L Oneida Nation of New York v. Cuomo UNITED STATES COURT OF APPEALS 1 2 FOR THE SECOND CIRCUIT 3 4 5 6 August Term,…

10-4265(L)
Oneida Nation of New York v. Cuomo
UNITED STATES COURT OF APPEALS 1
2
FOR THE SECOND CIRCUIT 3
4
5
6
August Term, 2010 7
8
(Argued: March 15, 2011 Decided: May 9, 2011) 9
10
Docket Nos. 10-4265(L); 10-4272(con); 10-4598(con); 11
10-4758(con); 10-4477(XAP); 10-4976(XAP); 10-4981(XAP) 12
13
14
15
O NEIDA N ATION OF N EW Y ORK , 16
17
Plaintiff-Appellee, 18
19
S ENECA N ATION OF I NDIANS , S T . R EGIS M OHAWK T RIBE , U NKECHAUGE I NDIAN 20
N ATION , 21
22
Plaintiffs-Appellees-Cross-Appellants, 23
24
–v.– 25
26
A NDREW M. C UOMO , in his official capacity as Governor of New 27
York, T HOMAS H. M ATTOX , in his official capacity as Acting 28
Commissioner of the N.Y. Department of Taxation & Finance, 29
R ICHARD E RNST , in his official capacity as Deputy Commissioner 30
for the Office of Tax Enforcement for the N.Y. Department of 31
Taxation & Finance, 32
33
Defendants-Appellants, 34
35
J OHN M ELVILLE, in his official capacity as Acting 36
Superintendent, New York State Police, 37
38
Defendant-Appellant-Cross-Appellee, 39
40
C AYUGA I NDIAN N ATION OF N EW Y ORK , 41
42
Intervenor-Appellant. 43
44

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2
1
2
Before: W ESLEY , C HIN , and L OHIER , Circuit Judges. 3
4
Consolidated and expedited appeals from three district 5
court proceedings in which Plaintiffs sought to enjoin 6
enforcement of 2010 amendments to New York’s tax law: (1) 7
Plaintiff Seneca Nation of Indians and Intervenor Cayuga 8
Indian Nation of New York appeal from an order of the United 9
States District Court for the Western District of New York 10
(Arcara, J.), which denied their motion for a preliminary 11
injunction; (2) Plaintiffs St. Regis Mohawk Tribe and 12
Unkechauge Indian Nation appeal from an order of the United 13
States District Court for the Western District of New York 14
(Arcara, J.), which denied their motion for a preliminary 15
injunction; and (3) New York State Defendants appeal from an 16
order of the United States District Court for the Northern 17
District of New York (Hurd, J.), which granted plaintiff 18
Oneida Nation of New York’s motion for a preliminary 19
injunction. 20
21
Plaintiffs all argue that New York’s amended tax law 22
interferes with their tribal sovereignty and violates their 23
immunity from state taxation. We conclude that none of the 24
Plaintiffs has demonstrated a likelihood of success on the 25
merits. Thus, we hold that the Northern District abused its 26
discretion in granting the Oneida Nation an injunction and 27
the Western District properly denied injunctions to the 28
Seneca Nation, Cayuga Nation, Unkechauge Nation, and Mohawk 29
Tribe. 30
31
The order of the Northern District is V ACATED . The two 32
orders of the Western District are A FFIRMED . All stays 33
pending appeal are V ACATED and the cases are R EMANDED . 34
35
36
37
RIYAZ A. KANJI (Cory J. Albright, Zach Welcker, 38
Kanji & Katzen, PLLC; Christopher Karns, Owen 39
Herne, Seneca Nation of Indians Department of 40
Justice, Salamanca, NY; Carol E. Heckman, 41
Jeffrey A. Wadsworth, David T. Archer, Harter 42
Secrest & Emery LLP, Buffalo, NY, on the 43
brief), Kanji & Katzen, PLLC, Ann Arbor, MI, 44
for Plaintiff-Appellee-Cross-Appellant Seneca 45
Nation of Indians. 46

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3
DAVID W. DEBRUIN (Scott B. Wilkens, Joshua M. 1
Segal, Jenner & Block, LLP; Daniel French, Lee 2
Alcott, French-Alcott, PLLC, Syracuse, NY, on 3
the brief), Jenner & Block, LLP, Washington, 4
D.C., for Intervenor-Appellant Cayuga Indian 5
Nation of New York. 6
7
JAMES M. WICKS (George C. Pratt, Hillary A. 8
Frommer, Farrell Fritz, P.C.; James F. 9
Simermeyer, New York, NY, on the brief), 10
Farrell Fritz, P.C., Uniondale, NY, for 11
Plaintiff-Appellee-Cross-Appellant Unkechauge 12
Indian Nation. 13
14
MICHAEL L. ROY (Marsha K. Schmidt, on the brief), 15
Hobbs, Straus, Dean & Walker, LLP, Washington, 16
D.C., for Plaintiff-Appellee-Cross-Appellant 17
St. Regis Mohawk Tribe. 18
19
MICHAEL R. SMITH (R. Miles Clark, Zuckerman 20
Spaeder, LLP; Peter D. Carmen, Meghan Murphy 21
Beakman, Oneida Nation Legal Department, 22
Verona, NY; Daniel F. Katz, Dennis M. Black, 23
Williams & Connolly, LLP, Washington D.C., on 24
the brief), Zuckerman Spaeder LLP, Washington, 25
D.C., for Plaintiff-Appellee Oneida Nation of 26
New York. 27
28
ANDREW D. BING (Eric T. Schneiderman, Attorney 29
General of the State of New York, Barbara D. 30
Underwood, Solicitor General, Alison J. 31
Nathan, Special Counsel to the Solicitor 32
General, Steven C. Wu, Assistant Solicitor 33
General, on the brief), Deputy Solicitor 34
General, for Defendants-Appellants Andrew M. 35
Cuomo, Thomas H. Mattox, Richard Ernst, and 36
Defendant-Appellant-Cross-Appellee John 37
Melville. 38
39
MICHAEL T. FEELEY (Lisa A. Coppola, on the brief), 40
Rupp, Baase, Pfalzgraf, Cunningham & Coppola 41
LLC, Buffalo, NY, for Amicus Curiae Akwesasne 42
Convenience Store Association. 43
44
45

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* We grant the outstanding motion of New York State Association
of Tobacco and Candy Distributors, Inc. for leave to file an amicus
brief. We have received and considered the brief in the disposition
of this appeal.
4
MICHAEL A. CARDOZO (Eric Proshansky, Aaron M. 1
Bloom, William H. Miller, on the brief), 2
Corporation Counsel of the City of New York, 3
New York, NY, for Amicus Curiae the City of 4
New York. 5
6
RICHARD T. SULLIVAN, Harris Beach PLLC, Buffalo, 7
NY, for Amicus Curiae New York Association of 8
Convenience Stores. 9
10
THOMAS G. JACKSON (Meagan A. Zapotocky, on the 11
brief), Phillips Nizer, LLP, New York, NY, for 12
Amicus Curiae New York State Association of 13
Tobacco and Candy Distributors, Inc.*
14
15
16
17
18
WESLEY, Circuit Judge: 19
The Seneca Nation of Indians (“Seneca Nation”), 20
Unkechauge Indian Nation (“Unkechauge Nation”), St. Regis 21
Mohawk Tribe (“Mohawk Tribe”), Cayuga Indian Nation of New 22
York (“Cayuga Nation”), and Oneida Nation of New York 23
(“Oneida Nation”) (collectively “Plaintiffs”) seek to enjoin 24
amendments to New York’s tax law, which are designed to tax 25
on-reservation cigarette sales to non-member purchasers. 26
Plaintiffs argue that the amended tax law interferes with 27
their tribal sovereignty and fails to ensure their access to 28
tax-free cigarettes for personal use. In three separate 29

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5
district court proceedings, Plaintiffs moved to enjoin New 1
York officials (“State Defendants”) from implementing the 2
amended tax law. The Western District denied the 3
preliminary injunction motions of the Seneca and Cayuga 4
Nations (Arcara, J.) as well as the Unkechauge Nation and 5
Mohawk Tribe (Arcara, J.) but stayed implementation of the 6
amended tax law pending appeal. The Northern District 7
(Hurd, J.) granted the Oneida Nation’s motion for a 8
preliminary injunction. We conclude that none of the 9
Plaintiffs has demonstrated a likelihood of success on the 10
merits. Thus, we hold that the Northern District abused its 11
discretion in granting the Oneida Nation a preliminary 12
injunction. We also hold that the Western District properly 13
denied injunctions to the Seneca Nation, Cayuga Nation, 14
Unkechauge Nation, and Mohawk Tribe. We therefore vacate 15
the order of the Northern District and affirm the two orders 16
of the Western District. We vacate all stays and remand the 17
cases. 18
BACKGROUND 19
I. New York Tax Law 20
New York currently imposes a $4.35 per pack excise tax 21
on all non-exempt cigarettes sold in the State. N.Y. Tax 22
Law § 471(1) (McKinney 2010). The consumer bears the 23

