Attorneys representing Ho-Chunk, Inc. and employees of the corporation's subsidiaries attended the hearing in federal court in Omaha, Nebraska, on December 10, 2018. Photo courtesy Ho-Chunk, Inc

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Winnebago Tribe wins round in lawsuit to defend its sovereignty

Wednesday, December 19, 2018

By Kevin Abourezk

A lawsuit by two Winnebago tribal corporations challenging the state of Nebraska’s efforts to regulate tobacco sales by the companies will proceed following a federal judge’s decision Wednesday to deny the state’s motion to dismiss the lawsuit.

Attorneys for both sides presented oral arguments December 10 on the state’s motion to dismiss the case before U.S. District Court Judge John Gerrard.

“The state’s illegal regulation threatens the ability of the Winnebago Tribe and tribes across Indian Country to provide for themselves,” said Nicole Ducheneaux, an attorney representing HCI Distribution and Rock River Manufacturing. “The state of Nebraska will be forced to defend its deal with Big Tobacco.”

Ho-Chunk Inc. (HCI) – an economic development corporation run by the tribe – owns the two subsidiaries, HCI Distribution and Rock River Manufacturing. On April 20, those two companies filed a lawsuit against the state of Nebraska seeking to prevent the state from forcing them to abide by a legal agreement between the state and a variety of tobacco manufacturers.

Cigarettes manufactured inside Rock River Manufacturing, a tobacco manufacturing company owned by the Winnebago Tribe. Photo by Kevin Abourezk

HCI Distribution purchases tobacco products from tribal-based manufacturers and resells those products exclusively to reservation-based wholesalers and retailers. Rock River is a federally licensed cigarette manufacturer whose products are distributed by HCI Distribution and other national distributors to retailers throughout the country.

The lawsuit, filed before the U.S. District Court for the District of Nebraska in Omaha, alleges the state’s efforts to force the two corporations to abide by an agreement between the state and several major tobacco manufacturers constitutes an attack on the tribe’s status as a sovereign nation. The lawsuit names Nebraska Attorney General Doug Peterson and Tony Fulton, state tax commissioner, as defendants.

The lawsuit alleges the state of Nebraska has sought to force the Winnebago Tribe to participate in a 1998 settlement between the four largest tobacco manufacturing companies and 46 states, which had sued those tobacco companies in order to recover healthcare costs related to smoking. The resulting legal agreement, known as the Tobacco Master Settlement Agreement (MSA), required the tobacco giants to make payments to the states each year.

Federal agents in unmarked black sports utility vehicles can be seen parked at the headquarters of Ho-Chunk Inc. on the Winnebago Reservation in Nebraska on January 30, 2018. Photo by Kevin Abourezk

States that fail to force all tobacco manufacturers that operate within their borders to either participate in the agreement or begin paying fees in order to sell cigarettes in the state face losing their sizeable settlement payments. For Nebraska alone, that payment was $37.7 million in 2017.

However, neither states’ attorney generals nor the big tobacco companies invited tribes to participate in the MSA, and they also failed to seek the involvement of Congress, which exercises “exclusive and plenary control over sovereign tribes within its borders independent of state jurisdiction,” according to the lawsuit.

The tobacco trade is important to Winnebago and many other tribal economies by providing employment and funding programs for education, social and cultural advancement. Ho-Chunk Inc. estimates that the state of Nebraska’s attempts to regulate on-reservation business has resulted in a more than 80 percent loss in revenue in 2018 for its two subsidiaries.

The state’s efforts also have effectively ended the distribution of third-party Native tobacco brands to other sovereign tribal nations and hampered outside sales of tobacco products manufactured on the Winnebago Indian Reservation, the company said. Ho-Chunk Inc. was launched in 1994 to spur economic development activity on the Winnebago Tribe’s reservation.

On January 30, nearly 50 armed agents of the Bureau of Alcohol, Tobacco, and Explosives raided Ho-Chunk Inc.’s offices in Winnebago and confiscated dozens of boxes of documents, office equipment and cigarettes.

Ducheneaux said the lawsuit by HCI Distribution and Rock River Manufacturing is focused on trying to prevent the state from forcing them from abiding by the Master Settlement Agreement and isn’t directly related to the January 30 raid by the ATF.

Ho-Chunk Inc. owns Indianz.Com. The website is not involved with the tobacco operations or the activities at issue in the lawsuit.

UPDATE – Judge to rule whether Tribal lawsuit against Nebraska proceeds to trial. Following arguments presented Monday (Dec. 10), a Federal judge in Omaha, Neb., will decide if a lawsuit challenging the State of Nebraska's attempts to regulate business activity on Native American reservations may proceed to trial. The hearing was on a motion by the State of Nebraska to dismiss the case HCI Distribution, Inc. v. State of Nebraska. A ruling whether the suit may proceed to trial is anticipated by the end of December. “Native Americans want to provide for themselves and determine their destiny as a people. The state’s regulatory overreach disrespects our sovereignty and violates established federal Indian law,” said Nicole Ducheneaux, an attorney representing HCI Distribution, Inc. and Rock River Manufacturing, Inc. The two companies are subsidiaries of Ho-Chunk, Inc., the Winnebago Tribe of Nebraska’s award-winning economic development corporation. The Tribe is seeking a judicial determination of these issues despite state and Federal Government efforts to halt the case. If the case is dismissed, the Tribe will likely appeal to the United States Court of Appeals for the Eighth Circuit. A 20-year dispute with Nebraska came into sharp focus early 2018 with a search of Ho-Chunk, Inc. locations conducted by the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. The tribal companies targeted manufacture and distribute tobacco products. Ho-Chunk, Inc.’s companies filed the suit in April 2018, detailing how big tobacco companies are using their financial power to coerce state governments to unlawfully target Native American tribes or lose millions in settlement funds. Tribes were not part of the historic 1998 Master Settlement Agreement in which major tobacco companies agreed to pay damages to states, nor are tribes subject to state regulation under federal law. Big Tobacco has withheld millions in settlement payments from other states for failing to enforce MSA laws on sovereign tribal nations. Nebraska’s MSA payment was $37.7 million in 2017. The tobacco trade is crucial to Winnebago and many other tribal economies by providing employment and funding programs for cultural and social advancement.
Posted by Ho-Chunk, Inc. on Tuesday, December 11, 2018

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