      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                        NO. 03-13-00753-CV



                Susan Combs, in her official capacity as Texas Comptroller, and
           Greg Abbott, in his official capacity as Texas Attorney General, Appellants

                                                  v.

              Texas Small Tobacco Coalition and Global Tobacco, Inc., Appellees


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
     NO. D-1-GN-13-002414, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING



                                            OPINION


                After the legislature enacted subchapter V of the Texas Health & Safety Code, entitled,

“Fee on Cigarettes and Cigarette Tobacco Products Manufactured by Certain Companies,” appellees

Texas Small Tobacco Coalition and Global Tobacco, Inc. (Small Tobacco) filed a suit for declaratory

and injunctive relief, alleging that the tax imposed by subchapter V is unconstitutional.1 Appellants

Susan Combs, in her official capacity as Texas Comptroller, and Greg Abbott, in his official capacity

as Texas Attorney General, (the State) filed a plea to the jurisdiction and a motion for summary


       1
          Subchapter V states that it assesses a “fee” on certain tobacco products. The parties approach
the case as raising taxation issues, and we will follow suit, viewing the assessment as a tax and not
a fee. See TracFone Wireless, Inc. v. Commission on State Emergency Commc’ns, 397 S.W.3d 173,
175 n.3 (Tex. 2013) (legislature’s decision to label assessment as fee not tax is not binding on courts;
“A charge is a fee rather than a tax when the primary purpose of the fee is to support a regulatory
regime governing those who pay the fee.”); Lowenberg v. City of Dallas, 261 S.W.3d 54, 57-58
(Tex. 2008) (quoting Hurt v. Cooper, 110 S.W.2d 896, 899 (Tex. 1937)) (whether assessment is tax
depends not on label given by legislature but on whether primary purpose is to raise revenue).
judgment, and Small Tobacco filed its own motion for summary judgment. The trial court denied

the State’s plea to the jurisdiction and motion for summary judgment, granted Small Tobacco’s

motion for summary judgment, found that the tax is unconstitutional, and enjoined the State from

assessing or collecting the tax. We affirm the trial court’s order.


                                       Factual Background

               In 1996, the State sued four major tobacco companies (Big Tobacco)2 for antitrust

violations, deceptive advertising, and marketing campaigns aimed at children. In 1997 and 1998,

Big Tobacco settled with the State, agreeing to change the way they advertised and marketed their

products and to pay billions of dollars to the State in exchange for a settlement of the State’s claims

and a release from any future claims the State might have against Big Tobacco.3

               The 1998 Comprehensive Settlement Agreement and Release (the 1998 Settlement)

provided a schedule of payments to be made to various entities and stated that the payments were

intended as “reimbursement for public health expenditures of the State” and to satisfy the State’s

claims “for damages incurred by the State in the year of payment or earlier years,” including

Medicaid expenditures and punitive damages. The 1998 Settlement stated that payments made in

1998 “constitute reimbursement for public health expenditures” and that “[a]ll other payments . . .

are in satisfaction of all of the State of Texas’s claims for damages incurred by the State in the year

       2
          The companies sued were Phillip Morris Companies; RJR Nabisco Holdings, the parent
company for R.J. Reynolds Tobacco; BAT Industries PLC, the parent company of Brown &
Williamson Tobacco; and the Loews Corporation, parent company of Lorillard Tobacco. At the
time, those four companies were responsible for more than ninety-five percent of the cigarettes sold
in this country.
       3
        More than forty states filed suit, and most of them joined a master settlement agreement.
Texas and several others negotiated their own separate agreements.

                                                  2
of payment or earlier years, including those for reimbursement of Medicaid expenditures and

punitive damages.” The agreement then listed seven specific payments, such as $351 million to be

paid to the State’s general revenue fund for funding the Children’s Health Insurance Program and

various anti-smoking programs, and stated that “[a]ll remaining amounts, including any amounts

due to be paid by Settling Defendants after December 31, 1998, are to be allocated to the general

revenue fund of the State of Texas to be used for such purposes as the State of Texas may

determine.” Big Tobacco agreed to make large yearly payments based on the companies’ various

market shares, and those payments were to increase or decrease “in accordance with decreases or

increases in volume of domestic tobacco product volume sales.”

