Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 1 of 32 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

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1 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 1 of 32 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO NAVAJO HEALTH FOUNDATION - ) SAGE MEMORIAL HOSPITAL, INC. ) ) PLAINTIFF, ) ) v. ) ) SYLVIA MATHEWS BURWELL, SECRETARY ) NO. 1:14-cv-958-JB-GBW OF THE UNITED STATES DEPARTMENT OF ) HEALTH AND HUMAN SERVICES; ) YVETTE ROUBIDEAUX, ACTING DIRECTOR ) OF INDIAN HEALTH SERVICE; ) JOHN HUBBARD, JR., AREA DIRECTOR, ) NAVAJO AREA INDIAN HEALTH SERVICE; ) and FRANK DAYISH, CONTRACTING ) OFFICER, NAVAJO AREA INDIAN HEALTH ) SERVICE, ) ) DEFENDANTS. ) ) MOTION FOR IMMEDIATE INJUNCTIVE RELIEF WITH SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES Dated: December 22, 2014 Paul E. Frye FRYE LAW FIRM, P.C Academy Rd. NE, Suite 310 Albuquerque, NM Tel Fax Attorney for Plaintiff

2 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 2 of 32 TABLE OF CONTENTS I. FACTS...1 A. Sage s Problems in B. Sage s Turnaround...2 C. Sage s ISDEAA Contracting with IHS; IHS 2014 Performance Review....3 D. IHS Declination...6 E. IHS s Other Actions Related to the Unlawful Declination II. APPLICABLE LAW...9 III. ISDEAA DECLINATION PROCEDURES IV. RELIEF ACCORDED BY THE ISDEAA V. DEFENDANTS VIOLATED THE ISDEAA AND ITS IMPLEMENTING REGULATIONS VI. SAGE IS ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF A. The ISDEAA Permits Immediate Injunctive and Mandatory Relief B. If a Bond or Other Security Is Required, It Should Be Nominal One VII. CONCLUSION ii

3 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 3 of 32 I. CASES TABLE OF AUTHORITIES Atchison, Topeka & Santa Fe Ry. Co. v. Lennen, 640 F.2d 255 (10th Cir. 1981) Bass v. Richardson, 338 F.Supp. 478 (S.D.N.Y. 1971) California Hosp. Ass n v. Maxwell-Jolly, 776 F.Supp. 2d 1129 (E.D. Cal. 2011) Cherokee Nation v. Leavitt, 543 U.S. 631 (2005)...4 Cheyenne River Sioux Tribe v. Kempthorne, 496 F.Supp. 2d 1059 (D.S.D. 2007). passim Crownpoint Inst. of Tech. v. Norton, Civ. No JP/DJS (D.N.M. Sept. 16, 2005)....16, 20, 21, 23 Cumberland Heights Found. v. Magellan Behavioral Health, Inc., No. 3:10-cv-00712, 2010 WL (M.D. Tenn. Sept. 7, 2010) Earth Island Inst. v. Carlton, 626 F.3d 462 (9th Cir. 2010) Equifax Services, Inc. v. Hitz, 905 F.2d 1355 (10th Cir. 1990) Guidance Endodontics, LLC v. Dentsply Int l, Inc., 633 F.Supp. 2d 1257 (D.N.M. 2008) Hinsley v. Standing Rock Child Protective Services, 516 F.3d 668 (8th Cir. 2008)...9 Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195 (1985)...1 Otero Savings and Loan Ass n v. Federal Reserve Bank of Kansas City, Mo., 665 F.2d 275 (10th Cir. 1981) Plant Oil Powered Diesel Fuel Systems, Inc. v. ExxonMobil Corp., 778 F.Supp. 2d 1180 (D.N.M. 2011) iii

4 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 4 of 32 Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d 1234 (10th Cir. 2001) Pyramid Lake Paiute Tribe v. Burwell, No. 1:13-cv (CRC), F.Supp. 3d, 2014 WL (D.D.C. Oct. 7, 2004) , 23 Ramah Navajo School Bd., Inc. v. Babbitt, 87 F.3d 1338 (D.C. Cir. 1996).. 15, 18-19, 20 Ramah Navajo School Bd. v. Sebelius, No. CV MV (D.N.M. May 9, 2013), cross appeals filed, Nos and (10th Cir. Apr. 4 and 10, 2014) Red Lake Band of Chippewa Indians v. United States Dep t of Interior, 624 F.Supp. 2d 1 (D.D.C. 2009) RoDa Drilling Co. v. Siegel, 552 F.3d 1203 (10th Cir. 2009) Salazar v. Ramah Navajo Chapter, 132 S.Ct (2012) Shadid v. Fleming, 160 F.2d 752 (10th Cir. 1947) Shoshone-Bannock of Ft. Hall Res. v. Shalala, 988 F.Supp (D. Or. 1997)...12, 15, 19 Shoshone-Bannock Tribes of Ft. Hall res. v. Shalala, 999 F.Supp (D. Or. 1998) Southern Ute Indian Tribe v.leavitt, 497 F. Supp. 2d 1245 (D.N.M. 2007), app. dism d, 564 F.3d 1198 (10th Cir. 2009), op. after remand, Southern Ute Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133 S.Ct. 24 (2012)... passim Star Fuel Marts, LLC v. Sam s East, Inc., 362 F.3d 639 (10th Cir. 2004) , 23 Susanville Indian Rancheria v. Leavitt, No. 2:07-cv-259-GEB-DAD, 2008 WL (E.D. Cal. Jan. 3, 2008) , 23 Temple Univ. v. White, 941 F.2d 201 (3d Cir. 1991), cert. denied, 502 U.S (1992)...21, 24 iv