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1 “Within twenty-four hours after liability for the tax accrues,
each such person shall file with the commissioner a return in such
form as the commissioner may prescribe together with a remittance of
the tax shown to be due thereon.” N.Y. Tax Law § 471-a.
2 Not all cigarette wholesalers are stamping agents. In
describing the amended tax law, however, we use the terms
interchangeably.
6
“ultimate incidence of and liability for the tax,” id. § 1
471(2), and willful evasion of the tax is a misdemeanor, id. 2
§ 1814(f). 1 New York’s Department of Taxation and Finance 3
(“Department”) “precollects” the tax from a limited number 4
of state-licensed stamping agents, see id. § 471(2), and 5
mandates that these agents be the only entry point for 6
cigarettes into New York’s stream of commerce, N.Y. Comp. 7
Codes R. & Regs. tit. 20, § 74.3(a)(1)(iii) (2010). 8
Stamping agents, often wholesalers themselves, 2 purchase tax 9
stamps from the State and cigarettes from manufacturers. 10
Before selling the cigarettes to other wholesalers or 11
retailers, agents must affix a stamp to each pack of 12
cigarettes to demonstrate payment of the tax. Id. 13
§ 74.3(a)(2). Agents incorporate the cost of the stamp into 14
the pack’s price and pass the cost along the distribution 15
chain to the consumer. N.Y. Tax Law §§ 471(2),(3). 16

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7
II. Cigarette Sales on Indian Reservations 1
Federal law prohibits New York from taxing cigarette 2
sales to enrolled tribal members on their own reservations 3
for personal use. See Moe v. Confederated Salish & Kootenai 4
Tribes of Flathead Reservation, 425 U.S. 463, 475–81 (1976). 5
New York may, however, tax “[o]n-reservation cigarette sales 6
to persons other than reservation Indians.” Dep’t of 7
Taxation & Fin. of N.Y. v. Milhelm Attea & Bros., Inc., 512 8
U.S. 61, 64 (1994) (citing Washington v. Confederated Tribes 9
of Colville Reservation, 447 U.S. 134, 160–61 (1980)). The 10
on-reservation sale of both taxable and tax-free cigarettes 11
and New York’s limited on-reservation taxing authority 12
complicate collection and enforcement. 13
In the late 1980s, the Department determined that the 14
volume of untaxed cigarettes that reservation retailers sold 15
“would, if consumed exclusively by tax-immune Indians, 16
correspond to a consumption rate 20 times higher than that 17
of the average New York resident.” Id. at 65. A 18
substantial number of non-Indian New Yorkers clearly 19
purchased their cigarettes from reservation retailers 20
without paying the tax to either the retailer or the 21
Department. The Department estimated the tax evasion to 22
cost New York $65 million annually. Id. 23

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3 Cayuga Indian Nation of N.Y. v. Gould, 14 N.Y.3d 614, 622–29,
cert. denied, 131 S. Ct. 353 (2010), contains a political and
regulatory history of New York’s prior attempts to tax on-reservation
cigarette sales to non-member purchasers. See also Note, A Tale of
Three Sovereigns: The Nebulous Boundaries of the Federal Government,
New York State, and the Seneca Nation of Indians Concerning State
Taxation of Indian Reservation Cigarette Sales to Non-Indians, 79
Fordham L. Rev. 2301, 2338-40 (2011).
4 The issues in this appeal do not turn on the distinction
between the title of “nation” or “tribe.” For ease of exposition,
when describing the amended tax law we use “tribe” to mean “nation
and/or tribe.” When referring to Plaintiffs, we adhere to their
titles of Nation or Tribe.
8
The Department first attempted to collect these taxes 1
in 1988 by promulgating regulations similar to those 2
Plaintiffs now challenge. 3 The Supreme Court upheld the 3
1988 regulations, and the scheme appeared ready for 4
implementation. See id. at 78. The Department never 5
implemented the regulations, however, due to additional 6
litigation, civil unrest, and failed negotiations between 7
the State and individual nations and tribes. 4 Consequently, 8
the Department repealed the regulations in 1998. Despite 9
the New York Legislature’s repeated efforts to the contrary, 10
the Department adopted a “forbearance” policy and allowed 11
wholesalers to sell untaxed cigarettes to recognized tribes 12
and reservation retailers without restriction. 13
Under the forbearance policy, non-member evasion of the 14
cigarette tax proliferated. For example, the Unkechauge 15
Nation has an estimated 376 enrolled members and yearly 16

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5 As discussed in more detail below, the Department calculates
each tribe’s yearly probable demand based upon population statistics
for each tribe and per-capita smoking statistics released by the
federal government, along with consideration of evidence of past
consumption. See N.Y. Comp. Codes R. & Regs. tit. 20, § 74.6(e).
6 The Seneca Nation has an estimated 7,967 members and yearly
probable demand of 67,440 cartons. It purchased 10 million untaxed
cartons in 2009 from state-licensed distributors. It sold
approximately half of those cigarettes tax-free to out-of-state
purchasers. The Mohawk Tribe has an estimated 13,784 members and
yearly probable demand of 116,640 cartons. It purchased over 1
million untaxed cartons in 2009. The Oneida Nation has an estimated
1,473 members and a yearly probable demand of 12,480 cartons. It
purchased 1.5 million untaxed cartons in 2009. The Department did not
present these figures for the Cayuga Nation.
9
probable demand 5 of 3,240 cigarette cartons (10 packs per 1
carton). Unkechauge retailers purchased approximately 5 2
million untaxed cigarette cartons from state-licensed 3
stamping agents in 2009 and 3.5 million untaxed cartons from 4
January through June 2010. If only Unkechauge members had 5
consumed these cigarettes, every man, woman, and child would 6
have smoked 364 packs per day in 2009. State Defendants 7
present similar figures for the other Plaintiffs. 6
8
The Department estimates that curbing tax evasion on 9
reservations will generate approximately $110 million in 10
annual tax revenue. Accordingly, New York once again seeks 11
to collect taxes on non-member, on-reservation cigarette 12
sales. The Department revoked its “forbearance” policy in 13
February 2010. In June 2010, the New York Legislature 14
amended New York Tax Law §§ 471 and 471-e , and the 15

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7 The Seneca Nation challenged the validity of the Department’s
regulations under New York’s Administrative Procedure Act (“SAPA”).
See Seneca Nation of Indians v. New York, No. 2011-000714 (N.Y. Sup.
Ct. Erie Cnty.). As of this time, the Seneca Nation intends to seek
an injunction against implementation of the regulations based on the
Department’s purported failure to comply with SAPA.
10
Department adopted regulations to implement the tax on 1
reservation sales. 7 The Department also issued a “Technical 2
Memorandum” explaining certain aspects of the tax scheme. 3
See Amendments to the Tax Law Related to Sales of Cigarettes 4
on Indian Reservations Beginning September 1, 2010, TSB-M- 5
10(6)M, (8)S (July 29, 2010) [hereinafter “Technical 6
Memorandum”]. Together, the 2010 amendments, new 7
regulations, and Technical Memorandum (collectively “amended 8
tax law” or “amendments”) create a system to collect the 9
excise tax on cigarette sales to non-members while exempting 10
sales to tribal members for personal use. The amendments 11
were scheduled to take effect September 1, 2010, but 12
enforcement has been stayed due to the Northern District’s 13
preliminary injunction and the Western District’s stays 14
pending appeal. 15
III. Amended Tax Law 16
The amended tax law requires state-licensed stamping 17
agents (i.e. wholesalers) to prepay the tax and affix tax 18
stamps on all cigarette packs, including those intended for 19
resale to tax-exempt Indians. See N.Y. Tax Law § 471(2); 20

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8 Whether taxable or tax-free, all cigarettes must bear a tax
stamp. Thus, tribal members will purchase stamped, albeit tax-free,
cigarettes for personal use. N.Y. Tax Law § 471(2).
11
N.Y. Comp. Codes R. & Regs. tit. 20, §§ 74.6(a)(2),(3). To 1
account for tribal tax immunity, the amendments distinguish 2
between taxable and tax-free cigarettes sold to tribes or 3
reservation retailers. The tax applies to all cigarettes 4
sold “on an Indian reservation to non-members of the Indian 5
nation or tribe.” N.Y. Tax Law § 471(1). Thus, when 6
purchasing inventory of taxable cigarettes, tribes or 7
reservation retailers must prepay the tax to wholesalers. 8
Because the tax does not apply to cigarettes sold “to 9
qualified Indians for their own use and consumption on their 10
nations’ or tribes’ qualified reservation,” id. § 471(1), 8
11
tribes or reservation retailers may purchase a limited 12
quantity of cigarettes without prepaying the tax to 13
wholesalers. Wholesalers, in turn, are entitled to refunds 14
of taxes prepaid on cigarettes eventually sold tax-free. 15
See id. §§ 471(5)(b), 471-e(4). 16
To prevent non-exempt purchasers from evading the tax, 17
the amendments limit the quantity of untaxed cigarettes 18
wholesalers may sell to tribes or tribal retailers. This 19
limitation mirrors each tribe’s “probable demand.” See 20
id. § 471-e(2)(b); N.Y. Comp. Codes R. & Regs. tit. 20, § 21

