New York v. United Parcel Service, Inc.
New York v. United Parcel Service, Inc. (U.S. Court of Appeals, Second Circuit, Nov. 7, 2019): The Second Circuit Court of Appeals found that United Parcel Service (UPS) shipped untaxed cigarettes from Native American reservations to locations throughout New York, knowingly violating state and federal laws designed to curtail cigarette tax evasion. The State and City of New York claimed UPS violated federal laws (Contraband Cigarette Trafficking Act (CCTA) and Prevent All Cigarette Trafficking (PACT)), state law (Public Health Law §1399-ll), and an Assurance of Discontinuance (AOD). Although significant state and city excise taxes are imposed on cigarettes to reduce youth access and deter adult use, federal law prohibits states from imposing such taxes on reservations for sales to tribe members for personal use. Tribes have refused to participate in the tax stamp process, complicating enforcement of excise tax provisions for reservation-based sales. As a result, New York State passed PHL §1399-ll, prohibiting all but face-to-face cigarette sales, imposing liability on shippers that violate the law. Despite agreeing in the AOD to stop certain practices, UPS continued to ship unstamped cigarettes to “numerous contraband cigarette enterprises.” The trial court found UPS liable, awarding $9.4 million in unpaid taxes and $237.6 million in penalties. The Second Circuit affirmed the trial court’s liability ruling, increasing the award of unpaid taxes to $18.8 million but reducing penalties to $78.8 million. Read the decision here.
View all cases in the Judicial Trends in Public Health – December 13, 2019.