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

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ORAL ARGUMENT REQUESTED IN THE UNITED STATES COURT OF FEDERAL CLAIMS THE OSAGE NATION AND/OR TRIBE OF INDIANS OF OKLAHOMA, ) ) ) Plaintiff, ) ) ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. ) __________________________________________)

Electronically Filed July 11, 2005 No. 00-169 L Judge Emily C. Hewitt

PLAINTIFF OSAGE NATION'S OPPOSITION TO DEFENDANT'S MOTION TO DISMISS, IN PART, PLAINTIFF'S TRANCHE ONE CLAIMS

WILSON K. PIPESTEM Pipestem Law Firm, P.C. 1333 New Hampshire Avenue, N.W. Washington, D.C. 20036 Telephone: (202) 419-3526 Fax: (202) 659-4931 [email protected] Attorney for Plaintiff Osage Nation

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TABLE OF CONTENTS

Table of Authorities .............................................................................................................. i I. II. INTRODUCTION................................................................................................... 1 STATEMENT OF THE CASE ................................................................................ 3 A. B. C. D. III. The 1906 Act ............................................................................................... 3 Applicable Regulations ............................................................................... 6 The Tranche One Leases ............................................................................. 8 The Government's Day-to-Day Control of Osage Oil and Gas Leases .......................................................................................................... 9

ARGUMENT ........................................................................................................ 12 A. B. C. Standard Of Review On A Motion To Dismiss For Lack Of Jurisdiction Under The Indian Tucker Act ................................................ 12 The Osage Nation's Tranche One Royalty Claims Are Within This Court's Jurisdiction ................................................................................... 15 The Government's Arguments That It Has No Duty To Collect Royalties Owed The Osage Trust Are Unavailing .................................... 19 1. The Osage Trust is Not a "Bare" or "Limited" Trust Because the 1906 Act and Osage Regulations Impose Enforceable Duties Regarding the Calculation and Collection of Royalties..... 20 a. The Government Improperly Relies On An Unduly Narrow Construction Of Navajo Nation And White Mountain Apache That The Supreme Court Has Rejected............................................................................. 20

2. 3. 4. 5.

Under Supreme Court and Federal Circuit Precedent, The Osage Trust is Not a "Bare" or "Limited" Trust ........................... 22 The Government's Attempts to Characterize Its Duties as Passive are Unavailing .................................................................. 24 The Fact the Lessees Owe the Royalty Does not Relieve the Government of its Duty to Collect the Royalty............................. 26 The Government Cannot Avoid Liability for Its Failure to Execute its Fiduciary Obligations by Arguing that It Acted as a Volunteer..................................................................................... 28

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6.

The Government Cannot Rely on the Limited Role the Osage Nation Plays in the Leasing Process to Avoid Liability for its Own Conduct................................................................................. 29 The Government Misconstrues the Shoshone Decisions in an Attempt to Evade its Fiduciary Duties to the Osage Nation ......... 31 The Court Should Reject the Government's Eleventh Hour Attempt to Redefine Tranche One of this Case............................. 33

7. 8. D.

The Osage Nation's Claims Are Not Time Barred And The Government's Arguments Have Already Been Rejected By This Court And The Federal Circuit in Shoshone ............................................. 35 The Osage Nation Has Sufficiently Plead That The Government Breached Its Investment-Related Duties To Survive A Motion To Dismiss ...................................................................................................... 38

E.

IV.

CONCLUSION AND REQUEST FOR ORAL ARGUMENT .............................. 40

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TABLE OF AUTHORITIES FEDERAL CASES Army and Air Force Exchange Serv. v. Sheehan, 456 U.S. 728 (1982) .............................................. 20 Brown v. United States, 42 Fed. Cl. 538 (1998) .................................................................................. 14 Brown v. United States, 86 F.3d 1554 (Fed. Cir. 1996) ................................................................ passim Coast Indian Cmty. v. United States, 550 F.2d 639 (Ct. Cl. 1977) ...................................................... 40 Minnesota Chippewa Tribe v. United States, 14 Ct. Cl. 116 (1987).................................................... 39 Navajo Tribe of Indians v. United States, 224 Ct. Cl. 171 (1980)................................................. 13, 29 Navajo Tribe of Indians v. United States, 9 Cl. Ct. 336 (1986)........................................................... 40 Osage Nation v. United States, 57 Fed. Cl. 392 (2003)....................................................................... 35 Pawnee v. United States, 830 F.2d 187 (Fed. Cir. 1987) ..................................................................... 27 Poafpybitty v. Skelly Oil Co., 390 U.S. 365 (1968)............................................................................. 30 Shoshone Indian Tribe v. United States, 52 Fed. Cl. 614 (2002).................................................. passim Shoshone Indian Tribe v. United States, 56 Fed. Cl. 639 (2003).................................................. passim Shoshone Indian Tribe v. United States, 58 Fed. Cl. 77 (2003).................................................... passim Shoshone Indian Tribe v. United States, 364 F.3d 1339 (Fed. Cir. 2004)..................................... passim United States v. Koch Indus., 57 F. Supp. 2d 1122 ( N.D. Okla. 1999)................................... 12, 17, 26 United States v. Mitchell, 445 U.S. 535 (1980) ....................................................................... 12, 20, 22 United States v. Mitchell, 463 U.S. 206 (1983) ............................................................................ passim United States v. Navajo Nation, 537 U.S. 488 (2003) .................................................................. passim United States v. Testan, 424 U.S. 392 (1976) ...................................................................................... 20 United States v. White Mountain Apache Tribe, 537 U.S. 465 (2003) ......................................... passim Wright v. United States, 32 Fed. Cl. 54 (1994).............................................................................. 20, 21 Yankton Sioux Tribe v. United States, 623 F.2d 159 (Ct. Cl. 1980) ..................................................... 40 DOCKETED CASES United States v. Plains Res., Inc., Case No 02-CV-976-E (M).......................................... 12, 17, 25, 26 STATUTES AND REGULATIONS Act of June 28, 1906, 34 Stat. 539 ............................................................................................... passim 25 U.S.C. §§ 155 (2000) .............................................................................................................. passim 25 U.S.C. §§ 161a (2000)............................................................................................................. passim 25 U.S.C. §§ 161b (2000) ............................................................................................................ passim iii

