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Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 1 of 19 LAWRENCE G. WASDEN ATTORNEY GENERAL STATE OF IDAHO BRETT DELANGE, ISB #3628 Deputy Attorney General Consumer Protection Division Office of the Attorney General 954 West Jefferson, 2 nd Floor P. O. Box 83720 Boise, Idaho 83720-0010 Telephone: (208 334-2424 Facsimile: (208 334-4151 brett.delange@ag.idaho.gov Attorneys for the State of Idaho THEODORE V. SPANGLER, JR., ISB #1318 Deputy Attorney General Idaho State Tax Commission 800 Park Boulevard P.O. Box 36 Boise, Idaho 83722-0150 Telephone: (208 334-7530 Facsimile: (208 334-7844 tspangler@tax.idaho.gov Attorneys for the Idaho State Tax Commission IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO STATE OF IDAHO by and through LAWRENCE G. WASDEN, Attorney General, and the IDAHO STATE TAX COMMISSION, Plaintiffs, vs. NATIVE WHOLESALE SUPPLY COMPANY, a corporation, and Does 1 through 20, Defendant. Docket No. 1:08-cv-00396-EJL PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 1

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 2 of 19 I. INTRODUCTION This enforcement action was brought by the State of Idaho and the Idaho State Tax Commission ( State against Native Wholesale Supply Company ( Native Wholesale, a large cigarette wholesaler, alleging that it has systemically and repeatedly violated various Idaho state laws by selling tens of millions of cigarettes that are contraband under Idaho law. The State brings this action exclusively under the statutes of Idaho. No federal claim is asserted. No aspect of the State s claims is brought pursuant to any federal law. No aspect of the State s claims require the interpreting or implementing of a federal contract, standard, or law. Thus, pursuant to 28 U.S.C. Section 1447(c, the State respectfully moves this Court to remand this case back to the District Court of the Fourth Judicial District of the State of Idaho, Ada County, because it arises exclusively under state law, not federal law, depriving this Court of subject matter jurisdiction. On September 17, 2008, Native Wholesale removed this case, arguing, conclusorily, that federal jurisdiction exists because the State s allegations in its Verified Complaint implicate federal law. Doc. 1-2, at 9. The federal law Native Wholesale contends has been implicated is the Commerce Clause and the Indian Commerce Clause. Id. Native Wholesale also asserts that the State s Verified Complaint is subject to complete preemption under federal law. Id. The statute upon which Native Wholesale relies for removal, 28 U.S.C. 1441(a, permits removal of an action for which the federal district courts have original jurisdiction. The statute relied upon by Native Wholesale as conferring original jurisdiction is 28 U.S.C. Section 1331, which confers jurisdiction of civil actions arising under the Constitution, laws, or treaties of the United States. However, as explained in greater detail, this case does not arise PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 2

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 3 of 19 under any federal law and there simply is no basis to assert that federal law has totally preempted the State s claims. Indeed, the arguments put forth by Native Wholesale as justification for removing this matter find no support in any authority. Accordingly, the State s remand motion should be granted, with costs and attorney's fees awarded under 28 U.S.C. 1447(c. II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY Consistent with the bedrock principle that the plaintiff is the master of its complaint, the State filed this enforcement action in the District Court of the Fourth Judicial District of the State of Idaho, Ada County, on August 14, 2008, electing to litigate purely state law claims in Idaho state court. As set forth in the State s Verified Complaint, attached as Exhibit A to Doc. 1-2, the State filed this lawsuit because Native Wholesale has sold millions of cigarettes in violation of the Idaho Tobacco Master Settlement Agreement Complementary Act (Complementary Act, codified at Title 39, Chapter 84, Idaho Code; the Idaho Consumer Protection Act (Consumer Protection Act, codified at Title 48, Chapter 6, Idaho Code; and the Idaho Cigarette and Tobacco Products Taxes Act (Cigarette Taxes Act, codified at Title 63, Chapter 25, Idaho Code. See Verified Complaint at 28-38. The specific Idaho state law violations committed by Native Wholesale are as follows. Native Wholesale has sold into Idaho over 90 million cigarettes of cigarette brand families that are not included on Idaho s Directory of Compliant Tobacco Product Manufacturers and Brand Families (Idaho Directory. Verified Complaint at 28-38. Native Wholesale s sales of these cigarettes violates Idaho Code 39-8403(3 of the Complementary Act. These sales into Idaho in violation of the Complementary Act are deemed also to be violations of the Consumer Protection Act. Idaho Code 39-8406(5. Concerning the claims of the Idaho State Tax Commission, all of Native Wholesale s 90-million plus cigarettes were to Idaho retailers for PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 3

