Cobell v. Salazar

573 F.3d 808

Elouise Pepion COBELL, et al., Appellants/Cross-Appellees v. Kenneth Lee SALAZAR, Secretary of the Interior, et al., Appellees/Cross-Appellants.

No. 08-5500.

No. 08-5506.

United States Court of Appeals, District of Columbia Circuit.

Argued May 11, 2009.

Decided July 24, 2009.

Appeals from the United States District Court for the District of Columbia, (No. 1:96-cv-01285-JR).

Dennis M. Gingold argued the cause for appellants/cross-appellees. With him on the briefs were Elliott H. Levitas and David C. Smith. Keith M. Harper entered an appearance.

Alisa B. Klein, Attorney, U.S. Department of Justice, argued the cause for appellees/cross-appellants. With her on the briefs were Michael F. Hertz, Acting Assistant Attorney General, Jeffrey A. Taylor, U.S. Attorney, and Robert E. Kopp, Mark B. Stern, Thomas M. Bondy, Alisa B. Klein, Mark R. Freeman, and Samantha L. Chaifetz, Attorneys. Tracy L. Hilmer and James C. Kohn, Attorneys, U.S. Department of Justice, and R. Craig Lawrence, Assistant U.S. Attorney, entered appearances.

Merrill C. Godfrey argued the cause for movant-intervenor Osage Nation. With him on the brief was James P. Tuite.

Before: SENTELLE, Chief Judge, GINSBURG, Circuit Judge, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Chief Judge SENTELLE.

SENTELLE, Chief Judge:

In this interlocutory appeal, both plaintiffs and defendants in protracted litigation over trust accounts held by federal officials on behalf of American Indians seek review of orders of the district court. The district court held the Department of the Interior to be in continuing breach of its duty to account for trust funds and that accounting for the funds was impossible; it ordered monetary relief to the members of the plaintiff class. On review, we hold that while the district court's analysis of duty and breach are generally correct, the court erred in freeing the Department of the Interior from its burden to make an accounting. We therefore vacate the district court's orders and remand for further proceedings.

I. Background

In 1996, beneficiaries of Individual Indian Money (IIM) trust accounts brought this class action against the Secretary of the Interior, the Secretary of the Treasury, and the Assistant Secretary of the Interior for Indian Affairs, alleging that those officials had violated their fiduciary duties as trustees acting on behalf of the United States. See Cobell v. Babbitt, 30 F.Supp.2d 24, 29 (D.D.C.1998) (Cobell I). The bulk of the trust assets "are the proceeds of various transactions in land allotted to individual Indians under the General Allotment Act of 1887, known as the `Dawes Act.'" Cobell v. Norton, 392 F.3d 461, 463 (D.C.Cir.2004) (Cobell XIII) (citing 24 Stat. 388 (codified as amended at 25 U.S.C. § 331 et seq. (§§ 331-333 repealed 2000))). In bringing this action, appellants rely upon the American Indian Trust Fund Management Reform Act of 1994, Pub.L. No. 103-412, 108 Stat. 4239 (codified as amended at 25 U.S.C. § 162a et seq.; id. at §§ 4001-4061) (1994 Act). That statute requires the Secretary of the Interior to "account for the daily and annual balance of all funds held in trust by the United States for the benefit of ... an individual Indian which are deposited or invested pursuant to the Act of June 24, 1938 (25 U.S.C. 162a)." 25 U.S.C. § 4011(a). The plaintiffs initially sought an accounting of the trust funds but did not seek payment of any money beyond "court costs, experts' costs, and attorneys' fees." Cobell I, 30 F.Supp.2d at 29.

Plaintiffs and defendants cross appeal from two orders of the district court. The first, Cobell v. Kempthorne, 532 F.Supp.2d 37, 39 (D.D.C.2008) (Cobell XX), held that the Department of the Interior continued to breach its duty to account for trust funds as identified in Cobell v. Babbitt, 91 F.Supp.2d 1, 58 (D.D.C.1999) (Cobell V), and affirmed by this court in Cobell v Norton, 240 F.3d 1081 (D.C.Cir.2001) (Cobell VI). Cobell XX further held that accounting for the funds was impossible "as a conclusion of law" because the government could not "achieve an accounting that passes muster as a trust accounting" given inadequate present and (likely) future funding from Congress. 532 F. Supp 2d at 104 n. 19. The second order of the district court, Cobell v. Kempthorne, 569 F.Supp.2d 223, 238, 251-52 (D.D.C.2008) (Cobell XXI), granted equitable restitution to the plaintiff class based on the unproven shortfall of the trust's actual value as compared with its statistically likely value. The district court stressed that breaching the duty to account did not generate the government's financial liability. Id. at 243. Rather, the government's "failure properly to allocate and pay trust funds to beneficiaries" gave rise to "restitution or disgorgement of the very money that ha[d] been withheld." Id. Accordingly, the court awarded $455,600,000 to the plaintiff class in what it called a restitutionary award. Id. at 226.