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25 U.S.C. § 162a (2000)............................................................................................................... passim Act of October 6, 1964, 78 Stat. 1008................................................................................................... 5 Act of October 21, 1978, 92 Stat. 1660................................................................................................. 5 Act of March 3, 1921, Chapter 120, 41 Stat. 1249................................................................................ 5 Act of March 2, 1929, Chapter 493, 45 Stat. 1478................................................................................ 5 Act of June 24, 1938, Chapter 645, 52 Stat. 1034................................................................................. 5 Act of July 25, 1947, Chapter 334, 61 Stat. 459 ................................................................................... 5 Act of June 15, 1950, Chapter 248, 64 Stat. 215................................................................................... 5 Consolidated Appropriations Act of 2005, Pub. L. No. 108-447, 118 Stat. 2809 ......................... 35, 36 Federal Oil and Gas Royalty Management Act of 1982, 30 U.S.C §§ 1707-57 (1994)...................... 32 25 U.S.C. § 155 (2000) ................................................................................................................ passim 25 U.S.C. § 161a (2000)............................................................................................................... passim 25 U.S.C. § 161b (2000) .............................................................................................................. passim 25 U.S.C. § 162a (2000)............................................................................................................... passim 25 C.F.R. § 211.40 (2003) ................................................................................................................... 32 25 C.F.R. § 226.2 (2003) ....................................................................................................................... 6 25 C.F.R. § 226.4 (2003) ........................................................................................................... 8, 16, 23 25 C.F.R. § 226.5 (2003) ....................................................................................................................... 6 25 C.F.R. § 226.7 (2003) ................................................................................................................. 6, 23 25 C.F.R. § 226.10 (2003) ..................................................................................................................... 6 25 C.F.R. § 226.11 (2003) ............................................................................................................ passim 25 C.F.R. §§ 226.14-15 (2003).............................................................................................................. 6 25 C.F.R. §§ 226.16-41 (2003).............................................................................................................. 7 25 C.F.R. §§ 226.42-46 (2003).............................................................................................................. 7 LEGISLATIVE HISTORY Federal Oil and Gas Royalty Management Act of 1982, H.R. Rep. No. 97-859 at 15 (1982), reprinted in 1982 U.S.C.C.A.N. 4268........................................................................................... 33 OTHER AUTHORITIES Austin Wakeman Scott & William Franklin Fratcher, The Law of Trusts § 177 (4th Ed. 1987)16, 25, 28, 40 Restatement (Second) of Trusts § 174, cmt. a (1959) ............................................................. 16, 25, 28

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PLAINTIFF OSAGE NATION'S OPPOSITION TO DEFENDANT'S MOTION TO DISMISS, IN PART, PLAINTIFF'S TRANCHE ONE CLAIMS I. INTRODUCTION

For nearly a century the United States of America (the "Government"), acting under the authority of the 1906 Act, 34 Stat. 539, and other federal laws and regulations, has exercised plenary control over all aspects of the mineral estate underlying the Osage Reservation (the "Osage mineral estate"). The Government holds the entire 1.475 million acre Osage mineral estate, and all proceeds therefrom, in trust for the use and benefit of the Osage Nation. In order to fulfill its trust duties, including the duty to collect all royalties due under the oil and gas leases that it issues, the Government employs almost 50 people, including petroleum engineers and accountants, at the Osage Agency, a subagency of the Department of the Interior, Bureau of Indian Affairs ("BIA"), located in Pawhuska, Oklahoma on the Osage Reservation. In addition, the Government employs numerous other professional employees at the Department of the Interior and the Department of the Treasury to invest the funds it collects before they are distributed to the Osage Nation and individual headright owners, in accordance with the 1906 Act. In this case, the Osage Nation is seeking money damages from the Government because the Government has breached its fiduciary duties to the Osage Nation with respect to the Osage mineral estate and other Osage Trust assets. While these breaches involve literally thousands of leases and extend back many years, the Court has limited this phase of the litigation ("tranche one") to the Osage Nation's damage claims involving five oil and gas leases (the "tranche one leases") and six months (the "tranche one months"). With respect to this more limited scope, the Osage Nation claims that the Government, as trustee, has failed to collect all payments due under the tranche one leases for the tranche one months and, in addition, failed to properly invest and distribute funds collected from those leases as required by law.

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Notwithstanding its plenary control over the Osage mineral estate, the Government has filed a motion to dismiss arguing it is not liable to the Osage Nation for any payments, including royalty payments, due to the Osage Nation under the tranche one leases that the Government failed to collect. In essence, the Government argues that its trust duties under the 1906 Act and the network of federal laws and regulations defining the Trust do not require it to collect or properly distribute any payments due to the Osage Nation under those leases for any time period. The Government states that its trust duties are limited to investing only those trust funds that, by whatever means, happen fall into its hands. The Government further contends that it is not liable for any damages for mismanaging those trust funds unless the Osage Nation can demonstrate that the Government has "abused" its discretion. As discussed below, however, under well-established authority of the Supreme Court, the Federal Circuit, and this Court, the Government is liable to the Osage Nation for any damages the Government caused the Osage Nation by failing to collect payments due under the tranche one leases and improperly distributing them. The 1906 Act contains express language requiring the Government, as trustee, to hold in trust "all funds belonging to the Osage tribe, and all moneys due, and all moneys that may become due, or may hereafter be found to be due said Osage tribe..." For almost 100 years, the Government itself has consistently interpreted this statutory language as creating a fiduciary duty to collect all payments due the Osage Nation under mineral leases that the Government, as trustee, issues with respect to the Osage mineral estate. This Court should not permit the Government to abandon its own long-standing interpretation of these statutory provisions simply because the Osage Nation now seeks damages based on the Government's failure to collect payments that are due the Osage Nation under the mineral leases that Government, as trustee, solicited, drafted, approved, and managed. Indeed, in the absence of

