Mashantucket Pequot Tribe v. Town of Ledyard, No. 12-1727 (2d Cir. 2013)
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The Town and the State appealed from the district court's adverse summary judgment ruling in a suit where the Tribe challenged the Town's imposition of the State's personal property tax on the lessors of slot machines used by the Tribe at Foxwoods Casino. The court held that the district court properly exercised jurisdiction; the Tribe had standing; neither the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. 2701 et seq., nor the Indian Trader Statutes, 25 U.S.C. 261-64, expressly barred the tax; and, under the White Mountain Apache Tribe v. Bracker test, federal law did not implicitly bar the tax because the State and Town interests in the integrity and uniform application of their tax system outweighed the federal and tribal interests reflected in IGRA. Accordingly, the court concluded that the district court erred in granting summary judgment for the Tribe and in denying summary judgment for the Town and State.
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12-1727-cv(L) Mashantucket Pequot Tribe v. Town of Ledyard 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2012 (Argued: March 18, 2013 Decided: July 15, 2013) Docket Nos. 12-1727-cv(L), 12-1735-cv(CON) MASHANTUCKET PEQUOT TRIBE, Plaintiff-Appellee, -v.TOWN OF LEDYARD; PAUL HOPKINS, Tax Assessor, Town of Ledyard; JOAN CARROLL, Tax Collector, Town of Ledyard, Defendants-Appellants, STATE OF CONNECTICUT, Intervenor-Defendant-Appellant.* Before: JACOBS, Chief Circuit Judge, CABRANES The Town judgment District that (1) AND WESLEY, Circuit Judges. of Ledyard and State of Connecticut appeal from the of the United States District Court for the of Connecticut (Warren W. Eginton, Judge), holding nothing barred the court from exercising * The Clerk of the Court is directed to amend the caption as listed above. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 jurisdiction and (2) Connecticut s personal property tax, as applied to vendors leasing slot machines to the Mashantucket Pequot Tribe for use at Foxwoods casino, was barred by the Indian Trader Statutes, Indian Gaming and Regulatory Act, and pursuant to the balancing test enunciated in White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980). We hold that the district court (1) appropriately reached the merits of the case but (2) erred by finding the tax to be preempted. 39 the Town of Ledyard s (the Town ) imposition of the State 40 of Connecticut s (the State ) personal property tax on the 41 lessors of slot machines used by the Tribe at Foxwoods REVERSED and REMANDED. ERIC D. MILLER (Benjamin S. Sharp, Jennifer A. MacLean, on the brief), Perkins Coie LLP, Seattle, WA and Washington, D.C., for Defendants-Appellants Town of Ledyard, Paul Hopkins, and Joan Carroll. ROBERT J. DEICHERT, Assistant Attorney General, for George Jepsen, Attorney General of the State of Connecticut, Hartford, CT, for Intervenor-Defendant-Appellant State of Connecticut. SKIP DUROCHER (Mary J. Streitz, James K. Nichols, on the brief), Dorsey & Whitney LLP, Minneapolis, MN, for Plaintiff-Appellee Mashantucket Pequot Tribe. WESLEY, Circuit Judge: The Mashantucket Pequot Tribe (the Tribe ) challenges 2 1 Resort Casino and MGM Grand at Foxwoods (collectively 2 Foxwoods ), located in Ledyard, Connecticut. 3 Gen. Stat. §§ 12-40 et seq. (the tax ). 4 complaints in August 2006 and September 2008 on behalf of 5 two vendors who lease slot machines to the Tribe for use at 6 Foxwoods. 7 the United States District Court for the District of 8 Connecticut (Warren W. Eginton, Judge) denying their motions 9 for summary judgment, granting summary judgment to the See Conn. The Tribe filed The Town and the State appeal from a ruling of 10 Tribe, and affording the Tribe injunctive and declaratory 11 relief. 12 As a threshold matter, the Town and State assert that 13 (1) the Tribe lacks standing; (2) the Tax Injunction Act, 28 14 U.S.C. § 1341, strips federal courts of jurisdiction over 15 this action; and (3) principles of comity bar federal courts 16 from deciding this action. 17 the district court s order to invalidate the State s 18 personal property tax as applied to the vendors, asserting 19 that the tax is preempted (1) by the Indian Trader Statutes, 20 25 U.S.C. §§ 261-64; (2) by the Indian Gaming Regulatory Act 21 ( IGRA ), 25 U.S.C. §§ 2701 et seq.; and (3) pursuant to the 22 balancing test enunciated in White Mountain Apache Tribe v. 23 Bracker, 448 U.S. 136 (1980). On the merits, the Tribe defends 3 We hold that: the district court properly exercised 1 2 jurisdiction, and the Tribe has standing to pursue this 3 claim; neither IGRA nor the Indian Trader Statutes expressly 4 bar the tax; and, under the Bracker test, federal law does 5 not implicitly bar the tax because State and Town interests 6 in the integrity and uniform application of their tax system 7 outweigh the federal and tribal interests reflected in IGRA. 8 The district court erred in granting summary judgment for 9 the Tribe and in denying summary judgment for the Town and 10 State. 11 Background 12 13 14 I. The Tax Connecticut imposes a generally-applicable personal 15 property tax for the purpose of revenue collection for the 16 municipalities that assess and collect the tax. 17 requires nonresident owners of personal property, which 18 includes slot machines, to file declarations spelling out 19 the value of their property with the towns where their 20 property is located. 21 of that property and bill the owners accordingly. 22 Gen. Stat. § 12-43. State law The towns apply a formula to the value Conn. To collect the tax, the Town relies 4 1 heavily on the willingness of taxpayers to comply with 2 State law and file personal property declarations. 3 Decl. ¶ 8. 4 located on-reservation. Hopkins This tax does not apply to Tribal property Connecticut s towns use these tax proceeds to fund the 5 6 operation of municipal government. Id. ¶ 5. The services 7 provided by the Town include, inter alia, police and 8 emergency-services functions, road maintenance, education, 9 and trash collection. The Town maintains roads to and 10 throughout the Indian reservation, provides emergency 11 services to the Tribe, buses children living on-reservation 12 to schools, and pays for the education of Tribal children 13 on-reservation. 14 Tribal children is at least $236,258.1 15 II. 16 The annual cost to the Town of educating The Gaming Procedures The Mashantucket Pequot Gaming Enterprise (the 17 Enterprise ) operates Foxwoods, the self-described largest 18 casino and resort in the United States. 19 employs 10,000 people, of whom approximately 150 are Tribal 20 members. The Enterprise Although the Tribe has other sources of income, 1 The Town actually spends approximately $652,158 per annum, but it receives approximately $415,900 in federal aid, leaving the Town with $236,258 in non-reimbursed costs. 5 1 including at least four types of taxes it imposes on on- 2 reservation activities, the majority of the Tribe s revenue 3 comes from the Enterprise. 4 popular Enterprise games. Slot machines are among the most IGRA defines slot machines as Class III games. 5 See 25 6 C.F.R. § 502.4. The Final Mashantucket Pequot Gaming 7 Procedures, promulgated by the Secretary of the Interior, 8 governs the Tribe s use of Class III games. 9 Doc. No. 221-13, 56 Fed. Reg. 24996 (1991), 56 Fed. Reg. See Dist. Ct. 10 15746-01 (1991) ( Gaming Procedures ). 11 Procedures, the State licenses gaming employees, requires 12 enterprises to register before providing gaming, and 13 collects compensation from the Tribe. 14 §§ 5-6. 15 proceeds from video facsimile games2 to the State. 16 payments exceeded $1.5 billion from 2003 to 2011. 17 Enterprise also reimburse[s] the State for law enforcement 18 and regulatory services related to [] gaming; this payment 19 was, in total, approximately $56.8 million from 2003-2011. 20 III. 21 22 Under the Gaming Gaming Procedures at The Enterprise pays twenty-five percent of all These The The Lease Agreements and Modifications The Enterprise obtains slot machines from different vendors, including Atlantic City Coin & Slot Company ( AC 2 Slot machines are included among video facsimile games. 6 1 Coin )3 and WMS Gaming Incorporated ( WMS ) (collectively 2 the vendors ). 