5 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 5 of 32 Tri-State Gen. and Transm. Ass n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351 (10th Cir. 1986) Winnebago Tribe of Neb. v. Stovall, 341 F.3d 1202 (10th Cir. 2003) , 24 II. STATUTES 25 U.S.C U.S.C. 450a et seq U.S.C. 450a(a) U.S.C. 450a(b) U.S.C. 450(a)(1) U.S.C. 450f(a)...7, 14, U.S.C. 450f(b)...15, U.S.C. 450f(e)...7, U.S.C. 450j , 18, U.S.C. 450k U.S.C. 450m...7, 8, U.S.C. 450m , 12, 15, U.S.C. 1602(1) U.S.C. 1602(7) III. RULES AND REGULATIONS Fed. R. Civ. P C.F.R. part , 10 v

6 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 6 of C.F.R C.F.R (a)(5) C.F.R (b) C.F.R C.F.R C.F.R C.F.R C.F.R , 15, C.F.R , 15, C.F.R , 13, C.F.R , 12, 13, C.F.R C.F.R C.F.R IV. OTHER AUTHORITY President Nixon s Special Message to the Congress on Indian Affairs 1970 Pub. Papers 564 (1970) S. Rep. No (1987)...10, 11, 15 vi

7 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 7 of 32 Plaintiff Navajo Health Foundation - Sage Memorial Hospital, Inc. ( Sage ) hereby moves for immediate injunctive relief to reverse Defendants declination finding (the Declination ) of September 26, 2014 under the Indian Self-Determination and Education Assistance Act ( ISDEAA or Act ), 25 U.S.C. 450, 450a et seq., and to compel Defendant Burwell to award and fund Sage s self-determination contract and successor annual funding agreements ( AFAs ) for FY 2014 and Such immediate injunctive relief is expressly provided for in the ISDEAA, 25 U.S.C. 450m-1(a). Defendants Declination of the self-determination contract violated the ISDEAA and its implementing regulations and Sage qualifies for such relief under the ISDEAA, as shown below. I. FACTS A. Sage s Problems in 2007 The governing body of the Navajo Nation, the Navajo Nation Council, see Kerr- McGee Corp. v. Navajo Tribe, 471 U.S. 195, 201 (1985), formally recognized Sage as a Navajo tribal organization under the ISDEAA in two resolutions. Ex. A 3. Sage employs approximately 200 people on a campus located on private fee land within the Navajo Nation at Ganado, Arizona. Ex. B 3. Since 2004, Sage has contracted with the IHS to perform healthcare services to a largely Navajo patient population. The three-year 2007 ISDEAA contract is the foundation of the present federal/sage relationship. Ex. C 6. Under previous management and a mostly different Board of Directors ( Board ), Sage was virtually insolvent and on the verge of being shut down by various governmental

8 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 8 of 32 agencies in 2007 and Ex. C 3, 7-8. Sage s physical plant was dilapidated and neglected, Sage was in violation of Administrative Orders issued in 1999 and 2006 by the Environmental Protection Agency ( EPA ), and Sage was being threatened with denial of its hospital accreditation by the Joint Commission on Accreditation of Health Care Organizations ( Joint Commission ), with involuntary termination of its certification by the Centers for Medicare and Medicaid Services ( CMS ), and with losing its Rural General Hospital Healthcare license by the Arizona Department of Health Services ( ADHS ). Id. Sage was also unable to retain top-quality health care professionals and managers. See id. 3, 9, Thus, prior to January 2007, Sage was forced to terminate general surgery (including orthopedics and ophthmalology) and obstetrical care for lack of adequate facilities and/or qualified staff. Id. 8. And Sage was in litigation with IHS at the time. Id. B. Sage s Turnaround To address these challenges, Sage engaged a third-party management company to turn around Sage, not only so that Sage could stay in business but also to permit Sage to finance the development of new facilities and expand services. Ex. A 5. One of the principals of the management company was Ahmad Razaghi. Id. After the Board rejected a closure plan by a former CEO and that person resigned, it requested Razaghi to act as temporary CEO in October 2007 and he agreed to do so. Id. The turnaround effort succeeded. Ex. C 10. From 2007 to 2009 Sage negotiated with CMS and ADHS to keep Sage open without losing additional services. Id. 9. Under 2

9 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 9 of 32 Razaghi s leadership, Sage settled its lawsuit against IHS. Id. In September 2009, for the first time in a decade, Sage received its unconditional ADHS license and CMS certification. Id. 10. On May 4, 2009, the Joint Commission awarded Sage its Gold Seal of Approval signifying the highest quality of patient care. Id. In March 2010 the United States Surgeon General, on behalf of HHS and with Defendant Roubideaux looking on, awarded Razaghi personally from out of 679 tribally or federally managed hospitals the Chief Executive Officer Managerial Excellence Award for leadership, successes and improvements which equate to improved and enhanced patient care. Id. 10 and Att. 1. In June 2012 Sage received the American Hospital Association Institute for Diversity s Best in Class Hospital Award for leadership to address health disparities and improve diversity in governance. Ex. A 7. This Best in Class award selected Sage and only one other hospital from 900 hospitals nationwide. Id. On January 10, 2012, the EPA determined that Sage had fulfilled all requirements of its Administrative Orders. Ex. C 11. On September 12, 2013, ADHS licensed Sage as a Rural General Hospital through September 30, Id. The Joint Commission granted Critical Access Hospital Accreditation to Sage after its survey was completed in March 2014, stating [a]s a result of the accreditation activity conducted on the above date(s), there were no Requirements for Improvement identified. Id. In each year from 2007 through 2013, Sage received unqualified, clean audits from its independent auditors. Id. All of this was accomplished notwithstanding IHS substantial underfunding of Sage s contracts in violation 3

