Amicus Curiae Brief — Department of Taxation and Finance of NY v. Milhelm Attea & Bros.

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IN THE

Supreme Court of the United Sta

OCTOBER TERM, 1993

DEPARTMENT OF TAXATION AND FINANCE

OF THE STATE OF NEW YORK, et ai.,

Petitioners,

against

MILHELM ATTEA & BROS. INC.,

Respondent.

JAMES W. WETZLER, as Commissioner of Taxation

and Finance of the State of New York, et al.,

Petitioners,

against

ELIAS H. ATTEA, JR.,

Respondent.

On Writ of Certiorari to the Court of Appeals

of the State of New York

BRIEF OF AMICUS CURIAE

THE ONEIDA INDIAN NATION OF NEW YORK

IN SUPPORT OF THE RESPONDENTS

William W. Taylor, III

Counsel of Record

Michael R. Smith

Eric F. Facer

Alan H. Scheiner

ZUCKERMAN, SPAEDER, GOLDSTEIN,

TAYLOR & KOLKER

1201 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 778-1800

Counsel for Amicus Curiae

The Oneida Indian Nation

of New York

Dated: January 18, 1994

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TABLE OF CONTENTS

SUMMARY OF ARGUMENT ...........

SE eee

THE NEW YORK INDIAN CIGARETTE TAX

REGULATIONS ARE PREEMPTED BY THE

FEDERAL INDIAN TRADER STATUTES

A. Indian trader preemption prevents state

interference with tribal self-government

and economic development. .........

1. Congress intended the Indian trader statutes

to protect the Indians from the states . . .

2. Protection from state interference remains

ee eee ee ee 6

3. Indian trader preemption is a valuable

a elk id 4 eo 65 6 0 0

B. The New York State Indian Cigarette

Tax Regulations are preempted under

conventional preemption analysis

because of the explicit language of

ee Oe ee ee 6 ks

C. The State’s “minimal burdens” standard

has no place where, as here, express statutory

language resolves the question ........

D. The New York State Indian Cigarette Tax

Regulations are preempted because they

discriminate against Indian traders .... . .

ee i ee

il il

TABLE OF AUTHORITIES Milheim Attea & Bros., Inc. v.

Cases Dep't of Taxation and Finance,

Altheimer & Gray v. Sioux Mfg. Corp., 81 N.Y.2d 417, 615 N.E.2d 994,

983 F.2d 803 (7th Cir.), cert. denied, TIPLE Rae OO CIORD)....------- 1S

1146. Co GR OS ec cee 11 Moe v. Confederated Salish and Kootenai Tribes,

Board of County Couun're v. Seber, EE eee 8,13,14,15

316 CU, Te eee 5 Montana v. Blackfeet Tribe of Indians,

Brendale v. Confederated Tribes and Bands STUUS. TI9(EIES). . .- - - - Re aie ae

of the Yakima Indian Nation, New Mexico v. Mescalero Apache Tribe,

400 US. GERTIID. 6 cs ok oe 7 TL es ae 6 5 9 6 0 14

Bryan v. Itasca County, Northern Natural Gas Co. v. State Corp.

496 US. FFatteeee sb da eee 5 Comm'n, 372 U.S. 84(1963) ......... 12,18

California v. Cabazon Band of Oklahoma Tax Comm'n v. Citizen

Mission Indians, 480 U.S. 202 (1987) 7,10 Band Potawatomi Indian Tribe,

Central Machinery Co. v. Arizona State 496.US. 05 (1991). .....------ 3,15,19

Tax Comm'n, 448 U.S. 160 (1980)... 4,5,9,11,12 Oneida Indian Nation v. County of Oneida,

, , EE 16

Cippolone v. Liggett Group, Inc.,

112 S. Ct. 2608 (1992) ............ i] Phillips Chem. Co. v. Dumas Indep. Sch. Dist.,

City of Philadelphia v. New Jersey, | I gs cc we ee ee 17

437 US. GEV CROTED.. . wc ee ct es 17 Quill Corp. v. North Dakota,

City Vending of Muskogee, Inc. v. Oklahoma re 10

Tax Comm'n, 898 F.2d 122 (10th Cir.), Rice v. Rehner, 463 U.S. 713 (1983) ........ 14

cert. denied, 498 U.S. 823 (1990)... 2... 15,16 Rice v. Santa Fe, 331 U.S. 218(1947)....... 13

Cotton Petroleum Corp. v. New Mexico, Seminole Nation v. United States,

SOUS. G5 Gis so cc ke eee eee 14,17 EE 7

County of Oneida v. Oneida Indian Nation, Shaw v. Delta Air Lines, Inc.,

STO US. Tee CIGD. 6 4s oe ane eee 6,7 sg ie oe 0 ee 13

Hines v. Davidowitz, 312 U.S. 52 (1941)... . |. 15,17,18 Three Affiliated Tribes v. Wold Engineering,

Lac Du Flambeau Band v. Stop Treaty Cg tt 7

Abuse-Wisconsin, Inc., 99\ F.2d 1249 Toomer v. Witsell, 334 U.S. 385(1948) ...... 17,18

Ul* 3. Peer 7

iv

Transcontinental Gas Pipeline Corp. v.

