Supreme Court to Review Breach of Trust Decisions

Robert T. Anderson

The U.S. Supreme Court will review two Federal Circuit Court of Appeals decisions imposing monetary liability on the United States for breaches of its trust responsibility: White Mountain Apache Tribe v. United States, 249 F.3d 1364 (2001), cert. granted, 122 S.Ct. 1604 (2002), and Navajo Nation v. United States, 263 F.3d 1325 (2002), cert. granted, 122 S.Ct. 2326 (2002). At issue in the first case are damages claims for harm allegedly done to property held in trust by the United States for the White Mountain Apache Tribe, but used by the United States for school and other administrative purposes. The Navajo case involves the Department of the Interior's approval of royalty rate adjustments in coal lease agreements between the Navajo Nation and Peabody Coal Company. During negotiations, Secretary of the Interior Donald Hodel engaged in ex parte communications with the Peabody Coal Company and suppressed an administrative decision that was favorable to the Nation. The Navajo Nation alleges that approval of the amendments by the Secretary under these circumstances was a breach of his trust obligations.

It is widely anticipated that the Supreme Court's rulings in these cases will have a significant impact on the ability of tribes to seek recourse for breaches of the federal government's trust responsibility. The Court has not reviewed a breach of trust case involving damages since the early 1980s when it issued two opinions in cases captioned United States v. Mitchell. The cases involved mismanagement of timber resources on allotments held in trust by the United States for individual Indians on the Quinault Indian Reservation. In Mitchell I, the Court rejected damages claims based on the General Allotment Act of 1887, United States v. Mitchell, 445 U.S. 535, 542 (1980). When the case returned for a second time, the Court found the United States liable under federal timber management statutes that provided the government with effective control over tribal timber. See United States v. Mitchell, 463 U.S. 206 (1983) (Mitchell II).

The United States asked the Supreme Court to review the White Mountain Apache and Navajo cases in order to address "the proper application of the Mitchell decisions in a comprehensive manner." United States' Petition for Certiorari at 28, United States v. Navajo Nation (No. 01-1375). The fact that tribes have not fared well in recent years before the Supreme Court causes tribes and their advocates to watch these cases with trepidation. At minimum, the Court's rulings will have a profound effect on how breach of trust actions are litigated in the Court of Federal Claims and could have a broader impact on the federal-tribal trust relationship.

The Trust Responsibility: Differences Between Damages Actions and Claims for Equitable Relief

The existence of a trust responsibility on the part of the United States to Indian tribes is without dispute. As described by the Supreme Court in Seminole Nation v. United States, 316 U.S. 286, 296-97 (1942), "under a humane and self-imposed policy which has found expression in many acts of Congress and numerous decisions of this Court, [the United States] has charged itself with moral obligations of the highest responsibility and trust." Most recently, in Department of the Interior v. Klamath Water Users Protective Ass'n, 532 U.S. 1, 121 S.Ct. 1060, 1067 (2001), the Supreme Court noted that:

The existence of a trust obligation is not, of course, in question, see United States v. Cherokee Nation of Oklahoma, 480 U.S. 700, 707 (1987); United States v. Mitchell, 463 U.S. 206, 225 (1983); Seminole Nation v. United States, 316 U.S. 286, 296-297 (1942). The fiduciary relationship has been described as "one of the primary cornerstones of Indian law," F. Cohen, Handbook of Federal Indian Law 221 (1982), and has been compared to one existing under a common law trust, with the United States as trustee, the Indian tribes or individuals as beneficiaries, and the property and natural resources managed by the United States as the trust corpus.

This responsibility has been interpreted as requiring the United States and its officers to meet exacting fiduciary standards in carrying out responsibilities affecting Indian tribes and treaty rights. The United States' sovereign immunity has been waived by the Administrative Procedure Act (APA) in cases for prospective enforcement of certain federal obligations and the trust responsibility. See 5 U.S.C. ' 702 ("A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.").