10 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 10 of 32 of ISDEAA s requirement that IHS compensate Sage for its administrative costs ( contract support costs ) associated with Sage s ISDEAA contracts. See generally Cherokee Nation 1 v. Leavitt, 543 U.S. 631 (2005). Sage completed its turnaround without eliminating any services, and, in fact, has expanded its services during the turnaround. Ex. C 12. The turnaround required terminating underperforming employees or allowing them to resign, including Navajo employees who were politically active. Id. 14. Some of them banded together to publicly discredit the Sage Board and management (Razaghi personally). See id. Att. 2 (sample news article and cartoon based on their allegations). Their allegations were printed and reprinted in the local press, and ultimately resulted in a non-stop, and often overlapping, series of investigations by the Joint Commission (on its own behalf for accreditation purposes and as agent for CMS on fiscal matters), ADHS, the Arizona Health Care Cost Containment System Office of the Inspector General, and the Health, Education and Human Services Committee of the Navajo Nation Council. Id. 15. None of these investigations ultimately resulted in any findings adverse to Sage. Id.; Ex. B 4. C. Sage s ISDEAA Contracting with IHS; IHS 2014 Performance Review Sage and IHS entered into the original three-year ISDEAA contract in 2007, and another three-year contract (the Contract ) in 2010, ending September 30, Ex. C 1 On August 25, 2014, Sage filed a claim for underpayments of contract support costs in the amount of $62,569,681. IHS responded on October 23, 2014 stating that it needed until October 21, 2015 to evaluate the claim. See First Amended Complaint (Nov. 24, 2014)

11 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 11 of By letter dated August 22, 2013 Sage proposed a further renewal of the Contract for another three-year term through September 30, 2016 and a successor Annual Funding Agreement ( AFA ) for fiscal year 2014 with no material changes in either the budget or the PFSAs from the prior year. Id. 16. However, the disgruntled ex-employees had started their campaign to discredit Sage by then, and IHS did not either approve or disapprove Sage s proposed three-year Contract renewal, opting instead to provide Sage funding on a monthly basis while it investigated the various allegations against Sage. Id. IHS began its own performance monitoring review and engaged the accounting firm of Moss Adams to review Sage s financial records. Ex. D 4. Sage cooperated fully with IHS and Moss Adams, ultimately producing approximately 23,000 pages of documents and hosting several on-site visits by both IHS and Moss Adams. Id. 5. Sage offered to make its officials available and to provide additional documents if IHS or Moss Adams required additional information or clarification. Id. At the outset of the investigation, IHS promised Sage that it would provide draft reports to Sage for its prior review and comments, so that any errors could be corrected and any adverse findings or conclusions could be discussed. Id Sage will shortly be moving to file a Lodging consisting of the ISDEAA contract and FY 2013 AFA; Sage s August 22, 2014 proposed FY ISDEAA contract and FY 2014 AFA, IHS September 26, 2014 declination letter with attached IHS performance monitoring report and Moss Adams report; Sage s proposed FY ISDEAA contract and proposed 2015 AFA, and IHS letter dated December 12, 2014 declining such proposal. 5

12 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 12 of 32 D. IHS Declination IHS and Moss Adams began work in January 2014 and Sage satisfied all of their requests for documents by July Id. 6. Sage continued to request the draft reports, as IHS promised, but IHS did not provide any. Id. 7. With the end of FY 2014 looming and without an IHS decision on Sage s three-year contract proposal, Sage submitted to IHS by letter dated September 19, 2014 a proposed three-year contract renewal and successor AFA for FY Ex. B 6. Unbeknownst to Sage, Moss Adams had completed its report on July 25, 2014 and IHS s review was finished on September 15, See Ex. B 7 and Att. 1 thereto. IHS provided neither of them to Sage until it hand-delivered the Declination to Sage on September 29, 2014, one day before the end of the fiscal year. Id.; Ex. D 4. Although permeated with factual errors and unwarranted speculation and innuendo, neither the Moss Adams report nor the IHS review identifies any actual instance of misuse of federal funds, improper patient care, or violation of Sage s ISDEAA contract. By letter dated and hand-delivered to IHS on October 2, 2014, Sage pointed out that the Declination was issued in plain violation of the ISDEAA and its implementing regulations, and Sage demanded that the Declination be rescinded. Ex. A Att. 1. The Declination erroneously relies on declination criteria that IHS is forbidden from using in dealing with a contract renewal and proposed successor AFA that do not differ substantially from the prior year s. See 25 C.F.R , In addition, even if the declination criteria were applicable, the Declination improperly ignores IHS burden to justify any 6

13 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 13 of 32 declination on clear and convincing evidence, see 25 U.S.C. 450f(e)(1), 450f(a)(2), instead purporting to justify the Declination on IHS asserted lack of information or uncertainties, see Complaint 29 (providing examples of IHS attempted burden-shifting). Because Defendants violated the ISDEAA and regulations, this Court need not address the merits of actions taken by them, see Cheyenne River Sioux Tribe v. Kempthorne, 496 F. Supp. 2d 1059, 1068 (D.S.D. 2007). Regardless, Sage s record of achievements and recognition by various government agencies (including HHS) and its successful accomplishment of all PFSAs through the date of Declination show IHS statements that the service to be rendered to the Indian beneficiaries of the particular program or function to be contracted will not be satisfactory and the proposed project or function to be contracted for cannot be properly completed or maintained by the proposed contract are baseless conclusory statements. See Ex. B 8, C 18. IHS funds provide approximately 53% of Sage s revenues. Ex. D 10. Notwithstanding the speculation and innuendo in the Declination, at no time from 2007 through the Declination did IHS: 1. give notice to Sage asserting that any costs should be disallowed as provided in the Act, 25 U.S.C. 450j-1(f); 2. assert gross negligence or misconduct in the handling or use of funds which might permit IHS to rescind the ISDEAA contract and reassume control of the services being performed by Sage, as provided in 25 U.S.C. 450m; 7

