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Cobell v. Norton

December 10, 2004


Appeal from the United States District Court for the District of Columbia (No. 96cv01285)

Before: Sentelle, Tatel, Circuit Judges and Williams, Senior Circuit Judge.

The opinion of the court was delivered by: Williams, Senior Circuit Judge

Argued September 15, 2004

Five named plaintiffs, members of Indian tribes and present or past beneficiaries of Individual Indian Money ("IIM") accounts, filed a class action in district court in 1996, alleging that the defendants--the Secretaries of the Interior and the Treasury, and the Assistant Secretary of the Interior for Indian Affairs--had "grossly mismanaged" those accounts. The bulk of the funds in the accounts are the proceeds of various transactions in land allotted to individual Indians under the General Allotment Act of 1887, known as the "Dawes Act," ch. 119, 24 Stat. 388 (codified as amended at 25 U.S.C. § 331 et seq. (§§ 331-333 repealed 2000)). The money-producing transactions in question evidently involved such matters as sales of timber and leases of rights to grazing, farming, or extraction of oil, gas, or other minerals. Complaint, ¶¶ 2, 3, 5, 7-11, 17. See also Cobell v. Babbitt, 91 F. Supp. 2d 1, 9-12 (D.D.C. 1999) (" Cobell V "). (The accounts also contain funds from a variety of other sources, see 25 C.F.R. § 115.702, but the allotment land transactions apparently predominate.)

Plaintiffs' suit draws significantly on Congress's findings of hopelessly inept management of the IIM accounts and its action to remedy the resulting chaos. A 1992 Congressional report, Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of the Indian Trust Fund, H.R. Rep. No. 102-499 (1992), catalogued Interior's "dismal history of inaction and incompetence," id. at 5, and concluded that the agency had "repeatedly failed to take resolute corrective action to reform its longstanding financial management problems," id. at 3. In 1994 Congress moved from findings to legislation, passing the Indian Trust Fund Management Reform Act, Pub. L. No. 103-412, 108 Stat. 4239 (codified as amended at 25 U.S.C. § 162a et seq. & § 4001 et seq.) (the "1994 Act"). The 1994 Act imposed a variety of duties on the Secretary of the Interior, most of them relating directly to trust funds such as the IIM accounts. See, e.g., 25 U.S.C. § 162a(d).

Even apart from the 1994 Act, the IIM funds have quite a different legal status from the allotment land itself. Section 5 of the Dawes Act nominally made the United States trustee of those lands, but did so solely in order to limit alienation by Indians and to assure immunity of the lands from state taxation. See United States v. Mitchell, 445 U.S. 535, 540-44 (1980) (" Mitchell I "). It gave the Indian beneficiaries the right to possess and manage the lands except insofar as alienation was involved. Id. at 542-46. See also United States v. Navajo Nation, 537 U.S. 488, 504 (2003) (describing Mitchell I and applying its principles to certain unallotted lands). Accordingly, the Supreme Court held in Mitchell I that the Dawes Act did not, alone, establish a fiduciary duty on the part of the United States to manage the allotted lands. 445 U.S. at 544, 546. In contrast, the IIM funds are by statute under the full control of the United States, to be invested for the benefit of individual Indians in public debt of the United States or deposited in banks. See 25 U.S.C. §§ 161a(b), 162a(a).

As the label Cobell V suggests, this litigation has generated many legal opinions, including three of this court. In Cobell v. Norton, 240 F.3d 1081 (D.C. Cir. 2001) (" Cobell VI "), we affirmed the district court's holding that the officials had breached their fiduciary duties and remanded for further proceedings. In Cobell v. Norton, 334 F.3d 1128 (D.C. Cir. 2003) (" Cobell VIII "), we vacated a contempt citation of successor defendants Interior Secretary Gale Norton and Assistant Secretary of Indian Affairs Neal McCaleb, and reversed the district court's appointment of a court monitor. And finally, in Cobell v. Norton, No. 03-5262, 2004 WL 2753197 (D.C. Cir. Dec. 3, 2004), we vacated an order of the district court directing Interior to disconnect its computers from the Internet pending a security determination, excepting only certain essential systems and ones that would not provide access to Indian trust data. Those opinions, as well as the many opinions of the district court, provide an array of background data.

Here we address a district court injunction issued September 25, 2003. Cobell v. Norton, 283 F. Supp. 2d 66 (D.D.C. 2003) (" Cobell X "). The decree, see id. at 287-95, imposes obligations on the defendants in two main categories. Duties related to "Historical Accounting" are intended to unravel the tangle resulting from past accounting failures, see id. at 70-211; those related to "Fixing the System" are intended to compel the issuance of a plan for future trust administration as a whole, see id. at 239-87. To assure fulfillment of both sets of duties, the court appointed a court monitor to oversee compliance and said it would retain jurisdiction until December 31, 2009. These two different sets of commands raise quite different issues.

