City of N.Y. v. Gordon

155 F.Supp.3d 411

The City of New York, Plaintiff,

v.Robert Gordon, Marcia Gordon, Regional Integrated Logistics, Inc., Defendants.

12–CV–4838 (VSB)

United States District Court, S.D. New York.

Signed December 10, 2015

Aaron Michael Bloom, Eric Proshansky, New York City Law Department, New York, New York, Counsel for Plaintiff

MEMORANDUM & ORDER

VERNON S. BRODERICK, United States District Judge:

Plaintiff the City of New York (the “City”) brings this action against Defendants Robert and Marcia Gordon (together, the “Gordon Defendants”) and Regional Integrated Logistics, Inc. (“RIL”), seeking injunctive relief, penalties, and damages for violations of the Prevent All Cigarette Trafficking Act (“PACT Act”), 15 U.S.C. § 375 et seq. ; the Contraband Cigarette Trafficking Act (“CCTA”), 18 U.S.C. § 2341 et seq. ; the Cigarette Marketing Standards Act, N.Y. Tax L. § 483 et seq. ; and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. The City has settled its claims against the Gordon Defendants.

Before me is the City's unopposed summary judgment motion against RIL (the “Motion”). Because I conclude that the City's theory of liability is legally valid and supported by admissible record evidence, the City's Motion is GRANTED in part. However, because the City's theory of damages is lacking in admissible evidentiary support, the City's Motion is DENIED with respect to damages.

I. Background¹

The City and the State of New York (the “State”) each impose a separate excise tax on all cigarettes possessed for sale or use in their respective jurisdictions. N.Y. Tax L. §§ 471(1), 471–A ; N.Y.C. Admin. Code § 11–1302(a)(1). (See also P's 56.1 ¶ 3.)² Those taxes must be pre-paid, the proof of which is a stamp affixed to each package of cigarettes, N.Y. Tax. L. § 471(1) ; N.Y.C. Admin. Code §§ 11–1302(e), (g), (h), (i); hence, “unstamped” cigarettes are untaxed cigarettes.³ (P's 56.1 ¶¶ 4–5.) The City's basic allegation is that RIL and the Gordon Defendants, who operated a cigarette business on a Seneca Nation of Indians (“SNI”) reservation, were part of a continuing enterprise or series of enterprises that transported untaxed cigarettes into the City. (See, e.g., P's Mem. 2; Am. Compl. ¶¶ 2–4.)⁴

In the mid–2000s, a group of mail carriers—the United Parcel Service (“UPS”), DHL, and Federal Express—stopped shipping cigarettes to consumers. (Id. ¶ 16; see also Bloom Decl. Ex. 6, ¶ 31.)⁵ The United States Postal Service (the “Postal Service”), however, continued to do so. (P's 56.1 ¶ 16; Bloom Decl. Ex. 6, ¶¶ 31, 35.) In 2010, Congress passed the PACT Act, which among other things bars the Postal Service from shipping cigarettes. 18 U.S.C. § 1716E(a)(1). (See also P's 56.1 ¶ 17.) The PACT Act also prohibits remote sales of cigarettes unless applicable state and local taxes are paid in advance. 15 U.S.C. §§ 376a(a)(3)–(4), (d). (See also P's 56.11 ¶ 17.) In a separate lawsuit, Defendant Robert Gordon challenged the PACT Act and won a preliminary injunction against the tax provisions—the provisions barring remote sales of cigarettes without advance payment of state and local taxes—on due process grounds, but not against the ban on mailing cigarettes. See Gordon v. Holder, 826 F.Supp.2d 279 (D.D.C.2011), aff'd 721 F.3d 638 (D.C.Cir.2013).⁶ The preliminary injunction was based on Gordon's argument that nonresident tobacco retailers could not be subjected to state and local taxes without regard to their contacts with the taxing jurisdiction. Id. at 288–293.

In August 2010, RIL began to assist SNI smoke shops in shipping untaxed cigarettes to various locations, including to New York City. (P's 56.1 ¶¶ 27.) RIL picked up packages containing cartons of cigarettes from smoke shops on SNI reservations, transported the packages to its warehouse in Buffalo, New York, sorted the packages, and arranged for the packages to be shipped to courier services that made final delivery of the packages to residential addresses. (Id. ¶¶ 37–40; Hale Dep. 36–37, 184.)⁷ RIL continued to undertake these activities until early June 2013, when this Court issued an injunction barring it from doing so, (Doc. 75). The City seeks to recover the taxes it lost from in or about August 2010 up to in or about June 2013. (See P's Mem. 1.)