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 4 of 19 purposes of resale. Native Wholesale has never applied for or possessed a cigarette permit as required by Idaho Code Section 63-2503(1 of the Cigarette Taxes Act and therefore is in violation of that law. Verified Complaint at 40-42. Of further concern, the Office of the Attorney General wrote Native Wholesale, advising it of its Complementary Act violations and requesting its compliance with this law s provisions. Despite being warned, Native Wholesale has continued to ignore and act in defiance of these laws, selling millions more contraband cigarettes. Its unlawful actions undermine and undercut the various Idaho state laws specified above. Verified Complaint at 36-37. On September 17, 2008, Native Wholesale removed this case, pursuant to 28 U.S.C. 1441, asserting that the federal courts have original jurisdiction over this case pursuant to 28 U.S.C. 1331. See Doc. 1-2, at 1. 28 U.S.C. Section 1441 states that any civil action brought in a state court of which the district courts of the United States have original jurisdiction, may be removed. (Emphasis added. The sole jurisdictional statute relied upon by Native Wholesale as conferring this Court with original jurisdiction, 28 U.S.C. 1331, as stated above, only confers federal courts with jurisdiction of civil actions arising under the Constitution, laws, or treaties of the United States. As spelled out below, Section 1331 does not confer jurisdiction upon this Court in this case. Further, as demonstrated below, Native Wholesale s removal of the State s complaint lacks any objective basis for removal. Accordingly, in addition to remanding this case back to Idaho state court, this court should assess Native Wholesale the State s attorney fees in seeking remand. III. ARGUMENT A. Native Wholesale s Burden to Justify Removal Is a Heavy One Federal courts disfavor depriving a litigant, particularly a sovereign such as the State of Idaho, of its choice of forum within which to litigate purely state-law claims. In determining PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 4

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 5 of 19 whether subject matter jurisdiction exists, the Ninth Circuit strictly construes the removal and jurisdiction statutes against finding jurisdiction and in favor of remand. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992; Sullivan v. First Affiliated Sec., Inc., 813 F.2d 1368, 1371 (9th Cir. 1987; Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979. Moreover, [f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance. Gaus, 980 F.2d at 566; see also Shamrock Oil & Glass Corp. v. Sheets, 313 U.S. 100, 108-109 (1941 (removal statute must be strictly construed, with all doubts and ambiguities resolved against removal and in favor of remand. Federal courts should be especially reluctant to remove cases brought by a State. According to the Supreme Court, considerations of comity make us reluctant to snatch cases which a State has brought from the courts of that State, unless some clear rule demands it. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 21 n. 22 (1983. Federal courts are courts of limited jurisdiction. Lowdermilk v. U.S. Bank Nat'l Ass n, 479 F.3d 994, 998 (9 th Cir. 2007. A party seeking removal has the burden of demonstrating that (i the federal court has original jurisdiction over the case; and (ii the removal was effected consistently with the applicable statutory requirements. Pullman Co. v. Jenkins, 305 U.S. 534, 540 (1939; see also California v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004; Gaus, 980 F.2d at 566. The strong presumption or strict construction against removal jurisdiction means that the burden is a heavy one. Id. Removal is generally only appropriate in four circumstances. First, the defendant may remove a case if the parties meet the statutory requirements for diversity jurisdiction. See 28 U.S.C. 1332, 1441(b. Diversity jurisdiction is not alleged here. Second, Congress has expressly authorized removal of certain types of claims outside the boundaries of 1441, none of which is involved here. See, e.g., id. 28 U.S.C. 1442-1444; El Paso Nat. Gas v. Neztsosie, 526 U.S. 473, 476-77 (1999 (Price-Anderson Act PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 5

