Free Reply to Response to Motion - District Court of Federal Claims - federal

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 1 of 89

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) TUNICA-BILOXI TRIBE OF LOUISIANA; ) RAMAH NAVAJO SCHOOL BOARD, INC., ) ) Plaintiffs, ) Case No. 02-2413 (RBW/DAR) ) v. ) ) 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. ) __________________________________________) DEFENDANTS' MOTION TO DISMISS AND FOR SUMMARY JUDGMENT Pursuant to Rules 12(b)(1) and 56 of the Federal Rules of Civil Procedure, Defendants United States, Michael O. Leavitt, Secretary of the U.S. Department of Health and Human Services, and Dirk Kempthorne, Secretary of the U.S. Department of the Interior, by and through undersigned counsel, hereby move this Court for an order dismissing many of the claims in the Second Amended Complaint and the Supplemental Complaint for lack of subject matter jurisdiction and for an order granting summary judgment to them on the remaining claims. The facts and law supporting this Motion are set forth in the accompanying Memorandum of Points and Authorities in Support of Defendant's Motion to Dismiss and for Summary Judgment and an attached Local Rule 7.1(h) Statement of Material Facts.

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 2 of 89

Respectfully submitted, JEFFREY S. BUCHOLTZ Acting Assistant Attorney General JEFFREY A. TAYLOR United States Attorney SHEILA M. LIEBER Deputy Director /s/Rachel J. Hines _____________________________ RACHEL J. HINES (D.C. Bar #424774) HANNAH Y.S. CHANOINE Federal Programs Branch, Room 7314 Civil Division Mailing Address P.O. Box 883 Washington, DC 20044 Delivery Address 20 Massachusetts Avenue, NW Washington, DC 20001 Telephone: (202) 514-5532 Facsimile: (202) 318-7604 E-mail: [email protected] E-mail: [email protected] Dated: April 20, 2008 Counsel for Defendants

2

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 3 of 89

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) TUNICA-BILOXI TRIBE OF LOUISIANA; ) RAMAH NAVAJO SCHOOL BOARD, INC., ) ) Plaintiffs, ) Case No. 02-2413 (RBW/DAR) ) v. ) ) 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 AND FOR SUMMARY JUDGMENT

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 4 of 89

TABLE OF CONTENTS PAGE INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATUTORY BACKGROUND.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 FACTUAL AND PROCEDURAL BACKGROUND.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 STANDARDS FOR REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 I. II. Standard for Motion to Dismiss for Lack of Subject Matter Jurisdiction. . . . . . . . . . . . . 15 Standard for Summary Judgment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 I. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER MANY OF PLAINTIFFS' CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 A. B. C. D. Some of Plaintiffs' Claims Must Be Dismissed for Lack of Presentment.. . . . . . 17 Plaintiffs Lack Standing to Pursue Their "Shortfall Claims". . . . . . . . . . . . . . . . 18 Plaintiffs' Claims Against Secretary Kempthorne Are Moot. . . . . . . . . . . . . . . . 20 Plaintiffs' Claims Against Secretary Kempthorne Must Be Dismissed for Failure to Exhaust Administrative Remedies. . . . . . . . . . . . . . . . . 21

II.

THE COURT SHOULD GRANT SUMMARY JUDGMENT TO DEFENDANTS BECAUSE THEY FULLY PERFORMED UNDER PLAINTIFFS' CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 A. B. IHS Fully Performed Under Tunica's Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 23 IHS Fully Performed Under RNSB's Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 24

III.

THE COURT SHOULD GRANT SUMMARY JUDGMENT TO DEFENDANTS BECAUSE PLAINTIFFS' CONTRACTS DO NOT VIOLATE THE ISDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 THE COURT SHOULD GRANT SUMMARY JUDGMENT TO DEFENDANTS ON ALL CONTRACT YEARS AFTER 1997 BECAUSE CONGRESS HAS LIMITED THE TOTAL AMOUNT OF CSC THAT IHS CAN AWARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 -i-

IV.

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 5 of 89

V.

THE COURT SHOULD GRANT SUMMARY JUDGMENT TO DEFENDANTS BECAUSE PLAINTIFFS' INDIRECT COST RATES DO NOT VIOLATE THE ISDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 A. The Nature and Treatment of Indirect Costs Under Federal Law. . . . . . . . . . . . . 32 1. 2. B. Federal appropriations law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Federal cost allocation principles.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

The ISDA Allows IHS to Use Indirect Cost Rates, Negotiated under OMB A-87, in Making Indirect CSC Funding Awards. . . . . . . . . . . . . . . . 38 1. Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir. 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Immediate congressional response to RNC. . . . . . . . . . . . . . . . . . . . . . . . 43 The decision in RNC does not apply to Plaintiffs. . . . . . . . . . . . . . . . . . . 45 a. b. Plaintiffs' costs are not fixed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Plaintiffs recover indirect costs from other federal agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

2. 3.

C. VI.

The Rate Adjustment Proposed by Plaintiffs Is Contrary to the ISDA. . . . . . . . . 49

THE COURT SHOULD GRANT SUMMARY JUDGMENT TO DEFENDANTS BECAUSE PLAINTIFFS HAVE WAIVED, AND ARE ESTOPPED FROM RAISING, ANY CLAIMS THAT THEIR CONTRACTS OR THEIR INDIRECT COST RATES VIOLATE THE ISDA. . . . . . . . 52 A. B. C. Plaintiffs Have Waived Any Claims to Additional Funding. . . . . . . . . . . . . . . . . 52 Plaintiffs Are Estopped from Claiming Additional Funding. . . . . . . . . . . . . . . . . 56 Plaintiffs Have Waived Any Claims Related to their Indirect Cost Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

VII.

THE COURT SHOULD GRANT SUMMARY JUDGMENT TO DEFENDANTS BECAUSE THE AWARD OF ADDITIONAL CSC WOULD BE A WINDFALL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

-ii-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 6 of 89

TABLE OF AUTHORITIES

CASES

PAGE(S)