II. Procedural History

The City filed its Complaint on June 20, 2012. (Doc. 1.) The Gordon Defendants, who were represented by counsel at the time, filed a motion to dismiss and supporting papers on September 7, 2012. (Docs.19–22.) By Order dated September 10, 2012, Judge Jesse M. Furman,⁸ to whom this case was initially assigned, directed Plaintiff to file an amended complaint by September 28, 2012, and Defendants to either file an answer, new motions to dismiss, or a letter indicating their intention to rely on their previously filed motions to dismiss by three weeks after the filing of the amended complaint. (Doc. 24.) Defendant RIL filed a motion to dismiss and supporting papers on September 10, 2012. (Docs.25–27.)⁹ The City filed a motion for a preliminary injunction and supporting papers on September 28, 2012. (Docs.28–31.) As directed by Judge Furman, the City filed its amended complaint the same day, (Doc. 32), and the Gordon Defendants and RIL filed renewed motions to dismiss and supporting papers on November 30, 2012, (Docs.37, 42). Counsel to the Gordon Defendants was granted permission to withdraw by Order dated March 25, 2013. (Doc. 65.)

On May 21, 2013, Judge Furman entered an Order denying both motions to dismiss and granting the City's motion for a preliminary injunction. (Doc. 70; see also City of New York v. Gordon, 1 F.Supp.3d 94, 98 (S.D.N.Y.2013).) Judge Furman entered injunctions against RIL on June 3, 2013, (Doc. 75), and against the Gordon Defendants on June 6, 2013, (Doc. 78).

The Gordon Defendants submitted a letter, received by the Court's Pro Se Office on June 14, 2013, indicating that they could not obtain legal representation and did not intend to represent themselves. (See Doc. 84.) By endorsement, Judge Furman ordered the Gordon Defendants to submit an additional letter clarifying their intentions with regard to the lawsuit. (Id. ) They did not do so. The case was reassigned to Judge Ramos, and on December 5, 2013, Judge Ramos granted the City leave to file an Order to Show Cause for a default judgment against the Gordon Defendants. (Doc. 92.) On December 30, 2013, RIL filed a notice of its petition for Chapter 11 bankruptcy, (Doc. 93), and on January 14, 2014, Judge Ramos stayed this case with respect to RIL pending resolution of the bankruptcy proceedings, (Doc. 95). Judge Ramos permitted the City to proceed against the Gordon Defendants for a default judgment, (see Doc. 97), and on February 3, 2014, the City requested that the Clerk enter default, (Doc. 98). On April 1, 2014, the City reported that RIL's bankruptcy case had been dismissed and requested permission to proceed with its motion for summary judgment. (Doc. 102.) On April 3, I issued an order lifting the stay of this case and setting a briefing schedule on the City's motion.

On April 8, 2014, I entered an Order for the Gordon Defendants to show cause why a default judgment should not be entered against them. (Doc. 105.) The City appeared for the show cause hearing on April 28, 2014, but the Gordon Defendants did not appear or request an adjournment. Instead, Marcia Gordon submitted a letter suggesting that the Gordon Defendants did not receive timely notice of the Order because they had moved out of state. (Doc. 117.) Following a telephone conference with Marcia Gordon on May 15, 2014, the City notified me that it had reached a settlement with the Gordon Defendants, (Doc. 125), and on June 10, 2014, I entered a Consent Order against the Gordon Defendants, (Doc. 127).

Meanwhile, on April 24, 2014, the City filed this Motion against RIL, as well as a supporting memorandum, Rule 56.1 Statement of Material Undisputed Facts, and supporting declarations. (Docs.111–15.) On June 9, 2014, RIL's counsel filed a motion to withdraw from the case because RIL had advised him that it had no money and could not pay its outstanding legal fees. (See Docs. 124, 132.) The City and counsel for RIL appeared before me on June 20, 2014 to discuss the motion to withdraw. On June 23, 2014, I granted the motion to withdraw, allowed RIL thirty additional days to oppose the City's Motion for Summary Judgment, and scheduled a teleconference for July 24, 2014 to discuss RIL's intentions. (Doc. 132.) RIL did not attend the teleconference and no notice of appearance was filed. Accordingly, I entered an Order for RIL to show cause why the City's Motion should not be deemed fully submitted and unopposed. (Doc. 133.) The City appeared for the show cause hearing on August 29, 2014, but RIL did not. Thereafter, the City filed a letter stating that settlement talks with RIL were unsuccessful and that RIL did not plan to file an opposition. (Doc. 134.) On January 13, 2015 the City filed a letter notifying me of a settlement in a related case, and affirming its position that this settlement and the settlement with the Gordon Defendants did not affect the damages to be assessed against RIL in this case. (Doc. 135.)

III. Legal Standard

A party moving for summary judgment must submit a statement of material facts deemed to be undisputed. Fed.R.Civ.P. 56(c) ; S.D.N.Y. Local R. 56.1. The statement of facts must reference admissible evidence in the record tending to prove each such fact. Fed.R.Civ.P. 56(c)(1). While the non-moving party is not required to respond to a motion for summary judgment, if it does not respond the non-moving party risks the movant's statement of facts being deemed admitted. Jackson v. Fed. Express, 766 F.3d 189, 194 (2d Cir.2014) (citing Fed.R.Civ.P. 56(e)(2) ). However, a non-response is not a default. Id. Instead, “[b]efore summary judgment may be entered, the district court must ensure that each statement of material fact is...