Whether the District Court’s civil penalty against UPS for illegally transporting hundreds of thousands of cartons of untaxed cigarettes from Indian reservation retailers to non-tribal members in the State of New York is constitutional, well within the court’s discretion, and consistent with the harm to public health caused by UPS’s violations.
New York State has one of the highest state tobacco taxes in the U.S. Understanding the devastating effect of cigarette tax evasion on public health, the New York State Attorney General’s Office entered into agreements with major carriers of goods, including United Parcel Service, to ensure that they would transport cigarettes only to those licensed or registered in accordance with law to deal in tobacco products, and not to consumers. The State and New York City also worked in support of federal legislation, the Prevent All Cigarette Trafficking (“PACT”) Act, which, among other things, prohibits the shipment of cigarettes by the U.S. Postal Service. Despite these agreements and legislation, from 2005 until 2015, UPS violated its 2005 agreement with the AG’s Office and several relevant statutes by illegally transporting hundreds of thousands of cartons of untaxed cigarettes from Indian reservation retailers to non-tribal members in the State of New York.
The New York Attorney General sued, claiming UPS cost the state millions of dollars in tax revenue by delivering cigarettes to private residences and unauthorized sellers. In 2017, a federal judge ordered United Parcel Service, Inc. to pay nearly $247 million in damages and penalties for "illegally shipping" large volumes of untaxed cigarettes in New York State and City. UPS appealed.
On February 28, 2018, the Public Health Law Center and five other public health partners filed an amicus brief at the 2nd Circuit U.S. Court of Appeals in support of the New York district court’s assessment of penalties against UPS. Our brief argued that collecting cigarette taxes is the most effective way to reduce smoking, especially among youth; that the amount of civil penalties awarded is well within the district court’s discretion and consistent with the harm to public health caused by UPS’s violations; and that the district court award was well below any 8thAmendment limitations. Joining the brief were the Campaign for Tobacco-free Kids; American Cancer Society Cancer Action Network; American Lung Association; New York State American Academy of Pediatrics, Chapters 2 & 3; Truth Initiative Foundation; and the Public Health Law Center.
The litigation is ongoing.