Free Response to Motion [Dispositive] - District Court of Federal Claims - federal

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 1 of 76

Index to Appendix Page The Indian Self-Determination and Education Assistance Act, as amended, 25 U.S.C. §§ 450 et seq.--Excerpts from 25 U.S.C. §§ 450j-1, 450l and 450m-1 The Contract Disputes Act, as amended, 41 U.S.C. §§ 601 et seq.-- Excerpts from 41 U.S.C. §§ 605 and 609 Bennie Cohoe, Executive Director, Ramah Navajo School Board, Inc., letter to Veronica Zuni, Contracting Officer, Indian Health Service (August 22, 2007) (requesting decision on 1997 Shortfall Claim) Bennie Cohoe, Executive Director, Ramah Navajo School Board, Inc., letter to Veronica Zuni, Contracting Officer, Indian Health Service (July 31, 2007) (requesting decision on 1997 Miscalculation Claim) Tunica-Biloxi Tribe of Louisiana, et al., v. United States, et al., No. 1:02CV02413 (RBW) Doc. 21, Plaintiffs' Motion to Certify Class (excerpt) Doc. 82, Defendants' Memorandum in Support of Motion to Dismiss (excerpt) Doc. 95-1, Defendants' Opposition to Plaintiffs' Motion for Partial Summary Judgment as to `Lump Sum Years' (1995-1997) (excerpt) Doc. 110, Memorandum of Points and Authority in Support of Plaintiffs' Motion for Partial Summary Judgment (table of contents) Doc. 111, Memorandum of Points and Authorities in Support of Defendants' Motion to Dismiss or, in the Alternative, for Summary Judgment (table of contents) Ramah Navajo Chapter v. Lujan, U.S.D.C. New Mexico No. 90CV0957 (LH/WWD), Stipulated Order Allowing Intervention and Amendment of the Amended Complaint, Doc. 347 (Sept. 30, 1999) Pueblo of Zuni v. United States, U.S.D.C. N.M. No. 01CV1046 (WJ/WPL), Complaint, Doc. 1 (Sept. 11, 2001) Ramah Navajo Chapter v. Lujan, No. 90CV0957 (LH/WWD), Order Doc. 96 (Oct. 1, 1993) A-25 A-36

A-2 A-14

A-18

A-20

A-38

A-40

A-43

A-46 A-48 A-81

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 2 of 76

The Indian Self-Determination and Education Assistance Act, as amended, 25 U.S.C. §§ 450 et seq. Excerpts from 25 U.S.C. §§ 450j-1, 450l, and 450m-1 (bold emphasis added) 25 U.S.C. § 450j­1. Contract funding and indirect costs (a) Amount of funds provided (1) The amount of funds provided under the terms of selfdetermination contracts entered into pursuant to this subchapter shall not be less than the appropriate Secretary would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract, without regard to any organizational level within the Department of the Interior or the Department of Health and Human Services, as appropriate, at which the program, function, service, or activity or portion thereof, including supportive administrative functions that are otherwise contractable, is operated. (2) There shall be added to the amount required by paragraph (1) contract support costs which shall consist of an amount for the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but which-- (A) normally are not carried on by the respective Secretary in his direct operation of the program; or (B) are provided by the Secretary in support of the contracted program from resources other than those under contract. (3) (A) The contract support costs that are eligible costs for the purposes of receiving funding under this subchapter shall include the costs of reimbursing each tribal contractor for reasonable and allowable costs of-- (i) direct program expenses for the operation of the Federal program that is the subject of the contract, and (ii) any additional administrative or other expense related to the overhead incurred by the tribal

A-2

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 3 of 76

contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract, except that such funding shall not duplicate any funding provided under subsection (a)(1) of this section. (B) On an annual basis, during such period as a tribe or tribal organization operates a Federal program, function, service, or activity pursuant to a contract entered into under this subchapter, the tribe or tribal organization shall have the option to negotiate with the Secretary the amount of funds that the tribe or tribal organization is entitled to receive under such contract pursuant to this paragraph. ... (b) Reductions and increases in amount of funds provided The amount of funds required by subsection (a) of this section-- (1) shall not be reduced to make funding available for contract monitoring or administration by the Secretary; (2) shall not be reduced by the Secretary in subsequent years except pursuant to-- (A) a reduction in appropriations from the previous fiscal year for the program or function to be contracted; (B) a directive in the statement of the managers accompanying a conference report on an appropriation bill or continuing resolution; (C) a tribal authorization; (D) a change in the amount of pass-through funds needed under a contract; or (E) completion of a contracted project, activity, or program; (3) shall not be reduced by the Secretary to pay for Federal functions, including, but not limited to, Federal pay costs, Federal employee retirement benefits, automated data processing, contract technical assistance or contract monitoring; (4) shall not be reduced by the Secretary to pay for the costs of Federal personnel displaced by a self-determination contract; and

A-3

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 4 of 76

(5) may, at the request of the tribal organization, be increased by the Secretary if necessary to carry out this subchapter or as provided in section 450j (c) of this title. Notwithstanding any other provision in this subchapter, the provision of funds under this subchapter is subject to the availability of appropriations and the Secretary is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe or tribal organization under this subchapter. (c) Annual reports Not later than May 15 of each year, the Secretary shall prepare and submit to Congress an annual report on the implementation of this subchapter. Such report shall include-- (1) an accounting of the total amounts of funds provided for each program and the budget activity for direct program costs and contract support costs of tribal organizations under self-determination; (2) an accounting of any deficiency in funds needed to provide required contract support costs to all contractors for the fiscal year for which the report is being submitted; (3) the indirect cost rate and type of rate for each tribal organization that has been negotiated with the appropriate Secretary; (4) the direct cost base and type of base from which the indirect cost rate is determined for each tribal organization; (5) the indirect cost pool amounts and the types of costs included in the indirect cost pool; and (6) an accounting of any deficiency in funds needed to maintain the preexisting level of services to any Indian tribes affected by contracting activities under this subchapter, and a statement of the amount of funds needed for transitional purposes to enable contractors to convert from a Federal fiscal year accounting cycle, as authorized by section 450j (d) of this title. (d) Treatment of shortfalls in indirect cost recoveries (1) Where a tribal organization's allowable indirect cost recoveries are below the level of indirect costs that the tribal organizations should have received for any given year pursuant to its approved indirect cost rate, and such shortfall is the result of lack of full indirect cost funding by any Federal, State, or other agency, such shortfall in recoveries