"Historical Accounting," we find, is governed by Pub. L. No. 108-108, a provision adopted after the district court opinion issued, which radically changes the underlying substantive law and removes the legal basis for the historical accounting elements of the injunction. We therefore vacate those elements.

The core of "Fixing the System," by contrast, requires the Interior defendants to produce a "plan" that would fix the IIM trust management system, and requires the Interior defendants to explain how the Department will comply with various constraints or objectives identified by the court, such as sixteen specific common law trust duties and tribal law. Although we agree that Interior is subject to many of the common law trust duties identified by the court, we find that much of the "Fixing the System" injunction exceeds the court's remedial discretion because the court failed to ground it in the defendants' statutory trust duties and in specific findings that Interior breached those duties. Aside from the requirement that Interior complete its so-called "To-Be Plan," as promised in its Comprehensive Plan, we thus vacate the district court's injunction and remand for further proceedings consistent with this opinion.

Historical Accounting

In Cobell VI we ruled that the 1994 Act, 25 U.S.C. § 4011(a), conferred a right on IIM beneficiaries to "a complete historical accounting of trust fund assets," explaining that "'[a]ll funds' [as used in that provision] means all funds, irrespective of when they were deposited (or at least so long as they were deposited after the Act of June 24, 1938)." 240 F.3d at 1102. In Cobell X the district court ruled that Interior must account for all funds deposited since 1887 and issued rules permitting some accounting methods and prohibiting others--e.g., rejecting any use of statistical sampling. Cobell X, 283 F. Supp. 2d at 288-90.

Defendants raise a variety of objections to the district court's historical accounting order, but the objection based on Pub. L. No. 108-108 trumps the others. Adopted November 10, 2003, less than two months after the issuance of Cobell X, Pub. L. No. 108-108 appropriates funds and provides as follows:

For the operation of trust programs for Indians by direct expenditure, contracts, cooperative agreements, compacts, and grants, $189,641,000, to remain available until expended: Provided, That of the amounts available under this heading not to exceed $45,000,000 shall be available for records collection and indexing, imaging and coding, accounting for per capita and judgment accounts, accounting for tribal accounts, reviewing and distributing funds from special deposit accounts, and program management of the Office of Historical Trust Accounting, including litigation support: Provided further, That nothing in the American Indian Trust Management Reform Act of 1994, Public Law 103-412, or in any other statute, and no principle of common law, shall be construed or applied to require the Department of the Interior to commence or continue historical accounting activities with respect to the Individual Indian Money Trust until the earlier of the following shall have occurred: (a) Congress shall have amended the American Indian Trust Management Reform Act of 1994 to delineate the specific historical accounting obligations of the Department of the Interior with respect to the Individual Indian Money Trust; or (b) December 31, 2004.

Pub. L. No. 108-108. A later sentence of the same section provides that the statute of limitations will not begin to run on any claim for losses or mismanagement of trust funds "until the affected tribe or individual Indian has been furnished with an accounting of such funds from which the beneficiary can determine whether there has been a loss." Id.

Thus Pub. L. No. 108-108 appears to give Interior temporary relief from any common law or statutory duty to engage in historical accounting for the IIM accounts. The provision's legislative history makes clear that Congress passed it in response to Cobell X, to clarify Congress's determination that Interior should not be obliged to perform the kind of historical accounting the district court required. The conference committee explained that "[i]nitial estimates indicate that the accounting ordered by the Court would cost between $6 billion and $12 billion...." H.R. Conf. Rep. 108-330, at 117. The committee "reject[ed] the notion that in passing the American Indian Trust Management Reform Act of 1994 Congress had any intention of ordering an accounting on the scale of that which has now been ordered by the Court. Such an expansive and expensive undertaking would certainly have been judged to be a poor use of Federal and trust resources." Id. at 118. "Indian country would be better served by a settlement of this litigation than the expenditure of billions of dollars on an accounting." Id. at 117. Congress thus gave itself until the end of 2004 to come up with a legislative solution. See id. at 118.

In addition, individual legislators said in effect that the disparity between the costs of the judicially ordered accounting, and the value of the funds to be accounted for, rendered the ordered accounting, as one senator put it, "nuts": "If this is a $13 billion fund, or somewhere in the neighborhood of $13 billion, would the Native Americans want us to begin a process in which we spend up to $9 billion to hire accountants and financial folks and others to sift through these accounts? I think that is just nuts. That doesn't make any sense at all to anybody." 149 Cong. Rec. at S13,786 (2003) (statement of Sen. Dorgan). See also id. at S13,785 (statement of Sen. Burns) ("If there is one thing with which everybody involved in this issue seems to agree, it is that we should not spend that kind of money on an incredibly cumbersome accounting that will do almost nothing to benefit the Indian people.").

