Oneida Nation of N.Y. v. Cuomo

• Citation: 645 F.3d 154
• Decision Date: 09 May 2011
• Docket Number: 10–4976(XAP),Docket Nos. 10–4265(L),10–4598(con),10–4477(XAP),10–4981(XAP).,10–4758(con),10–4272(con)
• Court: U.S. Court of Appeals — Second Circuit
• Parties: ONEIDA NATION OF NEW YORK, Plaintiff–Appellee,Seneca Nation of Indians, St. Regis Mohawk Tribe, Unkechauge Indian Nation, Plaintiffs–Appellees–Cross–Appellants,v.Andrew M. CUOMO, in his official capacity as Governor of New York, Thomas H. Mattox, in his official capacity as Acting Commissioner of the N.Y. Department of Taxation & Finance, Richard Ernst, in his official capacity as Deputy Commissioner for the Office of Tax Enforcement for the N.Y. Department of Taxation & Finance, Defendants–Appellants,John Melville, in his official capacity as Acting Superintendent, New York State Police, Defendant–Appellant–Cross–Appellee,Cayuga Indian Nation of New York, Intervenor–Appellant.

645 F.3d 154

ONEIDA NATION OF NEW YORK, Plaintiff–Appellee,Seneca Nation of Indians, St. Regis Mohawk Tribe, Unkechauge Indian Nation, Plaintiffs–Appellees–Cross–Appellants,

v.Andrew M. CUOMO, in his official capacity as Governor of New York, Thomas H. Mattox, in his official capacity as Acting Commissioner of the N.Y. Department of Taxation & Finance, Richard Ernst, in his official capacity as Deputy Commissioner for the Office of Tax Enforcement for the N.Y. Department of Taxation & Finance, Defendants–Appellants,John Melville, in his official capacity as Acting Superintendent, New York State Police, Defendant–Appellant–Cross–Appellee,Cayuga Indian Nation of New York, Intervenor–Appellant.

Docket Nos. 10–4265(L)

10–4272(con)

10–4598(con)

10–4758(con)

10–4477(XAP)

10–4976(XAP)

10–4981(XAP).

United States Court of Appeals, Second Circuit.

Argued: March 15, 2011.Decided: May 9, 2011.

Riyaz A. Kanji (Cory J. Albright, Zach Welcker, Kanji & Katzen, PLLC; Christopher Karns, Owen Herne, Seneca Nation of Indians Department of Justice, Salamanca, NY; Carol E. Heckman, Jeffrey A. Wadsworth, David T. Archer, Harter Secrest & Emery LLP, Buffalo, NY, on the brief), Kanji & Katzen, PLLC, Ann Arbor, MI, for Plaintiff–Appellee–Cross–Appellant Seneca Nation of Indians.David W. Debruin (Scott B. Wilkens, Joshua M. Segal, Jenner & Block, LLP; Daniel French, Lee Alcott, French–Alcott, PLLC, Syracuse, NY, on the brief), Jenner & Block, LLP, Washington, D.C., for Intervenor–Appellant Cayuga Indian Nation of New York.James M. Wicks (George C. Pratt, Hillary A. Frommer, Farrell Fritz, P.C.; James F. Simermeyer, New York, NY, on the brief), Farrell Fritz, P.C., Uniondale, NY, for Plaintiff–Appellee–Cross–Appellant Unkechauge Indian Nation.Michael L. Roy (Marsha K. Schmidt, on the brief), Hobbs, Straus, Dean & Walker, LLP, Washington, D.C., for Plaintiff–Appellee–Cross–Appellant St. Regis Mohawk Tribe.Michael R. Smith (R. Miles Clark, Zuckerman Spaeder, LLP; Peter D. Carmen, Meghan Murphy Beakman, Oneida Nation Legal Department, Verona, NY; Daniel F. Katz, Dennis M. Black, Williams & Connolly, LLP, Washington D.C., on the brief), Zuckerman Spaeder LLP, Washington, D.C., for Plaintiff–Appellee Oneida Nation of New York.Andrew D. Bing (Eric T. Schneiderman, Attorney General of the State of New York, Barbara D. Underwood, Solicitor General, Alison J. Nathan, Special Counsel to the Solicitor General, Steven C. Wu, Assistant Solicitor General, on the brief), Deputy Solicitor General, for Defendants–Appellants Andrew M. Cuomo, Thomas H. Mattox, Richard Ernst, and Defendant–Appellant–Cross–Appellee John Melville.Michael T. Feeley (Lisa A. Coppola, on the brief), Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC, Buffalo, NY, for Amicus Curiae Akwesasne Convenience Store Association.Michael A. Cardozo (Eric Proshansky, Aaron M. Bloom, William H. Miller, on the brief), Corporation Counsel of the City of New York, New York, NY, for Amicus Curiae the City of New York.Richard T. Sullivan, Harris Beach PLLC, Buffalo, NY, for Amicus Curiae New York Association of Convenience Stores.Thomas G. Jackson (Meagan A. Zapotocky, on the brief), Phillips Nizer, LLP, New York, NY, for Amicus Curiae New York State Association of Tobacco and Candy Distributors, Inc.^*Before: WESLEY, CHIN, and LOHIER, Circuit Judges.WESLEY, Circuit Judge:

The Seneca Nation of Indians (“Seneca Nation”), Unkechauge Indian Nation (“Unkechauge Nation”), St. Regis Mohawk Tribe (“Mohawk Tribe”), Cayuga Indian Nation of New York (“Cayuga Nation”), and Oneida Nation of New York (“Oneida Nation”) (collectively “Plaintiffs”) seek to enjoin amendments to New York's tax law, which are designed to tax on-reservation cigarette sales to non-member purchasers. Plaintiffs argue that the amended tax law interferes with their tribal sovereignty and fails to ensure their access to tax-free cigarettes for personal use. In three separate district court proceedings, Plaintiffs moved to enjoin New York officials (“State Defendants”) from implementing the amended tax law. The Western District denied the preliminary injunction motions of the Seneca and Cayuga Nations (Arcara, J.) as well as the Unkechauge Nation and Mohawk Tribe (Arcara, J.) but stayed implementation of the amended tax law pending appeal. The Northern District (Hurd, J.) granted the Oneida Nation's motion for a preliminary injunction. We conclude that none of the Plaintiffs has demonstrated a likelihood of success on the merits. Thus, we hold that the Northern District abused its discretion in granting the Oneida Nation a preliminary injunction. We also hold that the Western District properly denied injunctions to the Seneca Nation, Cayuga Nation, Unkechauge Nation, and Mohawk Tribe. We therefore vacate the order of the Northern District and affirm the two orders of the Western District. We vacate all stays and remand the cases.

BACKGROUND

I. New York Tax Law

New York currently imposes a $4.35 per pack excise tax on all non-exempt cigarettes sold in the State. N.Y. Tax Law § 471(1) (McKinney 2010). The consumer bears the “ultimate incidence of and liability for the tax,” id. § 471(2), and willful evasion of the tax is a misdemeanor, id. § 1814(f). ¹ New York's Department of Taxation and Finance (“Department”) “precollects” the tax from a limited number of state-licensed stamping agents, see id. § 471(2), and mandates that these agents be the only entry point for cigarettes into New York's stream of commerce, N.Y. Comp.Codes R. & Regs. tit. 20, § 74.3(a)(1)(iii) (2010). Stamping agents, often wholesalers themselves,² purchase tax stamps from the State and cigarettes from manufacturers. Before selling the cigarettes to other wholesalers or retailers, agents must affix a stamp to each pack of cigarettes to demonstrate payment of the tax. Id. § 74.3(a)(2). Agents incorporate the cost of the stamp into the pack's price and pass the cost along the distribution chain to the consumer. N.Y. Tax Law §§ 471(2),(3).

II. Cigarette Sales on Indian Reservations

Federal law prohibits New York from taxing cigarette sales to enrolled tribal members on their own reservations for personal use. See Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 475–81, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976). New York may, however, tax “[o]n-reservation cigarette sales to persons other than reservation Indians.” Dep't of Taxation & Fin. of N.Y. v. Milhelm Attea & Bros., Inc., 512 U.S. 61, 64, 114 S.Ct. 2028, 129 L.Ed.2d 52 (1994) (citing Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134, 160–61, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980)). The on-reservation sale of both taxable and tax-free cigarettes and New York's limited on-reservation taxing authority complicate collection and enforcement.

In the late 1980s, the Department determined that the volume of untaxed cigarettes that reservation retailers sold “would, if consumed exclusively by tax-immune Indians, correspond to a consumption rate 20 times higher than that of the average New York resident.” Id. at 65, 114 S.Ct. 2028. A substantial number of non-Indian New Yorkers clearly purchased their cigarettes from reservation retailers without paying the tax to either the retailer or the Department. The Department estimated the tax evasion to cost New York $65 million annually. Id.

The Department first attempted to collect these taxes in 1988 by promulgating regulations similar to those Plaintiffs now challenge.³ The Supreme Court upheld the 1988 regulations, and the scheme appeared ready for implementation. See id. at 78, 114 S.Ct. 2028. The Department never implemented the regulations, however, due to additional litigation, civil unrest, and failed negotiations between the State and individual nations and tribes.⁴ Consequently, the Department repealed the regulations in 1998. Despite the New York Legislature's repeated efforts to the contrary, the Department adopted a “forbearance” policy and allowed wholesalers to sell untaxed cigarettes to recognized tribes and reservation retailers without restriction.

Under the forbearance policy, non-member evasion of the cigarette tax proliferated. For example, the Unkechauge Nation has an estimated 376 enrolled members and yearly probable demand ⁵ of 3,240 cigarette cartons (10 packs per carton). Unkechauge retailers purchased approximately 5 million untaxed cigarette cartons from state-licensed stamping agents in 2009 and 3.5 million untaxed cartons from January through June 2010. If only Unkechauge members had consumed these cigarettes, every man, woman, and child would have smoked 364 packs per day in 2009. State Defendants present similar figures for the other Plaintiffs.⁶

The Department estimates that curbing tax evasion on reservations will generate approximately $110 million in annual tax revenue. Accordingly, New York once again seeks to collect taxes on non-member, on-reservation cigarette sales. The Department revoked its “forbearance” policy in February 2010. In June 2010, the New York Legislature amended New York Tax Law §§ 471 and 471–e, and the Department adopted regulations to implement the tax on reservation sales.⁷ The Department also issued a “Technical Memorandum” explaining certain aspects of the tax scheme. See Amendments to the Tax Law Related to Sales of Cigarettes on Indian Reservations Beginning September 1, 2010, TSB–M–10(6)M, (8)S (July 29, 2010) [hereinafter “Technical Memorandum”]. Together, the 2010 amendments, new regulations, and Technical Memorandum (collectively “amended tax law” or “amendments”) create a system to collect the excise tax on cigarette sales to non-members while exempting sales to tribal members for personal use. The amendments were scheduled to take effect September 1, 2010, but enforcement has been stayed due to the Northern District's preliminary injunction and the Western District's stays pending appeal.

III. Amended Tax Law

The amended tax law requires...