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9 “The annual amount of stamped untaxed packages of cigarettes
will be determined using a probable demand methodology as follows:
(A) the most recent U.S. Census data available on tribal populations
in New York State is obtained and then increased by ten percent for
each Indian nation or tribe to allow for potential undercounting in
Census enumeration and for nation or tribal use and (B) each Indian
nation’s or tribe’s adjusted population is then multiplied by average
annual per capita consumption amounts, as produced annually by the
federal government, for cigarettes. The estimated annual consumption
amounts for each Indian nation or tribe are then prorated to quarterly
periods for each of the four quarters . . . . [T]hese amounts are
subject to adjustment based on evidence provided by the Indian nations
or tribes as to their actual consumption amounts for these periods.”
N.Y. Comp. Codes R. & Regs. tit. 20, § 74.6(e)(1).
10 The amendments also provide a third option — private agreement
between an individual tribe and New York State:
If an Indian nation or tribe enters into an agreement
with the state and the legislature approves such
agreement or if an Indian nation or tribe enters into an
agreement with the state that is part of a stipulation
and order approved by a federal court of competent
jurisdiction regarding the sale and distribution of
12
74.6(e). To calculate probable demand, the Department 1
analyzes a tribe’s population and per-capita smoking 2
statistics. See N.Y. Comp. Codes R. & Regs. tit. 20, § 3
74.6. 9 Additionally, tribes may submit evidence of prior 4
consumption for the Department’s consideration. Id. In 5
this appeal, Plaintiffs do not challenge the Department’s 6
probable demand figures. 7
The amendments offer two mechanisms by which tribes and 8
reservation retailers may obtain tax-free cigarettes: (1) an 9
“Indian tax exemption coupon system” and (2) a “prior 10
approval” system. See N.Y. Tax Law § 471(1); N.Y. Comp. 11
Codes R. & Regs. tit. 20, § 74.6(a)(4). 10
12

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cigarettes on the nation’s or tribe’s qualified
reservation, the terms of such agreement shall take
precedence over the provisions of this article and
exempt sales to non-members of the tribe or nation and
non-Indians by such nation from such taxes to the extent
that such taxes are specifically referred to in the
agreement, and the sale or distribution, including
transportation, of any cigarettes to the nation’s or
tribe’s qualified reservation shall be in accordance
with the provisions of such agreement.
N.Y. Tax Law § 471(6). No agreements have been reached.
11 Typically, a tribal government must elect to participate in the
coupon system by August 15. N.Y. Comp. Codes R. & Regs. tit. 20, §
74.6(b)(1). The Department, however, may allow late election, which
it has done here due to the litigation delays. See id. §
74.6(b)(1)(ii).
13
A. Coupon System 1
The “recognized governing body of an Indian . . . tribe 2
may annually elect to participate in the Indian tax 3
exemption coupon system for that year.” N.Y. Tax Law § 471- 4
e(1)(b). No Plaintiff has elected the coupon system. 11 If 5
a tribal governing body elects the coupon system, the 6
Department provides the tribal government a quantity of tax 7
exemption coupons each quarter that corresponds to the 8
tribe’s probable demand. See id. § 471-e(2)(a). The tribal 9
government may use all or part of the coupons itself or 10
distribute them to its reservation retailers. Although 11
neither the statute nor the regulations require tribal 12
governments to distribute coupons among private retailers, 13
the State expressly “intend[s] that the Indian . . . tribes 14
will retain the amount of Indian tax exemption coupons they 15

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14
need each quarter . . . , and will distribute the remaining 1
Indian tax exemption coupons to reservation cigarette 2
sellers on such . . . tribe’s qualified reservations.” Id. 3
Tribes or reservation retailers then exchange the coupons 4
with wholesalers to purchase cigarettes without paying the 5
cost of the excise tax. Id. Tribal members may purchase 6
these cigarettes tax-free. Wholesalers, in turn, submit the 7
coupons to the Department for a refund of prepaid taxes. 8
Id. § 471-e(4). 9
B. Prior Approval System 10
Where a tribal government does not elect to participate 11
in the coupon system, the prior approval system governs by 12
default. Id. § 471(5)(a). Under this system, wholesalers 13
must obtain the Department’s approval before selling 14
cigarettes tax-free to a tribal government or retailer. Id. 15
§ 471(5)(b). Wholesalers who sell cigarettes to a tribe or 16
reservation retailer tax-free without the Department’s prior 17
approval violate the “terms of Article 20 of the Tax Law,” 18
N.Y. Comp. Codes R. & Regs. tit. 20, § 74.6(d)(3), and face 19
sanctions, see N.Y. Tax Law § 484(5). Moreover, without 20
prior approval and proof of a legitimate tax-free sale, 21
wholesalers cannot recoup prepaid taxes. 22
Both the statute and regulations authorize the 23

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12 The Technical Memorandum contains the following statement: “A
[Technical Memorandum] is an informational statement of changes to the
law, regulations, or Department policies. It is accurate on the date
issued. Subsequent changes in the law or regulations, judicial
decisions, Tax Appeals Tribunal decisions, or changes in Department
policies could affect the validity of the information presented in a
[Technical Memorandum].” Technical Memorandum 8.
15
Department to determine the “manner and form” by which it 1
grants prior approval. See N.Y. Tax Law § 471(5)(b); N.Y. 2
Comp. Codes R. & Regs. tit. 20, § 74.6(d)(3). The 3
Department has provided a “general description” of the prior 4
approval system’s intended operation. See Technical 5
Memorandum 5. 12 According to the Department, a website will 6
display each tribe’s quarterly tax-exempt allotment. The 7
Department contemplates that “[u]pon receipt of a purchase 8
request from a . . . tribe or reservation cigarette seller,” 9
a wholesaler will sign into the website, check the tribe’s 10
available allotment, and request approval to sell all or 11
part of that allotment. Id. at 5–6. Once the request is 12
submitted, “the remaining quantity available [on the 13
website] will be reduced.” Id. at 6. The wholesaler then 14
has forty-eight hours from the time of prior approval to 15
sell the tax-exempt quantity to the applicable tribe or 16
retailer and confirm the sale with the Department. Id. The 17
Department expedites refunds for confirmed tax-exempt sales. 18
N.Y. Tax Law § 471(5)(b). If the wholesaler does not 19

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16
confirm the sale within forty-eight hours, then “the balance 1
of the quantity not reported as sold will be added back to 2
the quantity available for Indian tax-exempt sales.” 3
Technical Memorandum 6. The website may be modified by the 4
Department in response to evidence that the prior approval 5
system operates to prevent tribal members from receiving an 6
adequate supply of tax-free cigarettes for personal and 7
tribal use. 8
IV. Plaintiffs’ Tobacco Economies 9
The Seneca Nation has licensed approximately 172 10
tobacco retailers and twenty-eight wholesalers. Seneca 11
members own and operate the wholesale and retail entities. 12
The Seneca Nation’s government regulates its private tobacco 13
economy under the tribal Import-Export Law and accompanying 14
regulations. It assesses a $0.75 per carton tax on all 15
cigarettes imported onto Seneca property. 16
The Unkechauge Nation has licensed approximately 17
twenty-five cigarette retailers. Unkechauge members own and 18
operate the retail entities. The Unkechauge Nation’s 19
governing Tribal Council regulates its tobacco economy 20
“through a strict licensing regime and tribal resolutions.” 21
Unkechauge Br. 8. The Council licenses member retailers and 22
approves which wholesalers may sell cigarettes to Unkechauge 23

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17
retailers. Under this regime, the “[Unkechauge] Nation 1
purchases cigarettes from only two State licensed 2
wholesalers, who are themselves licensed by the Tribal 3
Council.” Id. Additionally, under tribal resolutions, the 4
Tribal Council limits the number of cartons each retailer 5
may purchase from wholesalers, fixes the price of tobacco 6
products, and levies a $1 per carton fee on retail sales. 7
Id. at 9. 8
The Mohawk Tribe has licensed approximately thirty 9
cigarette retailers. Mohawk members own and operate the 10
retail entities. The Mohawk Tribe imposes a tobacco price 11
floor and licenses tribal wholesalers and retailers. Non- 12
tribal entities seeking to do business with Mohawk entities 13
must obtain a “Tribal Vendors Permit” from the Tribal 14
Council. The Council also assesses a “Tribal Tobacco Fee” 15
on all tobacco products. 16
Unlike the Seneca Nation, Unkechauge Nation, and Mohawk 17
Tribe, the governing bodies of the Cayuga and Oneida Nations 18
centralize tobacco retail within their respective 19
territories. Cayuga and Oneida members do not own 20
independent stores, and the tribal governments do not tax or 21
regulate their tobacco economies. The Cayuga Nation owns 22
and operates two retail stores that sell cigarettes to both 23