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 6 of 19 removal. Third, the defendant may remove a case if the complaint raises a substantial federal question. See 28 U.S.C. 1441(b; In re NOS Commc'ns, 495 F.3d 1052, 1057 (9 th Cir. 2007; Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1042-43 (9 th Cir. 2003; ARCO Envtl. Remediation, L.L.C. v. Dep t of Health & Envtl. Quality, 213 F.3d 1108, 1114 (9 th Cir. 2000. Finally, even where the complaint does not, on its face, raise a federal issue, a case may be properly removable under the complete preemption doctrine if plaintiff s state law claims have been totally subsumed by federal law. See Lippitt, 340 F.3d at 1042; ARCO, 213 F.3d at 1114. Native Wholesale asserts that this case arises under federal law under one or both of the last two theories. As the following sections will show, there is no substantial federal question because the State s claims for relief arise under state statutory law and do not arise under or require the construction or application of federal law as essential elements of those claims. Complete preemption is also absent because federal law does not substitute a congressional remedy for Idaho's inherent authority to regulate the introduction of tobacco into this state. B. Federal Question Jurisdiction and the Well-Pleaded Complaint Rule Native Wholesale s sole basis for asserting that this Court has jurisdiction is 28 U.S.C. Section 1331. Title 28 U.S.C. Section 1331 states simply that the district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. 1331 (emphasis added. It is well established that a statute which merely confers access to the federal courts, but does not require the application of substantive federal law, does not create arising under jurisdiction under Section 1331. In In re TMI Litigation Cases Consolidated II, 940 F.2d 832 (3 rd Cir. 1991, the court stated that the central teaching of Osborn [v. Bank of the United States, 22 U.S. (9 Wheat 738, 6 L.Ed. 204 (1824], therefore, is that a case cannot be said to arise under a federal statute where that statute is nothing more than a jurisdictional grant... it must do PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 6

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 7 of 19 more. Id. at 849. The TMI Litigation court noted the Supreme Court s conclusion that grants of jurisdiction that merely concern access to the federal courts do not as a result create arising under jurisdiction. Id., at 850. Instead, the statute must create substantive federal law. See also Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 480 (1981 (the Outer Continental Shelf Act, which was enacted in order to fill gaps in the federal scheme, borrow[ed] the applicable and not inconsistent laws of the adjacent states as surrogate federal law. The Osborn rule was affirmed by the Supreme Court in Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 496-97 (1983, where it held that pure jurisdictional statutes which seek to do nothing more than grant jurisdiction over a particular class of cases cannot support Article III arising under jurisdiction, and finding that the Foreign Sovereign Immunities Act conferred arising under jurisdiction because it codifie[d] the standards governing foreign sovereign immunity as an aspect of substantive federal law[,] and in Mesa v. California, 489 U.S. 121, 136 (1989, where it held that the federal officer removal statute, 28 U.S.C. 1442(a, is a pure jurisdictional statute which does not support arising under jurisdiction in the absence of a federal defense. Accordingly, Native Wholesale must show how the State s Verified Complaint arises under federal law. It does not do this in the removal petition and cannot do it otherwise. Whether the claim arises under federal law or raises a federal question is governed by the well-pleaded complaint rule. Under it, federal jurisdiction exists only when a federal question is presented on the facts of the plaintiff s properly pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987; Gully v. First Nat l Bank, 299 U.S. 109, 112-13 (1936. This rule requires that a federal question appear on the face of the state court complaint, without reference to the answer or the notice of removal. Gully, 299 U.S. at 113. It matters neither that the plaintiff could have construed his claim to include federal law nor that the parties anticipate a federal defense to the plaintiff s claims. Caterpillar, 482 U.S. at 393. PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 7

