33 F. Supp. 3d 303
S.D.N.Y.2014Background
- LaserShip, a Delaware package delivery company, is accused of partnering with Regional Integrated Logistics (RIL) and delivering untaxed (unstamped) cigarettes sourced from Seneca Nation smoke shops to New York City/State consumers from ~March 2011–May 28, 2013.
- The City alleges LaserShip made ~16,383 deliveries in New York State (13,167 in NYC) and delivered ~74,974 cartons over the scheme, sharing tracking information and providing logistics support to RIL.
- Plaintiff asserts LaserShip knew it was transporting untaxed cigarettes (meeting(s) in 2011 where LaserShip was allegedly informed shipments contained untaxed cigarettes) and participated in directing RIL’s operations.
- The City brings claims under federal RICO (18 U.S.C. §1961 et seq.), the Contraband Cigarette Trafficking Act (CCTA, 18 U.S.C. §2341 et seq.), the PACT Act (15 U.S.C. §375 et seq.), and New York Public Health Law §1399-ll, plus a request for injunctive relief.
- LaserShip moved to dismiss under Fed. R. Civ. P. 12(b)(6) and 12(b)(1). The court denied the motion in full, holding the complaint adequately pleaded RICO, CCTA, PACT Act, and Public Health Law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LaserShip "operated or managed" an enterprise under RICO §1962(c) | LaserShip received, routed, stored, shared tracking info, controlled pick-ups, and bore logistics/financial risk — thus directed RIL affairs | LaserShip was only a carrier providing routine services, not directing an enterprise | Court: Allegations plausibly show LaserShip had "some part in directing" RIL's affairs; operation/management adequately pleaded |
| Whether the conduct constituted a RICO "pattern" (continuity) | Multiple predicate acts over >2 years, many deliveries, participants, victims — closed-ended and open-ended continuity | Conduct was limited/single scheme that ended in May 2013; insufficient temporal breadth or threat of repetition | Court: Conduct spanned over two years with numerous predicates — closed-ended continuity pled; open-ended continuity also plausible given threat of repetition |
| Whether LaserShip proximately caused City’s tax-revenue injury under RICO | Delivering unstamped cigarettes directly enabled tax evasion and thus caused City's lost tax revenue | Any harm was caused by taxpayer-customers, not LaserShip (too remote) | Court: Direct causal link exists because the shipping/distribution of unstamped cigarettes enabled the tax evasion that injured the City; proximate cause adequately pled |
| CCTA: aggregation, carrier safe-harbor, and small-quantity exemptions | City aggregates shipments over time/recipients; carrier cannot use bill-of-lading safe harbor to shield knowingly receiving and distributing contraband; vacationer exemptions don't apply to a delivery service | CCTA requires 10,000+ in a single transaction; common-carrier with proper bill of lading is immune; deliveries to individuals were small (≤400) so tax exemptions apply | Court: CCTA has no single-transaction requirement; a carrier’s temporary possession under a bill of lading does not shield unlawful receipt/distribution to non-exempt persons; vacationer exemptions inapplicable and burden of proof is on defendant |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (labels/conclusions insufficient; well-pleaded facts assumed true)
- Reves v. Ernst & Young, 507 U.S. 170 (1993) (RICO "operation or management" test requires some part in directing enterprise)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) (RICO pattern requires continuity — closed- or open-ended)
- Cofacrédit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999) (duration guidance for closed-ended continuity)
- Spool v. World Child Int'l Adoption Agency, 520 F.3d 178 (2d Cir. 2008) (two-year period not a bright-line rule for continuity)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) (proximate cause in civil RICO requires direct relation between injury and predicate acts)
- Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002) (statutory interpretation: plain text controls)
- Oneida Indian Nation v. Cuomo, 645 F.3d 154 (2d Cir. 2011) (discussion of New York’s cigarette stamping and distribution system)