Advanced Materials, Inc. v. Perry, 108 F.3d 307 (Fed. Cir. 1997). . . . . . . . . . . . . . . . . . . . . . . 24 Alabama v. Shalala, 124 F. Supp. 2d 1250 (M.D. Ala. 2000). . . . . . . . . . . . . . . . . . . . . . . . 32, 33 Aleutian Constructors v. United States, 24 Cl. Ct. 372 (1991). . . . . . . . . . . . . . . . . . . . . . . . . . 53 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505 (1986). . . . . . . . . . . . . . . . . . 16 Andrade v. Lauer, 729 F.2d 1475 (D.C. Cir. 1984). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Appeal of USD Techs., Inc., ASBCA No. 31305, 1987 WL 40766 (Mar. 12, 1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Arizona v. Thompson, 281 F.3d 248 (D.C. Cir. 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Babbitt v. Oglala Sioux Tribal Pub. Safety Dep't, 194 F.3d 1374 (Fed. Cir. 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27, 30 Barnes v. Cohen, 749 F.2d 1009 (3d Cir. 1984). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Beethoven.com LLC v. Librarian of Cong., 394 F.3d 939 (D.C. Cir. 2005). . . . . . . . . . . . . . . . 19 Beta Sys., Inc. v. United States, 838 F.2d 1179 (Fed. Cir. 1988). . . . . . . . . . . . . . . . . . . . . 22, 55 Beverly Cmty. Hosp. Ass'n v. Belshe, 132 F.3d 1259 (9th Cir. 1997). . . . . . . . . . . . . . . . . 43, 44 Brown v. Marquette Sav. & Loan Ass'n, 686 F.2d 608 (7th Cir. 1982). . . . . . . . . . . . . . . . . . . 43 Brown v. Thompson, 374 F.3d 253 (4th Cir. 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Cannon v. Univ. of Chicago, 441 U.S. 677, 99 S. Ct. 1946 (1979).. . . . . . . . . . . . . . . . . . . . . . 25 Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548 (1986). . . . . . . . . . . . . . . . . . . . . . . . . 17 Cherokee Nation v. Thompson, 311 F.3d 1054 (10th Cir. 2002). . . . . . . . . . . . . . . . . . . . . . . 6, 13 Cherokee Nation v. Leavitt, 543 U.S. 631, 125 S. Ct. 1172 (2005). . . . . . . . . . . . . . . . . . . passim City of Houston v. Dep't of Hous. & Urban Dev., 24 F.3d 1421 (D.C. Cir. 1994).. . . . . . . . . . 29 Coast Fed. Bank v. United States, 323 F.3d 1035 (Fed. Cir. 2003).. . . . . . . . . . . . . . . . . . . . . . 22 -iii-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 7 of 89

ConocoPhillips v. United States, 501 F.3d 1374 (Fed. Cir. 2007). . . . . . . . . . . . . . . . . . . . . 52,57 Contract Cleaning Maint., Inc. v. United States, 811 F.2d 586 (Fed. Cir. 1987). . . . . . . . . . . . 18 Dep't of Soc. Serv. v. Sullivan, No. 89-15091, 1990 WL 81840 (9th Cir. June 18, 1990).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Do-Well Mach. Shop, Inc. v. United States, 870 F.2d 637 (Fed. Cir. 1989).. . . . . . . . . . . . 52, 53 E. Walters & Co. v. United States, 576 F.2d 362 (Cl. Ct. 1978). . . . . . . . . . . . . . . . . . . 52, 56, 57 Elden v. United States, 617 F.2d 254 (Ct. Cl. 1980). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 England v. The Swanson Group, Inc., 353 F.3d 1375 (Fed. Cir. 2004). . . . . . . . . . . . . . . . . . . 17 Fed. for Am. Immigration Reform, Inc. v. Reno, 897 F. Supp. 595 (D.D.C. 1995). . . . . . . . . . . 15 Flink/Vulcan v. United States, 63 Fed. Cl. 292 (2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 GHS Health Maint. Org., Inc. v. United States, 76 Fed. Cl. 339 (2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Granite Constr. Co. v. United States, 962 F.2d 998 (Fed. Cir. 1992). . . . . . . . . . . . . . . . . . . . . 20 Greenlee County v. United States, 487 F.3d 871 (Fed. Cir. 2007). . . . . . . . . . . . . . . . . . . . . . . . 29 Haig v. Agee, 453 U.S. 280, 101 S. Ct. 2766 (1981).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Hartford Accident & Indem. Co., 130 Ct. Cl. 490 (1955). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Herbert v. Nat'l Acad. of Scis., 974 F.2d 192 (D.C. Cir. 1992). . . . . . . . . . . . . . . . . . . . . . . . . 15 Hermes Consol., Inc. v. United States, 58 Fed. Cl. 409 (2003).. . . . . . . . . . . . . . . . . . . . 52, 55, 57 Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 119 S. Ct. 755 (1999). . . . . . . . . . . . . . . . . . . 25 John R. Sand & Gravel Co. v. United States, 128 S. Ct. 750 (2008).. . . . . . . . . . . . . . . . . . . . . 17 Kentucky ex rel. Cabinet for Human Res. v. United States, 16 Cl. Ct. 755 (1989).. . . . . . . . . . 35 LSi Serv. Corp. v. United States, 422 F.2d 1334 (Ct. Cl. 1970). . . . . . . . . . . . . . . . . . . . . . . . . 24 Lincoln v. Vigil, 508 U.S. 182, 113 S. Ct. 2024 (1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Ling-Temco-Vought, Inc. v. United States, 201 Ct. Cl. 135 (1973). . . . . . . . . . . . . . . . . . . . . . 55

-iv-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 8 of 89

Liquilux Gas Corp. v. Martin Gas Sales, Inc., 979 F.2d 887 (1st Cir. 1992). . . . . . . . . . . . . . . 43 Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct. 2130 (1992). . . . . . . . . . . . . . . . 18, 19 MAPCO Alaska Petroleum, Inc. v. United States, 27 Fed. Cl. 405 (1992).. . . . . . . . . . . . . . . . . 55 Madigan v. Hobin Lumber Co., 986 F.2d 1401 (Fed. Cir. 1993). . . . . . . . . . . . . . . . . . . . . . . . . 2 Maine v. Shalala, 81 F. Supp. 2d 91 (D. Me. 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 33, 35 Marine Mammal Conservancy, Inc. v. Dep't of Agric., 134 F.3d 409 (D.C. Cir. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Martin v. United States, 20 Cl. Ct. 738 (1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 McCreary v. Offner, 1 F. Supp. 2d 32 (D.D.C. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 44 Menominee Indian Tribe v. United States, No. 07-812, 2008 WL 680379 (D.D.C. Mar. 14, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Mexican Intermodal Equip., S.A. de C.V. v. United States, 61 Fed. Cl. 55 (2004). . . . . . . . . . 52 Neder v. United States, 527 U.S. 1, 119 S. Ct. 1827 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 110 S. Ct. 2465 (1990).. . . . . . . . . . . . . . . 32 Oglesby v. United States Dep't of Army, 920 F.2d 57 (D.C. Cir. 1990).. . . . . . . . . . . . . . . . . . 19 PCL Const. Servs., Inc. v. United States, 41 Fed. Cl. 242 (1998). . . . . . . . . . . . . . . . . . . . . . . . . 53 Piamba Cortes v. Am. Airlines, Inc., 177 F.3d 1272 (11th Cir. 1999). . . . . . . . . . . . . . . . . . . . 44 Porter v. Comm'r, 856 F.2d 1205 (8th Cir. 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Pueblo of Zuni v. United States, 243 F.R.D. 436 (D.N.M. 2007). . . . . . . . . . . . . . . . . . . . . . . . 15 Pueblo of Zuni v. United States, No. 01-1046 (D.N.M.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Pueblo of Zuni v. United States, 467 F. Supp. 2d 1066 (D.N.M. 2006). . . . . . . . . . . . . . . . . . . . 17 Pueblo of Zuni v. United States, 467 F. Supp. 2d 1114 (D.N.M. 2006). . . . . . . . . . . . . . . . . . . . 26 RNC v. Babbitt, No. 90-0957 (D.N.M. Nov. 4, 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 RNSB v. Shalala, No. 94-914 (D.N.M.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

