State v. Mountain Tobacco Co.

• Citation: 953 F.Supp.2d 385
• Decision Date: 11 July 2013
• Docket Number: No. 12–cv–6276 (ADS)(ETB).,12–cv–6276 (ADS)(ETB).
• Parties: State of NEW YORK, Plaintiff, v. MOUNTAIN TOBACCO COMPANY, d/b/a King Mountain Tobacco Company Inc. and Delbert Wheeler, Sr., Defendants.
• Court: U.S. District Court — Eastern District of New York

953 F.Supp.2d 385

State of NEW YORK, Plaintiff,

v.MOUNTAIN TOBACCO COMPANY, d/b/a King Mountain Tobacco Company Inc. and Delbert Wheeler, Sr., Defendants.

No. 12–cv–6276 (ADS)(ETB).

United States District Court,

E.D. New York.

July 11, 2013.

Eric T. Schneiderman, Attorney General of the State of New York, New York, NY, Dana H. Biberman, Marc A. Konowitz, Sarah Beth Evans, Assistant Attorney Generals, Attorneys for the Plaintiff.

Luebben Johnson & Barnhouse LLP, Los Ranchos De Albuq, NM, By: Randolph Barnhouse, Esq., Of Counsel Attorneys for the Defendant Mountain Tobacco Company d/b/a King Mountain Tobacco Company, Inc.

Petrillo Klein & Boxer LLP, New York, NY, By: Nelson A. Boxer, Esq. Jill Caroline Barnhart, Esq., Of Counsel, Attorneys for the Defendant Mountain Tobacco Company d/b/a King Mountain Tobacco Company, Inc.

The Defendant Delbert Wheeler, Sr., No Appearance.

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

The following facts are drawn from the parties' pleadings for purposes of this order and do not constitute the findings of the Court.

The Defendant Mountain Tobacco Company, d/b/a/ King Mountain Tobacco Company Inc. (“King Mountain”) is a corporation formed under the laws of the Yakama Nation of Indians and is engaged in the business of manufacturing, selling, transferring, transporting, and shipping cigarettes for profit. King Mountain offers cigarettes for sale, transfer, transport, and shipment throughout the United States, including New York. Although King Mountain is not owned or operated by the Yakama Nation Tribe, King Mountain is located within the Yakama Indian Reservation in the State of Washington. King Mountain's principal place of business and manufacturing facility are located at 2000 Fort Simcoe Road in White Swan, Washington. The former Defendant Mountain Tobacco Distributing Company Inc. (“Mountain Tobacco”), against whom the State of New York previously voluntarily dismissed this case, contracts with King Mountain to transfer and ship cigarettes throughout the United States. The Defendant Delbert Lauren Wheeler, Sr. (“Wheeler”) is the President, co-founder, and 50% co-owner of King Mountain, and is the President and part-owner of Mountain Tobacco.

According to the State of New York, on November 6, 2012, investigators from the Office of the New York State Attorney General entered the Poospatuck Reservation in Mastic, New York, for the purpose of purchasing King Mountain brand cigarettes. One of these investigators entered the Rising Native Sisters smoke shop, which is located on the Poospatuck Reservation. He observed that the reservation smoke shop offered King Mountain brand cigarettes for sale, as well as other brands. Later that day, the investigator entered the Native Delight Smoke Shop, which is also located on the Poospatuck Reservation, where he observed King Mountain brand cigarettes for sale. The investigator observed more than fifty cartons of King Mountain brand cigarettes for sale on display shelves. While in the Rising Native Sisters smoke shop, the investigator purchased one carton of King Mountain brand cigarettes for $25. The State of New York alleges that none of the cigarette packs in the purchased carton of King Mountain cigarettes bore a New York State cigarette tax stamp.

On December 3, 2012, the New York State police stopped and inspected a truck at a routine commercial check point in Clinton County. The truck was allegedly found to be carrying contraband cigarettes. During the inspection, the New York State Police discovered 140 cases of King Mountain cigarettes. The State of New York alleges that none of these 84,000 packs of cigarettes bore New York State tax stamps or had any indication on the packaging that the cigarettes were “fire-safe.”

On December 21, 2012, the State of New York filed this complaint against King Mountain, Mountain Tobacco, and Wheeler, alleging violations of the Contraband Cigarette Trafficking Act, 18 U.S.C. §§ 2341–2346 (“the CCTA”), the Prevent All Cigarette Trafficking Act, 15 U.S.C. §§ 375–378 (“the PACT Act”), and New York State tax and executive laws concerning tax stamping and sale of cigarettes within the state. On February 12, 2013, the State of New York filed an amended complaint.