Soon after issuing Cobell XXI, the district court certified an immediate interlocutory appeal from both decisions under 28 U.S.C. § 1292(b). Order (Sept. 4, 2008). All plaintiffs and all defendants petitioned for permission to appeal, and this court granted the petitions. Orders (Nov. 21, 2008).

We now hold that the district court correctly held that the 1994 Act and Cobell VI required a full accounting, but erred in holding that an accounting cannot be conducted because, in the district court's view, Congress will never appropriate the funds necessary to conduct such an accounting. The statute gives the plaintiff class a right to an accounting. Sitting in equity, the district court has the authority to approve a plan that efficiently uses limited government resources to achieve that goal. It is within the power of the district court to order an accounting without requiring Interior to perform analyses the costs of which exceed the benefits payable to individual American Indians. It would indeed be "nuts" to spend billions to recover millions. Cobell XX, 532 F.Supp.2d at 86. A court sitting in equity may avoid reaching that absurdity.

* * *

As this case enters its thirteenth year, it becomes increasingly difficult to summarize its factual and procedural background. See Cobell XX, 532 F.Supp.2d at 103 & n. 20 (collecting quotations from Charles Dickens's Bleak House); id. at 39-43 (attempting such a summary). Cobell VI contains a general description of how funds came to be deposited in the IIM accounts. 240 F.3d at 1086-88. For a summary of their early mismanagement and the government's early attempts at reform, see id. at 1089-90.

Since passage of the 1994 Act—and the filing of this lawsuit—the Department of the Interior has had mixed success in its efforts to account for the trust funds. Cobell XX, 532 F.Supp.2d at 43-56, provides a good summary of the evolution of the current historical accounting project. Apart from Interior's independent efforts, the district court has frequently issued injunctions specifying the terms of an accounting that it held were required by the 1994 Act. In 1999, the district court issued an eight-point injunction declaring the government in violation of the 1994 Act and in breach of trust. Cobell V, 91 F.Supp.2d at 58. The injunction ordered the defendants "to provide plaintiffs an accurate accounting of all money in the IIM trust held in trust for the benefit of plaintiffs, without regard to when the funds were deposited," and laid out a general plan for compliance. Id. We affirmed the district court's order in 2001. Cobell VI, 240 F.3d at 1110.

In 2003, the district court issued a nine-page injunction. See Cobell v. Norton, 283 F.Supp.2d 66, 287-95 (D.D.C.2003) (Cobell X). That injunction called for a detailed accounting of "all funds deposited or invested in," id. at 288, or "assets held by[,] the Trust since the passage of the General Allotment Act of 1887," id. at 289, as well as money held by Indian tribes, accounts of deceased beneficiaries, and all property escheated from the trust. Id. at 288-89. When performing this accounting, Interior was prohibited from "mak[ing] use of any statistical sampling." Id. at 289. In Cobell XIII, 392 F.3d at 464-68, we vacated the "historical accounting" portions of Cobell X's injunction, relying on the appropriations language of the Department of the Interior and Related Agencies Appropriations Act of 2004, Pub L. No. 108-108, 17 Stat. 1241. That act, passed by Congress in November 2003, conditioned the appropriation of Indian trust money on the requirement that nothing in the 1994 Act, "or in any other statute, and no principle of common law, sh[ould] be construed or applied to require the Department of the Interior to commence or continue historical accounting activities with respect to the Individual Indian Money Trust until" (a) Congress amended the 1994 Act to "delineate [Interior's] specific historical accounting obligations" or (b) "December 31, 2004." 117 Stat. at 1263.

After 2005 arrived without congressional action, the district court reissued the injunction that had been vacated by Cobell XIII. Reasoning that "December 31, 2004 ha[d] come and gone" with "no legislative solution," the district court held itself "bound, by its findings of fact and conclusions of law" in Cobell X, "to reissue without modification the `historical accounting' provisions of its structural injunction." Cobell v. Norton, 357 F.Supp.2d 298, 300 (D.D.C.2005) (Cobell XIV). We again vacated the district court's injunction. See Cobell v. Norton, 428 F.3d 1070, 1074-77 (D.C.Cir.2005) (Cobell XVI). We explained that the 1994 "Act's general language doesn't support the inherently implausible inference that it intended to order the best imaginable accounting without regard to cost." Id. at 1075. Because of the unique nature of this trust, we held that "the common law of trusts doesn't offer a clear path for resolving" the "ambiguities" involved in setting the...