Thus, in cases involving the management of Bureau of Reclamation water projects, the United States must exercise any discretion for the benefit of Indian tribes. See Pyramid Lake Paiute Tribe of Indians v. Morton, 354 F. Supp. 252, 256 (D.D.C. 1973). The United States also has been held to have an obligation to ensure that tribal oil and gas lessees obtain the best possible return on their leases. See Cheyenne Arapaho Tribes of Oklahoma v. United States, 966 F.2d 583 (10th Cir. 1992), cert. denied, sub. nom., Woods Petroleum v. United States, 507 U.S. 1003 (1993); see also, Winnebago Tribe of Nebraska v. Babbitt, 915 F. Supp. 957 (D.S.D. 1996) (requiring BIA to consult with tribe before making reductions in force). The much-publicized litigation over the management of individual Indian trust accounts is a high-profile example of a case seeking prospective equitable relief. See Cobell v. Norton, 240 F.3d 1081 (D.C. Cir. 2001). Cobell is a class action seeking an accounting of the funds held in trust for individual Indian money account holders and a declaration of the United States' responsibilities as trustee. The United States has extensive responsibilities recognized and detailed in the Indian Trust Fund Management Act of 1994. See 25 U.S.C. ' 162a, et seq. The action to vindicate those rights and common law trust duties was found proper under the APA. See Cobell, 240 F.3d at 1094-95. The APA's waiver, however, does not extend to claims for money damages. See 5 U.S.C. ' 702; see also Bowen v. Massachusetts, 487 U.S. 879 (1988) (allowing claim for restitution since it is not technically a "damages" claim); Rosebud Sioux Tribe v. United States, 714 F. Supp. 1546 (D.S.D. 1989) (declining to exercise jurisdiction over damages action and transferring case to Claims Court).

Prior to 1855, sovereign immunity generally barred private parties from seeking money damages in the courts against the United States. Besieged by private bills for relief, Congress adopted a series of statutes to provide access to the courts for wrongs committed by the federal government. See Act of February 24, 1855, ch. 122, 10 Stat. 612; Act of March 3, 1863, ch. 92, 12 Stat. 765. However, Congress expressly provided that its 1863 statute did not encompass claims by Indian tribes. See Act of March 3, 1863, ch. 92, ' 9, 12 Stat. 767. The enactment of the Tucker Act in 1887 provided a comprehensive scheme for assertion of damages actions against the Government of the United States. Act of March 3, 1887, ch. 359, 24 Stat. 505. Claims may be "founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States . . . ." 28 U.S.C. ' 1491; see also 28 U.S.C. ' 1346(a)(2) (the "Little Tucker Act") (providing concurrent jurisdiction in the district courts over claims not exceeding $10,000). The Tucker Act, however, continued to except Indian claims from its purview. Tribes thus sought repeated waivers of the United States' immunity by numerous special jurisdictional acts over the next eighty years. See F. Cohen, Handbook of Federal Indian Law 160-62 (1982 ed.). Finally, the Indian Tucker Act was passed in 1946 to waive the United States' immunity for claims arising after the date of its passage on the same terms as claims brought under the Tucker Act. See 28 U.S.C. ' 1505.

United States Liability Under Mitchell I and II

In Mitchell I and II, the Court set out the governing law as to the United States' liability for damages in breach of trust actions under the Indian Tucker Act. In Mitchell I, the Court considered a damages claim brought by individual Indian allottees for timber mismanagement based on the government's alleged failure to: obtain fair market value for timber sold, manage timber on a sustained yield basis, obtain payment for some timber, properly manage roads and pay interest in a proper fashion. The Court of Claims held the fact that the United States held the timber-lands in trust for individuals pursuant to the General Allotment Act sufficient to provide a cause of action for damages against the United States. See Mitchell v. United States, 591 F.2d 1300 (1979). The Supreme Court reversed, explaining that United States ownership of land in trust under the General Allotment Act constitutes a "bare trust" "that does not impose any duty upon the government to manage timber resources." Mitchell I, 445 U.S. at 542-43. The Court held that the United States' sovereign immunity bars damages actions under such a "bare trust," but remanded for consideration of whether other statutes might authorize an award of damages based on the same conduct.

When the Mitchell case came before the Court for the second time, the Court clarified that the Tucker Act itself constitutes a waiver of sovereign immunity, stating that: "a court need not find a separate waiver of sovereign immunity in the substantive provision [allowing for damages], just as a court need not find consent to suit in 'any express or implied contract with the United States.' The Tucker Act itself provides the necessary consent." Mitchell II, 463 U.S. at 212 (citation omitted). The Court proceeded to review the statutes governing timber management to determine if a damages award was authorized by Congress. The Court found that:

In contrast to the bare trust created by the General Allotment Act, the statutes and regulations now before us clearly give the Federal Government full responsibility to manage Indian resources and land for the benefit of the Indians. They thereby establish a fiduciary relationship and define the contours of the United States' fiduciary responsibilities.

