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People v. Shami

Supreme Court of Michigan

April 26, 2018

PEOPLE OF THE STATE OF MICHIGAN, Plaintiff-Appellee,
v.
SAMER A. SHAMI, Defendant-Appellant.

          Argued on application for leave to appeal January 11, 2018.

          Chief Justice: Justices: Stephen J. Markman, Brian K. Zahra, Bridget M. McCormack, David F. Viviano, Richard H. Bernstein, Kurtis T. Wilder, Elizabeth T. Clement

         SYLLABUS

         Defendant Samer A. Shami was charged in the 19th District Court with violating the Tobacco Products Tax Act (TPTA), MCL 205.421 et seq., for possessing, acquiring, transporting, or offering for sale tobacco products with an aggregate wholesale price of $250 or more as a manufacturer without a license in violation of MCL 205.423(1) and MCL 205.428(3). Defendant was the manager of Sam Molasses, a retail tobacco store owned by Sam Molasses, LLC. With the assistance of the Michigan State Police, officials from the Michigan Department of Treasury conducted an inspection of Sam Molasses on May 1, 2013. When the investigation revealed that the labels on several plastics tubs of tobacco in the store's inventory did not match those listed on the invoices from tobacco distributors, defendant explained that he had mixed two or more flavors of tobacco to create a new "special blend, " which was then placed in the plastic tubs and relabeled. Defendant also explained that he repackaged bulk tobacco from a particular distributor by taking the packets of tobacco out of the boxes, inserting them into metal tins, and placing his own label on the tins, which were then sold at the store. Following a preliminary examination, the district court, Sam A. Salamey, J., bound defendant over to the Wayne Circuit Court for trial, ruling that there was probable cause to believe that defendant was a manufacturer of a tobacco product because, by blending different types of tobacco together, he had created a new and distinctive product. Defendant thereafter filed a motion to quash, which the circuit court, Alexis A. Glendening, J., granted after concluding that blending two types of tobacco does not constitute manufacturing under the TPTA. The Court of Appeals, Gadola, P.J., and Wilder and Meter, JJ., reversed and remanded, holding that defendant had manufactured or produced tobacco for purposes of the TPTA when he mixed different flavors of tobacco and repackaged tobacco in tins with his own label before offering it for sale. 318 Mich.App. 316 (2016). Defendant applied for leave to appeal in the Supreme Court, which ordered and heard oral argument on whether to grant the application or take other peremptory action. 500 Mich. 1017 (2017).

         In a unanimous opinion by Justice Zahra, the Supreme Court, in lieu of granting leave to appeal, held:

         The Court of Appeals correctly held that an individual who combines two different tobacco products to create a blended product, relabels that new mixture, and makes it available for sale to the public is a manufacturer of a tobacco product for purposes of the TPTA. Because there was sufficient evidence for a person of ordinary prudence and caution to conscientiously entertain a reasonable belief that defendant was a manufacturer under MCL 205.422(m)(i) because he produced a tobacco product, the district court did not abuse its discretion by binding him over for trial for alleged violations of MCL 205.423(1) and MCL 205.428(3). However, the Court of Appeals erred by concluding that merely repackaging bulk tobacco into smaller containers renders an individual a manufacturer under the TPTA. Accordingly, the judgment of the Court of Appeals was affirmed in part and reversed in part.

         1. MCL 205.423(1) provides, in part, that a person shall not purchase, possess, acquire for resale, or sell a tobacco product as a manufacturer in this state unless licensed to do so. Under MCL 205.428(3), a person is guilty of a felony if he or she possesses, acquires, transports, or offers for sale contrary to the TPTA tobacco products other than cigarettes with an aggregate wholesale price of $250 or more. Taken together, these provisions subject a manufacturer of a tobacco product to criminal liability for possessing, acquiring, transporting, or selling a certain wholesale value of a tobacco product in this state without a license. The TPTA defines a "manufacturer" as a person who "manufactures or produces a tobacco product, " but it does not define the terms "manufacture" or "produce." Accordingly, a person can become a manufacturer under the TPTA by either manufacturing or producing a tobacco product under the plain and ordinary meaning of those terms. Defendant's blending of tobacco products did not fall under the relevant dictionary definitions of "manufacture, " which include "to make into a product suitable for use" and "to make from raw materials by hand or by machinery, " because the unblended tobacco products were not raw materials and they were already suitable for use. However, considering the statutory context in which the term "produce" appeared, the relevant definition of that term was "to give being, form, or shape to." Because a person cannot give being, form, or shape to something that already existed in the same form or shape, the product produced must take a different form or shape than any of its constituent parts. Therefore, an individual "produces" a tobacco product when he or she combines two or more different tobaccos "to give being, form, or shape to" a single, custom tobacco blend that differs from the ingredient tobaccos. Consequently, that individual is a "manufacturer" of a tobacco product under MCL 205.422(m)(i), and he or she must have a license before purchasing, possessing, acquiring for resale, or selling a tobacco product under MCL 205.423(1).

         2. There was sufficient evidence for a person of ordinary prudence and caution to conscientiously entertain a reasonable belief that defendant was a manufacturer under MCL 205.422(m)(i) because he produced a tobacco product. According to testimony at the preliminary examination, defendant admitted that he mixed two or more different tobaccos to create a new "special blend." He then relabeled that combination and made it available for sale to the public. Having produced a new tobacco product, defendant was required to be licensed as a manufacturer, and there was no dispute that defendant had no such license. Therefore, the district court did not abuse its discretion by binding defendant over for trial in the Wayne Circuit Court for alleged violations of MCL 205.423(1) and MCL 205.428(3). Because the Court of Appeals reached the same conclusion, albeit for different reasons, this portion of its judgment was affirmed.

