IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

Transcription

1 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 1 of 22 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA TUNICA-BILOXI TRIBE OF LOUISIANA, and RAMAH NAVAJO SCHOOL BOARD, INC., vs. PLAINTIFFS, UNITED STATES OF AMERICA; MICHAEL O. LEAVITT, Secretary of the United States Department of Health and Human Services; DIRK KEMPTHORNE, Secretary of the United States Department of the Interior, No. 1:02CV02413 (RBW/DAR) DEFENDANTS. PLAINTIFFS REPLY IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT

2 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 2 of 22 Table of Contents Page Table of Authorities iii Exhibit List v REPLY TO DEFENDANTS INTRODUCTION 1 POINT-BY-POINT REPLY TO ARGUMENT 2 I. 25 USC 450m-1 GRANTS SUBJECT MATTER JURISDICTION 2 A. Plaintiffs' Claims were Presented 2 B. ISDA's Jurisdictional Provision Allows All Relief Sought 3 C. "Claim One" (Defendants' Terminology) is Not in the Complaint 4 D. Claims against Secretary Kempthorne are Not Moot 5 II. FAILURE TO PAY FULL CONTRACT SUPPORT IS A BREACH 5 III. COLLATERAL ESTOPPEL IS FAIR AND PROPER 7 A. The BIA and the IHS Use Identical Rate Calculation Methodology 8 B. Collateral Estoppel is Appropriate 8 1. DOI and HHS are Co-ordinate Agencies Administering ISDA 8 2. The Issue is Identical 9 3. Collateral Estoppel is Not Unfair 9 4. No Change in Legal Landscape Precludes Application 10 C. The Court Should Apply RNC v. Lujan 11 IV. RATE ADJUSTMENTS ARE REQUIRED BY THE STATUTE AS WELL 12 V. PLAINTIFFS DID NOT WAIVE AND ARE NOT 14 i

3 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 3 of 22 ESTOPPED VI. THE TRUST RELATIONSHIP COLORS THIS CONTROVERSY 14 VII. DAMAGES ARE NOT A WINDFALL 15 VIII. PLAINTIFFS HAVE NOT CONCEDED 'CAP YEAR' CLAIMS 15 CONCLUSION 15 Plaintiffs Reply to Defendants Response to Plaintiffs Statement of Material Fact Filed herewith ii

4 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 4 of 22 CASES: Table of Authorities Alamo Navajo School Board, Inc. & Miccosukee Corp., Appeals of, I.B.C.A. No. 3463, 98-2 B.C.A. 29,832, 1997 WL (1997), reversed, Babbitt v. Oglala Sioux Tribal Pub. Safety Dep t, 194 F.3d 1374 (Fed. Cir. 1999), cert. denied, 530 U.S. 1203, 120 S. Ct (2000) American Pipe & Construction Co. v. Utah, 414 US 538, 94 S.Ct. 756 (1974) 3 Arizona v. Thompson, 281 F.3d 248 (D.C. Cir. 2002) 1, 11 Babbitt v. Oglala Sioux Tribal Public Safety Dep t, 194 F.3d 1374 (Fed. Cir. 1999), cert. denied, 530 U.S. 1203, 120 S. Ct (2000) 11 Cherokee Nation v. Leavitt, 543 U.S. 631, 125 S. Ct (2005) 6-7, 10-11, 12 Crown, Cork & Seal Co. v. Parker, 462 US 345, 103 S.Ct (1983) 3 Franconia Assoc. v. United States, 536 U.S. 129, 122 S. Ct (2002) 10 GHS Health Maintenance Org. v. United States, 76 Fed. Cl. 339 (2007) 6 Griffin v. Singletary, 17 F.3d 356, (11th Cir. 1994), cert. den. sub nom. Florida v. Platt, 513 US 1077, 115 S.Ct. 723 (1995) 3 Hitt Contracting, Inc., ASBCA Nos & 51878, 99-2 BCA (CCH) 30442, 1999 WL (1999) 5 John R. Sand & Gravel Co. v. United States, 552 US, 128 S.Ct. 750 (2008) 3 Kanag'Iq Construction Co. v. United States, 51 Fed. Cl. 38, 46 (2001) 5 MAPCO Alaska Petrol. Co. v. United States, 27 Fed. Cl. 405 (1992) 1, 5, 6 Menominee Indian Tribe v. United States, 539 F. Supp. 2d 152 (D.C. 2008) 10 New York Airways, Inc. v. United States, 369 F.2d 743 (Ct. Cl. 1966) 6-7, Placeway Constr. Corp. v. United States, 920 F.2d 903, 907 (Fed.Cir.1990) 5 Pueblo of Zuni v. United States, 243 F.R.D. 436 (D.N.M. 2007) 3 Ramah Navajo Chapter v. Babbitt, 50 F. Supp. 2d 1091 (D.N.M. 1999) 5, 14 iii

