Ashland Specialty Co., Inc. v. Dale W. Steager, State Tax Comm. of West Virginia

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2018 Term
_______________ FILED
May 1, 2018
No. 17-0437 released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
_______________ SUPREME COURT OF APPEALS
OF WEST VIRGINIA
ASHLAND SPECIALTY CO. INC.,
Petitioner Below, Petitioner
v.
DALE W. STEAGER, STATE TAX COMMISSIONER OF WEST VIRGINIA,
Respondent Below, Respondent
____________________________________________________________
Appeal from the Circuit Court of Kanawha County
The Honorable Carrie L. Webster
Civil Action No. 14-AA-102
AFFIRMED
____________________________________________________________
Submitted: April 11, 2018
Filed: May 1, 2018
Floyd M. Sayre, III, Esq. Patrick Morrisey, Esq.
Bowles Rice LLP Attorney General
Martinsburg, West Virginia Katherine A. Schultz, Esq.
Senior Deputy Attorney General
Mark A. Lloyd, Esq. Cassandra L. Means, Esq.
(admitted pro hac vice) Assistant Attorney General
Bingham Greenbaum Doll LLP Charleston, West Virginia
Louisville, Kentucky Counsel for the Respondent
Counsel for the Petitioner
JUSTICE WALKER delivered the Opinion of the Court.
JUSTICE DAVIS and JUSTICE KETCHUM dissent in part and concur in part and reserve
the right to file separate opinions dissenting in part and concurring in part.
SYLLABUS BY THE COURT
1. “In an administrative appeal from the decision of the West Virginia
Office of Tax Appeals, this Court will review the final order of the circuit court pursuant
to the standards of review in the State Administrative Procedures Act set forth in W. Va.
Code, 29A-5-4(g) [1988]. Findings of fact of the administrative law judge will not be set
aside or vacated unless clearly wrong, and, although administrative interpretation of State
tax provisions will be afforded sound consideration, this Court will review questions of
law de novo.” Syllabus Point 1, Griffith v. ConAgra Brands, Inc., 229 W. Va. 190, 728
S.E.2d 74 (2012).
2. “The ‘clearly wrong’ and the ‘arbitrary and capricious’ standards of
review are deferential ones which presume an agency’s actions are valid as long as the
decision is supported by substantial evidence or by a rational basis.” Syllabus Point 3, In
re Queen, 196 W. Va. 442, 473 S.E.2d 483 (1996).
3. “A review of a proportionality determination made pursuant to the
Excessive Fines Clause of the West Virginia Constitution is de novo.” Syllabus Point 8,
Dean v. State, 230 W. Va. 40, 736 S.E.2d 40 (2012).
i
WALKER, Justice:
Ashland Specialty Company, Inc. (Ashland) unlawfully sold 12,230 packs of
cigarettes in West Virginia in 2009 that were not approved for sale by the Tax
Commissioner of the State of West Virginia (Commissioner).1 Acting pursuant to West
Virginia Code § 16-9D-8(a) (2016), the Commissioner penalized Ashland $159,398 for
selling those cigarettes unlawfully, a penalty equal to 500% of the cigarettes’ retail value.
The Office of Tax Appeals (OTA) then ordered that penalty reduced by twenty-five
percent. On review, the Circuit Court of Kanawha County reversed the OTA and
reimposed the Commissioner’s original $159,398 penalty.
Contrary to Ashland’s arguments on appeal, we find that the Commissioner’s
original penalty (1) is not an abuse of the discretion afforded the Commissioner under West
Virginia Code § 16-9D-8(a); (2) should not be cancelled or reduced due to circumstances
that Ashland argues mitigate their unlawful cigarette sales; and (3) does not violate the
Excessive Fines Clause of the West Virginia Constitution or the Eighth Amendment to the
United States Constitution. For those reasons, and as discussed more fully below, we
affirm the April 11, 2017 order of the Circuit Court of Kanawha County reversing the OTA
and reinstating the Tax Commissioner’s original $159,398 penalty.
1
Mark W. Matkovich was the Tax Commissioner at the commencement of this
matter. He was later replaced by Dale W. Steager.
I. FACTUAL AND PROCEDURAL BACKGROUND
Before addressing the facts specific to Ashland’s appeal, we first briefly
review the statutes implicated by their arguments. These include West Virginia Code
§§ 16-9B-1 through 4 (2016) (“Implementing Tobacco Master Settlement Agreement”)
and §§ 16-9D-1 through 10 (2016) (“Enforcement of Statute Implementing Tobacco
Master Settlement Agreement”), related to the Tobacco Master Settlement Agreement
(MSA) and subsequent efforts by the Legislature to ensure the MSA and its related
requirements are enforced.
