Ashley Taylor will present on “Promotions in Rhode Island & New York.”  Bryan Haynes will participate in a panel entitled “Deeming Regulations — A Conversation,” which pertains to the Food and Drug Administration’s anticipated regulation that would deem additional tobacco products (such as cigars, e-cigarettes and pipe tobacco) subject to FDA’s authority under the Tobacco Control Act.

We look forward to seeing our friends at the conference.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

In a November 2012 post, we reported that several tobacco product manufacturers and a retailer requested that the Supreme Court consider their challenge to FDA’s requirement for graphic warning labels on cigarette packages.  The tobacco companies requested the Supreme Court reverse the Sixth Circuit Court of Appeals’ decision finding that the warning label requirement does not violate the First Amendment of the United States Constitution.

The Sixth Circuit approved the Tobacco Control Act’s warning label requirement.  The Sixth Circuit’s March 2012 ruling also upheld the district court’s ruling that tobacco companies may market it product as “mild” or “light” only after receiving approval from FDA.

The tobacco companies’ request for Supreme Court review of the Sixth Circuit decision came shortly after FDA’s request for rehearing of the D.C. Circuit Appeals’ decision finding that the graphic warning label requirement was constitutional.  The D.C. Circuit case involved a slightly different issue because it was an applied challenge to the warning labels (that is, after FDA determined the labels’ content); whereas, the Sixth Circuit case involved a facial challenge to the warning label requirement (that is, before FDA determined the labels’ content).  Last month, FDA decided not to pursue Supreme Court review of the D.C. Circuit ruling.

The Supreme Court has discretion whether to hear a case, and it hears a very small fraction of the requested appeals.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

King Mountain and the Washington Attorney General filed cross motions for summary judgment.  In its motion for summary judgment, King Mountain argued that it is exempt from making escrow payments under Articles II and III of the Yakama Treaty of 1855.  In support of its argument, King Mountain relied on: (1) the historical significance of the Yakama growing tobacco and trading it with others; (2) representations by U.S. representatives to the Yakama tribe during the negotiations of the Treaty in 1855; and (3) the language of the Treaty.  In response, the Attorney General relied on United States Supreme Court precedent, which provides that absent express federal law to the contrary, tribes exceeding reservation boundaries generally are subject to non-discriminatory state law applying to all citizens of the state.

The District Court found that, in 2010, less than 10 percent of the tobacco used by King Mountain to manufacture its products was grown on tribal land.  That number increased to roughly 38 percent in 2011.  The District Court also found that much of the manufacturing process does not occur on tribal lands.  Based on the amount of non-trust-land tobacco and the manufacturing process, the District Court concluded that much of King Mountain’s operations involve “extensive off-reservation activity.”  Consequently, the District Court held that King Mountain Tobacco Company is not exempt from making escrow payments.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

A Florida entrepreneur purchased cigarettes manufactured by NV Sumatra and sold them in Tennessee.  Between 2000 and 2002, more than 11 million cigarettes manufactured by NV Sumatra were sold in Tennessee.  The Indonesian manufacturer subsequently withdrew its cigarettes from the United States market.  Thereafter, the State of Tennessee filed a complaint against NV Sumatra in state court for the collection of escrow, alleging that the Indonesian manufacturer failed to pay into the Escrow Fund as required by Tenn. Code Ann. §§ 47-31-101 to -103.  Both parties filed cross-motions for summary judgment.  The trial court found that the State lacked personal jurisdiction over the Indonesian manufacturer and dismissed the case.

The State appealed the trial court’s ruling to the Court of Appeals of Tennessee.  In a June 2011 opinion, the Court of Appeals reversed the trial court’s finding that it lacked personal jurisdiction over the foreign manufacturer.  In reversing the trial court, the Court of Appeals concluded that NV Sumatra intentionally used a distribution system with the intended result of selling its tobacco products throughout the United States, including Tennessee.  Such intentional contact satisfies the test for personal jurisdiction.  The Court of Appeals remanded the case to the trial court for a determination of the applicable fines and escrow payment.  NV Sumatra filed a petition for rehearing in the Court of Appeals, and its petition was denied.