Plaintiffs make a vague claim that we should simply disregard Pub. L. No. 108-108, allowing the district court to address its effect in the first instance. But apart from an allusion to the possibility of considering it in conjunction with postdecree developments, they offer no reason overcoming the usual principle that a court is to apply the law in effect at the time the court rules. See Landgraf v. USI Film Products, 511 U.S. 244, 264 (1994). As the provision deprives the decree's "historical accounting" mandates of any legal basis, it is hard to see how post-decree developments could affect the matter. As a fallback position, plaintiffs argue that the law violates separation of powers principles and the takings and due process provisions of the Fifth Amendment. We reject both claims.

First, plaintiffs assert that Pub. L. No. 108-108 amounts to a "legislative stay" of a final judicial judgment. They cite language in Hayburn's Case, 2 U.S. (2 Dall.) 409 (1792), to the effect that Article III judicial decisions cannot "be liable to a revision, or even suspension, by the legislature." Id. at 413 (emphasis added) (quoting decision of the circuit court for the district of North Carolina, consisting of Iredell, Justice, and Sitgreaves, district judge). In Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995), the Court explained that Hayburn's Case "stands for the principle that Congress cannot vest review of the decisions of Article III courts in officials of the Executive Branch," id. at 218, and held that Congress could not require a federal court to reopen a completed case for money damages, id. at 240. But the Court also said that an appellate court must apply any law enacted after the judgment under review and clearly intended to have retroactive effect. See id. at 226.

Even more critical is the distinction between statutes that in effect reverse final judgments in suits for money damages, as in Plaut, and ones that alter the substantive obligations of parties subject to ongoing duties under an injunction, as in Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S. 421 (1855). Indeed, Plaut explicitly distinguished the latter. See 514 U.S. at 232. In Wheeling Bridge a court had entered a decree requiring removal of a bridge pursuant to a statute rendering it unlawful. Congress then amended the law to legalize the bridge. The Court held that because the act of Congress modified the law "so that the bridge is no longer an unlawful obstruction, it is quite plain the decree of the court cannot be enforced." 59 U.S. at 432. For purposes of the rule limiting congressional reversal of final judgments, an injunction is not "final." As we said in National Coalition To Save Our Mall v. Norton, 269 F.3d 1092 (D.C. Cir. 2001), applying Wheeling Bridge, "[A]lthough an injunction may be a final judgment for purposes of appeal, it is not the last word of the judicial department because any provision of prospective relief is subject to the continuing supervisory jurisdiction of the court, and therefore may be altered according to subsequent changes in the law." Id. at 1096-97 (quoting Miller v. French, 530 U.S. 327, 347 (2000)) (internal quotation marks omitted).

At oral argument plaintiffs seemed more to stress the idea that Pub. L. No. 108-108, rather than changing the substantive law, directed the courts how to interpret or apply pre-existing law. In Save Our Mall we assumed that under United States v. Klein, 80 U.S. (13 Wall.) 128 (1871), such an interpretive direction would invade the powers of the judicial branch. 269 F.3d at 1097. Here as there, however, we do not read the statutory language as such a directive. Some of the phrasing--especially the statement that nothing in the 1994 Act or any statute or the common law " shall be construed or applied to require the Department of the Interior to commence or continue historical accounting activities" (emphasis added)might be said to support such a reading. But "as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the act." NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 30 (1937).

We believe Pub. L. No. 108-108 is most plausibly read simply to say that the Department of Interior shall not, under any statute or common law principle, be required to engage in historical accounting in the specified period, i.e., all statutes and common law rules requiring any such accounting are temporarily and partially repealed or modified. Compare Robertson v. Seattle Audubon Soc., 503 U.S. 429 (1992) (rejecting claim that statute should be construed as mandate of judicial findings under unchanged substantive law rather than as a change in the law). Indeed, the Supreme Court has interpreted very similar wording--that "nothing... shall be construed" to allow--as simply repealing prior legislation to the contrary. See Carroll v. United States, 354 U.S. 394, 408-415 (1957); see also Total TV v. Palmer Communications, Inc., 69 F.3d 298, 302-03 (9th Cir. 1995).

Finding neither an effort to mandate a particular interpretation of the substantive law nor an impermissible legislative modification of a final judgment, we reject plaintiffs' separation of powers theories.

Second, plaintiffs say that Pub. L. No. 108-108 is an unconstitutional deprivation of property, in violation of the due process and takings clauses of the Fifth Amendment. The claim is obscure, as plaintiffs do not explicitly identify the property right that they believe enforcement of Pub. L. No. 108-108 would take. They do, however, mention the right to "interest earned on trust accounts," if only in a parenthetical to a case citation. Plaintiffs' Brief at 53.

But we see no reason to think Pub. L. No. 108-108 will affect plaintiffs' entitlement to interest. As trust income beneficiaries are typically entitled to income from trust assets for the entire period of their entitlement to income, and for imputed yields for any period of delay in paying over income or principal, see G. G. BOGERT & G.T. BOGERT, LAW OF TRUSTS AND TRUSTEES ยง 814, pp. 321-25 (rev. 2d ed. 1981), we do not see--and plaintiffs make no effort to ...

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