A. The MSA.
In 1998, leading tobacco product manufacturers entered into the MSA with
the State of West Virginia.2 In pertinent part, “[t]he master settlement agreement obligates
these manufacturers, in return for a release of past, present and certain future claims against
them . . . to pay substantial sums to the State (tied in part to their volume of sales) . . . .”3
The following year, the Legislature enacted Article 9B of Chapter 16. In part, Article 9B
requires cigarette manufacturers who are not part of the MSA, but whose cigarettes are
sold in West Virginia, to make annual deposits into escrow accounts intended to pay a
2
W. Va. Code § 16-9B-1(e) (2016).
3
Id.
2
judgment or settlement resulting from a claim brought against the manufacturer by the
State or a West Virginia resident.4
In 2003, the West Virginia Legislature enacted model legislation to prevent
violations and aid enforcement of the obligations imposed by Article 9B of Chapter 16 of
the West Virginia Code.5 This legislation, codified at Article 9D of Chapter 16 of the West
Virginia Code, directs the Commissioner to create and maintain a directory of cigarette
brands approved for sale in West Virginia.6 Chapter 16, Article 9D also charges the
Commissioner with adding or removing manufacturers from the list as appropriate,7 but
not without first notifying the manufacturer and distributors of the manufacturer’s affected
brand or brands.8 However, a manufacturer or distributor’s failure to receive notice from
the Commissioner of changes to the directory, or even the Commissioner’s failure to
4
W. Va. Code §§ 16-9B-1(f) and 3(b)(2)(A) (2016).
5
W. Va. Code §§ 16-9D-1 through 10 (2016).
6
W. Va. Code § 16-9D-3(b), which states in full:
The commissioner shall develop and publish on the Tax
Division’s website a directory listing all tobacco product
manufacturers that have provided current and accurate
certifications conforming to the requirements of subsection (a)
of this section and all brand families that are listed in the
certifications, except as provided in subdivisions (1) and (2) of
this subsection.
7
W. Va. Code § 16-9D-3(b)(3).
8
Id. § 16-9D-3(b)(3)(A) and (B).
3
provide such notice, does not excuse a party from their obligations under Article 9D of
Chapter 16 of the West Virginia Code.9
It is unlawful to sell, offer, or possess for sale in West Virginia a brand of
cigarettes that is not included in the Commissioner’s list.10 Pursuant to West Virginia Code
§ 16-9D-8(a), the Commissioner may impose a wide range of penalties upon a party that
sells a brand of cigarettes in West Virginia when that brand does not appear on the
Commissioner’s list—that is, when the brand is “delisted.”
B. Ashland’s Violations of § 16-9D-3(c).
Ashland is a Kentucky corporation that distributes cigarettes to convenience
stores in West Virginia and other states. It is undisputed that between June and September
2009, Ashland sold 12,210 packs of delisted GP and GP Galaxy Pro brand cigarettes and
20 packs of delisted Berley brand cigarettes in violation of West Virginia Code
§ 16-9D-3(c). The Commissioner identified these illegal sales during a 2012 audit. In
August 2012, pursuant to his authority under § 16-9D-8(a), the Commissioner assessed a
$159,398 penalty upon Ashland, a penalty equal to 500% of the retail value of the 12,230
packs of delisted cigarettes.
9
W. Va. Code § 16-9D-3(b)(3)(C).
10
Id. § 16-9D-3(c)(2). The statute contains two exceptions that do not apply here.
4
The Commissioner previously assessed a $3,808 penalty upon Ashland for
selling 56 cartons of delisted cigarettes from 2001 to 2003. Ashland had also paid a $5,127
penalty for selling 62 cartons of delisted cigarettes from 2005 to 2008. Like the penalty
imposed by the Commissioner in 2012, these penalties equated to 500% of the retail value
of the delisted cigarettes. Ashland did not contest these smaller penalties.
C. Review before the OTA.
Ashland timely petitioned the OTA to review the Commissioner’s August
2012 penalty assessment. The administrative law judge (ALJ) conducted an evidentiary
hearing in August 2013. Testimony offered at the hearing by a representative of the West
Virginia State Tax Department indicated that the Commissioner consistently imposes a
500%-of-retail-value penalty for violations of West Virginia Code § 16-9D-3(c).
Specifically, the Commissioner’s representative testified:
Yes. My auditors have no discretion. I mean they have
the ability to come to me. I have the ability to go to my director
and get anything—to request something less. It’s never
happened. I mean we—in my recollection, they’ve all been
500 percent that we’ve done. And these are rare. There’s not
many of them. . . .