-v-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 9 of 89

Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir. 1997). . . . . . . . . . . . . . . . . . . . passim Ramah Navajo Chapter v. Norton, No 90-957 (D.N.M. 2006). . . . . . . . . . . . . . . . . . . . 27, 30, 42 Ramah Navajo Sch. Bd. v. Babbitt, 87 F.3d 1338 (D.C. Cir. 1996). . . . . . . . . . . . . . . . . . . 27, 30 Ramah Navajo Sch. Bd. v. United States, No. 08-19C (C.F.C.). . . . . . . . . . . . . . . . . . . . . . . . . 14 Red Lion Broad. Co. v. FCC, 395 U.S. 367, 89 S. Ct. 1794 (1969). . . . . . . . . . . . . . . . . . . . . . 43 Renda Marine, Inc. v. United States, 509 F.3d 1372 (Fed. Cir. 2007). . . . . . . . . . . . . . . . . . . . 17 Reservation Ranch v. United States, 39 Fed. Cl. 696 (1997). . . . . . . . . . . . . . . . . . . . . . . . . 52, 57 Rochester Pure Waters Dist. v. EPA, 960 F.2d 180 (D.C. Cir. 1992). . . . . . . . . . . . . . . . . . . . . 32 SMS Data Prods. Group, Inc. v. United States, 19 Cl. Ct. 612 (1990). . . . . . . . . . . . . . . . . . . . 17 Samish Indian Nation v. United States, 419 F.3d 1355 (Fed. Cir. 2005). . . . . . . . . . . . . . . 26, 58 Seaboard Lumber Co. v. United States, 903 F.2d 1560 (Fed. Cir. 1990). . . . . . . . . . . . . . . 52, 57 Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332 (1987). . . . . . . . . . . 54 Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 96 S. Ct. 1917 (1976).. . . . . . . . . . . . . . . . . 18 Sociotechnical Research Applications, Inc. v. Whitman, No. 01-1232, 2002 WL 123557 (Fed. Cir. Jan. 30, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Southern Ute Indian Tribe v. Leavitt, No. 05-988 (D.N.M. June 15, 2007). . . . . . . . . . . . . . . . 28 State of Ohio Rehab. Serv. Comm'n v. United States Dep't of Educ., No. 95-4213, 1996 WL 665608 (6th Cir. Nov. 14, 1996). . . . . . . . . . . . . . . . . . . . . . . . 35 Titan Corp. v. West, 129 F.3d 1479 (Fed. Cir. 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Union Pac. R.R. Co. v. United States, 847 F.2d 1567 (Fed. Cir. 1988). . . . . . . . . . . . . . . . . . . 57 United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004). . . . . . . . . . . 44 United States v. Barnes, 295 F.3d 1354 (D.C. Cir. 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 United States v. Montgomery County, 761 F.2d 998 (4th Cir. 1985). . . . . . . . . . . . . . . . . . 43, 44 Wash. Legal Found. v. U.S. Sentencing Comm'n, 17 F.3d 1446 (D.C. Cir. 1994).. . . . . . . . . . 25

-vi-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 10 of 89

Whittaker Elec. Sys. v. Dalton, 124 F.3d 1443 (Fed. Cir. 1997). . . . . . . . . . . . . . . . . . . . . . 52, 57 Wilbur v. CIA, 355 F.3d 675 (D.C. Cir. 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 20 Worth v. Jackson, 377 F. Supp. 2d 177 (D.D.C. 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Valley Forge Christian Coll. v. Am. United for Separation of Church & State, Inc., 454 U.S. 464, 102 S. Ct. 752 (1982).. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

UNITED STATES CONSTITUTION U.S. Const. art. I, § 9, cl. 7.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 56 U.S. Const. art. III, § 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

FEDERAL STATUTES 25 U.S.C. § 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 25 U.S.C. § 450. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3 25 U.S.C. § 450b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 38 25 U.S.C. § 450f. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim 25 U.S.C. § 450j.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27, 30 25 U.S.C. § 450j-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim 25 U.S.C. § 450j-2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42, 43, 44 25 U.S.C. § 450j-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 43 25 U.S.C. § 450l. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 26, 27 25 U.S.C. § 450m-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13, 17, 54 28 U.S.C. § 1295. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 28 U.S.C. § 1407. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 28 U.S.C. § 2501. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 18 31 U.S.C. § 1301. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29, 32, 33 -vii-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 11 of 89

41 U.S.C. § 601 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 12 41 U.S.C. § 605. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 17 41 U.S.C. § 609. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 41 U.S.C. § 612. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 42 U.S.C. § 1601 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 42 U.S.C. § 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Indian Self-Determination & Educ. Assistance Act Amendments of 1988, Pub. L. No. 100-472, 102 Stat. 2285 (1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Indian Self-Determination Act Amendments of 1994, Pub. L. No. 103-413, 108 Stat. 4250 (1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Dep't of the Interior & Related Agencies Appropriations Act, Pub. L. No. 105-83, 111 Stat. 1543 (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 29 Omnibus Consol. & Emergency Supp. Appropriations Act, 1999, Pub. L. No. 105-277, 112 Stat. 2681 (1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Consol. Appropriations Act, 2000, Pub. L. No. 106-113, 1 113 Stat. 1501 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Dep't of the Interior & Related Agencies Appropriations Act, 2001, Pub. L. No. 106-291, 114 Stat. 922 (2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Dep't of the Interior & Related Agencies Appropriations Act, Pub. L. No. 107-62, 115 Stat. 411 (2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Dep't of the Interior & Related Agencies Appropriations Act, Pub. L. No. 108-7, 117 Stat. 11 (2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

FEDERAL REGULATIONS 2 C.F.R. § 225.20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 35, 57 25 C.F.R. § 900.8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 25 C.F.R. § 900.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 27 25 C.F.R. § 900.16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 -viii-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 12 of 89

25 C.F.R. § 900.18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 25 C.F.R. § 900.22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 25 C.F.R. § 900.31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 54 25 C.F.R. § 900.32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 25 C.F.R. § 900.37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 25 C.F.R. §§ 900.150-900.176.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 54 25 C.F.R. §§ 900.215-900.230.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 43 C.F.R. § 4.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 20, 58 35 Fed. Reg. 18797 (1970).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

LEGISLATIVE MATERIAL 140 Cong. Rec. H11140, 103rd Cong., 2d Sess., 1994 WL 553621 (Oct. 6, 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 H.R. Rep. No. 105-609 (1998).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 S. Rep. No. 100-274, 1988 U.S.C.C.A.N. 2620 (1988).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

FEDERAL RULES Rule 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Rule 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 15 Rule 56 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 16

MISCELLANEOUS 5 A Charles A. Wright & Arthur R. Miller, Fed. Practice & Proc. § 1366 (2d ed. 1990). . . . . . 15