               In 2013, the legislature passed House Bill 3536 and enacted subchapter V of

chapter 161 of the health and safety code. See Act of May 23, 2013, 83d Leg., R.S., ch. 1305, § 1,

2013 Tex. Gen. Laws 3331, 3331-36 (codified at Tex. Health & Safety Code §§ 161.601-.614

(effective September 1, 2013)). Subchapter V, entitled, “Fee on Cigarettes and Cigarette Tobacco

Products Manufactured by Certain Companies,” applies only to tobacco companies that did not

sign the 1997 and 1998 settlement agreements (“non-settling manufacturers”) and is intended to:

       (1) recover health care costs to the state imposed by non-settling manufacturers;

       (2) prevent non-settling manufacturers from undermining this state’s policy of
       reducing underage smoking by offering cigarettes and cigarette tobacco products at
       prices that are substantially below the prices of cigarettes and cigarette tobacco
       products of other manufacturers;

       (3) protect the tobacco settlement agreement and funding, which has been reduced
       because of the growth of sales of non-settling manufacturer cigarettes and cigarette
       tobacco products, for programs that are funded wholly or partly by payments to this
       state under the tobacco settlement agreement and recoup for this state settlement
       payment revenue lost because of sales of non-settling manufacturer cigarettes and
       cigarette tobacco products;

                                                3
       (4) ensure evenhanded treatment of manufacturers and further protect the tobacco
       settlement agreement and funding by imposing a partial payment obligation on
       non-settling manufacturers that already make payments on Texas sales under the
       master settlement agreement until a credit amendment to that agreement that will
       provide those manufacturers with a credit for payments to Texas is effective; and

       (5) provide funding for any purpose the legislature determines.


Tex. Health & Safety Code § 161.601.

               Under subchapter V, a 2.75 cent “fee” is imposed on each cigarette or 0.09 ounce of

tobacco product made by a non-settling manufacturer, for a total of 55 cents added to the price of

each 20-cigarette pack, with the fee to increase each year. Id. §§ 161.603, .604.4 Subchapter V does

not release non-settling manufacturers from liability, although it does provide that all fees paid by

a manufacturer “shall apply on a dollar for dollar basis to reduce any judgment or settlement on a

released claim brought against the manufacturer that made the payment.” Id. § 161.612.

               Small Tobacco sued for declaratory and injunctive relief, arguing that the fee

imposed by subchapter V was in fact a tax that violated the Equal and Uniform Clause of the Texas

Constitution and the Equal Protection Clause and the Due Process Clause of the United States

Constitution. The State filed a plea to the jurisdiction asserting that the Texas Small Tobacco

Coalition5 lacked standing to bring a taxpayer suit under chapter 112 of the tax code, that section



       4
          Tobacco companies who joined the multi-state master agreement, other than original
signatories to that agreement or parties to the State’s 1997 or 1998 settlements, pay a lower rate of
0.75 cents per cigarette or tobacco product. Tex. Health & Safety Code § 161.604(c).
       5
          The Texas Small Tobacco Coalition is a trade association made up of smaller tobacco
manufacturers, distributors, and retailers. Most of the coalition’s members came into existence after
1998, although Global Tobacco, Inc. has been in existence since before the settlement agreements
were negotiated.

                                                 4
112.108 of the tax code barred a suit under the Uniform Declaratory Judgments Act,6 and that

Small Tobacco had not pled a viable constitutional claim so as to overcome the State’s sovereign

immunity. Both Small Tobacco and the State filed motions for summary judgment. After a hearing,

the trial court signed an order denying the State’s plea to the jurisdiction and motion for summary

judgment and granting Small Tobacco’s motion for summary judgment. The trial court found that

subchapter V is unconstitutional “in its entirety” and permanently enjoined the State from assessing,

collecting, or enforcing the tax. The State appealed.


