Opposition Brief — Native Wholesale Supply v. Oklahoma ex rel. Edmondson

| No. 10-754 MAR 21 2017

C FICE SK tat

IGE SF teq= CLa

RK

In The

Supreme Court of the Anited States

+

NATIVE WHOLESALE SUPPLY,

a Corporation Chartered by the

Sac and Fox Tribe of Oklahoma,

Petitioner,

Vv.

STATE OF OKLAHOMA,

ex rel., W.A. “DREW” EDMONDSON,

ATTORNEY GENERAL OF OKLAHOMA,

Respondent.

¢

On Petition For Writ Of Certiorari To The

Supreme Court Of The State Of Oklahoma

¢

BRIEF IN OPPOSITION

*

E. CLYDE KIRK OBA #10572

Assistant Attorney General

OFFICE OF THE OKLAHOMA ATTORNEY

GENERAL

313 Northeast 21st Street

Oklahoma City, Oklahoma 73105

(405) 521-3921 Fax: (405) 522-4534

clyde. kirk@oag.ok.gov

Attorney for Respondent

March 21, 2011

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

RESPONDENT STATE OF

OKLAHOMA’S COUNTER-STATEMENT

OF QUESTIONS PRESENTED

Whether the Oklahoma Supreme Court erred

in finding the State’s Second Amended Petition

asserted sufficient jurisdictional facts to meet

either a “purposeful direction” or the more

restrictive “purposeful availment” standard for

personal jurisdiction.

When a member of the Seneca Nation of New

York forms a private, for profit corporation under

the laws of a separate Indian Tribe, the Sac and

Fox Tribe of Oklahoma, and the corporation oper-

ates its business from the Seneca Reservation in

New York, imports cigarettes from a Canadian

cigarette manufacturer, stores the cigarettes on

non-Indian lands in Nevada, and then sells and

arranges for the delivery of those cigarettes to a

third Indian Tribe, the Muscogee Creek Nation of

Oklahoma, for resale to non-tribal member con-

sumers in Oklahoma, does the Indian Commerce

Clause bar State taxation and regulation of those

sales, under a “Nation to Nation” Intertribal

Commerce theory?

TABLE OF CONTENTS

Page

RESPONDENT STATE OF OKLAHOMA’S

COUNTER-STATEMENT OF QUESTIONS

IIT 8 WEP os csssice new aessoncesasxecenssscssueess meee

STATEMENT OF THE CASE.....................0ccess0s-

SUMMARY OF THE ARGUMENT.............0.0......

STANDARD OF REVIEW ON MOTIONS TO

DISMISS FOR LACK OF PERSONAL JU-

RISDICTION WHERE NO EVIDENTIARY

iw sho FB % 4 © | Serene anmnnnne em

REASONS FOR DENYING THE PETITION .....

PROPOSITION I

THE OKLAHOMA SUPREME COURTS

PURPORTED APPLICATION OF THE “PUR-

POSEFUL DIRECTION” SPECIFIC JURIS-

DICTION STANDARD INSTEAD OF A

“PURPOSEFUL AVAILMENT” JURISDIC-

TION STANDARD IS IRRELEVANT AS

TO WHETHER THIS COURT SHOULD

GRANT NWS’ PETITION FOR CERTIORARI

BECAUSE THE OKLAHOMA SUPREME

COURT RULED NWS HAS SUFFICIENT

CONTACTS WITH THE STATE OF OKLA-

HOMA TO SATISFY EITHER JURIS-

DICTIONAL STANDARD ....000020. 00.2. eee eee ee

13

ill

TABLE OF CONTENTS — Continued

Page

B. The Oklahoma Supreme Court Specifi-

cally Held That NWS’ Contacts With

the State of Oklahoma Were Sufficient

to Meet a “Purposeful Availment” Stan-

i oindiccd ins sscasacissseosa eee Nees 15

PROPOSITION II

CERTIORARI SHOULD BE DENIED ON THE

INDIAN COMMERCE CLAUSE ISSUE.......... 18

A. Despite the Allegations of NWS, No

“Intertribal Commerce” Is Involved in the

Case at Bar Because NWS Is Not Owned

or Operated by an Indian Tribe. Instead,

NWS Is Merely a Private Corporation

Operating for Its Own Profit and Finan-

Uy Tas as sce co oe See ee 18

B. Even If NWS Was a Tribal Enterprise it

Was Not Shipping and Selling the Subject

Contraband Cigarettes to Members of the

Seneca Nation. Therefore, the Petition

for Certiorari Should Be Denied as this

Court Has Already Ruled That There Is

No Sovereign Interest Involved When a

Tribe Sells Products to People Who Are

Not Members of the Same Tribe. ............... 24

1V

TABLE OF CONTENTS — Continued

Page

C. Despite the Allegations of NWS That

Only “On Reservation” Activities Are In-

volved, NWS Shipped, Transported, and

Sold the Subject Cigarettes Directly Into

the State of Oklahoma, Far Beyond the

Borders of the Seneca Nation Reserva-

tion. This Court Has Repeatedly Ruled

That No Sovereign Interest Is Involved

When “Off Reservation” Conduct Is In-

Eo idovcce anaes 28

D. Despite the Allegations of NWS, this

Lawsuit Is “Direct” Regulation of Its

Unlawful Shipping and Sales Activity

Occurring in Oklahoma. This Is Not, as

NWS Puts it, “Indirect” Regulation of

Out-of-State Tribal Purchases................... 32

Se OES NI sus snarls naar ehamanriareeiaishoaaivakeeanaiele 37

TABLE OF AUTHORITIES

Page

FEDERAL CASES

Ariz. Dept. of Revenue v. Blaze Constr. Co., 526

Te GE ES ctickncussciersidccncashbvninlscasuesdueenpehieruiaaen yy

Asahi Metal Industry Co., Ltd. v. Superior

Court of California, 480 U.S. 102 (1987)...... 2,15,16

Baraga Products, Inc. v. Commisstoner of

Revenue, 971 F. Supp. 294 (W.D.Mich.1997) .....20, 22

Burger King Corp. v. Rudzewicz, 471 U.S. 462

SENN i; /sdgaceisasaes phusenkdnandoraneneaseaadueneneaaneeee 3,16

City of New York v. Golden Feather Smoke Shop,

Inc., 2009 WL 705815 (E.D.N-Y.2009)............... 22, 24

Department of Taxation and Finance of New

York v. Milheim Attea & Bros., Inc., 512 U.S.

eG | Rene oP nnNE Ie MIRC rere Race RMT, 35, 36

Dole Food Co. v. Patrickson, 538 U.S. 468

PIN cic) csowccaaie sc eccorsec demas metuamentensl aie ee 22.

Duro v. Reina, 495 U.S. 676 (1990)... eee. 4, 26

Mescalero Apache Tribe v. Jones, 411 U.S. 145

ID vicidisicstassusuasvncisleveavousseucemaadatat ee 32

Muscogee (Creek) Nation v. Henry, Civ. No. 10-

019-JHP 2010 WL 1078438 (E.D. Ok. Mar.