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a damage remedy, there is simply no way the Osage Nation (or this Court) can force the Government to fulfill its admitted trust duties to the Osage Nation under the 1906 Act. The Government also presents an overly narrow view of federal law pertaining to tribal trust claims by arguing that the 1906 Act and regulations must specifically create an express duty for the Government to perform the precise task the Osage Nation contends the Government failed to do. As detailed below, the law imposes no such requirement. The Federal Circuit and this Court in Shoshone Indian Tribe v. United States1 have consistently ruled that claims regarding the Government's failure to collect royalties owed Indian tribes are within this Court's jurisdiction. Moreover, because the Government does not dispute that it acts as trustee for the Osage Nation, the Government cannot evade its duty as a trustee to collect debts owed the Osage Nation, including royalty payments due and owing. Beyond the plain meaning of the provisions of the 1906 Act requiring it to place all payments due the Osage Nation in trust, moreover, the Government cannot escape liability when it erroneously applies its own regulations and lease forms pertaining to the Osage mineral estate. Having assumed the responsibility of collecting and managing Osage Trust funds, the Government is answerable in damages for failing to fulfill that responsibility, and the Government's erroneous presentation of the facts and law cannot change that conclusion. II. A. The 1906 Act For over 120 years, the Government has been the trustee of the Osage mineral estate. See Deed from the Cherokee Nation to the United States in Trust for the Use and Benefit of the Osage Shoshone Indian Tribe v. United States, 364 F.3d 1339 (Fed. Cir. 2004) ; Shoshone Indian Tribe v. United States, 58 Fed. Cl. 77, 82 (2003); Shoshone Indian Tribe v. United States, 56 Fed. Cl. 639, 646-48 (2003); Shoshone Indian Tribe v. United States, 52 Fed. Cl. 614, 620-21 (2002).
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STATEMENT OF THE CASE

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and Kansas Tribe, as reprinted in The Constitutions and Laws of the American Indians, Volume 4. (Nov. 26, 1890).2 This particular trust relationship began in 1883 when the United States, as trustee for the Osage Nation and its funds, purchased land from the Cherokee Nation in Oklahoma for the "use and benefit of the Osage and Kansas Indians." Appendix of Exhibits in Support of Plaintiff's Opposition to Defendant's Motion to Dismiss, in part, Plaintiff's Tranche One Claims ("App."), Exhibit 1 at 2. In 1906, Congress enacted a statute setting forth specific duties for the Government, as trustee, with respect to the Osage mineral estate. Act of June 28, 1906, Chapter 3572, 34 Stat. 539 (the "1906 Act").3 The 1906 Act provided that "all funds belonging to the Osage tribe, and all moneys due, and all moneys that may become due, or may hereafter be found to be due the said Osage tribe of Indians, shall be held in trust by the United States . . . ." Id. at § 4 (emphasis added). Congress further specified that "the royalty received from oil, gas, coal, and other mineral leases . . . shall be placed in the Treasury of the United States to the credit of the individual members of the Osage tribe" and such money "shall be distributed to the members of said Osage tribe according to the roll provided for herein, in the manner and at the same time that payments are made of interest on other moneys held in trust for the Osages by the United States, except as herein provided." Id. at § 4(2) (emphasis added). The 1906 Act acknowledges that claims could be made against the Government for recovery of money due the Osage Nation. Id. at § 4(2). Moreover, Congress provided that only the Government, as trustee, can issue a lease for the Osage Once the briefing on the Government's motion to dismiss is complete, the parties will jointly submit a Joint Appendix containing copies of all relevant statutes, regulations, and other authorities. 3 The 1906 Act also allotted a portion of the Osage Reservation surface lands to individual members of the Osage Nation. The Government, as trustee, also has trust duties with respect to those lands. Those trust duties, however, are outside the scope of tranche one. Accordingly, we do not address those assets in this memorandum.
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mineral estate. Id. at § 3. In short, under the 1906 Act, the Government, as trustee, exercises complete and plenary control over every aspect of the management and operation of the Osage mineral estate as well as all the funds derived from that mineral estate. Since its enactment, the 1906 Act has been amended by Congress on several occasions.4 In those amendments, Congress made clear that the Government was to lease the Osage Nation's mineral estate "as may be deemed for the best interest of the Osage Nation." Act of March 2, 1929, Chapter 493, 45 Stat. 1478; Act of June 24, 1938, Chapter 645, 52 Stat. 1034. Under those amendments, the Government further exercised its control over the Osage mineral estate by mandating that the Government and the Osage Nation must lease at least 25,000 acres of the Osage Reservation for mining. Id. Ultimately, Congress made the trust containing the Osage mineral estate permanent. Act of October 21, 1978, 92 Stat. 1660. None of these amendments, however, changed in any material way the Government's trust duties described above, including the duty to hold in trust all payments due or that may become due to the Osage Nation. In addition to the 1906 Act, which is applicable only to the Osage Nation, other statutes apply generally to the Government's conduct as trustee. For example, Congress has imposed specific duties regarding the protection of Indian and tribal trust funds, including the collection of money owed such trusts: The Secretary [of the Interior's] proper discharge of the trust responsibilities of the United States shall include (but are not limited to) the following: (1) Providing adequate systems for accounting for and reporting trust fund balances. The 1906 Act was amended and modified by: Act of March 3, 1921, Chapter 120, 41 Stat. 1249; Act of March 2, 1929, Chapter 493, 45 Stat. 1478; Act of June 24, 1938, Chapter 645, 52 Stat. 1034; Act of July 25, 1947, Chapter 334, 61 Stat. 459; Act of June 15, 1950, Chapter 248, 64 Stat. 215; Act of October 6, 1964, 78 Stat. 1008; and Act of October 21, 1978, 92 Stat. 1660. As used herein, the term "1906 Act" refers to the 1906 Act as amended, unless specified otherwise.
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(2)

Providing adequate controls over receipts and disbursements.

(3) Providing periodic, timely reconciliations to assure the accuracy of accounts. (4) Determining accurate cash balances. (5) Preparing and supplying account holders with periodic statements of their account performance and with balances of their account which shall be available on a daily basis. (6) Establishing consistent, written policies and procedures for trust fund management and accounting. (7) Providing adequate staffing, supervision, and training for trust fund management and accounting. (8) Appropriately managing the natural resources located within the boundaries of Indian reservations and trust lands. 25 U.S.C. § 162a(d) (2000). Other statutes regulate the manner in which the Government must manage and invest funds received into trust. 25 U.S.C. §§ 155, 161a, 161b and 162a (2000). B. Applicable Regulations In order to carry out the duties required by the 1906 Act, the Department of Interior, through the BIA, has promulgated comprehensive regulations governing almost every aspect of the leasing of Osage Nation oil and gas resources. The current version of the regulations is found at 25 C.F.R. § 226 (2003) (the "Osage Regulations"). The Government controls the mineral lease bidding and review process through the Osage Regulations. Id. at § 226.2. Each lease must be "in the form prescribed by the Secretary," id. at § 226.7, and the Government must approve the term of each lease, id. at 226.10. Each lease is also subject to the current Osage Regulations and future amendments to the regulations, except for changes affecting the term, royalty rate, rental or acreage unless all parties and the Government agree. Id. at § 226.5. As provided by the 1906 Act itself, no lease is effective unless it is approved by the Government. Id. at § 226.2(b).