State Oil and Gas Board,

GID a co pe cece sesewn 12

United States v. Forty-Three Gallons of Whiskey,

°. 6 4. 6c « ale Wie 6 ey 6,17

United States v. Kagama, 118 U.S. 375 (1886) . . 6

Warren Trading Post Co. v. Arizona State

Tax Comm'n, 380 U.S. 685 (1965)... = 4,6,11,12,17

Washington v. Confederated Tribes of the Colville

Reservation, 447 U.S. 134 (1980)... . 10,13,15,17

White Mountain Apache Tribe v. Bracker,

«cis et ee eee « 10,14

Williams v. Lee,

CPP osc cttw pee ees 8,14

Worcester v. Georgia,

OR ere 6,17

Constitutional Provisions

oF Re NR 8 8 eee eee 3,6,15,16

Statutes

Act of July 22, 1790,§ 1, 1 Stat. 137........ 6

Act of August 15, 1876, c. 289, § 5, 19 Stat. 200,

2 ho ane wee. so eA: 6. s 3,4,12

Indian Gaming Regulatory Act, Oct. 17, 1988,

Pub.L. 100-497, § 2, 102 Stat. 2467,

eee eee 7,10

PD os o's K sce we ee Be 8

ee

A ee ee 4

Federal Regulations

Is sg 5 no ole 0 8 80

46 Fed. Reg. 1298 (1981) .............

49 Fed. Reg. 25433 (1984) .............

50 Fed. Reg. 44242(1985).............

ee ee

58 Fed. Reg. 24442(1993) .............

58 Fed. Reg. 56456(1993).............

State Regulations

ET a

yp} oe ee

20 NYCRR § 335.7(c)&e(d)...........-..

ED . « 5.6/0.0 0:0: 6-eie

Other Authorities

120 Cong. Rec. 29197 (1974) ...........

The Federalist No. 42 at 284

GL IE ow wc cc cece ee ce

David Owen, Indians Dealing on New Terms,

The Financial Times,

ee

Sharon Henry, Multiplying Indian Casinos Draw

Critics’ Fire, Christian Science Monitor,

fC Ng ae

No. 93-377

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

DEPARTMENT OF TAXATION AND FINANCE

OF THE STATE OF NEW YORK, et al.,

Petitioners,

against

MILHELM ATTEA & BROS. INC.,

Respondent.

JAMES W. WETZLER, as Commissioner of Taxation

and Finance of the State of New York, et al.,

Petitioners,

against

ELIAS H. ATTEA, JR.,

Respondent.

On Writ of Certiorari to the Court of Appeals

of the State of New York

BRIEF OF AMICUS CURIAE

THE ONEIDA INDIAN NATION OF NEW YORK

IN SUPPORT OF THE RESPONDENTS

The Oneida Indian Nation of New York submits this briet

aS an amicus curiae in support of the Respondents, Milhelm

Attea & Bros., Inc. and Elias Attea, Jr., pursuant to letters of

permission trom counsel] for the parties, filed with the Clerk of

the Court.

2

INTEREST OF AMICUS CURIAE

The Oneida Indian Nation of New York (the “Oneida

Nation”) is a federally recognized Indian nation located in

central New York State. 53 Fed. Reg. 52829, 52831 (1988).

The Oneida Nation is one of the Indian nations affected by the

New York State Indian Cigarette Tax Regulations. The Oneida

Nation operates a smokeshop and has purchased cigarettes from

one of the Respondent cigarette wholesalers, Milhelm Attea &

Bros., Inc.

The Indian trader statutes are a necessary bulwark against

State interference with tnbal sovereignty, and are important now

more than ever. If the Court weakens its Indian trader preemp-

tion rulings at the request of the State of New York, it will invite

State interference with tribal commerce and erode tribal auton-

omy. Consequently, the Oneida Indian Nation believes that the

Court's decision in this case has ramifications beyond the nar-

row issue of Cigarette taxes.

The Oneida Nation, like many Indian tribes, is engaged in

significant economic and commercial activity. Such develop-

ment necessarily requires trade and contracts with non-Indians.

If a state can target the non-Indian side of a tribe's economic

relationships and impose special regulations, that state can

effectively regulate every aspect of Indian activity. The prob-

lem is particularly acute because, by virtue of federal law and

inherent sovereignty, Indians frequently have market advan-

tages that states and their non-Indian citizens wish to restrict or

eliminate. If states are permitted to regulate businesses that sell

goods to Indians, states will be able to use that power to interfere

with tribal economic development and thus tribal self-govern-

ment. As the Oneida Nation and other Indians diversify their

economic activities, the opportunities and temptations for state

interference by regulation of Indian traders will grow.