I’ve never gone up the food chain for any—. I’ve never
heard a good explanation to go up the food chain. Our audit
program is locked in at 500 percent. I mean I don’t—. Like I
said, these were rare. I don’t recall any reason to ask for a
reduced rate.
When asked to justify the 500%-of-retail-value penalty imposed by the
Commissioner in this case, the representative explained that Ashland had “two previous
5
audits, that they’ve been forewarned, and—they’re still continuing to do so, I don’t really
see any need to reduce it. I mean, they’ve had plenty of warning and they keep making the
same error.”
In August 2014, the ALJ issued a written order finding the Commissioner’s
$159,398 penalty to be “erroneous, unlawful, void, or otherwise invalid[.]” The ALJ
reasoned that “the Tax Commissioner exercised no discretion at all in issuing the penalty”
to Ashland because the evidence demonstrated that the Commissioner invariably assessed
the 500%-of-retail-value penalty for the sale of delisted cigarettes. Additionally, the ALJ
concluded that the $159,398 penalty was too harsh because “[c]ommon sense tells us that
the maximum penalty should be reserved for the worst offenders, for example, a seller who
deliberately sells delisted brands or who engages in some criminal activity in connection
with cigarette sales.” Consequently, the ALJ reduced the penalty by 25% to $119,548.50.
D. Review before the Circuit Court of Kanawha County.
Both the Commissioner and Ashland appealed the OTA’s reduction of the
Commissioner’s original penalty, and briefing on the matter proceeded before the Circuit
Court of Kanawha County.11 On April 11, 2017, the circuit court entered an order reversing
the order of the OTA and reinstating the Commissioner’s original penalty. The circuit
11
Ashland appealed to the Circuit Court of Cabell County, and the Commissioner
appealed to the Circuit Court of Kanawha County. The Circuit Court of Cabell County
transferred Ashland’s appeal to the Circuit Court of Kanawha County.
6
court found, among other things, that: (1) the OTA erred in concluding that the
Commissioner exercised no judgment, when the $159,398 penalty imposed was not the
maximum permitted by West Virginia Code § 16-9D-8(a); (2) the OTA erred in concluding
that the Commissioner abused his discretion by imposing the same, proportional penalty
on all violators of § 16-9D-3(c); and (3) the $159,398 penalty did not violate the Excessive
Fines Clause of the West Virginia Constitution or the Eighth Amendment to the United
States Constitution. Ashland now appeals from that order.
II. Standard of Review
Ashland’s arguments implicate several standards of review. We set out each
below within the analysis of the corresponding assignment of error.
III. Analysis
Ashland attacks the circuit court’s order on several fronts. First, it argues
that the circuit court erred by reinstating the Commissioner’s original $159,398 penalty.
Ashland contends that the OTA correctly concluded that the Commissioner’s consistent
application of a 500%-of-retail-value penalty is, itself, an abuse of discretion, and that by
reinstating the Commissioner’s original judgment, the circuit court substituted its judgment
for that of the OTA. Ashland also argues that the circuit court should have further reduced,
or completely forgiven, the reduced penalty ordered by the OTA due to circumstances that
Ashland contends mitigate its violation of West Virginia Code § 16-9D-3(c). Ashland next
argues that the Commissioner’s original penalty violates the Excessive Fines Clause of the
7
West Virginia Constitution and the Eighth Amendment to the United States Constitution.
It also challenges the Circuit Court of Kanawha County as the appropriate venue for the
proceedings below. We address each of Ashland’s arguments in turn.
A. Reinstatement of the Commissioner’s original penalty.
Ashland first argues that the circuit court abused its discretion by reversing
the decision of the OTA and reinstating the Commissioner’s original $159,398 penalty. In
Syllabus Point 1 of Griffith v. ConAgra Brands, Inc.,12 this Court confirmed the standard
of review applicable to appeals such as Ashland’s:
In an administrative appeal from the decision of the
West Virginia Office of Tax Appeals, this Court will review
the final order of the circuit court pursuant to the standards of
review in the State Administrative Procedures Act set forth in
W. Va. Code, 29A-5-4(g) [1988]. Findings of fact of the
administrative law judge will not be set aside or vacated unless
clearly wrong, and, although administrative interpretation of
State tax provisions will be afforded sound consideration, this
Court will review questions of law de novo.[13]
West Virginia Code § 29A-5-4(g) (2015) provides:
The court may affirm the order or decision of the agency
or remand the case for further proceedings. It shall reverse,
vacate or modify the order or decision of the agency if the
substantial rights of the petitioner or petitioners have been
prejudiced because the administrative findings, inferences,
conclusions, decision or order are:
12
229 W. Va. 190, 728 S.E.2d 74 (2012).
13
Id.
