In The United States Court of Appeals for the Tenth Circuit

Transcription

1 Appellate Case: Document: Date Filed: 06/23/2011 Page: 1 No In The United States Court of Appeals for the Tenth Circuit RAMAH NAVAJO CHAPTER, et al., Plaintiffs-Appellants, v. KENNETH L. SALAZAR, Secretary of the Interior, et al., Defendants-Appellees. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO The Honorable C. LeRoy Hansen, Judge APPELLEES PETITION FOR REHEARING AND REHEARING EN BANC TONY WEST Assistant Attorney General GREGORY J. FOURATT United States Attorney BARBARA C. BIDDLE (202) JOHN S. KOPPEL (202) Attorneys, Appellate Staff Civil Division, Room 7264 Department of Justice 950 Pennsylvania Ave., NW Washington, D.C

2 Appellate Case: Document: Date Filed: 06/23/2011 Page: 2 TABLE OF CONTENTS Page STATEMENT REQUIRED BY FED. R. APP. P. 35(b)(1)... 1 INTRODUCTION STATEMENT... 3 REASONS WHY THE PETITION SHOULD BE GRANTED CONCLUSION CERTIFICATE OF DIGITAL SUBMISSION CERTIFICATE OF SERVICE ADDENDUM

3 Appellate Case: Document: Date Filed: 06/23/2011 Page: 3 TABLE OF AUTHORITIES Cases: Page Arctic Slope Native Ass n v. Sebelius, 629 F.3d 1296 (Fed. Cir. 2010)... 2, 5, 13 Babbitt v. Oglala Sioux Tribal Pub. Safety Dep t, 194 F.3d 1374 (Fed. Cir. 1999), cert. denied 530 U.S (2000)... 2, 5, 13 Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2005)... 4, 8, 9-10, 12, 13 Ferris v. United States, 27 Ct. Cl. 542 (Ct. Cl. 1892)... 8 Ramah Navajo Sch. Bd. v. Babbitt, 87 F.3d 1338 (D.C. Cir. 1996).... 2, 5, 13 Constitution: United States Constitution: Appropriations Clause, art. I, 9, cl , 5, 6, 10 Statutes: Anti-Deficiency Act: 31 U.S.C. 1341(a).... 3, 5, 6, 10 Indian Self-Determination and Education Assistance Act of 1975 : 25 U.S.C aaa U.S.C. 450b(i) U.S.C. 450f(a) U.S.C. 450f(b) U.S.C. 450j(c)(1).... 1, 2, 4, 12 ii

4 Appellate Case: Document: Date Filed: 06/23/2011 Page: 4 25 U.S.C. 450j-1(a) U.S.C. 450j-1(b).... 1, 2, 4, U.S.C. 450j-1(c)(2) U.S.C. 450j-1(g) U.S.C. 450l U.S.C. 450l(a)(1) U.S.C. 450l(c) at Sec. 1(b)(5) U.S.C U.S.C. 612(c) Pub. L. No , 102 Stat (1987)... 7 Legislative Material: H.R. Rep. No (1999) iii

5 Appellate Case: Document: Date Filed: 06/23/2011 Page: 5 PETITION FOR REHEARING AND REHEARING EN BANC STATEMENT REQUIRED BY FED. R. APP. P. 35(b)(1) A divided panel of this Court has explicitly created an intercircuit conflict with the Federal Circuit and the D.C. Circuit on an important question of appropriations law involving the Indian Self-Determination and Education Assistance Act (ISDA), 25 U.S.C aaa-18, and the contracts entered into thereunder by the federal government with Indian tribes. ISDA authorizes the Secretaries of the Interior (Interior) and Health and Human Services (HHS) to enter into contracts with Indian tribes for the administration of programs that the Secretaries would otherwise operate. The Act also provides that an amount for contract support costs (CSC), which are reasonable and necessary direct and indirect costs related to the administration of a contract, that the Secretaries do not incur, shall be added to the contract. The provision authorizing such contracts, however, and the contracts themselves explicitly make all contract payments subject to the availability of appropriations, 25 U.S.C. 450j-1(b) & 450(j)(c)(1); in every fiscal year beginning with fiscal year 1994, Congress has enacted a statutory cap on the amount of CSC the Secretary of the Interior may pay (and beginning with fiscal year 1998 has enacted similar statutory caps on CSC with respect to HHS ISDA programs).

6 Appellate Case: Document: Date Filed: 06/23/2011 Page: 6 This case involves the following question of exceptional importance: Whether annual statutory appropriations caps, in conjunction with statutory and contractual provisions that make all contract payments subject to the availability of appropriations, preclude holding the government liable for additional CSC above and beyond the capped amounts. The panel majority s resolution of this question expressly conflicts with the recent decision of the Federal Circuit in Arctic Slope Native Ass n v. Sebelius, 629 F.3d 1296 (2010), as well as the earlier holdings of that court in Babbitt v. Oglala Sioux Tribal Pub. Safety Dep t, 194 F.3d 1374 (Fed. Cir. 1999), cert. denied, 530 U.S (2000), and the D. C. Circuit in Ramah Navajo Sch. Bd. v. Babbitt,87 F.3d 1338 (D. C. Cir. 1996). INTRODUCTION In this nationwide class action arising under ISDA and brought against Interior, a divided panel of the Court (Lucero, McKay, JJ.; Hartz, J., dissenting) has reversed the district court and created an intercircuit conflict with both the Federal Circuit and the D.C. Circuit, holding that despite the subject to the availability of appropriations language of the ISDA, 25 U.S.C. 450j-1(b) & 450j(c)(1), and corresponding language in ISDA contracts, plaintiff Indian tribes can obtain contract support costs from the Judgment Fund in excess of the across-the-board statutory cap imposed by Congress in annual appropriations acts

