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09/02/66 Stewart L. Udall, v. Norman M. Littell

September 2, 1966




Edgerton, Senior Circuit Judge, and Burger and Leventhal, Circuit Judges.


Petition for Rehearing En Banc Denied October 14, 1966.



This is an appeal by the Secretary of Interior from a permanent injunction prohibiting the Secretary from terminating Appellee's contract as General Counsel of the Navajo Indian Tribe, *fn1 enjoining any interference with that contract and requiring the Secretary to deal with Appellee as General Counsel. *fn2

The central issues are whether the Secretary has power to administratively terminate Appellee's contract for cause and, if so, whether on the record the Secretary acted properly within the scope of his claimed administrative powers.

Appellee has had professional relations with the Navajo Tribe for a long period of time, serving in two separate but related capacities. From 1947 to 1957 he was General Counsel; he also served as claims attorney for the Tribe, prosecuting claims against the United States. Effective August 8, 1957, Appellee contracted with the Tribe to continue the working arrangement in this dual capacity for an additional 10 years. The statutes governing Federal supervision of tribal activities require that such contracts be approved by the Secretary in his capacity as overseer of tribal interests *fn3 and the Secretary approved this contract.

As General Counsel of the Tribe, Appellee received a fixed contract fee for handling current and what may be called routine legal work. The fees paid to a general counsel are disbursed by the United States Government. In general, and for present purposes, Appellee's relationship to the Tribe was not unlike that of a private practitioner representing a business enterprise having a variety of recurring legal problems the scope of which is reasonably well established and sufficiently predictable to relate to a fixed retainer fee. The contract provided an annual retainer fee of $25,000 for Appellee, which was later increased to $35,000, and also provided for assistants or associate general counsel who were paid fixed salaries which in 1963 totaled $95,000.

In their capacity as claims attorneys, Appellee and an associate received no fixed fees; the contract provided they would be paid 10% of such amounts as they "recovered, saved, or obtained," by preparing, investigating and prosecuting the Tribe's claims against the United States Government. The 1957 contract provisions relating to the General Counsel services explicitly provided, with one exception not here relevant, that the duties and functions of the associate General Counsel attorneys were not to include services relating to claims work and that such associates were not to participate in any way in the 10% contingent fees for claims work. This separation of compensation and duties becomes of particular significance in reviewing the Secretary's termination of Appellee's General Counsel services.

The contract provided for termination for good cause by action of the Tribal Council subject to the approval of the Commissioner of Indian Affairs, who is a subordinate of the Secretary of the Interior. The contract provided for performance of work by the attorneys under the direction of the Tribal Chairman, the Advisory Committee and the Council. *fn4 In addition to proscribing use of staff attorneys on claims cases, the contract prohibited any change in Appellee's compensation during the first five years of the contract.

Between 1957 and 1962 eleven amendments were made to the General Counsel contract now before us. Seven of these amendments added associate attorneys to the General Counsel staff at fixed salaries paid by the Tribe; these added lawyers were engaged at Appellee's behest because of an increasing work load, and six of the amendments *fn5 to the contract explicitly prohibited Appellee from using these additional attorneys on contingent fee claims matters unless he secured the approval of the Advisory Committee of the Tribal Council and the Commissioner of Indian Affairs.

The background of the dispute giving rise to the Secretary's cancellation of Appellee's contract is important to an understanding of the issues. In March 1963 Raymond Nakai was elected Chairman of the Navajo Tribal Council on a platform including a demand for the dismissal of Appellee as General Counsel. In his campaign Nakai claimed that Appellee had improperly obtained an increase in his annual fee from $25,000 to $35,000. After his election the new Chairman requested Appellee to refrain from taking part in Tribal political affairs. The new Chairman was unable to secure a majority vote in the Tribal Council to terminate Appellee's contract. However, the Tribal Council's Advisory Committee did adopt a resolution calling on the Secretary of Interior to "investigate, audit and terminate" Appellee's contract for various reasons including an expressed fear that Appellee was using the time and services of salaried staff attorneys on Appellee's claims work covered by the 10% contingent fee contract.

After the Advisory Committee had requested the Secretary to investigate Appellee's performance and conduct, the Solicitor of the Department of Interior sent a memorandum to the Secretary in October 1963 in which he suggested that if General Counsel staff attorneys had worked on Appellee's contingent fee claims cases without authority, the Tribe could offset the value of such professional time against any contingent fee later to become due under the claims agreement or, alternatively, could cancel Appellee's General Counsel contract. The Secretary then sent a copy of his Solicitor's memorandum to Appellee advising him that he would not "take any action pursuant to this memorandum until you have had a fair and full opportunity to controvert any or all of the points which are raised in it."

Subsequently the Secretary received two additional memoranda from his Solicitor; in one the Solicitor advised termination of Appellee's fixed fee contract as General Counsel unless it developed that the factual basis of the memorandum was incorrect. The Secretary then sent copies of both memoranda to Appellee, at the same time suspending and withdrawing approval of his General Counsel contract. The Secretary also stated his intention to terminate the General Counsel contract unless Appellee could "adduce convincing evidence that the conclusions justifying . . . termination are unwarranted." This communication from the Secretary concluded: "I have directed that you shall have a full and fair ...

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