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Case 1:19-Cv-05934-BMC Document 18 Filed 01/06/20 Page 1 of 57 Pageid #: 106 Case 1:19-cv-05934-BMC Document 18 Filed 01/06/20 Page 1 of 57 PageID #: 106 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ----------------------------------------------------------------------- x CITY OF NEW YORK, STATE OF CALIFORNIA, STATE OF ILLINOIS, STATE OF CONNECTICUT, AND COMMONWEALTH OF PENNSYLVANIA Case No. 19 cv-05934 Plaintiffs, AMENDED COMPLAINT -against- UNITED STATES POSTAL SERVICE and MEGAN BRENNAN, in her official capacity as Postmaster General, Defendants. ----------------------------------------------------------------------- x Case 1:19-cv-05934-BMC Document 18 Filed 01/06/20 Page 2 of 57 PageID #: 107 TABLE OF CONTENTS Nature of The Action ................................................................................................. 4 Parties ......................................................................................................................... 5 Jurisdiction and Venue ............................................................................................... 6 Factual Allegations .................................................................................................... 6 I. Plaintiffs’ Interest In Protecting The Public Health ................................... 6 II. Cigarette Taxation and Regulation In The Plaintiff Jurisdictions ............. 8 III. Cigarette Tax Avoidance and Evasion Practices .................................... 10 IV. The PACT Act .......................................................................................... 12 A. Cigarettes Are Non-Mailable ................................................................... 13 B. The Non-Compliant List .......................................................................... 15 V. The USPS’s Unlawful Transport and Delivery of Cigarettes ................. 15 A. The USPS’s Obstruction of the PACT Act’s Mandate ............................ 15 B. Shipment of Cigarettes in the International Mail ..................................... 16 C. The USPS’s Knowledge of Cigarettes in the International Mails ........... 18 1. Yessmoke.com ..................................................................................... 19 2. 2011 Operation Smokeout.................................................................... 20 3. Altria Inc.’s Investigation of Websites Selling Counterfeit Cigarettes and Counterfeit Tax-Stamped Cigarettes ................................................. 21 D. City Investigations of USA001.com ........................................................ 23 E. Federal, State and City Investigations of Classica International Express (C.I.E.) ........................................................................................................... 26 - 2 - Case 1:19-cv-05934-BMC Document 18 Filed 01/06/20 Page 3 of 57 PageID #: 108 F. California’s Investigations of the USPS’s Cigarette Shipments .............. 31 G. The 2018 Audit of the USPS’s John F. Kennedy International Mail Facility ........................................................................................................... 35 VI. The USPS Return To Sender Program ....................................................... 41 A. The USPS RTS Program is Illegal and Ineffective .................................. 42 B. Contraband Per Se .................................................................................... 48 VII. Postmaster General Megan Brennan’s Acts Are Ultra Vires .................... 50 FIRST CLAIM FOR RELIEF ................................................................................. 50 Violation of the PACT Act (18 U.S.C. § 1716E) ............................................. 50 SECOND CLAIM FOR RELIEF ............................................................................ 52 Declaratory Judgment Pursuant to 28 U.S.C. § 2201 ....................................... 52 THIRD CLAIM FOR RELIEF ................................................................................ 53 Writ of Mandamus Pursuant to 28 U.S.C. § 1361 ............................................ 53 - 3 - Case 1:19-cv-05934-BMC Document 18 Filed 01/06/20 Page 4 of 57 PageID #: 109 Plaintiffs the City of New York (the “City”), by its counsel Georgia M. Pestana, Acting Corporation Counsel of the City of New York, the State of California, by its Attorney General Xavier Becerra, the State of Illinois, by its Attorney General Kwame Raoul, the State of Connecticut, by its Attorney General William Tong, and the Commonwealth of Pennsylvania, by its Attorney General, Josh Shapiro (collectively, “Plaintiffs”), with knowledge of their own actions and on information and belief as to the actions of others, bring this action against the United States Postal Service and Megan Brennan in her official capacity as Postmaster General (collectively, the “USPS”). Nature of The Action 1. In violation of the Prevent All Cigarette Trafficking Act of 2009 (the “PACT Act”), 15 U.S.C. § 375 et seq. and 18 U.S.C. § 1716E, the USPS accepts and transmits through the mail packages known or reasonably believed by the USPS to contain cigarettes. The conduct of the USPS deprives state and local governments of millions of dollars in tax revenue and thwarts the public health policies of those jurisdictions. 