Furthermore, the Government must approve any amendments, division orders, assignments, unitization agreements, or similar instruments. Id. at §§226.14, .15.

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The Osage Regulations also determine and control lessees' conduct and operations under any oil and gas lease, including when and where a well can be drilled, produced, or worked over. Id. at §§ 226.16-.41. The Government, as trustee, also enforces all provisions of the oil and gas leases, including the royalty provisions. Id. at §§ 226.42-.46. For example, the Osage Regulations establish a late payment charge with respect to any royalty payment (or portion thereof) that is paid late. Id. at § 226.42. Further, the Government can issue orders and instructions to the lessee and compliance with those instructions and orders is mandatory. Id. at § 226.30. In addition, the Government, as trustee, has the right to enter the lessee's premises and to inspect the lessee's books and records. Id. Further, as trustee, the Government can impose penalties for non-

compliance with the terms of the lessee and, in appropriate cases, terminate the lease for noncompliance with or without the consent of the Osage Nation. Id. at § 226.42. The Osage Regulations also provide that penalties and other enforcement actions are subject to the Government's administrative appeal process. Id. at §§ 226.43-.46. Neither the Osage Regulations nor the Government's form lease provide any enforcement role for the Osage Nation, other than the right to waive late fees, and even that is subject to Government approval. Id. at § 226.42. The Osage Regulations also establish a detailed process for the calculation and collection of royalties on oil and natural gas from the Osage mineral estate. The Osage Regulations establish a minimum royalty rate of 16-2/3 percent of gross proceeds, less certain deductions, and the Osage Nation may only negotiate a different rate "upon presentation of justifiable economic evidence by Lessee [and] subject to approval by the Superintendent." Id. at § 226.11(a). The Osage

Regulations further specify how the value of oil and gas is to be determined for purposes of determining the amount of royalty due. Id. at§ 226.11(a)(2). Consistent with the Government's collection duties mandated by the 1906 Act, the Osage Regulations require that all royalties and

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other payments due under the leases be made to the Government as trustee of the Osage mineral estate. Id. at §§ 226.4, 226.11(a)(1). C. The Tranche One Leases In form, each of the five leases in tranche one is an oil and/or gas lease between the Osage Nation, as lessor, and an oil and/or gas company, as lessee.5 In substance, however, these leases were dictated and controlled in every respect by the Government pursuant to the 1906 Act and the Osage Regulations, as described above. For example, each lease requires that royalties be made directly to the Government, and a fixed royalty rate is established. Lease at ¶¶ 3(C) & 5(D). Furthermore, the then-applicable version of the Osage Regulations required each of the tranche one leases to include a formula for determining the value of oil and gas for purposes of calculating the royalty due. The formula requires the lessee to pay the higher of the actual selling price, the highest posted price, or the highest offered price in the Oklahoma-Kansas area: Lessee shall pay or cause to be paid to the Superintendent, as royalty on oil, 3/16 of the gross proceeds from sales after deducting the oil used by lessee for development and operation purposes on the lease: Provided, that when the quantity of oil taken from all the producing wells on any quarter-section or fraction thereof, according to the public survey, during any calendar month is sufficient to average one hundred or more barrels per active producing well per day the royalty on such oil shall be 20 percent; payment shall be made at the time of sale or removal of the oil, except were payments are made on division orders, and settlement shall be based on the actual selling price, or the highest posted or offered price by a major producer in the Kansas-Oklahoma area whichever is higher on the day of sale or removal. Lease ¶ 3(C) (emphasis added). The tranche one leases further reaffirm that the leases may not be assigned or transferred without the Government's approval. Id. at ¶ 5(A). Enforcement of the each lease is placed in the hands of the Government (id. at ¶ 5(C)) and the Osage Nation is

The five tranche one leases in tranche one were identified in the Osage Nation's Statement of Claims filed on May 13, 2005. Copies of those leases will be included in the Joint Appendix.

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afforded no role in enforcing these leases. In addition, each of the leases expressly provides that it incorporates not only all Osage Regulations existing at the time the lease was executed but all future amendments to those regulations. Id. at ¶ 3(F). D. The Government's Day-to-Day Control of Osage Oil and Gas Leases In order to execute its trust and other duties to the Osage Nation, the Government established the Osage Agency. The Government describes the purpose of the Osage Agency as follows: The Osage Agency will uphold and strive to accomplish the Bureau of Indian Affairs mission within the boundaries of the Osage Nation Reservation in Oklahoma. Through the Branch of Minerals, we are to serve and promote the daily operations of the Osage Mineral Estate and the welfare of the Osage Tribe. The Branch of Minerals will prudently uphold the Bureau and Osage Agency mission by managing the Osage Minerals Estate for the Osage Tribe, which includes, but is not limited to, verifying volume and value of royalties of the Minerals Estate. Insuring that all monies are received in compliance with the Code of Federal Regulations and properly recorded in accordance with generally accepted accounting principles and generally accepted auditing standards. Deposition of Carole Revard, Ex. 7, App. Ex. 2 at 7. In order to carry out that purpose, the Osage Agency currently employs approximately 50 people. Deposition of Judy Hill (June 22, 2005) at 357:24-358:12, App. Ex. 3. Based on the testimony of several employees of the Osage Agency and Government manuals describing the Osage Agency's duties, there is little doubt that the Government exercises plenary control over Osage oil and gas leasing operations, including in particular the calculation and collection of royalties, precisely in order to fulfill its trust obligations to the Osage Nation. As described above, under the 1906 Act and the Osage Regulations, Government exercises control of every material aspect of the oil and gas leasing process. While the Osage Agency may - and sometimes does - consider the Osage Nation's wishes and may consult with the Osage Nation, the Osage Agency makes all decisions regarding Osage oil and gas leases based on the Government's determination of the proper course of action, even if that means disagreeing with 9

