« Healthcare Case Predictions | Main | Don't Forget Alvarez! »

Thursday, June 28, 2012

Why Salazar v. Ramah Navajo Chapter is more than simply a federal contracting case

Last week, the Supreme Court decided two cases involving Indian tribes: Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak and Salazar v. Ramah Navajo Chapter.

Patchak, which has generated more discussion and analysis, was an APA challenge by a neighboring (non-Indian) landowner to the Secretary of the Interior’s decision to take land into trust for a tribe’s casino. The U.S. and the tribe argued that the landowner lacked prudential standing to challenge the decision and that the APA’s general waiver of sovereign immunity did not apply because of a provision in the Quiet Title Act prohibiting challenges to Indian land title. The Court rejected both arguments, effectively opening the door for anyone to challenge land-into-trust decisions. See here and here for some good discussions of the Patchak decision and its potential ramifications.

In Ramah, the tribe (actually several tribes - Ramah Navajo represented a class and Oglala Sioux and Zuni Pueblo intervened) sued the federal government directly over the government’s failure to pay certain costs associated with the tribe’s federal contract, a contract authorized by the Indian Self-Determination and Education Assistance Act.

That law, passed in 1975, authorizes Indian tribes to enter into contracts with the Department of the Interior or the Indian Health Service to provide governmental services that the federal government would otherwise have provided. As long as a tribe can demonstrate basic institutional capacity to administer the program, the agencies are obligated to turn responsibility over to the tribe and to provide the tribe with at least the amount of funding that it would have used to fund the program directly, plus administrative and overhead costs (called contract support costs).

The U.S. argued that it was not required to pay all the costs due under the tribe’s contract because Congress had set an express limit on the amount of money that could be used by the agency to pay contract support costs, and that amount was not enough to cover the costs due to all contracting tribes. The Court sided with the tribe in Ramah, holding that as long as the agency’s appropriation for contract support costs has enough money to cover the costs due under a particular contract, it is legally obligated to pay those costs, even if it doesn’t have enough money to pay all tribal contractors. The agency arguably faced conflicting legal obligations. As a matter of appropriations law, it was prohibited from paying the full amount of contract support costs due to tribes. Moreover, a law called the Anti-Deficiency Act makes it a crime for federal officials to spend money that an agency does not have. But as a matter of contract law, the agency was liable to each contractor for its full costs. The Court resolved this conflict by permitting tribes to sue the agencies to recover on unpaid costs, with the government paying the costs from a separate fund.

As other blogs have noted, the U.S. was on the losing side in both cases. In Patchak, the U.S. sided with the tribes, so the loss is not surprising. Tribal interest have lost before the Supreme Court about 80% of the time since 1987 (David Getches and Alex Skibine have each analyzed success rates) and, as Matthew Fletcher has noted, the U.S. tends to lose when it sides with tribes. The bigger surprise is the tribal win in Ramah, one with a majority composed of an unlikely alliance of Justices.

Ramah follows Cherokee Nation v. Leavitt, a 2005 case in which the tribe won a unanimous decision in a similar case about the government’s obligation to pay contract support costs. In the past decade, tribal interests have won before the Supreme Court only four times, and two of these wins (the only wins since 2004 and the only win in the Roberts Court) were contract support cost cases. Why?

One compelling argument is that, in the modern era, tribes fare best when the issues are not Indian law issues at all. In Ramah and Cherokee Nation, the Court viewed the tribes as federal contractors. The tribal position in each case was supported by other (non-tribal) federal contractors (the U.S. Chamber of Commerce and the National Defense Industrial Association filed an amicus brief in Ramah, and they were joined by Aerospace Industries Association in a brief supporting the tribes in Cherokee Nation). The problem (failure to pay contract support costs) affects non-tribal contractors as well. So Ramah might be better described as a federal contracting case in which the contractors just happen to be Indian tribes – not an Indian law case at all.