Id. at 224 (emphasis added). This daily supervision over the harvesting and management of tribal timber implied congressional consent to damages. See id. at 228. The Court also cited to the common law of trusts to buttress its holding, stating that "it is well established that a trustee is accountable for the breach of its fiduciary duties." Id. at 226. The dissent, which included then-Justice Rehnquist and Justice O'Connor, would have required a more explicit statement of congressional intent to provide a damages remedy and rejected the notion that the rules governing private trustees should have any application to the inquiry. See id. at 229-30 (Powell, J., dissenting).

In the years since Mitchell II was decided, the United States has been held liable for damages when it "takes on or has control or supervision over the tribal monies or properties." Brown v. United States, 86 F.3d 1554, 1560 (Fed. Cir. 1996) (damages based on federal approval of allottee's lease); see also Pawnee v. United States, 830 F.2d 187 (Fed. Cir. 1987), cert. denied, 486 U.S. 1032 (1988) (damages based on federal approval of allottee's oil and gas leases); Shoshone Indian Tribe v. United States, 52 Fed. Cl. 614 (2002) (finding potential liability for alleged mismanagement of sand and gravel). It is this "ownership or control" test and reliance on the common law of trusts that is at the core of the United States' attack in the cases before the Court.

The Federal Circuit Decisions

The Fort Apache Military Reservation was established by Executive Order in 1877 to further the United States' efforts in the Indian wars. The 7,500-acre military reservation was located within the exterior boundaries of what became the White Mountain Apache Tribe's reservation. See 30 Stat. 62, 64. In 1923, the military reservation was designated an Indian Boarding School to be held by the Secretary of the Interior as long as required for Indian school purposes. See 25 U.S.C. ' 277. In 1960, Congress provided that the United States' interests in Fort Apache be "held by the United States in trust for the White Mountain Apache Tribe, subject to the right of the Secretary of the Interior to use any part of the land and improvements for administrative or school purposes for as long as they are needed for that purpose." Pub. L. No. 86-392, 74 Stat. 8 (1960).

The boarding school now has few students and the Secretary proposed to transfer the land and some thirty-five buildings to the Tribe. Many of the buildings were dilapidated. The Tribe declined to accept a transfer of some land and associated buildings unless the United States first repaired them. When the United States refused, the Tribe brought an action in the Court of Federal Claims seeking a declaration of the United States' trust responsibility and damages for failing to maintain the property. See White Mountain Apache Tribe v. United States, 249 F.3d 1364, 1369-70 (Fed. Cir. 2001).

In a 2-1 decision, the Federal Circuit held that the federal government has some responsibility to maintain and restore the buildings. The court first concluded that the 1960 statute created a trust relationship between the Tribe and the United States, since the buildings were held by the United States for future use by the Tribe. See id. at 1373. It then evaluated whether the trust also embodied sufficient fiduciary responsibilities to imply a remedy for damages under Mitchell II. See id. at 1374.

The federal government argued that the trust was a "bare trust" of the Mitchell I type that could not support an award of damages. See id. at 1375. The court rejected the argument that liability may only be imposed when there are explicit and pervasive management obligations imposed on the United States by statute or regulation. The court interpreted Mitchell II as making it "quite clear that control alone is sufficient to create a fiduciary relationship." Id. In a prior decision imposing liability on the United States, the Federal Circuit held that in Mitchell II, "[t]he Supreme Court did not qualify 'control or supervision' with modifiers such as 'significant,' 'comprehensive,''pervasive,' or 'elaborate.' Nor did the Court anywhere suggest that the assumption of either control or supervision alone was insufficient to give rise to an enforceable fiduciary duty." Brown v. United States, 86 F.3d 1554, 1561 (Fed. Cir. 1991).

In reliance on Brown, the Federal Circuit held that the federal government's exclusive occupation of the buildings held in trust for future use by the White Mountain Apache Tribe made it "reasonable to infer that the government's use of any part of the property requires the government to act in accordance with the duties of a common law trustee." 249 F.3d at 1377 (quoting Restatement (Second) of Trusts ' 176 cmt. b (1959): "It is the duty of the trustee to use reasonable care to protect the trust property from loss or damage."). The court remanded for a determination of the merits of the tribal damages claim, ripeness issues and a statute of limitations defense. See id. at 1383.

The United States has asked the Supreme Court to reverse, arguing that the "1960 Act does not establish any explicit management duties, much less specific duties of a fiduciary nature that could be interpreted as mandating money damages if breached." Petitioner's Merits Brief at 11, United States v. White Mountain Apache Tribe (No. 01-1067). The federal government also argues that the Court should reject the notion that the common law of trusts may serve as basis for imposing liability on the United States. Id. at 35-36. While not expressly criticizing the results in Brown v. United States and Pawnee v. United States, the federal government in essence asks the Court to reject the Federal Circuit's reasoning in those decisions.