Be IND sox aici ecesnwsiincsntiacuouapapcucnapeemseiaier aes 5, 11, 31

Oklahoma Tax Comm. v. Citizen Band Pota-

watomi Indian Tribe of Okla., 498 U.S. 505

,__ § Ee oe enema ea I Bee! ck 7s). 26, 35, 36

Puyallup Tribe, Inc. v. Dept. of Game of State of

a, ee Fe BU CII DP vcisiscn cccwvecsncccdsscaceg coe 20

v1

TABLE OF AUTHORITIES — Continued

Page

Rice v. Rehner, 463 U.S. 713 (1983).....4, 21, 25, 26, 28

Squaxin Island Tribe v. State of Wash., 781

ME Fe OE GARE, RUPEES dcescscsvscsevescscsetessvenssardevsceeses 21

United States v. Montour, No. CR 0900214MJP,

2010 WL 3211888 (W.D. Wash. Aug. 12,

CE ia tuanndanssatvannviwede 4

Wagnon v. Prairie Band Potawatomi Nation,

ss Voceasuncadsdunnvadcswonsecessvesenadads 34

Washington v. Confederated Tribes of the

Colville Indian Reservation, 447 U.S. 134

ei rete PTE Sk laieateks 5, 27, 36

STATE CASES

Patterson v. Beall, 947 P.2d 617 (Okl. 1997).............. 14

Powers v. District Court, 227 P.3d 1060 (Okl.

a Ne os nay aa baba aakente ches 6

STATUTES

ee ee eb) | re See 14

eo say cuaps enunsvaunvavewsncnessas 14

oD cas ducaaccabiaidahescuecsesuaceieies 12

Lo css laep au gannaneennuescuans 12

G8 O.S. §360.7(E) .....ccccccccccecceseccesceceesceceees 13, 14, 30, 34

eo sux cadbutnadswadsceesinseuensduedons 12

Ee ME, MIE OREN BS ines cncvescsinsvcenenacnutensscvscensensees 33

TABLE OF AUTHORITIES — Continued

Page

COURT RULES

40 Sup.Ct.R. 10.......... Daas au aidaeke lanes teens 2

Ie, MO ts Oy BOs BOI ccc cnccedcsscdsaunscevsnncarenstoueaveciseserns 33

Be TO, I Bsa Sevicn oven nangdecdvicxencidacens 23, 32, 33, 36

Oe a 0. 9A iso eit act D

1

STATEMENT OF THE CASE

Plaintiff State of Oklahoma, ex rel., W.A. “Drew”

Edmondson, filed this civil action in the District

Court of Oklahoma County, State of Oklahoma

against Native Wholesale Supply (“NWS”) seeking

injunctive relief and disgorgement and payment to

the State of the gross proceeds realized by NWS from

cigarette sales made in violation of the Oklahoma

Tobacco Master Settlement Agreement Complemen-

tary Act, 68 O.S. §§360.1, et seq.

NWS filed a Motion to Dismiss for lack of per-

sonal jurisdiction and subject matter jurisdiction. The

court denied NWS’ challenge to personal jurisdiction

but granted its challenge to subject matter jurisdic-

tion under the Indian Commerce Clause. The State of

Oklahoma was granted leave to amend its Petition.

The State filed an Amended Petition and shortly

thereafter a Second Amended Petition asserting addi-

tional factual allegations. The District Court, without

conducting an evidentiary hearing, found the State in

its Second Amended Petition had made a prima facie

showing of personal jurisdiction and denied defen-

dant’s Motion to Dismiss for lack of personal jurisdic-

tion. The Court, however, granted defendant’s Motion

to Dismiss for lack of subject matter jurisdiction

under the Indian Commerce Clause.

The State of Oklahoma appealed the trial court’s

Order dismissing this case for lack of subject matter

jurisdiction under the Indian Commerce Clause.

NWS filed a Counter-Petition in Error asserting that

2

the trial court erred in denying its Motion to Dismiss

for lack of personal jurisdiction.

The Oklahoma Supreme Court sustained the Dis-

trict Court’s finding that it had personal jurisdiction

over NWS and reversed the District Court determina-

tion that the Indian Commerce Clause barred the

State’s cause of action.

+

SUMMARY OF THE ARGUMENT

Neither of the Questions Presented by NWS mer-

its this Court’s plenary review under the standards of

Sup.Ct. R. 10. The first Question Presented is based

on a false premise — that the Supreme Court of Okla-

homa adopted a “‘purposeful direction’ specific juris-

diction standard” rather than a “purposeful

availment” standard, thereby supposedly creating a

conflict with decisions of this Court and the federal

Courts of Appeals. See NWS Petition for Writ of

Certiorari (“Pet.”) at 10-11 (emphasis added). The

court below did no such thing. To the contrary, it

emphasized that it did not need to choose between

these standards “because Native Wholesale Supply

has engaged in conduct that satisfies even the rigor-

ous criteria advocated by Justice O’Connor” in her

plurality opinion in Asahi Metal Industry Co., Ltd. v.

Superior Court of California, 480 U.S. 102 (1987) —

namely, the “purposeful availment” standard. See Pet.

App. at 14a.

The Oklahoma Court’s application of the pur-

poseful availment standard to the facts of this case is

3

manifestly correct, and certainly presents no cert-

worthy issue. Contrary to NWS’ claim that the con-

tracts in issue here were “entered into ... and fully

performed outside” Oklahoma (Pet. at I, emphasis

added), the record evidence overwhelmingly demon-

strates that NWS has (1) directly and repeatedly

solicited business from tribes in Oklahoma, including

personal sales trips to the State by both its President

and National Sales Manager; (2) created an elaborate

distribution system for delivering cigarettes into

Oklahoma; and (3) arranged to channel hundreds of

millions of contraband cigarettes into the State. As

emphasized by the court below, “[t]o claim, as Native

Wholesale Supply does, that it does not know, expect,

or intend that the cigarettes it sells to [Oklahoma

tribal wholesalers] are intended for distribution and

resale in Oklahoma is simply disingenuous.” Pet.

App. at 18a; see also Burger King Corp. v. Rudzewicz,

471 U.S. 462, 473 (1985) (“parties who ‘reach out

beyond one state and create continuing relationships

and obligations with citizens of another state’ are

subject to regulation and sanctions in the other State

for the consequences of their activities”). As demon-

strated below, many of NWS’ denials of jurisdictional

contacts with Oklahoma are not only “disingenuous,”

but downright false and misleading.’

' This Court should be aware that NWS recently pled

guilty to federal obstruction-of-justice charges that grew out of

very similar misrepresentations it made to a federal court about

its supposed lack of jurisdictional contacts with the State of

(Continued on following page)

The second Question Presented fares no better. It

rests entirely on the false premise that a tribe and its

members located in one State have a protected right

under federal Indian law to purchase and bring into

the State goods from other Indian tribes in other

States, free of any state taxation or regulation.’ See

Pet. at 10 (claiming immunity for “purely Indian

commerce”), 25-34. This Court has repeatedly rejected

such claims to “intertribal immunity” from state taxa-

tion and regulation. See, e.g., Duro v. Reina, 495 U.S.

676, 686-87 (1990); Rice v. Rehner, 463 U.S. 713, 720

Washington. Many of the false statements that NWS and its

President, Mr. Montour, made in the Washington litigation are

virtually identical to several of the key jurisdictional denials

that NWS and Montour have made in the present litigation. See

United States v. Montour, No. CR 0900214MJP, 2010 WL

3211888, at **1, 3-4 (W.D. Wash. Aug. 12, 2010) (detailing the

“false statements to the Court” that formed the basis for the

obstruction-of-justice count). The penalties imposed on NWS for

making these false jurisdictional statements included forfeitures

totaling $1 million, 5 years probation, additional “criminal mone-

tary penalties,” and stringent injunctive relief. See Sept. 10,

2010 Judgment in a Criminal Case in United States v. Montour.

* Although NWS is owned by a member of the Seneca

Nation of New York and located on that Reservation, it is char-

tered by the Sac and Fox Tribe of Oklahoma. The Sac and Fox

Tribe of Oklahoma entered into a Tobacco Compact with the

State of Oklahoma. Under that Compact all tobacco sales,

including tribal member sales, are subject to a reduced State ex-

cise tax. The Compact further provides that all tobacco products

sold by tribal retailers must be from MSA compliant manu-

facturers who must fund an Escrow Account for those Sales. See

Oklahoma Secretary of State, Executive Legislation Division,

File No. 39638, filed on March 26, 2004. NWS has complied with

none of these requirements

& n. 7 (1983); Washington v. Confederated Tribes of

the Colville Indian Reservation, 447 U.S. 134, 160-61

(1980).

