MEMORANDUM & ORDER Plaintiffs Amsterdam Tobacco Co., Inc. (“Amsterdam”), Donohue Candy and Tobacco Co., Inc. (“Donohue”), and Mountain Candy & Cigar Co., Inc. (“Mountain Candy” and collectively with Amsterdam and Donohue, “plaintiffs”), along with Kingston Candy & Tobacco Co., Inc., and Sunrise Candy & Tobacco Corp, (collectively with plaintiffs, the “original plaintiffs”), licensed cigarette distributors based in New York, brought this action against Harold Levinson Associates, LLC, (“HLA”), McLane Eastern, Inc., McLane Midwest, Inc., (together with McLane Eastern, “McLane”), Plainfield Tobacco and Candy Co., Inc., doing business as Resnick Distributors (“Resnick”), Consumer Product Distributors, Inc., doing business as J. Polep Distribution Services (“Polep”), and defendant Core-Mark Midcontinent, Inc. (“Core-Mark” or “defendant”) in Kings County Supreme Court on February 6, 2018 alleging violations of New York’s tax laws pertaining to the sale of cigarettes. (ECF No. 1, Removal Notice.) McLane removed to this court on March 8, 2018 pursuant to 28 U.S.C. §§1332, 1441, and 1446(a). (See id.) The parties agreed to sever and remand all claims against HLA, a citizen of New York. (See ECF No. 20, Stip.; ECF No. 34, Order dated 5/31/2018.) The parties then agreed to dismiss all claims against McLane and certain claims against each remaining defendant; plaintiffs subsequently filed three amended complaints, one against each remaining defendant, Core-Mark, Resnick, and Polep. (See ECF Nos. 36-38, Am. Compls.; ECF No. 39, Notice of Dismissal; ECF No. 40, Stipulation Regarding Severance.) Defendants respectively moved to dismiss the Amended Complaints. (See ECF Nos. 41-51.) The parties, however, soon sought to sever this case into three separate actions, each based on the three amended complaints, and the court ordered the original plaintiffs to open two new cases and file their respective amended complaints in the new cases, along with appropriate notices of dismissal in this case. (Docket Order dated 04/03/2019.) Plaintiffs complied with the court’s order and on May 1, 2019, the court dismissed Resnick and Polep, leaving only Amsterdam’s, Donohue’s, and Mountain Candy’s claims against Core-Mark in this action. (See ECF No. 36, Am. Compl.) Donohue and former plaintiff Kingston then filed a complaint against Polep in Docket No. 19-CV-2079, Mountain Candy filed a complaint against Resnick in Docket No. 19-CV-2080, and both defendants have respectively moved to dismiss those complaints. In the operative Amended Complaint in this action, plaintiffs allege defendant Core-Mark systematically violated New York tax law by selling cigarettes to New York retailers at prices below the statutory minimum set by the New York Cigarette Marketing Standards Act (“CMSA”), N.Y. Tax Law §483, et seq. (Am. Compl.
1-2.) Core-Mark now moves this court to dismiss plaintiff’s Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”) for failure to state a claim. (See ECF No. 53, Mot. to Dismiss; ECF No. 53-1, Def.’s Mem. (“DM”); ECF No. 55, Pls.’ Opp. (“Opp.”); ECF No. 54, Def.’s Reply (“Reply”); ECF No. 56, Fox Decl.) For the reasons discussed below, the court DENIES defendant’s motion and finds that plaintiffs have sufficiently pleaded a violation of the CMSA by Core-Mark. BACKGROUND The following facts are drawn exclusively from plaintiff’s Amended Complaint. Plaintiffs are each New York corporations and cigarette wholesale dealers (or “wholesalers”), and during the relevant time period, each was also a licensed stamping agent. (Am. Compl. 