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Federal judge tosses out almost all of supermarket tycoon's claims against tribes

BROOKLYN, N.Y. - A federal judge has dismissed almost all of a lawsuit filed last year by a New York tycoon who claimed that tax-free cigarette sales by two state-recognized Long Island tribes undermined profits at his supermarket empire.

John A. Catsimatidis, who owns, among other things, more than 50 Gristedes supermarkets located throughout New York City, Westchester County and Long Island, claimed in the suit that the Unkechaug Indian Nation and the Shinnecock Tribe violated civil laws, the Racketeering Influence and Corrupt Organization Act, and statutes prohibiting false advertising and deceptive trade packages.

He asked the court to force Indian retailers to buy cigarettes from wholesalers at the taxed price and sought $20 million in damages from the tribes, the amount he claimed he has lost.

Tribal leaders sought to have the claims dismissed. In a Nov. 30 ruling, Judge Carol Bagley Amon of Federal District Court in Brooklyn dismissed the claim that the non-taxed cigarette sales ''created, fostered and nourished a thriving black market in illegally discounted cigarette sales'' and dismissed all RICO charges of corrupt business dealings and unfair competition, according to a report in The New York Times.

Amon did find that advertisements calling the cigarettes ''tax-free'' were misleading because cigarette sales are not actually tax-free under state law - in the case of untaxed cigarettes sold on tribal land, the customer is by law responsible for paying the taxes. The ads were ''likely to mislead the consumer into believing that he or she need not pay taxes on purchased cigarettes,'' Amon wrote.

Unkechaug Nation Chief Harry Wallace, an attorney who owns a smokeshop on the reservation in Mastic, said he was pleased with the ruling.

''I would be more pleased if the judge dismissed the whole thing, but I'm pleased that the most egregious allegations about blackmarketeering and racketeering and unfair competition were tossed out,'' Wallace said.

The judge set a hearing date for early next year to address the remaining charges concerning advertising.

Catsimatidis intends on moving forward with the lawsuit, Wallace said. Catsimatidis could not be reached for comment.

Listed by The Forbes 400 as the 220th of the 400 richest men in America, Catsimatidis' net worth is estimated to be in the $2.1 billion range.

In addition to the Gristedes supermarket chain, Catsimatidis owns $500 million worth of property in New York, 372 gas stations and a Pennsylvania refinery, according to Forbes.

He is running for mayor of New York City and plans to spend a few million dollars during the 2009 primary and another $50 million if he wins the Republican nomination, according to Forbes.

The state imposes a sales tax of $1.50 per pack of cigarettes, but has never collected cigarette taxes from the tribes because they are sovereign nations. In recent years, the state has threatened to collect taxes on tribal cigarette sales, but last February in a turnaround from those threats, the New York state attorney general's office filed a motion in state Superior Court in New York for a declaratory judgment verifying that tribal nations and the distributors who sell them cigarettes are exempt from paying tobacco excise taxes.

The ruling, if granted, would be a de facto affirmation of tribal sovereignty and immunity; but the tribal leaders refused to sign onto it as requested, speculating that the state's intention was not to support Indian sovereignty and immunity, but a tactic driven by the state's desire to avoid further lawsuits from the big tobacco companies in the still-lingering $246 billion 1998 tobacco settlement case.

Recently, the court granted the tribes' motion to be withdrawn from the case, Wallace said.