7 Appellate Case: Document: Date Filed: 06/23/2011 Page: 7 This case presents an important legal question warranting en banc review. First, the legal issue is a recurring one affecting annual contracting between federal agencies and more than 350 Indian tribes and tribal organizations, and it implicates congressional efforts to limit the government s expenditures on ISDA contracts. Second, although the government undoubtedly would present additional defenses, the decision potentially subjects the United States to substantial financial exposure from the multitude of individual claims for additional CSC. Third, as it acknowledges (Maj. Op ), the majority s ruling creates a conflict with decisions of both the Federal Circuit and the D.C. Circuit. That conflict would require the agencies to treat ISDA contracts differently among the tribes, depending on the jurisdiction in which the tribes are located -- a palpably undesirable result. Finally, for the reasons set forth in Judge Hartz s comprehensive dissent, the analysis of the majority is demonstrably mistaken and runs afoul of the ISDA, the Anti-Deficiency Act, 31 U.S.C. 1341(a), and the Appropriations Clause of the Constitution, U.S. Const., art. I, 9, cl. 7. Accordingly, rehearing en banc is warranted. STATEMENT The pertinent facts are set forth in the panel majority s opinion (Maj. Op. 5-14) and the dissent (Dissent 2-9). Briefly, this case involves a recurring issue between tribal contractors and the federal government with respect to the government s - 3 -

8 Appellate Case: Document: Date Filed: 06/23/2011 Page: 8 obligation to fund ISDA CSC in the face of insufficient congressional appropriations. The dispute at issue on this appeal crystallized in the aftermath of Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2005), where the Supreme Court held that the government is bound by its promise to pay CSC when it has entered into an ISDA contract with a tribe, and there are sufficient unrestricted appropriated funds available to make the payments promised in the contracts. The Supreme Court, however, did not address the question of the liability of the government when breach is contested or when there is a capped annual appropriation for the total amount of funds that can be spent on CSC for all ISDA contracts. The district court in the instant case granted summary judgment in favor of the government, holding that plaintiffs are not entitled to recover additional CSC in fiscal years in which Congress has imposed such a statutory cap in annual appropriations legislation. Plaintiffs appealed, and a divided panel of this Court has now reversed the district court and avowedly created an intercircuit conflict with the Federal Circuit and the D.C. Circuit, holding that despite the subject to the availability of appropriations language of the ISDA, 25 U.S.C. 450j-1(b) & 450j(c)(1), and corresponding language in ISDA contracts, plaintiff Indian tribes can obtain CSC from the Judgment Fund in excess of the across-the-board statutory cap imposed by Congress in annual appropriations acts. The panel majority rejected the recent - 4 -

9 Appellate Case: Document: Date Filed: 06/23/2011 Page: 9 contrary holding of the Federal Circuit in Arctic Slope Native Ass n v. Sebelius, 629 F.3d 1296 (2010), as well as the earlier holdings of that court in Babbitt v. Oglala Sioux Tribal Pub. Safety Dep t, 194 F.3d 1374 (Fed. Cir. 1999), cert. denied, 530 U.S (2000), and the D. C. Circuit in Ramah Navajo Sch. Bd. v. Babbitt 87 F.3d 1338 (D. C. Cir. 1996). Judge Hartz filed a lengthy dissent agreeing with Arctic Slope, the earlier cases, and the position of the United States in the instant case, stating that [w]hen Congress says that the provision of funds under this subchapter [the ISDA] is subject to the availability of appropriations..., it must mean that the government s obligation on ISDA contracts is limited by the amount appropriated. Dissent 14. He further added that if payments in excess of the statutory cap are not barred by the Constitution s Appropriations Clause, then the Anti-Deficiency Act should do the trick, id., and thus concluded that he would adopt the more natural interpretation of the statutory scheme, which... has been adopted in three other circuit opinions and even endorsed by the plaintiffs in one of the cases. Id. at 33. REASONS WHY THE PETITION SHOULD BE GRANTED A divided panel of the Court has reversed the district court and expressly created an intercircuit conflict with both the Federal Circuit and the D.C. Circuit, holding that despite the subject to the availability of appropriations language of the - 5 -

10 Appellate Case: Document: Date Filed: 06/23/2011 Page: 10 ISDA, 25 U.S.C. 450j-1(b) & 450j(c)(1), and corresponding language in ISDA contracts, plaintiff Indian tribes can obtain contract support costs from the Judgment Fund in excess of the across-the-board statutory cap imposed by Congress in annual appropriations acts. This ruling potentially exposes the United States to substantial liability in this long-running nationwide class action litigation, and with respect to the similarly capped ISDA programs of the Department of Health and Human Services as well. The majority s holding thus threatens to upend key limitations established by the legislative branch with respect to the expenditure of public funds, and runs afoul of both the Anti-Deficiency Act, 31 U.S.C. 1341(a), and the Appropriations Clause of the Constitution, U.S. Const. art. I, 9, cl. 7. With respect to the merits, we have little to add to Judge Hartz s thorough dissent, which fully elucidates the majority s error. Briefly, the majority s ruling is flawed in at least two crucial respects. First, the majority incorrectly discounts the parties expectations at the time of contract formation. Second, it disregards Congress s intent in placing an express cap upon the amount available for contract support costs. Regarding the first point, the majority recognizes, but mistakenly fails to give appropriate significance to, the parties expectations when the ISDA contracts were signed. The majority properly notes that, based upon the contracts language and the - 6 -