3 Jersey; WMS is a Delaware corporation with headquarters in 4 Illinois. 5 but they offer some of their most popular proprietary games 6 by lease only.4 AC Coin is incorporated and based in New AC Coin and WMS sell some of their slot machines, AC Coin began leasing slot machines to the Tribe in 7 8 1997-98. These leases provided that [t]axes and any 9 license fees applicable to the use and operation of the 10 [machines] shall be paid by [the] [c]asino. 11 10/11/2000. AC Coin Lease The agreements further provided that the Tribe: agrees to defend, indemnify, and hold harmless A.C. Coin, its agents, employees, officers, and directors from and against any and all liabilities, obligations, losses, damages, injuries, claims, demands, penalties, costs and expenses . . . of whatsoever kind or nature . . . arising out of the use, operation and possession of the [machines], provided such liabilities are not the direct result of the negligent or intentional conduct of A.C. Coin or its agents, officers, and directors. 12 13 14 15 16 17 18 19 20 21 22 23 Id. 24 form tax and indemnification language . . . in leases for AC Coin has used, and continues to use, this standard 3 On June 27, 2013, the Tribe notified the Court that AC Coin would cease operations on June 30, 2013. This does not affect any of the legal analysis in this case. 4 As of October 2009, AC Coin began to make its proprietary games available for purchase. See Tribe Brief at 12. 7 1 both its tribal and non-tribal lessees. 2 AC Coin has paid Connecticut s personal property tax on slot 3 machines leased to the tribes that operate both Foxwoods and 4 Mohegan Sun, another Connecticut-based, Indian-run casino. 5 Despite the permissive language in its leases, AC Coin has 6 not sought or received reimbursement for the taxes that it 7 has paid on gaming equipment leased to other casinos and had 8 not sought reimbursement from the Tribe prior to this 9 lawsuit. 10 McCormick Aff. 2. WMS also leased slot machines to the Tribe pursuant to 11 standard form leases, beginning in 1998. A 1998 lease with 12 the Tribe contained standard language requiring that: [t]axes, licenses and permit fees applicable to the installation or operation of the [machines] shall be paid by the [Tribe]. [The Tribe] shall indemnify and defend WMS from and against any penalty, liability and expense . . . arising from [the Tribe s] failure to remit such taxes or from any delinquency with respect to such remittance. 13 14 15 16 17 18 19 20 21 WMS Lease Agreement 10/15/98. 22 sought reimbursement nor has it ever been reimbursed for 23 personal property taxes it has paid on gaming equipment 24 leased to casinos by any casino or Indian tribe, including 25 the . . . Enterprise and the Mohegan Sun casino. 26 56(a)(1) Statement 7. Like AC Coin, WMS has not Town Rule Similarly, WMS does not change the 8 1 pricing, or lease rate, of leased slot machines because of 2 personal property tax; the tax is not a factor in lease 3 pricing. 4 Id. In the late 1990s, the Tribe decided that its vendors 5 should not be subject to the tax. 6 initial reluctance, the Tribe persuaded the vendors to 7 modify the lease agreements to reflect this decision. 8 modified AC Coin lease indicated: 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Despite the vendors The Foxwoods represents that it is not subject to any state or local taxes for any services or sales or leases occurring at Foxwoods premises and . . . AC Coin agrees not to file with the local towns or any other applicable jurisdiction, including specifically the Town of Ledyard, a list of property or equipment provided under the Agreement or to pay such tax with respect to such equipment except in the event that AC Coin is legally obligated to do so. In the event [that] AC Coin becomes legally obligated to file and/or pay taxes, AC Coin agrees to immediately notify Foxwoods of such obligation and to reasonably cooperate with Foxwoods in contesting such tax filing and/or payment if so requested by Foxwoods . . . . Foxwoods agrees to hold harmless and/or reimburse AC Coin within thirty (30) days for any taxes or any related cost or expense paid in accordance with this provision. Town Rule 56(a)(1) Statement 4-5. The modified language in the WMS lease agreement was 30 substantially identical. See id. 31 modifications, WMS and AC Coin continued to pay personal 32 property taxes until the Tribe pressured them to stop. 9 Despite the 1 IV. Court Actions among the Parties 2 In 2006, AC Coin pursued and lost an administrative 3 appeal of the tax to the Town s Board of Assessment Appeals. 4 In August 2006, the Tribe and AC Coin filed the complaint in 5 this action in the United States District Court for the 6 District of Connecticut. 7 In July 2008, the Town filed suit in Connecticut 8 Superior Court to collect unpaid property taxes from WMS. 9 In September 2008, the Tribe sued in federal court to enjoin 10 the enforcement of the tax against WMS. The district court 11 consolidated the two federal actions. 12 has stayed Connecticut s action against WMS pending 13 resolution of this case. 14 KNL-cv08-5007839 (Conn. Sup. Ct.). The State intervened as 15 a defendant in both federal cases. As relevant here, the 16 parties filed cross-motions for summary judgment, which the 17 district court resolved in favor of the Tribe. The Superior Court Town of Ledyard v. WMS Gaming, 18 19 20 Discussion The Town and State offer three independent reasons to 21 dismiss this case for lack of jurisdiction: (1) standing, 22 (2) the Tax Injunction Act ( TIA ), and (3) comity. 10 The 1 Tribe argues that jurisdiction was proper and that we should 2 affirm the district court s opinion that the tax is 3 preempted by (1) the Indian Trader Statutes, (2) IGRA, and 4 (3) the Bracker balancing test. 5 district court properly reached the merits of the case, and 6 (2) the district court erred in holding that the tax was 7 preempted. 8 I. 9 We find that (1) the The District Court Properly Exercised Jurisdiction The district court concluded that none of the 10 Appellants challenges to its jurisdiction were persuasive. 11 See Mashantucket Pequot Tribe v. Town of Ledyard, No. 06-cv- 12 1212(WWE), 2007 WL 1238338, *1-2 (D. Conn. Apr. 25, 2007) 13 ( Pequot I ) (denying motion to dismiss based on the TIA and 14 comity); Mashantucket Pequot Tribe v. Town of Ledyard, No. 15 06-cv-1212(WWE), 2012 WL 1069342, *5-6 (D. Conn. Mar. 27, 16 2012) ( Pequot II ) (denying motion to dismiss based on the 17 TIA and lack of standing). We affirm that conclusion. 18 A. The Tribe Has Standing to Pursue Its Claim 19 The Town alleges that the Tribe lacks standing to bring 20 this claim. To establish Article III standing, an injury 21 must be concrete, particularized, and actual or imminent; 22 fairly traceable to the challenged action; and redressable 11 1 by a favorable ruling. 2 U.S. --, 133 S. Ct. 1138, 1147 (2013) (quoting Monsanto Co. 3 v. Geertson Seed Farms, 561 U.S. --, 130 S. Ct. 2743, 2752 4 (2010)). 5 injury is at issue in this case. 6 Clapper v. Amnesty Intern. USA, -- Only the existence of a concrete, particularized The Tribe argues, inter alia, that it has suffered an 7 injury-in-fact because the tax infringes upon Tribal 8 sovereignty. 9 sufficient to confer standing. 10 We agree that the Tribe s allegations are Although Article III s standing requirement is not 11 satisfied by mere assertions of trespass to tribal 12 sovereignty, actual infringements on a tribe s sovereignty 13 constitute a concrete injury sufficient to confer standing. 14 This injury, distinct from the monetary injury asserted by 15 the taxed parties, implicates the substantive interest 16 which Congress has sought to protect [in] tribal self- 17 government. 18 of Flathead Reservation, 425 U.S. 463, 469 n.7 (1976) 19 (addressing state taxes imposed on on-reservation Indians 20 directly implicating the tribe s relationship with its 21 members). 22 afforded special solicitude in our standing analysis. 23 Massachusetts v. EPA, 549 U.S. 497, 520 (2007). Moe v. Confederated Salish and Kootenai Tribes This rule exists because tribes, like states, are 12 1 The Supreme Court has consistently recognized that a 2 tribe has an interest in protecting tribal self-government 3 from the assertion by a state that it has regulatory or 4 taxing authority over Indians and non-Indians conducting 5 business on tribal reservations. 