3

SUMMARY OF ARGUMENT

1. The New York State Indian Cigarette Tax Regulations

specifically target Indian traders and regulate the price, quantity

and kind of goods sold. The federal Indian trader statutes,

however, explicitly reserve to the federal government “the sole

power and authority” to regulate the “price,” “quantity,” and

“kind” of goods sold to Indians. 25 U.S.C. § 261. These

statutory terms constitute an express federal preemption of state

regulation of Indian traders and embody a Congressional intent

to protect Indian tribes from state interference. The State argues

for an exception to Indian trader preemption, urging a balancing

approach that would permit the imposition of “minimal bur-

dens” on Indian traders. The Court never has applied a balanc-

ing or minimal burdens analysis where, as here, preemption is

mandated by express statutory language. A bright-line rule of

preemption is compelled by the clear language of Section 261

and is necessary to fulfill the Congressional purpose of protect-

ing tribes against state interferenee thrve@gh the regulation of

Indian traders.

2. The State argues that this Court's decision in Okla-

homa Tax Comm'n vy. Citizen Band Potawatomi Indian Tribe,

498 U.S. 505 (1991), authorizes the regulations at issue. In

Potawatomi, however, the Court merely suggested that a State

could enforce its laws of general application against Indian

traders. The State’s regulations here are not laws of general

application but, rather, a complex regulatory scheme targeting

only Indian traders. The Indian commerce clause, U.S. Const.,

Art I, § 8, cl. 3, standing alone might prohibit this type of

discrimination against Indian traders. However, since Congress

has acted in this sphere, it is not necessary for the Court to reach

that issue. The Court should hold that the Indian trader statutes,

read in tandem with the Indian commerce clause, prohibit the

discrimination against Indian traders embodied in the New York

State Indian Cigarette Tax Regulations.

4

ARGUMENT

THE NEW YORK INDIAN CIGARETTE TAX

REGULATIONS ARE PREEMPTED BY THE

FEDERAL INDIAN TRADER STATUTES.

Section 261 of the federal Indian trader statutes provides

that the Commissioner of Indian Affairs has “the sole power and

authority to appoint traders to the Indian tribes and to make... .

rules and regulations . . . specifying the kind and quantity of

goods and the prices at which such goods shall be sold to

Indians.” Act of August 15, 1876, c. 289, § 5, 19 Stat. 200, 25

U.S.C. § 261. All persons desiring to trade with Indians are

subject to the Commissioner's authority. 25 U.S.C. §§ 261, 262:

Central Machinery Co. v. Arizona State Tax Comm'n, 448 U.S.

160, 163 (1980). Pursuant to the federal Indian trader laws, 25

U.S.C. §§ 261-264, the Bureau of Indian Affairs has promul-

gated regulations governing Indian traders, currently published

at 25 C.F.R. § 140 (1993).

The Court has twice held that the Indian trader statutes and

regulations thereunder occupy the field of sales to Indian tribes,

and “no room remains for state laws imposing additional bur-

dens upon traders.” Central Machinery, 448 U.S. at 163-64;

Warren Trading Post Co. v. Arizona State Tax Comm'n, 380

U.S. 685, 690 (1965). In Warren Trading Post, the Court

concluded that Congress intended that “no burden shall be

imposed upon Indian traders for trading with reservation Indians

except as authorized by Acts of Congress or by valid regulations

promulgated under those Acts,” 380 U.S. at 691, and that

Anzona could not apply a gross proceeds tax to a retailer selling

goods to reservation Indians. 380 U.S. at 685-86. In Central

Machinery, the Court held that Arizona could not apply a

transactions privilege tax to a company selling tractors to reser-

vation Indians. 448 U.S. at 161.

5

Notwithstanding these principles, the New York State In-

dian Cigarette Tax Regulations are targeted directly and solely

against Indian traders and tribes. 20 NYCRR § 335.6(b). The

regulations control the quantity of untaxed cigarettes that can be

sold to Indian tribes, and even authorize State officials to entirely

prohibit sales of untaxed cigarettes to the tribes. 20 NYCRR §§

335.7(c)&(d), 335.6(d)(3). In order to save these regulations,

the State of New York invites the Court to overrule its holding

in Central Machinery, urging the application of a “minimal

burdens” standard borrowed from cases in which no federal

Statute was controlling.

The Court should decline that invitation. Congress has

already balanced federal, state and tribal interests and has deter-

mined that states should be banned from regulating Indian

traders, regardless of the burden imposed. With regard to the

Indian trader statutes, Congress intended preemption to be an

end in itself.

A. Indian trader preemption prevents state

interference with tribal self-government and

economic development.

1. Congress intended the Indian trader

Statutes to protect the Indians from the

States.

From the very beginning, it has been an important function

of federal law to “regulate and protect the Indians and their

property against interference even by a state.” Bryan v. Itasca

County, 426 U.S. 373, 376 n.2 (1976); Board of County

Comm'rs v. Seber, 318 U.S. 705, 715 (1943). Of the many

federal interests in maintaining exclusive federal regulation of

Indian tribes, the protection of Indian tnbes against local inter-

ests and state control is distinct and compelling.

