The state’s second-highest court denied a Littleton woman’s request to block the part of a voter-approved ballot initiative that set a minimum price for cigarettes.
Jennifer Ann Smith sued the state of Colorado and several officials over the passage of the EE proposal in the 2020 election. One of the initiative’s main functions was to raise taxes on cigarettes and tobacco products, with the increase in income going largely to education. Smith claimed that as a smoker who voted for the EE proposal, the state failed to properly inform voters that part of the initiative would also establish a $7 price floor for cigarettes.
Last year, a Denver judge refused to issue an injunction blocking the application of Article 10, because the floor price is known. Smith asked the Court of Appeals to overturn that ruling, saying the law was passed in violation of the state constitution and the judge improperly relied on tax revenue projections that Colorado would lose if the minimum price for cigarettes disappeared.
On Thursday, a three-member panel of the Court of Appeal upheld the lower court’s analysis.
“We cannot say that the trial court clearly erred in relying on these projections to conclude that the state would lose millions of dollars if Section 10 were prohibited,” Judge Christina F wrote. Gomez in the panel opinion.
The EE proposal was passed by a 2-to-1 margin in 2020. Proponents at the time argued that higher prices on cigarettes and tobacco products deterred consumption, while opponents warned that low-income smokers would bear a substantial burden of the increase.
The initiative was based on House Bill 1427, but required voter approval in addition to legislative passage due to increased taxes. Neither the title of the ballot paper presented to voters nor the summary explanation of the impact of a yes vote would have indicated that the ballot initiative would enact a minimum price for cigarettes.
However, the ballot information bookletknown as Blue Book, noted a floor price of $7 per pack of 20 cigarettes starting in January 2021, which would increase to $7.50 per pack in July 2024.
Smith alleged that the ballot’s title was flawed because it failed to mention the Section 10 floor price, which she said would cost her an extra $700 a year on her cigarette purchases. It also created a second subject within the Nicotine and Tobacco Taxation Act. A price floor would increase the purchase price of discounted cigarettes for the sole benefit of retailers, rather than consumers or the government, Smith explained.
As of late 2020, Smith filed two lawsuits seeking to strike down Section 10. One went to federal court, with three discount cigarette makers also listed as plaintiffs. This lawsuit alleges a violation of the Commerce Clause of the US Constitution, arguing that the Section 10 floor price discriminates against manufacturers of discount cigarettes. A judge is currently considering the government’s motion to dismiss.
The second lawsuit, filed in Denver District Court, describes an effort within the government allegedly to obfuscate Section 10 for voters in order to seal a deal with Altria, a producer of high-end cigarettes whose most expensive would become competitive once the floor price of HB 1427 increases. cheap cigarette prices. Altria would have wanted the floor price in exchange for abandoning its opposition to the increase in taxes on cigarettes.
“(I) if Altria can’t get this, the deal could be in jeopardy,” one strategist wrote in June 2020, according to an email Smith obtained for his lawsuit.
Smith asked District Court Judge Eric M. Johnson to grant an injunction blocking the application of Section 10 while the case continues. Johnson, at a hearing in January 2021, appeared supportive of the argument that the minimum price for cigarettes did not appear to be tied to the EE proposal’s statement to voters that it was a tax measure on tobacco and nicotine.
“You have to admit on some level that the plaintiff is right. This very long, very long headline very clearly deals with taxation. And a minimum price hits you in your gut like ‘this is different,'” Johnson said.
He ultimately refused to block Section 10. In order to qualify for an injunction, Smith had to meet six different factors, including that she was likely to succeed on the merits of her case and that there was a danger of irreparable harm. Johnson found that Smith specifically failed to show how his $700 a year in extra cigarette costs outweighed the harm to the government from giving up revenue that voters had overwhelmingly approved.
“The damages to the defendant, financially, would be in the millions of dollars,” the judge wrote, “but more importantly, the damages to the defendants, measured by the impact on society, would be incalculable given that “a delay would undermine the intended effect of the legislation: reducing the number of smokers in Colorado and preventing young people from starting.”
During oral argument before the Court of Appeals panel, Smith’s attorney argued that sooner or later Section 10 would be struck down as unconstitutional. Marc E. Kasowitz, then-President Donald Trump’s personal attorney who now represents Smith, repeatedly referenced the Altria deal as grounds for concluding that Section 10 was misrepresented to voters.
“We need to revisit the decision he made,” Judge Rebecca R. Freyre said, referring to Johnson’s finding that an injunction would disproportionately harm the state. “It’s hard for me to understand how the single subject and these other things relate to that.”
The panel found that Johnson acted at his discretion in refusing the preliminary injunction while the case continued.
An estimate of legislative staff predict that the EE proposal will bring in $177 million in revenue in fiscal year 2021-22. Much of the increase would come from higher cigarette taxes, but the projection was that the Section 10 floor price would also increase tax revenue.
The deal is Smith v. Colorado et al.