11 Appellate Case: Document: Date Filed: 06/23/2011 Page: 11 course of the parties dealing, plaintiffs faced two levels of uncertainty concerning how much funding they would receive for contract support costs. Maj. Op. 13. Thus, neither the contracts text nor the parties course of dealing assured the contractors of the full amount they sought for CSC. The majority avoids the parties bargain, however, by resting upon the premise that in the ISDA, Congress required full funding of contract support costs, Maj. Op. 6 (citing Pub. L. No , 205, 102 Stat. 2285, (1988)) -- but the contractors did not have that assurance in their contracts, and ISDA itself anticipates shortfalls in CSC funding by requiring the government to provide an annual report to Congress including an accounting of any deficiency in funds for payment of CSC. See 25 U.S.C. 450j-1(c)(2). Moreover, had plaintiffs sought to challenge the contracts terms, they had a unique statutory means of doing so before signing the agreements. 25 U.S.C. 450f(b). The majority thus erroneously held the government liable for breaching a promise that was not contained in the contracts. The majority s error is particularly glaring because the limitation on the funds available for ISDA contracts is not only mandated by statute, but is also statutorily required to be included in the language of each ISDA contract. See 25 U.S.C. 450l(a)(1). Pursuant to the Model Contract set forth at 25 U.S.C. 450l, ISDA contracts must contain language limiting the government s funding of those contracts - 7 -

12 Appellate Case: Document: Date Filed: 06/23/2011 Page: 12 to available appropriations, and plaintiffs contracts contained this required language. Moreover, the Model Contract also limits the obligation of ISDA contractors to perform under the contract to the amount of funds awarded. See 25 U.S.C. 450l(c) at Sec. 1(b)(5). The tribes thus could not commence providing services without knowing that CSC funds would be limited. The lack of a contractual assurance of payment for the full CSC amount requested also demonstrates the majority s error in relying upon Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2005), and Ferris v. United States, 27 Ct. Cl. 542 (1892). In Cherokee, the government conceded both that the contract assured the amount the plaintiff sought for CSC, and that the government had breached that promise. Cherokee, 543 U.S. at 635. In Ferris, the court found that insufficient funds were not a defense to a breach of contract action because the contractor is not chargeable with knowledge of a contract s administration. Ferris, 27 Ct. Cl. at 546. In contrast, in the instant case the government warned the contractor at contract formation that funding of the full amount requested for CSC was not guaranteed; the subject to the availability of appropriations language of ISDA and plaintiffs contracts thereunder, in conjunction with the annual funding caps established by Congress for the years in question, renders this conclusion inescapable

13 Appellate Case: Document: Date Filed: 06/23/2011 Page: 13 Regarding the second point, the majority misconstrued the congressional intent in capping CSC funding. Given Congress s general requirement (subject to specified exceptions) that the government enter into ISDA contracts requested by tribes and tribal compacts, see 25 U.S.C. 450b(i) & 450f(a), Congress s cap on CSC for particular years could only mean that Congress did not intend to fund all of the tribes contract support costs in those years. Congress provided as part of the ISDA that an amount for reasonable and allowable CSC would be funded subject to the availability of appropriations ; the cap necessarily restricts the amount of funds available. The majority s opinion disregards Congress s intent and makes public funds over and above what Congress appropriated available for all contractors CSC, when Congress expressly prohibited that result. As the dissent demonstrates at great length, the majority s holding is contrary to key statutory and contractual language, renders the congressionally imposed annual appropriations caps meaningless, and is at odds with decisions of both the Supreme Court and other circuits. The notion that the United States should be liable through the Judgment Fund for aggregate CSC amounts far in excess of the annual appropriations cap, simply because each tribe s individual annual CSC claim is within the capped amount, is both legally and logically untenable. And the majority s reliance upon the Supreme Court s Cherokee decision is misplaced, precisely because - 9 -

14 Appellate Case: Document: Date Filed: 06/23/2011 Page: 14 there were no annual statutory appropriations caps to support the admitted breach in Cherokee. The majority s conclusion that the Secretary is required to pay CSC for each tribal contract since 1994, without regard to the annual appropriations cap, is based on a misreading of the Appropriations Clause and congressional intent expressed in the Anti-Deficiency Act, the ISDA and all appropriations provided to fund Interior s tribal contracts since The Appropriations Clause prohibits the expenditure of funds by the United States in the absence of appropriations. U.S. Const., art. I, 9, cl. 7. Additionally, in enacting the Anti-Deficiency Act, Congress has prohibited any officer or employee of the United States from authorizing an expenditure that exceeds appropriations. 31 U.S.C. 1341(a). Appropriations limitations are not unique to funding for Indian programs pursuant to ISDA. It is understood that the government could face such limitations and funding shortfalls in connection with its own direct operation of programs and provisions of services. So too the specific appropriations provided by Congress might not always be sufficient to allow Interior to pay every tribal contractor the full amount of funding requested by a tribe to operate its ISDA programs. Neither the agency nor a court has authority to ignore the funding limitation imposed by Congress

15 Appellate Case: Document: Date Filed: 06/23/2011 Page: 15 in appropriations Interior receives, whether for CSC for ISDA contracts or for other programs. The majority found that Congress s appropriations for the Judgment Fund satisfy the requirements of the Appropriations Clause, but failed to establish how the act that created the Judgment Fund, 31 U.S.C. 1304, granted the Secretary authority to expend funds to pay CSC beyond the capped CSC appropriations. The majority further failed to show what provision of the ISDA allows the Secretary to contravene the Anti-Deficiency Act. The majority reasons that because the appropriations cap limits the agency s payment for CSC in the aggregate only, each ISDA contractor is still entitled to the full amount requested for CSC, as long as that amount is less than the lump-sum appropriation for CSC. But that rationale conflicts with Congress s intent in imposing appropriations caps on CSC payments, essentially eviscerating Congress s departure from the pre-1994 unrestricted agency appropriations. Recognizing that the appropriations cap precludes the agency from making CSC payments in excess of the capped appropriations, the majority relies on the Judgment Fund as the source of the funding gap. Not only is that approach inconsistent with statutory limits on the availability of the Judgment Fund, see 31 U.S.C (making the Judgment Fund available only if payment is not