6 Indians of Fla. v. Fla. State Athletic Comm n, 226 F.3d 7 1226, 1230 (11th Cir. 2000) (citing White Mountain Apache 8 Tribe v. Bracker, 448 U.S. 136 (1980), and Ramah Navajo Sch. 9 Bd. v. Bureau of Revenue of N.M., 458 U.S. 832, 845 (1982)). 10 In Miccosukee, the Eleventh Circuit held that a tax imposed 11 on revenues gained by a non-Indian boxing promoter from an 12 on-reservation match constituted an affront to sovereignty 13 sufficient to confer standing. 14 cases in which the Supreme Court reached the merits of 15 similar actions). 16 Miccosukee Tribe of Id. at 1230-31 (collecting The Town relies on Reich v. Mashantucket Sand & Gravel, 17 95 F.3d 174 (2d Cir. 1996), in which this Court held 18 (without discussing standing) that some statutory 19 interference with tribal sovereignty was permissible, to 20 argue that the alleged infringement of sovereignty at issue 21 here does not confer standing. 22 conflat[ing] the requirement for an injury-in-fact with the 13 However, we must avoid 1 . . . validity of [the Tribe s] claim. Dean v. Blumenthal, 2 577 F.3d 60, 66 n.4 (2d Cir. 2009) (per curiam). 3 standing inquiry only requires that the Tribe establish an 4 invasion of a legally protected interest which is (a) 5 concrete and particularized, and (b) actual or imminent, not 6 conjectural or hypothetical. 7 Wildlife, 504 U.S. 555, 560 (1992) (internal quotations and 8 citations omitted). The Lujan v. Defenders of 9 Here, the imposition of state taxes on slot machines 10 operated only by the Tribe s casino and stored solely on- 11 reservation impinges upon the Tribe s ability to regulate 12 its affairs and to be the sole governmental organ 13 influencing activities, including possession of property, on 14 its reservation. 15 speculative nor generalized; there is a real tax with 16 measurable interference in the Tribe s sovereignty on its 17 reservation. 18 has standing to vindicate these interests. The injury in this case is neither Miccosukee, 226 F.3d at 1230, 1234. The Tribe 19 B. The TIA Does Not Bar This Action 20 The State alleges that the Tribe s suit is barred by 21 the TIA, which provides that district courts shall not 22 enjoin, suspend or restrain the assessment, levy or 14 1 collection of any tax under State law where a plain, speedy 2 and efficient remedy may be had in the courts of such 3 State. 4 exception recognized in Moe, 425 U.S. at 470-74, undercuts 5 the TIA s seemingly sweeping language. 6 Tribe. 28 U.S.C. § 1341. The Tribe counters that a tribal We agree with the 7 Federal courts have original jurisdiction of all 8 [federal claims] brought by any Indian tribe or band with a 9 governing body duly recognized by the Secretary of the 10 Interior. 28 U.S.C. § 1362. In Moe, the Supreme Court 11 permitted a Tribe to challenge, inter alia, the imposition 12 of a state personal property tax imposed on-reservation. 13 425 U.S. at 469. 14 entitled to treatment similar to that of the United States 15 had it sued on their behalf. 16 further noted that the United States could sue to vindicate 17 Indian interests that it had sought to protect through 18 federal legislation and federal programs. 19 (citing Heckman v. United States, 224 U.S. 413 (1912), and 20 United States v. Rickert, 188 U.S. 432 (1903)). 21 was therefore permitted to sue to dispute imposition of 22 state personal property taxes and sales taxes as applied to 23 on-reservation Indians. The Moe Court held that tribes are Id. at 474. Id. at 474-75. 15 The Court Id. at 473 The tribe 1 If the Tribe were suing to enjoin enforcement of a 2 state tax imposed directly on the Tribe, the action would 3 not be barred by the TIA. 4 Sac and Fox Nation of Missouri v. Pierce, 213 F.3d 566, 571- 5 72 (10th Cir. 2000). 6 subject to the TIA when they sue on behalf of non-exempt 7 institutions. 8 1991). 9 third-party vendors who are the taxed parties, its suit 10 11 Moe, 425 U.S. at 472-74; see also However, otherwise exempt parties are FDIC v. New York, 928 F.2d 56, 59 (2d Cir. Insofar as the Tribe is suing on behalf of the (like theirs) is barred by the TIA. Here, the Tribe is suing to defend against the Town s 12 and State s alleged encroachment upon aspects of tribal 13 sovereignty protected by the Indian Trader Statutes and 14 IGRA. 15 the United States in securing immunity to the Indians from 16 taxation conflicting with the measures it had adopted for 17 their protection. 18 224 U.S. at 441). 19 the state tax at issue conflicts with the federal measures 20 enacted for the Tribe s protection, we have undoubted 21 jurisdiction notwithstanding the TIA - to perform that 22 task. Courts embrace[] the recognition of the interest of Moe, 425 U.S. at 473 (quoting Heckman, Since we are required to decide whether Recognizing this requirement, Congress bestowed on 16 1 the federal courts original jurisdiction over all federal 2 claims brought by tribes. 3 not preclude jurisdiction over a tribe s suit to enjoin 4 purportedly preempted state taxation of non-Indians on the 5 reservation. 6 Yee, 528 F.3d 1184, 1186 n.1 (9th Cir. 2008).5 28 U.S.C. § 1362. The TIA does See, e.g., Barona Band of Mission Indians v. 7 C. 8 The State alleges that the district court abused its 9 Comity Does Not Preclude Federal Jurisdiction discretion in failing to dismiss this case under principles 10 of comity. The Tribe asserts that the State forfeited this 11 claim. 12 preserved its comity objection, but the district court was 13 within its discretion in denying the motion to dismiss. 14 Joseph v. Hyman, 659 F.3d 215, 218 n.1 (2d Cir. 2011) 15 ( where, as here, a district court dismisses the action 16 based on comity, we review the decision for abuse of 17 discretion ). We reject both arguments: the State adequately See 18 5 The State s reliance on United States v. Jicarilla Apache Nation, U.S. --, 131 S. Ct. 2313 (2011), is misplaced. Jicarilla addresses the fiduciary exception to the attorneyclient privilege as related to the United States in its trustee relationship with Indian tribes. The opinion relies on analysis of the evidentiary privilege and the relationship between the United States and Indian tribes; neither is directly at issue here. Id. 17 1 The Tribe points to cases in which courts have held 2 that arguments raised in the complaint were waived unless 3 reiterated in opposition to motions for summary judgment. 4 Tribe Br. 41 (citing, inter alia, Rocafort v. IBM Corp., 334 5 F.3d 115, 121 (1st Cir. 2003)). 6 unpersuasive in the context of comity and federalism[, 7 which] bear on the relations between court systems, 8 [because] those relations will be affected whether or not 9 the litigants have raised the issue themselves. These cases are Washington 10 v. James, 996 F.2d 1442, 1448 (2d Cir. 1993). Moreover, the 11 district court considered and rejected the comity challenge 12 prior to the motion for summary judgment. 13 final order, the district court s earlier denial of the 14 motion to remand for lack of subject matter jurisdiction 15 also is reviewable. 16 Winthrop, Shaw, Pittman, LLC, 569 F.3d 485, 488 (D.C. Cir. 17 2009) (citing CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. 18 COOPER, FEDERAL PRACTICE AND PROCEDURE § 3740 (3d. ed. 1998)). 19 require [the State] to re-raise [its] objections would be an 20 overly formalistic application of waiver. 21 Local v. Rogan, 602 F.3d 879, 884 (7th Cir. 2010). After [the] Capitol Hill Grp. v. Pillsbury, 22 18 Dexia Credit To 1 More embracive than the TIA, the comity doctrine 2 applicable in state taxation cases restrains federal courts 3 from entertaining claims for relief that risk disrupting 4 state tax administration. 5 560 U.S. 413, 130 S. Ct. 2323, 2328 (2010). 6 reasons for the stringent application of comity in the 7 context of state tax law were explained by Justice Brennan: Levin v. Commerce Energy, Inc., The practical The special reasons justifying the policy of federal non-interference with state tax collection are obvious. . . . If federal declaratory relief were available to test state tax assessments, state tax administration might be thrown into disarray, and taxpayers might escape the ordinary procedural requirements imposed by state law. During the pendency of the federal suit the collection of revenue under the challenged law might be obstructed, with consequent damage to the State s budget, and perhaps a shift to the State of the risk of taxpayer insolvency. Moreover, federal constitutional issues are likely to turn on questions of state tax law, which, like issues of state regulatory law, are more properly heard in the state courts. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Perez v. Ledesma, 401 U.S. 82, 128 n.17 (1971) (concurring 25 in part and dissenting in part). 26 of the state courts to adjudicate federal issues is 27 essential to Our Federalism, particularly in the area of 28 state taxation. 29 McNary, 454 U.S. 100, 103 (1981). Recognizing the competence Fair Assessment in Real Estate Ass n v. 30 19 1 There is little precedent for applying the comity 2 doctrine in cases brought by Indian tribes. Cf. Kiowa Tribe 3 of Oklahoma v. Lewis, 777 F.2d 587, 592 (10th Cir. 1985) 4 (affirming the dismissal, on res judicata grounds, of an 5 issue that had already been litigated and appealed through 6 the entire Kansas state court system). 7 has upheld the dismissal on comity grounds of a lawsuit 8 brought by a private Indian enterprise. 9 Co. v. Cox, 365 F.3d 538, 544-46 (6th Cir. 2004). The Sixth Circuit Chippewa Trading However, 10 in so holding, the court explicitly relied on the fact that 11 the plaintiff [wa]s not an Indian tribe or band, as the 12 statutory exception [to the TIA] requires. 13 Cf. Winnebago Tribe of Neb. v. Kline, 297 F. Supp. 2d 1291, 14 1301 (D. Kan. 2004). 15 Id. at 545. Two factors counsel against dismissing due to comity in 16 this case, brought by an actual Indian tribe and not yet 17 litigated in state court.6 18 interests in determining the contours of the Indian Trader 19 Statutes and IGRA, two federal regulatory regimes that 20 entirely occupy (and preclude state legislation in) fields First, there are strong federal 6 If the Town had brought suit in state court to collect unpaid taxes prior to instead of two years after commencement of this action, the argument for federal deference to the pending state action would be stronger. 20 1 of indeterminate size. Where Congress has determined that 2 there are strong policies . . . favoring a federal forum to 3 vindicate deprivations of federal rights, as in the context 4 of litigation brought by Indian tribes, federal courts 5 should exercise their lawful jurisdiction. 6 at 119 (Brennan, J., concurring). 7 have regularly entertained Indian tribes challenges to 8 state taxes. 9 of Colville Indian Reservation, 447 U.S. 134, 138 (1980); McNary, 454 U.S. Second, federal courts See, e.g., Washington v. Confederated Tribes 10 Oneida Nation of N.Y. v. Cuomo, 645 F.3d 154 (2d Cir. 2011). 11 Seeing no reason to depart from this precedent, we affirm 12 the denial of the motion to dismiss on comity grounds.7 13 II. 14 The State Tax Has Not Been Preempted On reaching the merits, the district court held that 15 the tax was preempted by the Indian Trader Statutes, by 16 IGRA, and pursuant to the Bracker balancing test. 17 II, 2012 WL 1069342, at *7-12. 18 Indian Trader Statute nor IGRA preempts the tax expressly 19 or by plain implication, Cotton Petroleum Corp. v. New 7 Pequot We conclude that neither the The State views the district court s decision not to dismiss due to comity as an abuse of discretion, despite the fact that such a decision would have made it the first federal court to dismiss an Indian tribe s challenge of a state tax on comity grounds. 21 1 Mexico, 490 U.S. 163, 175-76 (1989), and that the Town and 2 State interests in the tax, as applied to the vendors, 3 outweigh the Tribe and federal interests. 4 preempted. 5 The tax is not In determining whether federal law preempts a state s 6 authority to regulate activities on tribal lands, courts 7 must apply standards different from those applied in other 8 areas of federal preemption. 9 Siletz Indians of Or. v. Oregon, 143 F.3d 481, 486 (9th Cir. 10 1998) (quoting Cabazon Band of Mission Indians v. Wilson, 37 11 F.3d 430, 433 (9th Cir. 1994)). 12 certainly be without jurisdiction if its authority is 13 preempted under familiar principles of preemption, we 14 . . . d[o] not limit preemption of State laws affecting 15 Indian tribes to only those circumstances. 16 Mescalero Apache Tribe, 462 U.S. 324, 333-34 (1983). 17 Confederated Tribes of Although a State will New Mexico v. When examining whether a state tax is permissible, the 18 initial and frequently dispositive question in Indian tax 19 cases is who bears the legal incidence of the tax, [as] the 20 States are categorically barred from placing the legal 21 incidence of an excise tax on a tribe or on tribal members 22 for sales made inside Indian country without congressional 22 1 authorization. Wagnon v. Prairie Band Potawatomi Nation, 2 546 U.S. 95, 101 (2005) (internal quotation, alterations, 3 and emphasis omitted). 4 the legal incidence of the tax falls on the vendors. 5 Supreme Court in White Mountain Apache Tribe v. Bracker laid 6 out a mode of analysis for courts to use where, as here, a 7 State asserts authority over the conduct of non-Indians 8 engaging in activity on the reservation. 448 U.S. 136, 145 9 (1980); see also Wagnon, 546 U.S. at 102. Under Bracker, a But here, the parties stipulate that The 10 state tax may be invalid because it is pre-empted by 11 federal law, or because it unlawfully infringe[s] on the 12 right of reservation Indians to make their own laws and be 13 ruled by them. 14 omitted). 15 Id. at 143 (internal quotation marks In our view, neither the Indian Trader Statutes nor 16 IGRA indicates congressional intent to bar the tax, and 17 subjecting the tax scheme over on-reservation, non-member 18 activities to a particularized inquiry into the nature of 19 the state, federal, and tribal interests at stake leads us 20 to conclude that the tax is a valid exercise of State 21 authority. 22 448 U.S. at 145). Oneida Nation, 645 F.3d at 165 (quoting Bracker, 23 1 A. The Indian Trader Statutes Do Not Bar This Tax 2 The Tribe argues that the Indian Trader Statutes, 25 3 U.S.C. §§ 261 et seq., bar any state regulation in the 4 field of transactions with Indians occurring on 5 reservations. 6 Comm n, 448 U.S. 160, 165 (1980). 7 the Indian Trader Statutes, the district court held that 8 the state tax that is imposed upon the non-Indian entities 9 for the . . . leased equipment is preempted by the Indian Central Machinery Co. v. Ariz. State Tax 10 Trader Statutes. 11 Adopting a broad view of disagree.8 12 Pequot II, 2012 WL 1069342, at *7. We Throughout this Nation s history, Congress has 13 authorized sweeping and comprehensive federal regulation 14 over persons who wish to trade with Indians and Indian 15 tribes. 16 Attea & Bros., Inc., 512 U.S. 61, 70 (1994) (quoting Warren 17 Trading Post Co. v. Ariz. State Tax Comm n, 380 U.S. 685, Dep t of Taxation and Fin. of N.Y. v. Milhelm 8 The State and Town argue that IGRA has displaced the Indian Trader Statutes with respect to gaming operations. While this argument has some force, given that IGRA does provide room for state regulatory authority over gaming, cf. Central Machinery, 448 U.S. 166 ( no room for state regulation under Indian Trader Statutes), we need not address that argument here. Assuming arguendo that the Indian Trader Statutes apply, they do not preempt this generally applicable property tax assessed on non-Indian property. 24 1 687-89 (1965)). This regulation includes the Indian Trader 2 Statutes, passed in 18349 to protect Indians from becoming 3 victims of fraud in dealings with persons selling goods. 4 Central Machinery, 448 U.S. at 165. 5 the federal government sole power and authority . . . to 6 make such rules and regulations as [it] may deem just and 7 proper specifying the kind and quantity of goods and the 8 prices at which such goods shall be sold to the Indians. 9 25 U.S.C. § 261. These regulations grant They also prohibit unrecognized traders 10 (such as AC Coin and WMS)10 from trading with Indians and 11 require [t]hat no white person shall be employed as a clerk 12 by any Indian trader . . . unless first licensed so to do by 13 the Commissioner of Indian Affairs. 14 25 U.S.C. § 264. The Supreme Court initially interpreted these statutes 15 very broadly. See Milhelm Attea, 512 U.S. at 75; Warren 16 Trading Post, 380 U.S. 685. 