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18
members and non-members. The record does not reflect the 1
number of retail stores the Oneida Nation operates. The 2
Oneida Nation indicates, however, that it keeps 80,000 3
cigarette cartons in inventory at nearly all times for sale 4
to non-member purchasers from Oneida-owned stores. 5
V. Procedural Posture 6
This consolidated appeal arises from three separate 7
district court proceedings: (1) Seneca Nation and Cayuga 8
Nation in the Western District, see Seneca Nation of Indians 9
v. Paterson, No. 10-CV-687A, 2010 WL 4027796 (W.D.N.Y. Oct. 10
14, 2010) (Arcara, J.); (2) Unkechauge Nation and Mohawk 11
Tribe in the Western District, see Unkechauge Indian Nation 12
v. Paterson, Nos. 10-CV-711A, 10-CV-811A, 2010 WL 4486565 13
(W.D.N.Y. Nov. 9, 2010) (Arcara, J.); and (3) Oneida Nation 14
in the Northern District, see Oneida Nation of N.Y. v. 15
Paterson, No. 6:10-CV-1071, 2010 WL 4053080 (N.D.N.Y Oct. 16
14, 2010) (Hurd, J.). 17
In their respective suits, all Plaintiffs moved for 18
preliminary injunctions and raised similar arguments. The 19
Western District denied preliminary injunctions in both 20
proceedings, concluding that the Seneca Nation, Cayuga 21
Nation, Unkechauge Nation, and Mohawk Tribe each failed to 22
demonstrate a likelihood of success on the merits. See 23

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13 A motions panel of this Court consolidated and expedited the
appeals. It also denied State Defendants’ motion to stay the Northern
District’s preliminary injunction and to vacate the Western District’s
stays pending appeal.
19
Seneca Nation, 2010 WL 4027796, at *9; Unkechauge Indian 1
Nation, 2010 WL 4486565, at *6. However, the court granted 2
stays in both proceedings pending this interlocutory appeal. 3
State Defendants appealed both stays, and the Nations and 4
Tribe cross-appealed the denial of the injunctions. By 5
contrast, the Northern District granted the Oneida Nation’s 6
motion for a preliminary injunction. Oneida Nation, 2010 WL 7
4053080, at *8–9. State Defendants appealed. 13
8
On appeal, the Oneida, Cayuga, and Unkechauge Nations 9
argue that the precollection mechanism either imposes an 10
impermissible direct tax on tribal retailers, or 11
alternatively, imposes an undue and unnecessary economic 12
burden on tribal retailers. Additionally, all Plaintiffs 13
argue that the amended tax law’s dual allocation mechanisms 14
— the coupon and prior approval systems — interfere with 15
their right of self-government, unduly burden tribal 16
retailers, and fail to adequately ensure members’ access to 17
tax-free cigarettes. At this stage in the litigation, 18
Plaintiffs have not demonstrated that they are likely to 19

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14 The Mohawk Tribe abandoned the argument raised below that the
amended tax law violates Equal Protection. Likewise, the Seneca
Nation has abandoned its argument that the amended tax law is unduly
burdensome because it fails to account for reservation sales to out-
of-state purchasers. The Unkechauge Nation raises five arguments not
made by the other Plaintiffs: (1) the prior approval system violates
the Indian Trader Statutes; (2) the precollection mechanism violates
“the Takings Clause of the Fifth and Fourteenth Amendments, and the
New York State Constitution;” (3) the Western District abused its
discretion by denying a preliminary injunction without holding an
evidentiary hearing; (4) the Western District abused its discretion in
denying a motion for mediation; and (5) this Court should certify
certain questions to the New York Court of Appeals. We have
considered each of these arguments and find them to be without merit.
20
prevail on any of these arguments. 14
1
DISCUSSION 2
I. Standard of Review 3
The fundamental question presented in these cases is 4
whether Plaintiffs presented evidence that would justify a 5
preliminary injunction prohibiting enforcement of the 6
amended tax law. We review a district court’s decision to 7
grant or deny a preliminary injunction for abuse of 8
discretion. SEC v. Dorozhko, 574 F.3d 42, 45 (2d Cir. 9
2009). An abuse of discretion occurs if the district court 10
“(1) based its ruling on an erroneous view of the law, (2) 11
made a clearly erroneous assessment of the evidence, or (3) 12
rendered a decision that cannot be located within the range 13
of permissible decisions.” Lynch v. City of New York, 589 14
F.3d 94, 99 (2d Cir. 2009) (internal quotation marks 15
omitted). Under abuse of discretion review, the factual 16

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21
findings and legal conclusions underlying the district 1
court’s decision are “evaluated under the clearly erroneous 2
and de novo standards, respectively.” Garcia v. Yonkers 3
Sch. Dist., 561 F.3d 97, 103 (2d Cir. 2009) (citation and 4
brackets omitted). 5
Generally, a party seeking a preliminary injunction 6
must establish “(1) irreparable harm and (2) either (a) a 7
likelihood of success on the merits, or (b) sufficiently 8
serious questions going to the merits of its claims to make 9
them fair ground for litigation, plus a balance of the 10
hardships tipping decidedly in favor of the moving party.” 11
Monserrate v. N.Y. State Senate, 599 F.3d 148, 154 (2d Cir. 12
2010) (quoting Lynch, 589 F.3d at 98). Additionally, the 13
moving party must show that a preliminary injunction is in 14
the public interest. Winter v. Natural Res. Def. Council, 15
Inc., 555 U.S. 7, __, 129 S. Ct. 365, 374 (2008). 16
A party seeking to enjoin “governmental action taken in 17
the public interest pursuant to a statutory or regulatory 18
scheme” cannot rely on the “fair ground for litigation” 19
alternative even if that party seeks to vindicate a 20
sovereign or public interest. Monserrate, 599 F.3d at 154 21
(internal quotation marks omitted). Thus, to succeed in the 22
present appeal, Plaintiffs must establish a likelihood of 23

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22
success on the merits. Because we conclude that Plaintiffs 1
have failed to satisfy this burden, there is no need to 2
address the other prongs of the analysis. See id. at 154 & 3
n.3. 4
II. Likelihood of Success on the Merits 5
A. Applicable Law 6
The Supreme Court has long recognized that Indian 7
tribes possess “attributes of sovereignty over both their 8
members and their territory.” White Mountain Apache Tribe 9
v. Bracker, 448 U.S. 136, 142 (1980) (internal quotation 10
marks omitted). The “semi-autonomous status of Indians 11
living on tribal reservations,” McClanahan v. State Tax 12
Comm’n of Ariz., 411 U.S. 164, 165 (1973), vests tribes and 13
their enrolled members with the federally protected right 14
“to make their own laws and be ruled by them,” Williams v. 15
Lee, 358 U.S. 217, 220 (1959). Among other things, tribes 16
have authority to prescribe the conduct of their members, 17
New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 332 18
(1983), create economic policies, and tax economic 19
activities within their territories, see, e.g., Merrion v. 20
Jicarilla Apache Tribe, 455 U.S. 130, 137–39 (1982). 21
“The Constitution vests the Federal Government with 22
exclusive authority over relations with Indian Tribes.” 23

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23
Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 764 1
(1985) (citing U.S. Const. art. I, § 8, cl. 3). “As a 2
corollary of this authority, and in recognition of the 3
sovereignty retained by Indian tribes . . . , Indian tribes 4
and individuals generally are exempt from state taxation 5
within their own territory.” Id. Consequently, absent 6
Congressional authorization, “[s]tates are categorically 7
barred from placing the legal incidence of an excise tax on 8
a tribe or on tribal members for sales made inside Indian 9
country.” Wagnon v. Prairie Band Potawatomi Nation, 546 10
U.S. 95, 101-02 (2005) (internal quotation marks and 11
citation omitted). 12
The situation is different, however, when a state seeks 13
to tax non-members who engage in economic transactions on 14
Indian reservations. See Okla. Tax Comm’n v. Chickasaw 15
Nation, 515 U.S. 450, 459 (1995). Here, courts must subject 16
a state tax scheme over on-reservation, non-member 17
activities to “a particularized inquiry into the nature of 18
the state, federal, and tribal interests at stake.” 19
Bracker, 448 U.S. at 145. Eschewing “mechanical or absolute 20
conceptions of state or tribal sovereignty,” this interests- 21
balancing analysis instead “determine[s] whether, in the 22
specific context, the exercise of state authority would 23

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24
violate federal law.” Id. 1
In the context of cigarette sales, the balancing of 2
state and tribal interests is informed by two judgments that 3
are well-established in the caselaw. First, non-Indian 4
purchasers are consistently willing and able to evade state 5
cigarette taxes by purchasing their cigarettes from 6
reservation retailers. Cf. Colville, 447 U.S. at 145. 7
Second, the revenue tribes and retailers gain from cigarette 8
sales to non-members derives from the marketing of a tax 9
exemption, not from value “generated on the reservations by 10
activities in which the [t]ribes have a significant 11
interest.” Id. at 155. 12
In recognition of the foregoing, the Supreme Court has 13
stated that “principles of federal Indian law, whether 14
stated in terms of pre-emption, tribal self-government, or 15
otherwise, [do not] authorize Indian tribes . . . to market 16
an exemption from state taxation to persons who would 17
normally do their business elsewhere.” Id. at 155. That is 18
so because “[s]tates have a valid interest in ensuring 19
compliance with lawful taxes that might easily be evaded 20
through purchases of tax-exempt cigarettes on reservations; 21
that interest outweighs tribes’ modest interest in offering 22
a tax exemption to customers who would ordinarily shop 23