5 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 5 of 22 Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10 th Cir. 1997) 7-12 Ramah Navajo School Board, Inc. v. Babbitt, 87 F.3d 1338 (D.C. Cir. 1996) 2, 4, 5 Ramah Navajo School Board, Inc. v. Leavitt, D.N.M. No. 6:07-cv-289 (2008) (Exh. 71) 10 Seldovia Village Tribe, Appeal of, Interior Board of Contract Appeals, Nos. IBCA 3862 & 3863 (Oct. 20, 2003) (Exh. 66) 1, 6, 10 Shoshone-Bannock Tribes v. Leavitt, 408 F.Supp.2d 1073 (D.Ore. 2005) 10 St. Regis Mohawk Tribe, In Re, Dept. of Health and Human Services, Departmental Appeal Board, No. A-02-12, Decision No (Jan. 17, 2002) (Exh. 67) 10 Stone Container v. United States, 229 F.3d 1345 (Fed. Cir. 2000), cert. den. sub nom. Smurfit-Stone Container Corp. v. United States, 532 US 971, 121 S.Ct (2001) 3 Tesoro Haw. Corp. v. United States, 405 F.3d 1339 (Fed. Cir. 2005) 1 United States v. Winstar, 518 U.S. 839, 116 S.Ct (1996) 6, 7, 10 Wetsel-Oviatt Lumber Co. v. United States, 38 Fed. Cl. 563 (Ct. Cl. 1997) 6 Wilbur v. CIA, 355 F.3d 675 (DC Cir 2004) 5 STATUTES: 25 U.S.C. 1602(a) 15 Budget Act, 2 U.S.C. 622(2)(A)(iii) 6 Contract Disputes Act, Public Law , 92 Stat (1978), enacting 41 U.S.C. 601 et seq. and amending parts of titles 5, 28, and 31, U.S.C Indian Self-Determination Act and Education Assistance Act of 1975, 25 U.S.C. 450 et seq., as amended passim 450b(j) 8 450j(c) 7 450j-1(a)(2) j-1(b) 7 iv

6 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 6 of j-1(g) j l(c), sec. 1: 8, 12 Model Agreement 8, 11, 12 Sec. 1(a)(1) 9, 12 Sec. 1(d)(1) m-1 1-5, 12, 13, m-1(a) 4-5 Judgment Fund, 31 U.S.C , 14 Public Law , 102 Stat (1988) 7, 11 Public Law , Div. A, 314 [Title III], 112 Stat (1998) 11 REGULATIONS: 25 C.F.R. part OTHER AUTHORITIES: Nash, Ralph C. & John Cibinic, CHEROKEE NATION: MORE THAN MEETS THE EYE, 19 Nash & Cibinic Report No. 29 (2005) (Exh. 69) 6 Exhibit List Exhibit No.: 75 Seventh Declaration of Marcel Kerkmans v