11-13.) Defendant is a publicly traded company incorporated in Arkansas. (Id. 14.) Like plaintiffs, Core-Mark is a licensed cigarette wholesaler and stamping agent in New York. (Id. 15.) New York State regulates the distribution of cigarettes through its tax laws. (See id. at 4-10.) The State controls what entities can sell cigarettes, collects taxes on the sale of cigarettes, and sets certain minimum prices under the CMSA. (Id. at 5.) The typical distribution scheme for cigarettes begins with manufacturers who make and package cigarettes. (Id. 17.) In New York, as in many other states, stamping agents purchase cigarettes in cartons of several packs from the manufacturers and then purchase tax stamps from the state government. (Id.) The stamping agents then affix these tax stamps to the cigarette packages and sell the stamped cigarettes to either wholesalers or retailers. (Id.) Wholesalers that are also licensed stamping agents will generally sell to retailers, though some wholesalers are not licensed stamping agents. (Id.) These latter, non-stamping wholesalers, are often referred to as “subjobbers,” and they typically purchase stamped cigarettes from wholesaler stamping agents before selling the stamped cigarettes to retailers who, in turn, sell cigarettes to consumers. (Id.) Agents, wholesalers, and retailers must all be licensed by New York’s Tax Department to sell cigarettes in the state. (Id. 18.) Defendant Core-Mark is licensed as a stamping agent and wholesaler in New York; it purchases cigarettes from manufacturers, purchases and affixes tax stamps to the cigarette packages, and then sells the stamped cigarettes to retailers or smaller wholesalers. (Id. 20.) The CMSA sets a minimum price by formula at which stamping agents and wholesalers in this distribution scheme may sell cigarettes. (Id. 16.) Plaintiffs allege that Core-Mark has engaged in a “broad scheme” to drive its cigarette prices below the statutory minimum by giving rebates to its New York customers dating back to 2015 and earlier. (Id. 46.) Core-Mark’s list prices for cigarettes are almost always at the CMSA minimum price, and when it occasionally diverges from the minimum, its list prices exceed the minimum by “pennies.” (Id. 47.) As a regular part of its business, Core-Mark extended rebates in various forms to its New York customers, including per-carton rebates of $1 to $3, and up-front or monthly payments to its customers. (Id. 49.) Core-Mark’s sales representatives used misleading sales codes on customer forms and invoices labelling per-carton rebates that gave the impression the amounts were for unrelated products. (Id. 58.) Plaintiffs offer four examples where Core-Mark obtained business, former customers of plaintiffs in New York, by offering per-carton rebates. Sometime in 2012, Amsterdam noticed it was selling fewer major brand cigarettes to Tri-State Candy Wholesale, Inc, a Queens, New York subjobber. (Id. 64.) Amsterdam charged Tri-State cigarette list prices at exactly the CMSA minimum price, and these prices were the same as Core-Mark’s list prices. (Id. 63.) Amsterdam soon discovered that Tri-State shifted its business to Core-Mark because it was offering Tri-State rebates of $1 per carton. (Id. 65.) From 2014 to 2017, Amsterdam’s sales to Tri-State declined by nearly $6 million. (Id. 66.) No other competitor offered Tri-State cigarette prices that were equal to or lower than Core-Mark’s prices. (Id. 67.) In September 2016, Mountain Candy similarly experienced a decrease in cigarette sales to Holbrook Development Corp., a group of 25 retail stores in New York. Mountain Candy sold cigarettes to Holbrook at the minimum price under the CMSA, and Core-Mark’s list prices were the same. (Id. 71.) Mountain Candy had made approximately $100,000 in annual sales to a particular Holbrook store. (Id. 76.) But, in September 2016, Holbrook stopped purchasing from Mountain Candy altogether. After a Mountain Candy sales representative visited the Holbrook store, Mountain Candy learned Holbrook was using Core-Mark shelf labels, and that Core-Mark was offering a $2 per-carton rebate to Holbrook. (Id. 73.) As a result, Mountain Candy stopped selling to this particular Holbrook store, and was “shut out” from the rest of the Holbrook collection of stores. (Id. 76.) Mountain Candy was not aware of any other competitor that offered sales to Holbrook at prices equal to or lower than Core-Mark’s prices. Donohue experienced similar losses with Anchor Beverage Center and ASC Mart. (Id. 80.) Donohue charged Anchor and ASC list prices at exactly the CMSA minimum, matching Core-Mark’s list prices. (Id. 81.) Sometime in July 2016, however, Anchor and ASC stopped purchasing altogether from Donohue. (Id. 