16 Appellate Case: Document: Date Filed: 06/23/2011 Page: 16 otherwise provided for, as it is here through the capped annual appropriations), but it is an unreasonable interpretation of the statutory scheme. If Congress had intended to fully fund the CSC amount requested by the tribes, it would have provided sufficient unrestricted appropriations to do so, as it had done before 1994, rather than restricting the total amount available but allowing annual litigation by each contractor to recover the balance of CSC payments from the Judgment Fund. ISDA should not be read to require Congress to restrict a specific amount for each tribal contractor in each appropriations act -- an unworkable result -- to achieve its intended outcome. The majority s holding effectively renders 25 U.S.C. 450j-1(b) and 450j(c)(1) superfluous and entirely ignores the appropriations caps put in place by Congress in every fiscal year since The majority fails to explain how the Secretary is supposed to comply with 450j-1(b) s additional prohibition against reallocating funds from other tribes to pay for the CSC of another tribe -- particularly given the fact that, under the majority s ruling, other, non-contracting tribes might eventually have to bear the costs paid to contracting tribes, because the law contemplates that agencies will reimburse the Judgment Fund for breaches of contracts from departmental appropriations. See 41 U.S.C. 612(c). Although the majority relied on Cherokee, the underlying facts of this case are significantly different from those at issue in Cherokee. First, in Cherokee, the

17 Appellate Case: Document: Date Filed: 06/23/2011 Page: 17 Supreme Court s ruling was limited to determining the nature of an ISDA contract; the Court did not hold that the ISDA itself created an obligation to pay. Second, and most importantly, the appropriations at issue in Cherokee were legally unrestricted -- a distinction that was recognized by the Supreme Court. See Cherokee, 543 U.S. at 644 ( The Government refers to legislative history,... but that history shows only that Executive Branch officials would have liked to exercise discretionary authority to allocate a lump-sum appropriation too small to pay for all the contracts the Government had entered into; the history does not show that Congress granted such authority. ). Here, however, the majority is extending the application of Cherokee considerably beyond its holding, thereby creating a direct conflict with decisions of the D.C. and Federal Circuits. See Arctic Slope Native Ass n v. Sebelius, 629 F.3d 1296 (Fed. Cir. 2010); Babbitt v. Oglala Sioux Tribal Pub. Safety Dep t, 194 F.3d 1374 (Fed. Cir. 1999); Ramah Navajo Sch. Bd. v. Babbitt, 87 F.3d 1338 (D.C. Cir. 1996). 1 1 We note that the legislative history to the fiscal year 2000 appropriation specifically endorses the Federal Circuit s Oglala ruling, observing that the decision clearly states that the law unequivocally makes contracts providing [CSC] subject to the availability of appropriations and that any agency can only spend as much money as has been appropriated for contract support costs. Any shortfall does not create an unfunded liability for the Federal government. H.R. Rep. No , at 495 (1999)

18 Appellate Case: Document: Date Filed: 06/23/2011 Page: 18 Furthermore, the majority itself recognizes that the result of its opinion is unworkable. Its proposed remedy is to invite Congress to remove the guarantees of full funding purportedly provided in 25 U.S.C. 450j-1(a) and (g). See Maj. Op Alternatively, it invites Congress to limit appropriations on a contract-bycontract basis. Id. at 46. What the majority fails to recognize, however, is that through its annual appropriations caps and its subject to the availability of appropriations language in ISDA, Congress has already accomplished the first alternative, and by distributing CSC funds in a pro-rata manner, as the D.C. Circuit held in Ramah, supra, Interior is required to do, the agency is already accomplishing the second. To be sure, as the dissent acknowledges (Dissent 1), the statutory scheme may ultimately leave Indian tribes unpaid for some costs incurred in performance of government contracts. But a combination of ISDA s subject to the availability of appropriations language, the terms of the contracts repeating that language, the clear mandate of Congress s post-1994 appropriations caps for CSC, and Interior s annual Federal Register notices regarding CSC shortfalls, put tribal contractors on notice of the potentially limited funding of their contracts. See Dissent 2-7. Finally, if the panel majority s decision in this nationwide class action stands, the United States will face significant litigation risk associated with claims for

19 Appellate Case: Document: Date Filed: 06/23/2011 Page: 19 additional CSC from Interior s ISDA contractors. While the government may well have additional defenses to individual claims, the government s litigation risk with respect to ISDA contractors could be substantial. Similarly, there is additional and considerable potential financial exposure associated with claims that HHS s ISDA contractors would be expected to pursue under this decision as well. Accordingly, this factor also militates in favor of the grant of rehearing en banc. JUNE 2011 CONCLUSION For the foregoing reasons, this petition should be granted. Respectfully submitted, TONY WEST Assistant Attorney General GREGORY J. FOURATT United States Attorney BARBARA C. BIDDLE Barbara.Biddle@usdoj.gov (202) s/ JOHN S. KOPPEL John.Koppel@usdoj.gov (202) Attorneys, Appellate Staff Civil Division, Room 7264 Department of Justice 950 Pennsylvania Ave., N.W. Washington, D.C