7 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 7 of 22 REPLY TO DEFENDANTS INTRODUCTION The express purpose of ISDA is to allow tribes to operate their own programs without reduction in level of services, not to give them control over the contract formation process and certainly not to give them hard choices. Defendants litany of options whereby tribes might control contract formation boils down to nothing. The powerful option of seeking immediate judicial review of declination leads to years of the tribe not operating its own program. Suspending performance or retroceding programs wipes out the point of ISDA. Insisting brings retaliation. The sole practical option for a tribe that wants to operate its own programs with full payment as mandated is to sue under 25 USC 450m-1, as Plaintiffs have done. Defendants waiver theory is negatived by MAPCO Alaska Petrol. Co. v. U.S., 27 Fed Cl. 405 (1992), overruled on other grds., Tesoro Haw. Corp. v. U.S., 405 F.3d 1339 (Fed Cir. 2005), and Seldovia Village Tribe, IBCA 3862 & 3863 (2003) (Exh. 66). Defendants claim they acted to their detriment in reliance on Plaintiffs seeming acceptance but Plaintiffs protested and sued. IHS is not asked to foot the bill of other agencies, rather to foot its own bill in full. Common costs are everyone s costs. See Arizona v. Thompson, 281 F 3d 248 (D.C. Cir. 2002). ISDA does not require a contract price to include a fair share of the contractor s indirect costs; it requires that it include all indirect costs necessary to operate at the Secretarial level. Collateral estoppel is appropriate where the IHS regulations are the BIA regulations. Ramah Chapter could not have sued IHS in the BIA case because it had no 1

8 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 8 of 22 IHS programs. IHS injected itself into the settlement process. The suggestion, without a shred of evidence, that the Indians tried to sneak one past IHS is specious and insulting. The full rate-depressive effect of Defendants complex carry-forward methodology only came to light in the course of litigation, but it is clearly an element of the miscalculation of rates subject of the Second Amended Complaint. POINT-BY-POINT REPLY TO ARGUMENT I. 25 USC 450m-1 GRANTS SUBJECT MATTER JURISDICTION The Court has the full jurisdiction granted by 25 USC 450m-1. Defendants contention that the Court lacks equitable jurisdiction flies in the face of the express jurisdictional grant. See RNSB v. Babbitt, 87 F 3d 1338, 1344 (DC Cir. 1996). Defendants insistence on discussing a Claim One not before this Court is designed to set the table and predispose the Court for the class certification battle to come. A. Plaintiffs Claims were Presented Defendants have not carefully reviewed the record. Their reference to a letter dated July 22, 2007 conflates the RNSB presentment of June 22, 2007, Exh. 1 48, covering 2004, 2005 and 2006, with the presentment of July 31, 2007, Exh. 72, covering all years from 1995 through Both of these letters are comprehensive in the sense that they specify all aspects of the carryforward defects, including those aspects that only became apparent in discovery. In addition, RNSB presented claims based on the Ramah theory of rate dilution on August 31, Exh 53, at 19. On December 30, 2003, RNSB presented 1 "Exh." refers to Plaintiffs' exhibits filed with doc. no. 147 and with this reply. 2

9 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 9 of 22 comprehensive claims for Exh. 55, at 69. On September 21, 2005, RNSB presented comprehensive claims for 1999 through Exh. 55, at 75. Defendants are not challenging presentment by Tunica. The argument reduces to an allegation that Ramah failed to timely present claims for The time for presenting RNSB s individual claims for 1997 was tolled until class certification was denied in Pueblo of Zuni v. U.S., 243 FRD 436 (NM 2007). 2 Defendants rate-making methodology is complex and convoluted. Even IHS s designated expert Ron Demaray in his August 26, 2006, deposition was confounded by the double-dipping process and admitted that it appears to be a prohibited adverse adjustment. Exh. 22, at Presentment damage demands are not binding. Plaintiffs cannot be faulted because new elements of miscalculation of rates emerged in discovery. Though subject to mathematical calculation, damages were not fully determinable at the outset of litigation and the calculation continues to be refined. That is why the motion does not seek damages but merely a declaration of liability. B. ISDA s Jurisdictional Provision Allows All Relief Sought 2 American Pipe & Construction Co. v. Utah, 414 US 538, 94 S Ct 756 (1974)(limitations tolled during pendency of class action); Crown, Cork & Seal Co. v. Parker, 462 US 345, 103 S Ct 2392 (1983)(tolling available to all members of putative class); Stone Container v. U.S., 229 F 3d 1345 (Fed. Cir. 2000), cert. den. sub nom. Smurfit-Stone Container Corp. v. U.S., 532 US 971, 121 S Ct 1601 (2001) (Rule 23 tolling is statutory, not equitable, and so applies to Federal Government); Griffin v. Singletary, 17 F 3d 356, (11th Cir. 1994), cert. den. sub nom. Florida v. Platt, 513 US 1077, 115 S Ct 723 (1995) (American Pipe rule tolls time for administrative filing). John R. Sand & Gravel Co. v. U.S., 552 US, 128 S Ct 750 (2008), cited by Defendants, is not relevant. There, the Court relied on stare decisis to hold that the Federal Circuit should consider sua sponte noncompliance with the Court of Federal Claims limitations statute despite Government waiver of the issue in the lower courts. 128 S Ct at The case did not address Rule 23 tolling. 3