Federal preemption of state law concerning Indians was of

paramount importance to the first Congress, which enacted in

6

1790 the antecedent to the current Indian trader laws. Act of

July 22, 1790, § 1, 1 Stat. 137; Warren, 380 U.S. at 688. The

first Congress legislated pursuant to the new Constitution and

its Indian commerce clause, U.S. Const. Art. I, § 8, cl. 3, which

had been written to close the loopholes in the Articles of

Contederation permitting state regulation of Indian commerce.

County of Oneida v. Oneida Indian Nation, 470 U.S. 226, 235

& n.4 (1985) (citing The Federalist No. 42 at 284 (J. Cooke, ed.

1961)). Chief Justice Marshall noted in Worcester v. Georgia

that the goal of federal preemption was embodied in the ante-

cedent to Section 261 enacted on March 30, 1802, and that “[t}he

treaties and laws of the United States . . . provide that all

intercourse with [the Indians] shall be carried on exclusively by

the government of the union.” 31 U.S. (6 Pet.) 515, 557 (1832).

The goal of federal preemption was still paramount when

Section 261 was enacted in 1876. In that year, the Court heard

a challenge to a seizure of whiskey by federal authorities,

pursuant to the 1834 antecedent to the current Indian trader laws.

United States v. Forty-Three Gallons of Whiskey, 93 U.S. 188,

195-196 (1876). Holding that the whiskey could be seized, the

Court noted that the Indian trader laws embodied the notion that

“Congress now has the exclusive and absolute power to regulate

commerce with Indian tribes” and “the only efficient way of

dealing with the Indian tribes was to place them under the

protection of the general government.” 93 U.S. at 194.

The principle of federal protection against the states was

reiterated by the Court ten years later in United States v.

Kagama, which upheld federal criminal jurisdiction over Indian

country. 118 U.S. 375 (1886). The Court identified a “duty of

protection” on the part of the federal government, noting that

Indians “owe no allegiance to the states, and receive from them

no protection. Because of the local ill feeling, the people of the

States where they are found are often their deadliest enemies.”

United States v. Kagama, \18 U.S. at 384-85.

7

2. Protection from state interference remains

important today.

Federal protection of Indian tribes from state interference

remains important. Only the federal government is charged

with a “unique trust relationship” with the tribes. County of

Oneida v. Oneida Indian Nation, 470 U.S. 226, 247 (1985). The

states do not have this trust relationship, and do not have the

fiduciary obligations that control federal dealings with the

tribes. See Seminole Nation v. United States, 316 U.S. 286,

296-97 (1942). The states, in regulating trade with tribes, are

also much more likely than the federal government to serve

local, non-Indian commercial interests. They are also more

likely to express the hostility of non-Indians who resent the

economic advantages and political independence enjoyed by

Indians.

Indians enjoy many privileges pursuant to federal law of

which their non-Indian neighbors are likely to be jealous. These

exemptions are not evils to be eradicated; they are benefits to

Indian tribes arising from federally protected Indian sovereignty

or from a federal policy to promote Indian welfare. For exam-

ple, Indians are permitted to fish and hunt in ways forbidden to

non-Indians. See, e.g., Lac Du Flambeau Band v. Stop Treaty

Abuse-Wisconsin, Inc., 991 F.2d 1249, 1253 (7th Cir. 1993).

Indians are exempt from state regulatory policies, such as gam-

ing restrictions, to which non-Indians are subject. California v.

Cabazon Band of Mission Indians, 480 U.S. 202, 211 (1987);

Indian Gaming Regulatory Act, Oct. 17, 1988, Pub.L. 100-497,

§ 2, 102 Stat. 2467, 25 U.S.C. § 2701, et seg. Reservation land

may not be subject to local zoning. Brendale v. Confederated

Tribes and Bands of the Yakima Indian Nation, 492 U.S. 408,

444 (1989). States may not condition access to courts on a

waiver of tribal sovereign immunity. Three Affiliated Tribes v.

Wold Engineering, 476 U.S. 877, 891 (1986).

8

If permitted to regulate Indian traders, states can dilute

these privileges by imposing restrictions on those who do busi-

ness with the tribes. For example, absent Indian trader preemp-

lion, states might require Indian traders to obtain a waiver of

sovereign immunity in contracts with tribes, either for the ben-

efit of the trader alone or the state government as well. Allter-

natively, sales of goods used in a particular Indian trade, whether

spearfishing or high-tech manufacturing, could be taxed or

otherwise regulated ultimately to affect a tribe’s access to or use

of goods in commerce. Sales and contracts could also be

regulated to achieve practical control over tribal activity.

The State’s regulations here are a good example of this

danger. They authorize the State to embargo sales of untaxed

Cigareties to selected tribes, 20 NYCRR §§ 335.6(d)(3) and

335.7(d)(6), although the Court has held that the Indians have a

right, under principles of tribal sovereignty, to sell cigarettes to

Indians without collecting the tax. Moe v. Confederated Salish

and Kootenai Tribes, 425 U.S. 463, 480 (1976).!