2. Plaintiffs bring this civil action for an order under the PACT Act (i) permanently enjoining the USPS from accepting for delivery or transmitting through the mails any package the USPS knows or reasonably believes contains cigarettes; (ii) declaring that the USPS is violating the PACT Act by accepting and transmitting packages through the mails that the USPS knows or reasonably believes contain cigarettes; (iii) compelling the Postmaster General to comply with the nondiscretionary mandate in the PACT Act prohibiting the USPS from accepting and transmitting through the mails packages that the USPS knows or reasonably believes contain cigarettes; (iv) declaring cigarettes defined by 18 U.S.C. § 2341(2) (“contraband - 4 - Case 1:19-cv-05934-BMC Document 18 Filed 01/06/20 Page 5 of 57 PageID #: 110 cigarettes”)1 found within the mails to be contraband per se and enjoining the return of those cigarettes to senders; and (v) awarding Plaintiffs the other appropriate relief as provided by the PACT Act. Parties 3. Plaintiff the City of New York is a municipal corporation organized under the laws of the State of New York. 4. Plaintiff the State of California brings this action through its duly elected Attorney General, Xavier Becerra, who is the chief law enforcement officer of the State of California. Cal. Const., art. 5, § 13. 5. Plaintiff the State of Illinois brings this action through its duly elected Attorney General, Kwame Raoul, who is the chief legal officer of the State of Illinois. Ill. Const. art. V, § 15. 6. Plaintiff the State of Connecticut brings this action through its duly elected Attorney General, William Tong, who is the chief legal advocate of the State of Connecticut. Conn. Const. art IV, § 1; Conn. Gen. Stat. § 3-125. 7. Plaintiff the Commonwealth of Pennsylvania brings this action through its duly elected Attorney General, Josh Shapiro, who is the chief law enforcement officer of the Commonwealth of Pennsylvania. PA CONST Art. 4, §4.1. 8. Defendant United States Postal Service, with a principal place of business at 475 L’Enfant Plaza SW, Washington, DC 20260-0546, is an independent establishment of the 1 18 U.S.C. § 2341(2) defines contraband cigarettes as a quantity of cigarettes in excess of 10,000 on which applicable taxes have not been paid. See United States v. Hasan, 846 F. Supp. 2d 541, 543 (E.D. Va. 2012) (contraband cigarettes are cigarettes that “bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found”). Contraband cigarettes are commonly also referred to as “untaxed” or “unstamped” cigarettes. - 5 - Case 1:19-cv-05934-BMC Document 18 Filed 01/06/20 Page 6 of 57 PageID #: 111 executive branch of the United States government, empowered by Congress to sue and be sued in its own name. The United States Postal Service is responsible for the delivery of domestic and international mail in the United States. 9. Defendant Megan Brennan is the Postmaster General of the United States. She is sued in her official capacity but has acted and is acting ultra vires by operating the USPS to accept and transmit through the mails packages that the USPS knows or reasonably believes contain cigarettes, without statutory authority to do so. Jurisdiction and Venue 10. This Court has jurisdiction over the subject matter of this action pursuant to 18 U.S.C. § 1716E, 15 U.S.C. § 375 et seq., 39 U.S.C. § 409(a), 28 U.S.C. § 1331, 28 U.S.C. § 1339 and 28 U.S.C. § 1361. 11. Venue is proper in this district under 28 U.S.C. § 1391(b) because a substantial part of the events and omissions giving rise to the claims occur in this district. Factual Allegations I. Plaintiffs’ Interest In Protecting The Public Health 12. Cigarette smoking is a leading cause of preventable premature death in the United States. Smoking annually kills more than 480,000 people nationwide, including 26,000 from New York, 40,000 from California, 18,300 from Illinois, 4,900 from Connecticut, and 22,000 from Pennsylvania, a figure that exceeds the combined number of deaths from alcohol, motor vehicle collisions, and firearms. 13. Smoking-related disease is a substantial drain on the public treasury, costing approximately $300 billion a year in medical care costs and lost productivity. New York residents
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