There is no reason to depart from this clear

precedent here. There is no split among lower courts

on this point. Indeed, as one Oklahoma federal court

recently emphasized in rejecting this identical claim,

“the Supreme Court has repeatedly held that Native

American immunities from state taxation and regula-

tion only extend to commerce within a_ particular

tribe, not to commerce among different tribes or their

members,” and a contrary rule “would truly be un-

precedented.” Muscogee (Creek) Nation v. Henry, Civ.

No. 10-019-JHP 2010 WL 1078438, at **3-4 (E.D. Ok.

Mar. 18, 2010).

Se cs

STANDARD OF REVIEW ON

MOTIONS TO DISMISS FOR LACK OF

PERSONAL JURISDICTION WHERE NO

EVIDENTIARY HEARING IS HELD

A court may address a motion to dismiss for lack

of in personam jurisdiction prior to trial based solely

on documentary evidence or by holding a hearing. If

the court decides the motion only on the documentary

evidence, the plaintiff need only demonstrate a prima

facie showing of personal jurisdiction to defeat the

motion. Allegations of the complaint must be accepted

as true to the extent that they are not contradicted by

the defendant’s competent evidence. If the parties

6

submit conflicting evidence, all factual disputes are

resolved in the Plaintiff’s favor. See Powers v. District

Court, 227 P.3d 1060, 1066-67 (Okl. 2009).

¢

COUNTER-STATEMENT OF FACTS

The affidavit that NWS submitted to the District

Court in support of its motion to dismiss for lack of

personal jurisdiction was controverted by extensive

documentary evidence submitted to the court by the

State. Specifically, the State submitted the following

documents:

1. The State submitted documents demonstrat-

ing NWS was storing its cigarettes in Oklahoma

including a document titled “Notice Of Abandonment

and Assent to Forfeiture of Prohibited or Seized Mer-

chandise and Certificate of Destruction” of 568 cases

of cigarettes, dated April 10, 2007, which NWS had

stored at a warehouse in Catoosa, Oklahoma. This

notice was signed by NWS’ designated agent in fact in

Oklahoma, Eric Johnson.

2. A Certificate of Disposal, dated May 31, 2007,

by Waste Management of Oklahoma, Inc., affirming

that the 568 cases of abandoned or forfeited ciga-

rettes were buried in a land field located in Tulsa,

Oklahoma.

3. A UCC Financing Statement dated June 28,

2006 given by NWS to Upstate Bank in Rochester,

New York pledging collateral located at UPS Supply

7

Chain Solutions, 5445 N. Bird Creek Avenue, Catoosa,

Oklahoma 74015, and other locations.

4. Exemplar Bills of Lading, Invoices, Ware-

house Withdrawal Forms and cancelled checks re-

vealing that NWS created a distribution center for its

cigarettes located off of Indian land in Las Vegas,

Nevada. This evidence demonstrated that NWS ar-

ranged, paid for and directed the shipping of its

cigarettes to MCN ‘Tobacco Wholesale located in

Okmulgee, Oklahoma.

5. NWS is the importer and trademark holder

for Seneca brand cigarettes.° An affidavit from Clint

Long, of the Oklahoma Tax Commission, documented

the seizure of more than 10,000 packs of Seneca

brand cigarettes from smoke shops located off of

Indian land. The affidavit also described the Seneca

cigarette marketing campaign as displayed in one of

‘the smokeshop’s windows. Photographs of the cam-

paign were attached to his affidavit. The photographs

reveal that on May 2, 2008, NWS awarded prizes to a

winning store, customer and cashier in Oklahoma.

These prizes included a Plasma television, and

$5,000.00 in cash. In a second contest from October 6,

2008, to December 8, 2008, NWS awarded a first

prize of $10,000.00, a second prize of $5,000.00, and a

* See NAFTA AWARD, http//www.state.gov/documents/

organization/156820.pdf, and Native Wholesale Supply, et al. v.

Campbell Wholesale, Case No. 03-CV-065, U.S. District Court,

Northern District of Oklahoma (March 10, 2003).

8

third prize of $2,500.00, in Oklahoma as noted by the

photographs attached to the affidavit."

6. The Agenda for a “Tobacco Forum” held on

November 12, 2008, at the Muscogee Creek Nation

where Arthur Montour, President of NWS and its

National Sales Manager, Kim Porter, as well as the

President of Grand River Enterprises were listed as

giving a presentation on the Master Settlement

Agreement.”

The following facts contained in the State’s Sec-

ond Amended Petition are treated as true in respect

to a ruling on NWS jurisdictional challenge:

1. NWS stored cigarettes in a warehouse located

in Oklahoma until April 10, 2007, when it abandoned

568 cases of cigarettes that were subsequently buried

in an Oklahoma land field. Amended Petition 418.

2. On February 22, 2008, the Oklahoma Tax

Commission seized 189 full cases and 19 half cases

of contraband Seneca brand cigarettes that NWS

* Arthur Montour, the sole owner of NWS, testified in a

NAFTA hearing that “ ... he made great personal efforts to

promote on reservation sales of Seneca cigarettes ... The

evidence also shows that NWS expended large sums to promote

the brand, paying for advertising, distribution of promotional

goods, drawings, and the like.”

See NAFTA AWARD, http//www.state.gov/documents/organization/

156820. pdf.

- ®° Although not available at the time, the State has now

been provided with an audiotape of the forum presentations.

9

shipped to Bowen Wholesale, located in the State of

Oklahoma. Amended Petition 719.

3. On February 29, 2008, the State of Oklahoma

seized a number of cases of Seneca Brand Cigarettes

from Norman Edward Enyart, Jr., an individual

operating an internet pharmacy and smokeshop off of

Indian land. Amended Petition 420.

4. Records from Bowen Wholesale showed the

contraband tobacco products it possessed had been

shipped by carrier from the Nevada International

Trade Corporation, a Foreign Trade Zone (“FTZ”)

located in Las Vegas, Nevada. Records subpoenaed

from the carrier and the Nevada FTZ revealed that

from or about February, 2007, through October, 2008,

NWS had also knowingly and unlawfully sold, dis-

tributed, acquired, held, owned, possessed, trans-

ported, imported, or caused to be imported for sale

approximately 15,270 cases or 916,200 cartons of

contraband Seneca Brand cigarettes manufactured

by Grand River Enterprises to Muscogee Creek

Nation Wholesale located in the State of Oklahoma.

Amended Petition 421.

5. NWS had the cigarettes shipped from the

manufacturer, Grand River Enterprises, in Canada to

the Las Vegas FTZ. NWS, acting through a local

Customs Broker in Las Vegas, then had the cigarettes

released from the FTZ, and shipped to recipients in

Oklahoma. NWS arranged with a common carrier for

shipment of its product into Oklahoma, directed the

carrier where to pick up and deliver the product, and

10

paid the shipping costs to have its product delivered

into Oklahoma. At no time was the FTZ or carrier

contacted by the recipient to arrange shipping.

Amended Petition 422.

6. On October 15, 2008, the Oklahoma Tax

Commission seized an additional 1,267 cartons of

Seneca brand cigarettes from two cigarette retailers,

located off of Indian land, which had been purchased

from Creek Nation Wholesale. Window displays in

these retailers, located off of Indian land, in Oklaho-

ma reveal that NWS is marketing its Seneca brand

cigarettes to consumers in Oklahoma through cash

and merchandise giveaways which require product

purchase. Amended Petition 423.