The Supreme Court of Tennessee heard oral arguments in June 2012 and issued its opinion last month.  The Supreme Court recognized that Tennessee’s statute permitting Tennessee courts to assert personal jurisdiction over defendants is designed to allow courts to exercise personal jurisdiction to the full extent authorized by the Fourteenth Amendment of the United States Constitution.  If the defendant has minimum contacts with a state, then the court has personal jurisdiction over the defendant.  Minimum contacts require the defendant to engage in purposeful conduct and have a connection with the state such that the defendant avails itself of the state’s benefits and protections and reasonably anticipates being sued into that state’s court.

In assessing whether NV Sumatra had minimum contacts with Tennessee, the Supreme Court first addressed NV Sumatra’s contact with the United States.  In doing so, the Supreme Court focused on the lack of: (1) an aggressive advertising campaign in the United States; (2) sales representatives in the United States; and (3) Internet sales targeting the United States marketplace.  The Supreme Court then focused on NV Sumatra’s contact with Tennessee.  In doing so, it concluded that NV Sumatra had almost nothing to do with the sale of its cigarettes in Tennessee but that the arrival of the foreign-manufactured cigarettes in Tennessee was almost entirely attributable to Florida-based distribution company.  Consequently, the Supreme Court concluded that NV Sumatra did not have minimum contacts with Tennessee.  The Supreme Court reversed the judgment of the Court of Appeals and affirmed the trial court’s dismissal of the State’s complaint for lack of personal jurisdiction.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

In September 2008, the City filed a complaint in District Court against eight smoke shops as well as individuals who owned and operated the smoke shops.  The eight corporate defendants include: (1) Peace Pipe Smoke Shop; (2) Red Dot & Feather Smoke Shop; (3) TDM Discount Cigarettes; (4) Monique’s Smoke Shop; (5) Smoking Arrow Smoke Shop; (6) Golden Feather Smokes, Inc.; (7) Kimo Smoke Shop, Inc.; and (8) Smoke & Rolls.  The City alleged that the defendants violated the Contraband Cigarette Trafficking Act by selling cigarettes on which the State and City taxes had not been paid.

Once the lawsuit began, five of the smoke shops voluntarily stopped operations.  The City sought to enjoin the remaining defendants from selling untaxed cigarettes.  These defendants included Peace Pipe, Red Dot & Feather and TDM.

In its opinion, the District Court stated that “the City presented extensive evidence that unstamped cigarettes sold by these defendants were trafficked in large quantities into the City from Poospatuck Reservation for many years.”  The District Court found that these unstamped cigarettes entered New York City without payment of the city cigarette tax.  New York City’s cigarette tax is the highest tax rate in the country at $5.85 per pack.

The District Court ordered Peace Pipe pay $10,041,075 and TDM pay $450,000 in damages to the City.  The amount of Red Dot & Feather’s fine will be decided at a later hearing.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

Bryan Haynes will be speaking on a panel titled:  “Tobacco Product Deeming Regulations – Are They Appropriate and What Should They Look Like?”  The panel is described as follows:

FDA has indicated that it will publish proposed deeming regulations this spring to expand its tobacco product jurisdiction to additional tobacco products, such as cigars, pipe tobacco and electronic cigarettes.  This session will address issues related to the implementation of such regulations.  Panelists will cover a range of topics, including new tobacco product requirements, allocation of user fees to new tobacco categories, an appropriate grandfather date for newly-regulated tobacco products, advertising regulations and marketing restrictions, and good manufacturing practices.

2013 FDLI Annual Conference
April 23-24, 2013
Washington, DC
Agenda and Registration Information: http://www.fdli.org/conferences/conference-pages/2013-fdli-annual-conference/overview

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

Senate Bill 802 would tax electronic cigarettes at the rate of 5 cents per “vapor product unit,” defined as every 0.03 ounces of consumable material in an electronic cigarette.  The new tax could never exceed 1/10 the rate for cigarettes.  As a taxed product, electronic cigarettes also would need to be sold through state-licensed distributors.

Senate Bill 802 would prohibit self-service displays of electronic cigarettes, except in adult-only stores.  The bill also would impose limitations on sampling.  The bill also would prohibit sales of electronic cigarettes to minors.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

The Contraband Cigarette Trafficking Act requires, as evidence of payment of the state excise tax, that cigarettes sold in a particular state bear that state’s tax stamp.  The State alleges that Defendants violated the CCTA because Grand River shipped cigarettes to Native Wholesale Supply, an entity not authorized as a New York licensed stamping agent.  The State further alleges that Grand River, in selling to Native Wholesale Supply, intended its cigarettes be sold in New York neither stamped nor taxed.