The second case, United States v. Navajo Nation (No. 01-1375), involves a damages claim based on the government's approval of coal royalty lease amendments between the Navajo Nation and the Peabody Coal Company. Secretarial approval is required by 25 U.S.C. ' 396a, which is one provision of the Indian Mineral Leasing Act (IMLA). An agreement signed by the Nation and Peabody's predecessor in 1964 set a royalty rate of 37.5 cents per ton of coal and authorized the Secretary of the Interior or his delegate to adjust the royalty rate to a "reasonable" level on the twentieth anniversary of the lease. By the early 1980s the original rate was equal to only about 2% of gross proceeds, which was well below prevailing royalty rates. See Petitioner's Merits Brief at 5, United States v. Navajo Nation (No. 01-1375).

When negotiations between the Nation and Peabody for a new agreement broke down, the Navajo Area Office of the Bureau of Indian Affairs exercised the authority provided in the original agreement and set the royalty rate at 20%. On appeal to the Assistant Secretary for Indian Affairs, a decision was apparently made to affirm the decision of the Area Office. Before the decision was formalized, however, Secretary of the Interior Don Hodel met with a representative for Peabody who urged that the imminent decision from the Assistant Secretary be postponed. See id. at 7-8. Secretary Hodel then sent a memorandum to the Assistant Secretary suggesting that he withhold release of any decision affirming the administrative decision pending further negotiations between the Nation and Peabody. See id. The Nation and Peabody then agreed to a 12.5% royalty, which was approved by the Secretary of the Interior as required by 25 U.S.C. ' 396a. Upon learning of the Secretary's conduct and the withheld decision to set the royalty at 20%, the Nation brought a damages action.

The Court of Federal Claims denied relief despite finding that the government's actions "violated the most fundamental fiduciary duties of care, loyalty and candor." Navajo Nation v. United States, 46 Fed. Cl. 217, 227 (2000). The Federal Circuit reversed, holding that the United States had full fiduciary responsibilities based on the IMLA and its implementing regulations. See 263 F.3d at 1330-31. In addition to the requirement that the Secretary approve any tribal lease, the court characterized the statutory scheme as leaving no "significant authority in the hands of the Indian tribes." Id. at 1331. The Court of Appeals stated that "[i]t cannot be reasonably disputed that the Secretary's actions were in Peabody's interest and contrary to the Navajo's interest." Id. at 1328. Accordingly, the court found the United States liable for violation of the basic common law fiduciary duties and remanded for determination of the damages. In a partial concurrence and dissent, one judge concluded that the Secretary had only breached the duty to perform an economic analysis prior to approving the lease agreement and would have remanded for a determination of damages based on that breach. See id. at 1340-41 (Schall, J. concurring in part and dissenting in part).

As in the White Mountain Apache case, the United States argues that it is liable for money damages only when a statute can be interpreted as mandating compensation due to the exercise of extensive "fiduciary management duties" by the United States. Petitioner's Brief on the Merits at 47-48, United States v. Navajo Nation (No. 01-1375). The federal government contrasts its role under the IMLA with the control it exercises over timber harvest and management that gave rise to liability in Mitchell II. It argues that only in the latter case does the United States have "full fiduciary responsibilities" that may give rise to a damages claim, and likens the IMLA to the "bare trust" established by the General Allotment Act and rejected as a basis for liability in Mitchell I. In other words, the United States argues, the federal government can only be held liable for damages based on violation of specific duties imposed by statutes or regulations. According to the United States, the Secretary's ex parte contacts with Peabody and the directive to the Assistant Secretary were merely the exercise of administrative oversight of subordinates and not a breach of any specific statutory or regulatory duty. See id. at 49-51.

An additional theme of the federal government's argument is that the IMLA was designed to further tribal control over mineral leasing activities and that the Secretary of the Interior is merely "furnishing a general backstop protection" to assure that minimum standards are met. Id. at 52. The United States accepts the state of the law as set out in Mitchell II, but seems to reject any extension beyond statutory schemes that mirror the timber statutes. As in the White Mountain case, the federal government argues that reliance on the common law of trusts to impose liability was an improper extension of Mitchell II.

The Supreme Court is expected to rule by June 2003.

Robert Anderson is an assistant professor at the University of Washington School of Law and director of its Native American Law Center.