7. Arthur Montour, President of NWS, and Kim

Porter, National Sales Manager of NWS, have per-

sonally traveled to Oklahoma to market their product

to cigarette retailers doing business within the State

of Oklahoma. Amended Petition 424.

8. Records from the United States Census

Bureau show a population of 2,124 individuals, ages

18 and above, in Okmulgee County, Oklahoma who

reported their heritage as Creek alone or any combi-

nation. A study by the Oklahoma Department of

Health revealed the prevalence of cigarette smoking

in the adult population of Native Americans in Okla-

homa is 33 percent as compared to the general adult

population rate of 23 percent. Native Americans in

Oklahoma reported smoking, on average, about a half

pack of cigarettes per day. Instead of an expected

11

consumption of 1 and one-half cartons of cigarettes

per month, smokers of Creek heritage in Okmulgee

County would have to exclusively smoke Seneca brand

cigarettes at a rate of 98 and one-half cartons of

cigarettes per month to consume the average of 1,149

cases of Seneca brand cigarettes shipped to Okmulgee

County by NWS each month.° Amended Petition 725.

9. In December, 2008, investigators from the

Oklahoma Attorney General’s Office purchased Sene-

ca and two other brands of contraband non escrowed,

non-taxed cigarettes from smokeshops owned or

licensed by the Muscogee Creek tribe of Oklahoma.

No proof of tribal membership was required for the

purchases. Statistically 98.5 percent of the sales of

Seneca brand cigarettes by Muskogee Creek retailers

in Okmulgee County are to non-tribal members.

Amended Petition’ 926.

° Based upon evidence available at the time. The United

States District Court for the Eastern District of Oklahoma in

Muscogee (Creek) Nation v. Henry, 2010 WL 1078438, found that

the State of Oklahoma lost close to thirteen million dollars in

tax revenues from these sales in calendar year 2009 alone. This

equates to twenty-six million cigarettes per month or 260

million cigarettes per year. In 2009, smokers of Creek heritage

in Okmulgee County would have had to smoke 183.61 cartons of

Seneca brand cigarettes per month to consume the amount of

cigarettes shipped into Okmulgee County.

" NWS presented no evidence that any of the cigarettes it

sold and caused to be transported to Muscogee Creek Nation

Wholesale were purchased by members of the Muscogee Creek

tribe.

12

The Petition for Certiorari, at pp. 5-6, contains

many misstatements as to how Escrow Statutes and

Complementary Statutes function. For example, the

Participating Manufacturers (“PMs”) do not share

their profits with the State. Instead, under the Mas-

ter Settlement Agreement they make a per-cigarette

payment to the State based upon Federal Excise

Taxes paid. Oklahoma does not protect the PMs’ mar-

ket share, by enforcing its Escrow Statute. Instead,

the purpose of the escrow account is “... to guaran-

tee a source of compensation and to prevent [non-

participating] manufacturers from deriving large,

short term profits and then becoming judgment proof

before liability may arise.” See 68 O.S. §360.4.

NWS claims that Oklahoma prohibits the sale of

cigarettes by companies that do not contract with the

State. There is no such requirement. The Attorney

General maintains an online directory of all tobacco

manufacturers that are in compliance with the MSA

or escrow statutes. Non-compliant tobacco manufac-

turers are not listed on the directory and a stamping

agent cannot affix a tax stamp, which is required for

lawful cigarette sales, to any cigarette package of a

manufacturer not listed in the directory. See 68 O.S.

§360.4(B); and 68 O.S. §360.8(A).

Unlike the “Escrow Statute” which applies only

to Tobacco Product Manufacturers, complementary

legislation makes it unlawful for any person to: ac-

quire, hold, own, possess, transport, import, or cause

to be imported cigarettes that the person Knows or

should know are intended for distribution or sale in

13

the state in violation of the Master Settlement Agree-

ment Complementary Act. Title 68 O.S. §360.7(E).

The purpose and effect of these statutes are explained

in detail in Plaintiff’s Second Amended Petition.

+

REASONS FOR DENYING THE PETITION

PROPOSITION I

THE OKLAHOMA SUPREME COURT’S PUR-

PORTED APPLICATION OF THE “PURPOSE-

FUL DIRECTION” SPECIFIC JURISDICTION

STANDARD INSTEAD OF A “PURPOSEFUL

AVAILMENT” JURISDICTION STANDARD IS

IRRELEVANT AS TO WHETHER THIS

COURT SHOULD GRANT NWS’ PETITION FOR

CERTIORARI BECAUSE THE OKLAHOMA

SUPREME COURT RULED NWS HAS SUF-

FICIENT CONTACTS WITH THE STATE OF

OKLAHOMA TO SATISFY EITHER JURISDIC-

TIONAL STANDARD.

A. The State’s Cause of Action Against NWS Is

Not a Contract Based Cause of Action.

The Petitioner, in a difficult to follow argument,

claims the Oklahoma Supreme Court erred in apply-

ing a tort based, instead of contract based jurisdic-

tional standard. The State’s Second Amended Petition

asserted cause of action against NWS is clearly not

based upon contract but is a tort based cause of

action. Under Oklahoma law:

14

A contract is an agreement between two or

more persons which creates an obligation to

do or not do a particular thing; its essentials

are parties capable of making a contract, their

consent, a lawful object, and sufficient cause

or consideration.

15 O.S. §§1 and 2 (2001).

A tort is a civil wrong, other than breach of

contract, for which the court will provide a remedy in

the form of an action for damages. See Patterson uv.

Beall, 947 P.2d 617, 619, 1997 Okla. Civ. App. 64, 78

(citations omitted).

This action was brought against N‘YS for violation

of the Master Settlement Agreement Complementary

Act, 68 O.S. §§360.1 et seg. The Complementary Act

provides that selling, offering, or possessing for sale

cigarettes that are not on the Attorney General’s

Directory is a deceptive trade practice under the

Oklahoma Consumer Protection Act. See 68 O.S.

360.7. Committing an unfair or deceptive trade prac-

tice is a tort. See Patterson v. Beall, 947 P.2d 617, 619,

1997 Okla. Civ. App. 64, (9. The remedy for a viola-

tion of the act is a disgorgement of the gains NWS

received from violation of the Act.°

* Contrary to Petitioners’ assertions the Seneca brand ciga-

rettes it shipped into Oklahoma were not “legal” cigarettes.

First, these cigarettes are illegal because they did not bear the

excise tax stamp of the State. Second, they are illegal because

they are from a non escrow compliant tobacco product manufac-

turer whose brands had been banned from being shipped into or

sold within the State of Oklahoma.

15

B. The Oklahoma Supreme Court Specifically

Held That NWS’ Contacts With the State

of Oklahoma Were Sufficient to Meet a

“Purposeful Availment” Standard.

The Petitioner argues that the Supreme Court of

Oklahoma adopted a “‘purposeful direction’ specific

jurisdiction standard” rather than a “purposeful

availment” standard, thereby supposedly creating a

conflict with decisions of this Court and the federal

Courts of Appeals. Pet. at 10-11 (emphasis added).

The court below did no such thing. To the contrary, it

emphasized that it did not need to choose between

these standards “because NWS has engaged in con-

duct that satisfies even the rigorous criteria advocated

by Justice O’Connor” in her plurality opinion in Asahi

Metal Industry Co., Ltd. v. Superior Court of Califor-

nia, 480 U.S. 102 (1987) — namely, the “purposeful

availment” standard. See Pet. App. at 14a.