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the Osage Nation. Deposition of Newell Barker (June 10, 2005) at 233:20-236:14, App. Ex. 4; Deposition of Charles Hurlburt (June 3, 2005) at 65:6-66:8, App. Ex. 5. In fact, the Government understands that it must exercise this independent "high fiduciary responsibility" duty precisely in order to discharge its fiduciary obligations, even if that means denying certain requests by the Osage Nation to manage oil and gas leasing in a different manner: We agreed with your line of thinking that a high fiduciary responsibility does exist as defined in the 1906 Osage Allotment Act which offers specific guidance in the management of oil and gas trust resources. We place considerable weight in protecting the interests of the Osage mineral owners or annuitants as provided in the 1906 Act as amended. Letter from Gordon Jackson, Superintendent, Osage Agency, to Principal Chief Charles O. Tillman, Jr., Osage Tribal Council 2 (October 18, 1996) (denying request for a division order), App. Ex. 6 at 30. Employees' duties include collecting all revenue from the Osage mineral estate for the benefit of the Osage Nation. Deposition of Newell Barker (June 8, 2005) at 92:8-93:15, App. Ex. 7; Hill Deposition Ex. 14, App. Ex. 8; Revard Depo. Ex. 7, App. Ex. 2. With respect to the calculation and collection of royalty payments, the Government recognizes that the fact that it receives royalty payments imposes a duty to correctly calculate the amount of royalty due: "As the Osage Agency is the representative royalty collector, all royalties due the Osage Tribe of Indians are accounted for by the oil and gas accounting sections within the Branch of Minerals." Bureau of Indian Affairs, Osage Agency, Policies and Procedures Guide, (May 2004) ("Osage Policy Guide"), App. Ex. 9 at 46. To carry out this duty, the Government employs several people whose job duties include verifying the volume and value of oil in order to determine the amount of royalty due. Deposition of Carole Revard (June 20, 2005) at 55:10-55:4, 150:2-16, App. Ex. 10; Barker Depo. (June 8, 2005) at 93:23-94:5, App. Ex. 7; Barker Depo. (June 10, 2005) at 229:18:231:13, App. Ex. 4; Deposition of Mary Lou Drywater (June 24, 2005) at 25:11-27:9, App. Ex. 11.

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The Osage Policy Guide requires that "Accounting records [be] verified and re-verified by the Branch of Minerals Accounting Section before data is posted to computer." App. Ex. 9 at 47. The Government, in the Osage Policy Guide has established a detailed, multi-step procedure to calculate and verify royalty payments from lessees. App. Ex. 9 at 85, 86. These procedures include consideration of highest posted prices and specify that "[r]oyalty and volume information from the Lessee Reports are compared to the Dbase for concurrence with each other." Id. at. 85. The procedures also include steps to "contact producer and report discrepancy," "call to the purchaser regarding the discrepancy," and issuing "a bill for collection for the additional amount." Id. See also Drywater Depo. (June 24, 2005) at 17:21-18:13, 26:15-27:9, App. Ex. 11. Moreover, the Osage Policy Guide expressly recognizes that the Government has duties to calculate the royalty under the terms of 25 C.F.R. § 226.11(a)(2) by setting out detailed procedures for applying the valuation formula set out in Section 226.11(a)(2). App. Ex. 9 at 102. In addition, the Osage Agency mails out its Highest Posted Price letter to lessees in order to assist them in making correct royalty payments. Id. at 100. Further, "Lessees/Operators within Osage County are required to send in monthly lessee reports, which are verified against the purchaser's run statements. (Reference C.F.R. 226.13)." Id. at 46. As part of that collection process, the Osage Agency attempts to collect any underpayment of a royalty of which it is aware. Deposition of Charles Hurlburt (June 1, 2005) at 143:7-144:, App. Ex. 12; Drywater Depo. (June 24, 2005) at 25:11-27:9, App. Ex. 11; Revard Depo. (June 20, 2005) at 36:12-37:4, App. Ex. 10; Barker Depo. (June 10, 2005) at 231:21-232:8, App. Ex. 4. Furthermore, the Government controls the means by which oil and gas royalties are calculated and collected. The Osage Nation does not have access to the database the Government created to manage mineral royalty payments. Hill Depo. (June 22, 2005) at 360:6-14, App. Ex. 3. Indeed, so tightly does the Osage Agency control the royalty collection process that the Osage 11

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Nation cannot even issue a bill to a lessee for the collection of any royalty, even assuming it has the authority, as beneficiary of the trust, to do so. Id. at 360:15-22. Further, although the Government has specified in great detail how the Osage Agency is to discharge its trust duties, the Osage Policy Guide does not establish any procedure for notifying the Osage Nation of any issue regarding royalty payments, nor does it provide a much role for the Osage Nation in that process. In addition to these administrative duties, the Government has initiated and participated in litigation to collect royalty payments due the Osage Nation, expressly recognizing that such collection efforts were part of its fiduciary duties to the Osage Nation. United States v. Plains Res., Inc., Case No 02-CV-976-E(M) (N.D. Okl.) Complaint at ¶¶ 1, 4, 8 (filed Dec. 30, 2002) (App. Ex. 13) (seeking to collect royalty payments due the Osage Nation "pursuant to its trust responsibilities to the Osage Nation," in reliance on, inter alia, the 1906 Act and 25 C.F.R. § 226.11(a)(1)). See also United States v. Koch Indus., 57 F. Supp. 2d 1122, 1123-24 ( N.D. Okla. 1999) (summary judgment for Government in qui tam action to collect royalty payments due the Osage Nation). III. A. ARGUMENT

Standard Of Review On A Motion To Dismiss For Lack Of Jurisdiction Under The Indian Tucker Act In four cases, United States v. Mitchell, 445 U.S. 535 (1980) ("Mitchell I"), United States v.