But it’s a mistake, particularly for teachers of Indian law, to view Ramah and Cherokee Nation as cases that are not about Indian law. They arise under the Indian Self-Determination and Education Assistance Act, which is the central legislative expression of the U.S. government’s modern day self-determination policy, a policy initiated by President Nixon and affirmed by every President since. That policy, which favors tribal control over Indian issues and local governance of reservation communities, was a direct response to prior federal policies favoring pervasive (and remote) federal control over almost every aspect of reservation life, from health care to policing to schools to natural resource management. The rationale for such pervasive federal control was twofold: it was based in part on the idea that the federal government has a trust and treaty-based responsibility to provide many of these services to Indian people, and in part on the widespread belief throughout much of U.S. history that Indians were incapable of providing these services for themselves.

The ISDA affirms the first idea (federal responsibility) and soundly rejects the second (Indian incompetence). Broadly, its purpose is to facilitate tribes’ ability to control the programs and issues that affect their communities. It does so through the mechanism of government contracts. Specifically, the Act allows tribes to enter into contracts with the federal government to run any program that was previously run directly by the Bureau of Indian Affairs or the Indian Health Service. Many tribes have seen tremendous improvements in the quality and responsiveness of programs, such as police, jails, and hospitals, since taking them over under the ISDA.

But make no mistake – federal Indian programs remain devastatingly under-funded, and this under-funding is passed through to tribes via the ISDA. This is precisely why contract support costs matter so much to tribes. When the Act was first passed, tribes received only the amount the agency would have directly allocated to their program, but a lot of the program money was eaten up by indirect administrative costs, for which the agencies generally did not reimburse tribes. For example, while the Indian Health Service would have relied on its own administrative funding to cover overhead and administrative costs of running a hospital on Tribe X’s reservation (e.g., liability insurance and employee fringe benefits), Tribe X would only receive the amount directly allocated to hospital programming, with the agency retaining its full administrative funding. Tribe X might be forced to cover these overhead costs by cutting hospital services or laying off staff.

So Congress amended the ISDA to require the agencies to pay contract support costs. Agencies use a standard formula to calculate these costs, and the amounts are included in each tribe’s contracts and annual funding agreements. The agencies are obligated to pay these costs, subject to the availability of appropriations.

But for years the agencies have not paid the costs due to tribes under their contracts, racking up a pretty big debt to tribes. The problem is that, as more tribes opt to enter into contracts and the agencies are obligated under the statute to agree to those contracts, the amount of money appropriated for contract support costs has not kept pace with the total need (remember, these are chronically under-funded agencies).

The government first argued that no more money was legally available to pay the tribes because each agency’s entire lump sum appropriation had been allocated to other costs, such as program and central administrative costs.  In Cherokee Nation v. Leavitt, two tribes (the Cherokee Nation and the Shoshone-Paiute Tribes of the Duck Valley Reservation) challenged this excuse directly, arguing that not having enough money to do everything was not a reason for the Indian Health Service to escape its contractual obligation to pay a tribe so long as the agency’s appropriations were sufficient to cover the contract support costs due under that specific contract. The Court agreed unanimously, holding that the Department was obligated to pay the contract support costs due under a particular tribe’s contract, even when Congress had failed to appropriate sufficient funds to the agencies to cover all necessary program and operating expenses, plus the contract support costs due all tribes collectively. 

So while general under-funding of Indian programs provides a ready-made excuse for poor federal services on many reservations, it does not allow the government to escape liability for costs that are enshrined in a contract. As more and more tribes enter into contracts, more and more of these costs will be legally protected. (You might be wondering where the money to pay contract support costs will come from after the agency has exhausted its annual appropriation. The answer is that the U.S. has a separately funded Judgment Fund that exists to pay judgments when the U.S. loses in court, including losses in Contract Disputes Act cases like these).

