In a blow to rural communities struggling to maintain their tax base, the U.S. Court of Appeals for the Second Circuit has affirmed a decision that said the doctrine of tribal immunity bars localities from foreclosing on land held by Native Americans.

The circuit on Thursday upheld a decision by Western District Judge Charles Siragusa, who said in Cayuga Indian Nation of New York v. Seneca County, 11-cv-6004 (NYLJ, Aug. 22, 2012), that governments cannot foreclose on Indian-held land for tax purposes.

The dispute involves land in Seneca County that was part of the 64,000-acre Cayuga Reservation some 200 years ago. Large tracts were sold off generations ago, but the Cayuga have been buying parcels, refusing to pay property taxes on the grounds that the re-claimed land is “Indian Country” and immune from taxation.

Seneca County sued for the right to foreclose on the land and return to the tax rolls property that had been taxed for decades until it was bought up by the Cayugas.

But Siragusa (See Profile), citing a 2010 Second Circuit decision, Oneida Indian Nation v. Madison County, 605 F.3d 149, held that the Cayugas are cloaked with tribal sovereign immunity and preliminarily enjoined the county’s collection efforts.

On appeal, Seneca County, supported by an amicus brief by the state, stressed that the decision on which Siragusa relied had been vacated by the U.S. Supreme Court in 2011. Siragusa had held that the vacatur was not on the merits and of no consequence.

The circuit said in its per curiam decision that there is no need to “discern the implied message communicated by the vacatur” since the Supreme Court subsequently re-affirmed that “tribes retain, as ‘a necessary corollary to Indian sovereignty and self-governance,’ a common-law immunity from suit’” (quoting from Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024, 2014).

The appeal was argued Jan. 7 before Chief Judge Robert Katzmann (See Profile) and circuit judges Dennis Jacobs (See Profile) and Susan Carney (See Profile). Appearing were: Philip Spellane, a partner at Harris Beach, for Seneca County; and David DeBruin, managing partner of Jenner & Block’s Washington office, for the Cayuga Indian Nation.