(Nov. 6, 2020) On October 23, 2020, the U.S. Court of Appeals for the Second Circuit affirmed a lower court’s decision permanently enjoining Seneca County, New York, from foreclosing on the Cayuga Indian Nation’s real property for nonpayment of property taxes on the ground of tribal sovereign immunity. (Cayuga Indian Nation of New York v. Seneca County, New York, No. 19-0032, slip op. (Oct. 23, 2020).)
The Cayuga Nation, a federally recognized tribe, purchased real property in Seneca County in 2007 and subsequently refused to pay the county property taxes. Seneca County levied a tax lien against the Cayuga Nation’s property under New York state law and eventually commenced an action in state court to foreclose the lien and seize the property. In response, the Cayuga Nation sued Seneca County in federal court, asserting that the foreclosure suit was barred by the doctrine of tribal sovereign immunity and requesting that the suit be enjoined from proceeding.
In August 2012, the District Court entered in favor of the Cayuga Nation a preliminary injunction, which halted the foreclosure action. Following Seneca County’s appeal, in 2014, the Court of Appeals affirmed the preliminary injunction and remanded the case to the District Court. Back at the lower court, both sides moved for summary judgment, and in 2018, the District Court granted permanent injunctive relief to the Cayuga Nation on the ground that tribal sovereign immunity barred Seneca County from foreclosing on the real property. Seneca County appealed, arguing that the immovable-property exception to sovereign immunity permits its foreclosure action against the Cayuga Nation.
At common law, the doctrine of sovereign immunity generally precludes sovereigns from having to defend lawsuits in a foreign jurisdiction. The doctrine is frequently invoked by foreign countries being sued in United States courts. However, the doctrine of sovereign immunity is subject to a number of exceptions. One such exception curbs immunity in actions where the sovereign’s rights or interests in real property are at issue. The so-called “immovable-property exception” exists because property ownership is not an “inherently sovereign function” (Cayuga Indian Nation, slip op. at 11) and because states have an inherent interest in resolving disputes over rights to property within their bounded territory (slip op. at 12.)
Federally recognized tribes like the Cayuga Nation are “domestic dependent nations . . . [that] possess the common-law immunity from suit traditionally enjoyed by sovereign powers.” (Slip op. at 10.) U.S. Supreme Court precedent establishes that courts should take care to avoid chipping away at tribal sovereign immunity, for the “power to restrict the scope of a tribe’s immunity from suit lies, instead, with Congress (which is empowered to authorize suits against tribes) and with the tribes themselves (which may waive their immunity from suit…).” (Slip op. at 10.)
The Court of Appeals concluded that the foreclosure action brought by Seneca County against the Cayuga Nation did not fall within the immovable-property exception to tribal sovereign immunity because the Cayuga Nation’s rights or interests in the real property were not at issue. While a tax foreclosure action does involve real property, fundamentally the action is “about money, not property.” (Slip op. at 14.) The legitimacy of the Cayuga Nation’s rights to the property were not in dispute; rather, Seneca County was attempting to seize the property to satisfy a debt. As such, the court found that the immovable-property exception to sovereign immunity did not apply, and thus that the foreclosure suit was barred by the doctrine of tribal sovereign immunity.
Seneca County maintained that the court’s determination—that the immovable-property exception does not apply to abrogate sovereign immunity in tax foreclosure actions—could result in tribes buying “large swaths of property within the County” (slip op. at 21), refusing to pay property taxes, and leaving the county remediless. However, the court theorized that Seneca County could pursue remedies other than foreclosure actions, including reaching an agreement with a tribe on real property taxes or pursuing “appropriate legislation from Congress.” (Slip op. at 21.)