10 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 10 of 22 Plaintiffs Second Amended Complaint seeks damages for the miscalculated price of their ISDA contracts. It also seeks reform of the defective rate-making methodology Defendants used to establish those prices. Though Defendants section heading references ISDA jurisdiction, their text references only the bar of the CDA, and their long line of cases prohibiting government contractors from dressing up contract claims includes not a single ISDA precedent. Plaintiffs invoke the injunctive powers of this Court not to dress up contract damages claims from the past, but to reform the conduct of Defendants in the future. Section 450m-1 specifically grants this Court jurisdiction not only to award CDA money damages but, independently, to enjoin officials to perform their ISDA duties. RNSB v. Babbitt, 87 F 3d 1338 (DC Cir. 1996) was not in effect a declination case ; it did not address a contract claim or an AFA that was declined but rather an arbitrary rule concocted by the Secretary to evade the intent of Congress. Equitable relief is available here, as in RNSB v. Babbitt, because 25 USC 450m-1(a) provides jurisdiction for equitable relief. C. Claim One (Defendants Terminology) is Not in the Complaint Defendants persist in arguing lack of standing with reference to a shortfall claim that is not in the operative Complaint. Plaintiffs do not deny that the shortfall claim (that Defendants failed to pay even the miscalculated contract price) was presented to contracting officers. But they were under no obligation to include that claim in this litigation and chose not to for the very good reason that the miscalculation claim has proven maintainable as a class action while the shortfall claim has not. Nothing in ISDA or the CDA requires a contractor to seek judicial review of all claims on a single 4

11 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 11 of 22 contract in a single forum or at the same time. 41 U.S.C. 609; Placeway Constr. Corp. v. U.S., 920 F 2d 903, 907 (Fed.Cir.1990); Kanag'Iq Construction Co. v. U.S., 51 Fed Cl 38, 46 (2001); Hitt Contracting, Inc., ASBCA Nos & 51878, 99-2 BCA (CCH) 30442, 1999 WL (1999). Defendants say that Plaintiffs' previous briefs in this case raised the shortfall claim, but they conspicuously omit citations as there are none. 3 D. Claims against Secretary Kempthorne are Not Moot Defendants doggedly repeat their assertion that the Court lacks jurisdiction for claims against the Secretary of DOI, even in the face of the second sentence of 450m-1(a) authorizing injunctive relief against an officer of the United States or any agency thereof. RNSB v. Babbitt, 87 F 3d 1341, 1352 n.1, confirms the broad scope of 450m-1(a). Wilbur v. CIA, 355 F 3d 675 (DC Cir 2004), holding that a district court was not precluded from deciding a FOIA dispute despite failure to comply with a FOIA appeal deadline, is of no apparent relevance. II. FAILURE TO PAY FULL CONTRACT SUPPORT IS A BREACH Ignoring the authorities provided by Plaintiffs (Memo, 4 at 12-14), Defendants repeat the assertion that Plaintiffs agreed to accept less than full entitlement by signing AFAs with miscalculated amounts. Defendants refuse to acknowledge MAPCO. Except for a footnote, Opp. 27, where they argue Seldovia (Exh. 66) should be ignored because 3 RNC v. Babbitt, 50 F Supp 2d 1091, 1098, finding 8 (DNM 1999), confirms the distinction between these claims. 4 Memo refers to Plaintiffs Memorandum in Support of their motion for partial summary judgment, doc. no