A-4

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 5 of 76

shall not form the basis for any theoretical over-recovery or other adverse adjustment to any future years' indirect cost rate or amount for such tribal organization, nor shall any agency seek to collect such shortfall from the tribal organization. (2) Nothing in this subsection shall be construed to authorize the Secretary to fund less than the full amount of need for indirect costs associated with a self-determination contract. ... (g) Addition to contract of full amount contractor entitled; adjustment Upon the approval of a self-determination contract, the Secretary shall add to the contract the full amount of funds to which the contractor is entitled under subsection (a) of this section, subject to adjustments for each subsequent year that such tribe or tribal organization administers a Federal program, function, service, or activity under such contract. ... *** 25 U.S.C. § 450l. Contract or grant specifications (a) Terms Each self-determination contract entered into under this subchapter shall-- (1) contain, or incorporate by reference, the provisions of the model agreement described in subsection (c) of this section (with modifications where indicated and the blanks appropriately filled in), and (2) contain such other provisions as are agreed to by the parties. (b) Payments; Federal records Notwithstanding any other provision of law, the Secretary may make payments pursuant to section 1(b)(6) of such model agreement. As provided in section 1(b)(7) of the model agreement, the records of the tribal government or tribal organization specified in such section shall not be considered Federal records for purposes of chapter 5 of title 5. (c) Model agreement The model agreement referred to in subsection (a)(1) of this section reads as follows:

A-5

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 6 of 76

"SECTION 1. AGREEMENT BETWEEN THE SECRETARY AND THE XXXXXX TRIBAL GOVERNMENT. "(a) Authority and Purpose.-- "(1) Authority.--This agreement, denoted a Self-Determination Contract (referred to in this agreement as the `Contract'), is entered into by the Secretary of the Interior or the Secretary of Health and Human Services (referred to in this agreement as the `Secretary'), for and on behalf of the United States pursuant to title I of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450 et seq.) and by the authority of the XXXXXX tribal government or tribal organization (referred to in this agreement as the `Contractor'). The provisions of title I of the Indian SelfDetermination and Education Assistance Act (25 U.S.C. 450 et seq.) are incorporated in this agreement. "(2) Purpose.--Each provision of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450 et seq.) and each provision of this Contract shall be liberally construed for the benefit of the Contractor to transfer the funding and the following related functions, services, activities, and programs (or portions thereof), that are otherwise contractable under section 102(a) of such Act, including all related administrative functions, from the Federal Government to the Contractor: (List functions, services, activities, and programs). "(b) Terms, Provisions, and Conditions.-- "(1) Term.--Pursuant to section 105(c)(1) of the Indian SelfDetermination and Education Assistance Act (25 U.S.C. 450j (c)(1)), the term of this contract shall be XX years. Pursuant to section 105(d)(1) of such Act (25 U.S.C. 450j (d)), upon the election by the Contractor, the period of this Contract shall be determined on the basis of a calendar year, unless the Secretary and the Contractor agree on a different period in the annual funding agreement incorporated by reference in subsection (f)(2). "(2) Effective date.--This Contract shall become effective upon the date of the approval and execution by the Contractor and the Secretary, unless the Contractor and the Secretary agree on an effective date other than the date specified in this paragraph.

A-6

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 7 of 76

"(3) Program standard.--The Contractor agrees to administer the program, services, functions and activities (or portions thereof) listed in subsection (a)(2) of the Contract in conformity with the following standards: (list standards). "(4) Funding amount.--Subject to the availability of appropriations, the Secretary shall make available to the Contractor the total amount specified in the annual funding agreement incorporated by reference in subsection (f)(2). Such amount shall not be less than the applicable amount determined pursuant to section 106(a) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450j­1). "(5) Limitation of costs.--The Contractor shall not be obligated to continue performance that requires an expenditure of funds in excess of the amount of funds awarded under this Contract. If, at any time, the Contractor has reason to believe that the total amount required for performance of this Contract or a specific activity conducted under this Contract would be greater than the amount of funds awarded under this Contract, the Contractor shall provide reasonable notice to the appropriate Secretary. If the appropriate Secretary does not take such action as may be necessary to increase the amount of funds awarded under this Contract, the Contractor may suspend performance of the Contract until such time as additional funds are awarded. "(6) Payment.-- "(A) In general.--Payments to the Contractor under this Contract shall-- "(i) be made as expeditiously as practicable; and "(ii) include financial arrangements to cover funding during periods covered by joint resolutions adopted by Congress making continuing appropriations, to the extent permitted by such resolutions. "(B) Quarterly, semiannual, lump-sum, and other methods of payment.-- "(i) In general.--Pursuant to section 108(b) of the Indian Self-Determination and Education Assistance Act, and notwithstanding any other provision of law, for each fiscal year covered by this Contract, the Secretary shall

A-7

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 8 of 76

make available to the Contractor the funds specified for the fiscal year under the annual funding agreement incorporated by reference pursuant to subsection (f)(2) by paying to the Contractor, on a quarterly basis, onequarter of the total amount provided for in the annual funding agreement for that fiscal year, in a lump-sum payment or as semiannual payments, or any other method of payment authorized by law, in accordance with such method as may be requested by the Contractor and specified in the annual funding agreement. "(ii) Method of quarterly payment.--If quarterly payments are specified in the annual funding agreement incorporated by reference pursuant to subsection (f)(2), each quarterly payment made pursuant to clause (i) shall be made on the first day of each quarter of the fiscal year, except that in any case in which the Contract year coincides with the Federal fiscal year, payment for the first quarter shall be made not later than the date that is 10 calendar days after the date on which the Office of Management and Budget apportions the appropriations for the fiscal year for the programs, services, functions, and activities subject to this Contract. "(iii) Applicability.--Chapter 39 of title 31, United States Code, shall apply to the payment of funds due under this Contract and the annual funding agreement referred to in clause (i). "... "(9) Availability of funds.--Notwithstanding any other provision of law, any funds provided under this Contract-- "(A) shall remain available until expended; and "(B) with respect to such funds, no further-- "(i) approval by the Secretary, or "(ii) justifying documentation from the Contractor, shall be required prior to the expenditure of such funds. ". . .

A-8

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 9 of 76

"(11) Federal program guidelines, manuals, or policy directives.-- Except as specifically provided in the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450 et seq.) the Contractor is not required to abide by program guidelines, manuals, or policy directives of the Secretary, unless otherwise agreed to by the Contractor and the Secretary, or otherwise required by law. ". . . "(14) Successor annual funding agreement.-- "(A) In general.--Negotiations for a successor annual funding agreement, provided for in subsection (f)(2), shall begin not later than 120 days prior to the conclusion of the preceding annual funding agreement. Except as provided in section 105(c)(2) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450j (c)(2)) the funding for each such successor annual funding agreement shall only be reduced pursuant to section 106(b) of such Act (25 U.S.C. 450j­1 (b)). "(B) Information.--The Secretary shall prepare and supply relevant information, and promptly comply with any request by the Contractor for information that the Contractor reasonably needs to determine the amount of funds that may be available for a successor annual funding agreement, as provided for in subsection (f)(2) of this Contract. "(15) Contract requirements; approval by secretary.-- "(A) In general.--Except as provided in subparagraph (B), for the term of the Contract, section 2103 of the Revised Statutes (25 U.S.C. 81), section 16 of the Act of June 18, 1934 (48 Stat. 987, chapter 576; 25 U.S.C. 476), and the Act of July 3, 1952 (25 U.S.C. 82a), shall not apply to any contract entered into in connection with this Contract. "(B) Requirements.--Each Contract entered into by the Contractor with a third party in connection with performing the obligations of the Contractor under this Contract shall-- "(i) be in writing; "(ii) identify the interested parties, the authorities of such parties, and purposes of the Contract;