17 this interpretation, holding that wherever a product is 18 bought, sold, or leased by a tribe on-reservation, state The district court relied on 9 For a detailed discussion of the history of the Indian Trader Statutes and related statutes and laws, see Warren Trading Post v. Arizona State Tax Commission, 380 U.S. at 687-90. 10 Although invited to do so by the parties, we decline to examine whether AC Coin and WMS are in criminal violation of the Indian Trader Statutes by virtue of the leases at issue. 25 1 taxes may not be applied. Pequot II, 2012 WL 1069342, at 2 *7. However, in Milhelm Attea, the Supreme Court backed away 3 from this all-encompassing interpretation: [a]lthough 4 language in Warren Trading Post suggests that no state 5 regulation of Indian traders can be valid, our subsequent 6 decisions have undermined that proposition. 7 (internal alteration and quotation marks omitted); see also 8 Cotton Petroleum, 490 U.S. at 175. 9 wholly immune from state regulation that is reasonably 512 U.S. at 71 Indian traders are not 10 necessary to the assessment or collection of lawful state 11 taxes. 12 Milhelm Attea, 512 U.S. at 75. Instead of depend[ing] on rigid rules or on 13 mechanical or absolute conceptions of state or tribal 14 sovereignty, preemption under the Indian Trader Statutes 15 involves a particularized inquiry into the nature of the 16 state, federal, and tribal interests at stake . . . to 17 determine whether, in the specific context, the exercise of 18 state authority would violate federal law. 19 512 U.S. at 73 (quoting Bracker, 448 U.S. at 142, 145) 20 (alteration omitted). 21 Indian Trader Statutes require the Bracker balancing 22 analysis. Milhelm Attea, Thus where they are implicated, the 26 1 The ability of a state to apply generally-applicable 2 taxes to non-Indians performing otherwise-taxable functions 3 on an Indian reservation is well established. 4 Nation, 645 F.3d at 167; Milhelm Attea, 512 U.S. at 73; 5 Cotton Petroleum, 490 U.S. at 191. 6 interests in economic development and fair dealing nor the 7 federal interests in protecting the Tribe by monitoring and 8 regulating its commercial partners are implicated by 9 Connecticut s generally-applicable personal property tax. Oneida Neither the Tribe s 10 See Colville, 447 U.S. at 156-57. That is particularly true 11 here, where the incidence of the generally applicable tax 12 falls on the non-Indian s ownership of property, rather than 13 on the transaction between the Tribe and the non-Indian. 14 Cf. Central Machinery, 448 U.S. at 165 (Indian trader law 15 pre-empts the field of transactions with Indians (emphasis 16 added)). 17 preempt the personal property tax expressly or by plain 18 implication. As a result, the Indian Trader Statutes do not Cotton Petroleum, 490 U.S. at 175-76. 19 B. IGRA Does Not Bar the Tax 20 The district court also determined that IGRA preempts 21 the tax. Pequot II, 2012 WL 1069342, at *7-9. 22 of the view that IGRA completely preempts all state 27 The Tribe is 1 legislation affecting the field of gaming. 2 is correct that IGRA preempts certain state regulations 3 affecting the governance of gaming, the tax at issue here 4 does not affect the Tribe s governance of gaming on its 5 reservation, see, e.g., Barona Band, 528 F.3d at 1192. 6 Therefore, we conclude that IGRA does not preempt the tax. 7 8 9 1. While the Tribe The Plain Text of IGRA Does Not Bar the Tax The plain text of IGRA does not bar the tax. IGRA insists that nothing in this section shall be interpreted 10 as conferring upon a State or any of its political 11 subdivisions authority to impose any tax, fee, charge, or 12 other assessment upon an Indian tribe or upon any other 13 person or entity authorized by an Indian tribe to engage in 14 a class III activity. 15 confer the authority, however, for states and tribes to 16 include provisions in the Gaming Procedures, relating to 17 . . . assessment[s] by the State of . . . amounts [] 18 necessary to defray the costs of regulating [Class III] 19 activity. 20 25 U.S.C. § 2710(d)(4). IGRA does 25 U.S.C. § 2710(d)(3)(C)(iii). In this case, the Gaming Procedures are silent as to 21 the legality of Connecticut s generally-applicable personal 22 property tax. Neither the State nor the Tribe sought to 28 1 include language relating to the personal property tax in 2 the Gaming Procedures. 3 Procedures nor, by extension, IGRA explicitly forbids (or 4 permits) the State to apply its personal property tax to the 5 vendors. 2. 6 7 As a result, neither the Gaming IGRA Does Not Bar the Tax by Plain Implication IGRA does not explicitly bar the tax, but the Tribe 8 asserts that the provisions of IGRA demonstrate 9 congressional intent to exempt non-Indian lessors of gaming 10 equipment from a generally-applicable state property tax 11 levied on property located within a reservation even though 12 that tax does not produce acute economic effects that 13 interfere with the relevant gaming practices. 14 in 1988 in response to the Supreme Court s decision in 15 California v. Cabazon Band of Mission Indians, 480 U.S. 202 16 (1987),11 was intended to expressly preempt the field in 17 the governance of gaming activities on Indian lands. 18 Consequently, Federal courts should not balance competing 11 IGRA, passed Although the Cabazon decision is frequently cited as the immediate cause of IGRA, Congress had been weighing similar bills for four years prior. All of these bills were designed to establish a federal scheme that would pre-empt state regulation of Indian gaming. Alex Tallchief Skibine, The Indian Gaming Regulatory Act at 25: Successes, Shortcomings, and Dilemmas, 60 FED. LAWYER 35, 36 (Apr. 2013). 29 1 Federal, State, and tribal interests to determine the extent 2 to which various gaming activities are allowed. 3 Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536, 544 (8th Cir. 4 1996) (quoting S. Rep. No. 446, 100th Cong., 2d Sess. 6 5 (1988)). 6 peripherally associated with tribal gaming is subject to 7 IGRA s constraints. 8 Inc., 243 F.3d 435, 439 (8th Cir. 2001). Gaming However, [n]ot every contract that is merely Casino Res. Corp. v. Harrah s Entm t, 9 In determining whether a state tax imposed on a third 10 party is preempted by IGRA s occupation of the governance 11 of gaming field, courts have been quick to dismiss 12 challenges to generally-applicable laws with de minimis 13 effects on a tribe s ability to regulate its gambling 14 operations. 15 preemptive scope is not implicated in cases involving gaming 16 management and service contracts with a tribe, id. at 438- 17 39; contracts to acquire materials to build a casino, Barona 18 Band, 528 F.3d at 1192; and release of detailed 19 investigative reports on the management of gaming, Siletz, 20 143 F.3d at 487. 21 of the field of gaming regulations is not at issue here, 22 where the state tax on property is not targeted at gaming. For example, courts have held that IGRA s Similarly, we conclude that any preemption 30 1 Instead, we apply the Bracker framework to determine whether 2 the particular application of this tax conflicts with 3 federal law. 4 to accept the Tribe s argument that IGRA itself preempts the 5 state taxation of non-Indian contractors working on tribal 6 territory, we would effectively ignore Bracker and its 7 progeny. ). The Tribe contends that, in order to assure the 8 9 See Barona Band, 528 F.3d at 1193 ( If we were legality of a tax of general application, the State was 10 required to include language in the Gaming Procedures 11 reserving the right to apply the property tax to slot 12 machine vendors. 13 a state can apply its general civil laws to gaming is 14 through a tribal-state compact. 15 546. 16 vendors does not qualify as gaming, and taxing such 17 ownership therefore does not interfere with the governance 18 of gaming. 19 [U]nder [IGRA], the only method by which Gaming Corp., 88 F.3d at But under IGRA, mere ownership of slot machines by the Although the Gaming Procedures outline the Tribe s use 20 of gaming services, nothing in the Gaming Procedures 21 indicates that it delineates all of the rights and 22 responsibilities of vendors engaged in gaming services. 31 1 Gaming services in the Gaming Procedures is defined as 2 the providing of any goods or services to the Tribe 3 directly in connection with the operation of Class III 4 gaming in a gaming facility, including . . . manufacture, 5 distribution, maintenance or repair of gaming equipment. 