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 8 of 19 Moreover, the mere presence of a federal defense to a state law claim, even one relying on the preemptive effect of a federal statute, is insufficient to confer federal jurisdiction and will not provide basis for removal. See Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003. Plaintiffs are considered the masters of their own cases and, for the most part, can avoid federal jurisdiction by relying exclusively on state law in alleging their claims. Lowdermilk, 479 F.3d at 998-99. Consequently, if the State s Verified Complaint fails to allege claims that are founded on a federal claim or right, the action must be remanded to the state court. See generally 14B Charles Alan Wright et al., Federal Practice and Procedure 3722, at 444 (3d ed. 1998 ("14B Wright" ("The rationale for these cases is that if the plaintiff's claims had been well pleaded, the federal question that purportedly creates subject matter jurisdiction necessarily would have appeared on the face of the complaint". A brief review of the Verified Complaint demonstrates that no claims arise out of a federal claim or right. Native Wholesale s contention that the State s Verified Complaint implicates the Commerce Clause of the United States Constitution (erroneous as that claim is is not grounds for removal. It is perhaps an affirmative defense but, most assuredly, is not grounds for removal. 1 City of Camden v. Beretta, 81 F. Supp. 2d 541, 547 (D.N.J. 2000, is illustrative. There, the court rejected defendants' effort to create out of whole cloth a new doctrine of complete constitutional preemption. The defendants removed the plaintiff s state 1 It is also a claim that has been rejected in various other federal courts. Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205, 218 (2 nd Cir. 2004; Star Scientific, Inc. v. Beales, 278 F.3d 339 (4 th Cir 2002; Mariana v. Fisher, 226 F. Supp. 2d 575 (M.D. Pa. 2002, aff d on other grounds, 338 F.3d 189 (3 rd Cir. 2003; Forces Action Project, LLC v. California, No. C99-0607MJJ (N.D. Cal. Jan. 15, 2002, aff d, 61 Fed. Appx. 472 (9 th Cir. 2003; Grand River Enter. Six Nations, Ltd. v. Beebe, 418 F. Supp. 2d 1082 (W.D. Ark. 2006; Dos Santos, S.A. v. Beebe, 418 F. Supp. 2d 1064 (W.D. Ark. 2006; and Star Scientific, Inc. v. Carter, 2001 WL 1112673 (S.D. Ind. Aug. 20, 2001. The merits of Native Wholesale's claim in this regard nevertheless neither need nor should be addressed in resolving the State s motion to remand. PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 8

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 9 of 19 court lawsuit, claiming that issues related to the Commerce Clause supported the removal notice. The federal district court was unpersuaded: The Commerce Clause confers upon Congress the power to enact legislation regulating interstate and foreign commerce. However, that provision contains no self-enforcing mechanism nor does the Commerce Clause give rise to a private right of action absent specific federal legislation. Further, simply because a state law or claim may have an effect on interstate commerce does not mean that such law is precluded by the Commerce Clause. It is long established that Congress's power to regulate interstate commerce does not preclude all state power to regulate. Therefore, although the Commerce Clause and other provisions of the Constitution may affect the measure of the City's relief should its suit prove successful, this possibility has no bearing on whether this Court has jurisdiction. Id. at 547-48 (citations omitted. The court further held that [a]llowing defendants to remove state law claims to federal court on the grounds that the City's suit will impact interstate commerce would eviscerate the well settled principle that the plaintiff is the master of the claim and may avoid federal jurisdiction by exclusive reliance on state law. Id. at 548; accord City of Gary ex rel. King v. Smith & Wesson Corp., 94 F. Supp. 2d 947, 950-51 (N.D. Ind. 2000 ( The defendants arguments that Gary s action violates the Commerce Clause and other constitutional provisions is a defense, not a basis for removal as an exception to the well-pleaded complaint rule. In short, questions of federal law simply do not arise from the face of the Verified Complaint. Under the well-pleaded complaint rule, remand is therefore appropriate to the extent that removal is founded on the existence of a substantial federal question. The State s claims against Native Wholesale are for violations of state law for tobacco sales into Idaho and depend not one jot on federal law. C. "Complete Preemption" Does Not Exist with Respect to State Regulation of Native Wholesale's Tobacco Sales Native Wholesale also argues as a separate basis for jurisdiction, equally in error, that federal law has completed [sic] preempted the field of Indian Commerce and Indian Affairs. PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 9

