“The Cobell Trust Land Lawsuit” by Justin Guilder (November-December 2008 P&R Issue)

By Justin Guilder (Click here to view the entire P&R issue)

Cobell v. Kempthorne (Dirk Kemp­thorne, the current Secretary of the Interior) is one of the nation’s more complex, long-running and important lawsuits, seeking justice for a class of American Indians who beneficially own allotted trust land. The trust assets include oil, natural gas, timber, minerals, land leases, grazing leases, etc. The geographical area covered by these trust revenues stretches all across the Western U.S., from Oklahoma to Montana to California to Arizona and everywhere in between. The land was the subject of the 1887 Dawes Act, which broke up reservations and gave individual Indians their own land in order to assimilate the Indians into white culture by destroying their sense of tribal (community) property and instilling a sense of self (individual) ownership.

The Background

In 1996, five Indians filed a complaint in the U.S. District Court for the District of Columbia on behalf of themselves and all other individual Indian trust beneficiaries (over 500,000 in all), alleging the federal government had breached its fiduciary obligations, claiming that the government destroyed critical records, failed to account to trust beneficiaries, and either lost trust assets or converted them to government use. Over the next three years, the district court certified the case as a class action, issued many opinions and, after conducting a lengthy trial, concluded that the federal government had failed to discharge its fiduciary duties and was in breach of trust. In 2001, the Court of Appeals for the District of Columbia Circuit generally affirmed and recognized that the individual Indian trust that Congress created over 100 years ago had been mismanaged nearly as long.

Plaintiffs and defendants battled over many issues over the next five years. During these years, mediation occurred, yet the government never offered to settle the lawsuit at any price, rejecting every proposal to settle the case made by plaintiffs and by mediators. Extraordinarily, two previous Secretaries of the Interior have been held in contempt by the district court.

On August 7, 2008, Judge James Robertson of the U.S. District Court for the District of Columbia issued the latest opinion in Cobell v. Kempthorne (“Cobell XXI”—there have been so many major decisions—and minor ones —in this case that the courts have begun numbering the major ones for identification purposes). This most recent decision, which follows on the heels of a January 30, 2008 decision in which the court concluded that the historical accounting of all individual Indian trust funds was impossible, awards the plaintiff class in restitution from defendants $455.6 million of undisbursed trust funds. Although the court in Cobell XXIdetermined that the plaintiff class is entitled to recover their own undisbursed trust funds, several significant legal errors exist; the plaintiff class is in the process of seeking appellate review of those issues.

Appellate Review

Plaintiffs are challenging (at least) the following three paramount questions of law contained in Cobell XXI: (1) Although the government rendered impossible its declared accounting duty, the court held that it is unfair to hold the government accountable to the plaintiff class in accordance with traditional trust law, despite the absence of Congressional limitations on either the government’s accounting duty or its accountability for breach of such duty; (2) The court held that the government has not waived its immunity under 5 U.S.C. § 702 with respect to a claim for specific relief for interest that has accrued on plaintiffs’ trust funds, notwithstanding an express statutory trust duty to pay such interest; and, (3) The court held that funds expressly held in trust by the government for the benefit of individual Osage Tribe members of the plaintiff class are not recoverable if held in an account not expressly designated as an individual Indian trust account.

First, the district court concluded that it would be unfair to invoke traditional trust law presumptions and adverse inferences against the government as trustee that ordinarily apply where, as here, the trustee has destroyed, lost and compromised records essential to a complete and accurate accounting, because, in the district court’s opinion, unique characteristics of the Individual Indian Trust “temper the application of ordinary trust law.” Cobell XXI, 2008 WL 3155157, at *24. The district court’s ruling that the government as trustee is not obligated to prove or justify disbursements that it claims it has made from the IIM (Individual Indian Money) Trust and that traditional presumptions and adverse inferences do not apply to the government is inconsistent and in conflict with controlling Supreme Court and Circuit law, as well as governing trust law. The government’s trust duties are not diminished by the unique qualities of the IIM Trust, because Congress has enacted no legislation that expressly, or by necessary implication, limits such fiduciary duties and obligations. The district court’s expressed concern about fairness to the government when it rejected traditional trust law presumptions and inferences is unprecedented and in conflict with controlling law.

Indeed, Supreme Court and Circuit precedent make clear that traditional trust principles apply to the government’s management of the IIM Trust notwithstanding its unique qualities. In Mitchell v. United States, 463 U.S. 206, 225 (1983), the Supreme Court held that traditional trust duties and ordinary incidents of trusteeship apply to the IIM Trust because the government exercises complete control over Individual Indian Trust lands and trust revenue solely for the benefit of the plaintiff class. District of Columbia Circuit law is in accord. A trustee must show how the trust assets and funds entrusted to them have been administered or applied. And if full and accurate accounts have not been kept, all presumptions are adversely indulged, and all obscurities and doubts are to be taken most strongly against them. Plaintiffs, therefore, are challenging the court’s conclusion that the presumptions typically utilized in trust cases do not apply to this case because of the unique nature of the trust.

Second, the court held that enforcement of 25 U.S.C. § 4012—which requires the Secretary of the Interior to pay interest “to an individual Indian in full satisfaction of any claim . . . for interest on amounts deposited” where the claim is identified through “a reconciliation process of individual Indian money accounts”—is not specific relief within the waiver of immunity in 5 U.S.C. § 702. This ruling not only conflicts directly with Supreme Court precedent, but with the law of the Cobell case; the D.C. Circuit has already explained that the plaintiff class is entitled to recovery of interest for any delay in payment. Cobell v. Norton (“Cobell XIII”), 392 F.3d 461, 468 (D.C. Cir. 2004). Plaintiffs are deeply troubled by the court’s blatant disregard for such controlling precedent.

Third, the district court rejected the arguments of both the plaintiffs and the Osage Tribe that individual Osage Indian trust funds collected by the government should be included in the calculation of individual Indian trust revenue, and thus in the calculation of a remedy to the extent the funds remain undisbursed. The court’s sole basis for that conclusion is the fact that the government contends that individual Osage Indian trust revenue was deposited into a “tribal” rather than an IIM account. Plaintiffs contend that the particular Treasury account holding individual Indian trust moneys is irrelevant to whether it constitutes IIM funds for purposes of this action. The exclusion of the individual Osage revenue had a significant adverse impact on the restitution calculation.

Next Phase

Plaintiffs recently filed briefs with the Court of Appeals for the District of Columbia Circuit seeking immediate appellate review of these three issues. It is important to resolve these legal issues regarding the exclusion of class members and trust revenue before significant time and money are expended on notice to beneficiaries and a plan for distribution. Plaintiffs hope that the Court of Appeals reverses the lower court’s rulings and that this case may move forward to a fair and expeditious resolution. Individual Indians have faced significant problems throughout the 120-year history of this trust and, unfortunately, justice is still years away. That is, of course, if it can ever be attained.

Notes:

All of the court opinions (and much more information) are available on www.indiantrust.com.

Justin Guilder (JGuilder@kilpatrickstockton.com) is a litigation associate at Kilpatrick Stockton, LLP, co-counsel for the Cobell plaintiff class. All of the court opinions (and more information) are available on indiantrust.com.