United States District Court, W.D. New York
FREDRICK PERKINS and ALICE J. PERKINS, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
DECISION AND ORDER
LAWRENCE J. VILARDO United States District Judge
case presents what appears to be an issue of first
impression: whether a treaty between the United States and
Native Americans ensuring the free use and enjoyment of
tribal land bars taxes on income derived directly from the
land-here, the sale of gravel mined on the land. Although at
least two circuit courts have suggested in dicta that
“income derived directly from the land” might be
exempt from taxation under such treaties, they did so to
distinguish that scenario from cases where an exemption was
sought for income earned in ways that do not relate to the
land itself. See Lazore v. Comm'r, 11 F.3d 1180
(3d Cir. 1993); Hoptowit v. Comm'r, 709 F.2d 564
(9th Cir. 1983). This case presents the very issue about
which those courts speculated. And for the reasons that
follow, this Court agrees with their speculation and finds
that the plaintiffs have plausibly stated a claim for relief
under two treaties with the Native American Seneca Nation.
16, 2016, Fredrick and Alice Perkins commenced this action
against the United States of America. See Docket
Item 1; see also Docket Item 7 (Verified Amended
Complaint). The plaintiffs, one of whom is “an enrolled
member of the Seneca Nation, ” removed gravel, with
permission, from the Seneca Nation Allegany Territory and
later sold it. See Docket Item 7 ¶¶ 1,
22-25. After receiving a “notice of deficiency”
from the Internal Revenue Service, the plaintiffs paid taxes
on the income from the sale. See Id. ¶¶
5-7. In the amended complaint,  they have alleged that they are
owed a tax refund, interest, and penalties-totaling $9,
863.68-because their income from the sale of gravel is not
taxable under the Treaty with the Six Nations at Canandaigua
of November 11, 1794 (“Canandaigua Treaty”), and
the Treaty with the Seneca of May 20, 1842 (“1842
Treaty”). See Id. ¶¶ 8, 10-15,
26-29. The United States has moved to dismiss the amended
complaint. See Docket Item 9.
September 16, 2016, this Court referred this action to
Magistrate Judge Hugh B. Scott for all pre-trial matters,
pursuant to 28 U.S.C. § 636(b)(1)(A) and (B).
See Docket Item 10. On January 27, 2017, Judge Scott
issued a Report and Recommendation, concluding that the
motion to dismiss should be denied with respect to claims
under the Canandaigua Treaty but granted with respect to
claims under the 1842 Treaty. See Docket Item 14
(Report and Recommendation). Both parties objected, and after
the objections were fully briefed, see Docket Items
15, 16, 19, 20, 21 & 22, this Court heard oral argument.
on the analysis below, this Court adopts the recommendation
of Judge Scott regarding the claims under the Canandaigua
Treaty but rejects the recommendation regarding the claims
under the 1842 Treaty. Accordingly, the government's
Motion to Dismiss (Docket Item 9) is denied.
REVIEW OF REPORT AND RECOMMENDATION
Court “must determine de novo any part of the
magistrate judge's disposition that has been properly
objected to” and “may accept, reject, or modify
the recommended disposition.” Fed.R.Civ.P. 72(b)(3);
see 28 U.S.C. § 636(b)(1).
MOTION TO DISMISS STANDARD
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face. A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(internal quotation marks and citation omitted). “The
plausibility standard is not akin to a probability
requirement, but it asks for more than a sheer possibility
that a defendant has acted unlawfully.” Id.
Courts assess Rule 12(b)(6) motions “accepting all
factual allegations in the complaint as true, and drawing all
reasonable inferences in the plaintiff's favor.”
Peter F. Gaito Architecture, LLC v. Simone Dev.
Corp., 602 F.3d 57, 61 (2d Cir. 2010) (internal
quotation marks and citation omitted). “On a motion to
dismiss, the court may consider any written instrument
attached to the complaint as an exhibit or any statements or
documents incorporated in it by reference.” Yak v.
Bank Brussels Lambert, 252 F.3d 127, 130 (2d Cir. 2001)
(internal quotation marks and citation omitted).
ANALYSIS OF THE PLAINTIFFS' CLAIMS
Principles of ...