UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
RYO MACHINE RENTAL, LLC, et al., Plaintiffs,CASE NO. 4:10-CV-2462
U.S. DEPARTMENT OF THE
TREASURY, ALCOHOL AND TOBACCO
TAX AND TRADE BUREAU, et al.,
Before the Court is Defendants’ motion to clarify or modify the Court’s December 14,
2010 preliminary injunction order expressly to allow Defendants to process six tobacco
manufacturer permit applications pursuant to TTB Ruling 2010-4. ECF No. 42. Plaintiffs filed
their response in opposition to Defendants’ motion on January 18, 2011. ECF No. 44.
Defendants did not file a reply.
Having reviewed Defendants’ motion, Plaintiffs’ opposition, the Court’s Order and the
applicable law, the Court denies Defendants’ motion to clarify or modify the Court’s December
14, 2010 preliminary injunction order.
I. Relevant Factual and Procedural History
Defendant United States Department of the Treasury, Alcohol and Tobacco Tax and
Trade Bureau (“TTB) issued Ruling No. 2010-4 (the “Ruling”) on September 30, 2010. The
The proprietor of a retail establishment who is in the business of making cigarettes
for others, or who facilitates the making of cigarettes by or for others by providing
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1 ECF No. 2-1 at 5.
2 ECF No. 18 at 12.
3 The Court dismissed Plaintiff Tightwad Tobacco, LLC in the Court’s December 14,
2010 preliminary injunction order. ECF No. 41 at 22.
4 ECF Nos. 1 & 2.
the use of a commercial cigarette-making machine at its premises is engaged in the
business of a tobacco products manufacturer and must qualify for and obtain a permit
from TTB to engage in such business. The proprietor must also obtain a bond and
comply with the applicable regulatory recordkeeping, reporting, and inventory
requirements. As a manufacturer of tobacco products, the proprietor is liable for the
payment of tax on the cigarettes produced. Once qualified as a manufacturer of
tobacco products, a proprietor may, under the IRC, obtain roll-your-own tobacco and
cigarette papers or tubes without payment of tax for use in the manufacture of
Non-compliance with the regulatory requirements subjects a violator to forfeiture and civil and
criminal penalties. Defendants assert that “TTB issued the Ruling because it determined that the
use of commercial cigarette-making machines in retail establishments jeopardized the assessment
and collection of taxes on cigarettes.”2
Plaintiffs RYO Machine Rental, LLC, Tobacco Outlet Express, LLC, and Tightwad
Tobacco, LLC3 (“Plaintiffs”) filed a complaint and motion for temporary restraining order and
preliminary injunction, concomitantly, against the U.S. Department of the Treasury, Alcohol and
Tobacco Tax and Trade Bureau and John J. Manfreda, Administrator, Alcohol and Tobacco Tax
and Trade Bureau (“Defendants”) on October 28, 2010, to enjoin Defendants from enforcing
Ruling No. 2010-4 issued on September 30, 2010.4
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AUSA Kathleen Midian was present i 5 n Chambers while DOJ attorney Lisa Bellamy
attended by telephone from Washington, D.C.
6 ECF No. 9.
7 ECF Nos. 16 & 18.
8 The Court ordered in part as follows: “[The U.S. Treasury Department, Alcohol and
Tobacco Tax and Trade Bureau (“TTB”) and their agents, servants, employees, successors,
representatives and assigns, and all others in active concert and privet with them who receive
actual notice of this Temporary Restraining Order by personal service or otherwise, are
immediately restrained from enforcing the TTB’s September 30, 2010 Ruling No. 2010-4 and all
requirements set forth therein. . . .” ECF No. 20.
9 See ECF Nos. 25 & 26.
On October 29, 2010, the Court conducted an informal conference in Chambers, not on
the record, with counsel for Plaintiffs and Defendants present.5 On the same day, the Court
denied Plaintiffs’ motion for a temporary restraining order and scheduled a hearing on the motion
for a preliminary injunction for November 12, 2010.6 On November 10, 2010, Defendants filed a
motion to dismiss Plaintiffs’ Complaint arguing that the Court lacks subject matter jurisdiction
under Federal Rule of Civil Procedure 12(b)(1) and an opposition to Plaintiffs’ motion for a
preliminary injunction.7 continued on page 23
After hearing the parties’ arguments during the November 12, 2010 preliminary
injunction hearing and having reviewed all of the briefs and evidence presented, the Court
reconsidered its denial of Plaintiffs’ motion for a temporary restraining order and granted the
motion on November 15, 2010.8 The Court also ordered the parties to file post-hearing briefs to
which the parties complied on November 29, 2010.9
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10 ECF No. 41 at 22-23.