Recent regulatory developments highlight the continuing

importance of the Indian trader statutes in promoting tribal

self-government and economic development while preventing

State interference. On April 25, 1980, the Bureau of Indian

Affairs (the “BIA”) proposed that the Indian trader regulations

be restricted to businesses located in isolated communities

where there is an absence of competition. 46 Fed. Reg. 1298

(1981). That proposal was abandoned because most comments

received were strongly opposed, “both because Indian reserva-

| The burdens imposed on tribes by the New York State Indian Cigarette

Tax Regulations violate the nght of the tribes to “make their own laws and

be ruled by them,” Williams v. Lee, 358 U.S. 217, 220 (1959), are not

authorized by 25 U.S.C. §§ 232 & 233 (granting civil and criminal jurisdic-

tion to New York State), and are impermissible under the Court's “minimal

burdens” test applied in Moe. However, since the regulations have been

challenged under the Indian trader statutes, rather than the tribal sovereignty

doctrine, we will not address those issues here.

9

tion consumers need the protection of the tederal government

and because the failure of the federal government to regulate

could result in permitting more state taxation of transactions

involving Indians on Indian reservations.”’ /d. Thus, the federal

government actively chose in 1981 to continue to occupy the

field o1 Indian trader regulation, responding to fears of state

incursions into the area.

The BIA then proposed that it “modernize the trading

regulations by adopting as its regulations the consumer protec-

tion statutes of the state where the business is located.” Jd. That

proposal was considered for a number of years but does not

appear in the Federal Register after the Department’s Semian-

nual Agenda in October 29, 1985. 50 Fed. Reg. 44242 (1985).

The proposal, which presumably was abandoned, highlights the

Executive's understanding that state laws do not apply to Indian

trader transactions absent federal incorporation. The abandon-

ment of the proposal is significant because it shows that the

Executive is not inclined to surrender control over Indian trading

to the States.?

Recently, a similar suggestion that the Indian trader regu-

lations be repealed was proposed and, judging by its disappear-

ance trom the Department’s Semiannual Agenda six months

later, quickly abandoned. Compare Semiannual Agenda, 58

Fed. Reg. 24442, 24490 (1993) with Semiannual Agenda, 58

Fed. Reg. 56456, 56502 (1993). Instead, the BIA proposes to

lend New York tribes the authority of the United States to

enforce tribal commercial codes against Indian traders. Semi-

annual Agenda, 58 Fed. Reg. 56456, 56502 (1993).

These developments show that the federal government

continues to use the Indian trader statutes to encourage the tribes,

in partnership with the federal government, to develop politi-

cally and economically while insulated from state interference.

? Also during the period since Central Machinery, the BIA enacted new

regulations governing federal government employees trading with Indians.

49 Fed. Reg. 25433 (1984).

10

3. Indian trader preemption is a valuable

bright-line rule.

Indian trader preemption creates a well-settled, bright-line

rule that protects Indian autonomy against state incursions. The

New York Court of Appeals accepted this. Milhelm Attea &

Bros., Inc. v. Dep't of Taxation and Finance, 81 N.Y.2d 417,

427, 615 N.E.2d 994, 998, 599 N.Y.S.2d 510, 514 (1993)

(adhering to “established law regarding Federal preemption’).

Any weakening of Indian trader preemption will encourage

aggressive state regulation of Indian traders and engender a new

round of the type of “case-by-case litigation which has plagued

this area of the law for a number of years.” Washington v.

Confederated Tribes of the Colville Reservation, 447 U.S. 134,

176 (1980) (Rehnquist, J., concurring and dissenting). By con-

trast, if the Court adheres to a bright line of Indian trader

preemption, it will “encourage[] settled expectations and, in

doing so, foster{] investment by businesses and individuals.”

Quill Corp. v. North Dakota, 112 S. Ct. 1904, 1915 (1992)

(upholding rule that a state may not impose sales and use taxes

on mail order sales).

The longstanding goal of federal Indian policy, reflected in

statutes, is to “promote tribal economic development, tnbal

self-sufficiency, and strong tribal government.” 25 U.S.C. §

2701(4). The Court has consistently applied this policy when

considering questions of federal preemption. See, e.g., Califor-

nia v. Cabazon Band of Mission Indians, 480 U.S. 202, 216

(1987); White Mountain Apache Tribe v. Bracker, 448 U.S.

136, 143 (1980). The more success the tribes enjoy in achieving

economic development, the greater the temptations and oppor-

tunities for state interference by regulation of those with whom

the tribes do business. As tribes develop, they necessarily must

be involved with non-Indians to pursue economic activities, so

that the ability of states to regulate non-Indians who deal with

tribes ultimately is the ability to regulate tribal development

itself.

Tribes already are engaged in a wide variety of economic

activity other than selling cigarettes and gaming. See, e.g.,

Altheimer & Gray v. Sioux Mfg. Corp., 983 F.2d 803, 806 (7th

Cir.), cert. denied, 114 S. Ct. 621 (1993) (tribe manufactured

military supplies and sought to expand into medical products);

David Owen, Indians Dealing on New Terms, The Financial

Times, April 14, 1987 at 6 (describing diversity of Cherokee

businesses with $9 million annual payroll). Indian tribes will

increasingly use some of their $6 billion annual gaming revenue,

earned pursuant to federal law, to diversify into the full spectrum

of economic activity. See Sharon Henry, Multiplying Indian

Casinos Draw Critics’ Fire, Christian Science Monitor, August

2, 1993 at 12 ($6 billion in tribal gaming revenue). Indian trader

preemption allows the tribes to pursue the federal policy goals

of tribal economic growth and diversification, free from state

interference through the economic back door of Indian trader

regulation.

