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Media Alerts - Gordon v. Holder
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July 2, 2013
  Gordon v. Holder
Headline: Split D.C. Circuit panel upholds injunction against enforcement of Section 2a and 3 of the Prevent All Cigarette Trafficking (PACT) Act, finding constitutional questions too close to call without further factual development.

Area of Law: Due Process; Taxation; Federal Courts

Issue(s) Presented: [1] Whether the Ashcroft standard, requiring courts to uphold a preliminary injunction and remand for trial on the merits where the district court's decision reflects a reasonable conclusion on a close question of constitutional law, is limited to First Amendment cases. [2] Whether Appellee has raised "close" questions that the PACT Act violates tobacco retailers' due process rights by subjecting his company to taxation in states with which it lacks minimum contacts.

Brief Summary: Appellee, Robert Gordon, owned a tobacco retail business in western New York. A large majority of Appellee's sales were to customers outside of New York. In June 2012, the day before the Prevent All Cigarette Trafficking Act (PACT Act), 15 U.S.C. 375 et seq., was enacted, Appellee brought suit in the United States District Court for the District of Columbia to enjoin two provisions of the act. Specifically, Appellee claimed that section 2a, which prohibits delivery sales of tobacco products unless all applicable state and local taxes are paid in advance of the sale, violates the Due Process Clause and the Tenth Amendment and that section 3, which prohibits sending tobacco products by U.S. mail, violates the Due Process Clause and the Equal Protection Clause. The district court initially denied Appellee's motion on the sole ground that it was too late to stop the Act from taking effect. Gordon appealed, and the D.C Circuit reversed and remanded for the district court to consider the factors necessary to obtain a preliminary injunction. The district court enjoined the tax provisions on due process grounds and dismissed the remaining claims for failure to state a claim. Both parties appealed.

The D.C. Circuit began by rejecting the government's contention that the deferential standard of review set forth in Ashcroft v. ACLU, pursuant to which the appellate court will uphold an injunction if it reflects a reasonable decision on a close question of constitutional law, applied only to First Amendment cases. The D.C. Circuit next determined that the Due Process challenge to the PACT Act's tax burden presented the requisite "close" questions of constitutional law. The court subdivided the question into two substantial and novel issues, [1] whether the Due Process Clause requires minimum contacts between a seller and state/local taxing authority when the federal government, rather than the state, is the source of the duty; and [2] if so, whether a single sale gives rise to minimum contacts within a jurisdiction. With respect to the first question, the court suggested that the requirement of minimum contacts with the taxing entity had deep roots in the founding of our republic and is fundamental to democratic legitimacy. The court made clear that it was not deciding, as a matter of law, which sovereign (federal or state) a court must look to in completing its minimum contact analysis; it merely was flagging the question as novel and necessitating further factual development. On the second question, the court concluded, again, that the question whether a single sale is enough to establish minimum contacts with the taxing jurisdiction "is a close one, deserving of further development at a trial on the merits." Given these conclusions, and finding the district court's determination that Gordon was likely to suffer irreparable harm reasonable, the D.C. Circuit affirmed the preliminary injunction. The D.C. Circuit affirmed the district court's dismissal of Gordon's Tenth Amendment and Equal Protection claims. Judge Kavanaugh dissented on the basis that he found no merit to Gordon's Due Process Clause claim.

For the full text of this opinion, please visit

Significance (if any): The decision upholds the injunction on enforcement of the PACT Act, and the case raises important and novel questions of constitutional law.

Panel (if known): Griffith, Kavanaugh, Sentelle

Argument Date (if known): 10/22/2012

Date of Issued Opinion: 6/28/2013

Docket Number: 12-5031

Decided: Affirmed

Case Alert Author: Tiffany Kelley

Counsel (if known): Michael P. Abate, Stuart F. Delery, Ronald C. Machen Jr., Alisa B. Klein, and Mark B. Stern for Appellant.

Aaron M. Streett, R. Stan Mortenson, and Sara E. Kropf for Appellee.

Author of Opinion: Griffith; Kavanaugh concurring in part and dissenting in part; Sentelle concurring in part and concurring in the judgment.

Case Alert Circuit Supervisor: Elizabeth Beske, Ripple Weistling

    Posted By: Ripple Weistling @ 07/02/2013 07:35 PM     DC Circuit  

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