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25
elsewhere.” Milhelm Attea, 512 U.S. at 73. A state’s 1
interest in ensuring the collection of taxes on cigarette 2
sales to non-Indians continues to outweigh a tribe’s 3
countervailing interests even when collection of an excise 4
tax “seriously disadvantages or eliminates the Indian 5
retailer’s [cigarette] business with non-Indians.” 6
Colville, 447 U.S. at 151. 7
Furthermore, tribes do not oust a state’s taxing 8
authority merely by collecting tribal taxes on reservation 9
cigarette sales and regulating their cigarette economies. 10
See id. at 158–59. A state “does not interfere with the 11
[t]ribes’ power to regulate tribal enterprises” simply by 12
imposing its tax on sales to non-members. Id. at 159. In 13
fact, the balance of interests favors state taxation of 14
cigarette sales to non-members even where collection of the 15
state tax deprives tribes of their own tax revenues. Id. at 16
156. 17
In light of this balance of interests, the Supreme 18
Court has determined that to enforce valid state taxation of 19
on-reservation cigarette sales, states may impose “on 20
reservation retailers minimal burdens reasonably tailored to 21
the collection of valid taxes from non-Indians.” Milhelm 22
Attea, 512 U.S. at 73. As a result, a party challenging a 23

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26
state cigarette tax must establish that a state’s collection 1
mechanism is unduly burdensome and not reasonably tailored 2
to collection of the taxes. See Colville, 447 U.S. at 160. 3
On several occasions, the Supreme Court has found collection 4
mechanisms similar to those at issue in this appeal to be 5
consistent with principles of federal Indian law. 6
1. Law Regarding Precollection of the Tax 7
In Moe v. Confederated Salish & Kootenai Tribes of 8
Flathead Reservation, the Court upheld a Montana tax law 9
that required the cigarette seller to prepay the tax and add 10
the tax to the cigarette’s retail price. 425 U.S. 463, 483 11
(1976); see also Moe v. Confederated Salish & Kootenai 12
Tribes of Flathead Reservation, 392 F. Supp. 1297, 1308 (D. 13
Mont. 1974) (describing the tax “as an advance payment 14
[which] shall be added to the price of the cigarettes and 15
recovered from the ultimate consumer or user.”) (internal 16
quotation marks omitted). There, like here, the tribe 17
argued that precollection of the tax infringed tribal 18
sovereignty because the tribal retailer “has been taxed, and 19
. . . has suffered a measurable out-of-pocket loss.” Moe, 20
425 U.S. at 481. The Court rejected this argument because 21
the legal incidence of the tax fell upon non-member 22
purchasers. Id. at 481–82. The Court reasoned that 23

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27
prepayment was “not, strictly speaking, a tax at all,” but 1
rather constituted the “simpl[e]” requirement that “the 2
Indian proprietor . . . add the tax to the sales price and 3
thereby aid the State’s collection” effort. Id. at 483. 4
Consequently, the Court held that Montana’s “requirement 5
that the Indian tribal seller collect a tax validly imposed 6
on non-Indians is a minimal burden designed to avoid the 7
likelihood that in its absence non-Indians purchasing from 8
the tribal seller will avoid payment of a concededly lawful 9
tax.” Id. 10
Similarly, in Colville, the Court upheld a Washington 11
precollection scheme that required retailers to either 12
purchase prestamped cigarettes from wholesalers or purchase 13
tax stamps directly from the state and affix them to 14
cigarette packs before sale. Colville, 447 U.S. at 141–42; 15
see also Confederated Tribes of Colville Indian Reservation 16
v. Washington, 446 F. Supp. 1339, 1346 (E.D. Wash. 1978) 17
(describing the precollection mechanism). As in Moe, the 18
Court characterized precollection as a “simple collection 19
burden imposed . . . on tribal smokeshops” and held that 20
Washington “may validly require the tribal smokeshops to 21
affix tax stamps purchased from the State to individual 22
packages of cigarettes prior to the time of sale to 23

-- 27 of 53 --

15 Though less relevant to the present case, Colville also upheld
Washington’s requirement that tribal retailers keep extensive records
concerning both taxable and nontaxable transactions. Colville, 447
U.S. at 159–60.
28
nonmembers of the Tribe.” Colville, 447 U.S. at 159. 15
1
2. Law Regarding Allocation of Tax-Free Cigarettes 2
In Milhelm Attea, the Supreme Court analyzed the 1988 3
version of New York’s tax law. Milhelm Attea, 512 U.S. at 4
78. As the Western District correctly noted, the general 5
features of the 1988 version – precollection, probable 6
demand limitations, allocation through the use of coupons 7
and prior approval – were similar to the main features of 8
the amended tax law. See Seneca Nation, 2010 WL 4027796, at 9
*9–10 & *14 (comparing the amended tax law and 1988 10
version). In Milhelm Attea, wholesalers that were federally 11
licensed to sell cigarettes to reservation Indians 12
challenged the 1988 regulations as being preempted by the 13
Indian Trader Statutes. Under the Indian Trader Statutes, 14
the Commissioner of Indian Affairs has sole authority to 15
“make such rules and regulations . . . specifying the kind 16
and quantity of goods and the prices at which such goods 17
shall be sold to the Indians.” 25 U.S.C. § 261. The 18
wholesalers argued that the federal government’s authority 19
to regulate Indian Traders precluded New York from both 20

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29
limiting the quantity of tax-free cigarettes wholesalers 1
could sell to reservation retailers and requiring 2
wholesalers to obtain approval before making tax-free sales. 3
The Court disagreed. 4
Relying on Moe and Colville, the Court recognized New 5
York’s valid interest “in ensuring compliance with lawful 6
taxes that might easily be evaded through purchases of tax- 7
exempt cigarettes on reservations,” and concluded that the 8
“balance of state, federal, and tribal interests” left 9
appreciable room for state regulation of on-reservation 10
cigarettes sales to non-member purchasers. Milhelm Attea, 11
512 U.S. at 73. Congress enacted the Indian Trader Statutes 12
to protect reservation Indians who do business with non- 13
Indians. Thus, the Court reasoned, it would be “anomalous” 14
to forbid states from imposing on non-Indian wholesalers the 15
same tax collection and bookkeeping burdens that, under Moe 16
and Colville, states could validly impose on reservation 17
retailers. Id. at 74. “Just as tribal sovereignty does not 18
completely preclude States from enlisting tribal retailers 19
to assist enforcement of valid state taxes, the Indian 20
Trader Statutes do not bar the States from imposing 21
reasonable regulatory burdens upon Indian traders for the 22
same purpose.” Id. 23

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30
The Court also rejected the argument that the tax-free 1
allotments and prior approval requirement imposed excessive 2
regulatory burdens on wholesalers or Indian trading. 3
Specifically, the Court held that the probable demand 4
mechanism validly related to “New York’s decision to stanch 5
the illicit flow of tax-free cigarettes early in the 6
distribution stream” and constituted a “reasonably necessary 7
method of preventing fraudulent transactions, . . . without 8
unnecessarily intruding on core tribal interests.” Id. at 9
75 (internal quotation marks omitted). The Court observed 10
that “[i]f the Department’s ‘probable demand’ calculations 11
are adequate, tax-immune Indians will not have to pay New 12
York cigarette taxes . . . .” Id. Finally, it held that 13
“[t]he associated requirement that the Department preapprove 14
deliveries of tax-exempt cigarettes in order to ensure 15
compliance with the quotas does not render the scheme 16
facially invalid.” Id. at 76. 17
Importantly, in analyzing the 1988 regulations, the 18
Court construed the wholesalers’ preemption challenge as 19
“essentially a facial one.” Id. at 69. Accordingly, the 20
Court declined to “rest [its] decision on consequences that, 21
while possible, are by no means predictable,” and limited 22
its analysis “to those alleged defects that inhere in the 23

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31
regulations as written.” Id. Regarding the probable demand 1
mechanism, for example, the Court noted that “[w]hile the 2
possibility of an inadequate quota may provide the basis for 3
a future challenge to the application of the regulations, 4
[it was] unwilling to assume in the absence of any such 5
showing by respondents, that New York will underestimate the 6
legitimate demand for tax-free cigarettes.” Id. at 75–76. 7
The prior approval requirement, the Court observed, “should 8
not prove unduly burdensome absent wrongful withholding or 9
delay of approval — problems that can be addressed if and 10
when they arise.” Id. at 76. The Court added that 11
“[a]greements between the Department and individual tribes 12
might avoid or resolve problems that are now purely 13
hypothetical.” Id. at 77. 14
B. Analysis 15
In the present case, Plaintiffs challenge the amended 16
tax law’s precollection requirement as well as the amended 17
tax law’s dual mechanisms for allocating each tribe’s 18
limited quantity of tax-free cigarettes. 19
1. Precollection of the Tax 20
Under the amended tax law’s precollection scheme, the 21
wholesale price of taxable cigarettes includes the cost of 22
the tax. Tribal retailers, like other New York retailers, 23

