STATE OF NEW YORK

SUPREME COURT         :       COUNTY OF ERIE

________________________________________________________________

DANIEL T. WARREN,

Plaintiff,

                         vs.                                                                                                       1-2002-4880

GEORGE E. PATAKI, as Governor of the State of New York and

his successors in office, ARTHUR J. ROTH, as Commissioner of

the New York State Department of Taxation and Finance and his

successors in office, JOSEPH PASSAFIUME, as Director of

Budget, Management & Finance and his successors in office,

COMMISSIONER OF THE ERIE COUNTY FINANCE DEPARTMENT,

and COUNTY OF ERIE, NEW YORK,

Defendants.

________________________________________________________________

STATE DEFENDANTS’ MEMORANDUM IN SUPPORT OF MOTION TO DISMISS

Preliminary Statement

Defendants Pataki and Roth (“state defendants”) submit this memorandum in support of their motion pursuant to CPLR 3211(a)(3) to dismiss the complaint in this action.

Statement of Facts

For the purpose of this motion only, the allegations set forth in the complaint are assumed to be correct. The plaintiff, a resident of Erie County, brings action against the Governor and Commissioner of Taxation and Finance of the State of New York, both in their official capacities only, as well as against the County of Erie and its Commissioner of Finance. The plaintiff challenges the defendants’ policy of declining to collect taxes on the sales of cigarettes on Indian reservations within New York State. He asks the Court to grant declaratory relief, declaring, in part, that the state defendants’ policy “constitutes a gift or loan of state and county money or

credit in violation of New York State Constitution Article 7 § 8 and Article 8 § 1” (prayer for relief paragraph E) and that it “constitutes a waste or misappropriation of assets that belong to the State of New York in the County of Erie, New York” (id. ¶ F), and injunctive relief enjoining the state defendants to enforce and collect such taxes.

Previously, the plaintiff— apparently in an attempt to avoid the controlling decision in New York Association of Convenience Stores v. Urbach, 275 A.D.2d 520 (3d Dept. 2000), which upheld the state defendants’ policies — commenced an action raising similar claims in the United States District Court for the Western District of New York. On January 9, 2002, that Court dismissed that action without prejudice to the plaintiffs right to file an action in State court. Warren v. Pataki, Index No. 01-CV-0004E, 2002 U.S. Dist. LEXIS 861 (W.D.N.Y., 2002). On June 12, 2002, the District Court denied the plaintiffs motion for reconsideration. Meanwhile, on June 7, 2002, the plaintiff commenced this action by filing his complaint.

Argument

THE PLAINTIFF LACKS STANDING TO MAINTAIN

THIS PROCEEDING BECAUSE HE IS NOT WITHIN THE

ZONE OF INTERESTS INTENDED TO BE PROTECTED

BY THE TAX LAW AND REGULATIONS

The plaintiff at bar makes no claim in his complaint that he is a retailer or in any way competes with retailers on Indian reservations. (In fact, in his federal court action, he affirmatively stated that he is not a retailer.) Instead, he apparently attempts to premise standing to sue solely on his status as a state taxpayer. Complaint ¶ 2. This is not sufficient.

It is well settled that the burden of establishing standing is on the party claiming it. Society of the Plastics Industry, Inc. v County of Suffolk, 77 N.Y.2d 761, 769 (1991). Very simply, “an unaggrieved citizen-taxpayer” lacks standing. St. Clair v. Yonkers Raceway, Inc., 13 N.Y.2d 72, 75 (1963). The plaintiff cannot show any interest to defeat this rule.

The standing of a party, for claims such as those raised here, ultimately depends upon whether the interests or injuries it asserts fall within the zone of interests protected by the tax statutes and regulations that the defendants have allegedly failed to enforce. See Society of the Plastics Industry, 77 N.Y.2d at 773. The Court of Appeals has described the zone of interests test:

The zone of interests test, tying the in-fact injury asserted to the governmental act challenged, circumscribes the universe of persons who may challenge administrative action. Simply stated, a party must show that the in-fact injury of which it complains (its aggrievement, or the adverse effect upon it) falls within the “zone of interests,” or concerns, sought to be promoted or protected by the statutory provision under which the agency has acted (Lujan v National Wildlife Fedn., 497 US 871, 883, 110 S Ct 3177, 3186; see also, Matter of Mobil Oil Corp. v Syracuse Indus. Dcv. Agency, 76 N.Y.2d 428, 433).

Society of the Plastics Industry, 77 N.Y.2d at 773. In that case, the Court held that the purposes of the State Environmental Quality Review Act (“SEQRA”) included the maintenance, preservation and enhancement of environmental quality (id. at 777) but did not extend to prevention of the economic injury that might result to a plastics manufacturer resulting from a county law limiting the use of plastic. Id. The Court concluded that, where the economic injury complained of did not fall within the zone of interests sought to be protected by SEQRA, the plastics manufacturer had no standing to challenge the county law based on SEQRA. Id. at 777-778.

Similarly, in Matter of Ayers v Coughlin, 72 N.Y.2d 346, 3 54-355 (1988), the Court of Appeals held that county sheriffs lacked standing to challenge the failure of Division of Parole to schedule timely parole revocation procedures under the Executive Law, even though such failure allegedly contributed to overcrowding in county jails, because the procedures were plainly designed for the protection of the parolees rather than the counties.

