.

¶ 5 In May of 2008, Drew Edmondson, Oklahoma Attorney General, initiated this proceeding in Oklahoma County District Court seeking disgorgement and payment to the State of all gross proceeds realized by NWS from the sale of contraband Seneca cigarettes in violation of the Complementary Act. The petition set forth the following allegations. 1) NWS “knowingly sold, transported or caused to be transported, or imported or caused to be imported, Seneca cigarettes for sale in Oklahoma, thereby transacting business within this state and availing itself of the privilege of conducting activities within this state.” 2) The Complementary Act “requires that a tobacco product manufacturer and its brand families must be listed on the Directory of Compliant Tobacco Manufacturers maintained by the Oklahoma Attorney General before the cigarettes can be lawfully sold in the state.” 3) The Complementary Act makes it unlawful for a person to sell, distribute, acquire, possess, hold, own, transport, import or cause to be imported, cigarettes that the person knows or should know are intended for distribution or sale in this state in violation of the Complementary Act. 4) “ ‘Seneca’ cigarettes are a brand of cigarettes manufactured by Grand River Enterprises Six Nations, Ltd.” and neither Grand River Enterprises nor Seneca cigarettes have been listed on the AG's directory since 2006. 5) Beginning in 2007, NWS has knowingly and unlawfully sold, distributed, acquired, held, owned, possessed, transported, imported or caused to be imported Seneca brand cigarettes in this state when it knew or should have known those cigarettes were intended for distribution in violation of the Complementary Act.

¶ 6 In August of 2008, NWS removed the case to federal court asserting complete federal preemption of this state-law suit because NWS “is chartered by the Sac and Fox Nation, is wholly owned by a member of the Seneca Nation, and conducts business on Indian land with Native Americans.” The federal court concluded the case was improperly removed and remanded it to the state court.

¶ 7 In June of 2009, the state district court granted NWS' motion to dismiss for lack of subject matter jurisdiction and denied NWS' motion to dismiss for lack of personal jurisdiction. The AG appealed the subject matter jurisdiction dismissal and NWS counter-appealed the personal jurisdiction ruling. This Court held “that the State has personal jurisdiction over defendant based on the Company's purposeful availment of the Oklahoma cigarette marketplace and has jurisdiction over the subject matter of this suit, the Native–American identity of the participants in the distribution channel notwithstanding.” Native Wholesale Supply I, 2010 OK 58 at ¶ 49, 237 P.3d at 217. Native Wholesale Supply I remanded this case to the district court after mandate issued in August of 2010.

¶ 8 On NWS' motion filed October 25, 2010, this Court suspended the effectiveness of the mandate to allow NWS to petition for certiorari review in the United States Supreme Court. On April 25, 2011, the United States Supreme Court denied NWS' petition for a writ of certiorari to review our opinion in Native Wholesale Supply I. Native Wholesale Supply v. State of Oklahoma, ––– U.S. ––––, 131 S.Ct. 2150, 179 L.Ed.2d 935 (2011). Thereafter, NWS answered the AG's amended petition but did not respond to the AG's pending discovery requests and motions. In November of 2011, the trial court granted the AG's motion to compel, NWS filed for Chapter 11 bankruptcy in the Western District of New York, and the state court proceeding was stayed by operation of 11 U.S.C. § 362(a)(1).

¶ 9 NWS listed three states in the bankruptcy proceeding—California, New Mexico, and Oklahoma. The three states, each with a pending suit against NWS for violations of their respective complementary legislation, jointly moved to lift the automatic stay. On April 26, 2012, the bankruptcy court lifted the stay and directed that “information produced by [NWS] during discovery in the bankruptcy case shall be treated by the States as satisfying any request for such information in the State Litigation.” The information NWS turned over to Oklahoma included documents showing the cigarette sales and shipping transactions between NWS and Muscogee Creek Nation Tobacco Wholesale and Bowen Wholesale from 2006 to 2010.

¶ 10 The state district court case proceeded; and, on August 17, 2012, the AG moved for summary judgment. By order dated May 9, 2013, the district court sustained the AG's motion for summary judgment, denied NWS' cross-motion for summary judgment, and entered judgment “in favor of the plaintiff, State of Oklahoma ex rel. E. Scott Pruitt, Attorney General of Oklahoma, in the amount of Forty–Seven Million Seven Hundred Sixty–Seven Thousand Seven Hundred Ninety–Five Dollars and 20/100 ($47,767,795.20) against the Defendant Native Wholesale Supply.” By order dated June 17, 2013, the district court denied NWS' motion for new trial. NWS appealed the summary judgment and denial of a new trial. We retained this second appeal in this protracted litigation.⁴

III. Standard of Review

¶ 11 Summary judgment is a pretrial procedure available where there is no dispute as to the material facts and the inferences that may be drawn from the undisputed material facts and where the evidentiary materials establish each and every material fact necessary to support the judgment as a matter of law. Lowery v. Echostar Satellite Corp., 2007 OK 38, ¶ 11, 160 P.3d 959, 963.

We review a summary judgment de novo, without deference to the lower court. Id. We review the denial of a new trial for abuse of discretion. Evers v. FSF Overlake Assocs., 2003 OK 53, ¶ 6, 77 P.3d 581, 584. It is an abuse of discretion to deny a new trial where the...