12 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 12 of 22 handed down before Cherokee Nation v. Leavitt, 543 US 631, 125 S Ct 1172 (2005), they ignore the decision. 5 They ignore GHS Health Maintenance Organization v. U.S., 76 Fed Cl 339 (2007). Except in narrow circumstances, statutory benefits intended for government contractors are not waived, even where contractors are muscled into signing them away. Defendants additional defense of post-1997 capped CSC appropriations, Opp. 6 9, is not an issue on this Motion for Partial Summary Judgment that specifically excludes post-1997 damages. Defendants wish away the distinction between contract authority and expenditure authority: [T]here is no such distinction, and Plaintiffs cite no case in support. Defendants turn a blind eye to the Budget Act, 2 USC 622(2)(A)(iii); to the many cases such as Wetsell-Oviatt v. U.S., 38 Fed Cl 563 (1997); to the finding of contract authority in the ISDA by Nash & Cibinic (Exh. 69), an authority frequently relied upon in contract matters by federal courts including the Supreme Court in Winstar; and to the 51 statutes showing how Congress limits contracting authority as opposed to spending authority, Exh. 70. Defendants posit a false distinction with New York Airways, Inc. v. U.S., 369 F 2d 743 (Ct Cl 1966), cited twice with approval by the Supreme Court in Cherokee. They contend Congress included language in ISDA restricting self-determination contracts to 5 Defendants Exhibit 55 vacates only the attorneys' fees decision pursuant to an agreement of the parties, not the authoritative underlying decision on which the attorneys' fees award was based and on which Plaintiffs rely, another mislabeling. 6 Opp. refers to Defendants memorandum in opposition to Plaintiffs motion for partial summary judgment and in support of their own motion, doc. no

13 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 13 of 22 the availability of annual appropriations. But the plain wording of 450j-1(b) limits provision of funds, not price terms of self-determination contracts. And the statute in the remarkably parallel scheme in New York Airways similarly provided for payments out of appropriations. The critical passage quoted by Defendants, Opp. 10, actually demonstrates the proper way to analyze ISDA. Misreading New York Airways, reading the five page discussion of contract v. expenditure authority out of the Plaintiffs brief, and denying the distinction goes beyond careless reading. The deliberate confusion of the payment authority of the Secretary with the obligation of the United States is the heart of Defendants defense. Defendants continue to argue for sweeping interpretation of 450j(c). Not only is the legislative history contrary but if the scope of 450j(c), which preceded the 1988 amendments, were as broad as Defendants assert there would have been no need for 450j-1(b) allowing (but not requiring) the Secretary to limit his payments to contracting tribes in order to equalize the benefits to noncontracting tribes. Section 450j-1(b) is a recognition that contract debt is a higher category of obligation that must be paid in preference to grants or the expenses of department s own activities ( inherent federal functions in the argument decisively rejected in Cherokee, 543 US at ). III. COLLATERAL ESTOPPEL IS FAIR AND PROPER Defendants say collateral estoppel should not apply because the facts are different, because it would be unfair, and because Congress overruled the 10 th Circuit. But the operative facts are identical. There is nothing unfair about holding both ISDA coordinate agencies to the same standard, and any Congressional overruling could not 7

14 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 14 of 22 be retroactive. Ramah Navajo Chapter v. Lujan, 112 F 3d 1455 (10th Cir. 1997)( RNC ) is cited in 162 post-1998 Westlaw documents with no indication it is anything other than good law. Fairness strongly favors application. A. The BIA and the IHS Use Identical Rate Calculation Methodology RNC v. Lujan challenged reductions to CSC rates from inclusion of non-paying agencies in the base of the rate fraction. The identical claim is made here. The NBC (formerly OIG) sets rates for both the BIA and the IHS on their ISDA contracts, using the identical incorrect protocol. B. Collateral Estoppel is Appropriate Plaintiffs were members of the RNC class and if the class had lost would be bound by the result. The contested issue was fully litigated, it was actually and necessarily determined de novo on summary judgment by the 10 th Circuit, and there is nothing unfair about holding IHS to the same standard. 1. DOI and HHS are Co-ordinate Agencies Administering ISDA. The ISDA is a unitary scheme. DOI and HHS are co-ordinate agencies that administer the scheme. They are both bound by the same statute, 25 USC 450 et seq., and by the same regulations, 25 CFR pt 900. As shown on the face of the contract mandated at 25 USC 450l(c), Model Agreement 1(a)(1), both Secretaries sign ISDA contracts on behalf of the United States, 7 and nothing in statute or regulation distinguishes or differentiates their authority. DOI is the cognizant agency for Plaintiffs and most ISDA contractors. 7 Section 450b(j) is not inconsistent, because the Secretary signs as agent of the United States. 8