-ix-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 13 of 89

INTRODUCTION The Tunica-Biloxi Tribe ("Tunica") and The Ramah Navajo School Board ("RNSB"), Plaintiffs in this case, are parties to self-determination contracts with the Secretary of the U.S. Department of Health and Human Services ("HHS"), as authorized by the Indian SelfDetermination and Education Assistance Act ("ISDA"), 25 U.S.C. §§ 450 et seq. Pursuant to their 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 underfunded certain cost components of Plaintiffs' contracts, called indirect contract support costs ("CSC"). A review of Plaintiffs' contracts, however, demonstrates that IHS has fully performed its contractual obligations. To avoid application of the actual terms of their contracts, Plaintiffs instead allege that the contract's funding amounts, and formulas used to derive the amounts, violate the ISDA. As a threshold matter, many of Plaintiffs' claims must be dismissed for lack of subject matter jurisdiction. Plaintiffs have failed to properly present many of their claims through the Contract Disputes Act's ("CDA") mandatory administrative process. In addition, Plaintiffs lack standing to pursue certain of their claims, and the claims related to their indirect cost rates are moot and subject to dismissal for failure to exhaust administrative remedies. Defendants are also entitled to summary judgment on the merits of Plaintiffs' claims. First, the ISDA does not dictate contract amounts; it directs the parties to negotiate the contract amounts. Once an agreement is negotiated and signed, the parties are bound by its terms. While the ISDA has many procedural protections for Tribes and Tribal organizations, it does not provide for the relief Plaintiffs seek here: the retroactive reopening of the contracts to allow for the inclusion of additional funding. In other words, "contracting parties must be held to their

-1-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 14 of 89

agreements." Madigan v. Hobin Lumber Co., 986 F.2d 1401, 1404 (Fed. Cir. 1993). An ISDA contractor that believes that the indirect costs specified in a contract (ISDA or otherwise) are insufficient thus must make a critical decision at the outset: (1) accept the contract, the

administration of which causes the contractor to incurs costs beyond those provided for in the contract and find other means to cover these costs, or (2) decide not to accept the contract. While it may be a difficult choice, the decision is the contractor's alone. One of the goals of self-determination--particularly given limited federal and Tribal resources--is to allow Tribes and Tribal organizations, and not the federal government, to make the hard choices about what programs and services will best serve their members. While a Tribe or Tribal organization has the choice to accept or decline a contract or grant, the ISDA and federal appropriations law do not allow government contractors to shift the costs of programs that do not provide sufficient funding to the health care programs run under IHS contracts. Congress intended IHS programs to be charged only the costs that relate to and are directly attributable to IHS programs. Second, Plaintiffs' claims related to the funding methodology also lack merit. As to IHS, its use of indirect cost rates, negotiated under Office of Management and Budget Circulars, is fully endorsed by the ISDA. But even if their use violated the ISDA, Plaintiffs have acquiesced in the use and validity of these rates and thus have waived any claims for additional CSC. Plaintiffs are likewise not entitled to a remedy, as they recovered far more CSC from IHS than they expended on IHS programs. On these many bases, the Court should grant Defendants' Motion to Dismiss and for Summary Judgment. STATUTORY BACKGROUND The Indian Self-Determination and Education Assistance Act. In 1975, Congress enacted the Indian Self-Determination and Education Assistance Act ("ISDA"), a statute that was

-2-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 15 of 89

designed to foster Indian self-government by permitting the transfer of certain federal programs to Tribal governments and other Tribal organizations. See 25 U.S.C. §§ 450, 450a. The ISDA directs both the Secretary of HHS and the Secretary of DOI, upon the request of an Indian Tribe, to enter into "self-determination contracts." "Secretary"). See id. § 450f(a)(1); id. § 450b(i) (defining

A self-determination contract is a contract for "the planning, conduct and

administration of programs or services which are otherwise provided [by IHS or DOI] to Indian tribes and their members pursuant to Federal law." Id. § 450b(j). At issue in this lawsuit are Plaintiffs' self-determination contracts with IHS. IHS

provides health care services to American Indians and Alaska Natives throughout the United States, either directly under the Snyder Act and the Indian Health Care Improvement Act, see 25 U.S.C. § 13; 42 U.S.C. §§ 1601, 2001(a), or by providing funding and support to Tribes and Tribal organizations under ISDA contracts. See Lincoln v. Vigil, 508 U.S. 182, 185, 113 S. Ct. 2024, 2027 (1993). Although the ISDA applies equally to agencies within DOI, this matter involves the duties and responsibilities of the Secretary of HHS and IHS, and thus the statutory references cited hereinafter will refer solely to these parties. ISDA Contract Formation. Under the ISDA, if a Tribe or Tribal organization wishes to take over the planning, conduct, or administration of programs or services which are otherwise provided by IHS, it may submit a proposal to the Secretary. See 25 U.S.C. § 450f(a)(2). The proposal must contain, inter alia, the amount of funding requested for the contract. See 25 C.F.R. § 900.8(h). The Secretary thereafter has 90 days either to (1) approve the proposal and proposed funding levels and award the contract, or (2) issue a written notification declining all or part of the proposal for one of five justifications found in § 450f(a)(2). See 25 U.S.C.

-3-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 16 of 89

§ 450f(a)(2); 25 C.F.R. § 900.16. If the Secretary does not take action on a contract proposal within 90 days, the proposal is deemed approved. See 25 C.F.R. § 900.18. Declination of Contract Proposals. The Secretary may decline, in part or in full, a contract proposal on one of five statutory bases. See 25 U.S.C. § 450f(a)(2); see also 25 C.F.R. § 900.22 (reciting statutory bases). In issuing a partial or full contract "declination," the

Secretary must "state any objections in writing[,]" "provide assistance to the tribal organization to overcome the stated objections," and provide the organization with an administrative appeals process. See id. § 450f(b); 25 C.F.R. § 900.31. This administrative appeals process is set forth in 25 C.F.R. §§ 900.150-900.176. The Tribe or Tribal organization may also initiate a federal court action under 25 U.S.C. § 450m-1(a). See 25 U.S.C. § 450f(b). Direct Review by a Federal Court. Section 450m-1(a) gives federal courts the power to review a Secretary's declination decision for its compliance with ISDA and, if the decision is in error, to enjoin the Secretary "to reverse the declination finding . . . or to compel the Secretary to award and fund an approved self-determination contract." Id. § 450m-1(a). The conclusion of a action challenging a declination is an order affirming the decision of the Secretary or an order compelling the Secretary to enter into a contract. An ISDA contract is thus formed if either (1) the parties are in agreement about the terms of the contract and the Secretary awards the contract, or (2) a reviewing court orders the Secretary to award the contract. The ISDA Contract. Each ISDA contract has three components: the contract itself, modifications or amendments to the contract, and, since 1995, annual funding agreements ("AFAs"). See id. § 450l (providing for a model contract); id. § 450l(c)(e)(2) (providing for written modifications to the contract); id. §§ 450l(c)(b)(4), (c)(f)(2) (providing for an AFA). The funding levels for an ISDA contract are generally described in the AFA.