The Oklahoma Court’s application of the pur-

poseful availment standard to the facts of this case is

manifestly correct. Contrary to NWS’ claim that the

contracts in issue here were “entered into ... and

fully performed outside” Oklahoma (Pet. at I, empha-

sis added), the record evidence demonstrates that

NWS has directly and repeatedly solicited business

from tribes in Oklahoma, created an elaborate distri-

bution system for delivering cigarettes into Oklaho-

ma, and arranged to channel hundreds of millions of

contraband cigarettes into the State. As emphasized

by the court below, “[t]o claim, as Native Wholesale

Supply does, that it does not know, expect, or intend

16

that the cigarettes it sells to [Oklahoma tribal whole-

salers] are intended for distribution and resale in

Oklahoma is simply disingenuous.” Pet. App. at 18a;

see also Burger King Corp. v. Rudzewicz, 471 U.S.

462, 473 (1985) (“parties who ‘reach out beyond one

state and create continuing relationships and obliga-

tions with citizens of another state’ are subject to

regulation and sanctions in the other State for the

consequences of their activities”).

NWS has had significant, sizeable and purposeful

contacts with the State of Oklahoma that are long

lasting and justify personal jurisdiction under any

jurisdictional standard, including the more restrictive

“purposeful availment” standard argued by the Peti-

tioner. The Second Amended Petition alleged that

NWS directed the sale and shipments of more than

100,000,000 untaxed and non escrow compliant ciga-

rettes per year into and through the State of Okla-

homa to the Muscogee (Creek) Nation of Oklahoma.

We now know that the true figure is almost 2 '/ times

that amount. This alone should be sufficient to satisfy

the Due Process clause’s requirement of “minimum

contacts” with the forum state.

In Asahi, 480 U.S. at 121-22 Justice Stevens pre-

sented a third view of “purposeful availment” which

includes the consideration of the volume, value and

hazardous character of the product at issue. The facts

of this case even meet the third view held only by

Justice Stevens. In this case the product is cigarettes,

a highly regulated, and hazardous product. NWS

profits from the high volume of its sale of cigarettes

|

from a non-compliant tobacco manufacturer to Okla-

homa consumers by laundering its sales through trib-

al retailers licensed by the Muscogee Creek Nation.

NWS is able to market cigarettes from the non-

compliant manufacturer to Oklahoma residents at

substantially lower costs than compliant manufactur-

ers because these cigarettes are sold without payment

of Oklahoma excise taxes and without the manu-

facturer funding an escrow account. NWS not only

increases the volume of its sales, but its profits as

well. Through the illegal acts of NWS, the State of

Oklahoma not only loses millions of dollars of lost tax

revenue but also suffers an increase in the number of

Oklahomans, including juveniles, suffering severe

illness and death with the corresponding increase in

health care costs to the State of Oklahoma. Because

there is no funded escrow account, the State also

loses any ability to recover any of its health care costs

from the non-compliant manufacturer.

There was no error in finding NWS had sufficient

contacts with the State of Oklahoma for the court to

exercise personal jurisdiction.

18

PROPOSITION II

CERTIORARI SHOULD BE DENIED ON THE

INDIAN COMMERCE CLAUSE ISSUE.

A. Despite the Allegations of NWS, No “Inter-

Tribal Commerce” Is Involved in the Case

at Bar Because NWS Is Not Owned or Oper-

ated by an Indian Tribe. Instead, NWS Is

Merely a Private Corporation Operating

for Its Own Profit and Financial Gain.

NWS is not a Tribal enterprise. See |{1-3 of

Oklahoma’s Second Amended Petition, Attached to

Pet. at 50(a). It is nothing more than a private busi-

ness that happens to be owned and operated for the

individual profit of a man who claims to be a member

of an Indian Tribe:

ARTHUR MONTOUR, being duly sworn, deposes

and says:

l. I am the President and sole owner of De-

fendant, Native Wholesale Supply (“NWS”).

[I am a Native American and member of the

Seneca Nation.

{1 of Affidavit of Arthur Montour Attached to Pet. at

65(a)-66(a) (emphasis added); see also {2 of Affidavit

of Arthur Montour Attached to Pet. at 66(a). Despite

this fact, NWS, in its Petition for Writ of Certiorari,

erroneously refers to its transactions with Muscogee

(Creek) Wholesale as being “intertribal commerce”:

[T]he Oklahoma Supreme Court held: (1) that

Native Wholesale “is not clothed with tribal

immunity”; and (2) “there is no blanket ban

19

on state regulation of intertribal commerce

even on a reservation.”

It is on this second issue, application of the

Indian Commerce Clause to on reservation

intertribal commerce, that the Oklahoma

Supreme Court misapplied the Indian

Commerce Clause and misinterpreted this

Court’s decisions addressing the scope of that

constitutronal provision.

Only Congress can regulate the right of

tribes to engage in Indian commerce with

other tribes. Here, the Oklahoma Supreme

Court’s decision sanctioning that State’s law-

suit against Native Wholesale directly inter-

feres with this congressional power, and

unduly burdens Indian commerce, all in vio-

lation of the Indian Commerce Clause.

Pet. at 29 and 32 (emphasis added) (internal citations

omitted). Accordingly, it is clear that NWS is incor-

rectly relying on nothing more than its owner’s as

serted Tribal membership’ in the Seneca Nation in an

" A corporation may only be considered to be entitled to the

same attributes of sovereignty as those possessed by an Indian

Tribe if the corporation is actually owned by the Tribe, controlled

by the Tribe, and operated for governmental purposes of the

Tribe:

It is possible that a corporation owned by Indian

shareholders might be immune from state taxation

if it is acting as an equivalent to the Indian tribe

itself. For example, a corporation has been held to be

entitled to the same sovereign immunity as the Indian

(Continued on following pape)

20

attempt to argue that he may operate a private

business in an unlawful manner free from any and all

State regulation. NWS is wrong.

Mr. Montour’s claimed tribal membership in no

way confers any type of sovereign status on the pri-

vate business he operates for his own financial gain,

as individual tribal members do not possess the attri-

butes of sovereignty that an Indian Tribe does:

The doctrine of sovereign immunity which

was applied in United States v. United States

Fidelity & Guaranty Co., does not immunize

the individual members of the Tribe.

Puyallup Tribe, Inc. v. Dept. of Game of State of

Wash., 433 U.S. 165, 171-72 (1977) (emphasis added)

(internal citation omitted). Specifically on this point,

Tribe when it is organized under tribal laws; it is con-

trolled by the Tribe; and it is operated for government

purposes.

* * *

But none of these conditions are present here and

plaintiff concedes it is not acting as the Trnibe’s agent

nor is it incorporated under the laws of the Tribe.

Baraga Products, Inc. v. Commissioner of Revenue, 971 F. Supp.

294, 296-97 (W.D.Mich.1997) (emphasis added) (internal citations

omitted). NWS does not allege any of these factors in relation to

the Seneca Nation of New York. Instead, NWS’ assertion of

Tribal status stems from the mere claim of its President and sole

owner that he is a member of the Seneca Nation of New York.

See 491-3 of Oklahoma’s Second Amended Petition, Attached to

Pet. at 50(a).

21

this Court has ruled that “Congress did not intend to

make tribal members “super citizens” who could trade

in a traditionally regulated substance free from all

but self-imposed regulations.” Rice v. Rehner, 463 U.S.

713, 734 (1983); see also Squaxin Island Tribe v. State

of Wash., 781 F.2d 715, 719-20 (9th Cir. 1986). There-

fore, Mr. Montour cannot rely on his asserted tribal

membership to seek some type of “super citizen”

status to operate a business that engages in the trade

of a traditionally regulated substance free from all

but self-imposed regulation. This Court has already

precluded NWS’ argument. See Rice, 463 U.S. at 734;

and Squaxin Island Tribe, 781 F.2d at 719-20. Simply

put, Mr. Montour, as a mere Tribal member, does not

possess the attributes of sovereignty held by an

actual Indian Tribe. Therefore, it is axiomatic that

Mr. Montour cannot confer a sovereign status onto

NWS which he himself does not have. NWS is not a

Tribal enterprise.