                                       Scope Of Our Review

                Initially, we note that in its statement of its arguments, the State contends only that

the trial court erred in denying the State’s plea to the jurisdiction, asserting (1) that Small Tobacco

failed to plead valid claims that subchapter V violates the Equal and Uniform Clause of the

Texas Constitution or the Equal Protection and Due Process Clauses of the federal constitution and

(2) that the Texas Small Tobacco Coalition lacks standing to bring the suit. In its prayer, the State

asks us to reverse the trial court’s judgment and “render judgment dismissing plaintiffs’ claims

for lack of subject-matter jurisdiction.” Although the State’s statements of argument and prayer

present a very limited question, the parties present detailed argument about the overall merits of

Small Tobacco’s underlying claims and the trial court’s ruling of unconstitutionality. Because the

parties’ actual arguments concern the propriety of the trial court’s finding that the statutes are

unconstitutional, we will not limit our discussion to the trial court’s denial of the State’s plea to




       6
           See Tex. Civ. Prac. & Rem. Code §§ 37.001-.011.

                                                  5
the jurisdiction. See Majeed v. Hussain, No. 03-08-00679-CV, 2010 WL 4137472, at *7-9 (Tex.

App.—Austin Oct. 22, 2010, no pet.) (mem. op.) (omission of prayer for remand in brief did not

waive appellant’s entitlement to or court’s power to award remand).


                                               Standing

                In its third issue, the State asserts that the Texas Small Tobacco Coalition lacks

associational standing to bring the underlying suit on behalf of its members. We disagree.

                An association has standing to sue on behalf of its members if: the members

themselves have standing to sue in their own right7; the interests the association is seeking to

protect are germane to its purpose; and participation of the individual members in the lawsuit is not

necessary, meaning the pleadings and record show that neither the claim asserted nor the relief

sought require the individual members to participate in the suit. Texas Ass’n of Bus. v. Texas Air

Control Bd., 852 S.W.2d 440, 447-48 (Tex. 1993) (quoting Hunt v. Washington State Apple Adver.

Comm’n, 432 U.S. 333, 343 (1977)). When, as here, an association seeks injunctive or declaratory

relief, as opposed to damages requiring a showing of individualized lost profits, the relief will




        7
          “[I]t is well-recognized that a suit seeking a declaratory judgment that a state agent is acting
pursuant to an unconstitutional law is not barred by sovereign immunity.” Scott v. Alphonso Crutch
Life Support Ctr., 392 S.W.3d 132, 137 (Tex. App.—Austin 2009, pet. denied) (mem. op.) (citing
Rylander v. Caldwell, 23 S.W.3d 132, 135 (Tex. App.—Austin 2000, no pet.) (“when a party’s rights
have been violated by the unlawful acts of a state official or by a state agent acting pursuant to an
unconstitutional law, the suit is not an action against the State requiring the State’s consent”)); see
Texas Dep’t of State Health Servs. v. Holmes, 294 S.W.3d 328, 336 (Tex. App.—Austin 2009,
pet. denied) (“Texas law is clear that private parties may seek declaratory relief against state officials
who are acting pursuant to an allegedly unconstitutional law,” and it is “well recognized that
declaratory relief is the proper remedy when challenging the constitutionality of a statute and that
plaintiffs are not required to obtain the State’s consent before suing for declaratory judgment”).

                                                    6
inure to the benefit of the association’s members and does not require the participation of each

individual member. Id. at 448 (quoting Hunt, 432 U.S. at 343).

                The State contends that only an individual taxpayer has standing to sue under section

112.108 of the tax code and asserts that “lawsuits by associations of taxpayers . . . are forbidden.”8

However, we have held that section 112.108 is unconstitutional, and that holding has not been

overruled by the Texas Supreme Court. See Richmont Aviation, Inc. v. Combs, No. 03-11-00486-

CV, 2013 WL 5272834, at *5-6 (Tex. App.—Austin Sept. 12, 2013, pet. filed) (mem. op.); Rylander

v. Bandag Licensing Corp., 18 S.W.3d 296, 304-05 (Tex. App.—Austin 2000, pet. denied).9 Further,

none of the statutes cited by the State forbids an association from bringing a lawsuit on behalf of its



       8
           Section 112.108 provides:

       Except for a restraining order or injunction issued as provided by this subchapter,
       a court may not issue a restraining order, injunction, declaratory judgment, writ
       of mandamus or prohibition, order requiring the payment of taxes or fees into the
       registry or custody of the court, or other similar legal or equitable relief against
       the state or a state agency relating to the applicability, assessment, collection, or
       constitutionality of a tax or fee covered by this subchapter or the amount of the
       tax or fee due, provided, however, that after filing an oath of inability to pay the
       tax, penalties, and interest due, a party may be excused from the requirement of
       prepayment of tax as a prerequisite to appeal if the court, after notice and hearing,
       finds that such prepayment would constitute an unreasonable restraint on the party’s
       right of access to the courts. The court may grant such relief as may be reasonably
       required by the circumstances. A grant of declaratory relief against the state or a state
       agency shall not entitle the winning party to recover attorney fees.