-4-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 17 of 89

Although many self-determination contracts remain in effect for more than one year, Tribal contractors must submit AFA proposals each year, which are then subject to individualized negotiations with the Secretary. See id. § 450j-1(a)(3)(B); 25 C.F.R. § 900.12. If the parties are unable to agree on the appropriate funding level, the Secretary can decline the proposal in part or in full under the declination procedures described above. See 25 C.F.R. § 900.32. The Tribal contractor has the right either to seek review through the administrative appeals process or by a direct federal court action. See 25 U.S.C. § 450f(b). Contract Disputes. Once the parties execute (sign) an ISDA contract and AFA, all disputes arising under it are subject to the Contract Disputes Act ("CDA"). See id. §§ 450m1(a), (d). The CDA is found at 41 U.S.C. §§ 601 et seq., and requires, inter alia, that before a claim may be brought in federal court, it must first be timely presented to a contracting officer at the relevant agency. See 41 U.S.C. § 605(a); see also 25 C.F.R. §§ 900.215-900.230 (explaining the exhaustion requirement for ISDA CDA claims). Funding of an ISDA Contract. Funding under an ISDA contract includes two

components­the Secretarial amount and CSC. The Secretarial amount includes expenses for a broad array of functions and activities that support the delivery of health services. See 25 U.S.C. § 450j-1(a)(1) (the "amount of funds . . . shall not be less than the appropriate Secretary would have otherwise provided for the operation of the programs"). Because the Secretarial amount does not necessarily cover all of the administrative or operating expenses of a particular program, a self-determination contract generally also includes CSC funding for certain administrative or operating expenses. See id. § 450j-1(a)(2). CSC can be further broken down into three categories. See id. § 450j-1(a)(3)(A). First, there are direct CSC, which are administrative costs of the contracted-for program, such as

-5-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 18 of 89

unemployment taxes or workers' compensation insurance.

See id. § 450j-1(a)(3)(A)(i); id.

§ 450b(c). Second, in the initial year of a contract, CSC may include "startup costs consisting of the reasonable costs that have been incurred or will be incurred on a one-time basis." Id. § 450j1(a)(5). Finally, there are indirect CSC, at issue here, which are administrative costs that are shared by several different programs or services. See id. § 450j-1(a)(3)(A)(ii); id. § 450b(f). The ISDA permits payment of only those CSC that are reasonable in light of the activities to be conducted. See id. § 450j-1(b). The ISDA directs that IHS's ISDA

appropriations "may be expended only for costs directly attributable to [ISDA contracts or grants] and no funds . . . shall be available for any [CSC] associated with [any non-IHS contracts or grants]." Id. § 450j-3. Finally, IHS's payment of CSC, like all funding under the ISDA, is subject to the availability of appropriations. See id. § 450j-1(b); id. § 450j(c). Insufficient CSC Appropriations and IHS's Policy Response. Since before 1995,

Congress has provided funding each fiscal year to IHS for, among other things, selfdetermination contracts and their associated CSC. In fiscal years before 1998, Congress did not specifically limit the amount of the IHS lump-sum appropriation that could be awarded for CSC. See Cherokee Nation v. Thompson, 311 F.3d 1054, 1058-59 (10th Cir. 2002), rev'd, 543 U.S. 631 (2005). IHS allocated CSC on the basis of recommendations in committee reports

accompanying the appropriations. See id. IHS followed Congress's recommendation because it had competing health care obligations and priorities, such as running hospitals and clinics for Tribes that did not wish to enter into self-determination contracts. Starting in 1998, Congress "capped" the amount of funds available for CSC, and this amount has since been the basis for CSC allocations. See, e.g., Dep't of the Interior & Related Agencies Appropriations Act, Pub. L. No. 105-83, 111 Stat. 1543, 1582-83 (1997) (Ex. 39).

-6-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 19 of 89

Since at least 1995, IHS's total allocations for CSC have been insufficient to fund the total amount requested by all Tribal contractors for CSC in all years at issue in this lawsuit. See Declaration of Thomas Thompson ¶ 6 (Ex. 4). Thus, IHS has had to develop policies for how the annual appropriation for CSC should be allocated equitably among Tribal contractors. These policies, developed with full Tribal participation, have been memorialized in a series of guidance memoranda or Circulars.1 IHS Memoranda and Circulars are not binding on contractors; they set forth the guidelines that IHS officials follow for ISDA contracting and the funding of CSC. As a starting place for negotiating indirect CSC, contractors either may use an indirect cost rate (discussed in more detail below) or may negotiate what are called "indirect-type costs" directly with IHS. See Declaration of Ralph Ketcher ¶ 32 (Ex. 1); Declaration of Veronica Zuni ¶ 73 (Ex. 2). Additionally, IHS has implemented pilot projects for CSC awards that allow contractors to negotiate unique CSC funding terms. (Ex. 34 at 26.) For the years at issue in this case, Tunica and RNSB have submitted to IHS indirect cost rates as the starting point for calculating indirect CSC. Indirect Cost Rates. Indirect cost rates are not issued by IHS, but by federal government agencies designated by OMB to negotiate rates (called a "cognizant agency"). Indirect cost rates are the result of a negotiation that is independent from contracting under the ISDA. See 2 C.F.R. Pt. 225, App. A, § A.6; Declaration of Deborah Moberly ¶¶ 4, 37 (Ex. 3). DOI is Tunica and RNSB's cognizant agency. See 2d Supp. Am. Compl. ¶ 12; Moberly Dec. ¶ 40 (Ex. 3).

The most recent Circular, IHS CSC Circular No. 2004-03 (applicable in 2005) is attached as Exhibit 34. The earlier Circulars, ISD Memorandum 92-2 (adopted in 1992), IHS CSC Circular No. 96-04 (adopted in 1996), IHS CSC Circular No. 2000-01 (adopted in January 2000), and IHS CSC Circular No. 2001-05 (applicable to 2002, 2003, and 2004 ISDA awards), can be found at http://www.ihs.gov/PublicInfo/Publications/IHSManual/Circulars_index.cfm -7-

1

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 20 of 89

The indirect cost rate negotiation is guided by general cost principles set forth in circulars developed by the Office of Management and Budget ("OMB"), OMB A-21, 2 C.F.R. Pt. 220 (for educational organizations), OMB A-87, 2 C.F.R. Pt. 225 (for State, Local, and Tribal governments), and OMB A-122, 2 C.F.R. Pt. 230 (for nonprofit organizations). Although the Circulars provide guidance for different types of organizations, the principles are the same: indirect costs must be equitably allocated among the programs that benefit from the costs. The Circulars provide a means to determine the maximum amount of indirect costs that can be charged to a federal award, unless more or less is permitted by law. See 2 C.F.R. pt. 225, App. A § A.1; Moberly Dec. ¶ 4 (Ex. 3). The Circulars, however, are not intended "to identify the circumstances or dictate the extent of Federal or [contractor] participation in the financing of a particular program or project." 2 C.F.R. Pt. 225, App. A, § A.1; see also Maine v. Shalala, 81 F. Supp. 2d 91, 96 n.4 (D. Me. 1999) (noting that provisions of law explicitly supercede general cost principles in circulars). Because Tunica and RNSB's rates at issue in this suit were

negotiated under OMB-87, all references are to OMB A-87. Negotiating Indirect Cost Rates. A Tribal contractor that wishes to obtain an indirect cost rate (or rates) must first submit an indirect cost rate proposal to its cognizant agency. See 2 C.F.R. Pt. 225, App. E, § D.1.a. The proposal "must be developed (and, when required, submitted) within six months after the close of the [contractor's] fiscal year, unless an exception is approved by the cognizant Federal agency." Id. App. E, § D.1.d. Once the contractor has submitted an indirect cost rate proposal, the cognizant agency will review, negotiate, and ultimately approve an indirect cost rate or rates. See id. App. E, § E.1. A rate agreement is then signed by the contractor and a representative of the cognizant agency. See id. App. E, § E.3. Once the agreement is signed, the rate is available to all federal agencies for their use. See id.

