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United States v. Tarbell

United States District Court, W.D. New York

March 10, 2017

UNITED STATES OF AMERICA,
v.
IAN TARBELL, Defendant.

          DECISION AND ORDER

          HONORABLE RICHARD J. ARCARA UNITED STATES DISTRICT JUDGE.

         This case is before the Court on several motions in limine filed by the Government. See Docket Nos. 24 & 27. For the reasons stated below, the Court grants the Government’s motions in their entirety.[1]

         BACKGROUND

         The facts relevant to the Government’s motions in limine are straightforward.[2]The Government alleges that on February 18, 2016, the Defendant-a member of the Saint Regis Mohawk Tribe-was stopped by a Genesee County Sheriff’s Deputy for traffic infractions in Pembroke, New York. The Defendant, who was accompanied by his then-girlfriend, was driving a pickup truck with a U-Haul trailer attached. After the Deputy inquired, the Defendant and his girlfriend reported that the trailer was carrying cigarettes. The Defendant also told the Deputy that he was a Native American-licensed cigarette wholesaler, and that he was driving the cigarettes from the Akwesasne Reservation to the Seneca Nation. The Government alleges that neither the Defendant nor his girlfriend were able to produce bills of lading or other “proper documentation related to the legal transportation and sales of the cigarettes.” Docket No. 1 ¶ 8.

         The Defendant then consented to a search of his trailer. Inside were 90 master cases of cigarettes (each of which contained 50 bags of “rollie” cigarettes),[3] plus four more bags of rollie cigarettes. In total, the Defendant’s trailer contained approximately 900,800 cigarettes. None had a New York State cigarette tax stamp on its packaging.

         A federal grand jury ultimately charged the Defendant in a two-count indictment. See Docket No. 6. Count 1 alleges that the Defendant violated the Counterfeit Cigarette Trafficking Act (CCTA), 18 U.S.C. § 2341, et seq., which, in relevant part, makes it a crime for “any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes.” 18 U.S.C. § 2342(a). With several exceptions not relevant here, the CCTA defines the term “contraband cigarettes” to mean “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 to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes.” 18 U.S.C. § 2341(2). Count 2 of the indictment charges that the Defendant, “with intent to defraud the United States,” refused and/or attempted “to evade and defeat” the federal excise tax imposed on cigarettes manufactured in the United States, in violation of 26 U.S.C. § 5701(b)(1) and § 5762(a)(3).

         DISCUSSION

         The Government has filed a motion in limine concerning the CCTA’s scienter element. The Government also moves to preclude the Defendant from making arguments based on the fact that the cigarettes at issue were produced on a Native American reservation and were, at the time they were seized, bound for another reservation. The Court addresses each motion in turn.

         1. The CCTA’s scienter element

         As noted, the CCTA makes it a crime to “knowingly . . . ship, transport, receive, possess, sell, distribute or purchase contraband cigarettes.” 18 U.S.C. § 2342(a). The question raised by the parties’ briefing is whether, to obtain a conviction under the CCTA, the Government must prove that the Defendant knew the cigarettes he possessed were illegal under New York Tax Law or whether, instead, the Government need only prove that the Defendant knew the physical characteristics of the items he possessed.

         The caselaw on this question strongly supports the Government. The Second Circuit has not addressed this issue in detail, but it has summarily rejected as “meritless” the argument that “the CCTA require[s] the government to show that [a defendant] had knowledge that he was selling ‘contraband’ cigarettes.” United States v. Morrison, 686 F.3d 94, 107-08 (2d Cir. 2012). A number of other courts of appeals have similarly held, in more detailed opinions, that the CCTA is a general intent crime. For instance, the Ninth Circuit has interpreted the CCTA’s scienter element to require the Government to prove that the Defendant “knew the physical nature of what he possessed.” United States v. Baker, 63 F.3d 1478, 1491 (9th Cir. 1995). Thus, according to the Ninth Circuit, to obtain a conviction under the CCTA the Government need not prove that a defendant “knows his conduct violates the law.” Id. at 1493. The Sixth Circuit has likewise held that, to obtain a conviction under the CCTA, the Government must prove that a defendant “knew the physical nature of what he possessed, a quantity in excess of [10,000] cigarettes which [bore] no evidence of the payment of applicable state cigarette taxes.” United States v. Elshenawy, 801 F.2d 856, 859 (6th Cir. 1986) (first set of brackets added, second set in original, quotation marks omitted). And, finally, the Eighth Circuit recently agreed with the Sixth and Ninth Circuits that the word “knowingly” in the CCTA “‘merely requires proof of knowledge of the facts that constitute the offense.’” United States v. Nguyen, 758 F.3d 1024, 1027 (8th Cir. 2014) (quoting Bryan v. United States, 524 U.S. 184, 192-93 (1998)).

         In response, the Defendant points to the Supreme Court’s opinion in Cheek v. United States, 498 U.S. 192 (1991). Cheek interpreted the word “willfully” in 26 U.S.C. §§ 7201 and 7203-both of which are criminal tax evasion statutes-to require that the Government, among other things, “negat[e] a defendant’s claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws.” Id. at 202. Relying on Cheek, the Defendant argues that, “[w]hile a good faith belief is not a defense in the assessment or collection of that tax, it[] is a defense to a criminal prosecution for the criminal charges.” Docket No. 29 at 3-4. Specifically, the Defendant argues, the Government must prove “that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty.” Id. at 4.

         Cheek’s reasoning does not support the Defendant’s argument that the CCTA is a specific intent crime. Cheek’s interpretation of the word “willfully” was premised on the fact that, given the size and complexity of the Internal Revenue Code (IRC), it may be “difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws.” 498 U.S. at 199-200. In other words, Congress “‘did not intend that a person, by reason of bona fide misunderstanding as to his liability for the tax . . . should become a criminal.’” Id. at 200 (quoting United States v. Murdock, 290 U.S. 389, 396 (1933)). The provisions of New York Tax Law regulating cigarettes, however, are not similarly “so complex as to create the danger of innocent violation.” Baker, 63 F.3d at 1493 (interpreting the CCTA as applied to Washington State’s cigarette tax). The provision of New York Tax Law on which liability is based in this case is simple: “Whether taxable or tax-free, all cigarettes must bear a tax stamp.” Oneida Nation of New York v. Cuomo, 645 F.3d 154, 160 n.8 (2d Cir. 2011). See also New York Tax Law § 471(2). The CCTA as applied in this case does not, then, present a risk of ensnaring an innocent wholesaler who cannot understand the vagaries of New York Tax Law. As a result, Cheek has no relevance to the CCTA charge in this case. Cf. City of New York v. Golden Feather Smoke Shop, Inc., No. 08-CV-03966(CBA)(JMA), 2013 WL 3187049, at *24 (E.D.N.Y. June 20, 2013) (rejecting reliance on Cheek in a civil CCTA enforcement action).

         It is therefore irrelevant what the Defendant knew about the manner in which New York Tax Law taxes and regulates cigarettes. That is, the Defendant’s liability under the CCTA does not turn on whether he knew that the cigarettes he possessed were illegal under New York Tax Law. Rather, his liability turns on whether he knew that what he had in his trailer was more than 10,000 cigarettes that did not bear a New York tax stamp. Thus, as to the CCTA’s scienter element, the Court will instruct the jury that the Government must prove beyond a reasonable doubt that the Defendant “knew the physical nature of what he possessed”-not that he knew that “his conduct violates the law.” Baker, 63 F.3d at 1491, 1493. Further, because such evidence is ...


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