20 Appellate Case: Document: Date Filed: 06/23/2011 Page: 20 CERTIFICATE OF DIGITAL SUBMISSION Pursuant to this Court s General Order filed March 18, 2009, I hereby certify that: 1. all required privacy redactions have been made, and every document submitted in Digital Form or scanned PDF format is an exact copy of the written document filed with the Clerk; and 2. the digital submissions have been scanned for viruses with the most recent version of the following commercial virus scanning program, which indicates that the submissions are free of viruses. Program: Microsoft Forefront Endpoint Protection 2010 Version: Last Updated: June 23, 2011 s/ JOHN S. KOPPEL Attorney

21 Appellate Case: Document: Date Filed: 06/23/2011 Page: 21 CERTIFICATE OF SERVICE I hereby certify that on this 23d day of June, 2011, I filed and served the foregoing Petition for Rehearing and Rehearing En Banc by submitting a digital copy via the ECF system and causing 18 hard copies to be dispatched to the Clerk of this Court by Federal Express overnight delivery, and by effecting service via the ECF system and causing hard copies to be served upon the following by Federal Express overnight delivery: Michael P. Gross, Esq. Geoffrey D. Strommer, Esq. M.P. Gross Law Firm, P.C. Hobbs, Straus, Dean & Walker, LLP 460 St. Michael s Drive, No SW Broadway, Suite 900 Santa Fe, New Mexico Portland, OR mpgross@cnsp.com gstrommer@hobbstraus.com C. Bryant Rogers, Esq. Van Amberg, Rogers, Yepa, Abeita & Gomez, LLP P.O. Box 1447 Santa Fe, New Mexico cbrogers@nmlawgroup.com Lloyd B. Miller, Esq. Sonosky, Chambers, Sachse, Miller & Munson, LLP 900 West Fifth Avenue, Suite 700 Anchorage, AK lloyd@sonosky.net s/ JOHN S. KOPPEL Attorney

22 Appellate Case: Document: Date Filed: 06/23/2011 Page: 22 ADDENDUM

23 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 123 FILED United States Court of Appeals Tenth Circuit PUBLISH UNITED STATES COURT OF APPEALS TENTH CIRCUIT May 9, 2011 Elisabeth A. Shumaker Clerk of Court RAMAH NAVAJO CHAPTER; OGLALA SIOUX TRIBE; PUEBLO OF ZUNI, for themselves and on behalf of a class of persons similarly situated, v. Plaintiffs Appellants, KENNETH SALAZAR, Secretary of the Interior; LARRY ECHO HAWK, Assistant Secretary of the Interior; MARY L. KENDALL, Acting Chief of Office of Inspector General, U.S. Department of the Interior 1 ; UNITED STATES OF AMERICA, No Defendants Appellees, and THE NATIONAL CONGRESS OF AMERICAN INDIANS, Amicus Curiae. 1 Pursuant to Fed. R. App. P. 43(c)(2) Kenneth Salazar is substituted for former Secretary of the Interior, Dirk Kempthorne; Larry Echo Hawk is substituted for former Assistant Secretary of the Interior, Eddie Brown; and Mary L. Kendall is substituted for former Chief of Office of Inspector General, Marvin Pierce.

24 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 224 Appeal from the United States District Court for the District of New Mexico (D.C. No. 1:90-CV LH-KBM) Michael Paul Gross, Esq., M. P. Gross Law Firm, P.C., Santa Fe, New Mexico (C. Bryant Rogers, VanAmberg, Rogers, Yepa, Abeita & Gomez, LLP, Santa Fe, New Mexico; and Lloyd Benton Miller, Sonosky, Chambers, Sachse, Miller & Munson, Anchorage, Alaska with him on the briefs) for Plaintiffs-Appellants. John Samuel Koppel, Appellate Staff, Civil Division (Tony West, Assistant Attorney General; Gregory J. Fouratt, U.S. Attorney; and Barbara C. Biddle, Appellate Staff, Civil Division, with him on the briefs) U.S. Department of Justice, Washington, DC, for Defendants-Appellees. Geoffrey D. Strommer and Stephen D. Osborne, Hobbs, Straus, Dean & Walker, LLP, Portland, Oregon, and John Dossett, General Counsel, National Congress of American Indians, Washington, D.C., filed an Amicus Curiae brief for National Congress of American Indians, in support of Plaintiffs-Appellants. Before LUCERO, McKAY, and HARTZ, Circuit Judges. LUCERO, Circuit Judge. We are faced with an apparent contradiction. Pursuant to the Indian Self- Determination and Education Assistance Act ( ISDA ), the United States enters into selfdetermination contracts with Indian tribes and tribal organizations for the planning, conduct and administration of programs or services which are otherwise provided to Indian tribes and their members pursuant to Federal law. 25 U.S.C. 450b(j). These agreements include contract support costs ( CSCs ) which are the reasonable costs for -2-

25 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 325 activities that must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but would not be paid by the Secretary of the Interior if the federal government operated the contracted program directly. 450j-1(a)(2). Congress has mandated that all self-determination contracts provide full funding of CSCs, see 450j-1(g), but has nevertheless failed to appropriate funds sufficient to pay all CSCs every year since 1994, instead capping appropriations at a level well below the sum total of CSCs. See, e.g., Dep t of the Interior & Related Agencies Appropriations Act, 1995, Pub. L. No , tit. I, 108 Stat. 2499, 2511 (1994). These funding shortfalls have threatened tribal programs designed to fulfill the congressionally mandated goal of the ISDA to enhance the progress of Indian people and their communities. 25 U.S.C. 450(a)(1). Contracts for programs absolutely essential to self-government, such as law enforcement, economic development, and natural resource management, have become unworkable in the words of a tribal representative. As a result, several tribes and tribal organizations brought suit seeking to collect the promised, but unappropriated, CSCs. The government urges us to affirm the district court and resolve the ISDA/appropriations contradiction by holding that the phrase subject to the availability of appropriations, included in both the ISDA, see 450j-1(b), and all self-determination contracts, see 450l(c), unambiguously eliminates the government s obligation to pay CSCs unless Congress appropriates funds to pay all CSCs on every self-determination -3-