8
(1) In violation of constitutional or statutory provisions; or
...
(5) Clearly wrong in view of the reliable, probative and
substantial evidence on the whole record; or
(6) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion.
“The ‘clearly wrong’ and the ‘arbitrary and capricious’ standards of review are deferential
ones which presume an agency’s actions are valid as long as the decision is supported by
substantial evidence or by a rational basis.”14 With this standard in mind, we analyze
Ashland’s argument that the circuit court erroneously reinstated the Commissioner’s
original $159,398 penalty.
The Tax Commissioner penalized Ashland’s sale of delisted cigarettes under
West Virginia Code § 16-9D-8(a). That subsection states:
(a) Revocation of business registration certificate and
civil money penalty. — In addition to or in lieu of any other
civil or criminal remedy provided by law, upon a determination
that a distributor, stamping agent or any other person has
violated subsection (c), section three [§16-9D-3] of this article,
or any rule adopted pursuant thereto, the commissioner may
revoke or suspend the business registration certificate of the
distributor, stamping agent or other person in the manner
provided by article twelve [§§ 11-12-1 et seq.], chapter eleven
of this code. Each stamp affixed and each sale or offer to sell
cigarettes in violation of [§ 16-9D-3(c)] constitutes a separate
violation. The commissioner may also impose a civil penalty
in an amount not to exceed the greater of five hundred percent
of the retail value of the cigarettes or five thousand dollars
upon a determination of violation of [§ 16-9D-3(c)] or any
14
Syl. Pt. 3, In re Queen, 196 W. Va. 442, 473 S.E.2d 483 (1996).
9
rules adopted pursuant thereto. The penalty shall be imposed
and collected in the manner that tax is assessed and collected
under article ten [§§ 11-10-1 et seq.], chapter eleven of this
code. The amount of penalty collected shall be deposited in the
tobacco control special fund created in section nine [§ 16-9D-
9] of this article.[15]
The parties agree that this subsection provides the Commissioner with broad
discretion16 to select a penalty for Ashland’s unlawful sale of 12,230 packs of delisted
cigarettes in 2009. For example, the Commissioner could have revoked or suspended
Ashland’s West Virginia business registration. And, he could have imposed a civil penalty
on Ashland of up to $61,150,000, that is, $5,000 per violation, assuming that Ashland sold
each delisted pack of cigarettes individually.17 And, of course, the Commissioner could
have imposed the exact penalty that he actually did in this case: a civil penalty equivalent
to 500% of the delisted cigarettes’ retail value.
Based on the plain language of West Virginia Code § 16-9D-8(a), we
conclude that the circuit court did not err by reinstating the Commissioner’s original
15
W. Va. Code § 16-9D-8(a) (emphasis added).
16
See State v. Hedrick, 204 W. Va. 547, 552, 514 S.E.2d 397, 402 (1999) (“The
word ‘may’ generally signifies permission and connotes discretion.”).
17
In its briefing, Ashland asserted that the Commissioner’s original $159,398
penalty was the maximum civil penalty that could be imposed under West Virginia Code
§ 16-9D-8(a). However, in response to the Court’s inquiry during oral argument,
Ashland’s counsel conceded that the maximum penalty permitted by § 16-9D-8(a) was, in
fact, over $61 million, as the Commissioner argued. In this sense, the OTA’s finding that
the Commissioner imposed the maximum penalty on Ashland is clearly wrong.
10
$159,398 penalty. First, and most importantly, the Commissioner imposed a penalty that
is expressly provided for in § 16-9D-8(a). Thus, the Commissioner did not violate that
subsection; he strictly complied with it.18 Nor was the Commissioner’s original $159,398
penalty arbitrary or capricious.19 There is no dispute that Ashland sold 12,230 packs of
delisted cigarettes in 2009. Ashland, therefore, violated § 16-9D-3(c) and was subject to
any of the penalties set forth in § 16-9D-8(a). The Commissioner imposed a penalty that
directly correlated to the retail value of the cigarettes that Ashland sold unlawfully.
Consequently, the Commissioner’s original $159,398 penalty was both supported by
substantial evidence and based on reason and, therefore, was neither arbitrary nor
capricious.20 For those same reasons, we reject Ashland’s assertion that the circuit court
simply substituted its own judgment for that of the OTA when it reinstated the
Commissioner’s original penalty.