Mitchell, 463 U.S. 206 (1983) ("Mitchell II"), United States v. White Mountain Apache Tribe, 537 U.S. 465 (2003), and United States v. Navajo Nation, 537 U.S. 488 (2003), the Supreme Court has established a test to determine whether this Court has jurisdiction over a claim that the Government has breached its trust duties. This Court recently summarized that test as follows: [A] Tribe must identify a substantive source of law that establishes specific fiduciary or other duties, and allege that the Government has failed faithfully to perform those duties. If that threshold is passed, the court must then determine whether the relevant source of substantive law "can fairly be interpreted as mandating compensation for damages sustained as a result of a breach of the 12

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duties [the governing law] imposes." Although "the undisputed existence of a general trust relationship between the United States and the Indian people" can "reinforce" the conclusion that the relevant statute or regulation imposes fiduciary duties, . . . that relationship alone is insufficient to support jurisdiction under the Indian Tucker Act. Instead, the analysis must train on specific rightscreating or duty-imposing statutory or regulatory prescriptions. Those prescriptions need not, however, expressly provide for money damages; the availability of such damages may be inferred.' Shoshone, 56 Fed. Cl. at 645 (quoting Navajo Nation, 537 U.S. at 506 and Mitchell II, 463 U.S. at 219). See also Shoshone, 58 Fed. Cl. at 81 (same). The key factor in applying this test is whether the Government exercises control or supervision over the assets in issue, regardless of whether there is specific language imposing fiduciary obligations. The Supreme Court explained that where the Federal Government takes on or has control or supervision over tribal monies or properties, the fiduciary relationship normally exists with respect to such monies or properties (unless Congress has provided otherwise) even though nothing is said expressly in the authorizing or underlying statute (or other fundamental document) about a trust fund, or a trust or fiduciary connection. Mitchell II, 463 U.S. at 225 (quoting Navajo Tribe of Indians v. United States, 224 Ct. Cl. 171, 183 (1980)). The Federal Circuit has held that such control or supervision over a leasing process is established when the Government is authorized to exercise veto power over the major aspects of leases, including who to lease to and the terms and forms of the lease. Brown v. United States, 86 F.3d 1554, 1562 (Fed. Cir. 1996) ("Such control over the entry into, terms of, and exit from leasing as the Secretary retains by virtue of [applicable statutes and regulations] is all that is required to create enforceable fiduciary duties under the `control' portion of the test established by Mitchell II"). "[B]y virtue of the control they place in the hands of the Secretary, [the applicable statutes and regulations] impose upon the government a fiduciary duty in the commercial leasing context. `Given the existence of a trust relationship, it naturally follows that the government

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should be liable in damages for breach of its fiduciary duties.'" Id. at 1563 (quoting Mitchell II, 463 U.S. at 226).6 Thus, when a nominal trust imposes no authority to control or supervise a particular asset, no fiduciary obligation arises regarding that asset. (Navajo Nation; Mitchell I). On the other hand, however, where the Government does exercise such control and supervisory authority over an asset, a fiduciary obligation arises from which a damage remedy for breach of duty may be reasonably inferred. (White Mountain Apache; Mitchell II). Once the existence of a fiduciary relationship has been established, it must also be shown that the Government breached the duties established by the statutes and regulations that define the fiduciary relationship. Mitchell II, 463 U.S. at 224. The Supreme Court has made clear that those prescriptions include common law duties of trustees, in addition to statutory requirements. For example, in White Mountain Apache the Government was subject to this Court's jurisdiction because the Government had failed to abide by its common law obligation to preserve and maintain trust assets the Government controlled even though the applicable statutes and regulations were silent regarding a specific duty to maintain the asset. 537 U.S. at 475. Thus, the controlling Supreme Court precedent has established at least three ways for a plaintiff to establish that the Government owes the plaintiff a fiduciary duty of sufficient specificity to make the Government answerable in damages for breaching that duty. First, under White Mountain Apache, the plaintiff can show that an enforceable fiduciary duty arose as a The Government may point out the court in Brown, following remand, dismissed a claim that the Government had failed to determine that the lessees were underreporting gross receipts, Brown v. United States, 42 Fed. Cl. 538, 555-56 (1998), arguing that this Court should dismiss this case. Brown is distinguishable on this point, however, because the court did not consider any statute requiring that royalties be paid to the Government nor did it appear that the Government had, as here, in fact assumed the duty of calculating and verifying royalty amounts, and of enforcing royalty payment obligations. Accordingly, Brown does not support dismissal of the Tribe's royalty claims.
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necessary incident of the trust, in light of both the terms of the trust and the common law obligations of a trustee. Second, under Mitchell II, the plaintiff can show that the Government was given pervasive authority over the resource or asset in question that it is answerable in damages for failing to exercise that authority in accordance with its fiduciary obligations. Third, under Mitchell II, the plaintiff can establish that the Government in fact exercises such complete control over the asset in question control that it is answerable in damages for failing to exercise that authority in accordance with its fiduciary obligations. Applying these tests, this Court and the Federal Circuit have consistently held that claims relating to the Government's failure to collect royalties due an Indian trust managed by the Government and claims that the Government failed to properly calculate the value of oil for royalty purposes are subject to this Court's jurisdiction. Shoshone Indian Tribe v. United States, 364 F.3d 1339, 1350 (Fed. Cir. 2004) ("Navajo Nation . . . does not foreclose liability for failing to manage or collect the proceeds for the approved mining contracts from the approved mining contracts . . . "); Shoshone Indian Tribe v. United States, 56 Fed. Cl. 639, 646-48 (2003) (dispute regarding "the setting of `value' upon which the rate of royalty was to be paid" was subject to this Court's jurisdiction); Shoshone Indian Tribe v. United States, 58 Fed. Cl. 77, 82 (2003) (finding that the Court had jurisdiction over claims relating to Government's failure to collect certain royalties owed "on the take-or-pay portion of the ARCO settlement"). B. The Osage Nation's Tranche One Royalty Claims Are Within This Court's Jurisdiction Under the governing precedents of the Supreme Court , the Federal Circuit, and this Court, there are three independent reasons that mandate finding that the Osage Nation's tranche one royalty claims are within the jurisdiction of this Court. First, there can be no dispute that under the 1906 Act, the Government has an express fiduciary duty to collect all payments due the Osage Nation under the mineral leases that the 15