6 Gaming Procedures § 2(m).12 7 prohibit State taxation of any Tribal gaming operation 8 other than those explicitly permitted, Gaming Procedures 9 § 17(f), they are silent as to taxes imposed on a third 10 party s ownership of slot machines on the Tribe s land, 11 which, as explained above, is not gaming. 12 While the Gaming Procedures Absent the Gaming Procedures, IGRA would not preempt 13 the tax. 14 the question of state taxation of the vendors property, the 15 analysis is unchanged. 16 With the Gaming Procedures, which are silent on IGRA does not directly preempt, by its text or by plain 17 implication, the imposition of Connecticut s generally- 18 applicable personal property tax. 12 It also does not Gaming equipment is separately defined to mean any machine or device which is specially designed or manufactured for use in the operation of any Class III gaming activity. Gaming Procedures § 2(i). The Gaming services definition therefore includes the services of the vendors, who provide slot machines to the Tribe to be used as class III gaming devices. 32 1 explicitly authorize the tax; the Bracker balancing test is 2 therefore in play. 3 C. The Tax Is Not Barred under Bracker 4 Even when a state law is not barred by the text or 5 plain implication of a federal statute, it may unlawfully 6 infringe on the right of reservation Indians to make their 7 own laws and be ruled by them. 8 (quoting Williams v. Lee, 358 U.S. 217, 220 (1959)); see 9 also Wilson, 37 F.3d at 433. Bracker, 448 U.S. at 142 It may also unlawfully impinge 10 upon the objectives of federal legislation. 11 448 U.S. at 149. 12 imposition of the tax fails to satisfy the Bracker interest- 13 balancing test. 14 See Bracker, Such a tax is impermissible if the Wagnon, 546 U.S. at 102. The Bracker test is a flexible pre-emption analysis 15 sensitive to the particular facts and legislation involved. 16 Cotton Petroleum, 490 U.S. at 176. 17 statutes and treaties . . . in light of the broad policies 18 that underlie them and the notions of sovereignty that have 19 developed from historical traditions of tribal 20 independence. Ramah, 458 U.S. at 838 (quoting Bracker, 448 21 U.S. at 144-45). 22 related barriers of (1) possible pre-emption under federal We examine federal We then weigh the independent but 33 1 statutes, and (2) interfere[nce] with [a] tribe s ability 2 to exercise its sovereign functions. 3 Bracker, 448 U.S. at 142). 4 in exercising its regulatory authority over the activity in 5 question must be examined and given appropriate weight. 6 Id. at 838. 7 law should be construed generously, and federal pre-emption 8 is not limited to those situations where Congress has 9 explicitly announced an intention to pre-empt state 10 11 activity. Id. at 837 (quoting Finally, [t]he State s interest In balancing interests, ambiguities in federal Id. The Town and State contend that the balancing test does 12 not apply and, in the alternative, that the Town and State 13 interests at issue are more significant than the Tribal and 14 federal interests at play. 15 test applies, and second, that it balances in favor of the 16 Town and State. 17 18 1. We find, first, that the Bracker The Bracker Test Applies The Town makes two arguments in support of its claim 19 that the Bracker test does not apply: (1) the taxed 20 transaction takes place off of the reservation, and (2) 21 any needed balancing has already been conducted by the 22 Supreme Court in Thomas v. Gay, 169 U.S. 264 (1898). 23 Neither argument is persuasive. 34 1 First, [t]he Bracker interest-balancing test has never 2 been applied where . . . the State asserts its taxing 3 authority over non-Indians off the reservation. 4 546 U.S. at 110. 5 fuel tax imposed on distributors who received fuel off- 6 reservation and delivered it to the Prairie Band Potawatomi 7 Nation on-reservation was imposed on off-reservation 8 transactions not subject to Bracker. 9 tax at issue in Wagnon applied regardless of the disposition 10 of the fuel because it was triggered by the off-reservation 11 receipt of fuel. 12 reservation. 13 because they are located in the State of Connecticut - here, 14 on the Tribe s reservation. 15 Wagnon, In Wagnon, the Supreme Court held that a Id. at 101-110. The Here, no relevant transaction occurs off- Instead, the tax is levied upon slot machines Conn. Gen. Stat. § 12-43. Second, the Town points to several late nineteenth- 16 century cases ( Non-Indian Lessee Cases ) in which the 17 Supreme Court upheld taxes on property of non-Indians who 18 resided on Indian reservations. 19 upheld a tax put upon the cattle of the [non-Indian] 20 lessees [as] too remote and indirect to be deemed a tax upon 13 In Thomas,13 the Court In other cases cited by the parties, the fact patterns and analysis mirror Thomas. See Wagoner v. Evans, 170 U.S. 588 (1898); Utah & N. Ry. Co. v. Fisher, 116 U.S. 28 (1885); Truscott v. Hurlbut Land & Cattle Co., 73 F. 60 (9th Cir. 1896). 35 1 the lands or privileges of the Indians. 2 Expressly setting aside the argument that the value of the 3 lands for such purposes would fluctuate or be destroyed 4 altogether by the tax, id., the Court declined to engage in 5 a structured analysis or to weigh the tribal against the 6 State interests. 7 169 U.S. at 273. Thomas and the Non-Indian Lessee Cases are similar to 8 this case insofar as the Court addressed state taxation with 9 the incidence of the tax falling within Indian land despite 10 the absence of a direct tax on the Indians. Cf. Colville, 11 447 U.S. at 183-86 (Rehnquist, J., concurring). 12 the law has changed since the 1890s; the Supreme Court has 13 clarified the ways in which courts should evaluate 14 assertions of preemption of state taxes. 15 at 145. 16 of the relevant state, federal, and tribal interests. 17 Cotton Petroleum, 490 U.S. at 176 (quoting Ramah, 458 U.S. 18 at 838). 19 of the specific federal interests at issue by enacting 20 protective legislation such as IGRA. 21 at 274-75 (conceding [t]he unlimited power of [C]ongress to 22 deal with the Indians but noting that the tax at issue However, Bracker, 448 U.S. Each case requires a particularized examination Moreover, Congress has established the importance 36 Cf. Thomas, 169 U.S. 1 would not be an interference with congressional power ). 2 Although Thomas informs our inquiry, we cannot forgo 3 Bracker s fact-specific analysis because the Supreme Court 4 decided a related question 115 years ago. 2. 5 6 7 8 9 The State and Town Interests Outweigh the Federal and Tribal Interests i. The Federal Interest For the purposes of the Bracker test, determining 10 relevant federal interests is primarily an exercise in 11 examining congressional intent, [and] the history of tribal 12 sovereignty serves as a necessary backdrop to that 13 process. 14 described at times as Congress s strongest and most 15 explicit statement in favor of tribal economic development, 16 Matthew L.M. Fletcher, The Supreme Court and Federal Indian 17 Policy, 85 NEB. L. REV. 121, 146 (2006), is intended to 18 promote tribal [economic] development, prevent criminal 19 activity related to gambling, and ensure that gaming 20 activities are conducted fairly. 21 Mission Indians of the Rincon Reservation v. Schwarzenegger, Cotton Petroleum, 490 U.S. at 176. 14 IGRA,14 Rincon Band of Luiseno Because the tax in no way implicates the federal interest in ensuring that Tribes are not swindled in unfair transactions, the federal interests reflected in the Indian Trader Statutes are irrelevant. We therefore focus our inquiry on the federal interests reflected in IGRA. 37 1 602 F.3d 1019, 1034 (9th Cir. 2010), and also to ensure 2 that the Indian tribe is the primary beneficiary of the 3 gaming operation. 4 IGRA reveals congressional intent to exempt non-Indian 5 suppliers of gaming equipment from generally applicable 6 state taxes that would apply in the absence of the 7 legislation. 8 § 2710(d)(4),15 without prohibiting taxes like this personal 9 property tax. 25 U.S.C. § 2702(1)-(2). Nothing within IGRA addresses state taxation, 25 U.S.C. See, e.g., Container Corp. of Am. v. 10 Franchise Tax Bd., 463 U.S. 159, 196-97 (1983) (holding that 11 if federal legislation speaks to a particular tax without 12 prohibiting it, this undermines a claim that the tax is 13 preempted). 