B. The New York State Indian Cigarette Tax

Regulations are preempted under conventional

preemption analysis because of the explicit

language of Section 261.

The New York State Indian Cigarette Tax Regulations are

preempted without reference to special principles of Indian

sovereignty, or even to the scope and purpose of the federal

regulatory scheme. The regulations are invalid under the plain

language of Section 261.

State law can be preempted either because of explicit

language in a Statute or because the structure and purpose of a

Statute implies a Congressional intent to occupy the field.

Cippolone v. Liggett Group, Inc., 112 S. Ct. 2608, 2617 (1992).

In Warren and Central Machinery, the state taxes al issue were

not explicitly preempted by the Indian trader statutes. Never-

12

theless, the Court held that the structure and scope of the statutes

showed that Congress intended to preempt the field, and there-

fore the taxes. Warren, 380 U.S. at 691; Central Machinery,

448 U.S. at 163-64. In this case, preemption is even more

manifest, since the text of Section 261 directly expresses the

Congressional intent to displace state regulations of the “kind,”

“quantity” and “price” of goods sold to Indians:

The Commissioner of Indian Affairs shall have the

sole power and authority to . . . make such rules and

regulations . . . specifying the kind and quantity of

goods and the prices at which such goods shall be sold

to Indians.

25 U.S.C. § 261 (emphasis added).

The New York State Indian Cigarette Tax Regulations

require state officials to determine the quantity of cigarettes that

can be sold to Indians at untaxed prices, 20 NYCRR §

335.7(c)&(d), and empower the State to block an Indian tnbe 's

access to all untaxed cigarettes if State officials believe the

regulations or the general tax laws have been violated. 20

NYCRR §§ 335.6(d)(3) & 335.7(d)(6). The State is thus setuing

quotas on the amount of untaxed cigarettes the Indians can

receive, and reserving the right to set the quota at zero. The

imposition of the targeted tax on Indian traders inevitably in-

creases the price of cigarettes sold to Indians. See Northern

Natural Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 92 (1963)

(state regulations preempted because of indirect effect on natural

gas prices); Transcontinental Gas Pipeline Corp. v. State Oil

and Gas Board, 474 U.S. 409, 420 (1986) (explaining Northern

Natural Gas). These are exactly the type of price, kind, and

quantity regulations explicitly reserved to the “sole power and

authority” of the Commissioner by the statute. See, e.g., 25

C.F.R. § 140.17 (prohibiting the sale of cigarettes to minors).

When the language of a federal statute grants “sole power

and authority” to a federal official over a particular subject

13

matter, there is no room for state regulation on the same subject.

The precise phrase “sole power” has been quoted extensively

from ERISA’s legislative history to support that statute's blan-

ket preemption. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 99

(1983) (quoting 120 Cong. Rec. 29197 (1974): ERISA reserves

“to Federal authority the sole power to regulate the field of

employee benefit plans.”). Reference to “exclusive” federal

“power” and “authority” as to warehouse licensing also has been

held to preempt all state regulation of federally licensed ware-

housemen on subject matters addressed by federal law. Rice v.

Santa Fe, 331 U.S. 218, 236 (1947). There is no reason to

believe that the phrase “sole power’ has any less preemptive

force here than elsewhere. The conclusion of federal preemp-

tion, without reference to special principles of Indian law or even

to the scope and purpose of the Indian trader regulatory scheme,

is inescapable.

C. The State’s “minimal burdens” standard has no

place where, as here, express statutory language

resolves the question.

The State essentially concedes that the federal Indian trader

Statutes preempt state law generally. However, the State be-

lieves that because states may require Indian tribes to collect

cigarette taxes from non-Indian customers, New York may

require Indian traders to collect the taxes from Indians.

Petitioner's Brief at 19. The State argues that the balancing test

applied in this Court's opinions in Moe v. Confederated Salish

and Kootenai Tribes, 425 U.S. 463, 483 (1976), and Washington

v. Confederated Tribes of Colville, 447 U.S. 134, 159-62 (1980),

should be applied here, and the State tax regulations upheld

because they impose only “minimal burdens” on Indian traders.

Petitioner's Brief at 21-22. This argument seeks to carve an

exception from Indian trader preemption that cannot be found

in any of this Court's opinions or in the Indian trader statutes

themselves.