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Government, as trustee, issues for the benefit of the Osage Nation. The 1906 Act expressly places in trust, with the Government acting as trustee, "all" funds then due the Osage Nation as well as "all" funds that may become due to the Osage Nation at a later time. 1906 Act at § 4. In addition, the 1906 Act expressly provides that, as trustee, the Government "shall" place in the United States Treasury "the royalties received from oil, gas, coal, and other mineral leases..." Id. at § 3. The royalty and other payments that are the subject of tranche one are undeniably payments of this type. Finally, the Osage Regulations require that royalty payments be made directly to the Government. 25 C.F.R. § 226.4. As trustee, the Government has an affirmative duty to collect amounts due the trust. Austin Wakeman Scott & William Franklin Fratcher, The Law of Trusts § 177 (4th Ed. 1987); Restatement (Second) of Trusts § 174, cmt. a (1959) (Duty to Enforce Claims, noting that "If the trustee hold in trust a contract claim against a third person, it is his duty to take reasonable steps to enforce such claim"). Because the corpus of the Osage trust consists not only of royalty payments actually received, but of royalty payments due, that may become due and that may be found to be due, 1906 Act at § 4, the Government is under a clear, specific fiduciary duty to collect the full royalty due. The Osage Regulations and tranche one leases, therefore, have defined

responsibilities regarding the collection of royalties based on a specific formula that the Government, as trustee, must carry out. Moreover, the duty must be understood as "money mandating" because the duty relates specifically to the collection of money for the Osage Nation. Without a damages remedy, the Osage Tribe would have no remedy at all. Pursuant to White Mountain Apache, the Government is answerable in damages for breaching its trust obligation to collect money due the trust. Indeed, this Court found a very similar regulatory structure established that this Court had jurisdiction over a tribe's claim that the Government had failed to collect royalty payments due the tribe. Shoshone, 364 F.3d at 1350 16

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(noting that a regulation requiring that royalties be paid to the Government created a duty to collect the correct royalty payment). See also Shoshone, 56 Fed. Cl. at 646-48 (dispute regarding "the setting of `value' upon which the rate of royalty was to be paid" was subject to this Court's jurisdiction); Shoshone, 58 Fed. Cl. at 82 (finding that the Court had jurisdiction over claims relating to Government's failure to collect certain royalties owed "on the take-or-pay portion of the ARCO settlement"). In fact, in cases where the Government is not trying to avoid liability, the Government freely admits that the 1906 Act imposes a fiduciary duty on the Government to collect all payments due the Osage Nation under the mineral leases that the Government issues for the benefit of the Osage Nation. For example, at the same time it was telling this Court that it had no duty at all to collect royalty payments, the Government was prosecuting an action under the False Claims Act seeking unpaid royalties from an oil company "pursuant to its trust responsibilities to the Osage Nation," in reliance on, inter alia, the 1906 Act and 25 C.F.R. § 226.11(a)(1)). Plains Res., Complaint at ¶¶ 1,4,8. See also Koch Indus., 57 F. Supp. 2d at 1123-24 (summary judgment for Government in qui tam action to collect royalty payments due the Osage Nation). Second, even if the 1906 Act and Osage Regulations were not so precise regarding the duty to collect royalty payments, it is clear that those laws and regulations establish such pervasive control over the Osage Mineral Estate and leases that the Government is subject to a fiduciary duty with respect to those assets under Mitchell II. As detailed above, the 1906 Act and Osage Regulations give the Government pervasive control over all aspects of oil and gas leasing making it liable damages for a breach of its duties. As described above, the Government exercises complete control over all aspects of the leasing process, from the decision of whether to enter into a specific lease, the form and terms of the lease, the manner in which the lessee may operate, enforcement of the lease to the collection of payments under the lease. Pursuant to this control, 17

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the Government in fact established by regulation the oil valuation formula that the Osage nation claims the Government failed to correctly apply. Supra at 3-12. This pervasive control over the oils and gas leasing process, including the collection of royalty payments, is sufficient under Mitchell II to create a fiduciary duty for which the Government is answerable in damages in this Court if it breaches those duties. Indeed, as in Brown, the fact that the Government must approve every aspect of the leasing process such that the Osage Nation cannot do a single thing with respect to leasing or using its mineral resources without Government approval establishes the pervasive control necessary to establish that a claim for damages is properly within this Court's jurisdiction. Third, even apart from the terms of the 1906 Act and Osage Regulations, the Osage Nation's royalty claims are subject to this Court's jurisdiction because the Government has actually assumed complete control over the oil and gas leasing process in general, and the royalty calculation and collection process in particular, thereby making claims that it exercised that authority improperly subject to this Court's jurisdiction under Mitchell II and Brown. The

Government, through the Osage Agency, exercises actual control over the entire oil and gas leasing process. Supra at 3-12. With respect to the calculation and collection of royalties, Government employees calculate the royalty, verify the payments made by lessees, correspond with lessees about the correct payment and take enforcement action when necessary. Supra. at 1012. Moreover, the Government has put in place an elaborate bureaucracy, with detailed

procedures, to help its employees carry out these duties. Id. These tasks are carried out without the control or direction of the Osage Nation, and indeed the Government exercises its authority to overrule the Osage Nation. Id. In this case, the Osage Nation alleges, quite simply, that the Government failed to perform the royalty collection task correctly by, inter alia, failing to apply correctly the oil and gas 18

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valuation formula the Government created and applied, thereby failing to collect the full amount of royalty actually due under the Osage Regulations and Tranche One Leases. As the Shoshone cases and Brown make clear, a claim that the Government failed to correctly apply a statute or regulation clearly states a claim for damages within this Court's jurisdiction. Further, the fact that the Government has assumed control and in fact exercises complete control over the royalty calculation and collection process creates an enforceable fiduciary duty to perform that task correctly. Brown, 86 F.3d at 1561-62;7 Shoshone, 52 Fed. Cl. at 621. Accordingly, for each of the above independent reasons, the Osage Nation has stated a claim for damages within this Court's jurisdiction. C. The Government's Arguments That It Has No Duty To Collect Royalties Owed The Osage Trust Are Unavailing Instead of confronting directly this overwhelming body of law and facts, including its own admissions, demonstrating the existence of a fiduciary duty to accurately calculate and collect royalty payments, the Government simply turns its back on it all and constructs an argument based what the Government wishes were the law and facts. Accordingly, the Government's arguments ignore key holdings in applicable cases and indeed seek to reverse prior decisions of this Court. Moreover, the Government relies on a myopic view of the facts that simply ignores the words and deeds of its own employees in an attempt to somehow avoid liability for its own conduct. When subject to scrutiny based on the law and facts as they really exist, however, it is clear that none of the Government's arguments have any merit.

The Government argues that Navajo Nation undermines the Federal Circuit's decision in Brown. Gov't Br. at 13. But Navajo Nation does not address that aspect of Brown. Furthermore, the degree of Government approval and regulatory authority in Brown and this case is far more extensive than in Navajo Nation.

