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Winnebago cigarette plant

A worker grabs cartons of Silver Cloud cigarettes to put into a case box at Rock River Manufacturing in April 2017. A federal judge on Monday will hear arguments on a motion to dismiss a lawsuit filed by HCI Distribution and Rock River, both subsidiaries of Ho-Chunk Inc., the Winnebago Tribe's economic development arm, against Nebraska officials, claiming their efforts to regulate tribal tobacco are unconstitutional.

OMAHA -- A federal judge on Monday will hear arguments concerning Nebraska state officials' request to dismiss a lawsuit filed by Winnebago tribal entities challenging the state's attempts to regulate their tobacco sales.

Nebraska Attorney General Doug Peterson and Tax Commissioner Tony Fulton said in a dismissal motion filed in August that the federal court does not have jurisdiction to hear the case and that attorneys for HCI Distribution and Rock River Manufacturing have failed to state a claim upon which relief can be granted.

HCI and Rock River are both subsidiaries of Ho-Chunk Inc., the Winnebago Tribe's economic development corporation.  

The subsidiaries are seeking a bench trial in the case. If U.S. District Judge John Gerrard were to grant the state's motion to dismiss, tribal officials likely would appeal the decision to the 8th Circuit Court of Appeals.

"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. They don't want us to have our day in court because we are well-positioned to win," Nicole Ducheneaux, an attorney representing HCI and Rock River said Friday in a news release.

The hearing is scheduled for 3:30 Monday in U.S. District Court in Omaha. A ruling is expected to be issued in coming weeks.

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The Ho-Chunk subsidiaries sued Peterson and Fulton in April, saying that the state's efforts to regulate the Winnebago Tribe's production of tobacco products on its reservation are unconstitutional and an attack on the tribe's sovereignty. The cigarette makers argued that tribal commercial activities are protected by federal law, and Nebraska has no regulatory authority over the tribe's cigarette operations that take place on tribal land.

In addition to creating jobs at the cigarette plant, the tribe collects its own tobacco taxes that fund health, education and infrastructure programs. HCI and Rock River say the uncertainty caused by the threat of penalty and retaliation by the state has impeded business operations and caused production reductions.

Federal agents in January raided four sites owned by Ho-Chunk in Winnebago and seized records related to the tribe's tobacco operations, which have been under both state and federal scrutiny.

In March 2014, the Nebraska Department of Revenue issued tax assessments against several reservation-based cigarette retailers, claiming they made sales subject to state cigarette tax laws. That action led to compact negotiations to settle a dispute over whether Nebraska laws apply to HCI Distribution and Rock River's manufacture, sale and distribution of cigarettes. Negotiations on the compact broke down in 2016.

In July, a federal appeals court ruled in a separate case that Ho-Chunk must turn over certain tobacco records to federal authorities under provisions of the Contraband Cigarettes Trafficking Act. Ho-Chunk had argued that some of those record-keeping provisions did not apply to tribal entities.

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