Appellate Rulings Highlight Growth in 'Thorny' Indian Law Issues

Joel Stashenko

New York Law Journal

07-16-2009

Neither Mohawk Indian governmental nor sovereignty rights are violated by the application of a provision of New York's "scaffold law" to injuries a worker suffered during a fall while working on a privately owned building on the St. Regis Mohawk Reservation, a state appeals court has ruled.

Other upstate New York appeals court panels also held recently that a major Tennessee-based seller of cigarettes is liable for more than $1 million in state taxes for under-reporting income he made from tobacco sales to American Indian vendors in New York and that two upstate counties illegally closed Cayuga Indian cigarette stores and seized their products last year in New York's Seneca and Cayuga counties for non-payment of tobacco taxes.

Attorneys say the three Appellate Division rulings last week reflect the growing litigation related to American Indian lands and tribal issues in both state and federal courts in New York.

"The Indian law has flowered from nothing to a whole discreet area of practice as a result of the rise of tribal sovereignty," said Cornelius D. Murray of O'Connell & Aronowitz in Albany, N.Y., a litigator in several gaming cases involving Indian nations. "It has raised a whole host of thorny legal questions that don't easily resolve because there is no coherent structure to Indian law. It is evolving and it doesn't have the same kind of precedents that other areas of the law have."

Murray said by "Indian law" he means federal and state laws as they apply to American Indians and Indian nations and also to tribal laws that have developed within the nations themselves.

Nearly every case involving Indian nations ultimately touches in one way or another on the question of whether they, like the state and federal governments, have sovereign immunity against being sued without their consent.

David Schraver of Nixon Peabody in Rochester, N.Y., said the first Indian-related cases began appearing in the 1970s with land claims. He said the litigation has proliferated since with the advent of disputes over Indian gaming, property taxes and sales taxes on cigarette and gasoline sold by Indian vendors.

Schraver said it is not always clear when Indian-related litigation will end up in federal courts or, like the three issues decided by Appellate Division panels last week, state courts.

"Indian law is primarily federal law, but when you get into issues of whether certain state laws apply to the conduct of certain tribes and their members, then you could end up in state courts," said Schraver, whose firm typically represents non-Indian governments in disputes with tribes. "And if they get through state courts, then it could get to the U.S. Supreme Court, if they grant cert."

An attorney for an Indian nation that lost in one Appellate Division department thinks he has just such a case.

A Third Department panel ruled in Alexander v. Hart, 505694, that an injured worker is not precluded from alleging a violation of the so-called scaffold law, Labor Law §§240 and 241, simply because the worker's fall took place on Indian land. Injured worker Roger Alexander alleged his injuries were suffered when he fell from a ladder while working on the roof of a fitness center on the St. Regis Mohawk Reservation in Franklin County.

Justice Anthony T. Kane wrote that Congress allows state courts to exert state jurisdiction over civil actions if no state or federal laws have precluded state action. Since no St. Regis Mohawk tribal law pertains to liability for injured workers, "we apply the civil laws of New York to this action," Justice Kane wrote.

As for the Indian nation's sovereign right to self-government, the panel noted that the scaffold law action was brought by Alexander against Fabian M. Hart, the owner of the fitness center building, and not the Mohawk nation. The fact that Hart is a Mohawk who lives on the reservation does not make him exempt from the action, the court held.

"Jurisdiction is proper in this action involving statutes aimed at protecting workers, as the statutes and this action address commercial and tort matters between individual civil litigants and do not implicate the St. Regis Mohawk nation's government or sovereign rights," Justice Kane wrote, citing Seneca v. Seneca, 293 AD2d 56 (2002).

The Court declined to dismiss Alexander's claim under Labor Law §240 (1), finding that Alexander was engaged in repair of a building at the time of his fall, as provided for under the statute. It did dismiss Alexander's claim under §241 (6), finding that he was not engaged in construction, excavation or demolition work when he was hurt, as that statute stipulates.

Hart's attorney, John A. Piasecki of Malone, N.Y., said he argued that application of the Labor Law is an administrative action by the state and does not have force in the St. Regis Mohawk territory. Piasecki said he would like to someday argue the point before the U.S. Supreme Court.

"It is larger than mere tribal sovereignty," Piasecki said Tuesday in an interview. "We have argued that unless a law is specifically adopted on an Indian reservation or specifically imposed on an Indian reservation by a federal act of Congress … New York statutes simply don't apply within the boundary of the St. Regis Mohawk Indian Reservation."

Rebecca A. Crance of the Sugarman Law Firm in Syracuse, N.Y., said she tried to steer clear of sovereign immunity questions by not naming the tribe or the reservation in the suit.

Justices Thomas E. Mercure, Robert S. Rose, E. Michael Kavanagh and Elizabeth A Garry joined in Justice Kane's ruling.

CIGARETTE TAX ISSUES

In another unanimous Third Department ruling, a different panel upheld a Tax Appeals Tribunal decision that found Tennessee cigarette wholesaler Elias H. Attea Jr. liable for more than $1 million in additional state income taxes plus interest for the 1992 and 1993 tax years.

Attea argued that he properly apportioned about $430,000 of the $11.6 million he reported in income for the two years to income from the sale of cigarettes on Indian lands to other Indians on the St. Regis and Tuscarora Indian reservations.

But the appellate court ruled in Attea v. Tax Appeals Tribunal, 504571, that Attea could not produce any "sales journals, general ledgers, balance sheets, expense receipts, income statements or bank statements" to substantiate his claim that he traded exclusively with Indians who resold his cigarettes to other Indians living on native lands.

The taxpayer must meet the burden of establishing that income declared on such sales was properly confined to sales to other Indians, Justice Mercure wrote for the court.

"Although petitioner argues that all state transactional record-keeping requirements are inapplicable to Indian traders due to preemption by federal law in this area, it is now well established that 'Indian traders are not wholly immune from state regulation that is reasonably necessary to the assessment or collection of lawful state taxes,'" Justice Mercure wrote, quoting a landmark Indian tax case, Department of Taxation & Fin. V. Milhelm Attea & Bros., 512 U.S. 61 (1994).

Justices Rose, Kavanagh and Garry concurred.

In a Fourth Department tax case, Cayuga Indian Nation of New York v. Cayuga County Sheriff David S. Gould, CA 08-02582, the judges held that sheriff's deputies in Cayuga and Seneca counties moved illegally last fall when they seized some three million untaxed cigarettes from Cayugas' Lake Side Trading stores in each county.

The judges decided that a section of state Tax Law, 471-e, has been rendered inoperable because of the Department of Taxation and Finance's failure to issue coupons allowing for the taxing of cigarettes sold by Indian vendors to non-Indians. Since the statute is not in effect, the counties cannot prohibit the sales of untaxed cigarettes at the Lake Side Trading stores.

The court ruled 4-1, with the dissenter, Justice Erin M. Peradotto, writing that sections of state Tax Law other than §471-e provide for authorization to tax the sales by Indians to non-Indians.

Justices Robert G. Hurlbutt, John V. Centra, Samuel L. Green and Jerome C. Gorski were in the majority, with Justice Hurlbutt writing the majority ruling.

An attorney for the Cayugas, former federal prosecutor Daniel French, said Tuesday the tribe had given the governments in both Cayuga and Seneca counties an offer to dismiss the suit and pay the counties' $180,000 for legal fees. If not, French said the tribe would press the litigation, possibly exposing the two counties to millions of dollars in damages and legal fees.

Legislators from both counties planned to meet Tuesday night to discuss the Cayugas' offer.