15 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 15 of 22 Plaintiffs agree that the crucial point is whether in the earlier litigation the representative of the United States had authority to represent its interests. Clearly the RNC defendants, including the United States, represented by the DOJ, had authority to represent the interests of the United States. It is elementary agency law that an agent and its principal may be joined. 2. The Issue is Identical. Obviously the two agencies are different. They have different names, different seals, different headquarters, and so on. But the issue is whether the DOI rate setting protocol for ISDA contracts, held improper as applied to BIA ISDA contracts, is equally improper as identically applied to IHS ISDA contracts. There are no differences relevant to the issue. 3. Collateral Estoppel is Not Unfair. Ramah Navajo Chapter, with no IHS contracts, could not sue IHS. Tribes with BIA and IHS contracts intervened after the 10th Circuit ruling in favor of the Chapter. Defendants here vigorously opposed JPMDL consolidation of this action with the RNC litigation. See doc. no. 73. For IHS to suggest, Opp , that it was hornswoggled by "strategic behavior" is unsupported by the history of that litigation and defies logic. The IHS closely monitored the RNC litigation and inserted itself in the settlement, demanding and obtaining a release of certain potential claims, which do not include claims in this lawsuit. The suggestion that the government had no incentive to defend vigorously in the first action is ridiculous, where the United States has already paid $114 million in damages from the Judgment Fund and the lawsuit filed in 1990 continues. 9

16 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 16 of 22 Plaintiffs agree that collateral estoppel is not to be applied mechanically, but the balance greatly favors application. The suggestions that non-joinder of the IHS as a party defendant in the earlier litigation was strategic or sneaky or that undersigned counsel were Svengalian are rude, gratuitous, and utterly unsupported in the record or in fact. 4. No Change in Legal Landscape Precludes Application. The legal landscape has indeed changed since the 10 th Circuit ruled on RNC v. Lujan, but in favor of Plaintiffs. Strictly speaking, Cherokee did not so much change the legal landscape as confirm it. The unanimous ruling was foreshadowed by St. Regis Mohawk and by Seldovia, finding contract authority in ISDA, as well as by RNC, Alamo, New York Airways, Winstar, and Franconia. It has since been extended by Shoshone-Bannock Tribes v. Leavitt, 408 F Supp 2d 1073 (D.Ore. 2005); Menominee Indian Tribe v. U.S., 539 F Supp 2d 152 (DC 2008), and RNSB v. Leavitt, Exh. 71. If the essential character of the promises in an ISDA contract was unclear before Cherokee, Opp. 18, it was unclear mainly to the IHS. In any case the clarification confirms such promises are to be kept. Cherokee holds ISDA contracts are interpreted according to ordinary contract law and no less enforceable than procurement contracts; acknowledges that special authority may exist to overcome the availability of appropriations argument; decisively restores New York Airways to sanctity from the contractual purgatory of earlier lowercourt decisions; rejects retroactive contract changes by Congress; and elevates the pro- ISDA contractor outcome in the Alamo Appeal to respectability by citing it while failing 10

