Superior Court Judge: Roll-Your-Own Tobacco Stores Don't Violate State Law

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Superior Court Judge: Roll-Your-Own Tobacco Stores Don't Violate State Law

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By JANICE PODSADA, jpodsada@courant.com

The Hartford Courant

6:42 PM EST, February 27, 2012

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A Connecticut Superior Court Judge has ruled that roll-your-own tobacco shops are not cigarette manufacturers and thus are not violating state law by allowing customers to operate automated rolling machines, which can produce about 200 cigarettes in 10 minutes.

State officials had sought a preliminary injunction, which would have allowed the state to bar the use of roll-your-own machines at tobacco shops. That was denied Friday by Superior Court Judge William Bright.

The case will now proceed, but lawyers for the shops say Bright's ruling means their claim — that the businesses are self-service, not cigarette manufacturers — will probably prevail in the end.

The lawsuit, filed in August by Attorney General George Jepsen on behalf of Kevin B. Sullivan, state commissioner of revenue services, targeted Tracey's Smoke Shop and Tobacco LLC, charging the company with illegally manufacturing cigarettes at its stores in Norwalk and Orange.

"I'm really happy with the outcome," Tracey Scalzi, the smoke shops' owner, said Monday.

The Department of Revenue Services claimed the machines are commercial cigarette-making machines and retailers who operate them must obtain a cigarette-manufacturing license and pay the associated fees and tariffs, including Connecticut's cigarette tax, which adds $3.40 to a pack of cigarettes.

Scalzi operates six of the machines at the two stores, which opened about a year ago. Scalzi and other tobacco shop owners have said the machines only produce enough cigarettes for personal use.

About a dozen roll-your-own tobacco shops have opened around the state in the last two years. Customers typically pay about $40 for 8 ounces of loose tobacco, 200 hollow cigarette tubes and the use of the machine. Employees, who cannot physically assist customers in operating the machines, are only to "talk" customers through the process.

The machine, which costs about $40,000, automatically fills each tube with tobacco and then ejects the finished cigarette into a collection bin, an eight-minute process that produces the equivalent of a carton of cigarettes --10 packs of 20 cigarettes. Scalzi and other tobacco shop owners say the machines, like other legal roll-your-own devices, only produce enough cigarettes for personal use.

"In essence, the court opinion stated that provided that there was no direct participation by employees, consumers who want to rent a machine can do so and it does not constitute manufacture," said Anthony Troy, an attorney with Atlanta-based Toutman Sanders LLP, which represented Tracey's Smoke Shop.

In a joint statement, issued Monday, Jepsen and Sullivan said: "Superior Court Judge William Bright issued a preliminary injunction Friday in the state's ongoing lawsuit against Tracey's Smoke Shop and Tobacco. We are pleased with the court's preliminary determination under the Connecticut Unfair Trade Practices Act that the smoke shop has been operating illegally in several ways as a cigarette manufacturer."

Investigators with the attorney general's office did find that in some instances, employees assisted customers in operating the machines, which is illegal.

The court ordered that smoke shop employees cannot directly participate in the operation of the filling stations to make finished cigarettes. The smoke shops are also prohibited from making cartons or packs of cigarettes on the premises and then offering them for sale.

However, claims that the shops violated fire safety standards were dismissed.

State officials failed to prove that "an activity that can be legally performed, presumably without causing irreparable harm, in one's home — rolling your own cigarettes — causes irreparable harm merely because it is performed more quickly at the defendants' stores," Bright wrote in his decision.

Jepsen and Sullivan said, "We are disappointed in other aspects of the court's ruling that fail to bar the use of automatic "roll-your-own" machines in stores by tobacco retailers. The decision, however, is not a final ruling and litigation to finally determine this matter will continue."

Said Troy, "It is not a final order. It is an opinion. It is a temporary injunction. We are pleased and we will work with the attorney general."

Attorney Bryan Haynes, a partner at Troutman Sandders, said the temporary injunction bodes well for the tobacco shops. "You've got a judge's determination that these machines do not constitute manufacture. What the judge is saying is that the state is not likely to succeed in that claim."

"We're not manufacturing cigarettes — we're selling tobacco and tubes," said Michael Hatzisavvas, owner of Big Cat's Smoke Shop in Bristol. Big Cat's was not named in the lawsuit.

Hatzisavvas, who employs four people at his store, said he plans to open a second Connecticut store in May.He would not say the location.

The machines, made by RYO Machine LLC, a Cincinnati company, began appearing a few years ago. Bryan Haynes, an attorney representing the company, which was founded in 2008, has said the company's machines are not in the same league as commercial cigarette-making equipment.

"The advanced machines used by companies like Philip Morris and R.J. Reynolds will produce 20,000 cigarettes in a minute," Haynes said last December.


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Cigarette Competition

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The fear is that these Indian brands will surface in other states creating more smokers because of the lower competitive cost.

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