Ashland’s primary argument in opposition—that the Commissioner’s
consistent application of a 500%-of-retail-value penalty is, itself, an abuse of the discretion
afforded him by West Virginia Code § 16-9D-8(a)—is a red herring, albeit an intriguing
18
See W. Va. Code § 29A-5-4(g)(1) (court shall reverse, vacate or modify the
decision of the agency because the administrative decision violates statutory provisions).
19
Id. § 29A-5-4(g)(6).
20
See Syl. Pt. 3, In re Queen, 196 W. Va. at 442, 473 S.E.2d at 483.
11
one. Unfortunately, we find the authority relied upon by the OTA to justify adoption of
Ashland’s argument, Brunson v. Pierce County,21 unpersuasive.
In Brunson, a Washington county imposed one-year suspensions on the
licenses of three women who violated various county ordinances governing erotic
dancing.22 In setting the one-year suspensions, the responsible county official considered
the seriousness of the offense, but not the dancers’ personal situations or criminal
histories.23 The official testified that she could not think of a situation where a penalty less
than a one-year suspension—the maximum penalty permitted—would be appropriate.24 A
Washington intermediate appellate court reversed the one-year suspensions because the
county official did not consider the dancers’ individual circumstances and so failed to
exercise the discretion granted to her by the applicable county ordinance.25
We are not inclined to follow Brunson for several reasons. First, it is not
binding on this Court, and the case has not been cited outside of Washington. Second, it
arises from a factual scenario drastically different than that presented here. The three
21
205 P.3d 963 (Wash. App. Div. 2 2009).
22
Id. at 965.
23
Id.
24
Id. at 965, 967.
25
Id. at 967.
12
dancers penalized by the county official in Brunson (who testified regarding the specific
hardships the suspensions would create for their families26) are not comparable to a multi-
state distributor of convenience store items, such as Ashland. Moreover, the penalty at
issue in Brunson was not calibrated to the severity of the dancers’ offenses. In this case,
the penalty imposed by the Commissioner each time Ashland violated West Virginia Code
§ 16-9D-3(c) reflected the retail value of the cigarettes sold illegally. So, when Ashland
sold 560 packs of delisted cigarettes between January 2001 and November 2003, it paid a
$3,808 penalty. And, six years later, when Ashland sold many more packs of delisted
cigarettes (12,230), the Commissioner imposed a much larger penalty upon it ($159,398).
Thus, unlike in Brunson, the rubric applied by the Commissioner in this case reflects a
factual circumstance explicitly recognized in § 16-9D-3(c): the retail value of the cigarettes
unlawfully sold by Ashland.
Finally, the county official in Brunson applied the maximum penalty
permitted by the relevant county ordinance. That is not the case, here. As Ashland
admitted during oral argument, West Virginia Code § 16-9D-8(a) enables the
Commissioner to impose a civil penalty up to $61,150,000 in this case and to suspend
Ashland’s business registration. The Commissioner exercised neither option. In light of
26
Id. at 965.
13
those distinctions, the circuit court did not err by finding that the OTA’s reliance on
Brunson was misplaced and declining to apply the reasoning of that case in this instance.
The West Virginia authority relied upon by Ashland, footnote 6 of our
decision in Gentry v. Magnum,27 is also distinguishable. In Gentry, we stated: “In general,
an abuse of discretion occurs when a material factor deserving significant weight is
ignored, when an improper factor is relied upon, or when all proper and no improper factors
are assessed but the circuit court makes a serious mistake in weighing them.”28 We offered
the commentary in that footnote in the course of reviewing a circuit court’s decision as to
the admissibility of certain testimony under the West Virginia Rules of Evidence.29 While
this Court has cited that dicta from Gentry on several occasions, we have not cited it in the
context of a review of an administrative decision.30 And this makes sense. Ashland’s
27
Gentry v. Mangum, 195 W. Va. 512, 520 n.6, 466 S.E.2d 171, 179 n.6 (1995).
28
Id.
29
Id. at 520, 466 S.E.2d at 179.
30
State v. Greeson, App. No. 16-0497, 2017 WL 2210145, at *3 (W. Va. May 19,
2017) (reviewing circuit court’s exclusion of certain evidence at trial for abuse of
discretion); Rife v. Shields, App. No. 15-0975, 2016 WL 6819045, at *3 (W. Va. Nov. 18,
2016) (reviewing judgment entered pursuant to West Virginia Rule of Civil Procedure
60(b) for abuse of discretion); Melody A. v. Todd A., App. No. 14-1112, 2016 WL 3410340,
at *3 (W. Va. June 14, 2016) (reviewing circuit court’s custody decision for abuse of
discretion); Prima Mktg., LLC v. Hensley, App. No. 14-0275, 2015 WL 869265, at *2 (W.