26 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 426 contract. Plaintiffs counter that the phrase subject to the availability of appropriations must be interpreted from the perspective of the individual contractor, not by reference to all contractors who might lay claim to a given appropriation. In other words, only Congressional funding decisions not discretionary allocation decisions made by an agency can render an appropriation unavailable. Following a recent Supreme Court case addressing a nearly identical issue, we conclude that plaintiffs interpretation is reasonable. As the Court held in Cherokee Nation of Oklahoma v. Leavitt, 543 U.S. 631 (2005), if the amount of an unrestricted appropriation is sufficient to fund the contract, the contractor is entitled to payment even if the agency has allocated the funds to another purpose or assumes other obligations that exhaust the funds. Id. at 641 (quotation omitted). Following our canon of construction requiring that an act be construed in favor of a reasonable interpretation advanced by a tribe, see Ramah Navajo Chapter v. Lujan, 112 F.3d 1455, 1462 (10th Cir. 1997), and the ISDA s requirement that contracts be construed in favor of the contractor, 25 U.S.C. 450l(c), we hold that the government remains liable because the annual CSC appropriations were sufficient to cover any individual contract. Exercising jurisdiction under 28 U.S.C. 1291, we reverse the district court s grant of summary judgment in favor the government and remand for further proceedings. I This appeal comes after nearly two decades of litigation under the ISDA by Ramah Navajo Chapter ( Ramah ). The statutory and administrative landscape provides -4-

27 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 527 an important backdrop for our legal analysis. A Prior to the ISDA, educational and governmental services were provided directly by the federal government to the hundreds of federally recognized tribes in the United States. Acknowledging that Federal domination of Indian service programs has served to retard rather than enhance the progress of Indian people, 25 U.S.C. 450(a)(1), Congress enacted the ISDA to permit an orderly transition from the Federal domination of programs for, and services to, Indians to effective and meaningful participation by the Indian people in the planning, conduct, and administration of those programs and services, 450a(b). The ISDA reaffirms the Federal Government s unique and continuing relationship with, and responsibility to, individual Indian tribes and to the Indian people as a whole. 450a(a). It pursues a goal of Indian self-determination by assuring maximum Indian participation in the direction of educational as well as other Federal services to Indian communities so as to render such services more responsive to the needs and desires of those communities. Id. Pursuant to the ISDA, the Secretary of the Interior and the Secretary of Health and Human Services are directed to enter into self-determination contracts upon the request of a tribe, provided that the request satisfies several statutory criteria. See 450b(i), 450f(a). The Secretary must provide the amount that the agency would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract. 450j-1(a)(1). These contracts effectively transfer responsibility for -5-

28 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 628 various programs from federal agencies to the tribes themselves, while maintaining federal funding of the programs. Congress soon recognized that providing only the funds the Secretary would have spent operating a given program created a serious problem because those funds do not cover federally mandated annual single-agency audits, liability insurance, financial management systems, personnel systems, property management and procurement systems and other administrative requirements. S. Rep. No , at 8 (1987), reprinted in 1988 U.S.C.C.A.N. 2620, As a result, tribal resources which are needed for community and economic development must instead be diverted to pay for the indirect costs associated with programs that are a federal responsibility. Id. at 9, reprinted in 1988 U.S.C.C.A.N. at Congress accordingly amended the ISDA to require full funding of CSCs. See Indian Self Determination Act Amendments of 1987, Pub. L. No , 205, 102 Stat. 2285, (1988). CSCs include direct program expenses for the operation of the Federal program that is the subject of the contract, 25 U.S.C. 450j-1(a)(3)(A)(i), and any additional administrative or other expense related to the overhead incurred by the tribal contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract, 450j-1(a)(3)(A)(ii). The latter category appears to correspond to indirect costs which are defined as the costs incurred for a common or joint purpose benefiting more than one contract objective, or which are not readily assignable to the contract objectives specifically benefited without effort disproportionate to the results -6-

29 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 729 achieved. 450b(f). Indirect costs are generally calculated by multiplying the contract funding base by the indirect cost rate, a negotiated figure. See 450b(b), (g); S. Rep. No , at 9, reprinted in 1988 U.S.C.C.A.N. at 2628 ( Tribal indirect cost rates are negotiated and approved according to OMB guidelines by the Department of the Interior Office of Inspector General. ). Under the revised ISDA, CSC funding shall be added to the amount the Secretary would have spent on the program subject to a self-determination contract. 25 U.S.C. 450j-1(a)(2) (emphasis added). Another section of the ISDA provides that [u]pon the approval of a self-determination contract, the Secretary shall add to the contract the full amount of funds to which the contractor is entitled under [ 450j-1(a)]. 450j-1(g) (emphasis added). However, the ISDA twice states that entitlement to selfdetermination contract funding is subject to the availability of appropriations. 450j(c)(1), 450j-1(b). It further provides that the Secretary is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe or tribal organization under this [Act]. 450j-1(b). The phrase subject to the availability of appropriations has become highly significant because of Congress ISDA funding decisions. In 1994, Congress began capping CSC funding. The 1994 appropriations act for the Department of the Interior allocated nearly $1.5 billion to the Bureau of Indian Affairs ( BIA ), but provided that not to exceed $91,223,000 of the funds in this Act shall be available for payments to tribes and tribal organizations for indirect costs associated with contracts or grants or -7-