14

Even in the often complex area of federal Indian law, the

preemption inquiry remains at bottom a question of statutory

construction. Rice v. Rehner, 463 U.S. 713, 718 (1983), Cotton

Petroleum Corp. v. New Mexico, 490 U.S. 163, 176 (1989). The

State’s balancing approach and “minimal burdens” test never

have been used when preemption can be determined trom a

statute’s terms. The State relies upon the three-part balancing

of “federal, state, and tribal interests” that is the hallmark ot the

tribal sovereignty doctrine. See Rehner, 463 U.S. at 720. That

balancing test, however, should only be applied in the presence

of “vague or ambiguous federal enactments.” White Mountain

Apache Tribe v. Bracker, 448 U.S. 136, 143 (1980). The

balancing is amechanism by which “[a]mbiguiues in federal law

have been construed generously in order to comport with . . .

traditional notions of sovereignty and with the federal policy of

encouraging tribal independence.” Bracker, 448 U.S. at 144.

Contrary to the suggestion of the State, the balancing test has no

role to play when Congress's preemptive intent is otherwise

clear. “{A] State will certainly be without jurisdiction if its

authority is pre-empted under familiar principles of pre-emp-

tion.” New Mexico v. Mescalero Apache Tribe, 462 U.S. 324,

333-34 (1983).

The very cases cited by the State show that the “minima!

burdens” test cannot be applied where, as here, a question is

resolved by conventional preemption analysis. In Moe, the

relevant statutes and treaties did not refer to the State’s power

to tax. 425 U.S. 475-77. When considering whether the State

could require Indians to collect cigarette taxes from non- Indians,

in the absence of a governing statute, the Court asked whether

the “minimal burden” of requiring Indians to collect sales taxes

from non-Indians would frustrate tribal sovereignty as articu-

lated in Williams v. Lee, 358 U.S. 217, 219-20 (1959). Moe,

425 U.S. at 483. The Court explicitly distinguished the case of

Indian traders selling to reservation Indians, because that situa-

tion was governed by a federal statute. 425 U.S. at 482.

15

| In Colville, the Court was left with similarly ambiguous

(ederal law when considering whether tribal sales taxes affected

the State's power to tax reservation sales to non-Indians. 447

U.S. at 156. The Court again explicitly distinguished the situa-

tion from that of Indian traders. Colville, 447 U.S. at 155-56.

Lacking a federal statute on point, the Court had no choice but

to apply the “minimal burdens” test derived from the tribal

sovereignty doctrine. 447 U.S. at 159-60. Thus, the “minimal

burdens” test applied in Moe and Colville to sales by Indians to

non-Indians is simply irrelevant here, where a statute expressly

preempts state regulation of sales to Indians.

D. The New York State Indian Cigarette Tax Regula-

tions are preempted because they discriminate

against Indian traders.

The Court's opinion in Potawatomi suggests that laws of

general application can be enforced against Indian traders to

collect cigarette taxes. Even if that is so, the regulations here

are invalid because they facially discriminate against Indian

traders. The Indian commerce clause commits regulation of

Indian traders to the special purview of Congress. U.S. Const.,

Art. I, § 8, cl. 3. Congress has acted pursuant to the Constitution

by enacting the Indian trader statutes. Whatever the preemptive

effect of the Indian commerce clause or the Indian trader statutes

when read separately, the two read together prohibit state dis-

crimination against the objects of federal regulation, i.e. Indian

traders. See Hines v. Davidowitz, 312 U.S. 52, 62-66 (1941).

The State takes heart from the Court's suggestion in

Potawatomi that a State can collect its taxes on sales by Indians

to non-Indians by “assessing wholesalers who supplied unstamp-

ed cigarettes to the tribal stores.” Oklahoma Tax Comm'n v.

Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 514

(1991). In Potawatomi, the Court was referring to City Vending

of Muskogee, Inc. v. Oklahoma Tax Comm'n, 898 F.2d 122, 124

(10th Cir.), cert. denied, 498 U.S. 823 (1990). 498 U.S. at 514.

16

In that case, Oklahoma sued an Indian trader for non-payment

of taxes on cigarettes that the State claimed had already been

sold to non-Indians. City Vending, 898 F.2d at 124. The State's

lawsuit in City Vending sought only to enforce laws of general

application to collect taxes on sales made ultimately to non-In-

dians. In such circumstances, the State's lawsuit may be per-

missible because it is arguably not regulating the Indian trader

qua Indian trader, although this question should be left for

resolution in an appropriate case.

Here, by contrast, the New York State Indian Cigarette Tax

Regulations target only Indian traders and tribes. The regula-

lions presume that sales to Indian nations exceeding each

nation’s quota — as set by the State — are taxable sales. There

is no requirement, as in a lawsuit, that the State prove untaxed

sales have been made to non-Indians. Enforcement is simply

left to the judgment of the State bureaucracy. The regulations

contain no procedural protections, such as hearings, burdens otf

proof, and rights to present evidence, to control when and how

State officials determine that Indian traders and tribes have sold

too many untaxed cigarettes or should be banned trom selling

any at all.

The regulations thus discriminate against Indian traders by

subjecting them, because they are Indian traders, to a special

administrative scheme. The State’s scheme includes a presump-

tion of misconduct and deprivation of procedural protections

that Indian traders would enjoy if regulated only through the

State’s laws of general application. It is this means of enforce-

ment — facially discriminatory regulation of Indian traders —

that is inconsistent with the Indian trader statutes, interpreted in

light of the Indian commerce clause.

