State v. United Parcel Serv., Inc.
| Decision Date | 25 May 2017 |
| Docket Number | 15-cv-1136 (KBF). |
| Parties | The STATE of New York and The City of New York, Plaintiffs, v. UNITED PARCEL SERVICE, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Christopher Kin Leung, Dana Hope Biberman, Tatyana A. Trakht, Isaac C. Cheng, New York State Office of the Attorney General, John P. Oleske, Office of the Attorney General State of New York, John Turrettini, Office of New York State Attorney General, Kevin M. Lynch, N.Y.S. Office of The Attorney General, Lilia Isobel Toson, New York City Law Department, Eric Proshansky, NYC Law Department, Tonya Jenerette, New York, NY, for Plaintiff.
Jamie A. Levitt, Mark David McPherson, Natalie Anne Fleming Nolen, Amanda Aikman, Kendall Manlove, Morrison & Foerster LLP (NYC), New York, NY, Deanne E. Maynard, Morrison & Foerster LLP, Washington, DC, Gregory B. Koltun, Morrison & Foerster (LA), Los Angeles, CA, Paul T. Friedman, Ruth N. Borenstein, Morrison & Foerster LLP(San Francisco), San Francisco, CA, for Defendant.
CORRECTED OPINION & ORDER 1
Table of Contents
1. Sweet Seneca Smokes ...651
Issues surrounding the appropriate taxation and collection scheme for cigarettes sold on Indian reservations in the State of New York have presented persistent and complex challenges. Cigarettes sold on reservations to tribal members for personal use are exempt from tax; those sold to non-tribal members are not. The tracking and collection of appropriate taxes has proceeded in fits and starts—including a lengthy period of forbearance by the State of New York from enforcing existing tax laws on reservations, which continued until June 2011.
This lawsuit concerns a non-tribal member, United Parcel Service, Inc. ("UPS"), which allegedly transported, inter alia, cigarettes from and between New York State Indian reservations for a number of shippers ("Relevant Shippers"). Plaintiffs, the State of New York and the City of New York (collectively, "plaintiffs," and, respectively, the "State" and/or the "City"), assert that in transporting unstamped (and therefore untaxed) cigarettes,2 UPS has violated an Assurance of Discontinuance ("AOD") it signed with the State in 2005, as well as New York Executive Law ("N.Y. Exec. Law") § 63(12) ; New York Public Health Law ("PHL") § 1399–ll ;3 the Prevent All Cigarette Trafficking Act ("PACT Act"), 15 U.S.C. §§ 375 – 78 ; the Contraband Cigarettes Trafficking Act ("CCTA"), 18 U.S.C. §§ 2341 – 46 ; and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 – 68.4
UPS has denied plaintiffs' assertions from the commencement of this action, and it vigorously defended itself through trial. While UPS pursued a number of defenses discussed in more detail below, a few are worth additional focus at the outset. First and foremost, UPS has disputed that it ever violated its obligations under the AOD or knowingly transported unstamped cigarettes from or between Indian reservations to unauthorized recipients.
Second, UPS argues that even if it had violated the statutes or the AOD, plaintiffs have failed to carry their burden with regard to establishing damages.5 UPS's primary legal arguments in support of this contention are that plaintiffs failed to adequately disclose their damages computation prior to trial and then made a separate error at trial by attempting to introduce the details of their damages claim through a demonstrative when it should have been presented by an expert. According to UPS, these legal issues provide two independent bases for the Court to preclude plaintiffs' damages claim altogether. UPS has also made factual arguments in furtherance of preclusion. UPS argues that plaintiffs improperly and without sufficient factual support seek damages for every package transported by UPS after a certain point in time. UPS also asserts that, in all events, neither UPS nor plaintiffs can possibly know the contents of any particular package, rendering assessment of damages on a per-package basis impossible.
Upon careful review and consideration of the entire trial record, the Court finds that UPS violated its obligations under the AOD in a number of respects and, in addition, knowingly6 transported cigarettes from and between Indian reservations for all but one of the shippers (the "Liability Shippers").7 For this reason and others detailed below, UPS's arguments against any liability fail. The more complicated issue, however, relates to damages. Plaintiffs left their damages case open to severe attack; such exposure could and should have been avoided. However, the Court finds that plaintiffs are entitled to compensatory damages as well as monetary penalties in amounts yet to be determined, but not injunctive relief or the appointment of a monitor.
The State and City initiated this action by filing a complaint against UPS on February 18, 2015. (ECF No. 1.) They filed an amended complaint ("Amended Complaint") on May 1, 2015, a second amended complaint ("Second Amended Complaint") on November 30, 2015, and a third amended complaint ("Third Amended Complaint") on February 24, 2016. (ECF Nos. 14, 86, 189.) The Second Amended Complaint contains fourteen causes of action seeking various forms of relief under the AOD,8 N.Y. Exec. Law § 63(12),9 PHL § 1399–ll ;10 the PACT Act;11 the CCTA;12 and RICO.13
The parties agreed that the affirmative defenses asserted by UPS in its answer to the Amended Complaint, (ECF No. 110), were deemed asserted as to the Second Amended Complaint. On December 4, 2015, plaintiffs moved to strike UPS's Fifth through Seventeenth Affirmative Defenses. (ECF No. 89.) In an Opinion & Order dated February 8, 2016, the Court granted the motion in part and denied it in part. (ECF No. 177, New York v. United Parcel Serv., Inc., 160 F.Supp.3d 629 (S.D.N.Y. 2016).) UPS moved for reconsideration with regard to the portion of the decision that struck its Seventh Affirmative Defense. (ECF No. 187.)
There has been significant motion practice regarding UPS's Seventh Affirmative Defense. (See, e.g., ECF Nos. 91, 111, 122, 188, 198, 201, 287, 345, 384.) Although the Court granted UPS's motion for reconsideration, (ECF No. 258),14 and vacated certain portions of its prior decision, the Court ultimately granted plaintiffs' renewed motion for summary judgment on the Seventh Affirmative Defense. (ECF No. 406.) The Court refers the reader to the...
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