A-9

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 10 of 76

"(iii) state the work to be performed under the Contract; and "(iv) state the process for making any claim, the payments to be made, and the terms of the Contract, which shall be fixed. "(c) Obligation of the Contractor.-- "(1) Contract performance.--Except as provided in subsection (d)(2), the Contractor shall perform the programs, services, functions, and activities as provided in the annual funding agreement under subsection (f)(2) of this Contract. "(2) Amount of funds.--The total amount of funds to be paid under this Contract pursuant to section 106 (a) shall be determined in an annual funding agreement entered into between the Secretary and the Contractor, which shall be incorporated into this Contract. "(3) Contracted programs.--Subject to the availability of appropriated funds, the Contractor shall administer the programs, services, functions, and activities identified in this Contract and funded through the annual funding agreement under subsection (f)(2). ". . . "(d) Obligation of the United States.-- "(1) Trust responsibility.-- "(A) In general.--The United States reaffirms the trust responsibility of the United States to the XXXXXX Indian tribe(s) to protect and conserve the trust resources of the Indian tribe(s) and the trust resources of individual Indians. "(B) Construction of contract.--Nothing in this Contract may be construed to terminate, waive, modify, or reduce the trust responsibility of the United States to the tribe(s) or individual Indians. The Secretary shall act in good faith in upholding such trust responsibility. "(2) Good faith.--To the extent that health programs are included in this Contract, and within available funds, the Secretary shall act in good faith in cooperating with the Contractor to achieve the goals set forth in the Indian Health Care Improvement Act (25 U.S.C. 1601 et seq.).

A -10

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 11 of 76

"(3) Programs retained.--As specified in the annual funding agreement, the United States hereby retains the programs, services, functions, and activities with respect to the tribe(s) that are not specifically assumed by the Contractor in the annual funding agreement under subsection (f)(2). "(e) Other Provisions.-- "(1) Designated officials.--Not later than the effective date of this Contract, the United States shall provide to the Contractor, and the Contractor shall provide to the United States, a written designation of a senior official to serve as a representative for notices, proposed amendments to the Contract, and other purposes for this Contract. "(2) Contract modifications or amendment.-- "(A) In general.--Except as provided in subparagraph (B), no modification to this Contract shall take effect unless such modification is made in the form of a written amendment to the Contract, and the Contractor and the Secretary provide written consent for the modification. "(B) Exception.--The addition of supplemental funds for programs, functions, and activities (or portions thereof) already included in the annual funding agreement under subsection (f)(2), and the reduction of funds pursuant to section 106 (b)(2), shall not be subject to subparagraph (A). ". . . "(f) Attachments.-- "(1) Approval of contract.--Unless previously furnished to the Secretary, the resolution of the XXXXXX Indian tribe(s) authorizing the contracting of the programs, services, functions, and activities identified in this Contract is attached to this Contract as attachment 1. "(2) Annual funding agreement.-- "(A) In general.--The annual funding agreement under this Contract shall only contain-- "(i) terms that identify the programs, services, functions, and activities to be performed or administered, the general budget category assigned, the funds to be provided, and the time and method of payment; and

A -11

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 12 of 76

"(ii) such other provisions, including a brief description of the programs, services, functions, and activities to be performed (including those supported by financial resources other than those provided by the Secretary), to which the parties agree. "(B) Incorporation by reference.--The annual funding agreement is hereby incorporated in its entirety in this Contract and attached to this Contract as attachment 2." *** 25 U.S.C. § 450m­1. Contract disputes and claims (a) Civil actions; concurrent jurisdiction; relief The United States district courts shall have original jurisdiction over any civil action or claim against the appropriate Secretary arising under this subchapter and, subject to the provisions of subsection (d) of this section and concurrent with the United States Court of Claims, over any civil action or claim against the Secretary for money damages arising under contracts authorized by this subchapter. In an action brought under this paragraph, the district courts may order appropriate relief including money damages, injunctive relief against any action by an officer of the United States or any agency thereof contrary to this subchapter or regulations promulgated thereunder, or mandamus to compel an officer or employee of the United States, or any agency thereof, to perform a duty provided under this subchapter or regulations promulgated hereunder (including immediate injunctive relief to reverse a declination finding under section 450f (a)(2) of this title or to compel the Secretary to award and fund an approved selfdetermination contract). (b) Revision of contracts The Secretary shall not revise or amend a self-determination contract with a tribal organization without the tribal organization's consent. (c) Application of laws to administrative appeals The Equal Access to Justice Act (Publc [1] Law 96­481, Act of October 1,[1] 1980; 92 [1] Stat. 2325, as amended), section 504 of title 5, and section 2412 of title 28 shall apply to administrative appeals pending on or filed after October 5, 1988, by tribal organizations regarding self-determination contracts.

A -12

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 13 of 76

(d) Application of Contract Disputes Act The Contract Disputes Act (Public Law 95­563, Act of November 1, 1978; 92 Stat. 2383, as amended) [41 U.S.C. 601 et seq.] shall apply to self-determination contracts, except that all administrative appeals relating to such contracts shall be heard by the Interior Board of Contract Appeals established pursuant to section 8 of such Act (41 U.S.C. 607). (e) Application of subsection (d) Subsection (d) of this section shall apply to any case pending or commenced on or after March 17, 1986, before the Boards of Contract Appeals of the Department of the Interior or the Department of Health and Human Services except that in any such cases finally disposed of before October 5, 1988, the thirty-day period referred to in section 504 (a)(2) of title 5 shall be deemed to commence on October 5, 1988.