Even business competitive injury, of itself, is insufficient to confer standing under the zone of interests test. Matter of Dairylea Cooperative. Inc. v Walkley, 38 N.Y.2d 6, 11(1975). There, the Court found that Dairylea had standing to challenge the determination of the Commissioner of Agriculture and Markets granting a competing milk dealer’s application for an extension of its milk license to include a larger sales area. However, the Court’s conclusion was explicitly based on the specific incorporation into the statute of the overriding objective of preventing destructive competition. Id. at 11.

Where the applicable statute contains no objective regarding business competition, even business competitors generally fall outside the zone of interests to be protected by the statute and thus have no standing. Neither the fact that the statutory scheme incidentally affects competition nor that the competitor will arguably suffer a particularized injury in fact will confer standing upon a business competitor who is outside the statutory zone of interests. See Matter of Blue Cross of Western New York, Inc. v. Cooper, 164 A.D.2d 578 (3d Dept. 1991) (health insurer had no standing to challenge the Insurance Department’s approval of health insurance offered by a competitor at a rate which was allegedly inadequate, because it was not within the zone of interests intended to be protected by the statute); Arnot-Ogden Memorial Hospital v. Guthrie Clinic, Inc., 122 A.D.2d 413, 414-415 (3d Dept. 1986), lv. denied, 68 N.Y.2d 612 (1986) (a competing hospital had no standing to challenge a clinic’s failure to apply for a certificate of need under the Public Health Law); New York Hearing Aid Society, Inc. v. Children’s Hospital and Rehabilitation Center of Utica, 91 A.D.2d 333, 334 (2d Dept. 1983), lv to appeal denied 59 N.Y.2d 915 (1983), 59 N.Y.2d 607 (1983) (hearing aid dealers have no standing to enjoin hospital from selling hearing aids allegedly in violation of the General Business Law because the statute was intended to protect the public from abuses resulting from aggressive marketing of hearing aids rather than to regulate competition). The zone of interest test is specifically designed to preclude litigation brought by persons other than the intended beneficiaries of the statutory scheme. See Matter of Heritage Coalition Inc. v City of Ithaca Planning and Development Board, 228 A.D.2d 862, 864 (3d Dept. 1996), lv to appeal denied 88 N.Y.2d 809 (1996) (teachers who used existing building as illustration in art and architecture classes lacked standing to challenge approvals of modifications to building).

In this proceeding the plaintiff alleges that the state defendants failed to enforce cigarette sales and excise taxes imposed by Tax Law Article 20 and the regulations thereunder (20 N.Y.C.R.R. Part 336) on sales of cigarettes to non-Indians made on Indian reservations in New York. The plaintiff claims that respondents’ alleged failure to enforce equally the Tax Law and regulations “cause[s] an increase in property taxes and taxes on sales of items other than those sold to non-indians [sic] on Indian land (or less of a tax reduction) to the detriment of the plaintiff.” Complaint ¶ 46. Standing based on such a claim must be denied, even if there were any injury in fact to the plaintiff, because the plaintiff is not within the zone of interests sought to be protected by the revenue laws he invokes.

The primary purpose of the sales and excise taxes at issue in this proceeding is to raise money for the State and, in the case of the sales tax, for local governments. See, e.g., Memorandum of the Division of the Budget, L. 1965, c. 93, New York State Legislative Annual -

1965, 432, 434 (broad-based state sales tax “is the most equitable means of financing a major part of New York’s revenue needs”). The regulations promulgated in accordance with the statutory tax schemes are designed to implement the statutory mandate in a manner consistent with the limitations imposed by federal law upon the taxation of Indians on the reservation. The tax statutes and regulations at issue are not designed, explicitly or implicitly, for the benefit or detriment of individuals.

The denial of standing to this plaintiff will not mean that the State’s policies which are at issue will be immune from challenge, (A plaintiff who otherwise would lack standing might be able to sue when “the failure to accord such standing would be in effect to erect an impenetrable barrier to any judicial scrutiny of legislative action.” Boryszewski v. Bridges, 37 N.Y.2d 361, 364 (1975).) for the Court of Appeals has specifically held that business competitors who make off-reservation sales of tobacco products have standing to challenge these policies. New York Association of Convenience Stores v. Urbach, 92 N.Y.2d 204, 212 (1998). There, off-reservation retailers and their trade association sought to enjoin the State to collect taxes on reservation sales of tobacco and motor fuels. Although the Court upheld the State’s policy, it determined that, as competitors, the retailers had standing to challenge the very exemption the plaintiff at bar attacks:

With respect to the threshold question of petitioners’ standing, we agree with the Appellate Division’s conclusion that their grievance was essentially an equal protection claim based on differential enforcement of the tax laws and that, as members of the disadvantaged class, petitioners have a right to seek judicial resolution of that claim.

Id. at 212 (citations omitted).

The plaintiff at bar, however, does not — and could not — make a similar claim, for he is not a competing retailer. He simply claims that he pays income and property taxes (complaint ¶ 2) and that the failure to collect taxes on reservation sales causes his taxes to increase. Id. ¶ 46.  This is not enough. Any injury the plaintiff may suffer does not differ in kind or degree from that suffered by the general public, and so he lacks standing. Matter of Sun-Brite Car Wash, Inc. v Board of Zoning, 69 N.Y.2d 406, 413 (1987).

Conclusion

The state defendants’ motion should be granted in all respects and the complaint should be dismissed as to them.

DATED:           Buffalo, New York

                         July 1,2002