14 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 14 of assert any endangerment of the health or safety of any person by Sage which would permit IHS to rescind and reassume control under 25 U.S.C. 450m; 4. claim that Sage has failed to comply with the minimum standards for the management systems used by Sage under 25 C.F.R. part 900 subpart F, including the rigorous financial management and accounting standards prescribed in 25 C.F.R or the procurement standards prescribed in 25 C.F.R ; 5. question any of Sage s budgets or audited financial reports, cf. 25 C.F.R ; 6. suggest that Sage needed IHS technical assistance or offer any, cf. 25 C.F.R , ; 7. provide drafts of the reports purportedly justifying the Declination to Sage so that Sage could explain any ambiguities or correct any errors, as IHS had promised to do; or even 8. discuss any of its concerns with Sage prior to issuing its Declination, see Southern Ute Indian Tribe v. Leavitt, 564 F.3d 1198, 1204 (10th Cir. 2009), op. after remand, Southern Ute Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133 S. Ct. 24 (2012). Ex. B 9, C 19. E. IHS s Other Actions Related to the Unlawful Declination Having waited until the next-to-last day of the contract year to spring the Declination on Sage, IHS actions taken concurrently with and after the Declination have exacerbated the harm to Sage. With no notice to Sage and at IHS direction, the Gallup Regional Supply 8

15 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 15 of 32 Service Center ( GRSSC ), a federal facility whose pharmaceutical supplies and preferred pricing were made available to Sage under section 14 of the 2013 AFA, Ex. B 14, immediately cut off pharmaceutical supplies to Sage, endangering patient safety and causing an immediate and significant cost increase, id. 10. IHS one-day notice left Sage without malpractice coverage because the Declination eliminated Federal Tort Claims Act ( FTCA ) protection for its doctors, again jeopardizing patient welfare and causing concern to Sage s professional staff. Ex. B 11; see, e.g., Hinsley v. Standing Rock Child Protective Services, 516 F.3d 668, 672 (8th Cir. 2008) (regarding FTCA coverage). IHS sent its staff to Sage s patient communities (called Navajo Chapters ) to deal with patients allegedly formerly served by Sage, to urge Sage s patients to go elsewhere (including to IHS own Gallup and Chinle facilities and to a hospital at Fort Defiance, Arizona), to falsely state that Sage is closing, and even to instruct school officials not to release students whose parents had authorized their children to obtain free vaccinations at Sage, as Sage has done for several years. Id. 12. IHS Declination expressly severed IHS relationship with Sage, signaling that Sage s proposed three-year contract for FY and the proposed 2015 successor AFA would be declined. IHS did so on December 12, 2014, using the same rationale as it did in the Declination. Ex. B 6 and Att. 1 thereto. II. APPLICABLE LAW This case arises under the ISDEAA, under which Sage has contracted with the United States to provide health care to a remote region of the Navajo Reservation. The ISDEAA 9

16 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 16 of 32 followed President Nixon s Special Message to the Congress on Indian Affairs, 1970 Pub. Papers 564 (1970); see S. Rep. No at 2-3 (1987) ( Senate Report ). In the ISDEAA, Congress found that the prolonged Federal domination of Indian service programs has served to retard rather than enhance the progress of Indian people and their communities, 25 U.S.C. 450(a)(1), and recognize[d] the obligation of the United States to respond to the strong expression of the Indian people for self-determination by assuring maximum Indian participation in the direction of educational as well as other Federal services to Indian communities, 25 U.S.C. 450a(a). The Indian Health Service ( IHS ) of the Department of Health and Human Services ( HHS ) has historically provided Federal services to Native Americans. Under 25 U.S.C. 450k, HHS, together with the Department of the Interior, promulgated regulations to implement the ISDEAA, at 25 C.F.R. part 900. Those regulations, binding on IHS, repeat the congressional findings and declarations of policy, 25 C.F.R , see Southern Ute Indian Tribe v. Leavitt, 564 F.3d 1198, 1209 n. 4 (10th Cir. 2009), op. after remand, Southern Ute Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133 S.Ct. 24 (2012), and acknowledge that each provision of the Act and each provision of contracts entered into thereunder shall be liberally construed for the benefit of the tribes or tribal organizations to transfer the funding... from the Federal government to the contractor, 25 C.F.R (a)(5); see generally Salazar v. Ramah Navajo Chapter, 132 S.Ct. 2181, 2193 (2012) (ISDEAA is construed in favor of tribes ); Southern Ute Indian 10

