Ho-Chunk, Inc. v. Jeff Sessions

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 15, 2018 Decided July 3, 2018
No. 17-5140
HO-CHUNK, INC., ET AL.,
APPELLANTS
v.
JEFF SESSIONS, IN HIS OFFICIAL CAPACITY, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:16-cv-01652)
B. Benjamin Fenner argued the cause for appellants. With
him on the briefs were Patricia A. Marks and Joseph V.
Messineo. Peter D. Lepsch entered an appearance.
William E. Havemann, Attorney, U.S. Department of
Justice, argued the cause for appellees. With him on the brief
were Jessie K. Liu, U.S. Attorney, and Mark B. Stern, Attorney.
R. Craig Lawrence and Benton G. Peterson, Assistant U.S.
Attorneys, entered appearances.
Before: ROGERS and PILLARD, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
2
Opinion for the Court filed by Senior Circuit Judge
RANDOLPH.
RANDOLPH, Senior Circuit Judge: Historically, the “Ho-
Chunk” Tribe occupied portions of what are now several
midwestern states. In the 1800’s the Tribe entered into treaties
with the United States and divided into two branches: the Ho-
Chunk Nation of Wisconsin and the Winnebago Tribe of
Nebraska. Both are federally-recognized Indian tribes with
federal reservations. See 83 Fed. Reg. 4,235, 4,237, 4,239 (Jan.
30, 2018).
The four appellants in this case – a parent corporation and
three of its subsidiaries – are incorporated under the laws of the
Winnebago Tribe of Nebraska. Ho-Chunk, Inc., the parent
corporation, is the Tribe’s wholly-owned economic development
arm. Among its wholly-owned subsidiaries are the three
corporations who are also parties here. They are involved in the
manufacture and distribution of cigarettes. Each corporation’s
principal place of business is the Tribe’s reservation in
Winnebago, Nebraska.
Appellant Rock River Manufacturing Company, one of
these corporations, manufactures and imports tobacco products,
including cigarettes. Rock River sells its products to another
subsidiary corporation, HCI Distribution Company, as well as
to state-licensed distributors. HCI Distribution resells these
products to businesses owned or licensed by other Indian tribes.
Woodlands Distribution Company, the third subsidiary
corporation, sells tobacco products to off- and on-reservation
companies.
In 2016, the federal Bureau of Alcohol, Tobacco, Firearms
and Explosives sent letters to Rock River, HCI Distribution, and
Woodlands. The letters notified the companies that the Bureau
3
intended to inspect and copy their records of tobacco
transactions and asked them to name a mutually-acceptable
inspection date within fifteen business days from receipt of the
letters.
The companies and their parent responded with a complaint
seeking a declaratory judgment that they are not subject to
federal recordkeeping laws dealing with the distribution of
cigarettes. The district court entered summary judgment against
them. Ho-Chunk, Inc. v. Sessions, 253 F. Supp. 3d 303, 304
(D.D.C. 2017). Their appeal presents a question of statutory
interpretation – do the federal recordkeeping laws cover these
corporations?
ATF, as the Bureau is commonly known, issued its
inspection notices pursuant to the Contraband Cigarette
Trafficking Act of 1978, as amended. See 18 U.S.C. § 2343(c).
The Act sought to remedy the “problem of organized crime and
other large scale operations of interstate cigarette bootlegging
and to help provide law enforcement assistance and relief to
cities and States.” S. Rep. 95-962, at 3 (1978).1 To this end,
“[a]ny person who ships, sells, or distributes any quantity of
cigarettes in excess of 10,000 . . . in a single transaction . . .
[must] keep such information as the Attorney General considers
appropriate . . ..” 18 U.S.C. § 2343(a). This may include
1
The Act makes it a crime for “any person knowingly to ship,
transport, receive, possess, sell, distribute, or purchase contraband
cigarettes or contraband smokeless tobacco.” 18 U.S.C. § 2342(a).