A -13

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 14 of 76

The Contract Disputes Act, as amended, 41 U.S.C. §§ 601 et seq. Excerpts from 41 U.S.C. §§ 605, 609, and 611 41 U.S.C. § 605. Decision by contracting officer (a) Contractor claims All claims by a contractor against the government relating to a contract shall be in writing and shall be submitted to the contracting officer for a decision. All claims by the government against a contractor relating to a contract shall be the subject of a decision by the contracting officer. Each claim by a contractor against the government relating to a contract and each claim by the government against a contractor relating to a contract shall be submitted within 6 years after the accrual of the claim. The preceding sentence does not apply to a claim by the government against a contractor that is based on a claim by the contractor involving fraud. The contracting officer shall issue his decisions in writing, and shall mail or otherwise furnish a copy of the decision to the contractor. The decision shall state the reasons for the decision reached, and shall inform the contractor of his rights as provided in this chapter. Specific findings of fact are not required, but, if made, shall not be binding in any subsequent proceeding. The authority of this subsection shall not extend to a claim or dispute for penalties or forfeitures prescribed by statute or regulation which another Federal agency is specifically authorized to administer, settle, or determine. This section shall not authorize any agency head to settle, compromise, pay, or otherwise adjust any claim involving fraud. (b) Review; performance of contract pending appeal The contracting officer's decision on the claim shall be final and conclusive and not subject to review by any forum, tribunal, or Government agency, unless an appeal or suit is timely commenced as authorized by this chapter. Nothing in this chapter shall prohibit executive agencies from including a clause in government contracts requiring that pending final decision of an appeal, action, or final settlement, a contractor shall proceed diligently with performance of the contract in accordance with the contracting officer's decision.

A -14

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 15 of 76

(c) Amount of claim; certification; notification; time of issuance; presumption (1) A contracting officer shall issue a decision on any submitted claim of $100,000 or less within sixty days from his receipt of a written request from the contractor that a decision be rendered within that period. For claims of more than $100,000, the contractor shall certify that the claim is made in good faith, that the supporting data are accurate and complete to the best of his knowledge and belief, that the amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable, and that the certifier is duly authorized to certify the claim on behalf of the contractor. (2) A contracting officer shall, within sixty days of receipt of a submitted certified claim over $100,000-- (A) issue a decision; or (B) notify the contractor of the time within which a decision will be issued. (3) The decision of a contracting officer on submitted claims shall be issued within a reasonable time, in accordance with regulations promulgated by the agency, taking into account such factors as the size and complexity of the claim and the adequacy of the information in support of the claim provided by the contractor. (4) A contractor may request the tribunal concerned to direct a contracting officer to issue a decision in a specified period of time, as determined by the tribunal concerned, in the event of undue delay on the part of the contracting officer. (5) Any failure by the contracting officer to issue a decision on a contract claim within the period required will be deemed to be a decision by the contracting officer denying the claim and will authorize the commencement of the appeal or suit on the claim as otherwise provided in this chapter. However, in the event an appeal or suit is so commenced in the absence of a prior decision by the contracting officer, the tribunal concerned may, at its option, stay the proceedings to obtain a decision on the claim by the contracting officer. (6) The contracting officer shall have no obligation to render a final decision on any claim of more than $100,000 that is not certified in

A -15

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 16 of 76

accordance with paragraph (1) if, within 60 days after receipt of the claim, the contracting officer notifies the contractor in writing of the reasons why any attempted certification was found to be defective. A defect in the certification of a claim shall not deprive a court or an agency board of contract appeals of jurisdiction over that claim. Prior to the entry of a final judgment by a court or a decision by an agency board of contract appeals, the court or agency board shall require a defective certification to be corrected. (7) The certification required by paragraph (1) may be executed by any person duly authorized to bind the contractor with respect to the claim. ... *** 41 U.S.C. § 609. Judicial review of board decisions (a) Actions in United States Court of Federal Claims; district court actions; time for filing (1) Except as provided in paragraph (2), and in lieu of appealing the decision of the contracting officer under section 605 of this title to an agency board, a contractor may bring an action directly on the claim in the United States Court of Federal Claims, notwithstanding any contract provision, regulation, or rule of law to the contrary. (2) In the case of an action against the Tennessee Valley Authority, the contractor may only bring an action directly on the claim in a United States district court pursuant to section 1337 of title 28, notwithstanding any contract provision, regulation, or rule of law to the contrary. (3) Any action under paragraph (1) or (2) shall be filed within twelve months from the date of the receipt by the contractor of the decision of the contracting officer concerning the claim, and shall proceed de novo in accordance with the rules of the appropriate court. ... *** 41 U.S.C. § 611. Interest Interest on amounts found due contractors on claims shall be paid to the contractor from the date the contracting officer receives the claim pursuant

A -16

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 17 of 76

to section 605(a) of this title from the contractor until payment thereof. The interest provided for in this section shall be paid at the rate established by the Secretary of the Treasury pursuant to Public Law 92­41 (85 Stat. 97) for the Renegotiation Board. ***

A -17

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 18 of 76

A -18

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 19 of 76

A -19

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 20 of 76

A -20

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 21 of 76

A -21

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 22 of 76

A -22

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 23 of 76

A -23

03/22/2007 12/31/95 $ 25.80% 1.45% N/A 0.99% 1.16% 1.04% 0.08% 1.65% 0.00% 0.37% 1.42% 1.94% 0.00% 0.28% 1.38% 1.37% 0.00% 1.20% N/A 0.71% 2.21% 0.94% N/A 0.62% 1.41% 0.93% N/A -0.45% 0.98% 0.28% N/A 0.37% 1.21% 0.61% N/A 0.13% 1.15% 21.30% 17.20% 20.49% 19.33% 18.40% 17.30% 17.04% 30.17% 1,496,944 $ 1,537,975 $ 1,531,178 $ 1,679,525 $ 2,029,752 $ 2,411,556 $ 2,229,056 $ 2,193,929 $ 2,568,729 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03

RNSB ,INC. CUMULATIVE IMPACTS

IHS actual Base

GOVERNMENT RATE

Adjusted for Ramah vs Lujan Adjusted for PL-100-297* Adjusted for Double dipping Adjusted for Shortfall

Corrected Rate
$ $ $ $ $ 427,677 $ 384,955 $ 309,757 $ 413,331 $ 452,635 $ 478,935 $ 386,212 $ 327,589 $ 263,363 $ 344,135 $ 392,351 $ 443,726 $ 197,680 $ 275,796 $ 293,501 $ 415,971 $ 412,422 $ 463,372 $ 297,311 385,627 427,087 $ $ $ 130,825 $ 60,924 $ 77,394 $ 62,257 $ 71,244 $ 36,691 $ 243,521 $ 328,505 $ 336,720 $ 370,895 $ 478,228 $ 483,666 $ 500,063 $ 540,832 $ 417,815 65,798 352,017 373,846 415,311

28.57%

25.03%

20.23%

24.61%

22.30%

19.86%

19.16%

18.93%
$ $ $ $ $

33.77%
417,815 64,007 353,808 774,986 867,460

ihs Claimed it Paid

Case 1:08-cv-00019-LJB

Overrecovery Carryforward Paybaclk

Net Payment

Government Contract price ( line 1 x line11)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

IHS Corrected Contract price ( line 8 x line 12)