17 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 17 of 32 Tribe v. Sebelius, 657 F.3d at 1078 (applying canon of construction favoring Indians in ISDEAA context). It is IHS duty to undertake its best efforts to remove any obstacles which might hinder Indian tribes and tribal organizations including obstacles that hinder tribal autonomy and flexibility in the administration of such programs. 25 C.F.R (b) (quoted in Southern Ute, 564 F.3d at 1209 n.4). The ISDEAA puts federal bureaucrats in the awkward position of being responsible for contracting themselves out of jobs and resources. See Senate Report at 6. So, notwithstanding the congressional findings and statements of policy, federal agencies erected numerous roadblocks frustrating the ability of tribes to obtain contracts and funding, including excessive paperwork, undue delays, inappropriate application of federal procurement laws, and inadequate funding of contract support costs. Id. at 7-9. In response, Congress amended the ISDEAA to give self-determination contractors viable remedies for compelling BIA and IHS compliance with the Self-Determination Act. The strong remedies provided in these amendments are required because of those agencies consistent failures over the past decade to administer self-determination contracts in conformity with the law. Id. at 37. Then-existing law had made it virtually impossible for self-determination contractors to enforce their rights under the Act. Id. Under the 1988 amendments, and [u]nlike the usual civil case where the plaintiff bears the burden of proof by a preponderance of the evidence, the ISDEAA places the burden of proof in any hearing or on appeal on the Secretary to establish by clearly demonstrating the validity of the grounds for 11

18 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 18 of 32 declining the contract proposal (or portion thereof). Shoshone-Bannock of Ft. Hall Res. v. Shalala, 988 F.Supp. 1306, 1318 (D. Or. 1997) (quoting 25 U.S.C. 450f(e)). Those amendments confer original jurisdiction on the federal district courts and permit the district courts to order appropriate relief including money damages, injunctive relief against any action by [a federal agency] contrary to this subchapter or regulations promulgated thereunder, or mandamus to compel [the agency] to perform a duty provided under this subchapter or regulations promulgated hereunder (including immediate injunctive relief to reverse a declination finding under section 450f(a)(2) of this title or to compel the Secretary to award and fund an approved self-determination contract). 25 U.S.C. 450m- 1(a) (emphasis added); Southern Ute, 657 F.3d at Sage seeks such relief here, as Defendants Declination of Sage s proposed contract and failure to provide funding violate the Act and its implementing regulations, and threaten Sage s viability as a tribal organization providing top-quality health care to its Navajo patient communities. III. ISDEAA DECLINATION PROCEDURES IHS has no authority to use the declination criteria to refuse to renew a term contract, such as Sage s. 25 C.F.R ( Are all proposals to renew term contracts subject to the declination criteria? [HHS] will not review the renewal of a term contract for declination issues where no material and substantial change to the scope or funding of a program, functions, services, or activities has been proposed by the... tribal organization. ) 12

19 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 19 of 32 (italics added). Similarly, IHS may not decline a proposed successor AFA if it is substantially the same as the prior AFA. 25 C.F.R ( Can the Secretary decline an Indian tribe or tribal organization s proposed successor annual funding agreement? No. If it is substantially the same as the prior annual funding agreement... and the contract is with DHHS or the BIA, the Secretary shall approve and add to the contract the full amount of funds to which the contractor is entitled, and may not decline any portion of a successor annual funding agreement.... ); Cheyenne River Sioux, 496 F.Supp. 2d at In cases where IHS may examine an ISDEAA contract proposal under the Act s declination criteria (unlike this case, which concerns renewal of a substantially similar term contract and successor AFA, see 25 C.F.R ), the Act sets forth only five permissible grounds for declination. Under the ISDEAA, the agency shall, within ninety days after receipt of the proposal, approve the proposal and award the contract unless the Secretary provides written notification to the applicant that contains a specific finding that clearly demonstrates that, or that is supported by a controlling legal authority that -- (A) the service to be rendered to the Indian beneficiaries of the particular program or function to be contracted will not be satisfactory; (B) adequate protection of trust resources is not assured; (C) the proposed project or function to be contracted for cannot be properly completed or maintained by the proposed contract; (D) the amount of funds proposed under the contract is in excess of the applicable funding level for the contract, as determined under section 450j-1(a) of this title; or 13

20 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 20 of 32 (E) the program, function, service, or activity (or portion thereof) that is the subject of the proposal is beyond the scope of programs, functions, services, or activities covered under paragraph (1) because the proposal includes activities that cannot lawfully be carried out by the contractor. 25 U.S.C. 450f(a)(2); Southern Ute Indian Tribe v. Leavitt, 497 F.Supp. 2d 1245, 1253 (D.N.M. 2007), app. dism d, 564 F.3d 1198 (10th Cir. 2009), op. after remand, Southern Ute Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133 S. Ct. 24 (2012). These are the only permissible grounds for contract declination. Id.; 25 C.F.R , ( Can a contract proposal... be declined for any reason other than the five reasons specified in ? No.... ); see, e.g., Southern Ute, 657 F.3d at 1079 ( the Secretary may not decline a contract proposal for exceeding the applicable funding level for contract support costs) (internal quotation marks omitted). If an agency violates the Act or the regulations in declining to enter into a contract or contract renewal, the court need not address the merits of the agency s actions, and the proposed contract must be executed. Cheyenne River Sioux, 496 F.Supp. 2d at IHS has the heavy burden to justify a refusal to enter into a contract by providing clear and convincing evidence of the validity of any declination finding. 25 U.S.C. 450f(a)(2); Southern Ute, 497 F.Supp. 2d at Moreover, IHS may not decline to enter into a contract with a tribal organization based on an objection that can be overcome through the contract itself. 25 C.F.R In addition, if only a portion of a new contract proposal 14