14 The tax, imposed on non-Indian vendors, is likely to 15 have a minimal effect on the Tribe s economic development. 16 While IGRA seeks to limit criminal activity at the casinos, 17 nothing in Connecticut s tax makes it likely that Michael 18 Corleone will arrive to take over the Tribe s operations. 15 Section 2710(d)(4) provides in relevant part that nothing in this section shall be interpreted as conferring upon a State or any of its political subdivisions authority to impose any tax, fee, charge, or other assessment upon an Indian tribe or upon any other person or entity authorized by an Indian tribe to engage in a class III activity. 38 1 Moreover, IGRA presented an opportunity for Congress to 2 preempt taxes exactly like this one; Congress chose to limit 3 the scope of IGRA s preemptive effect to the governance of 4 gaming. 5 owners of vending machines leased by the Tribe, the tax 6 entitles the State to a tangential benefit from the Tribe s 7 gaming operation, but it does not prevent the Indian tribe 8 [from being] the primary beneficiary of the gaming 9 operation. 10 As imposed on the 25 U.S.C. § 2702(2) (emphasis added). The tax therefore has only a minimal effect on federal interests. ii. The Tribal Interest 11 12 Gaming Corp., 88 F.3d at 550. The tax implicates two Tribal interests economic 13 development and sovereignty over the reservation - but the 14 parties dispute the magnitude of the tax s impact on each. 15 16 The economic effect of the tax on the Tribe is minimal.16 From 2004 to 2011, AC Coin had paid $69,894 in 16 Both parties claim that we should disregard the magnitude of the tax in evaluating its economic effect on the Tribe, albeit for different reasons. The Tribe asserts that any tax, regardless of its size, is impermissible. The Tenth Circuit has held that, under some circumstances, preemption analysis cannot turn on the severity of a direct economic burden on tribal revenues caused by the state tax. Indian Country, U.S.A., Inc. v. Okla. Tax Comm n, 829 F.2d 967, 986 n.9 (10th Cir. 1987). In Indian Country, the State taxed Indian sales of bingo tickets; the court held that IGRA s regulation of gaming itself is sufficiently comprehensive to prevent any tax on casino sales not accounted for in the 39 1 personal property tax. After several years, at the Tribe s 2 urging, AC Coin permitted the Tribe to reimburse it for this 3 tax while this lawsuit was pending. 4 taxes on WMS,17 this leads to an approximate total tax of Assuming comparable compact. Id. In Bracker, the state sought to impose a motor carrier license tax and a use fuel tax on a subcontractor of a tribe s timber operations. 448 U.S. at 139. The taxes burdened contracts for the sale of timber that were often drafted by employees of the Federal Government, and the federal scheme Indian timber regulations were so pervasive that there was no room for the[] taxes in the comprehensive federal regulatory scheme. Id. at 147, 148. While IGRA may prevent any tax on gaming itself, a tax on personal property possessed by a nonIndian on the reservation does not fall within IGRA s pervasive reach. Cf. Casino Res. Corp., 243 F.3d at 439; Barona Band, 528 F.3d at 1192. The Town and the State assert that the tax has no actual economic effect on the Tribe. Indeed, the record reflects that the tax is not a factor in lease pricing and that the vendors do not seek reimbursement from Tribal lessees. Tribe Rule 56(a)(2) Statement 12-14. Insofar as the Tribe challenges this assessment, it would constitute a genuine dispute as to [a] material fact, Fed. R. Civ. P. 56(a); however, we construe the record as devoid of genuine dispute on this question, insofar as any effect on the Tribe is minimal compared to the other relevant interests. Nevertheless, the Tribe did, pursuant to industry standard lease agreements, assume contractual liability for the taxes incurred by the vendors. Deane Decl. 3-4. The extent of the legal liability that the Tribe theoretically incurred is relevant, though not particularly weighty, to the calculation of the Tribe s interest, even if the Tribe s actual cost associated with the tax hinged upon the vendors decision to seek the reimbursement to which they were lawfully entitled. See Denney v. Deutsche Bank AG, 443 F.3d 253, 265 (2d Cir. 2006) (listing run[ning] the risk of being assessed a [cost] as a cognizable injury, even if it is not clear that the debtor will seek repayment). 17 The actual amounts owed by WMS appear to vary substantially from year to year, but average approximately $10,000 for the years on record. 40 1 $20,000 per annum.18 2 constitutes less than two tenths of one percent of the 3 $2,300,000 (AC Coin) and $12,900,000 (WMS) in revenue per 4 annum that the vendors anticipate from their dealings with 5 the Tribe. 6 Although this is a substantial sum, it As of September 2011, the Tribe had invested over $1.42 7 billion in its gaming operations at Foxwoods. Many of the 8 vendors most popular games are available by lease only, and 9 the Tribe has elected to pursue leases of a significant 10 duration; however, the challenged tax does not significantly 11 compromise the profitability of these leases. 12 payments to the State of twenty-five percent of its gross 13 operating revenues from video facsimile games have exceeded 14 $1.5 billion since 2003. 15 reimburse the vendors, $20,000 per year would not pose a 16 substantial threat to the revenue the Tribe derives from the 17 vendors games, and it does not make the State the primary 18 beneficiary of even this part of the Tribe s gaming 19 operation. The tax s economic effect on the Tribe is less 20 than minimal. The Tribe s Even if the Tribe were forced to 18 The record also reflects that other slot machine vendors, including International Gaming Technology and Bally Technologies, regularly pay personal property taxes in Ledyard, but does not suggest how much they pay. 41 1 The tax has a moderate effect on tribal sovereignty. 2 A tribe s power to exclude nonmembers entirely or to 3 condition their presence on the reservation is . . . well 4 established. 5 [w]e long ago departed from the conceptual clarity of Mr. 6 Chief Justice Marshall s view in Worcester [v. Georgia, 31 7 U.S. 515 (1832)], that Indian tribes were wholly distinct 8 nations within whose boundaries the laws of a State can 9 have no force. Mescalero Apache, 462 U.S. at 333. However, Id. at 331 (quoting Worcester, 31 U.S. at 10 561) (alterations omitted). 11 tax, as imposed on the slot machines located entirely on- 12 reservation, overlaps with the Tribe s ability to set the 13 restrictions to property rights in its sovereign territory. 14 [U]nder some circumstances a State may exercise concurrent 15 jurisdiction over non-Indians acting on tribal 16 reservations. 17 encroachment into an area of tribal sovereignty, however 18 modest, is a recognized injury that must be considered in a 19 Bracker balancing. 20 21 22 The State s personal property Id. at 333 (citations omitted). Still, this iii. The State and Town Interests In evaluating a State s economic interests for the purpose of Bracker balancing, we look for a nexus between 42 1 the taxed activity and the government function 2 provided. . . . 3 Ute Mountain Ute Tribe v. Rodriguez, 660 F.3d 1177, 1201 4 (10th Cir. 2011). 5 regulation targeted hunting in particular; the Supreme Court 6 considered State interests to be weaker because the State 7 did not contribute to hunting or wildlife on the 8 reservation. 9 Tenth Circuit noted that the state taxes relating to Barona Band, 528 F.3d at 1193; see also In Mescalero, the challenged state 462 U.S. at 341. Similarly, in Ute Tribe, the 10 extraction of oil and gas would be more defensible if the 11 state used the tax s proceeds to provide related services to 12 the Tribe. 13 660 F.3d at 1201. There is nothing unique in the nature of a [generally- 14 applicable] tax . . . that requires a different analysis. 15 Ramah, 458 U.S. at 843. 16 tax, a court may credit the services provided by the State 17 to the Tribe more generally as related to the tax. 18 Cotton Petroleum, 490 U.S. at 185, 189-91, the Supreme Court 19 permitted application of a generalized tax on oil and gas 20 production to on-reservation production, despite evidence 21 that tax payments by reservation lessees far exceed[ed] the 22 value of services provided by the State to the lessees, or However, for a generally-applicable 43 In 1 more generally, to the reservation as a whole. 