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 10 of 19 Doc. 1-2 at 9. "Complete preemption" is an exceptionally limited legal doctrine. As the Ninth Circuit Court of Appeals has explained, it embodies a "corollary of the well-pleaded complaint rule" and occurs only when "Congress [has] so completely pre-empt[ed] a particular area that any civil complaint raising this select group of claims is necessarily federal in character." ARCO, 213 F.3d at 1114; see also Beneficial Nat'l Bank, 539 U.S. at 8 ("a state claim may be removed to federal court in only two circumstances when Congress expressly so provides... or when a federal statute wholly displaces the state-law cause of action through complete preemption". Here, in stark contrast, Native Wholesale points to no specific statute that purports to occupy the field of tobacco regulation either generally or with particular respect to business entities that may have some connection to a tribe or tribal member. Cf. Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536 (8 th Cir. 1996 (Indian Gaming Regulatory Act completely preempted state law claims related to law firm's conduct in tribal gaming licensing process. It accordingly asks this Court to find "complete preemption" i.e., the transmutation of the State's claims under Idaho tobacco regulation statutes into federal claims on the basis of common-law preemption principles. Native Wholesale's reasoning proves far too much, since it seeks not to substitute a federal common-law claim for a state claim but to interpose federal common law to preclude any form of relief. 2 As such, it advances nothing more than a garden-variety 2 This case is thus distinguishable from Oneida Indian Nation v. County of Oneida, 414 U.S. 661 (1974, where the Supreme Court found federal question jurisdiction with respect to a claim for fair rental value asserted by a tribe with respect to certain lands, as to which aboriginal title was asserted, and therefore reversed the court of appeals' determination that the claim arose, if at all, under state law. It reasoned that, "[g]iven the nature and source of the possessory rights of Indian tribes to their aboriginal lands, particularly when confirmed by treaty, it is plain that the complaint asserted a controversy arising under the Constitution, laws, or treaties of the United States within the meaning of both [28 U.S.C.] 1331 and 1362." Id. at 667. To the extent that Oneida is deemed a "complete preemption" case see Beneficial Nat'l Bank, 539 U.S. at 8 n.4 it fits into the paradigm of providing recourse under federal law. See In re Miles, 430 F.3d 1083, PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 10

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 11 of 19 preemption defense upon which removal may not be predicated. E.g., Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 841 (1989 (per curiam ("it has long been settled that the existence of a federal immunity to the claims asserted does not convert a suit otherwise arising under state law into one which, in the statutory sense, arises under federal law". The applicability of state law to tribes and their members has proven to be a staple of federal and court litigation since Worcester v. Georgia, 31 (6 Pet. 515 (1832, where the issue was the authority of a State to enforce its criminal laws on lands occupied pursuant to treaty by the Cherokee Nation. The federal common law principles governing such authority have been refined substantially since Worcester. E.g., McClanahan v. State Tax Comm'n, 411 U.S. 164, 171 (1973 ("This is not to say that the Indian sovereignty doctrine, with its concomitant jurisdictional limit on the reach of state law, has remained static during the 141 years since Worcester was decided. Not surprisingly, the doctrine has undergone considerable evolution in response to changed circumstances"; Mescalero Apache Tribe v. Jones, 411 U.S. 145, 147-48 (1973 ("[W]e reject as did the state court the broad assertion that the Federal Government has exclusive jurisdiction over the Tribe for all purposes and that the State is therefore prohibited from enforcing its revenue laws against any tribal enterprise '(whether the enterprise is located on or off tribal land.' Generalizations on this subject have become particularly treacherous" because "[t]he conceptual clarity of Mr. Chief Justice Marshall's view in Worcester... has given way to more individualized treatment of particular treaties and specific federal statutes, including statehood enabling legislation, as they, taken together, affect the respective rights of States, Indians, and the Federal Government". Thus, as the McClanahan Court observed, "notions of Indian sovereignty have been adjusted to take account of the State's legitimate interests in 1088 (9 th Cir. 2005 (under the complete preemption doctrine, "'any claim purportedly based on that preempted state law is considered, from its inception, a federal claim, and therefore arises under federal law'". PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 11