Tex. Tax Code § 112.108.
       9
          See also FM Express Food Mart, Inc. v Combs, No. 03-12-00144-CV, 2013 WL 1149551,
at *6 n.6 (Tex. App.—Austin Mar. 15, 2013, no pet.) (mem. op.) (noting holding in Bandag that
section 112.108 was unconstitutional); Local Neon Co. v. Strayhorn, No. 03-04-00261-CV, 2005
WL 1412171, at *6 n.6 (Tex. App.—Austin June 16, 2005, no pet.) (mem. op.) (“the Comptroller
concedes on appeal that this Court held section 112.108 unconstitutional”).

                                                  7
members to argue that a tax statute is unconstitutional, and we recently reaffirmed that a suit for

declaratory relief challenging a tax statute’s constitutionality can be brought by a trade association.

Texas Entm’t Ass’n, Inc. v. Combs, 431 S.W.3d 790, 795 & n.3 (Tex. App.—Austin 2014, pet. filed).

We overrule the State’s third issue.


                                    Equal and Uniform Clause

               Although phrased in terms of whether Small Tobacco pled a valid constitutional

claim, the State argues in its first issue that subchapter V’s fee does not violate Texas’s Equal and

Uniform Clause because the legislature’s decision to assess a fee against non-settling manufacturers

and not against settling manufacturers was based on a reasonable distinction.

               In Texas, taxation must be equal and uniform. Tex. Const. art. VIII, §§ 1, 2. Although

the legislature may “pursue policy goals through tax legislation,” those goals must be “related to

the taxation.” In re Nestle USA, Inc., 387 S.W.3d 610, 622 (Tex. 2012) (orig. proceeding). The

legislature has the discretion to make classifications in levying sales and occupation taxes, and there

is a strong presumption in favor of a tax statute’s constitutionality. Id. at 623 (quoting Vinson v.

Burgess, 773 S.W.2d 263, 266 (Tex. 1989), and citing 2 Wade Newhouse, Constitutional Uniformity

and Equality in State Taxation 1723 (2d ed. 1984)). Exact equality and uniformity in taxation is

unattainable, and the uniformity that is required is “uniformity within classes.” Id. at 620 (quoting

Enron Corp. v. Spring Indep. Sch. Dist., 922 S.W.2d 931, 935 (Tex. 1996)). In reviewing tax

classifications, we will uphold a tax statute that “treat[s] differently those engaged in the same

business so long as a reasonable basis justifies the disparate treatment.” American Home Assurance

v. Texas Dep’t of Ins., 907 S.W.2d 90, 97 (Tex. App.—Austin 1995, writ denied). We look to the

                                                  8
nature of the business in evaluating a classification’s reasonableness, and a “slight difference in the

subject matter taxed justifies a separate classification.” Id. at 97-98.10 Thus, our focus must be

on the subject of the tax, not the entity being taxed. See id.; Prudential Health Care Plan, Inc. v.

Commissioner of Ins., 626 S.W.2d 822, 830 (Tex. App.—Austin 1981, writ ref’d n.r.e.) (legislature

may classify people, corporations, and organizations and may treat classes differently “merely

because they are engaged in different businesses”).

               Small Tobacco’s members make cigarettes and other tobacco products, as do the

Big Tobacco companies. There is no indication in this record that the taxed subject matter, cigarettes

or “cigarette tobacco products,”11 see Tex. Health & Safety Code §§ 161.603, .604, differs even

slightly when manufactured by Small Tobacco versus Big Tobacco. The only justification proffered

by the legislature for making a distinction between the products is that Big Tobacco and, to a

lesser degree, subsequent participating manufacturers, entered into the 1997 and 1998 settlement

agreements. See id. § 161.601. Subchapter V was in part enacted to protect the settlement agreements

and funding for the various programs that receive money from Big Tobacco and also is an apparent

