Background Information
Legislative Background
In 1887, Congress enacted the General Allotment Act, instituting a policy of dividing tribal lands among tribes’ individual members¹. The allotted land – which has consisted of as much as 54 million acres – is held in trust by the United States government for Indian beneficiaries. In 1934, the Indian Reorganization Act (IRA) ended further allotment of individual Indian lands. However, the federal government remained the trustee of existing individual Indian lands.
In its capacity as trustee, the federal government is responsible for approving all leases and sales of natural resources on Indian lands, for collecting payments on behalf of the beneficial Indian owners of the land and disbursing these funds to the Indians to whom the money belongs. Since the turn of the century, the government has collected billions of dollars from farming and grazing leases, timber sales, mining and oil and gas production on Indian lands, which it was required to disburse to its rightful Indian owners.
As trustee, the federal government has had a longstanding duty to provide regular accounting for beneficiary trust funds and assets but has never done so. Confirming this responsibility and in attempt to prod the federal government to discharge its accounting obligation, Congress enacted in 1994, the American Indian Trust Fund Management Reform Act.
Case Background
On June 10, 1996, Indian plaintiffs including Elouise P. Cobell, Mildred Cleghorn, Thomas Maulson and James Louis Larose, filed a class action lawsuit against the federal government for its failure to properly manage Indian trust assets on behalf of all present and past individual Indian trust beneficiaries, including over 300,000 current Individual Indian Money (IIM) account holders. The assets at issue are the monies that belong to the individual Indians. The named defendants are the Secretaries of the Interior and Treasury and the Assistant Secretary-Indian Affairs.
This matter has been pursued under four specific defendant names, depending upon the individuals heading the Departments of Interior and Treasury in successive presidential administrations from 1996-2009, including Cobell v. Babbitt, Cobell v. Norton and Cobell v. Kempthorne. The current case is Cobell v. Salazar.
The legal team for the Plaintiffs has been headed by Dennis M. Gingold, an attorney in private practice in Washington, D.C., with a team that included Thaddeus Holt (a retired partner of Breed, Abbott) and Keith M. Harper, Willliam Dorris, David Smith, Adam Charnes and Elliott Levitas, attorneys at Kilpatrick Stockton LLP. The Plaintiff class challenged the government's longstanding failure to account for individual Indian trust funds. It asserted that the federal government had breached its legally-mandated trust responsibility to prudently manage trust assets belonging to individual Indian trust beneficiaries. It further claimed the government consistently refused to fix an accounting system that is fundamentally flawed and ineffective in accounting for these assets, with the result that billions of dollars belonging to individual Indians remain unaccounted for. As a matter of legal process, the matter was bifurcated into two trial phases that corresponded to the Plaintiffs’ two objectives.
Phase 1: To require the federal government to create and maintain an adequate system to properly manage and accurately account for the trust assets of individual Indians, going forward.
Phase 2: To require the federal government to provide a full and accurate accounting to individual Indian trust beneficiaries, and to restate IIM account balances accordingly.
Judicial Course of the Matter Phase One
The first phase trial began in U.S. District Court for the District of Columbia on June 10, 1999, during which Secretary Babbitt admitted that the fiduciary responsibilities of the United States to individual Indian trust beneficiaries were not being fulfilled and Assistant Secretary for Indian Affairs Kevin Gover admitted that the government's Indian trust asset management system was broken.
On December 21, 1999, the trial court ruled (Cobell v. Babbitt, 91 F. Supp. 2d 1, 58) the United States had breached its trust responsibilities to individual Indian trust beneficiaries, and that the government's belated trust reform efforts were inadequate to cure the ongoing breach of trust. It directed the government to take steps to reform the system, retaining jurisdiction for a period of at least five years to ensure that reform was carried through. The ruling laid the groundwork for the second phase of the litigation, which involved an accounting to the individual Indian trust beneficiaries.
In January 2000, the government appealed the district court ruling, asserting that the court had overstepped its authority in requiring the government to properly manage and account for Indian trust funds. On February 23, 2001, the U.S. Court of Appeals for the District of Columbia Circuit unanimously upheld the lower court ruling, citing the magnitude of government malfeasance and the “egregious misconduct” at issue in the case.
Judicial Course of the Matter Phase Two
In this phase the plaintiffs and defendants cross appealed from two sets of orders of the District Court.
In 2008, (Cobell v. Kempthorne, 532 F. Supp. 2d 37, 39) the court ruled the Department of the Interior was continuing to breach its duty to account for the trust funds, and 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.
In the second order (Cobell v. Kempthorne, 569 F. Supp. 2d 223, 238, 251-52), also in 2008, the District Court 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. It stressed that breaching the duty to account did not generate the government’s financial liability. Rather, it said the government’s failure properly to allocate and pay trust funds to beneficiaries gave rise to restitution or disgorgement of the very money that had been withheld. The plaintiff class was awarded $455,600,000 (although this figure did not include interest). Plaintiffs were granted permission to appeal the District Court’s decisions to the D.C. Court of Appeals, and did so.
On July 29, 2009 the D.C. Court of Appeals ruled on the appeal, finding that the District Court correctly held that the 1994 Act and earlier rulings of the District Court and Court of Appeals required a full accounting of the individual Indians trust funds, but erred in ruling that an accounting could not be conducted because Congress will not appropriate the funds. The Court of Appeals found the statute gives the plaintiff class a right to an accounting and the District Court has authority to order and approve a plan that efficiently uses limited government resources to conduct an accounting. On this basis, the Court of Appeals vacated the $455,600,000 award and remanded the matter to the District Court.
This remand led to negotiations between the parties from July 30, 2009 through early December 2009, which culminated in the settlement announced December 8, 2009.
¹ NOTE: This matter is NOT related to tribal trusts or their accounting or disputes with the federal government. It is a completely separate and distinct matter.