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 12 of 19 regulating the affairs of non-indians" (id., and the result has been development of interestbalancing and categorical standards for determining when state civil law may be applied to tribes, tribal members and nonmembers with respect to activities within Indian country and a categorical standard as to tribes and their members when they engage in activities outside Indian country. 3 The basic standards are described easily enough in broad terms: Where on-reservation transactions between nonmembers and the resident tribe or its members are involved, the applicability of state law is determined by balancing relevant federal, state and tribal interests. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 144-45 (1980; Colville, 447 U.S. at 156-57. Where a State attempts to regulate the on-reservation activities of the resident tribe or its members outside the context of taxation, an "exceptional circumstances" standard has been applied. New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 331-32 (1983. Where regulation, including taxation, of nonmember on-reservation activity or property alone is involved, state law applies absent a contrary congressional directive. County of Yakima v. Confederated Tribes and Bands of Yakima Indian Nation, 502 U.S. 251, 257-58 (1992. Where state taxation of on-reservation property or transactions of the resident tribe or its members is attempted, preemption occurs absent congressional authority of the tax. California v. Cabazon Band of Mission Indians, 480 U.S. 202, 215 n.17 (1987. 3 The term "nonmembers" is used because Indians are treated, for civil law purposes, no differently than non-indians with respect to activities in Indian country not set aside for their benefit. Washington v. Confederated Tribes of Colville Indian Reserv., 447 U.S. 134, 161 (1980. PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 12

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 13 of 19 Where regulation of off-reservation activity or property of a tribe or its members is at issue, nondiscriminatory state law applies absent express federal law to the contrary. Mescalero Apache, 411 U.S. at 148-49. Application of these standards in specific contexts, in contrast, has often been a vexing task. Nonetheless, regardless of the outcome in individual cases, the fact remains that Congress has not exercised its authority under the Indian Commerce Clause, U.S. Const. art. I, 8, cl. 3, or any other provision of the Constitution not only to displace state law entirely with respect to tobacco regulation but also to substitute exclusive federal law remedies for such regulation the twin hallmarks of "complete preemption." See generally 14B Wright 3722.1, at 511 ("[i]n complete preemption a federal court finds that Congress desired to control the adjudication of the federal cause of action to such an extent that it did not just provide a federal defense to the application of state law; rather, it replaced the state law with federal law and made it clear that the defendant has the ability to seek adjudication of the federal claim in a federal court". Native Wholesale ignores the settled doctrinal standards that govern preemption of state authority with respect to the regulation of Indian country activities and the non-indian country activities of tribes and their members. It instead asserts that the Verified Complaint "implicates the... Indian Commerce Clause" for complete preemption purposes. Doc. 1-2 at 9. It goes seriously astray in this respect. The Supreme Court has consistently refused to assign a negative, or dormant, function to the Indian Commerce Clause because its constitutional role differs materially from that of the Interstate Commerce Clause. See Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 192 (1989 ("while the Interstate Commerce Clause is concerned with maintaining free trade among the States even in the absence of implementing federal legislation,... the central function of the Indian Commerce Clause is to provide Congress with plenary power to legislate in the field of Indian affairs". In Ramah Navajo School Board, Inc. v. Bureau PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 13

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 14 of 19 of Revenue, 458 U.S. 832 (1982, it accordingly rejected the United States' request to "rely on the dormant Indian Commerce Clause... to hold that on-reservation activities involving a resident tribe are presumptively beyond the reach of state law even in the absence of comprehensive federal regulation, thus placing the burden on the State to demonstrate that its intrusion is either condoned by Congress or justified by a compelling need to protect legitimate, specified state interests other than the generalized desire to collect revenue." Id. at 845. In the Court's view, "the existing pre-emption analysis governing these cases is sufficiently sensitive to many of the concerns expressed by the Solicitor General" since, "[a]lthough clearer rules and presumptions promote the interest in simplifying litigation, our precedents announcing the scope of preemption analysis in this area provide sufficient guidance to state courts and also allow for more flexible consideration of the federal, state, and tribal interests at issue." Id. at 846. The flexible nature and character of the Indian law preemption analysis can be seen in various Ninth Circuit decisions. Perhaps most telling for present purposes is Confederated Tribes of Siletz Indians v. Oregon, 143 F.3d 481 (9 th Cir. 1998, where it reversed a district court judgment enjoining Oregon officials from complying with state public records law and releasing an investigative report concerning a tribal gaming facility subject to a compact entered into pursuant to the Indian Gaming Regulatory Act ("IGRA", 25 U.S.C. 2701-2721. While the Court of Appeals found the report's release consistent with the compact's terms, it continued on to address whether the public record law was preempted by IGRA or federal law more generally. It reasoned that the Supreme Court has striven to accommodate the sometimes-competing sovereign interests possessed by the federal government, states and tribes through the White Mountain "balancing test." 143 F.3d at 486. The court rejected the position that regulation of only the Siletz Tribe was involved, observing that "the Report covers only on-reservation matters" but that it also "discusses a gaming enterprise which is used by large numbers of non- PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 14

