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Wynn Las Vegas, LLC v. Cigar Row, LLC

United States District Court, D. Nevada

April 13, 2017

CIGAR ROW, LLC, Defendant.


          ROBERT C. JONES United States District Judge.

         This case arises from an alleged breach of contract between a wholesale vendor of tobacco products and its vendee. Now pending before the Court is Wynn's Motion to Dismiss Cigar Row's amended counterclaim. (ECF No. 43.) For the reasons given herein, the Court grants the motion.


         The facts underlying this case have been detailed in the Court's prior orders, and need not be revisited at length here. (See ECF Nos. 37, 41.)

         In brief, Wynn filed this action alleging Cigar Row breached its contract with Wynn by failing to obtain a license to operate in Nevada and failing to collect and remit $136, 008.99 in “other tobacco products” (“OTP”) taxes. As a result of Cigar Row's breach, Wynn was ultimately forced to pay the OTP taxes to the State. (See July 10, 2014 Email from Michael P. Kelly, ECF No. 22 at 175-76; Lawrence Decl. ¶ 4, ECF No. 22 at 184; Check, ECF No. 22 at 186.) On November 28, 2016, the Court granted summary judgment in Wynn's favor on the breach of contract claim, the effect of which was to award Wynn damages in the amount of OTP tax assessment. (Order, ECF No. 37.) On January 4, 2017, the Court permitted Cigar Row to file an amended counterclaim, on the basis that under N.R.S. 370.450(3), OTP taxes “must be collected and paid by the wholesale dealer . . . .” Therefore, Cigar Row had an obligation to collect OTP taxes from Wynn, and under the standard contractual relationship Wynn would have had to pay the disputed taxes anyway. Accordingly, the Court observed that “the ultimate just result may be that Cigar Row owes Wynn nothing, or at least less than the full amount claimed by Wynn.” (Order 4-5, ECF No. 41.)

         Cigar Row's amended counterclaim was thus filed, alleging one cause of action for collection of OTP tax pursuant to N.R.S. 370.450. (ECF No. 42.) Wynn now moves to dismiss the counterclaim under Rule 12(b)(6). (Mot. Dismiss, ECF No. 43.)


         Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). The court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts pertaining to his own case making a violation “plausible, ” not just “possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677-79 (2009) (citing Twombly, 550 U.S. at 556) (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is, under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a cognizable cause of action (Conley review), but also must allege the facts of his case so that the court can determine whether the plaintiff has any basis for relief under the cause of action he has specified or implied, assuming the facts are as he alleges (Twombly-Iqbal review).

         “Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss” without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).

         III. ANALYSIS

         Having now allowed Cigar Row to amend its pleading, and given proper consideration to the counterclaim, the Court will grant Wynn's motion to dismiss. Cigar Row has failed to state a cognizable claim to collect the disputed taxes.

         The statutory scheme governing the Nevada OTP tax is found at N.R.S. 370.440- 370.503. These statutes impose a thirty percent tax upon the purchase or possession of other tobacco products by a customer in Nevada, to be levied on the wholesale price of such products. N.R.S. 370.450. Under the definitions provided in the statutes, Wynn is a “retail dealer, ” and Cigar Row is a “wholesale dealer.” N.R.S. 370.440(3), (6). Both retail and wholesale dealers must be licensed through the Department of Taxation before engaging in business as dealers in Nevada. N.R.S. 370.441(2). However, the actual duty to remit OTP tax is imposed solely on wholesale dealers. N.R.S. 370.450(3). Under Section 370.450, wholesale dealers are subject to two independent statutory obligations: first, to collect the necessary OTP tax, and second, to pay the tax to the State. Id. Furthermore, when the statutory scheme is considered as a whole, it becomes clear that the Nevada Legislature intended that wholesale dealers-as opposed to retail dealers-would pay the OTP tax. For example, criminal penalties for failure to pay OTP tax are applicable only to wholesale dealers. N.R.S. 370.450(4). And it is only wholesale dealers who may claim tax credits “for other tobacco products on which the tax has been paid . . . and that may no longer be sold.” N.R.S. 370.490(1), (3).

         Here, there was a failure to collect and pay on the part of Cigar Row-this is why the parties are in litigation. Cigar Row clearly did not comply with the aforementioned statutes. However, this is not to say that Cigar Row's failure to collect and pay the taxes wholly absolves Wynn of all responsibility for the payment of OTP tax on the products it purchased from Cigar Row. The OTP tax statutes make it “unlawful for any person to sell or offer to sell other tobacco products on which the tax is not paid.” N.R.S. 370.460. Therefore, even though it is the wholesale dealer's obligation ...

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