The Indian commerce clause, U.S. Const., Art. 1, § 8, cl. 3,

“vests the Federal Government with exclusive authority over

relations with Indian tribes.” Montana v. Blackfeet Tribe of

Indians, 471 U.S. 759, 764 (1985), see Oneida Indian Nation

17

v. County of Oneida, 414 U.S. 661, 670 (1974); United States

v. Forty-Three Gallons of Whiskey, 93 U.S. 188, 194 (1876);

Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 557 (1832). The

limitations On state power created by the Indian commerce

Clause have never been spelled out, since the Court has resolved

challenges to state regulation by reference to federal statutes.

See, e.g., Warren, 380 U.S. at 686. In Colville, however, the

Court Stated that the clause may have a “role to play in prevent-

ing undue discrimination against, or burdens on, Indian com-

merce.” 447 U.S. at 157; see also Colville, 447 U.S. at 177

(Rehnquist, J., concurring and dissenting). The Court should

here find that Congress’ legislation in an area constitutionally

committed to its expertise, “conjoined with the Indian com-

merce Clause,” Colville, 447 U.S. at 175 (Stewart, J., concurring

= dissenting), prohibits state discrimination against Indian

traders.

In Hines v. Davidowitz, the Court rejected state regulation

of resident aliens, holding that the “legal imposition of distinct,

unusual and extraordinary burdens and obligations” by a state

on a Class of persons committed to the special protection of

Congress violates the Supremacy Clause. Hines v. Davidowitz,

312 U.S. 52, 65-66 (1941). In Hines, Pennsylvania had enacted

an Alien Registration Act. 312 U.S. at 62. Congress had also

enacted a federal Alien Registration Act, but without express

preemptive language. 312 U.S. at 60. The Court found that

tradition and the Constitution had committed the regulation of

resident aliens to the special province of Congress. 312 U.S. at

3 aan

The prohibiuon on discrimination is familiar from the Interstate com-

merce clause, which prohibits discrimination against interstate commerce

even when the state is pursuing an otherwise legitimate goal. See, e.g., City

of Philadelphia v. New Jersey, 437 U.S. 617,627 (1978). Toomer v. Witsell.

334 U.S. 385, 406 (1948). Discrimination is also a touchstone of the

protection of federal instrumenialities against state power. See Cotton Pe-

troleum Corp. v. New Mexico, 490 U.S. 163, 175 (1989), Phillips Chem. Co.

v. Dumas Indep. Sch. Dist., ¥61 U.S. 376, 487 (1960).

18

62-65. Writing with respect to the regulation of aliens, the Court

could have been describing the regulation of Indians, stating that

it is “one aspect of our government that from the first has been

most generally conceded imperatively to demand broad national

authority. Any concurrent state power thal may exist is re-

stricted to the narrowest of limits. . . .” 312 U.S. at 68.

The Court held in Hines that because resident aliens were

committed to the special care of Congress, and Congress had

acted, state laws discriminating against resident aliens were

preempted. 312 U.S. at 74. As in Hines, the Court here is

charged with determining the preemptive scope of a federal

statute enacted in an area constitutionally committed to Con-

gress, and the Court should hold that State discnmination

against Indian traders, like State discrimination against resident

aliens, is forbidden.

The S.ate has not attempted to justify its discrimination,

other than by referring to difficulties in collection of its tax. New

York State’s discriminatory tax regulations cannot be upheld

“simply because they facilitate in some measure enforcement of

a valid tax.” Toomer v. Witsell, 334 U.S. 385, 406 (1948). In

Toomer v. Witsell, the Court considered a commerce clause

challenge to a South Carolina regulation requiring all boats

shrimping off the coast of that State to clean, pack and stamp

(with a shrimp tax stamp) their catch in South Carolina. 334

U.S. at 403. The Court found the regulation invalid because it

discriminated against shrimpers who preferred to take their

catch directly out of the State, even though the regulation made

it much easier for the State to collect its otherwise valid shrimp

tax. 334 U.S. at 406. “[T]he problem in this case is not as to

the existence or even the scope of a State’s power to [tax

cigarettes ultimately sold to non-Indians]; the problem is only

whether the Constitution sanctions the particular means chosen

by [New York] to exercise the conceded power... .” Northern

Natural Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 93 (1963).

19

It New York State finds that it cannot collect cigarette taxes

without running afoul of federal law, it “may of course seek

appropriate legislation from Congress,” Potawatomi, 498 U.S.

at 514, or regulations from the Bureau of Indian Affairs under

the Indian trader statutes. This Court is simply not the proper

forum in which to solve the State's problem.

CONCLUSION

| For the reasons stated, the decision of the New York Court

ol Appeals should be affirmed.

Respectfully submitted,

William W. Taylor, III

Counsel of Record

Michael R. Smith

Eric F. Facer

Alan H. Scheiner

ZUCKERMAN, SPAEDER, GOLDSTEIN,

TAYLOR & KOLKER

1201 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 778-1800

Counsel for Amicus Curiae

The Oneida Indian Nation

of New York

January 18, 1994