Va. Feb. 27, 2015) (reviewing denial of motion to set aside entry of default judgment for
abuse of discretion); State v. Bowling, 232 W. Va. 529, 550, 753 S.E.2d 27, 48 (2013)
(reviewing circuit court’s admission of certain testimony for abuse of discretion); State ex
rel. Thrasher Eng’g, Inc. v. Fox, 218 W. Va. 134, 139 n.2, 624 S.E.2d 481, 486 n.2 (2005)
(reviewing circuit court’s determination of whether to permit the filing of a third-party
14
appeal is subject to review under West Virginia Code § 29A-5-4(g) and its interpretive case
law, such as In re Queen. Those authorities sufficiently guide this Court’s review without
resort to the Gentry dicta cited by Ashland. We decline Ashland’s entreaty to rely on
footnote 6 of Gentry, now, to reject the circuit court’s reinstatement of the Commissioner’s
original $159,398 penalty, in light of our conclusion that that penalty was supported by
substantial evidence and based on reason.
We likewise find unpersuasive Ashland’s argument that the circuit court
should have further reduced the discounted penalty ordered by the OTA, or forgiven it
altogether. As explained above, in West Virginia Code § 16-9D-8(a), the Legislature
granted discretion to the Commissioner to impose a range of penalties for the sale of
delisted cigarettes. The Legislature did not dictate to the Commissioner what factors it
should or should not consider in selecting a penalty under § 16-9D-8(a). Nor did the
Legislature instruct the Commissioner to reduce or abate a penalty if the offending party
complaint for abuse of discretion); Shafer v. Kings Tire Serv., Inc., 215 W. Va. 169, 177,
597 S.E.2d 302, 310 (2004) (reviewing circuit court’s decision to award attorneys’ fees for
abuse of discretion); State ex rel. Leung v. Sanders, 213 W. Va. 569, 575, 584 S.E.2d 203,
209 (2003) (reviewing for abuse of discretion circuit court’s determination of whether to
permit the filing of a third-party complaint); State v. Calloway, 207 W. Va. 43, 47, 528
S.E.2d 490, 494 (1999) (reviewing circuit court’s evidentiary rulings for abuse of
discretion); State ex rel. Kahle v. Risovich, 205 W. Va. 317, 322–23, 518 S.E.2d 74, 79–
80 (1999) (reviewing circuit court’s grant of new trial for abuse of discretion); and State v.
Hedrick, 204 W. Va. 547, 552–53, 514 S.E.2d 397, 402–03 (1999) (reviewing for abuse of
discretion circuit court’s decision on whether to remit a previously forfeited bail bond).
15
demonstrated “reasonable cause,” as it has done in other statutes cited by Ashland.31 There
is no equivalent “reasonable cause” exception in §§ 16-9D-3(c) or 16-9D-8(a), and we will
not read one into those statutes.32 Even if we could read such an exception into those
statutes, it would not make sense to do so. The Legislature has already stated that the
Commissioner’s failure to provide notice to distributors of the delisting of a brand of
cigarettes does not excuse a violation of § 16-9D-3(c).33 This legislative statement cuts
strongly against a gloss on either §§ 16-9D-3(c) or 16-9D-8(a) that includes the “reasonable
cause” exception advocated by Ashland.
In sum, we conclude that the circuit court did not err in reversing the order
of the OTA and reinstating the Commissioner’s original $159,398 penalty against Ashland
for the sale of 12,230 packs of delisted cigarettes, in violation of West Virginia Code
§ 16-9D-3(c).
31
See, e.g., W. Va. Code § 11-10-18(a)(1) (2013) (imposing penalty where party
fails to file tax return, unless “it is shown that such failure is due to reasonable cause and
not due to willful neglect”).
32
See W. Va. Consol. Pub. Ret. Bd. v. Wood, 233 W. Va. 222, 230, 757 S.E.2d 752,
760 (2014) (“Courts must presume that a legislature says in a statute what it means and
means in a statute what it says there.”) (internal quotation and alteration omitted).
33
See W. Va. Code § 16-9D-3(b)(3)(C).
16
B. The Excessive Fines Clause of the West Virginia Constitution and the Eighth
Amendment to the United States Constitution.
As it did before the circuit court, Ashland argues that the Commissioner’s
$159,398 penalty violates both the Excessive Fines Clause of the West Virginia
Constitution and the Eighth Amendment to the United States Constitution. The circuit
court held that the penalty was not excessive under either the state or federal constitutions.
