Opinion ID: 2637676
Heading Depth: 2
Heading Rank: 1

Heading: The Complementary Act is intended to govern interstate as well as intrastate sales of cigarettes to consumers in the state of Idaho, and Maybee sells cigarettes in Idaho.

Text: The goal of the Idaho Legislature in enacting the Complementary Act was to prevent the sale of cigarettes made by any Noncompliant Manufacturer. Maybee, as a matter of uncontested fact, has sold over 2,500,000 cigarettes (as defined under the MSAA and Complementary Act) produced by Noncompliant Manufacturers to Idaho consumers.
Maybee acknowledges that he has sold unstamped cigarettes, not listed on the Idaho Directory, through interstate commerce, to Idaho consumers. Nevertheless, Maybee contends that he is not subject to the Complementary Act's restrictions, as the Complementary Act and the MSAA must be interpreted in pari materia, and therefore those Acts regulate not cigarettes but units sold. Maybee cites to the statement of purpose for House Bill 111, which later became the Complementary Act. That statement of purpose reads: This proposed legislation is designed to be complementary legislation to Idaho's Tobacco Master Settlement Agreement Act (the Act). Under Idaho's Master Settlement Agreement with the tobacco industry, Idaho must diligently enforce the Act. A number of tobacco product manufacturers are not complying with the provisions of the Act. Many of the non-compliant manufacturers are located in foreign countries. Effecting compliance is in some cases quite difficult because of their location. Requiring cigarette distributors to only stamp and distribute cigarettes of tobacco product manufacturers that are in compliance with the Act, and establishing procedures and remedies to ensure that the Act's provisions will be followed will significantly improve compliance under, and assist Idaho with its duty of enforcing, the Act. H.B. 111, RS 12609, 57th Leg., Reg. Sess. (Idaho 2003), available at http://www3.state. id.us/oasis/2003/H0111.html. Maybee argues that, because the MSAA only requires Non-Participating Manufacturers to make escrow payments for units sold, (such definition not including cigarettes that do not bear an Idaho tax stamp) the Complementary Act should also be read as regulating units sold rather than all cigarettes. Maybee contends that the regulation of units sold is all that is required for the State to meet its obligations of diligently enforcing the MSAA, as required by the MSA, and that therefore the State is not at risk of an NPM Adjustment under the MSA. The basic rules of statutory construction were summarized by this Court in City of Sandpoint v. Sandpoint Independent Highway District: The interpretation of a statute is a question of law over which we exercise free review. It must begin with the literal words of the statute; those words must be given their plain, usual, and ordinary meaning; and the statute must be construed as a whole. If the statute is not ambiguous, this Court does not construe it, but simply follows the law as written. A statute is ambiguous where the language is capable of more than one reasonable construction. If the statute is ambiguous, then it must be construed to mean what the legislature intended for it to mean. To determine that intent, we examine not only the literal words of the statute, but also the reasonableness of proposed constructions, the public policy behind the statute, and its legislative history. Statu[t]es that are in pari materia must be construed together to effect legislative intent. Statutes are in pari materia if they relate to the same subject. 139 Idaho 65, 69, 72 P.3d 905, 909 (2003) (internal citations omitted). Language of a particular section need not be viewed in a vacuum. And all sections of applicable statutes must be construed together so as to determine the legislature's intent. Friends of Farm to Market v. Valley County, 137 Idaho 192, 197, 46 P.3d 9, 14 (2002) (internal quotation marks omitted) (quoting Lockhart v. Dept. of Fish and Game, 121 Idaho 894, 897, 828 P.3d 1299, 1302 (1992)). Constructions that would lead to absurd or unreasonably harsh results are disfavored. In re Daniel W., 145 Idaho 677, 680, 183 P.3d 765, 768 (2008). The words of the Complementary Act, given their plain, usual and ordinary meaning, are unambiguous, and are not in conflict with any provision of the MSAA. Idaho Code § 39-8402(2) provides that cigarette has the same meaning under the Complementary Act as it has under the MSAA, defined at I.C. § 39-7802(d). [3] The definition of cigarette makes no reference to tax stamps, or units sold, and is quite broad in scope. Having incorporated this definition, I.C. § 39-8403(3) states: It shall be unlawful for any person: (a) To affix a stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not included in the directory; (b) To sell, offer or possess for sale in this state, cigarettes of a tobacco product manufacturer or brand family not included in the directory; (c) To acquire, hold, own, possess, transport, import, or cause to be imported cigarettes that the person knows or should know are intended for distribution or sale in the state in violation of this subsection (3). The plain meaning of this statute is, inter alia, that it is illegal to sell, offer, or possess for sale Noncompliant Cigarettes, within Idaho. It is worth noting that under Maybee's proposed interpretation, an absurdity would result. Idaho Code § 39-8403(3)(a) mandates that no stamps be affixed to cigarettes manufactured by Noncompliant Manufacturers. If we were to accept Maybee's proposed interpretation of cigarettes under the Complementary Act as meaning units sold, then I.C. § 39-8403(3)(a) is mandating that one may not affix a tax stamp to a Noncompliant Cigarette, and since unstamped cigarettes are not considered cigarettes, this in-effect means that one may not affix a stamp to a stamped cigarette. We hold that the Complementary Act clearly prohibits selling, or offering for sale, Noncompliant Cigarettes, in Idaho.