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32
pay the tax to wholesalers when purchasing inventory and 1
recoup the tax by adding it to the retail price. The Oneida 2
and Cayuga Nations argue that this prepayment obligation is, 3
in effect, a categorically impermissible direct tax on 4
tribal retailers. We disagree. 5
As we have already explained, it is only the legal 6
burden of a tax — as opposed to its practical economic 7
burden — that a state is categorically barred by federal law 8
from imposing on tribes or tribal members. See Chickasaw 9
Nation, 515 U.S. at 460 (rejecting “economic reality” as an 10
unworkable measure of the scope of state taxation 11
authority). Focusing on the economic impact of 12
precollection, the Northern District concluded that the 13
amended tax law “in effect [impermissibly] requires the 14
Oneida Nation to pay the tax.” Oneida Nation, 2010 WL 15
4053080, at *8. This finding is not relevant, however, 16
because the express language of New York’s tax law places 17
the legal incidence on the consumer, not the wholesaler or 18
retailer. N.Y. Tax Law § 471(2) (“It is intended that the 19
ultimate incidence of and liability for the tax shall be 20
upon the consumer.”). In fact, the statute contains 21
mandatory “pass-through provisions” that require wholesalers 22
and retailers to pass on the tax to the consumer. Id. 23

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16 “In the absence of such dispositive language, the [legal
incidence] question is one of ‘fair interpretation of the taxing
statute as written and applied.’” Chickasaw Nation, 515 U.S. at 461
(quoting Cal. Bd. of Equalization v. Chemehuevi Tribe, 474 U.S. 9, 11
(1985) (per curiam)). Here, the “fair interpretation” analysis is
unnecessary.
33
(“[A]ny agent or dealer who shall pay the tax to the 1
commissioner shall collect the tax from the purchaser or 2
consumer.”); id. § 471(3) (“The amount of taxes advanced and 3
paid by the agent . . . shall be added to and collected as 4
part of the sales price of the cigarettes.”). The Supreme 5
Court has “suggested that such ‘dispositive language’ from 6
the state legislature is determinative of who bears the 7
legal incidence of a state excise tax.” Wagnon, 546 U.S. at 8
102 (citing Chickasaw Nation, 515 U.S. at 461). 16 The 9
statement of legislative intent and the mandatory pass- 10
through provisions establish that the legal incidence of New 11
York’s tax falls on non-Indian consumers. Accordingly, 12
whatever its economic impact, the tax is not categorically 13
barred. 14
The Oneida, Cayuga, and Unkechauge Nations argue that 15
precollection, if not categorically barred, nonetheless 16
places an undue and unnecessary economic burden on tribal 17
retailers. For example, the Oneida Nation estimates that 18
upon implementation of the precollection mechanism, it will 19

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34
need to front an additional $3.5 million per year to prepay 1
the tax and spend over $200,000 per year to finance that 2
increased cost in order to maintain its current cigarette 3
inventory levels (approximately 80,000 cartons per year at 4
all times). The Northern District concluded that these 5
financing costs imposed an impermissible burden on tribal 6
sovereignty. We disagree for two reasons. 7
First, the precollection mechanism will undoubtedly 8
impose an increased economic cost on tribal retailers who 9
continue to market taxable cigarettes to non-member 10
purchasers. But those costs result from the retailer’s 11
decision to participate in the taxable cigarette market, a 12
market in which Plaintiffs and their members have “no vested 13
right to a certain volume of sales to non-Indians, or indeed 14
to any such sales at all.” Colville, 447 U.S. at 151 n.27. 15
Second, New York’s precollection scheme is materially 16
indistinguishable from those upheld in Moe and Colville. 17
Here, State Defendants have presented evidence of non-member 18
tax evasion occurring through on-reservation cigarette 19
purchases. Thus, as in Moe and Colville, the amended tax 20
law’s precollection mechanism constitutes a minimal tax 21
collection burden that is “reasonably necessary” to prevent 22

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35
“wholesale evasion of [New York’s] own valid taxes without 1
unnecessarily intruding on core tribal interests.” Milhelm 2
Attea, 512 U.S. at 75 (brackets in original) (quoting 3
Colville, 447 U.S. at 160, 162). 4
The Cayuga, Oneida, and Unkechauge Nations seek to 5
distinguish Moe and Colville by pointing out that when those 6
cases were decided Washington imposed a $1.60 per carton 7
tax, see Colville, 447 U.S. at 141, and Montana a $1.20 per 8
carton tax, see Moe, 392 F. Supp. at 1313, whereas New York 9
currently imposes a $43.50 per carton tax. The three 10
Nations argue, and the Northern District agreed, that the 11
significantly greater economic burden imposed by New York’s 12
tax distinguishes the precollection schemes upheld in Moe 13
and Colville, and renders New York’s unduly burdensome. 14
Contrary to the Nations’ arguments, it was the demonstrated 15
need to prevent tax evasion by non-Indian purchasers, not 16
the low cost of the state tax, that justified precollection 17
in Moe and Colville. That justification remains valid even 18
where the excise tax is high; the higher the tax rate, the 19
greater the economic incentive to avoid it. 20
The Nations also contend that precollection is not 21
“reasonably tailored” to New York’s tax collection interest 22

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36
because there are other less burdensome alternatives. The 1
Northern District agreed with the Oneida Nation’s argument 2
that precollection is unnecessary to enforce payment of the 3
cigarette tax because New York Tax Law § 471-a already 4
requires each individual cigarette purchaser to remit the 5
tax to the State within twenty-four hours of when liability 6
for the tax accrued. See Oneida Nation, 2010 WL 4053080, at 7
*9 (citing N.Y. Tax Law § 471-a). However, the New York 8
legislature has reasonably determined that collection of the 9
cigarette excise tax through efforts directed at individual 10
buyers is impractical, and that, if it is to be collected at 11
all, the tax must be precollected when cigarettes enter the 12
stream of commerce. The Oneida Nation, for example, 13
purchased 1.5 million untaxed cartons of cigarettes in 2009, 14
despite having only 1,473 members. The legislature was 15
entitled to conclude on the basis of this and other evidence 16
that collection of the tax through efforts directed at 17
individual purchasers is ineffective and unworkable. Cf. 18
Milhelm Attea, 512 U.S. at 75 (upholding “New York’s 19
decision to stanch the illicit flow of tax-free cigarettes 20
early in the distribution stream as a reasonably necessary 21
method of preventing fraudulent transactions.”) (internal 22

-- 36 of 53 --

17 The three Nations cite other examples of plausibly less
burdensome collection mechanisms. For example, they contend that
tribal retailers could obtain sufficient cash flow to meet future
prior approval payments if the State waived precollection for the
first year. Whatever the practical merit of their suggestions, states
are not required to adopt the least burdensome collection mechanism
imaginable. Provided the State’s mechanism is reasonably tailored to
its collection effort — and here the Nations have not demonstrated the
contrary — the State’s chosen mechanism does not infringe tribal
sovereignty merely because there are conceivably less burdensome
alternatives.
37
quotation marks omitted). 17
1
Therefore, the Oneida, Cayuga, and Unkechauge Nations 2
have failed to demonstrate a likelihood of success on the 3
merits of their arguments against precollection of the tax. 4
2. Allocation of Tax-Free Cigarettes 5
Plaintiffs argue that the amended tax law’s dual 6
allocation mechanisms — the coupon and prior approval 7
systems — fail to adequately ensure members’ access to tax- 8
free cigarettes, unduly burden tribal retailers, and 9
threaten tribal self-government. 10
a. Applicability of Milhelm Attea 11
Initially, we reiterate that the main features of the 12
amended tax law’s probable demand and allocation mechanisms 13
are substantially similar to those of the 1988 version 14
upheld against a preemption challenge in Milhelm Attea. 15
Like the 1988 version, the amended tax law limits the tax- 16
free cigarettes that wholesalers may sell according to each 17

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38
tribe’s probable demand. New York’s legitimate interest in 1
avoiding tax evasion by non-Indian consumers justifies these 2
probable demand limitations. See Milhelm Attea, 512 U.S. at 3
75. Further, like in the 1988 version, through the 4
alternative coupon and prior approval systems, the State 5
meets its obligation to make available to tribal members a 6
tax-free quantity of cigarettes sufficient to “satisfy the 7
legitimate demands of those reservation Indians who 8
smoke[.]” Id. at 69. Thus, under the reasoning of Milhelm 9
Attea, the main features of the amended tax law’s quota and 10
allocation mechanisms, as written, do not unduly burden 11
tribal retailers or infringe tribal self-government. 12
In an effort to distinguish Milhelm Attea, Plaintiffs 13
argue that its rationale applies only to preemption 14
challenges, whereas the present dispute concerns tribal 15
sovereignty. They note that Milhelm Attea expressly 16
declined to “assess for all purposes each feature of New 17
York’s tax enforcement scheme that might affect tribal self- 18
government or federal authority over Indian affairs.” Id. 19
at 69. 20
Contrary to Plaintiffs’ argument, Milhelm Attea’s 21
reasoning is applicable here because federal preemption over 22

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39
the regulation of Indian tribes is closely related to 1
federal recognition and protection of tribal sovereignty. 2
Preemption and tribal sovereignty are two “independent but 3
related barriers to the assertion of state regulatory 4
authority over tribal reservations and members.” Bracker, 5
448 U.S. at 142. “[P]rinciples of federal Indian law, 6
whether stated in terms of preemption, tribal self- 7
government, or otherwise,” Colville, 447 U.S. at 155, 8
ultimately measure the scope of a state’s regulatory 9
authority through “a particularized inquiry into the nature 10
of the state, federal, and tribal interests at stake,” 11
Bracker, 448 U.S. at 145. 12
Indeed, Milhelm Attea’s reasoning demonstrates the 13
relationship between the preemption and tribal sovereignty 14
analyses within federal Indian law. The Court stated that 15
“[a]lthough Moe and Colville dealt most directly with claims 16
of interference with tribal sovereignty, the reasoning of 17
those decisions requires rejection of the submission that 25 18
U.S.C. § 261 bars any and all state-imposed burdens on 19
Indian traders.” Milhelm Attea, 512 U.S. at 74. 20
Accordingly, Milhelm Attea’s analysis is relevant to the 21
issues in this appeal, and to the extent the general 22