22 23

Damages

$ 41,465

$ 57,366

$ 46,395

$ 69,196

$ 60,284

$ 35,209

$ 41,460

$ 41,465

$

92,474 $ 485,315

Document 8-2

A -24

24

Cumulative Damages

Filed 04/12/2008 Page 24 of 76

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 25 of 76

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
TUNICA-BILOXI TRIBE OF LOUISIANA and RAMAH NAVAJO SCHOOL BOARD, INC., PLAINTIFFS, vs. UNITED STATES OF AMERICA; TOMMY G. THOMPSON, Secretary of the United States Department of Health and Human Services; GALE A. NORTON, Secretary of the United States Department of The Interior; CHARLES W. GRIM, Interim Director of the Indian Health Service, United States Department of Health and Human Services; EARL E. DEVANEY, Inspector General, United States Department of the Interior; and TIMOTHY G. VIGOTSKY, Director, National Business Center, United States Department of the Interior, DEFENDANTS. Civil Action No. 02-2413 (RBW)

PLAINTIFFS' MOTION TO CERTIFY CLASS UNDER RULE 23(b)(2) and (b)(3) AND INCORPORATED MEMORANDUM OF LAW

A -25

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 26 of 76

TABLE OF CONTENTS INTRODUCTION ..........................................................................................................................1 I. II. STANDARD FOR CERTIFICATION ....................................................................................2 NATURE OF CASE ..............................................................................................................3

III. THE PROBLEMS ADDRESSED IN THIS LAW SUIT ......................................................6 A. B. IV. V, VI. Calculation of Indirect Costs Rates................................................................................6 Carry-forward Adjustments..........................................................................................10

THE EFFECTS OF THE INCORRECT RATE CALCULATIONS .................................11 THE CLASS ......................................................................................................................13 THE CRITERIA FOR CERTIFICATION OF THE CLASS ARE MET .........................13 A. B. The GAO Report, Affidavits and Declarations, and Other Attached Documents Establish Satisfaction of All the Criteria ...............................................13 These Factual Allegations Establish All the Elements Required By Rule 23 ................................................................................................................16 Subpart (a).................................................................................................................16 1. 2. 3. 4. The class must be so numerous that joinder of all members is practical ..........16 There are questions of fact and law common the the class ...............................17 The claims of the representative must be typical to those of the members ......18 The representative will fairly and adequately protect the interest of the class .19

Subpart (b)(1) ............................................................................................................19 A. Separate lawsuits would create a risk of inconsistent or varying Adjudications which would establish incompatible standards of Conduct for the party opposing the class .................................................19 Dispositions as to the class which as a practical matter dispose of Plaintiffs' Motion to Certify Class Page ii

B.

A -26

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 27 of 76

Their interest or would substantially impair or impeded their ability To protect those interests..........................................................................21 Subpart (b)(2)..........................................................................................................21 The party opposing the class has acted or refused to act on grounds Generally applicable to the class, thereby making appropriate final Injunctive relief or corresponding declaratory relief with respect to The class as a whole...............................................................................................21 Subpart (b)(3).........................................................................................................21 The court finds that questions of law or fact common to the class Predominate over any questions affecting only individual members And that a class action is superior to other methods for the fair and Efficient adjudication of the controversy..............................................................21 C. VI. VII. Competency of Class Counsel...............................................................................22

NOTICE ............................................................................................................................22 CONCLUSION ..................................................................................................................23

Plaintiffs' Motion to Certify Class Page iii

A -27

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 28 of 76

INTRODUCTION Plaintiffs Tunica-Biloxi Tribe of Louisiana (Tunica) and Ramah Navajo School Board, Inc. (RNSB or Ramah), by and through their counsel, respectfully move under Rule 23(b)(2) and (b)(3), Federal Rules of Civil Procedure, for certification of a class action. Concurrence of opposing counsel has been requested but denied. The class sought to be certified consists of All entities contracting with the United States through the Secretary of Health and Human Services and the Director of the Indian Health Service (IHS) as agents for the United States pursuant to the Indian Self-Determination and Education Assistance Act of 1975, Public Law 93-638, 25 U.S.C. §§450-450n, as amended ("ISDA"), and comparable sub-titles for compacting tribes, whose contracts contain an indirect cost rate determined in negotiation with the Office of the Inspector General (OIG) of the United States Department of the Interior, or its successor, the National Business Center ("NBC") of the Department of the Interior. This is essentially the same class certified in Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir. 1997) with regard to ISDA contracts with the Secretary of the Interior. See, USDC N Mex No. CIV 90-0957 LH/WWD, October 1, 1993 (Attachment 1 to this Motion). (Although the District Court subsequently ruled against the Ramah Navajo Chapter on the merits in that action, Memorandum and Order, Nov. 4, 1993, the Tenth Circuit reversed that decision.) The Secretary of the Interior and the Secretary of Health and Human Services share identical obligations under ISDA. This case seeks to apply the same rule of law to ISDA contracts entered by the Secretary of Health and Human Services ("IHS contracts") that applies to the ISDA contracts of the Secretary of the Interior.

Plaintiffs' Motion to Certify Class Page 1

A -28

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 29 of 76

Co. v. Green, 395 U.S. 977, 89 S.Ct. 2131 (1969) ("if there is to be an error made, let it be made in favor and not against the maintenance of the class action, for it is always subject to modification should later developments during the course of the trial so require"); Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1968), cert. denied, 394 U.S. 928, 89 S.Ct. 1194 (1969) (to similar effect). II. NATURE OF THE CASE The claim in this case arises from the United States'1 failure to calculate the proper amount of contract support costs (CSC) which the Indian Self-Determination Act (ISDA) mandates be added to Plaintiffs' contracts under 25 U.S.C. §450j-1(a)(2) and §450j-1(g). ISDA is not a grant program; it especially is not a discretionary grant program. Rather, it is a program whereby the United States contracts with tribes and tribal organizations to operate federal programs and carry out federal responsibilities. If a tribe or tribal organization seeks to operate a program and meets criteria set out in the statute, the Secretary of Health and Human Services "is directed" to enter into these contracts. 25 U.S.C. §450f(a)(1). As set forth in its findings, the ISDA is designed to eliminate "prolonged Federal domination of Indian selfdetermination programs" and give Indian tribes and their communities an "effective voice in the planning and implementation of programs for the benefit of Indians." 25 U.S.C. §450(a)(1). In 1968, the Special Senate Subcommittee on Indian Education issued a landmark report "INDIAN EDUCATION: A NATIONAL TRAGEDY--A NATIONAL CHALLENGE, S. Rept. No. 91-5012. In July

Under 25 U.S.C. §450l(c) Model Agreement §1(a)(1), the United States is the contracting party; the Secretary acts as the United States' agent. The Report found that "the dominant policy of the Federal Government towards the American Indian has been one of coercive assimilation. The policy has resulted in: Plaintiffs' Motion to Certify Class Page 3
2