-8-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 21 of 89

The Use of Indirect Cost Rates. Once a rate is generated, it may be applied to the portion of the direct cost base associated with each program to determine the maximum amount of costs that can be equitably allocated to the program. The rate, however, is for allocating costs, and the Circulars specify that there is no right to or expectation of actual recovery of those costs created by the rate methodology. See id. § 225.20; Moberly Dec. ¶¶ 4, 56 (Ex. 3). A funding agency (such as IHS, BIA, or USDA) may or may not use an indirect cost rate as the basis for the actual reimbursement for or award of indirect costs. See 2 C.F.R. § 225.20. The amount actually recoverable from any government agency is determined by reference to the law and contractual requirements of the underlying contract or grant. See id. Dispute Processes. OMB also provides for a dispute resolution process in the event that there is a disagreement between a contractor and the cognizant agency in negotiating an indirect cost rate. "If a dispute arises in a negotiation of an indirect cost rate (or other rate) between the cognizant agency and the [contractor], the dispute shall be resolved in accordance with the appeals procedures of the cognizant agency." Id., App. E, § F.4. The appeals procedure for DOI is found at 43 C.F.R. §§ 4.1 et seq. FACTUAL AND PROCEDURAL BACKGROUND The Plaintiffs. The Tunica-Biloxi Tribe of Louisiana ("Tunica") is a federally-

recognized Tribe located in the State of Louisiana. (2d Am. Compl. ¶ 8.) Since before 1995, Tunica has had a self-determination contract with the Secretary to run a comprehensive health service program for its members. See id. Tunica's contracts at issue in this case cover fiscal years 1995-2001 (a 1995 Contract, a 1996 Contract in effect until 2000, and a 2000 Contract, in effect throughout 2001). (Exs. 6-8.) The other plaintiff, The Ramah Navajo School Board ("RNSB"), is a New Mexico non-profit corporation established by the Ramah Navajo Chapter of

-9-

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 22 of 89

the Navajo Nation. (2d Am. Compl. ¶ 9.) Since 1975, RNSB has had a self-determination contract to run a health clinic. See id. RNSB's contracts at issue in this case cover fiscal years 1995-2003 (a 1995 Contract in effect in 1995 and 1996, a 1997 Contract in effect in 1997-1999, a 2000 Contract in effect in 2000-2002, and a 2003 Contract in effect in 2003). (Exs. 9-12.) Both Plaintiffs negotiate indirect cost rates with DOI, acting through DOI's National Business Center ("NBC"). See Moberly Dec. ¶ 40 (Ex. 3). On February 4, 1997, DOI and Tunica finalized Tunica's 1995 negotiated indirect cost rate. (Ex. 13.) On March 5, 1997, DOI and Tunica finalized Tunica's 1996 negotiated indirect cost rate. (Ex. 14.) On November 1, 2007, DOI and Tunica finalized Tunica's 1997-2007 negotiated indirect cost rates. (Ex. 15.) On November 20, 1995, DOI and RNSB finalized RNSB's 1995 negotiated indirect cost rate. (Ex. 16.) On November 13, 1996, DOI and RNSB finalized RNSB's 1996 negotiated indirect cost rate. (Ex. 17.) On December 21, 2004, DOI and RNSB finalized RNSB's 1997 negotiated indirect cost rate. (Ex. 18.) On October 20, 2005, DOI and RNSB finalized RNSB's 1998-2002 negotiated indirect cost rates. (Ex. 19.) On October 31, 2005, DOI and RNSB finalized RNSB's 2003 negotiated indirect cost rate. (Ex. 20.) Tunica's Administrative Claims. On April 2 and September 27, 2001, Tunica submitted contract dispute claims to IHS related to its contracts and AFAs in effect between 1995 and 2001. (Ex. 23-24.) Tunica raised three legal theories to support its claims. The first was that IHS had underfunded indirect CSC generated by its indirect cost rate ("Claim One" or "the shortfall claim"). The second challenged the calculation of its indirect cost rate, relying on Ramah Navajo Chapter v. Lujan, 112 F.3d 1455 (10th Cir. 1997) ("Claim Two" or "the RNC" claim). The third challenged the rate methodology as not making adjustments for funding shortfalls ("Claim Three" or "the carry-forward claim"). A Table of Tunica's claims follows.

- 10 -

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 23 of 89

Claim One 1995 1996 1997 1998 1999 2000 2001 $5,768.00 $24,683.00 $21,220.00 $31,600.00 $14,706.00 $29,566.00 $12,036.00

Claim Two $13,938.00 $15,221.00 $14,966.00 $15,893.00 $15,513.00 $15,906.00 $15,191.00

Claim Three $8,206.00 $8,965.00 $8,815.00 $9,361.00 $9,138.00 $9,369.00 $8,947.00

Total $27,912.00 $48,869.00 $45,001.00 $56,854.00 $39,357.00 $54,841.00 $36,174.00

Record Cite Ex. 24 Ex. 23 Ex. 23 Ex. 23 Ex. 23 Ex. 23 Ex. 23

RNSB's Administrative Claims. On August 31, 2001, RNSB submitted contract dispute claims to IHS related to its contracts in effect between 1993-1996. (Ex. 26.) RNSB raised only Claims One and Two, as described above.2 RNSB did not submit any claims related to its 1997 contract. On December 30, 2003, RNSB submitted an additional contract dispute to IHS for 1998, which again raised only Claims One and Two. (Ex. 28.) On September 21, 2005, RNSB submitted a third claim letter related to its contracts in effect between 1999-2003. (Ex. 29.) In this letter, RNSB discussed Claims One, Two, and Three but included only the total amount claimed, without providing a specific amount claimed for each theory for relief.
Claim One 1995 1996 1997 1998 1999 2000 2001 2002 2003 $205,817.00 $57,647.00 -$40,643.20 Claim Two $68,644.00 $52,163.00 -$68,208.42 Claim Three ----Total $274,461.00 $109,810.00 -$108,852.00 $203,241.00 $188,545.00 $-19,245.00 $299,008.00 $305,395.00 Ex. 28 Ex. 29 Ex. 29 Ex. 29 Ex. 29 Ex. 29 Record Cite Ex. 26 Ex. 26

RNSB has since dismissed its claims for 1993 and 1994 and thus they are not discussed. - 11 -