17 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 17 of 22 to cite the reversal on appeal sub nom. Oglala. Nothing in Cherokee changes the legal landscape in any way to suggest collateral estoppel should not apply against Defendants. Defendants other argument is premised on the murky 1999 amendment codified at 25 USC 450j-2. The appropriations committee report calling the 10 th Circuit decision in RNC erroneous does not reference the amendment; indeed there is no legislative history explicitly bearing on 450j-2. Common costs are directly attributable to ISDA programs and associated with non-isda programs; they are not mutually exclusive. Ariz. v. Thompson, 281 F 3d at 255 n. 11. See Memo 44 n. 37. Reading the provision as Defendants posit would undermine the whole concept of contract support costs. That is something Congress obviously did not intend, as it did not repeal P.L , the Model Agreement or, more specifically, 450j-1(d)(1). In any case Plaintiff s liability claim on partial summary judgment is confined to years before Unless 450j-2 applies retroactively it cannot change the legal climate or bar collateral estoppel as to those years. Cherokee disposes of a similar government argument for retroactivity of section 314 of the 1999 Appropriations Act, passed by the same session of Congress. 543 US at 633. C. The Court Should Apply RNC v. Lujan Defendants make a major concession: all of the costs in Plaintiff's indirect cost pool benefit all of the programs in the direct cost base. Opp. 19 (lines 2-3). Thus, although IHS argues that its programs are only a small part of the base, it concedes those programs are hurt to at least some degree by the unreimbursed costs at issue. On the 11

18 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 18 of 22 same page, Defendants note our assertion that the coordinate ISDA agencies should share the costs of the Congressional mandate of full CSC. Id. n. 10. Defendants argue that Plaintiffs have not sued the BIA so relief is unavailable against the BIA. But the BIA was sued in RNC and relief is already granted. IV. RATE ADJUSTMENTS ARE REQUIRED BY THE STATUTE AS WELL ISDA at 450l(c) incorporates the mandatory Model Contract and the Model Contract in turn incorporates ISDA so there is no dichotomy. Defendants argument, Opp , that the statute no more than the contract requires full payment of CSC rehashes their contract argument and relies on the same elements: conflation of the duty of the Secretary to provide funding with the contract obligation of the United States; assertion that Plaintiffs should have used one of Defendants' preferred procedures rather than 450m-1 jurisdiction; and argument (e.g., Opp. 21 n. 13) that Plaintiffs waived their claim by following Defendants' required template. While it is true that the statute does not require the rate times base method of setting CSC to be included in full in the contract price, 8 the Defendants themselves chose that method, contractors are under strong pressure to obtain rates and once having a rate are required to use it, Plf. Facts (doc. no ) 15, and rate times base is precisely what the Supreme Court in Cherokee ordered paid in full, 543 US at 634. From the outset of litigation Plaintiffs have complained of Defendants' recondite carry-forward methodologies, ostensibly designed to reconcile estimated with actual 8 Defendants contend that ISDA does not require that reasonable and necessary CSC incurred with an ISDA program be added. Opp. 22. But 450j-1(a)(2) commands that reasonable costs for activities which must be carried on be added in the full amount as required by 450j-1(g). This includes common costs. 12

19 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 19 of 22 expenditures. Most contractors opt for Fixed with Carry Forward (FWCF) rates as the best of a set of bad options. 9 Carry-forwards are so complex that they flummox nearly everyone and Defendants' treatment of their merits, Opp , clarifies nothing. The seven Kerkmans declarations decisively answer Ms. Moberly s declaration, Def. Exh. 54, especially its two major problem areas. See especially his 7 th declaration, Exh. 75, filed herewith, passim. First, the template employed by NBC for ISDA contractors (and no other contractors) contains a shortfall column ostensibly designed to capture shortfalls in funding due to inadequate appropriations, which NBC does not permit to increase future rates. In fact, while overrecoveries invariably reduce future rates, virtually all underrecoveries by contractors, whether or not due to inadequate appropriations, are shunted into this shortfall column and have no effect on future rates. 10 Exh. 75, at , Second, under the multiyear cycle of the carry-forward methodology, an overrecovery by a contractor in the first year of the cycle causes a rate reduction in the third year of the cycle, by means of which the government is made whole. The amount of the over-recovery is also deducted from the contract price in the fifth year of the cycle. 9 The other choices are to forgo CSC altogether; negotiate a rate with a contract officer who lacks authority to grant a more favorable rate but might assign a less favorable one; or to use multiple rates that are even more complex but no more favorable. The latter two also require carryforwards, and the only other option, the provisional/final rate, requires a cash payment back where the final rate calculated according to the methodology is lower than the provisional rate; perennially cash-strapped contractors can't take the chance. Exh. 75, at Defendants use of an underrecovery rather than an overrecovery example to explain double dipping is an attempt to hide its true effect. Exh. 75, at