On April 3, 2013, the State of New York moved for a preliminary injunction enjoining the Defendants from selling, shipping, or distributing unstamped cigarettes into and within New York State. On April 9, 2013, the Court referred the motion for a preliminary injunction to United States Magistrate Judge E. Thomas Boyle for the purpose of holding a hearing and issuing a report and recommendation. On April 18, 2013, Judge Boyle set a hearing on the preliminary injunction to occur on April 23, 2013.

In advance of the April 23rd evidentiary hearing, the State of New York sought a stipulation of facts in lieu of the hearing and any further fact-finding. After significant negotiations, King Mountain and the State of New York stipulated to a certain set of facts (the “Stipulation”). Pursuant to the Stipulation, “both sides agree[d] there will be ... no further evidence admitted on the preliminary injunction” and that “all other statements of fact made in the memorandum of support of motion for preliminary injunction are to be deemed inadmissible and not considered by the court.” (Stipulation, ¶ 20.)

On May 8, 2013, King Mountain filed its response to the State of New York's motion for a preliminary injunction in accordance with the briefing schedule set forth in the Stipulation.

On May 22, 2013, in support of the motion for a preliminary injunction, the State of New York submitted a reply, which King Mountain asserts made factual assertions beyond the scope of the terms of the Stipulation.

On May 28, 2013, King Mountain moved to strike the State of New York's reply submission in its entirety. The State of New York offered to resolve this dispute by withdrawing two declarations and one exhibit, described in greater detail later, which it believed might be the items most objectionable to King Mountain. The State of New York asserted that the remainder of the material represented legal authority for its counterarguments to King Mountain's opposition, not evidence of King Mountain's activities, and thus were no “further evidence” excluded under the terms of the Stipulation. King Mountain rejected this offer.

On May 30, 2013, Judge Boyle entered an electronic order striking the Stipulation and scheduling an evidentiary hearing.

On June 6, 2013, the State of New York moved for discovery on an expedited basis. In particular, the State of New York contended that (1) King Mountain, in its answer and in its opposition to the motion for preliminary injunction, had interposed the affirmative defense of lack of personal jurisdiction; (2) the record was silent as to how unstamped King Mountain cigarettes ended up where they were when they were obtained by the State. King Mountain opposed the motion for expedited discovery on the ground, among other reasons, that Mountain Tobacco had previously disclaimed any need for discovery in favor of the Stipulation. King Mountain insisted that “the State apparently tricked [King Mountain] into revealing its defenses on the promise that the record was closed so the State could thereafter seek additional discovery to try to counter arguments thereafter made by [King Mountain].”

On June 11, 2013, Judge Boyle entered an electronic order granting the State of New York's request for expedited discovery.

King Mountain subsequently filed the present objections to Judge Boyle's May 30th and June 11th orders pursuant to Federal Rule of Civil Procedure (“Fed. R. Civ. Pr.”) 72. Specifically, as to the May 30th order, King Mountain asserts that absent a finding of good cause, Judge Boyle erred in striking the Stipulation negotiated and agreed on by the parties. As to the June 11th order, King Mountain contends that Judge Boyle's order granting the State of New York expedited discovery was both unreasonable and deficient under the criteria set forth in Notaro v. Koch, 95 F.R.D. 403 (S.D.N.Y.1982).

On June 18, 2013, Judge Boyle sua sponte adjourned the evidentiary hearing pending the outcome of these Fed. R. Civ. Pr. 72 objections.

I. DISCUSSION

A. Standard of Review

Pre-trial discovery issues are generally considered nondispositive matters. Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir.1990). When considering objections to a magistrate judge's ruling on a nondispositive matter, a district judge will only modify or set aside any portion of the magistrate's order found to be “clearly erroneous or contrary to law.” Rule 72(a); see also28 U.S.C. § 636(b)(1)(A) (“A judge of the court may reconsider any [nondispositive] pretrial matter ... where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law.”).

King Mountain “requests the court to review the order under the de novo standard on the basis that no findings of fact were issued. However, [King Mountain] fails to note that findings of facts and conclusions of law are only issued in connection with dispositive motions. The instant pretrial order is a non-dispositive motion.” Sana v. Hawaiian Cruises, Ltd., 961 F.Supp. 236, 238 (D.Haw.1997), rev'd on other grounds,181 F.3d 1041 (9th Cir.1999). Such orders are not subject to de novo determinations under 28 U.S.C. § 636(b)(1)(A) which provides:

Notwithstanding any provision of law to the contrary a judge may designate a magistrate to hear and determine any pretrial matter pending before the court.... A judge of the court may reconsider any pretrial matter under this subparagraph (A) where it has been shown that the magistrate's order is clearly erroneous or contrary to-law.

28 U.S.C. § 636(b)(1)(A) (emphasis added). See also Grimes v. City and County of San Francisco, 951 F.2d 236, 241 (9th Cir.1991) (“Pre-trial orders of a magistrate under 636(b)(1)(A) are...