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 15 of 19 tribal members." Id. at 486-87. Indeed, the panel voiced doubt that the "White Mountain preemption analysis applies at all" since "[i]t is unclear how the Oregon Public Records Laws interfere with or are incompatible with IGRA." Id. at 487. The release of even "damaging information on the operation of the... casino" and an attendant "decline in business[,]" it concluded, "is fully consistent with IGRA's goal of fair and honest gaming." Id. Unsurprisingly, Siletz provided the basis for rejecting a complete preemption claim premised on IGRA by a tribe that had removed a state-court nuisance action arising from failure to obtain several permits in connection with construction of a hotel and spa with a gaming casino. County of Madera v. Picayune Rancheria of Chukchansi Indians, 467 F. Supp. 2d 993, 1002-03 (E.D. Cal. 2006; accord Kersten v. Harrah's Casino-Valley Ctr., No. 07cv0103 BTM(JMA, 2007 WL 951342, at *2 (S.D. Cal. Feb. 27, 2007. Instantly, the Verified Complaint seeks to enforce state law against a corporation that unquestionably introduces cigarettes into Idaho without compliance with such law. Native Wholesale, in response, seeks to portray itself as a tribal member for preemption analysis purposes and, apparently, deems the State s enforcement efforts as regulating transactions outside the State and on the reservation where Native Wholesale's owner resides. Its position in this regard, however, arises as a matter of affirmative defense i.e., the alleged preemption of Idaho's tobacco regulation statutes and not as part of the State s claims. No federal law inquiry thus is necessary to determine whether Native Wholesale has acted inconsistently with those statutes; federal law issues will arise solely by virtue of the contention which presumably will be set out in the answer or some otherwise appropriate motion under Idaho R. Civ. P. 12 or 56 that those statutes do not apply at all. Even Native Wholesale, in other words, is not "say[ing] there is 'no such thing' as a state-law claim" for violation of the involved Idaho statutes a PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 15

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 16 of 19 necessary predicate for its complete preemption assertion. Lippit, 340 F.3d at 1042. Under these circumstances, reliance on complete preemption as a basis for removal under Section 1441 fails. D. The Tax Injunction Act and Principles of Comity Bar this Court from Taking Action Over the State s Enforcement of its Cigarette Taxes Act An additional problem with removal here relates to the State s claim that Native Wholesale is selling cigarettes to Idaho retailers without the cigarette tax permit required by Idaho Code Section 63-2503(1 of the Cigarette Taxes Act. Verified Complaint, Third Cause of Action. The State asks that Native Wholesale be enjoined from future violations of that section. Verified Complaint 49 52. The cigarette tax permit, part of Idaho s Cigarette Taxes Act, is the State s method of enforcing and collecting its excise tax on cigarettes. Pursuant to the Tax Injunction Act (TIA, 28 U.S.C. 1341, this court is deprived of jurisdiction to resolve Native Wholesale s violations of Idaho s Cigarette Taxes Act. Specifically, the TIA prohibits a federal district court from ruling on a state tax law where, as here, a state provides a plain, speedy and efficient remedy in its courts. Id. The Supreme Court recognizes the TIA s purpose as that of prevent[ing] federal-court interference with the assessment... of state taxes. California v. Grace Brethren Church, 457 U.S. 393, 411 (1982. Thus, the Court has long recognized that principles of federalism and comity generally counsel that courts should adopt a hands-off approach with respect to state tax administration. Nat'l Private Truck Council, Inc. v. Oklahoma Tax Comm'n, 515 U.S. 582, 586 (1995. The federal courts apply the TIA to cases, like this one, that come to the court by removal. State Tax Comm'n v. Union Carbide Corp., 386 F. Supp. 250 (D. Idaho 1974. 4 In 4. An exception to the TIA for actions by Indian Tribes does not apply to suits brought by individual Indians. Comenout v. Washington, 722 F.2d 574, 577 (9th Cir. 1983. Therefore, a private Indian-owned entity may not invoke the tribal exception to the Act. Amarok Corp. v. Nevada Dep't of Taxation, 935 F.2d 1068 (9 th Cir, 1991. PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 16

