The federal government is attempting to intervene in a lawsuit between a tribal tobacco manufacturer and the State of Nebraska.
HCI Distribution Inc. (“HCI”) and Rock River Manufacturing (“Rock River”) filed a lawsuit against the State of Nebraska alleging that Nebraska was attempting to regulate the companies’ tobacco production in violation of the U.S. Constitution. HCI and Rock River are subsidiaries of Ho-Chunk Incorporated (“Ho-Chunk”), which is the economic development arm of the Winnebago Tribe.
The federal government has been investigating Ho-Chunk, and in January, federal agents raided three sites owned by Ho-Chunk, seeking records related to tobacco sales. In May, the U.S. asked for permission to intervene in the lawsuit HCI and Rock River have against the state of Nebraska based on the claim that a resolution of the criminal matter could resolve the issues in the lawsuit. The federal government has also requested the proceedings be halted until the criminal investigation is concluded because the investigation and lawsuit stem from the same set of facts. The Winnebago Tribe believes that the government does not have standing to intervene, as the lawsuit filed by HCI and Rock River have nothing to do with the ongoing criminal investigation and has requested the stay be denied.
The original suit, filed by HCI and Rock River against the state of Nebraska, concerns Nebraska’s regulation of tobacco manufacturers under the terms of the Master Settlement Agreement. HCI and Rock River assert in their complaint that after the MSA was signed, the participating manufacturers became concerned that non-participating manufacturers would sell their products at a lower price, thus affecting the participating manufacturers’ market dominance. The suit goes on to allege that as a way to “protect Big Tobacco’s profits,” States agreed to enact laws that impose fees and regulations on nonparticipating manufacturers (“NPMs”). One such law requires any NPM to either join the MSA or deposit funds into an escrow account that are equal to a percentage of their sales in the State for the year. Failure of a state to enforce this provision can lead to the State losing its MSA payment for the year.
HCI and Rock River allege that Nebraska is now attempting to “bootstrap the MSA onto the Winnebago Tribe” by forcing the tribe to abide by the terms of the MSA and resulting state tobacco laws. HCI and Rock River argue that the State cannot force the tribal entities to comply with the State law, as States’ relationships with Indian tribes are controlled under the Indian Commerce Clause of the U.S. Constitution, and only Congress can regulate Indian tribes.
The court has not yet ruled on the federal government’s request to intervene in the suit.