Unkechaug seeks dismissal of Bloomberg’s federal case

Editors Note: As Indian Country Today was going to press, the U.S. District Court for Eastern New York denied the Unkechaug’s motion to dismiss the New York City lawsuit, and issued an injunction prohibiting the smoke shops from selling unstamped cigarettes to non-tribal customers. The injunction is stayed for 30 days to allow the nation time to appeal.

MASTIC, N.Y. – The Unkechaug Indian Nation has asked a federal court to dismiss a lawsuit filed last year by New York City Mayor Michael Bloomberg in an attempt to collect taxes from the sale of cigarettes on the nation’s Poospatuck Reservation.

The motion was filed in U.S. District Court for the Eastern District of New York July 15 and seeks reconsideration of the court’s decision to deny an earlier request to dismiss the case.

Bloomberg filed the case Sept. 29. The lawsuit accuses eight smoke shop owners on the reservation of allegedly breaking state and federal law by selling cigarettes in bulk to bootleggers who resell them in the city.

It was a new approach to the state’s ongoing cigarette tax wars. Cigarette sales to tribal members on reservations are not taxable, but the state has been trying for years to force tribal smoke shops to collect taxes on cigarettes sold to non-Indians. The tribes have just said no to that effort on the basis that as sovereign nations they are not obligated to act as tax collectors for New York state.

Bloomberg claimed tax losses from the Poospatuck businesses alone amount to $525 million in state taxes and up to $195 million for the city and that “fraudulent cigarette sales on Indian reservations” total tax losses of more than $1 billion a year to the state – numbers refuted by the city’s Independent Budget Office.

The district court denied the nation’s request to dismiss the case last March saying that the defendants are not “arms of the tribe” and they are not Indians in Indian country.

The Unkechaug motion for reconsideration is based on a number of arguments.

The nation says the court “overlooked crucial law and facts” that might change its conclusion that the smoke shops are not “arms of the tribe,” including that the tribe licenses reservation businesses and collects $1 per carton to be used for social services to its citizens.

The motion also says the court failed to examine the relationship of the businesses with the “unique historical and cultural customs and practices of the Unkechaug Indians since the seventeenth century.” The nation provided materials from John Strong, a professor and renowned historian of the culture of Algonquin Indians and the author of a forthcoming history of the Unkechaug Indian Nation to provide that context.

In addition to the new information, the motion was also prompted by a New York State Supreme Court Fourth Department, Appellate Division ruling July 10 regarding the Cayuga Indian Nation.

That ruling determined that Cayuga’s two Lakeside Trading stores in upstate New York are on “qualified reservation” lands, and the tax law governing cigarette sales on reservations is section 471-e, “Taxes imposed on qualified reservations,” and not section 471, “Imposition of cigarette tax,” which is a general law.

Section 471-e requires the state to provide the nations with tax exempt coupons for cigarettes sold to tribal members on reservations and aims to provide a means to collect taxes on cigarettes sold to non-Indians. But the law has never gone into effect because the state hasn’t been able to figure out an effective legal coupon system.

The Appellate Court determination that the Cayuga shops are on qualified reservation lands referred to federal common law in effect at the time Cayuga acquired the lands, which said Indian nations or tribes could purchase land on the open market and regain sovereignty over it provided the land was within the nation’s or tribe’s original reservation.

“The court’s specific use of Federal Common Law in the determination of reservation land also applies to the Poospatuck Indian Reservation here. The Cayuga case is a development of law that was not available to this court at the time of its initial ruling,” Unkechaug attorney Jim Simermeyer wrote in the nation’s motion.

Attorney Michael Cardozo, representing New York City, filed a motion July 24 opposing Unkechaug’s bid for reconsideration, stating that the nation’s request is “wholly lacking in merit.”

Cardozo could not be reached for comment.

The lawyers presented oral arguments July 31.

“We made our case,” said Unkechaug Chief Harry Wallace, an attorney with the New York bar. As a result of the lawsuit, the tribe has conducted the most extensive research into its history and genealogy that it has ever done and has uncovered thousands of pages of documentation about tribal history and ancestors, he said.

Wallace was “appalled” at the behavior of the city’s representatives.

“It’s unbelievable how arrogant these people are. They said the Appellate Division was insane and the court’s analysis was faulty and that they didn’t review the legislative history, and they claimed there would be wholesale bootlegging going on if the case was dismissed, which is not true because it’s an issue that only applies to Indians. It was fear mongering, scapegoating standard tactics.”

Simermeyer said the city is still presenting the same arguments.

“They’re still saying section 471 should be applied, but the Appellate Court ruled that the general provision to tax cigarettes never applied to Indians, ever. Indians have this special relationship and, logically, it wouldn’t make sense to create a new law – 471-e – for Indians if the general law applied to them.”

Simermeyer said he doesn’t know when a decision will be issued. The judge could dismiss the case, or issue an injunction against the tribe and move forward with Bloomberg’s lawsuit, forcing the nation to appeal to the 2nd Circuit Court of Appeals.

If that happens, the 2nd Circuit will determine whether it agrees with the Appellate Court or whether it will send the case to the highest state court – New York Court of Appeals – for a decision.

If either court determines there has been no violation of state statutes, the federal case will have no basis to continue.