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 17 of 19 short, the TIA is a bar to federal court jurisdiction, at least with respect to the State s Third Cause of Action and, at the least, should be remanded or dismissed sua sponte. E. The Court Should Award the State Attorney Fees Under 28 U.S.C. 1447(c 28 U.S.C. Section 1447(c provides that this Court, in its discretion, may assess attorney fees against a party improperly removing an action to federal court. Kanter v. Warner-Lambert Co., et al., 52 F.Supp.2d 1126, 1132 (N.D.Cal. 1999.. Its purpose is to reimburse a party for responding to an improper removal. Watson v. Charleston Hous. Auth., 83 F. Supp. 2d 709, 712 (S.D.W.Va. 2000. Thus, it is unnecessary to show frivolousness or unreasonableness on the part of the party seeking removal. Martin v. Franklin Capital Corp., 546 U.S. 132, 138-39 (2005. Instead, fees may be awarded where the removing party lacked an objectively reasonable basis for seeking removal. Id. at 141. This memorandum establishes the lack of any objective basis for Native Wholesale s removal of the State s Verified Complaint. There is no complete preemption; that claim is not even close. The State s Verified Complaint does not rely in any way, shape or form upon any federal law, standard or rule; it is a complaint that only seeks relief for Idaho state law violations. Native Wholesale does not cite to one fact indicating that this Court has original jurisdiction. In short, there is no objective basis for Native Wholesale to have sought removal of this matter and thus attorney fees are awardable under Section 1447(c. Accord Watson, 83 F. Supp. 2d at 712 ( Here it was clear from Plaintiff s complaint that he alleged no federal cause of action. The Court FINDS and CONCLUDES that an award of attorney s fees is therefore appropriate. (Emphasis in original. Native Wholesale s unreasonable removal has accomplished one thing. It has delayed the State s efforts to address Native Wholesale s continued state law violations. Such tactics should not be rewarded. Indeed, they waste the time and resources of both plaintiffs and the PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 17

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 18 of 19 courts in this circuit. Kanter, 52 F. Supp. 2d at 1132. Thus, the State should be compensated for the cost of this unnecessary round of litigation. Id. Accordingly, in addition to remanding this matter back to Idaho state court, the State respectfully requests that the Court order Native Wholesale to compensate the State for its attorney fees and costs in responding to Native Wholesale s removal. IV. CONCLUSION For all the foregoing reasons, Plaintiff asks the Court to remand this case back to the District Court of the Fourth Judicial District of the State of Idaho, Ada County, and also to award the State its attorney fees and costs. Dated this 25 th day of September, 2008. LAWRENCE G. WASDEN ATTORNEY GENERAL STATE OF IDAHO By: /s/ Brett T. DeLange BRETT T. DeLANGE Deputy Attorney General IDAHO STATE TAX COMMISSION By: /s/ Theodore V. Spangler, Jr. THEODORE V. SPANGLER, JR Deputy Attorney General State Tax Commission PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 18

Case 1:08-cv-00396-EJL Document 5-2 Filed 09/25/2008 Page 19 of 19 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 25 th day of September, 2008, I filed the foregoing electronically through the CM/ECF system, which caused the following parties or counsel to be served by electronic means, as more fully reflected on the Notice of Electronic Filing: Samuel A. Diddle Counsel for Defendant sdiddle@eberle.com /s/ Brett T. DeLange BRETT T. DeLANGE Attorney for Plaintiff PLAINTIFFS MEMORANDUM IN SUPPORT OF MOTION TO REMAND - 19