“A review of a proportionality determination made pursuant to the Excessive Fines Clause
of the West Virginia Constitution is de novo.”34 Following a de novo review, we find that
the penalty imposed by the Commissioner was not grossly disproportionate to the gravity
of Ashland’s offense, and so affirm the circuit court.
This Court recently analyzed a civil forfeiture under the Excessive Fines
Clause of the West Virginia Constitution and the Eighth Amendment to the United States
Constitution. Civil forfeiture is a slightly different context than the civil penalty at issue
in this case, but our analysis and decision in Dean v. State is instructive, nevertheless.35
34
Syl. Pt. 8, Dean v. State, 230 W. Va. 40, 736 S.E.2d 40 (2012).
35
Neither party disputes that the $159,398 penalty implicates the Eighth
Amendment. Nevertheless, we do observe that, “[c]ivil fines serving remedial purposes
do not fall within the reach of the Eighth Amendment. However, if a civil sanction can
only be explained as serving in part to punish, then the fine is subject to the Eighth
Amendment.” Korangy v. U.S. F.D.A., 498 F.3d 272, 277 (4th Cir. 2007) (internal
quotation omitted). Assuming that the $159,398 penalty is at least partially punitive and
thus subject to the Eighth Amendment, we would still affirm the circuit court’s order
because we find that the penalty is not grossly disproportionate to the gravity of Ashland’s
offense.
17
Following the United States Supreme Court’s decision in United States v.
Bajakajian,36 this Court identified in Dean several factors to determine whether the amount
of a forfeiture of real property pursuant to West Virginia Code § 60A-7-703(a)(8) (2014)
was grossly disproportionate to the gravity of the defendant’s offenses, and therefore
excessive. As we explained in Dean:
Factors to be considered in assessing whether the amount of
the forfeiture is grossly disproportionate to the gravity of an
offense, include: (1) the amount of the forfeiture and its
relationship to the authorized penalty; (2) the nature and extent
of the criminal activity; (3) the relationship between the crime
charged and other crimes; and (4) the harm caused by the
charged crime.[37]
The factors set forth by this Court in Dean presuppose that “judgments about the
appropriate punishment for an offense belong in the first instance to the legislature.”38
We enunciated the Dean factors in the context of a civil forfeiture, rather than
a civil penalty. However, the Dean factors, which themselves are derived from the United
States Supreme Court’s decision in Bajakajian, closely follow factors considered by
federal courts since Bajakajian to determine whether a punitive, civil penalty is grossly
disproportionate to the gravity of a party’s violation.39 Therefore, we apply the Dean
36
524 U.S. 321 (1998).
37
Syl. Pt. 7, in part, Dean, 230 W. Va. at 40, 736 S.E.2d at 40.
38
Bajakajian, 524 U.S. at 336.
39
See U.S. Sec. & Exch. Comm’n v. Brookstreet Sec. Corp., 664 F. App’x 654, 656
(9th Cir. 2016) (“This court generally considers four factors when weighing the gravity of
a violation: (1) the nature and extent of the violation, (2) whether the violation was related
18
factors, here, to determine whether the civil penalty imposed on Ashland is grossly
disproportionate to the gravity of its violation of West Virginia Code § 16-9D-3(c), and,
therefore, whether the civil penalty violates article III, section 5 of the West Virginia
Constitution and the Eighth Amendment to the United States Constitution.
The first factor, the amount of the penalty and its relationship to the
authorized penalty, cuts in the Commissioner’s favor. As both parties acknowledge, the
maximum penalty authorized by the Legislature for Ashland’s violation of West Virginia
Code § 16-9D-3(c) is $61,150,000—a penalty roughly 383 times larger than the one
actually imposed by the Commissioner.40 Additionally, the Commissioner could have also
suspended or revoked Ashland’s business registration, an option that the Commissioner
did not exercise.
The second factor, the nature and extent of the criminal activity, also weighs
in the Commissioner’s favor. Prior to 2012, the Commissioner had fined Ashland twice
for selling delisted cigarettes in violation of West Virginia Code § 16-9D-3(c). Obviously,
to other illegal activities, (3) the penalties that may be imposed for the violation, and (4)
the extent of the harm caused.”); United States v. Aleff, 772 F.3d 508, 512 (8th Cir. 2014)
(assessing proportionality of a civil penalty under “variety of factors, including the
reprehensibility of the defendant’s conduct; the relationship between the penalty and the
harm to the victim; and the sanctions in other cases for comparable misconduct”).
40
The Fifth Circuit Court of Appeals has gone so far as to hold that “[n]o matter
how excessive (in lay terms) an administrative fine may appear, if the fine does not exceed
the limits prescribed by the statute authorizing it, the fine does not violate the Eighth
Amendment.” Newell Recycling Co., Inc. v. U.S. E.P.A., 231 F.3d 204, 210 (5th Cir. 2000).