1

A -29

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 30 of 76

This function of the OIG was transferred to the National Business Center ("NBC") in November 2002. The Secretary adopted the negotiation of an indirect cost rate as the means for determining the amount to be included for indirect CSC, as mandated by 25 U.S.C. §450j-1(g). The rate calculation follows guidelines set forth in government circulars OMB A-87, OMB A122, and OASC-10. Affidavit of Marcel Kerkmans, Attachment 3 to this Motion; GAO Report (Att. 2), at 6. III. A. THE PROBLEMS ADDRESSED IN THIS LAW SUIT Calculation of Indirect Cost Rates The issue in this case arises when Indian ISDA contractors supplement their IHS programs with funds from other federal agencies. This is a perfectly legitimate practice and its legality and efficacy are not in question. The problem created by other agencies' programs would not exist had the Secretary5 not decided, along with his counterpart, the Secretary of the Interior, to use the indirect cost rate system of federal cost accounting in OMB Circulars A-87 and A-122 as the means for computing the mandatory indirect contract support costs component of ISDA funding. The choice was fateful because of the coincidence of three factors: 1. The indirect cost rate system requires inclusion of all programs in the base, including those of agencies which do not pay indirect costs; 2. The fact all other federal agencies do not pay or heavily restrict payment of indirect costs; and 3. The fixed or inelastic nature of most ISDA contractors' indirect cost pools Except where specifically indicated otherwise, references to "the Secretary" in Plaintiffs' Motion to Certify Class Page 6

5

A -30

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 31 of 76

ensures diminution of contractors' rates. The OMB circulars were designed for cost accounting purposes, not for computing statutorily-mandated contract funding levels.6 Because funds for most contractors come from a variety of sources, a category of administrative expenses called indirect costs was created for those expenditures that cannot be easily allocated to discrete programs. The indirect cost rate is calculated by dividing the contractor's total indirect cost pool ­ those costs of administration not easily allocated to discrete programs7­ by the contractor's total direct program costs from all sources in the direct cost base. The ratio between the pool and the direct base is the indirect cost rate. The Secretary multiplies the indirect cost rate by the IHS program base to compute the contractor's indirect contract support costs under 25 U.S.C. §450j-1(a)(2) ­ (5), just as the Secretary of the Interior did in Ramah v. Lujan, 112 F.3d at 1457-1459. The problem stems from the methodology's assumption that each contractor has recovered allocated shares of the indirect cost pool from each funding source in the direct cost base. If a contractor receives one tenth of its base from a particular agency, the system assumes that the contractor actually recovers one tenth of its indirect costs from that agency in addition to its program base. Most agencies prohibit or generally restrict payment of indirect costs from

this motion refer to the Secretary of Health and Human Services. There are three types of indirect cost rates. The most prevalently used is the "fixed with carry forward method" described in President's Council on Integrity and Efficiency. "AUDIT OF METHODS OF REIMBURSING INDIAN ORGANIZATIONS FOR INDIRECT COSTS INCURRED", September 1987 ("President's Council Audit"), at 5 (Attachment 6 to this Motion). Although most contractors employ fixed with carry forward rates, the next largest category is "provisional-final". The rate-setting methodology for provisional rates is identical to the fixed rate methodology with respect to including other federal programs in the base.
7 6

25 U.S.C. §450b(f) Plaintiffs' Motion to Certify Class Page 7

A -31

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 32 of 76

their grants. So, for ISDA contractors, the methodology's assumption is false, as the Secretary well knows. President's Council Audit, Att. 4, at 1, 34. Under 25 U.S.C. §450j-1(g), the Secretary is required to "add to the contract the full amount of funds to which the contractor is entitled under subsection [450j-1(a)]". But by assuming, incorrectly, that each agency actually pays its fair share, the Secretary assures recovery by the contractor of less than the amount needed to run the contracted HIS program. Indirect cost pools of ISDA contractors are generally fixed. Ramah v. Lujan, 112 F.3d at 1461 ("As the Act itself recognizes, and as the facts in this case demonstrate, indirect costs are not readily allocable to a particular grant or program, and therefore tend to be fixed rather than variable."). By dividing a more-or less fixed numerator (the pool) by addition of (non-paying) agencies to the base, the rate goes down. For example, if an ISDA contractor has programs totaling $1,000 from the IHS, no funds from other agencies, and a negotiated indirect cost pool of $500, its indirect cost rate is 50% (500 ÷ 1000 = .5). IHS is obligated to add $500 to the program base for a total contract price of $1,500. If this same contractor adds programs of other federal agencies to its base in the amount of $250, the fixed nature of the pool means that the pool will remain at or near $500. (The contractor still needs only one CEO; and its insurance costs, facilities, phone, and legal costs, etc. will not vary appreciably.) The methodology adopted by the Secretary therefore produces an indirect cost rate of 40% (500 ÷ 1250 = .4). Following the circulars' procedures, IHS then computes its indirect contract support cost obligation to be only $400 (1000 x .4 = $400). But since the other agencies do not pay indirect costs, the contractor actually recovers only $400 of the $500 needed to operate the IHS programs. The contractor winds up $100 short of the §450j-

Plaintiffs' Motion to Certify Class Page 8

A -32

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 33 of 76

1(a)(2) amount. The result is that the contract price computed by the Secretary does not comply with the mandate of the statute in 25 U.S.C. §450j-1(g) to "add to the contract the full amount of funds to which the contractor is entitled under subsection (a) of this section [25 U.S.C. §450j-1(a)]". This phenomenon affects each ISDA contractor which receives grants or contracts from other federal agencies. The problem is generally discussed in the GAO Report (Att. 2), at 44-45, and in Senate Report No. 100-274 (Att. 12), at 12 (accompanying Public Law 100-472). See also President's Council's Audit (Att. 4). The problem is also the basis for the Tenth Circuit's ruling in Ramah v. Lujan, 112 F.3d at 1463: We therefore agree with plaintiff that the 1988 amendments to the Act mandate that tribes executing self-determination contracts receive full funding for all reasonable contract support costs associated with self-determination contracts . . . We further conclude defendants unreasonably interpreted the Act by applying the preamendment indirect costs formula to determine the amount of indirect costs funding plaintiff would receive for fiscal year 1989. In applying the pre-amendment formula, defendants included in the direct costs base the funds plaintiff received from [other federal agencies]. Although inclusion of these funds in the direct cost base would have been proper if those programs included funding for their apportioned share of the indirect costs pool, the uncontroverted facts indicate that they did not. By including the [other agencies'] funds in the direct cost base, defendants effectively and knowingly reduced the amount of funding they would provide to plaintiff to cover the indirect costs pool and thereby deprived plaintiff of full indirect costs funding for fiscal year 1989. (Emphasis added.) This suit seeks to apply the same findings and conclusions to the Secretary's identical use of indirect cost rates.