Even after Cherokee Nation, however, the agencies continued to resist paying. In certain years, Congress actually imposed a statutory cap on the amount of money the agencies could use to pay contract support costs. The annual appropriations bill provided a lump sum for funding the agency, “of which not to exceed” a certain amount could be used to pay contract support costs. The agencies divided the available money among tribes, leaving many tribes with a shortfall. Cherokee Nation did not address the effect of this statutory cap, so the government continued to argue that the cap relieved them of the obligation to pay.

The existence of the statutory cap was the only difference between the two cases. In Cherokee Nation, the money was not available to pay contract support costs because the agency had chosen to allocate it to other things. The Court there pointed out that the agency could have reprogrammed funding from other agency needs to cover the costs due under tribal contracts. In theory, the agency could have directed all available funding to pay tribal contract support costs. In Ramah, on the other hand, Congress had expressly limited the amount of agency funding that could be used to pay these costs. As a matter of appropriations law, the agency was not free to reprogram other funding to cover excess contract support costs. Furthermore, ISDA specifies that the agencies need not take funding from one tribe to pay another, and the Anti-Deficiency Act makes it a criminal offense for federal officials to spend money that the agency does not have. The government argued that interplay of the appropriations cap, the ISDA provision, and the Anti-Deficiency Act meant that no more funding was legally available to pay contract support costs.

The Ramah Court rejected this excuse as well, holding that as long as there is enough money appropriated for contract support costs in a given year to cover a particular tribe’s costs, the government is obligated to pay those costs (and the tribe can sue to recover them), even if the money appropriated is not enough to pay the costs due under all contracts and even if Congress expressly limited the amount the agency was authorized to pay for such costs.  

When tribes act as federal contractors, the Court has been willing to come out strongly in their favor using “ordinary Government contracting principles,” even against the U.S. and even when it means imposing a fiscal obligation on the federal government in an era when federal spending is widely scrutinized. Cherokee Nation and Ramah also highlight the tension between authorizations and appropriations when it comes to federal funding. As is the case with many federal programs, Congress is authorized to spend far more on Indian programs than it actually does. The appropriations committees are apprised each year of the shortfall in contract support cost funding, yet each year they fail to appropriate enough money to pay the costs due. In this case, the agency did not even ask for the full amount of money needed to pay its ISDA-related costs in its annual budget requests. By affirming the enforceability of the contracts, the Court has provided tribes with a powerful tool to push back against federal under-funding of Indian programs that they otherwise can do little about.

Doctrinally, the tribal wins in Ramah and Cherokee Nation are simply examples of the Court ruling in favor of the enforceability of government contracts. But this dry-sounding issue is actually crucial to modern Indian law practice, and this is where I think many Indian law teachers (myself included) are missing the boat. Indian law casebooks contain minimal information on the ISDA, and most teachers probably spend little or no time teaching students the mechanics of the Act (I spent half a class period last semester). Yet ISDA contracts are one of the most important tools of self-determination and success in the past three decades, and contract support costs have emerged as a critical component of them. Tribes faced with funding shortages have been forced to lay off staff, cut programs, and even withhold services like medical care. The estimated national shortfall for tribal contract support costs almost $800 million. The litigation surrounding payment of contract support costs has affirmed a crucial source of funding for tribal programs where general principles of Indian law, such as the federal trust responsibility, have failed. The wins in Ramah and Cherokee Nation may mean judgments in the millions for those tribes, and could mean over $1 billion for tribes nationwide.

One important lesson to take from these cases is that tribes seem to fare best when they can take advantage of more straightforward legal principles without having to rely on the special rules of Indian law, toward which the Court today seems skeptical at best and hostile at worst. Another important lesson, though, is that after passage of the ISDA, law students should at least be introduced to government contracting principles as a component of Indian law training.  


Posted by Addie Rolnick on June 28, 2012 at 04:25 AM | Permalink


TrackBack URL for this entry:

Listed below are links to weblogs that reference Why Salazar v. Ramah Navajo Chapter is more than simply a federal contracting case:


Post a comment