Even if tribal members did possess the sovereign-

ty afforded to Indian Tribes, which they do not, Mr.

Montour asserts that NWS is a corporation:

2. In or around 2001, NWS was chartered

as a corporation by the Sac and Fox Tribe of

Oklahoma.” I have been the President and

‘© NWS does not allege that it is a Tribal enterprise of the

Sac and Fox Nation. Instead, it merely states that it is incorpo-

rated by the Sac and Fox Nation. Mere businesses which pay

licensing fees to a Tribe are not Tribal enterprises and stand in

sharp contrast to cases involving economic entities established

(Continued on following page)

22

sole owner of NWS since it was chartered.

NWS’ [sic] office has always been located on

the Seneca Cattaraugus Indian Territory in

Gowanda, New York:

{2 of Affidavit of Arthur Montour Attached to Pet. at

66(a) (emphasis added). Since NWS is incorporated, it

does not possess the same attributes as Mr. Montour

because incorporated businesses are separate and

distinct from their owners. It is “[a] basic tenet of

American corporate law that [a] corporation and its

shareholders are distinct entities.” Dole Food Co. v.

Patrickson, 538 U.S. 468, 474 (2003). A corporation

and its owners and shareholders have differing rights

and liabilities. See id. Due to the distinction between

a corporation and its individual members and stock-

holders, an incorporated business entity cannot argue

that it should be considered an enrolled member of an

Indian Tribe simply because its sole shareholder is.

See Baraga Prds., Inc. v. Comm’r, 971 F. Supp. 294,

296 (W.D.Mich.1977); see also Ariz. Dept. of Revenue

v. Blaze Constr. Co., 526 U.S. 32, 34 (1999). “[A] corpo-

ration is not an ‘Indian’ for purposes of immunity”

from the application of state law. Baraga Prds., Inc.,

971 F. Supp. at 298. Therefore, even if Mr. Montour’s

claimed tribal membership somehow accorded him a

“super citizen” status, which it does not, NWS would

by the tribe and managed by the tribe for the benefit of the tribe.

See City of New York v. Golden Feather Smoke Shop, Inc., 2009

WL 705815 at *7 (E.D.N.Y.2009); See also 941-3 of Oklahoma’s

Second Amended Petition, Attached to NWS’ Petition for Writ of

Certiorari at 50(a).

23

not possess the same “super citizen” status because it

and its President are separate and distinct from one

another. Thus, while Mr. Montour might be a Tribal

member of the Seneca Nation of New York, the sepa-

rate and distinct corporate entity NWS is not. NWS is

not a Tribal enterprise or an Indian.

There cannot be “intertribal commerce” without

at least two Tribes involved. Since NWS is not a

Tribe, a Tribal enterprise, or even an Indian, there

were not two Indian Tribes involved in the subject

transactions. Instead, the only commerce being regu-

lated in this case was that of a private corporation

engaging in business for its owner’s unlawful profit

and financial gain. Thus, the “intertribal commerce”

issue raised by NWS is premised upon misstatements

of fact, and law applied thereto. Since NWS is a

private incorporated business entity, not a Tribal

enterprise, or an Indian, the “intertribal” Indian

Commerce Clause issue raised by NWS would not be

at issue even if this Court accepted Certiorari. See

U.S. Sup.Ct.R. 15.2. The Petition for Writ of Certiora-

ri should be denied.

24

B. Even If NWS Was a Tribal Enterprise it

Was Not Shipping and Selling the Subject

Contraband Cigarettes to Members of the

Seneca Nation. Therefore, the Petition for

Certiorari Should Be Denied as this Court

Has Already Ruled That There Is No

Sovereign Interest Involved When a Tribe

Sells Products to People Who Are Not

Members of the Same Tribe.

Even if NWS was a Tribal enterprise, which it is

not, there would be no sovereign interest involved in

its illegal transactions because it would have been

shipping and selling the contraband cigarettes at

issue to non-Seneca Tribal members.

In the current case, NWS alleges that it was

chartered as a corporation by the Sac and Fox Nation

of Oklahoma. Even though it alleges to be chartered

as a corporation by the Sac and Fox Nation, its Presi-

dent and sole owner is not a member of that Tribe.

Instead, NWS’ President and sole owner states that

he is a member of the Seneca Nation." Regardless of

which Tribe NWS attempts to seek a strained affilia-

tion with, NWS was not shipping and selling the con-

traband cigarettes at issue to the Seneca Nation, the

Sac and Fox Nation, entities owned and/or operated

““ NWS has the burden of proving it is entitled to the pro-

tections of Indian sovereignty. Far from carrying this burden,

NWS does not even clearly identify which Tribe’s semi-sovereign

status it is asserting. See Golden Feather Smoke Shop, Inc., 2009

WL 705815 at *3-*4 (E.D.N.Y.2009).

25

by either Tribe, or members of either Tribe. Instead,

NWS was shipping and selling the illegal cigarettes

to an entity allegedly owned and operated by yet

another third and unrelated Tribe, the Muscogee

(Creek) Nation of Oklahoma, for eventual re-sale to

the general non-tribal Oklahoma public at large who

are also non-Senecas.

This Court settled the issue of state regulatory

power over sales transactions involving non-tribal

members in the case Rice v. Rehner, 463 U.S. 713

(1983). In that case, Ms. Rehner was a member of the

Pala Indian Tribe and a licensed Indian Trader. Ms.

Rehner was operating a general store on the Pala

Tribe’s Reservation in California. Ms. Rehner’s gen-

eral store was not owned or operated by the Pala

Indian Tribe. Ms. Rehner’s general store was selling

liquor for off-premises consumption. California state

law required Ms. Rehner to obtain a state liquor

license. Ms. Rehner filed a declaratory judgment

action asking the Court to rule that the doctrine of

Indian Sovereignty pre-empted the State of Califor-

nia’s regulatory authority over her general store. The

Rice Court rejected Ms. Rehner’s claims.

The Rice Court explicitly ruled that, in relation to

her general store’s sale of alcohol to non-members of

the Pala Indian Tribe, both Ms. Rehner and the Pala

Tribe were foreclosed from arguing that the doctrine

of Tribal Sovereignty pre-empted state regulation in

this area, even on Reservation land:

26

To the extent that Rehner seeks to sell to non-

Indians, or to Indians who are not members

of the tribe.... the decisions of this Court

have already foreclosed Rehner’s argument

that the licensing requirements infringe upon

tribal sovereignty.

Regulation of sales to non-Indians or non-

members of the Pala Tribe simply do not

contravene the principle of tribal self-

government, and, therefore, neither Rehner

nor the Pala Tribe have any special interest

that militates against state regulation tn this

case, providing that Congress has not pre-

empted such regulation.

* * Xi

If there is any interest in tribal sovereignty

implicated by imposition of California’s

alcoholic beverage regulation, it exists only

insofar as the State attempts to regulate

Rehner’s sale of liquor to other members of

the Pala Tribe on the Pala reservation.

Rice, 463 U.S. at 720, 720 n. 7, 721 (internal quota-

tions omitted) (emphasis added); see also Oklahoma

Tax Comm. v. Citizen Band Potawatomi Indian Tribe

of Okla., 498 U.S. 505, 512-13 (1991); Duro v. Reina,

495 U.S. 676, 686-87 (1990) (“We have held that

States may not impose certain taxes on _ trans-

actions of tribal members on the reservation because

this would interfere with internal governance and

self-determination.... But this rationale does not

27

apply to taxation of nonmembers, even where they are

Indians.”) (emphasis added); and Washington v. Con-

federated Tribes of the Colville Indian Reservation,

447 U.S. 134, 160-61 (1980) (State may “impose its

taxes on [tribal sales to} Indians not members of the

Tribe,” because such “nonmembers are not constitu-

ents of the governing Tribe” and “stand on the same

footing as non-Indians”).””