2

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 24 of 89

The Complaints. This case was originally filed in the District of New Mexico, but before the Defendants answered, Plaintiffs voluntarily dismissed and re-filed their Complaint here in the District of Columbia. The operative complaints are the Second Amended Complaint, filed February 26, 2003, and the Supplemental Complaint, filed July 5, 2006. The Second Amended Complaint describes this suit as one "for breach of contract under the Contract Disputes Act, 41 U.S.C. § 601 et seq., and the special jurisdictional provisions of the Indian Self-Determination and Education Assistance Act, as amended, 25 U.S.C. §§ 450-450n. . . ." (2d Am. Compl. ¶ 1.) It claims that Defendants violated ISDA's funding provisions applicable to indirect CSC under the three legal theories raised by Plaintiffs in some, but not all, of their CDA claims. See id. The Third Claim alleges breach of trust. (2d Am. Compl. ¶¶ 42-46.) Plaintiffs seek "money damages for underpayment of Indirect Contract Support Costs", a declaration that the "methods employed by the Defendants for computing and paying each class members' entitlement to Indirect [CSC]" are in violation of ISDA and Plaintiffs' contracts, and accordingly, an injunction. (2d Am. Compl. at 15-16.) This Court's Order of January 22, 2004. On March 31, 2003, Defendants filed a Motion to Dismiss the Second Amended Complaint (docketed as #13). In a Memorandum Opinion of December 9, 2003, amended January 22, 2004, the Court dismissed parts of the First and Second Claims and all of the Third Claim. See Tunica, slip op. at 8-15 (docketed at #48). Specifically, the Court held that the ISDA, 25 U.S.C. § 450m-1(d) made all contract disputes subject to the CDA, and that compliance with the CDA is a jurisdictional prerequisite to a suit for money damages under the ISDA. See id. at 8-10. The Court held that each claim for breach for each year must be properly presented. See id. at 13-15. The Court then dismissed all claims not presented to an IHS contracting officer, noting that Plaintiffs had already conceded that no

- 12 -

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 25 of 89

claims prior to fiscal years 1995 were at issue in this suit. See id. at 9-10, 15. Thus, all that remained were Tunica's claims for 1995-2001 funding and RNSB's claims for 1995 and 1996 funding. See id. at 15, nn.13, 17. For purposes of resolving the remaining claims and assessing the extent of its jurisdiction to award monetary relief, the Court ordered limited jurisdictional discovery and supplemental briefing into the factual availability of appropriated funds for years at issue in this suit. See id. at 26. The Court also ordered supplemental briefing on "whether there was an agreement between the parties that a certain rate would be applicable to fiscal years subsequent to 1996, in the absence of a new agreement." Id. at 29. All other claims related to the Secretary's alleged duty to request additional appropriations for CSC and the breach of trust claim were dismissed. See id. at 37-40. Upon reconsideration of the dismissal of all claims related to the Secretary's duty to request additional appropriations, the Court reaffirmed its prior holdings (docketed as #45). The parties thereafter conducted limited jurisdictional discovery, but before re-briefing the remaining issues, the Supreme Court granted certiorari in Cherokee Nation v. Leavitt. The Court stayed this case pending Cherokee's resolution. Cherokee Nation v. Leavitt. In Cherokee, the Supreme Court first had to determine the nature of an ISDA contract. See 543 U.S. 631, 638-39, 125 S. Ct. 1172, 1178-79 (2005). The government argued that an ISDA contract is not a contractually binding agreement, but a unique, government-to-government agreement to which general contract law did not apply. See 543 U.S. at 638, 125 S. Ct. at 1178. Rejecting this argument, the Court held that ISDA contracts are like any other procurement contract in which the government is bound by its promises. See id. Next, the Court had to assess a single defense raised by the Secretary to the specific contracts at issue in that case, e.g., that the Secretary did not have sufficient appropriations to pay the

- 13 -

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 26 of 89

amounts promised in the plaintiffs' contracts. See 543 U.S. at 640-43, 125 S. Ct. at 1179-81. It was undisputed that the Secretary had failed to pay the funding amounts in the contracts of the two Cherokee plaintiffs. See 543 U.S. at 636, 125 S. Ct. at 1177 ("The Government does not deny that it promised to pay the relevant contract support costs. Nor does it deny that it failed to pay."). Given these circumstances, the Court held that (1) when the Secretary promised a specific amount in an ISDA contract for indirect CSC, and (2) when appropriations were legally available for that purpose, the Secretary could not defend against a breach of contract action by arguing that it had insufficient appropriations. See 543 U.S. at 642-46; 125 S. Ct. at 1178-83. Moreover, the Court held that when Congress appropriated an unrestricted, lump-sum appropriation, that appropriation was legally available to satisfy contractual promises. See 543 U.S. at 642; 125 S. Ct. at 1180. After the Supreme Court's decision, the stay was lifted in this case, and the case proceeded to briefing and additional discovery, culminating in this Motion to Dismiss and for Summary Judgment.3 Ramah Navajo School Board v. United States, No. 08-19C (C.F.C.). On January 11, 2008, RNSB filed a lawsuit in the Court of Federal Claims, seeking additional CSC ("Claim

On December 12, 2005, the Court ordered Defendants to file any appropriate dismissal motions. On January 12, 2006, Defendants filed a Renewed Motion to Dismiss and on January 13, 2006, Plaintiffs filed a Motion for Partial Summary Judgment. After taking discovery, Defendants filed an Opposition to Plaintiffs' Motion and, on May 27, 2006, a Cross-Motion for Summary Judgment. Plaintiffs thereafter took discovery on Defendants' Cross-Motion. On June 5, 2006, the Court dismissed the motions without prejudice and, later, directed the re-filing of dispositive motions by December 21, 2006. On December 21, 2006, Defendants filed a Motion to Dismiss or, in the Alternative, for Summary Judgment, and Plaintiffs filed a Motion for Partial Summary Judgment. On March 17, 2008, the Court dismissed both motions without prejudice and ordered that they be updated and re-filed. - 14 -

3

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 27 of 89

One") under its 1993-2003 AFAs. The United States has moved to dismiss the Complaint as duplicative, as the claims asserted therein fall within the claims asserted in this case.4 STANDARDS FOR REVIEW I. Standard for Motion to Dismiss for Lack of Subject Matter Jurisdiction. Rule 12(b)(1) of the Federal Rules of Civil Procedure permits a defendant to move to dismiss a claim on the ground that the court lacks jurisdiction over the subject matter. Where necessary, "the court may consider the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992).