On December 14, 2010, the Court granted Plaintiffs’ motion for preliminary injunction
and ordered as follows:
Pending final resolution of this matter, the U.S. Treasury Department, Alcohol and
Tobacco Tax and Trade Bureau (“TTB”) and their agents, servants, employees,
successors, representatives and assigns, and all others in active concert and privity
with them who receive actual notice of this Injunctive Order by personal service or
otherwise, are immediately restrained from enforcing the TTB’s September 30, 2010
Ruling No. 2010-4 and all requirements set forth therein.10
Defendants now ask the Court to clarify or modify, which the Court interprets as to alter
or amend, its preliminary injunction enjoining the TTB’s enforcement of the September 30, 2010
Ruling No. 2010-4 and all requirements set forth therein.
II. Law and Analysis
A court may grant a motion to alter or amend judgment if a clear error of law or newly
discovered evidence exists, an intervening change in controlling law occurs, or to prevent
manifest injustice. See Gencorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 834 (6th
Cir.1999). Such a motion is extraordinary and is seldom granted because it contradicts notions
of finality and repose. See Wells Fargo Bank v. Daniels, No. 1:05-CV-2573, 2007 WL 3104760,
at *1 (N.D. Ohio Oct. 22, 2007) (citing Plaskon Elec. Materials, Inc. v. Allied-Signal, Inc., 904
F.Supp. 644, 669 (N.D. Ohio 1995)). “It is not the function of a motion to [alter or amend
judgment] either to renew arguments already considered and rejected by a court or ‘to proffer a
new legal theory or new evidence to support a prior argument when the legal theory or argument
could, with due diligence, have been discovered and offered during the initial consideration of
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11 ECF No. 41 at 19-20.
12 ECF No. 42-1 at 3.
the issue.’” McConocha v. Blue Cross & Blue Shield Mut. of Ohio, 930 F.Supp. 1182, 1184
(N.D. Ohio 1996) (quoting In re August 1993 Regular Grand Jury, 854 F.Supp. 1403, 1408 (S.D.
As the Court wrote in its Order granting Plaintiffs’ preliminary injunction:
The heart of this case is whether the TTB’s Ruling is considered interpretive or
legislative. If the Court finds the Ruling to be interpretive, then the Ruling does not
violate the Administrative Procedures Act. If the Ruling is legislative, then
Defendants have violated the APA upon issuing the Ruling. Plaintiffs RYO Machine
and Tobacco Outlet assert that the Ruling issued by the TTB violates the
Administrative Procedure Act, is ultra vires and otherwise unlawful. Defendants
contend that the Ruling at issue is interpretive rather than legislative in nature and
thus does not violate the Administrative Procedure Act and is otherwise lawful.11
Given that the question of the Ruling’s constitutionality remains unresolved, it defies common
sense to allow the TTB to enforce the Ruling (which may or may not be constitutionally valid)
upon those who wish to voluntarily submit themselves to the process set forth therein. The
Court’s injunction not only preserved the status quo for the Plaintiffs, but also any individual
who wishes to engage in similar business practices.
With respect to the Rule 59(e) criteria employed to determine whether to grant a request
to alter or amend judgment, it appears, without expressly stating, that Defendants seek only to
prevent manifest injustice. Defendants ask the Court to clarify its Order “to prevent any inequity
to retailers who may seek to challenge and/or comply with the Ruling.”12 Defendants have not
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13 To the extent Defendants assert that six applications filed with the TTB pursuant to the
Ruling is new evidence, those applications were submitted prior to the Courts Order granting the
preliminary injunction and could have been presented to the Court for consideration at that time.
Thus, these applications do not amount to newly discovered evidence.
14 ECF No. 42-1 at 3.
claimed the existence of newly discovered evidence13, that the Court committed a clear error of
law or that there has been an intervening change in controlling law.
Defendants argue that “retailers could ultimately be unfairly prejudiced by the TTB’s
inability to process the applications if the TTB ultimately prevails in this litigation.”14 The
inverse, however, holds true as well. If the TTB does not ultimately prevail in this litigation,
retailers could be prejudiced for having expended the time and costs associated with the Ruling’s
procedures. Therefore, preserving the status quo for all, Plaintiffs and prospective retailers
engaged or looking to engage in a similar business, is best served by not altering the terms of the
injunction until resolution of the primary issue in this case—the Ruling’s constitutionality.
Accordingly, the Court finds no manifest injustice to prevent and therefore declines to
alter or amend its Order enjoining the TTB from enforcing Ruling 2010-4 issued on September
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For the above mentioned reasons, Defendants’ motion to alter or amend the Court’s
December 14, 2010 preliminary injunction order pursuant to Rule 59(e) (ECF No. 42) is
IT IS SO ORDERED.
February 1, 2011
s/ David D. Dowd, Jr.
David D. Dowd, Jr.
U.S. District Judge
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