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18 Milhelm Attea does not specifically bear on our analysis of the
amended tax law’s coupon system because the present coupon system
functions differently than it did in the 1988 version. Under the 1988
version, the tax-exempt coupons and prior approval requirement were
not alternative systems, but rather, functioned together. The
Department would approve every tax-exempt sale and distribute coupons
directly to reservation retailers, “entitling them to their monthly
allotment of tax-exempt cigarettes.” Milhelm Attea, 512 U.S. at 66.
Under the amended tax law, by contrast, the coupon system and prior
approval system operate independently. Moreover, if a tribe elects
the coupon system, the Department distributes tax-exempt coupons to
tribal governments, not reservation retailers.
40
features of the amended tax law’s quota and allocation 1
schemes mirror those in the 1988 version, Milhelm Attea 2
undermines the likelihood of Plaintiffs’ success on this 3
pre-enforcement challenge to the amended tax law’s validity. 4
b. Coupon System 5
The Cayuga Nation, Seneca Nation, Unkechauge Nation, 6
and Mohawk Tribe argue that the coupon system interferes 7
with their tribal self-rule because it would require tribal 8
governments to either retain coupons for distribution by the 9
government or allocate coupons among reservation 10
retailers. 18 We agree with the Western District that the 11
coupon system does not impose allocation burdens on the 12
Cayuga Nation because its government owns and operates the 13
Nation’s two cigarette retailers. The Nation may elect the 14
coupon system, use the coupons to purchase tax-free 15
inventory, and sell that inventory to members from its 16

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41
stores. Therefore, the Cayuga Nation is unlikely to prevail 1
on the merits of its argument that the coupon system 2
infringes its right of self-government. 3
The Seneca Nation, Unkechauge Nation, and Mohawk Tribe, 4
which have regulated, market-based tobacco economies, argue 5
that under the coupon system, tribal governments must 6
distribute a limited number of coupons among their member- 7
owned and -operated reservation retailers. They argue that 8
creation of a tribal allocation system would involve 9
political decisions and require the enactment and 10
enforcement of new tribal regulations. They contend that 11
because the coupon system would require these governmental 12
actions, it interferes with their right of self-rule. 13
Because the coupon system is optional, we disagree. 14
Consistent with the right to “make their own laws and 15
be ruled by them,” Williams, 358 U.S. at 220, the Seneca, 16
Unkechauge, and Mohawk governments are free to decide 17
whether involvement in the allocation of their respective 18
cigarette allotments is in the members’ best interests. If 19
a tribal government chooses the coupon system, then it 20
likewise accepts the correlated responsibility to design an 21
effective allocation system, if necessary. New York has not 22

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42
foisted that requirement upon the tribal government. 1
c. Prior Approval System 2
As written, the prior approval system imposes no 3
regulatory burdens on Plaintiffs or their retailers. It 4
operates entirely off-reservation and involves only 5
wholesalers and the Department. If prior approval does not 6
unduly burden federally licensed Indian traders by requiring 7
them to obtain the Department’s approval before making tax- 8
free sales, see Milhelm Attea, 512 U.S. at 75–76, this same 9
mechanism certainly does not burden tribes or tribal 10
retailers that play no role in the prior approval system 11
whatsoever, see United States v. Baker, 63 F.3d 1478, 1489 12
(9th Cir. 1995) (holding that Washington’s prior approval 13
scheme did not impermissibly burden tribal sovereignty 14
because the “entire regulatory program [was] accomplished 15
off-reservation”). 16
Plaintiffs vigorously argue, however, that the prior 17
approval system might have the effect of denying tribal 18
members access to tax-free cigarettes and disrupting the 19
current functioning of Plaintiffs’ tobacco economies. 20
Specifically, Plaintiffs point out that under the 1988 21
regulations, prior approval was “based upon evidence of 22

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43
valid purchase orders received” by the wholesaler and 1
presented to the Department. See Milhelm Attea, 512 U.S. at 2
66 (quoting N.Y. Comp. Codes R. & Regs. tit. 20, §§ 3
336.7(d)(1), (d)(2)(ii) (1992) (repealed)). The amended tax 4
law does not contain this purchase order requirement. 5
Plaintiffs contend that without this requirement, any 6
state-licensed wholesaler might preemptively lock up a 7
tribe’s entire quarterly allotment. Although approval 8
automatically expires after forty-eight hours without 9
confirmation of the sale, Plaintiffs predict that the same 10
wholesaler might immediately re-request prior approval and 11
do so indefinitely. Thus, a wholesaler could leverage this 12
forty-eight hour long monopoly position to charge premium 13
prices, force tribal retailers to purchase exclusively from 14
that wholesaler, or sell exclusively to favored tribal 15
retailers. Plaintiffs contend that a market-dominant 16
wholesaler could ultimately deprive tribal members of access 17
to tax-free cigarettes and disrupt their tobacco economies. 18
In response, tribal governments would either have to enact 19
new tribal laws to police against monopolistic wholesalers 20
or elect the coupon system. Plaintiffs view both situations 21
as interfering with their rights of self-government. 22

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19 Prior to enactment of the amended tax law, Peter Day, along
with an individual member of the Seneca Nation, sought to enjoin the
State from collecting cigarette taxes on Indian reservations under the
tax law regime currently in effect at that time. See Day Wholesale,
Inc. v. New York, No. 2006/7668 (N.Y. Sup. Ct. Erie Cnty.). Erie
County Supreme Court granted two preliminary injunctions, the first of
which was affirmed by the Appellate Division. See Day Wholesale, Inc.
v. New York, 51 A.D.3d 383 (4th Dep’t 2008). Following enactment of
the amended tax law, the State successfully moved to vacate the two
Day Wholesale preliminary injunctions. See Day Wholesale, Inc., No.
2006/7668 (N.Y. Sup. Ct. Erie Cnty., Aug. 31, 2010). On August 31,
2010, plaintiffs, joined by intervenor Seneca Nation, appealed to the
Appellate Division, Fourth Department. That appeal remains pending.
44
To support its view, the Seneca Nation submitted an 1
affidavit from Peter Day, a state-licensed wholesaler and 2
federally-licensed Indian Trader. 19 Day stated that upon 3
implementation of the tax law he “intends to purchase the 4
entire tax-exempt allocation for each qualified Indian 5
reservation unless it has already been acquired by another 6
agent and that quantity will be made available only to my 7
customers.” He further stated that given the limited 8
quantity and high demand for tax-exempt cigarettes, “tribal 9
members can expect to pay higher prices” for those 10
cigarettes. 11
The tax law does not explicitly prohibit a single 12
wholesaler from obtaining approval over a tribe’s entire 13
allotment, and the regulations do not explicitly prohibit a 14
wholesaler from selling that entire allotment to only one 15
retailer. The Western District concluded that “there is a 16

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20 Plaintiffs and State Defendants hotly dispute whether the
present challenge is properly classified as facial or as-applied.
This classification, they assume, determines whether we consider
Plaintiffs’ hypothetical scenarios. Though the Constitution vests the
federal government with the exclusive power to regulate Indian tribes
(and therefore direct state taxation of Indian tribes, absent
Congressional approval, is constitutionally barred), tribal
sovereignty challenges are not, strictly speaking, constitutional
challenges. Cf. Colville, 447 U.S. at 167–68 (Brennan, J., concurring
in part and dissenting in part). Thus, the familiar facial/as-applied
distinction only relates to this case by rough analogy. Regardless of
45
very realistic possibility that the scenario presaged by Day 1
will occur.” Seneca Nation, 2010 WL 4027796, at *16. 2
Though without the benefit of Day’s affidavit, the Northern 3
District likewise concluded that the prior approval system 4
is “ripe for manipulation by wholesalers, and actually 5
incentivizes wholesalers” to monopolize the Oneida Nation’s 6
quota. Oneida Nation, 2010 WL 4053080, at *9. 7
Plaintiffs, particularly the Seneca Nation, argue that 8
they have demonstrated significant implementation problems 9
that will plague the prior approval system. They claim that 10
because the problems are specific to each tribe’s distinct 11
tobacco economy, they have established that they are likely 12
to prevail on the “as-applied” challenges that the Court in 13
Milhelm Attea left for “some future proceeding.” Milhelm 14
Attea, 512 U.S. at 77. Again we disagree. 15
Even if we accept, which we do not, that Plaintiffs 16
have properly classified their challenges as “as-applied,” 20
17