“[C]ontraband cigarettes” are “a quantity in excess of 10,000
cigarettes, which bear no evidence of the payment of applicable State
or local cigarette taxes in the State or locality where such cigarettes are
found, if the State or local government requires a stamp, impression,
or other indication . . . [of] payment of cigarette taxes . . ..” 18 U.S.C.
§ 2341(2).
4
identifying information about cigarette purchasers and
declarations of the purchasers’ purposes in receiving the
cigarettes. Id. § 2343(a)(1)–(3).
Rock River, HCI Distribution, and Woodlands claim that
they are exempt from the Act’s recordkeeping requirements.
They are exempt, they say, because the statute and the
regulations do not cover wholly-owned corporations of a
federally-recognized Indian tribe.
Over the years, the Supreme Court has dealt with issues
regarding Indian tribes and their sale of cigarettes. The law, as
the Court has developed it, now stands as follows. Indians and
Indian tribes may sell untaxed cigarettes on their reservations to
tribal members for their personal consumption. See Moe v.
Confederated Salish & Kootenai Tribes of the Flathead
Reservation, 425 U.S. 463, 480–81 (1976). States, however,
retain the authority to tax non-Indian customers of Indian
cigarette distributors on the reservation. See Washington v.
Confederated Tribes of the Colville Indian Reservation, 447
U.S. 134, 150–51 (1980). Under Moe and Colville, “a State may
require Indian retailers to collect a tax imposed on non-Indian
purchasers of cigarettes.” Dep’t of Taxation & Fin. of N.Y. v.
Milhelm Attea & Bros., Inc., 512 U.S. 61, 68 (1994). And a
state may require tribal retailers selling cigarettes on the
reservation to nonmembers of the tribe “to keep extensive
records concerning these transactions.” Id. at 71–72.
Although Indian tribes are thus subject to state
recordkeeping requirements for cigarette sales, the corporations
here claim they are exempt from the federal laws imposing
similar requirements. One of their arguments rests on the
following reasoning. The federal statute and regulations define
“State” as a “State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or the Virgin
5
Islands.” 18 U.S.C. § 2341(4); 27 C.F.R. § 646.143. These
corporations are headquartered on the Tribe’s reservation. An
Indian reservation is within “Indian country.” See 18 U.S.C.
§ 1151. The Act’s definition of “State” does not mention
“Indian country.” Therefore the Act’s recordkeeping
requirements do not apply to these corporations.
The argument suffers from several flaws. The most obvious
is that the Act’s recordkeeping requirements do not turn on any
territorial determination. See 18 U.S.C. § 2343(a). That these
three corporations have their principal place of business on the
Tribe’s reservation in Nebraska says nothing about whether
federal law requires them to keep records. More than that, if the
corporations were correct that the Act’s regulation of contraband
cigarettes does not apply to sales to non-Indians in Indian
country, this would not only be senseless but would also
contravene decades of settled law upholding enforcement of the
Act against individuals and entities operating on reservations.
See, e.g., United States v. Morrison, 686 F.3d 94, 96 (2d Cir.
2012); Grey Poplars Inc. v. One Million Three Hundred
Seventy-One Thousand One Hundred (1,371,100) Assorted
Brands of Cigarettes, 282 F.3d 1175, 1177 (9th Cir. 2002);
United States v. Baker, 63 F.3d 1478, 1485–86 (9th Cir. 1995).
Neither the Act nor the implementing regulations contain
any language exempting tribal entities operating on Indian
reservations from the federal recordkeeping requirements.
“Ordinarily, . . . an Indian reservation is considered part of the
territory of the State.” Nevada v. Hicks, 533 U.S. 353, 361–62
(2001) (citations and internal quotation marks omitted). The
corporate appellants conceded as much at oral argument. The
district court gave additional reasons for rejecting the
corporations’ “Indian country” argument. Ho-Chunk, Inc., 253
F. Supp. 3d at 307–09. We agree with the district court and
deem it unnecessary to repeat the court’s reasoning.