30 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: 830 compacts authorized by the Indian Self-Determination Act. Dep t of the Interior & Related Agencies Appropriations Act, 1994, Pub. L. No , tit. I, 107 Stat. 1379, (1993). The Conference Report on the appropriations bill suggested Congress was apprehensive about the growth of CSCs: The managers remain very concerned about the continued growth in contract support costs, and caution that it is unlikely that large increases for this activity will be available in future years budgets. It is also a concern that significant increases in contract support will make future increases in tribal programs difficult to achieve. H.R. Conf. Rep. No , at 28 (1993). A Senate Report accompanying the following year s appropriations act noted that significant shortfalls exist for fiscal year 1994 contract support funding, but advised that the shortfalls should be treated as onetime occurrences and should not have any impact on determining future indirect cost rates. S. Rep. No , at 57 (1994). Despite this expectation, funding shortfalls for CSCs were repeated every fiscal year from 1994 to Later appropriations acts, usually passed at the beginning of the fiscal year, used the phrase contract support costs rather than indirect costs, but each included the same not to exceed language. See tit. I, 108 Stat. at 2511; Omnibus Consol. Rescissions & Appropriations Act of 1996, Pub. L. No , 110 Stat. 1321, (1996); Omnibus Consol. Appropriations Act, 1997, Pub. L. No , 110 Stat. 3009, (1996); Dep t of the Interior & Related Agencies Appropriations Act, 1998, Pub. L. No , tit. I, 111 Stat. 1543, 1554 (1997); Omnibus Consol. & Emergency Supplemental Appropriations Act, 1999, Pub. L. No , 112 Stat. -8-

31 Appellate Case: Case: Document: Date Filed: 05/09/ /23/2011 Page: , (1998); Consol. Appropriations Act, 2000, Pub. L. No , 113 Stat. 1501, 1501A-148 (1999); Dep t of the Interior & Related Agencies Appropriations Act, 2001, Pub. L. No , tit. I, 114 Stat. 922, 934 (2000). B Following the passage of each appropriations act, the BIA issued a notice in the Federal Register discussing the CSC shortfalls. The 1994 notice warned of a shortfall of at least $ 10,000,000 in FY 1994 and possibly a shortfall as high as $ 25,000,000. Distribution of Fiscal Year 1994 Contract Support Funds, 58 Fed. Reg. 68,694, 68,694 (Dec. 28, 1993). It also reminded tribal contractors that the BIA can only utilize the amount appropriated for the [CSC] account to meet indirect cost needs. Id. Because of the projected shortfall, the BIA requested a report showing the amounts provided to cover prior year shortfalls, the amounts and percentages funded for current year contracts and a revised detailed need request from each area office. Id. The agency hoped to provide instructions advising each area of the level to be applied to each contract, around May 1, Id. Notices published for subsequent years similarly requested interim reports on CSC need at some point during the operative fiscal year. After receiving the reports, and well into the fiscal year for which funding was provided, the BIA would calculate the amount of the shortfall and provide CSC funding on a uniform, pro-rata basis. See Distribution of Fiscal Year 1995 Contract Support Funds, 59 Fed. Reg. 55,318 (Nov. 4, 1994); -9-

32 Appellate Case: Document: Date Filed: 05/09/ /23/2011 Page: 1032 Distribution of Fiscal Year 1996 Contract Support Funds, 61 Fed. Reg. 16,106 (Apr. 11, 1996); Distribution of Fiscal Year 1997 Contract Support Funds, 62 Fed. Reg (Jan. 10, 1997); Distribution of Fiscal Year 1998 Contract Support Funds, 63 Fed. Reg (Feb. 2, 1998); Distribution of Fiscal Year 1999 Contract Support Funds, 64 Fed. Reg (Jan. 15, 1999); Distribution of Fiscal Year 2000 Contract Support Funds, 65 Fed. Reg. 10,100 (Feb. 25, 2000); Distribution of Fiscal Year 2001 Contract Support Funds, 66 Fed. Reg. 15,275 (Mar. 16, 2001). The Department of Interior appropriation for fiscal year 1995, for example, was passed on September 30, 1994, the last day of fiscal year The BIA requested initial reports of CSC need by December 1, Distribution of Fiscal Year 1995 Contract Support Funds, 59 Fed. Reg. 55,318 (Nov. 4, 1994). After receiving these initial reports, the BIA disbursed 75 percent of the total amount reported. Id. It requested a second set of reports by July 10, 1995, and planned a final distribution of the remainder of CSC funds well into the fiscal year on or about July 31, 1995 [ten months into the fiscal year], on the basis of these reports. Id. If the reports indicate that [the appropriated sum] will not be sufficient to cover the entire need, this amount will be distributed so that all offices receive the same percentage of their reported need for distribution at this same percentage. Id. The BIA funded percent of the actual CSCs on each selfdetermination contract in fiscal year Between 1994 and 2004, the CSC funding rate ranged from 77 to 93 percent for each fiscal year. C -10-

