         SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department
1213.1
CA 11-01193
PRESENT: CENTRA, J.P., FAHEY, PERADOTTO, GREEN, AND GORSKI, JJ.


SENECA NATION OF INDIANS, PLAINTIFF-APPELLANT,

                    V                               MEMORANDUM AND ORDER

STATE OF NEW YORK, NEW YORK STATE DEPARTMENT OF
TAXATION AND FINANCE, THOMAS H. MATTOX, ACTING
COMMISSIONER, DEPARTMENT OF TAXATION AND FINANCE,
AND ERIC T. SCHNEIDERMAN, NEW YORK STATE ATTORNEY
GENERAL, DEFENDANTS-RESPONDENTS.


HARTER SECREST & EMERY LLP, BUFFALO (CAROL E. HECKMAN OF COUNSEL), AND
KANJI & KATZEN, PLLC, ANN ARBOR, MICHIGAN, FOR PLAINTIFF-APPELLANT.

ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL, ALBANY (ANDREW D. BING OF
COUNSEL), DEFENDANT-RESPONDENT PRO SE AND FOR DEFENDANTS-RESPONDENTS.

PHILLIPS NIZER LLP, NEW YORK CITY (THOMAS G. JACKSON OF COUNSEL), FOR
NEW YORK STATE ASSOCIATION OF TOBACCO AND CANDY DISTRIBUTORS, INC.,
AMICUS CURIAE IN SUPPORT OF DEFENDANTS-RESPONDENTS.

MARGARET A. MURPHY, HAMBURG, AND HOBBS STRAUS DEAN & WALKER, LLP,
WASHINGTON, D.C., FOR ST. REGIS MOHAWK TRIBE, AMICUS CURIAE.


     Appeal from a judgment (denominated order) of the Supreme Court,
Erie County (Donna M. Siwek, J.), entered June 9, 2011. The judgment
denied the motion of plaintiff for summary judgment, granted the cross
motion of defendants for summary judgment, denied as moot the motion
of plaintiff for a preliminary injunction and vacated a temporary
restraining order.

     It is hereby ORDERED that the judgment so appealed from is
unanimously modified on the law by granting judgment in favor of
defendants as follows:

          “It is ADJUDGED AND DECLARED that 20 NYCRR 74.6 is
     valid and enforceable, and that defendant New York State
     Department of Taxation and Finance substantially complied
     with State Administrative Procedure Act §§ 201-a, 202-a and
     202-b in promulgating that rule”

and as modified the judgment is affirmed without costs.

     Memorandum: Plaintiff commenced this action seeking, inter alia,
individual declarations that 20 NYCRR 74.6 (hereafter, the rule),
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                                                         CA 11-01193

concerning taxes imposed on cigarettes on qualified Indian
reservations, is null, void and unenforceable based on the failure of
defendant New York State Department of Taxation and Finance
(Department) to comply with sections 201-a, 202-a, and 202-b of the
State Administrative Procedure Act. The Department promulgated the
rule in accordance with the statutory mandate governing the sale of
tax-exempt cigarettes on qualified reservations to members of an
Indian nation or tribe, as well as the collection of the excise tax on
cigarette sales to non-members of the nation or tribe (see generally
Tax Law §§ 471, 471-e). Plaintiff appeals from a judgment that, inter
alia, denied its motion for summary judgment seeking declaratory and
injunctive relief and granted defendants’ cross motion for summary
judgment. We agree with plaintiff that, because “[i]nterpretation of
the State Administrative Procedure Act is not dependent on an
understanding of technical data or underlying operational practices .
. ., the courts [should] use their own competence to decide issues of
law raised” (Matter of Industrial Liaison Comm. of Niagara Falls Area
Chamber of Commerce v Williams, 72 NY2d 137, 144). Nevertheless, we
agree with Supreme Court that our standard of review is whether there
has been substantial compliance with the State Administrative
Procedure Act in promulgating the rule (see § 202 [8]; Industrial
Liaison Comm. of Niagara Falls Area Chamber of Commerce, 72 NY2d at
144), and we conclude that there was substantial compliance.

     Plaintiff contends that, because the quota system detailed in the
rule will have a substantial adverse impact on the approximately 3,000
individuals employed in the Seneca tobacco economy, the Department was
required to issue a Job Impact Statement (see State Administrative
Procedure Act § 201-a [2] [b]). Plaintiff similarly contends that the
Regulatory Impact Statement required by section 202-a and the
Regulatory Flexibility Analysis required by section 202-b were
deficient based on the Department’s failure to discuss the adverse
impact of the rule on Indian nations, members, and small businesses
such as reservation cigarette sellers. We reject those contentions,
inasmuch as the adverse impact of which plaintiff complains, i.e., the
negative economic effect of a limited supply of tax-exempt cigarettes
available for sale, is a direct result of the relevant statutes, not
the rule itself (see e.g. Tax Law § 471 [5] [b]; § 471-e [2] [b]). In
its amicus brief, St. Regis Mohawk Tribe argues that the rule contains
no mechanism requiring the Department, when approving a sale of tax-
exempt cigarettes by New York state licensed cigarette stamping agents
or wholesalers, to ensure that the limited quantities of such
cigarettes are fairly allocated to retailers on qualified reservations
(see § 471 [5] [b]; 20 NYCRR 74.6 [b] [3]). We reject the contention
that the Department violated the State Administrative Procedure Act by
failing to address the speculative possibility of monopolistic
behavior that may result from the absence of such a mechanism (see
Matter of Binghamton-Johnson City Joint Sewage Bd. v New York State
Dept. of Envtl. Conservation, 159 AD2d 887, 889; see also Oneida
Nation of N.Y. v Cuomo, 645 F3d 154, 173). Rather, we conclude that
the Department substantially complied with the requirements of State
Administrative Procedure Act §§ 201-a, 202-a, and 202-b.

     Finally, although the court properly determined the merits of the
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                                                         CA 11-01193

issues raised in the motion and cross motion before it, the court
failed to make the requisite declarations in favor of defendants (see
Hirsch v Lindor Realty Corp., 63 NY2d 878, 881; Schlossin v Town of
Marilla, 48 AD3d 1118, 1119). We therefore modify the judgment
accordingly.




Entered:   November 18, 2011                   Patricia L. Morgan
                                               Clerk of the Court