Plaintiffs' Motion to Certify Class Page 9

A -33

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 34 of 76

B. Carry-forward Adjustments Most contractors choose the "fixed with carry forward" option for indirect costs rates (see footnote 6) because it promises adjustments in succeeding years for under-recoveries of indirect costs in the base year, reducing the risk that the contractor will fail to recover its full administrative costs. The second problem in this suit, not directly presented in Ramah v Lujan, has to do with these carry-forward adjustments. See Kerkmans Affidavit (Att. 3); Declaration of Jim Hooper, Jr. (Hooper Declaration), Attachment 5 to this Motion; Declaration of Douglas Burke (Burke Declaration), Attachment 6 to this Motion. Here, OIG violates the methodology of Circulars A-87 and A-122 to the Plaintiffs' detriment by carrying forward over-recoveries but not under-recoveries. Over-recoveries depress the indirect cost rate in the succeeding year; under-recoveries increase the rate. Id. By not carrying forward under-recoveries, OIG deprives contractors of the benefits contemplated by the fixed with carry-forward method. OIG also defines carry-forwards inconsistently with ISDA. Program funds ­ which the contractor, by necessity, often is forced to divert to pay for indirect costs ­ are treated as "indirect cost recoveries" which lead to adverse carry-forward adjustments. Both the under-over recovery problem and this one have a snowball effect, increasing the contractor's shortfalls in succeeding years and causing the contractor to spend even more of its program monies for administrative costs. GAO Report (Att. 2), at 49-50. This is contrary to the ISDA's central purpose to maintain program levels. See S. Rept. No. 100-274 (Att. 12), at 16. Moreover, contrary to the prohibitions in 25 U.S.C. §450j-1(d), the Secretary and OIG treat the estimated recovery of indirect costs, namely, the negotiated indirect cost pool, as actually having been

Plaintiffs' Motion to Certify Class Page 10

A -34

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 35 of 76

recovered, even though the contractor may have recovered only a fraction of the negotiated pool amount. See Kerkmans Affidavit (Att. 3), Hooper Declaration (Att. 5); and President's Council Audit (Att. 4), at 6. How carry-forwards are supposed to be calculated is touched upon in the GAO Report (Att. 2), at 74-76. By not carrying forward under-recoveries and by treating program funds used for indirect costs as recoveries of contract support costs, OIG and the Secretary deprive contractors of the benefits of the "fixed with carry forward" method and exacerbate the original rate-calculation error. IV. THE EFFECTS OF THE INCORRECT RATE CALCULATIONS Unless the United States pays the true cost of running these programs to the contractor, Plaintiffs and other contractors are forced to reduce programs, go into debt, or eschew other federal programs altogether. The problem has another dimension as well. Money not paid to IHS contractors for contract support remains in the Secretary's control and is thereby available to pay his in-house administrative costs. One of the main intentions of Congress in passing ISDA--to reduce the federal bureaucracy managing Indian programs--is thereby defeated. See S. Rept. No. 100-274 (Att. 12), at 7-8. The Secretary's indirect cost rate system provides an unauthorized means for shoring up the bureaucracy at the expense of tribes and tribal organizations. This consequence of the indirect cost rate system is not mentioned in the GAO Report but stands as a principal feature of the present controversy, bearing directly on the expected defense that the agency does not have available funding from Congress to pay full indirect contract support costs to Plaintiffs or the Class.

Plaintiffs' Motion to Certify Class Page 11

A -35

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 36 of 76

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) TUNICA-BILOXI TRIBE OF LOUISIANA; ) RAMAH NAVAJO SCHOOL BOARD, INC., ) ) Plaintiffs, ) Case No. 1:02CV02413 ) Judge Reggie B. Walton v. ) Magistrate Judge Deborah A. Robinson ) UNITED STATES of AMERICA; ) MICHAEL O. LEAVITT, Secretary of the ) United States Department of Health and Human ) Services; GALE A. NORTON, Secretary of the ) United States Department of the Interior, ) ) Defendants. ) __________________________________________) DEFENDANTS' MEMORANDUM IN SUPPORT OF MOTION TO DISMISS INTRODUCTION Plaintiffs, Tunica-Biloxi Tribe and Ramah Navajo School Board, are parties to selfdetermination contracts with the Secretary of the U.S. Department of Health and Human Services ("HHS"), as authorized by the Indian Self-Determination and Education Assistance Act ("ISDA"), 25 U.S.C. §§ 450 et seq. Pursuant to their self-determination contracts, Plaintiffs have assumed responsibility for running certain health care programs from the Indian Health Service ("IHS"), an agency of HHS. At issue in this lawsuit are claims that the Secretary annually underfunded certain cost components of Plaintiffs' contracts. After considering Defendants' Motion to Dismiss in 2004, this Court dismissed some of Plaintiffs' claims and ordered limited jurisdictional discovery. Before the Court was able to determine whether it had jurisdiction to order monetary relief for certain surviving claims, the case was stayed pending a ruling in a related case before the Supreme Court. In early 2005, the

A -36

Case 1:08-cv-00019-LJB

Document 8-2

Filed 04/12/2008

Page 37 of 76

Supreme Court issued a decision in Cherokee Nation v. Leavitt, 543 U.S. 631, __, 125 S. Ct. 1172, 1178-81 (2005), and held that when (1) the Secretary promised a specific amount in an ISDA contract for indirect CSC (as it had for the Cherokee plaintiffs), and (2) appropriations were legally available for that purpose, the Secretary could not defend against a breach of contract claim by arguing that it had insufficient appropriations. Moreover, the Court held that when Congress appropriated unrestricted, lump-sum appropriations, these appropriations were legally available to satisfy contractual promises. See 125 S. Ct. at 1180. In light of this Court's 2004 Order and the recent decision of the Supreme Court, Defendants now renew their motion to dismiss and move to dismiss all of the remaining claims for lack of subject matter jurisdiction and for failure to state a claim. Distinct from the breach claims at issue in Cherokee, Plaintiffs are asking this Court to reopen their contracts--all long since performed--and alter their terms and funding amounts to include additional funds on the basis of a purported inconsistency with the ISDA. But not only are the terms and funding amounts in Plaintiffs' contracts fully consistent with the ISDA, Plaintiffs have waived, and are estopped from raising, these overdue claims. The expectations of the parties have long been settled, and IHS no longer has the authority to obligate any additional funding to either Tunica or Ramah's contracts at issue in this lawsuit. By failing to take advantage of the judicial review provisions of the ISDA before the contract was executed, Plaintiffs acquiesced to the funding levels in their contracts and cannot now ask the Court to rewrite them. Under these circumstances, any claims or contentions that the ISDA requires a different level of funding have been extinguished and the terms and conditions of the actual ISDA agreements control the duties of the parties. In other words, "contracting parties must be held to their agreements." Madigan 2

A -37

Case 1:02-cv-02413-RBW Document 8-2 Document 95-1 Filed 04/12/2008 Page 38 of 76 Filed 05/20/2006 Page 1 of 46 Case 1:08-cv-00019-LJB