         3. The Court of Appeals erred by concluding that defendant's repackaging packets of tobacco into tins and relabeling it before offering it for sale amounted to the manufacturing of a new tobacco product. Taking packets of tobacco out of a box from a distributor and placing those packets into tins with new labels did not constitute the manufacture a tobacco product, because the tobacco product itself remained completely unaltered and was suitable for use before being placed in the tins. Defendant also did not produce a tobacco product by repackaging and relabeling the tobacco because, given that the tobacco product was completely unchanged after being placed in the tins, the repackaging and relabeling did not give being, form, or shape to a new tobacco product. In going beyond the dictionary definitions of "manufactures" and "produces, " the Court of Appeals fashioned an overly expansive definition that encompassed conduct not supported by the plain and ordinary meaning of those words. That Court's definition also failed to appreciate that the focus of the inquiry should have been on the tobacco product itself, not the precise manner or mechanism in which that product was displayed or offered to the public. Accordingly, this portion of the Court of Appeals' judgment was reversed.

         Court of Appeals judgment affirmed in part and reversed in part; case remanded to the Wayne Circuit Court for further proceedings.

         BEFORE THE ENTIRE BENCH

          OPINION

          ZAHRA, J.

         The Tobacco Products Tax Act (TPTA)[1] requires a manufacturer of a tobacco product to be licensed with the Michigan Department of Treasury before purchasing, possessing, acquiring for resale, or selling that product in Michigan.[2] Criminal liability may arise from the failure to comply with the licensing requirement.[3] The issue presented in this case is whether an individual who combines two different tobacco products to create a new blended product or repackages bulk tobacco into smaller containers with a new label is considered to be a manufacturer of a tobacco product and must have the requisite license.

         The Court of Appeals held that, in either instance, such a person is a manufacturer. According to that Court, manufacturing simply requires a change from the original state of an object or material into a state that makes it more suitable for its intended use, and a person who changes either the form or delivery method of tobacco constitutes a manufacturer for purposes of the TPTA.

         Although we agree with the Court of Appeals' conclusion that an individual combining two different tobacco products to create a blended product, relabeling that new mixture, and making it available for sale to the public is a manufacturer of a tobacco product, we disagree with the Court of Appeals that merely repackaging bulk tobacco into smaller containers renders an individual a manufacturer under the TPTA. Therefore, we affirm in part and reverse in part the judgment of the Court of Appeals. This case is remanded to the Wayne Circuit Court for further proceedings consistent with this opinion.

         I. FACTS AND PROCEEDINGS

         Defendant Samer A. Shami managed the day-to-day operations of Sam Molasses, a hookah-tobacco retail store located in Dearborn, Michigan, which was owned by Sam Molasses, LLC. Although Sam Molasses, LLC, was licensed with the Michigan Department of Treasury as a secondary wholesaler[4] and an unclassified acquirer[5] of other tobacco products, it is undisputed that neither Sam Molasses, LLC, nor Shami was licensed as a manufacturer of tobacco products during the relevant time.

         With the assistance of the Michigan State Police, treasury officials conducted an administrative tobacco tax inspection of Sam Molasses on May 1, 2013, during which Shami produced several invoices from various tobacco distributors. When Alisha Nordman, an employee of the treasury's Tobacco Tax Enforcement Unit, discovered that the labels on several plastics tubs of hookah tobacco in the store's inventory did not match those listed on the invoices, Shami informed Nordman that he had mixed two or more flavors of hookah tobacco to create a new "special blend, " which was then placed in the plastic tubs and affixed with new labels to reflect the blended product. Michigan State Police Sergeant Stephanie Cleland also observed that labels on plastic tubs describing the flavor of hookah tobacco found inside did not correspond to invoices from the distributors.

         Sergeant Cleland further questioned Shami about tobacco in the store's inventory that did not match the labels on certain containers. In response, Shami told her that he repackaged bulk hookah tobacco from a particular distributor by taking the clear packets of tobacco out of the boxes, inserting them into silver metal tins, and placing a "360" label on the tins. These tobacco-filled tins were then sold at the store.

         Shami was subsequently charged with violating the TPTA by possessing, acquiring, transporting, or offering for sale tobacco products with an aggregate wholesale price of $250.00 or more as a manufacturer without a license in violation of MCL 205.423(1) and MCL 205.428(3).[6]

         Following a preliminary examination, the 19th District Court bound Shami over to the Wayne Circuit Court for trial, ruling that there was probable cause to believe that Shami was a manufacturer of a tobacco product insofar as he transformed "certain articles by blending those articles together to create a distinctive product or new character."[7] Shami thereafter filed a motion to quash, which the circuit court granted. According to the circuit court, "blending two types of hookah tobacco does not constitute manufacturing . . . ."[8] The Court of Appeals reversed, concluding that Shami was a manufacturer of tobacco products because he manufactured or produced tobacco for purposes of the TPTA when he mixed different flavors of tobacco and repackaged tobacco in tins with his own "360" label before offering it for sale.[9]

         Shami applied for leave to appeal in this Court. This Court directed the Clerk to schedule oral argument on whether to ...


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