GM 11-125

Second Circuit Holds Against Oneida Nation in Foreclosure Case, Remands Remaining State Law Claims to New York State Courts

On October 20, 2011, the United States Court of Appeals for the Second Circuit issued its opinion in Oneida Indian Nation of New York v. Madison County. This case is the most recent chapter of a long-running dispute that has spurred litigation since the 1990’s between the Oneida Indian Nation (OIN) and various counties in New York. The instant case addressed the OIN’s challenge to the counties’ alleged right to foreclose upon fee lands owned by OIN for non-payment of property taxes – lands that are part of the Oneida reservation.

At the outset of this case’s history, the OIN had sued to prevent the counties of Madison and Oneida from foreclosing on OIN-owned fee lands for failure to pay property taxes. The lower federal district court ruled in favor of the OIN on four independent grounds: Tribal sovereign immunity; the Nonintercourse Act; inadequate notice to the OIN in violation of federal due process rights; and the Indian reservation “exemption” from property taxes under New York state law. The federal district court issued injunctions that prevented the counties from enforcing the tax scheme on the OIN-owned lands. On the counties’ appeal, the Second Circuit initially upheld the lower court’s injunctions, but based the decision solely on the grounds of tribal sovereign immunity from suit. Subsequently, the counties appealed to the United States Supreme Court. After the Court agreed to review the case, the OIN notified the Court that it had voluntarily waived its immunity from suit, leaving no tribal immunity dispute for the Supreme Court to decide. Therefore, the Supreme Court vacated the Court of Appeals’ judgment, instructing the Court of Appeals to decide whether the tribal waiver of immunity was valid, and if so, to decide the other issues in the case.

On remand the Court of Appeals reversed its previous ruling, holding that the OIN had “affirmatively disclaimed any reliance on the doctrine of tribal sovereign immunity from suit,” and had thereby abandoned its claims against the counties to the extent that they depended on such immunity. The appeals court also held that the OIN had abandoned its Nonintercourse Act claim against the counties. The OIN had written in its letter-brief to the court that it “no longer invokes the Nonintercourse Act’s statutory restrictions on the alienation of Indian land as a defense to tax foreclosures.” This language gave the court enough reason to dismiss with prejudice the two claims, thus preventing the OIN from raising them again in future litigation.
After disposing of the sovereign immunity and Nonintercourse Act claims, the court held against the OIN on the remaining two claims. First, the OIN had claimed that the counties’ foreclosure notice procedures violated the OIN’s constitutional due process rights. The court held that the notice procedures did comport with the requirements of constitutional due process.

Then, and importantly for the future of OIN’s ability to challenge the taxes, the court addressed the OIN’s state law claims arising under New York property law. Section 454 of the New York Property Law provides that “[t]he real property in any Indian reservation owned by the Indian nation, tribe, or band occupying them shall be exempt from taxation.” Additionally, Section 6 of New York Indian Law provides that “[n]o taxes shall be assessed, for any purpose whatever, upon any Indian reservation in this state, so long as the land of such reservation shall remain the property of the nation, tribe, or band occupying the same.” The OIN had argued that these provisions effectively eliminated the counties’ ability to enforce the tax on the land.

The appeals court thought these issues should be presented to the state court to decide, not the federal court. There is considerable potential for the OIN to make strong state law claims based on these sections of New York statutes. In fact, the court explicitly remanded with instructions to dismiss without prejudice, leaving open the possibility that the OIN could still win the case in the New York state courts.

The court ended its opinion by refusing to consider the counties’ argument that the Oneida’s ancient reservation was disestablished by the 1838 Treaty of Buffalo Creek. Critically, the court declined to disturb its earlier holding – that the Oneida’s reservation was not disestablished – and left no doubt that holding remained the “controlling law” of the Second Circuit. The preservation of this ruling will assist Oneida in the state court proceeding.

Please let us know if we may provide further information regarding this development.