2 The Court reasoned that the State could point to [t]he 3 intangible value of citizenship in an organized society 4 [that] is not easily measured in dollars and cents. 5 It also pointed out the nightmarish administrative burdens 6 that would arise from requiring parity between state taxes 7 and state services. 8 9 Id. at 189. Id. Id. at 185 n.15. In this case, the Town has a cognizable economic interest in imposing the tax. The Supreme Court has 10 recognized the dependency of state budgets on the receipt 11 of local tax revenues and appreciate[s] the difficulties 12 encountered by [local governments] should a substantial 13 portion of [their] rightful tax revenue be tied up in 14 litigation. 15 527-28 (1981). 16 exceeds the value of the taxes on slot machines, insofar as 17 a ruling favorable to the Tribe could invite other non- 18 Indian owners of personal property on the reservation to 19 initiate similar actions. 20 anticipated litigation from such an event would tie up 21 hundreds of thousands of dollars per year. 22 ¶ 16. Rosewell v. LaSalle Nat l Bank, 450 U.S. 503, The Town s economic interest therefore According to the Town, the Hopkins Decl. Moreover, if the legality of the tax hinges upon the 44 1 extent to which the taxed property is used by the Tribe in 2 connection with Class III gaming - or other gaming at 3 Foxwoods - the Town would need to take careful account of 4 the use to which property owned by non-Indians on the 5 reservation was put. 6 would further frustrate the Town s revenue collection and 7 would render the State s tax more difficult and expensive to 8 administer. 9 This additional level of analysis There is a nexus between the tax and the services that 10 the Town provides. The Town funds the education and 11 bussing [sic] of the Tribe s children and [t]he 12 maintenance of the roads to the Reservation, inter alia. 13 Pequot II, 2012 WL 1069342, at *12. 14 system that brings in the customers is the lifeblood of the 15 Tribe s gaming activities. 16 generalized governmental functions performed by the Town 17 reinforces the validity of generalized taxes imposed by the 18 Town on third parties with whom the Tribe elects to do 19 business. 20 economic interest in the generally applicable tax is 21 therefore connected, in some respect, to the generally 22 available services that it provides. A well-maintained road That the Tribe benefits from Cotton Petroleum, 490 U.S. at 189. 45 The Town s 1 The State has an interest in the uniform application of 2 its tax code. 3 factors to determine the code s applicability would make it 4 less predictable and more difficult to administer. 5 Furthermore, states have a valid interest in ensuring 6 compliance with lawful taxes that might easily be evaded. 7 Oneida Nation, 645 F.3d at 165 (alteration omitted) (quoting 8 Milhelm Attea, 512 U.S. at 73). 9 contractually obligate the vendors not to comply with any 10 future personal property tax assessments required by State 11 law undermines the State s sovereignty in a meaningful way. 12 The likelihood of additional affronts to State sovereignty 13 increases as the tax s application becomes more contingent 14 upon the use to which non-Indian third parties put on- 15 reservation property. 16 the honor code; refusal to pay taxes erodes the public s 17 perception of the equity of the system and has the potential 18 of resulting in non-compliance with the reporting 19 requirement. 20 Requiring the State to consider additional The Tribe s decision to The tax system already relies upon Hopkins Decl. ¶ 10. Finally, a State has a separate sovereign interest in 21 being in control of, and able to apply, its laws throughout 22 its territory. Cotton Petroleum, 490 U.S. at 188. 46 That 1 interest is diminished where, as here, the sole application 2 of the state law at issue is on the Tribe s reservation, 3 which occupies a unique status within the State. 4 if there is evidence of arbitrage or Tribal efforts to 5 structure deals so as to avoid the State tax, the State s 6 interests are stronger. 7 94. Finally, See Barona Band, 528 F.3d at 1193- iv. Analysis 8 9 The Town and State have more at stake than the Tribe. 10 The economic effect of the tax on the Tribe is negligible; 11 its economic value to the Town is not. 12 sovereign interest in being able to exercise sole taxing 13 authority over possession of property is insufficient to 14 outweigh the State s interest in the uniform application of 15 its generally-applicable tax, particularly where, as here, 16 there is room for both State and Tribal taxation of the same 17 activity. 18 Ultimately, applying a tax that covers all property in the 19 State to non-Indian property located on-reservation is 20 minimally intrusive. 21 Cotton Petroleum to be highly instructive. 22 23 The Tribe s See Cotton Petroleum, 490 U.S. at 188-89. We find the Supreme Court s holding in As in that case, [t]his is not a case in which the State has had nothing to do with the on-reservation activity, save 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 tax it. Nor is this a case in which an unusually large state tax has imposed a substantial burden on the Tribe. It is, of course, reasonable to infer that the [State] taxes have at least a marginal effect on the [price of] on-reservation leases . . . . Any impairment to the federal policy favoring the [supremacy of the Tribe s role in gaming] that might be caused by these effects, however, is simply too indirect and too insubstantial to support [the Tribe s] claim of pre-emption. To find pre-emption of state taxation in such indirect burdens on this broad congressional purpose, absent some special factor such as those present in Bracker and Ramah Navajo School Bd., would be to return to the pre-1937 doctrine of intergovernmental tax immunity. Any adverse effect on the Tribe s finances caused by the taxation of a private party contracting with the Tribe would be ground to strike the tax. Absent more explicit guidance from Congress, we decline to return to this long-discarded and thoroughly repudiated doctrine. 490 U.S. at 186-87. 24 We recognize that this is arguably a close case. 25 However, the Tribe s generalized interests in sovereignty 26 and economic development are not significantly impeded by 27 the State s generally-applicable tax; neither are the 28 federal interests protected in IGRA. 29 economic and administrative interests at stake, and the 30 affront to the State s sovereignty on one hand approximates 31 the affront to the Tribe s sovereignty on the other. 32 balance of equities here favors the Town and State. 33 48 The Town has moderate The 1 2 3. Tribal Sovereignty Does Not Bar the Tax The Tribe alleges that, independent of all else, tribal 3 sovereignty poses another hurdle to the imposition of the 4 tax. The Tribe relies on two categories of cases: the 5 Bracker line, and the Worcester line. 6 its progeny only cite tribal sovereignty among the interests 7 in a balancing test where the incidence of a tax does not 8 fall on the Tribe. 9 see also Wagnon, 546 U.S. at 101-02. However, Bracker and See, e.g., Bracker, 448 U.S. at 142-45; Furthermore, cases 10 such as Worcester, 31 U.S. 515, contain exactly the sort of 11 mechanical or absolute conceptions of state or tribal 12 sovereignty repudiated by Bracker. 13 also Mescalero Apache, 462 U.S. at 331. 14 the Tribe s claim. 15 consideration for a court weighing interests in the Bracker 16 test, but it is insufficient in itself to bar the State s 17 generally applicable tax imposed on non-Indians ownership 18 of on-reservation personal property. 448 U.S. at 145; see Neither supports Tribal sovereignty is an important 19 20 21 22 49 Conclusion 1 2 The district court was not barred by Article III, the 3 TIA, or comity doctrines from reaching the merits of this 4 case. 5 Connecticut s generally-applicable personal property tax was 6 barred by the Indian Trader Statutes, by IGRA, and pursuant 7 to the Bracker balancing test. 8 9 However, the district court erred in determining that For the foregoing reasons, the opinion and order of the district court is REVERSED and the case is REMANDED with 10 instructions to enter summary judgment in favor of 11 Appellants. 50
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