       10
           See also Dancetown, U.S.A., Inc. v. State, 439 S.W.2d 333, 336 (Tex. 1969) (“Differences
in the commodities sold or services rendered are generally regarded as a proper basis for
classification in the absence of any showing to the contrary.”); Hurt, 110 S.W.2d at 900-01
(“merchants may be divided into classes and the classes taxed in different amounts and according
to different standards,” and “[m]ere differences in methods of conducting businesses have long
been recognized in this state as sufficient to support the classification of merchants for the purpose
of levying occupation taxes”); Texas Co. v. Stephens, 103 S.W. 481, 485 (Tex. 1907) (“The courts,
under the provisions relied on, can only interfere when it is made clearly to appear that an attempted
classification has no reasonable basis in the nature of the businesses classified, and that the law
operates unequally upon subjects between which there is no real difference to justify the separate
treatment of them undertaken by the Legislature.”).
       11
           “Cigarette tobacco products” are roll-your-own tobacco or tobacco that is suitable for use
in cigarettes and is likely to be used in such a way. Tex. Health & Safety Code § 161.602(3).

                                                  9
attempt to protect Big Tobacco from losing market share to Small Tobacco. See id. § 161.601(3)

(subchapter V is intended to “protect the tobacco settlement agreement and funding, which has

been reduced because of the growth of sales of non-settling manufacturer cigarettes and cigarette

tobacco products”). Protecting one company’s market share over another’s does not justify the

unequal treatment of identical products. Nor do the other, more laudable purposes of subchapter V.

Few would take issue with goals of reducing underage smoking or recovering costs of medical care

related to smoking. However, imposing a tax on only one class of identical products is not equal

and uniform under Texas law and cannot be upheld. See American Home Assurance, 907 S.W.2d

at 97-98; Prudential Health Care Plan, 626 S.W.2d at 830.

               Further, Big Tobacco, in entering into the settlement agreements, obtained a release

of past and future claims, including claims of serious misconduct, claims that have not been leveled

by the State at Small Tobacco.12 Small Tobacco obtains no similar release in exchange for the taxes

paid, although a non-participating manufacturer is to receive a dollar-for-dollar credit in the event

it is found liable for claims brought against the manufacturer. And, unlike in states with escrow




       12
            The State asserts that the settlement agreement’s ongoing annual payments are “not
tied to prior bad acts: They are tied to big tobacco’s future sales, and calculated to offset the
State’s ongoing health care costs.” However, the State does not cite to any portion of the settlement
agreements that supports that statement. Instead, the 1998 Settlement stated that payments made in
1998 “constitute[d] reimbursement for public health expenditures of the State of Texas” and that
“[a]ll other payments made by Settling Defendants pursuant to this Settlement Agreement are in
satisfaction of all of the State of Texas’s claims for damages incurred . . . in the year of payment or
earlier years, including those for reimbursement of Medicaid expenditures and punitive damages.”
(Emphases added.) After setting out seven specific sums to be paid to various entities, the agreement
then stated that “[a]ll remaining amounts, including any amounts due to be paid by Settling
Defendants after December 31, 1998, are to be allocated to the general revenue fund of the State of
Texas to be used for such purposes as the State of Texas may determine.”

                                                  10
laws, an alternative to taxation discussed in more detail below, here, non-settling manufacturers

like Small Tobacco’s members do not earn interest and have no opportunity to regain any of the

funds that are not used to satisfy claims leveled against the companies by the State. Instead, the

tax money goes into the State’s general revenue coffers for use in whatever way the State sees fit.

Id. § 161.601(5) (tax intended to “provide funding for any purpose the legislature determines”).

               Finally, we address the State’s assertion that, should we agree that subchapter V is

unconstitutional, we “must also declare unreasonable the judgment of fifty[-]four other legislatures”

and the “reasoning of every court of appeals in the nation to consider the question.” We disagree.

Only two other states, Minnesota and Mississippi, have assessed a per-cigarette tax on non-settling

manufacturers. The other states established “escrow statutes” that require tobacco manufacturers

other than Big Tobacco to either join the master settlement agreement as a subsequent participating

manufacturer or remain a non-participating manufacturer. See, e.g., Grand River Enter. Six

Nations, Ltd. v. Pryor, 481 F.3d 60, 63 (2nd Cir. 2007). In escrow-statute states, non-participating

manufacturers must make annual deposits into escrow accounts, creating “a pool of funds from

which settling states may secure damage awards from [non-participating manufacturers] for any

successful cigarette-related claims.” Id. After twenty-five years, funds remaining in the escrow

accounts, along with any earned interest, are returned to the non-participating manufacturers. Id.;