20 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 20 of 22 Defendants call the reduction an estimate and the deduction a reconciliation, but it is actually a double recovery. Exh. 75, at Such double dipping (in Plaintiffs' terminology) is neutral only in the sense that rich and poor alike are forbidden to sleep under bridges: it magnifies only over-recoveries, because under-recoveries are shunted into the shortfall column hence have no effect. V. PLAINTIFFS DID NOT WAIVE AND ARE NOT ESTOPPED Once again Defendants argue that by forgoing Defendants preferred but ineffective procedure in place of their 25 USC 450m-1 remedy, Plaintiffs waived their rights. The argument is addressed supra. Next, Defendants argue Plaintiffs were required to anticipate the outcome of RNC, slurring lawyer Michael P. Gross by name with an ad hominem attack suggesting it was his strategic masterplan for RNSB to await the outcome of RNC and sandbag HHS. As a matter of fact, Defendants own designated representative Ron Demaray happened to be employed by RNSB at the relevant time; he explains that RNSB did not join the RNC litigation because he did not think it was a winner. Exh. 22, at 9. Finally Defendants argue that Plaintiffs are estopped because appropriations are exhausted and any recovery from the Judgment Fund would have to be repaid. Such an argument would apply equally against any plaintiff seeking recovery from the Judgment Fund and if accepted there would be no point to the Judgment Fund. Repayment is required only when funds from current appropriations are available. See RNC v. Babbitt, 50 F Supp 2d at 1094 (repayment from Indian program funds would be charlatanism ). VI. THE TRUST RELATIONSHIP COLORS THIS CONTROVERSY 14

21 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 21 of 22 Congress has acknowledged the trust relationship between the United States and the Indian nations in matters of health care. 25 USC 1602(a). See also 25 USC 450l(c), Model Agreement 1(d)(1). This Court has recognized that relationship. Doc. no. 48, at The bureaucratic resistance to Indian self-determination and the panoply of insupportable and overbroad defenses in this litigation demonstrate just how far Defendants have strayed from their trust duties. VII. DAMAGES ARE NOT A WINDFALL Defendants windfall argument concedes, Opp. 29, that Defendants have recovered all overpayments of indirect costs through the carryforward process. But Plaintiffs have not recovered their losses due to the lower rates caused by the miscalculation defects, including those due to the carryforward manipulations, and Defendants do not dispute the effects of those defects and manipulations, as set out in the Kerkmans spreadsheets, Exh. 31, at 12-13, 35, 64, & Exh. 33, at VIII. PLAINTIFFS HAVE NOT CONCEDED CAP YEAR CLAIMS Defendants close with the silliest argument of all. Plaintiffs move for partial summary judgment on lump sum year claims because those claims have been determined and collateral estoppel is appropriate. A deadline for filing dispositive motions does not mean that all claims not subject of a dispositive motion are waived. CONCLUSION Plaintiffs Motion for Partial Summary Judgment is well taken and should be granted. Respectfully submitted, 15

22 Case 1:02-cv RBW Document 150 Filed 06/01/2008 Page 22 of 22 For Plaintiffs: M.P. GROSS LAW FIRM, P.C. /s/ Michael P.Gross MICHAEL P. GROSS Counsel for Plaintiffs 460 St. Michael s Drive, Suite 401 Santa Fe, New Mexico Telephone: (505) Fax: (505) New Mexico Bar No DAN MACMEEKIN, ATTORNEY AT LAW /s/ Daniel H. MacMeekin DANIEL H. MACMEEKIN 1776 Massachusetts Avenue, NW --Suite 801 Washington, DC Telephone: (202) Fax: (202) D.C. Bar No GALLEGOS LAW FIRM, P.C. /s/ J. E. Gallegos J.E. GALLEGOS Co-Counsel for Plaintiffs 460 St. Michael s Drive, Bldg. 300 Santa Fe, New Mexico Telephone: (505) Fax: (505) New Mexico Bar No. 897 ERIC TREISMAN /s/ Eric Treisman 460 St. Michael's Drive, Suite 402 Santa Fe, New Mexico Telephone: (505) Fax: (505) New Mexico Bar No