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) TUNICA-BILOXI TRIBE OF LOUISIANA; ) RAMAH NAVAJO SCHOOL BOARD, INC., ) ) Plaintiffs, ) Case No. 1:02CV02413 ) Judge Reggie B. Walton v. ) Magistrate Judge Deborah A. Robinson ) UNITED STATES of AMERICA; ) MICHAEL O. LEAVITT, Secretary of the ) United States Department of Health and Human ) Services; P. LYNN SCARLETT, Acting Secretary ) of the United States Department of the Interior, ) ) Defendants. ) __________________________________________) DEFENDANTS' OPPOSITION TO PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO `LUMP SUM YEARS' (1995-1997)

A -38

Case 1:02-cv-02413-RBW Document 8-2 Document 95-1 Filed 04/12/2008 Page 39 of 76 Filed 05/20/2006 Page 2 of 46 Case 1:08-cv-00019-LJB

INTRODUCTION AND SUMMARY OF ARGUMENTS Plaintiffs have moved for partial summary judgment in this putative class action. They assert that the Secretary of Health and Human Services (HHS) has violated the Indian Self Determination Act (ISDA) in Indian Health Service (IHS) self-determination contracts. The crux of plaintiffs' argument is that OMB Circular A-87, a method elected by Plaintiffs for calculating indirect contract support costs (CSC) in their IHS contracts, violates the ISDA. Under Plaintiffs' theory, IHS is required to pay not only for the indirect costs of running IHS programs, but must foot the bill for non-IHS programs as well. Underscoring the inequity of the relief Plaintiffs seek is the fact that IHS programs typically comprise less than half of a given tribal contractor's portfolio of programs. If the Court ruled as Plaintiffs desire, tribal contractors could assume 90% non-IHS contracts, but shift the entirety of the indirect costs associated with those contracts to IHS. Shifting costs from one agency to another is antithetical to appropriations law, but the logic of Plaintiffs' argument would accomplish precisely that perverse outcome. With this motion, Plaintiffs hope to evade scrutiny of the dubious merits of their contention that "the IHS methodology violates the ISDA" by invoking the judicial doctrine of collateral estoppel or issue preclusion. Specifically, Plaintiffs rely upon a Tenth Circuit decision involving a different contracting agency: the Department of the Interior (Interior or DOI). That case concerned ISDA contracts with the Bureau of Indian Affairs (BIA), a component of Interior. The BIA contracts at stake in that litigation were funded by Interior's appropriations, formed under Interior's regulations and contracting policies, and involved Interior's programs. Contrary to Plaintiffs' assertions, HHS neither stands in privity with Interior, nor is HHS bound based on Plaintiffs' characterization of the United States as "the real party in interest." Neither HHS nor IHS was a named defendant in the BIA contract litigation. Plaintiffs did not challenge -1-

A -39

Case 1:08-cv-00019-LJB Document 8-2 Filed 04/12/2008 Case 1:02-cv-02413-RBW Document 110 Filed 12/21/2006

Page 40of 40 of 76 Page 1

A -40

Case 1:08-cv-00019-LJB Document 8-2 Filed 04/12/2008 Case 1:02-cv-02413-RBW Document 110 Filed 12/21/2006

Page 41of 40 of 76 Page 2

A -41

Case 1:08-cv-00019-LJB Document 8-2 Filed 04/12/2008 Case 1:02-cv-02413-RBW Document 110 Filed 12/21/2006

Page 42of 40 of 76 Page 3

A -42

Case 1:02-cv-02413-RBW Document 8-2 Document 111 Filed 04/12/2008 Page 43 of 86 Filed 12/21/2006 Page 3 76 1:08-cv-00019-LJB

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) TUNICA-BILOXI TRIBE OF LOUISIANA; ) RAMAH NAVAJO SCHOOL BOARD, INC., ) ) Plaintiffs, ) Case No. 1:02CV02413 ) Judge Reggie B. Walton v. ) Magistrate Judge Deborah A. Robinson ) UNITED STATES of AMERICA; ) MICHAEL O. LEAVITT, Secretary of the ) United States Department of Health and Human ) Services; DIRK KEMPTHORNE, Secretary ) of the United States Department of the Interior, ) ) Defendants. ) __________________________________________) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT

A -43

Case 1:02-cv-02413-RBW Document 8-2 Document 111 Filed 04/12/2008 Page 44 of 86 Filed 12/21/2006 Page 4 76 1:08-cv-00019-LJB

TABLE OF CONTENTS

PAGE INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATUTORY BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 FACTUAL AND PROCEDURAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 STANDARDS OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 I. II. III. Standard for Motion to Dismiss for Lack of Subject Matter Jurisdiction . . . . . . . . . . . . 15 Standard for Motion to Dismiss for Failure to State a Claim . . . . . . . . . . . . . . . . . . . . . 16 Standard for Summary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 I. SOME OF THE CLAIMS AGAINST HHS SECRETARY LEAVITT SHOULD BE DISMISSED FOR LACK OF SUBJECT MATTER JURISDICTION . . . . . . . . . . 17 SECRETARY LEAVITT SHOULD BE GRANTED SUMMARY JUDGMENT BECAUSE IHS FULLY PERFORMED UNDER PLAINTIFFS' CONTRACTS . . . . . 19 A. B. III. IHS Fully Performed Under Tunica's Contracts . . . . . . . . . . . . . . . . . . . . . . . . 20 IHS Fully Performed Under RNSB's Contracts . . . . . . . . . . . . . . . . . . . . . . . . 21

II.

SECRETARY LEAVITT SHOULD BE GRANTED SUMMARY JUDGMENT BECAUSE PLAINTIFFS' CONTRACTS DO NOT VIOLATE ISDA . . . . . . . . . . . . 22 SECRETARY LEAVITT SHOULD BE GRANTED SUMMARY JUDGMENT ON ALL CONTRACT YEARS AFTER 1997 BECAUSE CONGRESS HAS LIMITED THE TOTAL AMOUNT OF CSC THAT IHS CAN AWARD . . . . . . . . . . 26 SECRETARY LEAVITT SHOULD BE GRANTED SUMMARY JUDGMENT BECAUSE PLAINTIFFS' INDIRECT COST RATES DO NOT VIOLATE THE ISDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 A. The Nature and Treatment of Indirect Costs Under Federal Law . . . . . . . . . . . . 28

IV.

V.

i

A -44

Case 1:02-cv-02413-RBW Document 8-2 Document 111 Filed 04/12/2008 Page 45 of 86 Filed 12/21/2006 Page 5 76 1:08-cv-00019-LJB

1. 2. B.

Federal appropriations law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Federal cost allocation principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

The ISDA Allows IHS to Use Indirect Cost Rates, Negotiated under OMB A-87, in Making Indirect CSC Awards . . . . . . . . . . . . . . . . . . . . . . . . . . 35 1. 2. 3. Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir. 1997) . . . . . 3