In the case at bar, NWS is advancing the same

flawed argument which this Court rightly rejected in

Rice and the other cited cases. That is, NWS is at-

tempting to indirectly assert the semi-sovereign

status of the Seneca Nation of New York to make the

'* NWS cites a number of federal economic development stat-

utes to support its flawed argument that Oklahoma’s MSACA is

pre-empted. See Pet. at 31-32. However, this Court has already

ruled that in cigarette transactions:

The federal statutes. ... evidence to varying degrees

a congressional concern with fostering tribal seif-

government and economic development, but none goes

so far as to grant tribal enterprises selling goods to

non-members an artificial competitive advantage over

all other businesses in a State.

Colville, 447 U.S. at 155 (emphasis added). Thus, not even

actual Tribal enterprises may rely on these economic develop-

ment statutes to gain the artificial competitive advantage being

sought by NWS. This applies with even more force in this case

since NWS is not a Tribal enterprise. Moreover, the strong

federal policy embodied in such laws as the Contraband Ciga-

rette Trafficking Act, 18 U.S.C. §§2341 et seg., and the Prevent

All Cigarette Trafficking Act, Pub. L. No. 111-154, 124 Stat.

1087, is to support and facilitate state taxation and regulation of

such sales, including by tribes and tribal retailers.

28

erroneous claim that Oklahoma’s regulation of contra-

band cigarette sales to non-Seneca members somehow

contravenes the principle of tribal self-government.

However, as noted by the Rice Court, Tribal Sover-

eignty has no application in this case because NWS is

not shipping and selling the contraband cigarettes to

members of the Tribe in which the President claims

membership, nor is NWS shipping and selling the

contraband cigarettes to members of the Tribe of NWS’

incorporation. See Rice, 463 U.S. at 720, 720 n. 7, 721.

Therefore, even if NWS was a Tribal enterprise,

which it is not, this Court has repeatedly rejected its

argument. There is no sovereign interest involved

when sales transactions involve members of a differ-

ent Tribe. The Petition for Writ of Certiorari should

be denied.

C. Despite the Allegations of NWS That Only

“On Reservation” Activities Are Involved,

NWS Shipped, Transported, and Sold the

Subject Cigarettes Directly Into the State of

Oklahoma, Far Beyond the Borders of the

Seneca Nation Reservation. This Court Has

Repeatedly Ruled That No Sovereign In-

terest Is Involved When “Off Reservation”

Conduct Is Involved.

NWS suggests that it does nothing more than

accept cigarette orders at its office allegedly located

within the boundaries of the Seneca Nation Reserva-

tion. According to NWS)’ fallacious argument, after

such orders are placed, it has no further involvement.

29

See Pet. at 29-33; see also (74-6 of Affidavit of Arthur

Montour Attached to Pet. at 66(a)-67(a). Therefore,

according to NWS, its action occurred entirely on the

Seneca Nation Reservation. However, as outlined

below, this statement is sizaply false. Accordingly, the

Petition for Writ of Certiorari should also be denied

because it is advancing misstatements of fact, and

law applied thereto, concerning the location and

nature of the activities complained of in Oklahoma’s

Second Amended Petition. See U.S. Sup.Ct.R. 15.2.”

In this case, NWS takes orders and imports

cigarettes from Canada at its office allegedly located

on the Seneca Nation Reservation in New York. NWS

then arranges for the cigarettes to be shipped and

sold to Muscogee (Creek) Wholesale in Okmulgee,

Oklahoma for resale to non-tribal Oklahoma consum-

ers. See 9419-31 of Oklahoma’s Second Amended

Petition, Attached to Pet. at 58(a)-62(a). However, it

must be stressed that in many instances, if not all

instances, the cigarettes sold, shipped and/or caused

to be shipped by NWS never even pass through the

Seneca Nation Reservation. Instead, the cigarettes,

after they pass customs, are stored :n Nevada and/or

Western New York — not on the Seneca Nation Reser-

vation. See |Y3-5 of Affidavit of Arthur Montour

Attached to Pet. at 66(a)-67(a). Furthermore, far from

" As discussed above, NWS recently pled guilty to federal

criminal obstruction-of-justice charges for having made virtually

identical claims about its supposed lack of jurisdictional contacts

with the State of Washington. See p. 3 n. 1 supra.

30

merely accepting unsolicited cigarette orders at its

office, it was NWS that actually arranged for the off

reservation shipment and transportation of the con-

traband cigarettes. As noted in Oklahoma’s Second

Amended Petition, shipping invoices have been ob-

tained that show that it was NWS, not Muscogee

(Creek) Wholesale, that paid for the transportation of

the cigarettes into Oklahoma. See 4419-22 of Okla-

homa’s Second Amended Petition, Attached to Pet. at

58(a)-59(a). Therefore, even if one were to take NWS’

statements regarding the cigarette orders being ac-

cepted at its office as true, it still does not account for

the shipping activities of NWS occurring off of the

Seneca Nation Reservation and over Oklahoma road-

ways. The mere possession and transportation of these

contraband cigarettes was, in and of itself, illegal.“

NWS is not merely shipping and transporting the

contraband cigarettes. Instead, NWS is engaged in a

calculated business plan to sell huge quantities of tax

and escrow free contraband cigarettes to the general

non-Indian Oklahoma public at large on and off the

supposed Indian land of the Muscogee (Creek) Tribe

of Oklahoma. See 4919-31 of Oklahoma’s Second

‘* It shall be unlawful for a person to:

a. sell or distribute cigarettes, or

b. acquire, hold, own, possess, transport, import, or cause

to be imported cigarettes that the person knows or should know

are intended for distribution or sale in the state in violation of

the Master Settlement Agreement Complementary Act.

68 O.S. §360.7(E); see also 68 O.S. §360.7(B).

31

Amended Petition, Attached to Pet. at 58(a)-62(a). As

alleged in the Second Amended Petition, NWS knew

that the vast majority of the cigarettes that it was

shipping to Muscogee (Creek) Wholesale were even-

tually being sold to the general non-Tribal Oklahoma

public. This is clear when one considers the sparse

population of Muscogee (Creek) Tribal members in

the area compared to the sheer volume of ciga-

rettes NWS was purposefully directing to Muscogee

(Creek) Wholesale. See 925-26 of Oklahoma’s Second

Amended Petition, Attached to Pet. at 60(a)-61(a); see

also Muscogee (Creek) Nation v. Henry, 2010 WL

1078438, *5-*6. NWS’ deliberate business plan was to

undercut other non-contraband cigarette sales made

by legitimate cigarette retailers in the area by having

its illegal cigarettes sold on Muscogee (Creek) Indian

land free from state tax and escrow requirements.

Moreover, in many instances, the contraband ciga-

rettes were being shipped to locations in Oklahoma

that were not even located on Muscogee (Creek)

Indian land for eventual re-sale to the general public.

See (918-23 of Oklahoma’s Second Amended Petition,

Attached to Pet. at 58(a)-60(a). Thus, despite the alle-

gations in the Petition for Writ of Certiorari, NWS’

activities involve far more than accepting unsolicited

cigarette orders and are occurring well beyond the

borders of the Seneca Nation Reservation.”

'° To the extent NWS might be asserting that it is a Tribal

enterprise of the Sac and Fox Nation of Oklahoma, the same

logic applies.

