United States District Court, D. Nevada
C. JONES United States District Judge.
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.
FACTS AND PROCEDURAL HISTORY
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.)
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.)
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.)
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).
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
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.
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.
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).
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 ...