21 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 21 of 32 is properly declined, IHS still must approve any severable portion of a proposal that does not support a declination finding. 25 C.F.R ; Southern Ute, 657 F.3d at 1080 n.7. Finally, even where a contract proposal may be declined or is properly declined in whole or in part for one of the five permissible reasons, IHS shall... provide assistance to the tribal organization to overcome the stated objections. 25 U.S.C. 450f(b)(2); C.F.R (pre-declination decision requirement for technical assistance), (post-declination decision requirement for technical assistance); Cheyenne River Sioux Tribe, 496 F.Supp. 2d at In general, IHS is supposed to work to eliminate obstacles to contracting, not erect them. Southern Ute, 564 F.3d at 1208 & n.3. IV. RELIEF ACCORDED BY THE ISDEAA The Act provides a comprehensive range of remedies for a contractor. 25 U.S.C. 450m-1(a); see generally Southern Ute, 657 F.3d at In addition to money damages, these remedies include the otherwise extraordinary remedies of mandamus to compel an officer or employee of the United States... to perform a duty provided under this subchapter or regulations promulgated hereunder (including immediate injunctive relief to reverse a declination finding under section 450f(a)(2) of this title or to compel the Secretary to award and fund an approved self-determination contract). 25 U.S.C. 450m-1(a). The Senate Report leaves no doubt that Congress intended exactly what it wrote. Ramah Navajo School Bd. v. Babbitt, 87 F.3d 1338, 1344 (D.C. Cir. 1996) (quoting Senate Report at 37); Shoshone-Bannock, 988 F.Supp. at (quoting same). 15

22 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 22 of 32 Thus, a contractor who prevails under the ISDEAA may be entitled to a writ of mandamus requiring the agency to enter into the rejected contracts, Crownpoint Inst. of Tech. v. Norton ( CIT ), Civ. No JP/DJS, Dkt. No. 86 at 26 (D.N.M. Sept. 16, 2005); Cheyenne River Sioux, 496 F.Supp. 2d at ; immediate payment of the full amount of a contract renewal improperly declined, id. at 1068; contract support costs, CIT, supra, Dkt. 86 at 25; expectation damages, specific performance and injunctive relief, Red Lake Band of Chippewa Indians v. United States Dep t of Interior, 624 F.Supp. 2d 1, 14-19, (D.D.C. 2009); expectation damages in certain circumstances, id. at 14-19; consequential (including intangible) damages, Ramah Navajo School Bd. v. Sebelius, No. CV MV, Dkt. No. 143 at 72 (D.N.M. May 9, 2013), cross appeals filed, Nos and (10th Cir. Apr. 4 and 10, 2014); costs incurred by the contractor in performing the services before a court-mandated execution of a contract, Southern Ute, 657 F.3d at ; injunctive relief, prejudgment interest, and attorney fees, see Shoshone-Bannock Tribes of Ft. Hall Res. v. Shalala, 999 F.Supp. 1395, 1398 (D. Or. 1998). The specific provision in the ISDEAA authorizing injunctive (including immediate injunctive) relief and mandamus relieves [the tribal contractor] of proving the usual equitable elements including irreparable injury and absence of an adequate remedy at law. CIT, supra Dkt. 86 at 26 (citing Atchison, Topeka & Santa Fe Ry. v. Lennen, 640 F.2d 255, 260 (10th Cir. 1981) (per curiam); Star Fuel Marts, LLC v. Sam s East, Inc., 362 F.3d 639, (10th Cir. 2004); and Shadid v. Fleming, 160 F.2d 752, 753 (10th Cir. 1947)); accord 16

23 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 23 of 32 Pyramid Lake Paiute Tribe v. Burwell, No. 1:13-cv (CRC), F.Supp. 3d, 2014 WL at *7 (D.D.C Oct. 7, 2014); Susanville Indian Rancheria v. Leavitt, No. 2:07- cv-259-geb-dad, 2008 WL at *11 (E.D. Cal. Jan. 3, 2008). No bond should be required of a tribal contractor obtaining the injunctive and mandatory relief provided for in the Act. Sage has properly performed all of the programs, functions, services and activities (called PFSAs ) required under the contract it sought to renew, Ex. B 8, and has almost assuredly done so more cost-effectively and competently than IHS. In vivid contrast to Sage s numerous awards and accreditations, the hospital run by the Navajo Area IHS at Gallup, New Mexico, received the worst rating of all hospitals rated in the United States under the Affordable Care Act. In an article published November 14, 2013 entitled Nearly 1,500 Hospitals Penalized under Medicare Program Rating, Kaiser Health News reported that the Gallup Indian Medical Center in New Mexico, a federal government hospital on the border of the Navajo Reservation, will be paid 1.14 percent less for each patient.... North Georgia Medical Center in Elijay is the only hospital besides 3 Gallup to lose more than 1 percent of its reimbursements: it will lose 1.04 percent. The percentage of Sage s revenues devoted to patient care in comparison with overhead is greater than IHS and Sage has significantly decreased the percentage going to overhead since it began contracting. Ex. D 8(D). 3 (visited October 21, 2014). 17