Commonwealth ex rel. Fisher v. Jash Int’l, Inc., 847 A.2d 125, 128 (Pa. Commw. Ct. 2004); see

Tenn. Code § 47-31-103(a)(2)(D) (“[a] tobacco product manufacturer that places funds into escrow

. . . shall receive the interest or other appreciation on such funds as earned”; escrow funds will be

released to pay “judgment or settlement on any released claim brought against such tobacco product



                                                 11
manufacturer by the state or any releasing party located or residing in the state,” if manufacturer can

show it overpaid, or after twenty-five years). Such deposits have been upheld against constitutional

challenges. See, e.g., Star Scientific Inc. v. Beales, 278 F.3d 339, 361-62 (4th Cir. 2002), cert. denied,

537 U.S. 818 (2002). Due to the differences between the tax in question here and the escrow system

established by the majority of the states, a finding that subchapter V is unconstitutional casts no

shadow on the “judgment of fifty[-]four other legislatures” or the reasoning of every other “court of

appeals in the nation.”

                As for Mississippi and Minnesota, the constitutionality of Mississippi’s tax statute

has apparently not been challenged, and Minnesota applies a “rational basis” test to its tax statutes.

See Council of Indep. Tobacco Mfrs. of Am. v. Minnesota, 713 N.W.2d 300, 308-11 (Minn. 2006),

cert. denied, 549 U.S. 1052 (2006) (quoting Miller Brewing Co. v. Minnesota, 284 N.W.2d 353, 356

(Minn. 1979)) (reviewing state “Uniformity Clause challenge under the rational basis standard,”

stating that “any legitimate purpose can support the classifications created by the statute,” and

asking whether “the differences between the taxpayers distinguished by the statute provide a

‘natural and reasonable basis’ for separate classifications”). Texas’s constitutional standard is more

stringent. See Tex. Const. art. VIII, §§ 1, 2 (taxation must be equal and uniform). As the supreme

court has stated, “tax classifications must not only be rational but must attempt to group similar

things and differentiate dissimilar things.” In re Nestle USA, 387 S.W.3d at 622. Thus, the Texas

Constitution requires more than that a tax classification be merely rational, and Minnesota’s rational-

basis analysis is not applicable here.

                We hold that the trial court did not err in determining that subchapter V’s tax violates

Texas’s Equal and Uniform Clause. We overrule the State’s first issue.

                                                   12
                                             Conclusion

                Having determined that subchapter V violates the Texas Constitution, we need not

examine whether it also violates the federal constitution. We affirm the trial court’s judgment.

                As for Small Tobacco’s motion and supplemental motion for sanctions, the State

provided this Court with packs of grape-flavored “cigars” while representing them to be “cigarettes,”

and certain of its assertions and allegations in its briefing were unsupported by factual references.

However, we do not believe those actions rose to a level that would justify our imposing sanctions

in the form of requiring the State to pay Small Tobacco’s appellate attorney’s fees.13 We therefore

deny Small Tobacco’s motions for sanctions.



                                                __________________________________________

                                                David Puryear, Justice

Before Justices Puryear, Goodwin, and Field

Affirmed

Filed: August 15, 2014


       13
           In its initial brief and its reply brief, the State provides two full-page discussions about
Small Tobacco’s alleged manufacture and sale of flavored cigarettes, allegations Small Tobacco
denies, noting that federal law bans the sale of “flavored cigarettes” but not “flavored cigars.” The
State also provided this Court, as an exhibit to its reply brief, three packs of what it characterizes
as “grape-flavored cigarettes” but which are labeled as flavored “cigars.” Despite placing some
emphasis on its allegations related to flavored cigarettes, the State concurs in its reply brief that
Small Tobacco’s “sale of flavored cigarettes is not relevant to the elements of their claim, of course.”
In asking us to deny Small Tobacco’s motions for sanctions, it asks us to take judicial notice of the
“legislative fact” that Small Tobacco sells “flavored cigarettes” but then argues that it never “said
that the tobacco companies [Small Tobacco] are federal lawbreakers. It said only that they sell
flavored cigarettes, and indeed they do.” For the State to emphasize disputed facts not in the record
and make allegations that imply a violation of federal law, while agreeing that the issue is not
relevant to the case, raises some concerns for this Court.

                                                  13
