U.S. Supreme Court Denies Review of County’s Tax Dispute With Cayuga Nation

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Snell & WilmerOn June 7, 2021, the United States Supreme Court denied Seneca County’s (New York) petition for certiorari, thus leaving in place the Second Circuit’s decision in Cayuga Indian Nation of New York v. Seneca County, New York, 978 F. 3d 829 (2d Cir. 2020). The Second Circuit had upheld the lower court’s ruling that the Cayuga Nation’s sovereign immunity prevented Seneca County from being able to foreclose on Cayuga Nation properties for nonpayment of real property taxes.  The Second Circuit also rejected the County’s argument that City of Sherrill v. Oneida Indian Nation of New York, 544 U.S. 197 (2005), abrogated the tribe’s immunity from suit.   

The fundamental issue in the Cayuga case was whether a federally recognized Indian tribe’s sovereign immunity from suit prevented Seneca County from foreclosing on tribal properties within the County’s borders for the nonpayment of real estate taxes.

In 2007, the Cayuga Nation purchased several parcels of land in Seneca County.  In 2010, after the Cayugas refused to pay real property taxes levied by the County on those parcels, the County initiated foreclosure proceedings under Article 11 of the New York Real Property Tax Law.  In response, the Cayugas sued the County in federal district court, asserting that the foreclosure proceedings were barred by the doctrine of tribal sovereign immunity.  The federal court agreed and ruled in favor of the Cayuga Nation, enjoining the County from pursuing foreclosure proceedings.  

On appeal to the Second Circuit, the County argued that the foreclosure proceedings were permissible under an “immovable property exception” to tribal sovereign immunity.  The County asserted that, at common law, a sovereign (such as France) would not be immune from legal actions that challenged the sovereign’s rights to real (i.e., immovable) property located outside the sovereign’s own territory (e.g., the United States).  The County asserted that an analogous exception to the general rule of tribal sovereign immunity was applicable, reasoning that the scope of the immunity to which indigenous tribes are entitled cannot exceed that enjoyed at common law by other sovereigns.  

The Second Circuit rejected this argument, concluding that, even if it were to recognize the County’s proposed exception to immunity, the foreclosure proceedings were outside its bounds.  The Court explained that the foreclosure proceedings did not seek to establish Seneca County’s rights in real estate, which are central to the immovable property exception.  Instead, because the proceedings are best seen as the functional equivalent of an action to execute on a money judgment in that the County seeks to seize the parcels as a remedy for the nonpayment of real estate taxes, the proceedings fall within the categories of suits from which sovereigns were traditionally immune under common law, and the immovable property exception is irrelevant.

The Second Circuit also rejected the County’s claim that the United States Supreme Court’s decision in Sherrill abrogated the tribe’s sovereign immunity and authorized state tax foreclosure actions against tribes.  In Sherrill, the Supreme Court held that equitable considerations of laches, acquiescence, and impossibility barred the Oneida Indian Nation of New York’s claim that its open-market purchases of parcels of land, which the tribe purchased and which were within the boundaries of its former reservation, unified the fee and aboriginal title in the parcels such that the tribe could assert sovereign dominion over the parcels and avoid payment of city property taxes on the parcels. The Second Circuit concluded that Sherill merely narrowed the scope of tribal immunity from certain forms of state regulation.

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