Buffalo News: Mailing ban on cigarettes is upheld by judge

(July 30, 2010)

buffalonews

Mailing ban on cigarettes is upheld by judge

Author: Brian Connolly

Published Date: Jul 30, 2010 

A judge upheld the federal government's right to ban the mailing of cigarettes by Seneca Nation businesses Friday, but rejected for the time being the collection of taxes on those cigarettes.

The ruling by U.S. District Judge Richard J. Arcara upholds the crux of a new federal law that Seneca business owners say will cripple their mail-order operations.

In short, the judge banned the sale of tobacco products through the mail but allowed for other forms of interstate sales of tax-free cigarettes. Under the Prevent All Cigarette Trafficking Act, or PACT Act, buyers would still be required to pay taxes on those cigarettes.

"It looks like we're going to have 3,000 people who will be out of work on Monday," Rick Jemison, a businessman and chairman of the Seneca Fair Trade Association. "I imagine all of our businesses will shut down."

Meanwhile, Seneca Nation President Barry E. Snyder Sr. said, "We are deeply disappointed the federal court did not enjoin all aspects of the PACT Act at this point."

"The court's decision ... fails to safeguard our Seneca tobacco retailers and their employees from the PACT Act's harm. Simply put, it does not preserve the status quo," he said.

Snyder said, "Congress and President Obama have portrayed the PACT Act as a tool to protect Americans from terrorism and to prevent tobacco sales to minors, but it's really nothing more than a vehicle for global tobacco giants --led by Philip Morris -- to kill off competition from Native American entrepreneurs."

Michael Seilback, vice president of public policy for the American Lung Association in New York, said, "We think this is a win for public health. The judge's ruling keeps intact the most important aspect of the law -- retailers won't be able to use the mail."

Arcara, in rejecting the taxing aspect of the new law, said, "The court is aware of no other federal statute requiring out-of-state retailers to be subject to taxing schemes for state and local governments into which they ship goods."

The PACT Act is viewed by both critics and supporters as sweeping legislation with billions of dollars in tax revenue and thousands of jobs at stake.

The bill, signed into law in March by President Obama, is backed by a coalition that ranges from anti-smoking groups to convenience store owners to large tobacco manufacturers.

Arcara, in his decision, rejected a request by Seneca businesses for a preliminary injunction that would have prevented the government from enforcing the overall ban on mailing tobacco products.

The judge, however, did issue an injunction against one aspect of the law -- the right of federal, state and local governments to collect taxes on other forms of interstate sales of tobacco products.

Arcara ruled that the federal law may violate the plaintiffs' right to due process, or the principle that government must respect all of the legal rights of individuals.

"Congress is broadening the jurisdictional reach of each state and locality without regard to the constraints imposed by due process," the judge said in his 43-page decision. "That it cannot do."

Arcara also made reference to the economic harm on cigarette retailers in granting a partial injunction.

"Undoubtedly," he said, "this will have a significant adverse economic impact upon plaintiffs and their employees, all of whom presumably reside in the Western New York area, and many of whom reside on the Seneca Nation reservation itself."

One anti-smoking advocate took note of Arcara's comments and suggested the closing of Seneca tobacco businesses is good for public health, especially among young people who buy cheap cigarettes.

"This is extremely important," said Matthew Myers, president of the Campaign for Tobacco Free Kids in Washington D.C., "because the Senecas have been the largest mass marketer of cheap cigarettes across the U.S."

Earlier this month, Arcara issued a temporary restraining order that, in essence, gave the businesses a reprieve from enforcement of the law.

The new law prohibits the U.S. Postal Service from delivering commercial cigarette shipments, and requires companies that engage in interstate cigarette sales to pay all federal, state and local taxes where the buyer lives.

The law also requires cigarette businesses to register with the state where they are headquartered and make periodic reports to state tax departments. It also requires they check the age and identification of customers who buy tobacco products.

In defending the law, government lawyers said it was enacted to prevent underage smokers from obtaining cigarettes through the mail and to end a practice that cost governments billions of dollars a year in lost taxes.

"The government is extremely pleased," said U.S. Attorney Williams J. Hochul Jr. "It's a victory because there now will be a complete end of cigarette trafficking through the mail."

The government claims the federal measure was carefully drafted to adhere to the U.S. Constitution and to avoid infringing on the sovereign rights of Native Americans.

The other side, most notably Seneca businesses, has portrayed the law as discriminatory against Indians, and as a windfall for non-Indian tobacco businesses.

At the CattRez smokeshop, on Route 438 in the Cattaraugus Reservation, the mail-order cigarette business ended about a month ago and five employees were laid off.

"It's an insult to mostly any Native business," Harold Gurnott, the smokeshop's night manager, who is a Seneca. said Friday. CattRez is fortunate, he added, because the store's mail-order venue was just part of the overall business and the loss will be minimal.

 Patrick Cook, an employee of Native Pride @ Adlai's and a Seneca, compared the decision to "a slap in the face." Though the store -- its shelves stocked full of domestic and native brands of cigarettes -- did not operate a mail-order business, Cook noted that mail order was a common cottage industry on the reservation.

Brett Snow, a manager of Native Pride @ Adlai's noted unhappy non-native customers are among the more vocal about the decision.

"I think some Native American people are so disgusted by it that they don't even talk about it that much," he added.

News Staff Reporter Abram Brown contributed to this report.