24 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 24 of 32 The Government is required to pay for medical services to Sage s patient population regardless of whether Sage provides them or IHS does. See 25 U.S.C. 1602(1), (7) ( Congress declares that it is the policy of this Nation, in fulfillment of its special trust responsibilities and legal obligations to Indians (1) to ensure the highest possible health status for Indians and urban Indians and to provide all resources necessary to effect that policy;... and (7) to provide funding for programs and facilities operated by Indian tribes and tribal organizations in amounts that are not less than the amounts provided to programs and facilities operated directly by the [Indian Health] Service. ). IHS has never asserted that any costs reported by Sage should be disallowed, as provided for in the ISDEAA, 25 U.S.C. 450j-1(f), nor has IHS ever asserted gross negligence in Sage s handling of funds or any endangerment of any patient, as provided in the ISDEAA to allow IHS to rescind and reassume control of Sage s contracted programs under 25 U.S.C. 450m. Ex. B 9, C 19. District courts have wide discretion in deciding whether to require and in what amount to set a bond or other security. Given these facts and the very likely probability that Sage will succeed on the merits (discussed below), the potential for a loss being incurred by the United States is so low that no bond should be required. See, e.g., Winnebago Tribe of Neb. v. Stovall, 341 F.3d 1202, 1206 (10th Cir. 2003) (affirming lack of bond requirement). V. DEFENDANTS VIOLATED THE ISDEAA AND ITS IMPLEMENTING REGULATIONS. IHS Declination is entitled to no deference. See Ramah Navajo School Bd., 87 F.3d 18

25 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 25 of 32 at 1344 ( The statute itself reveals that not only did Congress not intend to commit [ISDEAA] allocation decisions to agency discretion, it intended quite the opposite; Congress left the Secretary with as little discretion as feasible in the allocation of [ISDEAA contract support funds]. ) (emphasis in original); Shoshone-Bannock Tribes, 988 F.Supp. at (rejecting deferential court review of IHS decisions under ISDEAA [g]iven this history of Congressional concern with agency malfeasance ); see generally Southern Ute, 657 F.3d at 1078 (canon of statutory construction favoring Indians controls over general rules of deference to IHS interpretation of ISDEAA). Sage s contract renewal proposal and proposed AFA for FY 2014 are substantially the same as its approved ISDEAA contract and AFA for FY Ex. B 5, C 16. Therefore, Defendants invocation of the declination criteria was unlawful, and Defendants were required by law to approve the FY 2014 proposal, including the three-year renewal of the basic contract and successor AFA for FY 2014, including the GRSCC agreement for FY See 25 C.F.R ( Are all proposals to renew term contracts subject to the declination criteria? Department of Health and Human Services... will not review the renewal of a term contract [such as Sage s here] for declination issues where no material and substantial change to the scope or funding of a program, functions, services, or activities has been proposed by the... tribal organization. ) (emphasis added); 25 C.F.R ( Can the Secretary decline an Indian... tribal organization s proposed successor annual 19

26 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 26 of 32 funding agreement? No. If it is substantially the same as the prior annual funding agreement... and the contract is with DHHS or the BIA, the Secretary shall approve and add to the contract the full amount of funds to which the contractor is entitled, and may not decline, any portion of a successor annual funding agreement. ) (emphases added). In addition, by not sharing information with Sage to permit Sage to avoid the Declination and by refusing in the Declination to provide Sage with any technical assistance that might be needed to overcome IHS stated concerns, IHS violated the ISDEAA and its implementing regulations. See 25 U.S.C. 450f(b)(2); 25 C.F.R , These patent violations of the ISDEAA obviate the need to address any reasons that IHS may advance to support its Declination, and entitle Sage to the strong remedies accorded by the Act. See, e.g., CIT, supra, Dkt. 86 at 26 (where Secretary had nondiscretionary duty to approve ISDEAA contract, issuance of writ of mandamus was appropriate) (Parker, J.); Southern Ute, 497 F.Supp. 2d at 1257 (same) (Johnson, J.); Cheyenne River Sioux, 496 F.Supp. 2d at The same is true of the FY2015 contract renewal and AFA to the extent it is substantially the same as the prior approved one. See 25 U.S.C. 450f(a)(4)(B); Southern Ute, 657 F.3d at 1080 n.7. VI. SAGE IS ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF. A. The ISDEAA Permits Immediate Injunctive and Mandatory Relief. Congress strengthened the remedies available to tribal organizations to deal with cases like this one. E.g., Ramah Navajo School Bd., 87 F.3d at The Act provides for money 20

27 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 27 of 32 damages typically recoverable in contract actions, including consequential damages, Ramah Navajo School Bd. v. Sebelius, supra, Dkt. 143 at 28-31, 65-72; contract support costs, CIT, supra, Dkt. 87 at 2; injunctive relief; and mandamus to compel an officer or employee of the United States... to perform a duty provided under [the ISDEAA] (including immediate injunctive relief to reverse a declination finding under section 450f(a)(2) of this title or to compel the Secretary to award and fund an approved self-determination contract). 25 U.S.C. 450m-1(a) (emphasis added). This is a case where immediate injunctive and mandatory relief is appropriate and needed. See generally Guidance Endodontics, LLC v. Dentsply Int l, Inc., 633 F.Supp. 2d 1257, 1277 (D.N.M. 2008) (loss of goodwill, loss of customers, loss of future profits, diminishment of competitive advantage in the market place and impending bankruptcy are irreparable harms) (Browning, J.). Without an order compelling Defendants to reverse their unlawful declination finding and to award and fund Sage s proposed contract renewals and successor AFAs, Sage would lose approximately 53% of its revenues, and it would be on the brink of insolvency in less than one year. Ex. D 10; see Tri-State Gen. and Transm. Ass n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 356 (10th Cir. 1986) ( A threat to trade or business viability may constitute irreparable harm. ); Plant Oil Powered Diesel Fuel Systems, Inc. v. ExxonMobil Corp., 778 F.Supp. 2d 1180, 1190 (D.N.M. 2011) (same) (Browning, J.); Temple Univ. v. White, 941 F.2d 201, 219 (3d Cir. 1991) (affirming injunction requiring payment of certain Medicaid funds to preserve plaintiff s financial 21