The PACT Act sets forth various registration, reporting and record-keeping requirements.  The State alleges that Defendants violated this Act by failing to submit required tobacco tax filings to the New York Department of Taxation and Finance.

As for to the two New York Tax Law claims, the State alleges that Defendants violated § 471 and 471-e by possessing unstamped cigarettes for sale in New York upon which no state excise tax has been paid and that Defendants violated § 480-b by failing to file annual certifications with the Commissioner of Taxation and Finance.

In its complaint, the State seeks various remedies, including civil penalties and money damages under the Contraband Cigarette Trafficking Act and the PACT Act.  Additionally, the State seeks permission to confiscate unstamped Grand River cigarettes found in New York in the possession of persons unauthorized to possess unstamped cigarettes.

Defendants have not yet filed an answer.  We will report back as the case develops.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.

Background:  Twenty years ago, President Bill Clinton signed the FMLA into law.  The law, requiring all employers with 50 or more employees to provide job-protected and unpaid leave for qualified medical and family reasons, ranks as one of the most insidious and complicated federal statutes for employers. Instead of using the FMLA’s 20^th anniversary as a catalyst to provide FMLA clarifications, the DOL instead, issued additional federal regulations that implement statutory changes ensuring the FMLA will continue to be one of the biggest compliance headaches for covered employers. 

Poster Revisions:  The poster revisions include the updated language outlining the rights involving military leave, military caregiver leave, the expansion of the number of families of veterans covered, an expanded definition of a covered service member to include veterans discharged within the past five years under conditions other than dishonorable and the FMLA eligibility update for flight attendants and airline flight crews.  To download a copy of the poster, click here .

Compliance:  One of the top violations of the FMLA is a company’s failure to adequately display the poster.  To comply, the poster must be displayed in “a conspicuous place where employees and applicants for employment can see it.”  As long as your company is covered under the FMLA, a poster must be displayed at all company locations.

Statutory Changes:  In addition to the new poster requirements, by issuing regulations that became effective on March 8, 2013, the DOL seeks to finally implement the statutory changes resulting from the FMLA amendments that Congress made several years ago.  Those amendments broadened coverage for both military caregiver leave and qualifying exigency leave and at the same time provided protection for airline attendants who because of technical eligibility requirements were excluded from FMLA coverage. For easy reference, the DOL has prepared a side-by-side comparison of the changes. 

Ensuring Compliance:  For those employers covered under the FMLA, remaining compliant is crucial. In addition to taming the intermittent leave and reduced schedule beast, including FMLA abuse and fraud, employers must get a handle on the latest expansions or risk noncompliance.  Even the savviest of human resource departments get tripped up with FMLA record-keeping.  To ensure compliance, we can assist your company institute effective solutions that will provide your administrators with greater confidence in making and managing FMLA decisions.

Contributors: Jimmy Robinson, Troutman Sanders Tobacco Team

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Co-Leader, at 804.697.1420 or by email.

Zeller (who is a trained lawyer) has a long record in tobacco control, having led FDA’s failed effort in the mid-1990s to regulate tobacco products.  The U.S. Supreme Court rejected that effort, finding that FDA lacked congressional authority to regulate tobacco products.  Now that FDA has been given congressional authority, Zeller takes over as head of those efforts, assuming the position held by Dr. Lawrence Deyton since the inception of FDA’s tobacco authority.

Between his stints at FDA, Zeller worked with the American Legacy Foundation, which was created in the aftermath of the Master Settlement Agreement and is known for the “Truth” television advertisements designed to curb tobacco use.  Zeller then worked for a pharmaceutical consulting firm, which represents clients that sell nicotine replacement products.

Bryan Haynes of the Troutman Sanders Tobacco Team is quoted on Mr. Zeller’s appointment in articles in the Washington Post and in Law 360.

For questions and/or comments, please contact Bryan Haynes, Troutman Sanders Tobacco Law Team Leader, at 804.697.1420 or by email.