32

This Court held long ago that “[albsent express

federal law to the contrary, Indians’ going beyond

reservation boundaries have generally been held sub-

ject to non-discriminatory state law otherwise appli-

cable to all citizens of the State.” Mescalero Apache

Tribe v. Jones, 411 U.S. 145, 148-49 (1973) (and collec-

tion of authorities cited therein). Therefore, even if

NWS was a Tribal enterprise, or an Indian, neither of

which is true, there would be no sovereign interest

involved in this case because NWS was engaging in

unlawful activity beyond the borders of the Seneca

Nation Reservation subject to non-discriminatory

State regulation. The Petition for Writ of Certiorari

should be denied because it is advancing mis-

statements of fact, and law applied thereto, con-

cerning the nature and location of the activities

complained of in Oklahoma Second Amended Peti-

tion. See U.S. Sup.Ct.R. 15.2.

D. Despite the Allegations of NWS, this Law-

suit Is “Direct” Regulation of Jts Unlawful

Shipping and Sales Activity Occurring in

Oklahoma. This Is Not, as NWS Puts it,

“Indirect” Regulation of Out-of-State Trib-

al Purchases.

Finally, because it is clear that NWS is not a

Tribal enterprise, that there is no sovereign interest

° As noted earlier, NWS and its sole owner are separate

and distinct. Thus, while Mr. Montour might be an Indian, NWS

is not

33

involved in the sale of goods to non-tribal members,

and that there is no sovereign interest in unlawful

activities occurring beyond Reservation boundaries,

NWS attempts to shift this Court’s focus away from

its illegal conduct and onto the Muscogee (Creek)

Tribe. In doing so, NWS incorrectly states that the

purpose of the current lawsuit is to “indirectly” regu-

late the purportedly “out-of-state” purchases being

made by Muscogee (Creek) Wholesale. See Pet. at 29-

35. In advancing its flawed theory, NWS relies on

case law interpreting the Indian Trader Statutes to

assert the broad proposition that any and all applica-

tion of Oklahoma law is pre-empted in regard to its

unlawful shipping and sales activity merely because

it is dealing with an alleged arm of the Muscogee

(Creek) Tribe. As shown below, NWS’ argument is

wrong for at least three reasons.

First, to be an “Indian trader” a person is re-

quired to be appointed by the Commissioner of Indian

Affairs and secure a license from same. See 25 U.S.C.

§$261 and 262. In the lower Court proceedings, NWS

produced no evidence as to its status as an “Indian

trader,” nor did it allege to be an “Indian trader.”

Thus, this is a new argument being advanced that

is not properly considered on appeal. See U.S.

Sup.Ct.R.’s 14.1(g)(1); 15.2; and 15.4."

" Oklahoma’s response to these new arguments raised by

NWS should not be construed as an admission that they are

properly at issue. Oklahoma’s response is done merely out of an

(Continued on following page)

34

Second, the cases cited by NWS lend no support

to its flawed argument because such cases merely

recognize the general principle that a State tax im-

posed on Indian traders’ “on-reservation” transactions

with a Tribe may be pre-empted by the Indian Trader

Statutes if the tax’s financial burden is ultimately

passed on to the Tribe with which the trader was

dealing. However, in this case, the MSACA does not

impose a tax, or any type of financial obligation for

that matter, on NWS. Since no financial obligation is

imposed on NWS, it is clear that no financial obliga-

tion is passed on by NWS to Muscogee (Creek) Whole-

sale. Accordingly, the Indian Trader Statute cases

cited by NWS are irrelevant. See Wagnon v. Prairie

Band Potawatomi Nation, 546 U.S. 95 (2005) (State

motor fuel tax imposed on upstream distributor that

ultimately delivered fuel to Tribal entity not pre-

empted by Indian Trader Statutes because it imposed

no financial burden on Tribe).

Third, the Indian Trader Statute cases cited by

NWS dealt with the trade of goods, products, and/or

services that were otherwise legal — such as tractors

in Central Machinery and motor fuel in Chickasaw

Nation. Conversely, in this case, the mere act of pos-

sessing the tax and escrow free contraband cigarettes

in dispute is illegal. See 68 O.S. §360.7(E); see also

68 O.S. §360.7(B). Since the mere possession of the

abundance of caution and in an attempt to make sure the Court

is fully informed.

35

contraband cigarettes is illegal, the cases cited by

NWS regarding the trade of legal goods, products,

and/or services are inapposite. Moreover, this Court

has already ruled that the Indian Trader Statutes do

not pre-empt any and all State regulation of persons

or entities trading with Tribes:

Although Moe and Colville dealt ... directly

with claims of interference with tribal sover-

eignty, the reasoning of those decisions re-

quires rejection of the submission that 25

U.S.C. $261 bars any and all state imposed

burdens on Indian traders.

Department of Taxation and Finance of New York v.

Milhelm Atiea & Bros., Inc., 512 U.S. 61, 74 (1994).

Instead, it has already been determined that the

Indian Trader Statutes do not bar the States from

imposing reasonable regulatory burdens upon Indian

traders. See id. at 74. In fact, this Court has, on more

than one occasion, held that States are free to regulate

the activities of upstream wholesalers and distributors

that are shipping and selling illegal cigarettes to

Tribal entities. See Milhelm, 512 U.S. at 71-75 (Indian

Trader Statutes do not pre-empt State regulatory law

imposing record keeping requirements and quota

restrictions on number of tax free cigarettes upstream

supplier and deliverer could ship and sell to Tribal

entities); Citizen Band Potawatomi Ind. Tr. of Ohkla..,

498 U.S. at 514 (Sovereignty interests do not pre-

empt State from regulating off reservation transpor-

tation and shipping of contraband cigarettes through

seizures while contraband en route from upstream

36

wholesaler to Tribal entity); and Colville, 447 U.S. at

144-45, 144 n. 18, and 161-62 (Sovereignty interests

do not pre-empt State from regulating transportation

and shipping of contraband cigarettes purchased with

Tribal funds through seizures while contraband en

route from upstream out-of-state dealer that is li-

censed Indian Trader to in-state Tribe that eventually

distributes illegal cigarettes to in-state on-reservation

Tribal Outlets that are also operated by licensed

Indian Traders acting as retailers for Tribe). In this

case, just like in Milhelm, Citizen Band Potawatomi,

and Colville, the MSACA is nothing more than a

reasonable regulatory burden imposed on NWS to

staunch the flow of i/legal tax and escrow free contra-

band cigarettes to non-tribal consumers in Oklahoma.

Under the reasonable regulatory burdens imposed by

the MSACA, NWS remains free to sell whatever

lawful product it wants, including cigarettes, to

whoever it wants, at whatever price it desires, and in

whatever amount. There is no need to re-visit the

above-cited precedential rulings of this Court.

As described above, this lawsuit is not, as NWS

puts it, “indirect” regulation of the Muscogee (Creek)

Tribe. That is a misstatement of fact, and law applied

thereto, concerning the nature of this lawsuit. See

U.S. Sup.Ct.R. 15.2. Instead, this lawsuit is being

brought against NWS, a private, non-Tribal enter-

prise, as a “direct” result of its unlawful shipping and

sales activities occurring in Oklahoma. NWS may not

assert the semi-sovereign status of the Seneca Nation

in an attempt to free itself from reasonable regulatory

37

burdens merely because its President and sole owner

alleges to be a member of that Tribe. This is particu-

larly true since the facts of this case show that no

sovereign interests would be involved even if NWS

was actually a Tribal enterprise, which it is not.

There was no “intertribal commerce.”

¢

CONCLUSION

For the reasons stated above, the Petition for

Writ of Certiorari should be denied.

Respectfully submitted,

E. CLYDE KIRK, OBA #10572

Assistant Attorney General

OFFICE OF THE OKLAHOMA

ATTORNEY GENERAL

313 Northeast 2ist Street

Oklahoma City, Oklahoma 73105

(405) 521-3921 Fax: (405) 522-4534

clyde. kirk@oag.ok.gov

Attorney for Respondent