Accordingly, a motion to dismiss for lack of jurisdiction that relies on matters outside the pleadings, such as a declaration or other documents, should not be converted to a Rule 56 motion for summary judgment. See Fed. for Am. Immigration Reform, Inc. v. Reno, 897 F. Supp. 595, 600 n.6 (D.D.C. 1995), aff'd, 93 F.3d 897 (D.C. Cir. 1996); see also 5A Charles A. Wright &

The Court of Claims lawsuit is RNSB's third lawsuit in which it has sought additional CSC under its 1993 AFA (this case, the Claims Court case, and RNSB v. Shalala, No. 94-914 (D.N.M.)), and its second lawsuit claiming additional CSC under its 1994-2003 AFAs (this case and the Claims Court case). Beyond these three lawsuits, RNSB and its counsel have repeatedly sought to adjudicate their claims in more than one forum. In 2005, Plaintiffs unsuccessfully attempted to consolidate this case with other cases pending in the District of New Mexico, first by moving for transfer and consolidation under the multi-district litigation statute, 28 U.S.C. § 1407, and then by moving to intervene and file an identical complaint in Pueblo of Zuni v. United States, No. 01-1046 (D.N.M.). The Judicial Panel for Multi-District Litigation denied the multidistrict motion (Order docketed as #75). Likewise, the Zuni court denied Plaintiffs' motion to intervene. Thereafter, counsel for Plaintiffs moved for appointment as class counsel and for creation of a sub-class in Zuni. On May 22, 2007, the Court denied Zuni's motion for class certification as well as Plaintiffs' counsel's motion for appointment as class counsel. See Pueblo of Zuni v. United States, 243 F.R.D. 436 (D.N.M. 2007). In denying the motion, the Court stated that it was "nothing more than a self-serving motion requesting creation of a sub-class and appointment of themselves as counsel for that sub-class[.]" See id. at 449. - 15 -

4

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 28 of 89

Arthur R. Miller, Fed. Practice & Proc. § 1366 at 484-85 (2d ed. 1990) (explaining that attaching documents to a Rule 12(b)(1) motion does not convert it to one for summary judgment). II. Standard for Summary Judgment. Summary judgment is appropriate when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). "Summary Judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S. Ct. 2548, 2555 (1986) (citing Fed. R. Civ. P. 1). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. See Celotex, 477 U.S. at 323, 106 S. Ct. at 2552. "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 2510 (1986). A determination of which facts are material depends on the underlying substantive law. "Factual disputes that are irrelevant or unnecessary" do not preclude the entry of summary judgment. See 477 U.S. at 248, 106 S. Ct. at 2510. Once the initial burden of the moving party is satisfied, the burden shifts to the responding party to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. See 477 U.S. at 250, 106 S. Ct. at 2511. In considering a motion for summary judgment, "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Worth v. Jackson, 377 F. Supp. 2d 177, 181 (D.D.C. 2005), vacated in part on other grounds, 451 F.3d 854 (D.C. Cir.

- 16 -

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 29 of 89

2006). However, "the non-moving party cannot rely on mere allegations or denials . . . but . . . must set forth specific facts showing that there [are] genuine issue[s] for trial." Id. at 180-81. ARGUMENT I. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER MANY OF PLAINTIFFS' CLAIMS. The Court lacks jurisdiction over many of the claims in this case for lack of mandatory presentment, lack of standing, mootness, and failure to exhaust administrative remedies. A. Some of Plaintiffs' Claims Must Be Dismissed for Lack of Presentment.

As this Court has already held, all claims in this suit must first be presented to an IHS contracting officer ("CO"). Tunica, slip op. at 8-15 (docketed as #48). This is mandated by ISDA's jurisdictional provision, 25 U.S.C. § 450m-1(a), which authorizes courts to review claims for money damages under the CDA. See 25 U.S.C. §§ 450m-1(a), (d). Under the CDA, a prerequisite to judicial review is the timely and proper presentment of any claims to a government CO. See 41 U.S.C. § 605(a); Renda Marine, Inc. v. United States, 509 F.3d 1372, 1380-81 (Fed. Cir. 2007);5 England v. The Swanson Group, Inc., 353 F.3d 1375, 1379 (Fed. Cir. 2004); SMS Data Prods. Group, Inc. v. United States, 19 Cl. Ct. 612, 615 (1990); Pueblo of Zuni v. United States, 467 F. Supp. 2d 1099, 1106-07 (D.N.M. 2006); See generally John R. Sand & Gravel Co. v. United States, 128 S. Ct. 750, 757 (2008) (explaining that a similar statute, 28 U.S.C. § 2501, is jurisdictional and cannot be waived). In the Court's original Order and Opinion, it dismissed Tunica and RNSB's claims not first presented to an IHS CO. See Tunica, slip op. at 8-15. Remaining were Tunica's challenges

The Court of Federal Claims, and its reviewing court, the U.S. Court of Appeals for the Federal Circuit, interpret government contracts almost exclusively, see 41 U.S.C. § 609, 28 U.S.C. § 1295. Thus, the decisions of these courts are cited herein. - 17 -

5

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 30 of 89

(Claims One, Two, and Three) to its 1995-2001 ISDA contracts and AFAs, and RNSB's challenges (Claims One and Two) to its 1995-1996 ISDA contracts and AFAs. See id. RNSB supplemented the Second Amended Complaint to include claims presented to an IHS CO for its 1998-2003 contracts and AFAs. These claims must now be reviewed under the strict

jurisdictional prerequisites of the CDA. RNSB did not present any contract disputes related to its 1997 contract. Thus, all claims related to 1997 must be dismissed. RNSB also did not present Claim Three as to its 1998 contract. (Ex. 28.) This claim must be dismissed as well. Third, RNSB's September 21, 2005 CDA claim letter asserts that IHS overpaid CSC in 2001. (Ex. 29.) This claim must be dismissed. Finally, RNSB presented, in its claim letter, a total amount claimed for 1998-2003, but failed to specify the amount of CSC that it claimed under each theory. The CDA requires that all claims contain a clear statement of their basis and amount. See Contract Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987). Based on RNSB's failure to specify the nature of each claim and the actual amount claimed to be due under its 1998-2003 contracts and AFAs, these claims do not satisfy the jurisdictional prerequisite of the CDA and must be dismissed. B. Plaintiffs Lack Standing to Pursue Their "Shortfall Claims."

Plaintiffs lack standing as to their shortfall claims, i.e., their claims that IHS failed to pay the amount of CSC generated by multiplying their indirect cost rate by their direct cost base ("Claim One"). IHS paid Plaintiffs in each year at issue in this suit the amount generated by this calculation. Plaintiffs thus lack an injury for purposes of Article III standing requirements. Article III of the Constitution confines the federal courts to adjudicating "cases or controversies." U.S. Const., art. III, § 2. The case or controversy requirement is a "bedrock"

- 18 -

Case 1:08-cv-00019-LJB

Document 12-2

Filed 05/09/2008

Page 31 of 89

requirement. See Valley Forge Christian Coll. v. Am. United for Separation of Church & State, Inc., 454 U.S. 464, 471, 102 S. Ct. 752, 758 (1982). The Supreme Court has stated: "No principle is more fundamental to the judiciary's proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies." Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 37, 96 S. Ct. 1917, 1924 (1976). One element of the case-or-controversy requirement is that the plaintiff must establish that he or she has standing to sue. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S. Ct. 2130, 2136 (1992). The irreducible minimum of Article III standing constitutes three

elements. See Lujan, 504 U.S. at 560-61, 112 S. Ct. at 2136. Relevant here, the first is that the plaintiff must have suffered an injury in fact, which is defined as the i