6
The corporations’ main argument is that § 2343(a) – the
recordkeeping provision – applies only to “[a]ny person” and
they are not “persons.” They are not “persons,” they argue,
because they are “tribal instrumentalities,” which assumes that
a tribal instrumentality – and for that matter, a tribe itself –
cannot be a “person.” Both assumptions are mistaken.
The cigarette act does not define “person.” Therefore, an
interpreter of this legislation must consult the Dictionary Act, 1
U.S.C. § 1, as the Conference Committee on the cigarette act
acknowledged, H.R. Rep. No. 95-1778, at 10 (1978) (Conf.
Rep.). The Dictionary Act states: “In determining the meaning
of any Act of Congress, unless the context indicates otherwise
. . . the words ‘person’ and ‘whoever’ include corporations,
companies, associations, firms, partnerships, societies, and joint
stock companies, as well as individuals.”
This would seem to doom the corporations’ we-are-not-a-
person argument, regardless whether the Tribe itself is a
“person.” As to Ho-Chunk, Inc. and its subsidiaries, the obvious
progression is this: the Act’s § 2343(a) recordkeeping
requirements apply to “[a]ny person”; under federal law,
“person” includes “corporations”; these appellants are
“corporations”; they are therefore “persons” and the Act’s
recordkeeping requirements apply to them.
The government, relying on San Manuel Indian Bingo &
Casino v. NLRB, 475 F.3d 1306 (D.C. Cir. 2007), makes an
argument much the same as the one we have just described from
the Dictionary Act. The Indian tribe in San Manuel operated an
on-reservation casino. The question was whether the tribe itself
was a “person” and thus an “employer” within the meaning of
the National Labor Relations Act. Section 2(2) of the NLRA
defines “employer” to include “any person,” with exceptions for
the federal government and “any State or political subdivision
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thereof.” 29 U.S.C. § 152(2). The NLRA defines the term
“person” in much the same terms as the Dictionary Act. Id.§ 152(1). Our court, agreeing with the National Labor Relations
Board, held that the tribe was an “employer” and thus subject to
the NLRA. In so holding, the court necessarily decided that the
tribe was a “person.”2
If, as in San Manuel, an Indian tribe operating an on-
reservation commercial enterprise may itself be considered a
“person” subject to federal law, so too may the commercial
corporations established under the laws of the Winnebago Tribe.
It is no answer to say, as the corporations do, that they are tribal
instrumentalities and that the term “person” usually excludes
federal, state, and local governments and their agencies. See Vt.
Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 780
(2000). The statute in San Manuel, 29 U.S.C. § 152(2),
explicitly contained such an exclusion, yet our court held that an
Indian tribe running a casino was a “person” and thus an
“employer.” See also supra note 2.
There is another reason why the district court correctly held
that Congress did not exempt the corporate appellants from the
Act’s recordkeeping provision: statutory context. See Vt.
Agency, 529 U.S. at 781; United States v. Persichilli, 608 F.3d
2See also CFPB v. Great Plains Lending, LLC, 846 F.3d 1049,
1058 (9th Cir. 2017) (Indian tribes and their for-profit lending
companies are “person[s]” who may be investigated by the Consumer
Financial Protection Bureau under the Consumer Financial Protection
Act); Chickasaw Nation v. United States, 208 F.3d 871, 878–80 (10th
Cir. 2000), aff’d, 534 U.S. 84 (2001) (Indian tribe is a “person”
subject to federal wagering excise taxes); Fla. Paraplegic, Ass’n v.
Miccosukee Tribe of Indians of Fla., 166 F.3d 1126, 1134–35 (11th
Cir. 1999) (Indian tribe is a “person” subject to federal, but not
private, enforcement under the Americans with Disabilities Act).