Maybee next argues that the Complementary Act, read in pari materia with the MSAA, is applicable only to intrastate sales of cigarettes in Idaho. In summary, this argument is as follows: (1) the State's sole purpose in enacting the Complementary Act was to prevent an NPM Adjustment in the scheduled payments to the State from the Participating Manufacturers under the MSA; (2) the State has no obligation to regulate the sale of unstamped cigarettes within Idaho under the MSAA (the qualifying statute enacted in accordance with the MSA), and so would not face an NPM Adjustment by allowing interstate sales of Noncompliant Cigarettes; (3) out-of-state delivery sellers have no substantial nexus to the state and therefore cannot be required to collect or remit taxes on goods sold in interstate commerce to Idaho consumers, as such, these sellers do not have to stamp their cigarettes; and (4) the State therefore had no intention of regulating the conduct of interstate sellers selling unstamped cigarettes in Idaho. The logical flaws in this argument are apparent. First, as stated above, the plain language of the Complementary Act demonstrates a legislative intent to regulate the sale of all cigarettes, not only stamped cigarettes, whereas the MSAA regulates only stamped cigarettes (units sold). Second, under Maybee's proposed interpretation, Non-Participating Manufacturers based outside of Idaho could avoid their escrow obligations altogether by simply selling their cigarettes directly to Idaho consumers through the mail, or through an out-of-state retailer who would sell directly to Idaho consumers through the mail, rather than through in-state wholesalers and retailers. Such a result would violate not only the spirit of the MSA, but also Idaho public policy, and would be detrimental to the fiscal soundness of the State. Third, this argument glosses over the fact that, possible NPM Adjustments aside, Non-Participating Manufacturers that do not comply with the MSAA's escrow requirements deprive the State of financial assets, which are needed to defray medical care costs that have arisen as a result of tobacco-related health issues. Statutes are construed under the assumption that the legislature was aware of all other statutes and legal preceden[t] at the time the statute was passed. Druffel v. State, Dep't. of Transp., 136 Idaho 853, 856, 41 P.3d 739, 742 (2002).
The Complementary Act provides that it shall be unlawful for any person [t]o affix a stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not included in the directory. I.C. § 39-8403(3)(a). Idaho Code § 63-2508 provides that: No cigarettes may be purchased, sold, distributed, stored or held on hand or in possession of any person without Idaho stamps having been affixed thereto, within a reasonable time after receipt thereof. No person may import cigarettes, nor hold or have in possession unstamped cigarettes, unless he shall have qualified under this act as a wholesaler and obtained a permit, as provided for in section 63-2503, Idaho Code. (Emphasis added). Idaho Code § 63-2508 was enacted in 1974, and amended in 1986, long before the Complementary Act was enacted in 2003. See S.L.1986, ch. 193, § 5. When the legislature forbade the stamping of Noncompliant Cigarettes in I.C. § 39-8403(a), they did so with the knowledge that I.C. § 63-2508 broadly restricts the legality of possessing unstamped cigarettes within the state.
In 2003, the legislature amended the MAA, seeking to strengthen existing Idaho tobacco statutes, as they pertain to internet and delivery sellers. Under this amendment, Idaho Code § 39-5702(2) defines a [d]elivery sale as: [T]o distribute tobacco products to a consumer in a state where either: (a) the individual submits the order for such sale by means of a telephonic or other method of voice transmission, data transfer via computer networks, including the internet and other online services, or facsimile, or the mails; or (b) the tobacco products are delivered by use of the mails or a delivery service. From the stipulated and uncontested facts of this case, it is clear, as a matter of law, that Maybee is engaged in delivery sales. Idaho Code § 39-5714 addresses [r]equirements for delivery sales, providing in I.C. § 39-5714(2): Each permittee taking a delivery sale order shall comply with ... all other laws of the state of Idaho generally applicable to sales of tobacco products that occur entirely within Idaho including, but not limited to, those laws imposing excise taxes, sales and use taxes, licensing and tax stamping requirements and escrow or other payment obligations.[ [4] ] (Emphasis added). This is an unambiguous requirement that all delivery sellers shall be treated the same as in-state face-to-face sellers under the law. The plain language provides for no other reasonable interpretation.
Maybee next contends that he does not sell, or offer for sale, Noncompliant Cigarettes in Idaho. The provision of the Complementary Act that Maybee was sued under, I.C. § 39-8403(3)(b), prohibits anyone from selling, offering for sale, or possessing for sale in Idaho, Noncompliant Cigarettes. Maybee contends that the Uniform Commercial Code, as adopted by the Idaho Legislature, should be considered dispositive in determining where Maybee's sales take place for purposes of the Complementary Act. He also asserts that under the IUCC Maybee's sales take place in New York, and that therefore his conduct is not subject to regulation by the Complementary Act. The State responds that the official comment to I.C. § 28-2-401(2)(a) makes it clear that the IUCC's determination of the situs of sale, or transfer of title, is not controlling in determining whether a public regulation applies to a given transaction, and that Maybee is judicially estopped from arguing that his sales did not take place in Idaho. [5] The relevant portion of the IUCC reads as follows: Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading (a) if the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but (b) if the contract requires delivery at destination, title passes on tender there. I.C. § 28-2-401(2). Section one of the Official Comments to I.C. § 28-2-401 states [t]his section, however, in no way intends to indicate which line of interpretation should be followed in cases where the applicability of `public' regulation depends upon a `sale' or upon location of `title' without further definition. The goal of the legislature in enacting I.C. § 39-8403(3) of the Complementary Act was to prevent the cigarettes of Noncompliant Manufacturers from being sold to Idaho consumers. Idaho Code § 39-8403(3) is concerned with the introduction of Noncompliant Cigarettes into Idaho, not where the legal title to those cigarettes passes. Therefore, we hold that the Uniform Commercial Code is irrelevant to the determination of where Maybee's cigarette sales took place, and that those cigarette sales did, in fact, take place in Idaho for purposes of the Complementary Act.