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how the challenge is classified, the fact remains that no version of
New York’s collection scheme has ever been implemented. Lacking
evidence of its actual operation, Plaintiffs argue that the amended
tax law fails to foreclose one scenario that might arise upon
implementation. But under the statute, regulations, and the Technical
Memorandum, that scenario is by no means certain to occur. The
system’s actual operation remains largely uncertain. At this pre-
enforcement stage, and on this record, such speculation cannot support
a preliminary injunction of a state taxation scheme that is valid as
written.
21 As the Technical Memorandum indicates, the Department intends
that wholesalers will only seek prior approval after obtaining a
purchase order. The Technical Memorandum is an informational
46
nothing requires us to assume that a monopoly in tax-free 1
cigarettes will occur and to evaluate the prior approval 2
system under that assumption. Like the wholesalers in 3
Milhelm Attea, Plaintiffs seek to enjoin the amended tax law 4
before it is implemented; like the Court in Milhelm Attea, 5
we decline to base our decision on “consequences that, while 6
possible, are by no means predictable.” Id. at 69. 7
The Department anticipates that “[u]pon receipt of a 8
purchase request from a [tribe or reservation retailer]” a 9
wholesaler will request approval from the Department to sell 10
that quantity of cigarettes. Technical Memorandum 5. Under 11
the Department’s “general understanding” of the prior 12
approval system, wholesalers will only seek prior approval 13
if the wholesaler has a legitimate tribal buyer. Plaintiffs 14
contend that the prior approval system will not function as 15
the Department intends. 21 For at least two reasons, on this 16

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statement that provides the Department’s “general understanding” of
the prior approval system. Notwithstanding the Department’s intent,
two State witnesses admitted that the monopoly scenario is possible
under the prior approval system. These concessions do not render the
system invalid. They merely confirm that both fair dealing and
opportunism are possible under the prior approval system. The
system’s actual operation, however, is speculative.
47
record we cannot say which understanding will prove correct. 1
First, Plaintiffs’ predictions ignore the broader legal 2
framework within which wholesalers and tribal retailers 3
operate. That legal framework discourages wholesalers from 4
abusing the prior approval system. To sell cigarettes to 5
tribes or their retailers, a wholesaler must be a 6
state-licensed distributor, see N.Y. Tax Law § 480, and a 7
federally-licensed Indian Trader, see 25 U.S.C. § 262. 8
Under New York law, the Tax Commissioner may cancel or 9
suspend a wholesaler’s state license for, among other 10
things, “commit[ing] fraud or deceit in his . . . operations 11
as a wholesale dealer.” N.Y. Tax Law § 480(3)(b)(i); see 12
also N.Y. Comp. Codes R. & Regs. tit. 20, §§ 71.6(b)(2), 13
72.3(b)(2). Under federal law, the Superintendent of the 14
Bureau of Indian Affairs must “see that the prices charged 15
by licensed [Indian] traders are fair and reasonable.” 25 16
C.F.R. § 140.22. Wholesalers, like Peter Day, who intend to 17
abuse the prior approval system risk losing their New York 18
and federal licenses. A rational wholesaler must weigh the 19

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22 The Seneca Nation, Unkechauge Nation, and Mohawk Tribe argue
that some of their own reservation retailers might collude with
wholesalers to obtain monopoly positions within their reservations.
Tribal sovereignty, however, vests tribes with the power to regulate
the conduct of their own members, see Mescalero Apache Tribe, 462 U.S.
at 332, and all three Plaintiffs in fact heavily regulate their
retailers. Indeed, the Unkechauge Nation already restricts the
quantity of cigarettes its reservation retailers may purchase from
wholesalers. See Unkechauge Br. 8.
48
potential short-term financial benefits of gaming the prior 1
approval system against the potential long-term financial 2
loss caused by the suspension or revocation of necessary 3
licenses. 22
4
Second, if wholesalers disregard the legal risks of 5
monopolistic behavior, the Department has the flexibility to 6
modify the prior approval system to deter such behavior. 7
The Department enjoys discretion to set and amend the 8
conditions for prior approval. N.Y. Tax Law § 471(5)(b) 9
(“The department shall grant agents and wholesalers prior 10
approval in a manner and form to be determined by the 11
department and as may be prescribed by regulation.”) 12
(emphasis added); N.Y. Comp. Codes R. & Regs. tit. 20, § 13
74.6(d)(3) (“The manner and form of prior approval will be 14
determined by the department, and may include the use of an 15
interactive Web application.”). Thus, modification of the 16
prior approval system’s mechanics does not require amending 17
the statute or promulgating new regulations. Presently, 18

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49
however, the record of the Department’s effectiveness in 1
adapting the prior approval system is nonexistent because, 2
as a result of the injunctions or stays that were granted, 3
wholesalers have not been required to use the prior approval 4
system. 5
Moreover, any of the Plaintiffs may foreclose the 6
uncertainty associated with the prior approval system by 7
entering formal agreements with the Department. As the 8
Supreme Court observed in Milhelm Attea, “[a]greements 9
between the Department and individual tribes might avoid or 10
resolve problems that are now purely hypothetical.” Milhelm 11
Attea, 512 U.S. at 77. Upon approval from the New York 12
Legislature or a federal court, the collection and 13
allocation mechanism contained in the agreement would 14
supersede the statutory allocation mechanisms and eliminate 15
the uncertainty of private behavior. See N.Y. Tax Law § 16
471(6). 17
At this pre-enforcement stage, Plaintiffs have not 18
demonstrated that they are likely to prevail on their claim 19
that the amended tax law infringes tribal sovereignty or 20
unduly burdens tribal retailers. Plaintiffs ultimately 21
request that the tax law be enjoined prior to its 22

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23 Because we reject Plaintiffs’ contentions that they are
entitled to a preliminary injunction enjoining the prior approval
system, we do not address the severability argument of the Unkechauge
Nation and Mohawk Tribe.
50
implementation on the basis of hypothetical private behavior 1
and the assumption that there will be no Department 2
response. This kind of speculation cannot support a pre- 3
enforcement injunction of a state taxation scheme that is 4
valid as written. 23
5
Finally, the Seneca Nation, Unkechauge Nation, and 6
Mohawk Tribe argue that flaws in the prior approval system 7
will disrupt the current state of their tobacco economies. 8
Specifically, they argue that certain tribal retailers might 9
be unable to obtain a sufficient quantity of tax-exempt 10
cigarettes and their businesses will suffer. The three 11
Plaintiffs argue that this anticipated disruption will 12
undermine the federal interest in promoting and protecting 13
tribal economic self-sufficiency and burden tribal members’ 14
ability to engage in tax-free commerce with one another. 15
Previously, all cigarettes sold to tribes and 16
reservation retailers were untaxed. Reservation retailers 17
sold approximately ninety-nine percent of those untaxed 18
cigarettes to non-members. But there was no practical 19
distinction between a reservation retailer’s member and non- 20

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51
member cigarette markets. Plaintiffs’ current tobacco 1
economies developed under this system. For example, the 2
mass quantity of available untaxed cigarettes allowed 3
members of the Seneca Nation to open over 170 tobacco 4
stores. Members could access tax-free cigarettes at any of 5
these stores. 6
New York’s decision to limit the quantity of tax-free 7
cigarettes sold to reservation retailers will undoubtedly 8
disrupt the status quo, regardless of how the Department 9
allocates the untaxed cigarettes. Yet in limiting the 10
availability of tax-free cigarettes, the State does not have 11
to ensure that each reservation retailer obtains its pre- 12
amendment supply. Nor must the State ensure that tribal 13
members continue to enjoy the same easy access to tax-free 14
cigarettes. The Northern District erred in concluding at 15
this pre-enforcement stage that the prior approval system 16
“burdens [the Oneida Nation] by not protecting the right to 17
have available tax-free cigarettes for members and itself, 18
as required by law.” Oneida Nation, 2010 WL 4053080, at *9. 19
As written, the prior approval system makes tax-free 20
cigarettes available to member purchasers. Actual problems 21
of implementation “can be addressed if and when they arise.” 22

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24 Unlike the Western District, we express no opinion on whether
the monopoly scenario, if it occurred, would constitute state
infringement of tribal sovereignty. See Seneca Nation, 2010 WL
4027796, at *16–17.
52
Milhelm Attea, 512 U.S. at 76. 24
1
CONCLUSION 2
Plaintiffs have failed to demonstrate a likelihood of 3
success on the merits of their claims that (1) the 4
precollection scheme impermissibly imposes a direct tax on 5
tribal retailers, or alternatively, imposes an undue and 6
unnecessary economic burden on tribal retailers; and (2) the 7
coupon and prior approval systems interfere with their 8
rights of self-government and rights to purchase cigarettes 9
free from state taxation. The Northern District committed 10
legal error in determining that both of these arguments were 11
likely to succeed, and thus abused its discretion in 12
granting the Oneida Nation’s motion for preliminary 13
injunction. The Western District correctly rejected these 14
arguments and properly denied the Seneca Nation’s, Cayuga 15
Nation’s, Unkechauge Nation’s, and Mohawk Tribe’s motions 16
for preliminary injunctions. 17
The Western District’s two orders of October 14, 2010 18
and November 9, 2010 are AFFIRMED. The Northern District’s 19
order of October 14, 2010 is VACATED. All stays pending 20

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53
appeal are VACATED. The cases are REMANDED for further 1
proceedings consistent with this opinion. 2

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