Oklahoma Supreme Court upholds $47.7 million award over illegal contraband cigarettes

OKLAHOMA CITY (AP) – The Oklahoma Supreme Court Tuesday upheld a $47.7 million judgment awarded to the state over the sale of illegal contraband cigarettes, an activity the decision described as “flagrant disrespect for Oklahoma, our laws and our citizens.”

The ruling from the state’s highest court was against Native Wholesale Supply, a company chartered by the Sac and Fox Tribe of Oklahoma. The state Attorney General’s Office had requested the judgment be deposited into the Oklahoma Tobacco Settlement Endowment Trust, a fund dedicated to preventing and reducing tobacco use and improving Oklahomans’ overall health.

An attorney for Native Wholesale Supply, Paula Williams, declined comment on the decision. A spokeswoman for Attorney General Scott Pruitt said he was pleased with the outcome in the longstanding case.

“This is an important victory for the state in holding accountable those businesses that choose to violate the law and sell contraband tobacco in Oklahoma,” spokeswoman Diane Clay said.

A lawsuit filed by the state in 2008 accused Native Wholesale Supply of violating provisions of the Tobacco Master Settlement Agreement, which was reached in 1998 between four of the nation’s largest tobacco product manufacturers and 46 states, including Oklahoma. The agreement settled litigation by the states to recoup health care expenses resulting from cigarette smoking.

Among other things, the agreement requires that tobacco manufacturers and their brand families be listed on the Directory of Compliant Tobacco Manufacturers maintained by the attorney general’s office. Cigarettes not on the list are illegal to sell and are not taxed by the state.

The lawsuit alleged the Sac and Fox Nation appeared to be brokering the sale of Seneca brand cigarettes through Native Wholesale Supply, a corporation located on the Cattaraugus Indian Reservation in New York. Seneca brand cigarettes are manufactured by Grand River Enterprises Six Nations Ltd., a Canadian limited liability corporation.

The Supreme Court’s ruling says that in 2006, the attorney general removed Seneca brand cigarettes and their manufacturer from the directory. But between 2007 and 2010, Native Wholesale Supply brought the cigarettes into the state knowing that their manufacturer was not on the list and did not comply, the decision says. The company filed for bankruptcy in New York in 2011.

The decision, written by Justice Steven Taylor of McAlester, says the company “purposefully targeted the Oklahoma cigarette market and reaped the economic benefit of selling cigarettes in Oklahoma.”

The company “continued to import and distribute contraband Seneca cigarettes into Oklahoma and reap millions of dollars from the sale of contraband cigarettes to Oklahoma consumers for more than two years after Oklahoma’s chief law enforcer filed this suit,” the ruling says. Similar lawsuits were filed in California and New Mexico, according to the decision.

In a lone dissenting opinion, Justice Noma Gurich of Oklahoma City wrote that the fact cigarette sales were made did not prove Native Wholesale Supply knew wholesalers intended to distribute the cigarettes in violation of state law.