82.) When Donohue’s owner visited Anchor, he learned that Anchor and ASC, which have common corporate ownership, switched their business to Core-Mark because it was offering rebates of at least $1 per-carton. (Id. 83.) No other competitor offered Anchor and ASC cigarette prices equal to or lower than Core-Mark’s prices. (Id. 88.) As a final example, Mountain Candy points to Priya and Mohit Enterprises (“Priya”) to which it was the primary cigarette supplier prior to August 2016, making more than $260,000 in annual sales. (Id. 90.) Mountain Candy charged Priya at the CMSA minimum, as did Core-Mark. (Id. 91.) Priya, however, stopped ordering from Mountain Candy in August 2016, prompting Mountain Candy’s sales representative to inquire with Priya. (Id. 92.) Mountain Candy learned that Priya switched its business to Core-Mark because it was offering $1 per-carton rebates. (Id. 93.) As a result, Mountain Candy stopped making any sales to Priya. At the time, no other competitor offered Priya prices equal to or lower than Core-Mark. (Id. 97.) In addition to these specific examples, plaintiffs allege that a senior Core-Mark sales manager apparently acknowledged it was giving a certain New York customer up to $3 per-carton rebates, which rebate varied depending on the customer’s purchase volume. (Id. 52.) The sales manager indicated the rebates vary “with each particular customer” and the amount of business expected. According to the sales manager, these rebates are recorded as monthly statement “credits” or as “returns,” which are then disbursed to the customer by Core-Mark through a check. (Id. 53.) The sales manager instructed retailers receiving these credits to lie to auditors if asked about the cigarette rebates and say the credits were for returned merchandise. (Id. 54.) Though the sales manager was apparently aware that Core-Mark’s competitors also issued rebates, he did not believe these rebates were “legit.” (Id. 55.) In addition to per-carton rebates, plaintiffs similarly allege Core-Mark made a number of up-front payments or monthly allowances to their former customers, resulting in plaintiffs losing all or a significant portion of their business with these customers. In February 2016, for example, Mountain Candy’s largest customer, Smokers Choice, stopped purchasing from Mountain Candy altogether. Smokers Choice switched their business to Core-Mark “in exchange for an upfront payment of $750,000,” apparently tied to the “cigarette sales it expected to make to Smokers Choice.” (Id. 107-08.) Mountain Candy had been charging Smokers Choice list prices at exactly the CMSA minimum, as did Core-Mark. (Id. 106.) Though cigarettes comprised approximately 66 percent of Mountain Candy’s sales to Smokers Choice, they accounted for approximately 98 percent of Mountain Candy’s profits from Smokers Choice. (Id. 105.) Prior to February 2016, Mountain Candy’s annual sales to Smokers Choice were in the tens of millions of dollars. (Id. 109.) Mountain Candy makes similar allegations that it lost business to a number of stores as a result of monthly payments made by Core-Mark to Mountain Candy’s former customers. In each case, Mountain Candy’s prices and Core-Mark’s cigarette prices were at the CMSA minimum. Mountain Candy typically sold these customers a mix of cigarettes and non-cigarette goods, with the former making up most of the profits. To each of these customers, Core-Mark made monthly payments of $500 to $800, tied to the volume of cigarette sales each customer made. Though several of these retailers indicated they would bring their business back to Mountain Candy if it offered similar payments, Mountain Candy refused, and lost business as a result. JURISDICTION The court has original jurisdiction over this dispute, as plaintiffs invoke the court’s diversity jurisdiction pursuant to 28 U.S.C. §1332. This case was properly removed pursuant to 28 U.S.C. §1441 once the claims against HLA, the non-diverse defendant, were severed and remanded. Plaintiffs are all New York-based corporations and defendant is an Arkansas corporation that maintains a business location in New York. (Am. Compl.