28 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 28 of 32 solvency and role as a community hospital serving a disproportionate share of low income patients), cert. denied, 502 U.S (1992); Cumberland Heights Found. v. Magellan Behavioral Health, Inc., No 3:10-cv-00712, 2010 WL at *7 (M.D. Tenn. Sept. 7, 2010) (loss of 45% of revenues could launch health care business into insolvency, constituting irreparable harm). It would lose the stability of its professional work force, having painstakingly built up its medical staff over the past six years, and that harm, too, is 4 significant and irreparable. Ex. B 13. Sage s patients would be required (indeed, IHS has already urged them) to seek medical services at great distances from their homes and schools, Ex. A 8, including at IHS Gallup hospital, ranked worst among 1500 hospitals surveyed nationwide. See n.3, supra, and accompanying text; Otero Savings and Loan Ass n v. Federal Reserve Bank of Kansas City, Mo., 665 F.2d 275, 279 (10th Cir. 1981) (granting of preliminary injunction proper to prevent the disruption and confusion the termination of [the Federal Reserve s processing of checks and drafts for plaintiff bank] would certainly cause ); Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir. 1990) (loss of customers in business based on personal contacts and knowledge of their special needs is irreparable). Sage would be required to purchase pharmaceutical supplies from commercial vendors, and purchase professional liability insurance for its doctors at a cost of approximately $50,000 4 IHS has recently communicated with Sage s employees, inducing one to resign by stating that the Declination disqualified Sage s employees from benefitting from IHS loan repayment program. Ex. B

29 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 29 of 32 per month rather than avail itself of FTCA protection at no cost. See Ex. B 14. The stigmatizing effects of IHS actions on Sage are certain and will worsen if not promptly corrected by this Court. See Star Fuel Marts, 362 F.3d at 652 (inherent difficulty in measuring loss of sales volumes and good will is irreparable harm). If injunctive relief is not granted pending final judgment, it is likely that 200 Navajo employees at Sage will lose their jobs within eight months and the struggling economy in the Ganado area would go into a tailspin. Ex. B 15; see, e.g., Earth Island Inst. v. Carlton, 626 F.3d 462, 475 (9th Cir. 2010) (considering public interest in aiding struggling local economy and preventing job loss in preliminary injunction context); Ex. E (IHS Charts 2.09 and 2.10 showing median Household income for Navajos at 45% of national average and 40.4% of Navajos below poverty level). The public interest in tribal self-determination as expressed by Congress in the ISDEAA clearly favors Sage s position. 25 U.S.C. 450a(b); see generally Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d 1234, 1253 (10th Cir. 2001). B. If a Bond or Other Security Is Required, It Should Be a Nominal One. This motion is brought directly under 25 U.S.C. 450m-1(a), not Fed. R. Civ. P. 65. Thus, Sage is not required to prove up the various factors of Rule 65 in order to qualify for the requested equitable relief. See, e.g., CIT, supra Dkt. 87 at 26 (citing, e.g., Atchison, Topeka & Santa Fe Ry., 644 F.2d at 260); Pyramid Lake, 2014 WL at *7; Susanville Indian Rancheria, 2008 WL at *11. Application of the reasoning of CIT and these other cases should relieve Sage of any obligation to provide a bond or other security as a 23

30 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 30 of 32 condition of obtaining the requested injunction. However, if this Court determines otherwise, it has wide discretion to determine whether a bond should be required and, if so, the amount of any such bond or other security. E.g., Winnebago Tribe, 341 F.3d at 1206 (affirming grant of injunction without bond requirement where there was no proof of likelihood of harm to other party); accord RoDa Drilling Co. v. Siegel, 552 F.3d 1203, 1215 (10th Cir. 2009); Basis Int l Ltd. v. Research in Motion Ltd., 827 F.Supp. 2d 1302, 1311 (D.N.M. 2011); Temple Univ., 941 F.2d at 219 (affirming grant of injunction without requiring hospital to post bond where hospital served mostly low-income people and would have become insolvent absent the relief); Bass v. Richardson, 338 F.Supp. 478, (S.D.N.Y 1971) (requiring no bond where federal statute placed heavy burden on defendant agency to justify large cutbacks in medical funding and where Congress had declared public policy that the programs under the statute should be vigorously and properly administered ). The United States has ample ways of recouping any money not properly devoted to patient care, again militating against requiring a bond. See, e.g., 25 U.S.C. 450j-1(f); Temple Univ., 941 F.2d at ; California Hosp. Ass n v. Maxwell-Jolly, 776 F.Supp. 2d 1129, 1160 (E.D. Cal. 2011). No substantial bond or other security should be required of Sage in this case. VII. CONCLUSION For the above reasons, Sage respectfully requests an Order compelling the Secretary to immediately execute and fully fund the three-year contract proposal for FY and 24

31 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 31 of 32 the successor AFA for FY 2014, and to execute and fully fund all severable portions of Sage s three-year contract proposal for FY and the successor AFA for FY 2015 to the extent the budget and PFSAs are substantially the same as the prior ones. Dated this 22nd day of December, Respectfully submitted, FRYE LAW FIRM, P.C. By: s/ Paul E. Frye Paul E. Frye Academy Rd. NE., Suite 310 Albuquerque, NM Tel: (505) Fax: (505) Attorneys for Plaintiff Sage 25

32 Case 1:14-cv JB-GBW Document 17 Filed 12/22/14 Page 32 of 32 CERTIFICATE OF SERVICE I hereby certify that on December 22, 2014, I filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the parties of record in this matter. s/ Paul E. Frye Paul E. Frye 26