8
34, 37 (1st Cir. 2010); see also 1 U.S.C. § 1 (statutory terms
depart from Dictionary Act defaults if “the context indicates
otherwise”). Subsection (a) of § 2343 specifies the
recordkeeping requirements applicable to “[a]ny person.” The
next subsection – § 2343(b) – requires periodic reports to the
Attorney General of large cigarette transactions.3 Subsection (b)
applies to “[a]ny person, except for a tribal government” who
distributes cigarettes. Assume the corporate appellants in this
case are “a tribal government” even though they seem to be
exclusively involved in commercial transactions. That would
exempt them from subsection (b)’s reporting requirements. But
the issue in this case deals with subsection (a)’s recordkeeping
requirements. Subsection (a) contains no exception for “a tribal
government,” let alone for a corporation formed under tribal law
and engaged in the cigarette business. As the district court
recognized, the exception in (b) for tribal governments would
have been unnecessary if “persons” in § 2343 did not include
tribes. Ho-Chunk, Inc., 253 F. Supp. 3d at 311. The district
court added: “To the extent the goal was to cut down on
cigarette taxation avoidance, it would have made little sense to
wholly exempt tribal agencies and instrumentalities from the
Act—thus offering cigarette bootlegging organizations a clearly
demarcated shelter from enforcement.” Id.4
3
Congress added § 2343(b) in 2006. See Pub. L. No. 109-177,
§ 121(c), 120 Stat. 192, 222–23.
4
The Ho-Chunk corporations invoke the canon that statutes
should be liberally construed in favor of Indians. See Montana v.
Blackfeet Tribe of Indians, 471 U.S. 759, 766 (1985). But this canon
applies only to statutes that are both ambiguous and passed for the
benefit of Indian tribes. See El Paso Nat. Gas Co. v. United States,
632 F.3d 1272, 1278 (D.C. Cir. 2011); San Manuel, 475 F.3d at1311–15. The recordkeeping provision of the Act is not ambiguous
and neither that provision, nor the Act itself, was passed for the benefit
of Indian tribes.
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The corporations also claim that the position of the Bureau
of Alcohol, Tobacco, Firearms and Explosives regarding
§ 2343(a), as set forth in its 2016 inspection letters, is an
unexplained and arbitrary departure from agency policy in
violation of the Administrative Procedure Act, 5 U.S.C.
§ 706(2)(A), and that the Bureau violated the APA when it
adopted its position without engaging in notice and comment
rulemaking. The premise is that the inspection letters
represented a change in the Bureau’s position regarding whether
the Act applies to the Ho-Chunk corporations.5 The
corporations did not present their APA arguments to the district
court before it entered summary judgment and we therefore will
not consider them. See, e.g., Potter v. District of Columbia, 558
F.3d 542, 547–51 (D.C. Cir. 2009).
We have reviewed and rejected the appellants’ other
contentions.
Affirmed.
5
The government disputes this and points out that in 2013 the
Department of Justice brought an enforcement action against HCI
Distribution Company – one of the subsidiary corporations in this case
– and senior employees of the company for violations of the Act,
obtaining a $300,000 penalty from the company in lieu of prosecution
and extracting plea agreements from the employees. See Press
Release, Department of Justice, Independence Business Owner,
Wichita Attorney among 18 Indicted in $18 Million Conspiracy to
Traffic in Contraband Cigarettes (Aug. 14, 2013),
https://www.justice.gov/usao-wdmo/pr/independence-business-own
er-wichita-attorney-among-18-indicted-18-million-conspiracy; United
States v. Frenchman, No. 13-291 (W.D. Mo. Feb. 13, 2015), ECF No.
336 (plea agreement of HCI Distribution’s warehouse manager);
United States v. Guerrero, No. 13-419 (W.D. Mo. Dec. 11, 2013),
ECF No. 5 (plea agreement of officer in charge of operating HCI
Distribution).