33 Appellate Case: Document: Date Filed: 05/09/ /23/2011 Page: 1133 Plaintiffs Ramah and the Oglala Sioux Tribe ( Oglala ) are parties to long-term mature self-determination contracts of indefinite duration with the United States pursuant to the ISDA. See 25 U.S.C. 450b(h). Like all self-determination contracts, plaintiffs agreements expressly incorporate the ISDA. They further provide that the ISDA and each provision of this contract shall be liberally construed for the benefit of the contractor. A section titled FUNDING AMOUNT states: Subject to the availability of appropriations, the Secretary shall make available to the Contractor the total amount specified in the annual funding agreement incorporated by reference in subsection (f)(2). Such amount shall not be less than the applicable amount determined pursuant to section 106(a) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450j-1). The annual funding agreements ( AFAs ), incorporated by reference in the mature contracts, describe attachments containing terms that identify the programs, services, functions, and activities to be performed or administered, the general budget category assigned, the funds to be provided, and the time and method of payment. As their name implies, AFAs are renegotiated each year. Like the main self-determination contracts, AFAs include language discussing the availability of appropriations. Ramah s 2000 AFA 2 sets out Tentative FY 2000 Funding for various programs and activities using FY 99 funding levels. The AFA also uses a tentative indirect cost rate, adopting the last rate approved by the Office of Inspector General, which occurred 2 Oglala s AFAs are substantially similar. -11-

34 Appellate Case: Document: Date Filed: 05/09/ /23/2011 Page: 1234 in calendar year The AFA explains: Indirect Cost rate[s] for Calendar Year 1999 and 2000 have not been completed yet with the Office of Inspector General. As of the date of submittal of this AFA, neither has the Chapter completed its Calendar Year 2000 Indirect Cost proposal. The last approved IDC rate was for CY 1998 at 86.4%. Based on this last approved rate, Ramah Navajo Chapter requests that the CY 1998 IDC negotiated final rate be used to temporarily fund IDC at 100% level. NOTE*: (Funding of the amount shall be subject to the availability of appropriation....). As soon as funding has been appropriated and sub-allotted to the Ramah Navajo Agency, funds will be added to the AFA. (i) Direct Contract Support Costs are to be negotiated within the first ninety, (90) days of the new contract term and shall be funded from the BIA s Indian Self-Determination Fund as soon as resources can be made available, but not later than September 30, The Contractor reserves the right to annually renegotiate its need for Direct Contract Support Costs in accordance with Sec. 106(a)(3)(B) of the Act [25 U.S.C. 450j- 1(a)(3)(B)]. Funding of the amount needed shall be subject to the availability of appropriations. (ii) Outstanding Indirect Cost issues from past fiscal years which Ramah Navajo Chapter has not received will be subject to continuing discussion until resolved Funding for additional contract support costs shall be added to the AFA for the Contractor which includes Indian Self-Determination Fund direct and indirect type costs. The amount of Indirect Cost Funding shall be based upon the Contractor s Indirect Cost Agreement which is applicable to this period of performance. 3 The indirect cost rate is distinct from the CSC funding rate. One, the indirect cost rate, is multiplied by the non-csc contract amount to reach an estimate of indirect cost CSCs. See Cherokee, 543 U.S. at 635. The other, the CSC funding rate, is the percentage of total CSC need for which Congress actually appropriated funds. -12-

35 Appellate Case: Document: Date Filed: 05/09/ /23/2011 Page: 1335 As these provisions make clear, Ramah faced two levels of uncertainty at the time it entered into the AFA. First, the indirect cost rate was subject to negotiation and approval by the Office of Inspector General, meaning that the amount of the contract was undetermined. Second, even after the amount of the AFA was finalized, the actual payment forthcoming from the BIA was unknown because the agency did not determine the CSC funding rate until the fiscal year was well underway. Ramah did not receive notice of the exact amount of contract funding until the last month of each fiscal year. As an accounting consultant to Ramah and Oglala describes it, this system allowed one party to the contract, the government, to set the price after the service has been performed by the other party. D Ramah originally brought this class action in 1991 seeking to alter the manner in which the BIA calculated indirect cost rates. After this court held in favor of plaintiffs, see Ramah Navajo Chapter, 112 F.3d at 1455, the parties entered into several partial settlement agreements, see Ramah Navajo Chapter v. Norton, 250 F. Supp. 2d 1303 (D.N.M. 2002); Ramah Navajo Chapter v. Babbitt, 50 F. Supp. 2d 1091 (D.N.M. 1999). During these settlement negotiations, Oglala intervened as plaintiffs. The Pueblo of Zuni also intervened later in the proceedings. This appeal arises from a motion for summary judgment filed by plaintiffs in February 2000, seeking a declaration that they are entitled to unpaid CSCs from fiscal year 1994 forward. Plaintiffs sought relief pursuant to the Contract Disputes Act,

36 Appellate Case: Document: Date Filed: 05/09/ /23/2011 Page: 1436 U.S.C , after exhausting their administrative remedies. See 25 U.S.C. 450m-1(d). The government cross-moved for summary judgment, contending that its CSC obligation was dependent upon Congress appropriating funds sufficient to pay CSCs on every self-determination contract. These competing cross-motions were stayed pending the outcome of Cherokee Nation of Oklahoma v. Thompson, 311 F.3d 1054 (10th Cir. 2002), rev d sub nom. Cherokee Nation of Oklahoma v. Leavitt, 543 U.S. 631 (2005). After receiving supplementary briefing on the impact of Cherokee, the district court granted the government s motion. It held that the United States is not liable for shortfalls in contract payments when Congress has specified an insufficient not to exceed lump sum appropriation. Plaintiffs timely appealed. II We review the grant of summary judgment de novo. Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000). A party is entitled to summary judgment only if, viewing the evidence in the light most favorable to the nonmoving party, the movant is entitled to judgment as a matter of law. Id. A In construing the statute at issue, we begin with its plain text. See Chickasaw Nation v. United States, 208 F.3d 871, 876 (10th Cir. 2000). If the terms of the statute are clear and unambiguous, they are controlling absent rare and exceptional circumstances. Id. We also take into account the broader context of the statute as a -14-