19
Ashland was aware of its obligation not to sell delisted cigarettes and its obligation to
remain apprised of changes to the Commissioner’s directory of approved brands.41
Moreover, it was aware of the potential civil penalties it could face for future violations.
Federal courts have also affirmed administrative penalties similar in size to the $159,398
penalty imposed by the Commissioner, in this case.42
The third and fourth factors also mitigate in favor of the conclusion that the
penalty imposed by the Commissioner is not grossly disproportionate to Ashland’s
violation. With regard to the third factor—the relationship between Ashland’s violation of
West Virginia Code § 16-9D-3(c) and other violations—the West Virginia Legislature has
authorized similar, civil penalties in the context of the retail sale of alcohol.43 As to the
fourth factor, that is, the harm caused by Ashland’s violation of § 16-9D-3(c), we do not
agree with Ashland that the sole victim of its sale of delisted cigarettes is the State. The
Legislature enacted §§ 16-9D-1 through 10 to prevent violations and aid enforcement of
the laws implementing the MSA and so to “safeguard the Master Settlement Agreement,
41
See W. Va. Code § 16-9D-3(b)(3)(C).
42
See Salisbury v. United States, 368 Fed. App’x 310 (2010) ($152,500 civil penalty
imposed on lobster fisherman for violation of the Magnuson-Stevens Act was not
excessive).
43
See W. Va. Code § 60-3A-26 (2014) (authorizing West Virginia Alcohol
Beverage Control Commissioner to impose a civil penalty of up to $1,000 per violation of
statutes or rules controlling the sale of alcohol by retail liquor licensees).
20
the fiscal soundness of the state, and the public health.”44 Thus, contrary to Ashland’s
arguments, we find credible the Commissioner’s position that Ashland’s violation of
§ 16-9D-3(c) threatens public harm.
In sum, our analysis of the Dean factors demonstrates that the $159,398
penalty imposed is not grossly disproportionate to the severity of Ashland’s unlawful
activity, that is, the sale of 12,230 packs of delisted cigarettes in violation of West Virginia
Code § 16-9D-3(c). Accordingly, the circuit court did not err in holding that the
Commissioner’s original $159,398 penalty does not violate the Excessive Fines Clause of
the West Virginia Constitution or the Eighth Amendment to the United States Constitution.
C. Venue.
Finally, Ashland argues that under West Virginia Code § 11-10A-19(c)(3)
(2013), the appropriate venue for its administrative appeal was the Circuit Court of Cabell
County and not the Circuit Court of Kanawha County. We readily dispose of this argument
on the grounds of waiver.
“[T]the inadequacy of appellate relief in matters involving ‘a substantial
legal issue regarding venue’ may require the resolution of such issues through the exercise
44
W. Va. Code § 16-9D-1.
21
of original jurisdiction.”45 In this case, Ashland did not pursue a writ of prohibition
challenging the Circuit Court of Kanawha County as the venue for its appeal of the OTA’s
decision. Rather, it fully briefed the matter before the Circuit Court of Kanawha County
without objecting to venue46 and only raises the issue now, before this Court. On these
facts, we find that Ashland has waived its objection to venue in the Circuit Court of
Kanawha County47 and that any error with regard to venue that may have occurred in the
proceedings, below, is harmless.
IV. CONCLUSION
For the foregoing reasons, the April 11, 2017 order of the Circuit Court of
Kanawha County is affirmed.
Affirmed.
45
State ex rel. Air-Squid Ventures, Inc. v. Hummel, 236 W. Va. 142, 145, 778 S.E.2d
591, 594 (2015) (quoting State ex rel. Riffle v. Ranson, 195 W.Va. 121, 464 S.E.2d 763
(1995)).
46
In footnote 1 of “Ashland Specialty’s Brief in Reply to State Tax Commissioner’s
Response to Ashland Specialty’s Merit Brief,” Ashland acknowledged that it had filed its
appeal to the OTA’s decision with the Circuit Court of Cabell County, and that its appeal
was subsequently transferred to the Circuit Court of Kanawha County. Ashland did not,
however, object or otherwise argue that the Circuit Court of Kanawha County was an
improper venue for the matter.
47
See Hansbarger v. Cook, 177 W. Va. 152, 157, 351 S.E.2d 65, 70–71 (1986)
(concluding that party waived venue defense where he did not argue venue in a motion to
dismiss, or raise the issue in his answer or in any other responsive pleading).
22