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DOWD, J. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION 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., Defendants.
ORDER 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 Ruling held: 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 Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 1 of 7. Page ID #: 621 (4:10-CV-2462) 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. -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 cigarettes.1 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 Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 2 of 7. Page ID #: 622 (4:10-CV-2462) 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. -3- 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 Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 3 of 7. Page ID #: 623 (4:10-CV-2462) 10 ECF No. 41 at 22-23. -4- 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 Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 4 of 7. Page ID #: 624 (4:10-CV-2462) 11 ECF No. 41 at 19-20. 12 ECF No. 42-1 at 3. -5- 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. Ind.1994)). 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 Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 5 of 7. PageID #: 625 (4:10-CV-2462) 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. -6- 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 30, 2010. Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 6 of 7. PageID #: 626 (4:10-CV-2462) -7- III. Conclusion 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 DENIED. IT IS SO ORDERED. February 1, 2011 Date s/ David D. Dowd, Jr. David D. Dowd, Jr. U.S. District Judge Case: 4:10-cv-02462-DDD Doc #: 45 Filed: 02/01/11 7 of 7. PageID #: 627 |