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1.

The Osage Trust is Not a "Bare" or "Limited" Trust Because the 1906 Act and Osage Regulations Impose Enforceable Duties Regarding the Calculation and Collection of Royalties a. The Government Improperly Relies On An Unduly Narrow Construction Of Navajo Nation And White Mountain Apache That The Supreme Court Has Rejected

In an effort to make it appear that this case falls in the Mitchell I and Navajo Nation category of cases, the Government attempts to rewrite the law to demand that that the Osage Nation must point to some "controlling provision directing the United States to undertake any duty[] with respect to the calculation or collection of royalties." Memorandum in Support of Defendant's Motion to Dismiss, in Part, Plaintiff's Tranche One Claims ("Gov't Br.") at 19. For support, the Government quotes Wright v. United States, 32 Fed. Cl. 54, 56 (1994) (quoting Mitchell I, 445 U.S. at 542) for the proposition that "the relevant statutes and regulations must `unambiguously provide that the United States has undertaken full fiduciary responsibilities' as the particular aspect of the relationship complained of." Id. at 19-20. Because the Government claims the Osage Nation cannot point to such specific language, the Government argues that the Osage Trust is a "limited trust" within the meaning of Mitchell I and will not support a claim for damages under the Indian Tucker Act. Id. at 20. The Government attempts to bolster this argument by citing to, and quoting from two non-Indian Tucker Act cases, United States v. Testan, 424 U.S. 392, 398 (1976), and Army and Air Force Exchange Serv. v. Sheehan, 456 U.S. 728, 739 (1982). Id. at 19-21. This attempt to narrow the scope of White Mountain Apache is unavailing, however, and is undercut even by the cases the Government cites. First, the Supreme Court has specifically rejected the application of Sheehan and Testan to tribal trust cases. White Mountain Apache, 537 U.S. at 476-79. Second, nothing in Mitchell I, Mitchell II, Navajo Nation, or White Mountain Apache require that the trust enumerate the specific duties allegedly breached in order for this

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court to have jurisdiction over the case. Indeed, as this Court clarified in Wright, "What is required under Mitchell II is that the statues and regulations defining the activity in question must show congressional intent to assume a trust relationship with specific contours. . . . The statutes and regulations at issue must be fairly susceptible to a construction that imposes particular fiduciary duties, the violation of which were contemplated go result in financial accountability. Something comparable to the `pervasive' management role present in Mitchell II must be alleged." 32 Fed. Cl. at 57. Clearly, not even the authority cited by the Government supports its argument that the statutes and regulations do not specifically set forth a duty to calculate and collect royalties. As the Government's own statements and policies discussed above reveal, the

Government has long understood that the 1906 Act and the Osage Regulations create a fiduciary obligation with specific contours regarding the calculation and collection of royalties. Moreover, as the Supreme Court made clear in White Mountain Apache, the statutes and regulations do not need to specify the duty, if such a duty is implicit in the Government's trust duties. In White Mountain Apache, there was no express duty of the Government to preserve and maintain the Fort Apache site and facilities. That obligation was implied from the fact that the Government actively managed Fort Apache in trust for the White Mountain Apache tribe and was subject to an inherent trust obligation to preserve and maintain the trust corpus. 537 U.S. at 475. Similarly, in Shoshone, the Federal Circuit held that the government was subject to an enforceable fiduciary duty to collect royalty payments due based on the fact that royalty payments were required to be made to the Government and that the Government actively managed the trust containing those royalties. 364 F.3d at 1350. Finally, the fact that the Government exercises actual control over every aspect of Osage oil and gas leases, is the designated recipient of royalty payments, imposed the specific formula by with royalty payments are determined, actively calculates and verifies royalty payments plainly 21

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creates an enforceable fiduciary duty to correctly calculate and collect royalty payments. Brown, 86 F.3d at 1561-62; Shoshone, 52 Fed. Cl. at 621. 2. Under Supreme Court and Federal Circuit Precedent, The Osage Trust is Not a "Bare" or "Limited" Trust

The Government also argues that the Osage Trust is a "bare" or "limited" trust because "it does not create functional obligations to calculate or collect the moneys due." Gov't Br. at 20. However, even apart from the unduly narrow reading of the case law, there is simply no way to understand the Osage Trust as a "bare trust." The trust in Mitchell I was found to be a "limited trust" because the government was not given, and did not exercise any management or control over the resources in question. As the Supreme Court explained, the trust served the limited purpose of restricting the right of alienation, and of providing immunity from state taxation by vesting legal title in the United States while leaving actual control of the land in the hands of the tribes. Mitchell I, 445 U.S. at 543-44. Navajo Nation did not involve even a limited trust, and the underlying statute was intended to leave control of the land in the hands of the tribes. 537 U.S. at 508.8 Unlike Mitchell I or Navajo Nation, the 1906 Act and the Osage Regulations create a real trust that gives the Government extensive control over all aspects of the oil and gas leasing process, including the calculation and collection of royalties. 1906 Act at §§ 3&4. By regulation, the Government has established the methodology by which the value of the oil or gas is to be

The Government cites Navajo Nation to suggest that the statutory goal of tribal selfreliance militates in favor of not finding any fiduciary duty to the Osage Nation. Gov't Br. at 14. However, unlike the statute in question in Navajo Nation, there is no evidence that either the 1906 Act or the Osage Regulations were intended to increase the ability of the Osage Nation to manage its own mineral resources. Moreover, any such intent is rendered moot by the fact that the Government in fact exercises control over the lease process, even if it means making decisions contrary to the Tribe's wishes. In any event, it would not promote tribal self-determination to allow the Government to escape liability for its failure to correctly apply its own regulations.

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established for royalty purposes. 25 C.F.R. § 226.11. The Government drafted and mandated the use of the form lease to be used by the Osage Nation. Id. at §226.7. Government exercises approval authority over all aspects of oil and gas leases, from the decision to let a particular lease through termination, including such routine matters as division orders. Supra at 3-12. The Government has further directed by regulation that royalty payments are to be made directly to the Government by check payable to the Government. 25 C.F.R.§ 226.4. Under Mitchell II and Brown, this authority creates a real trust that is enforceable in this Court. Moreover, there is simply no way to understand these regulations as not creating enforceable duties. The requirement that lessees make royalty payments to the Government creates a duty on the part of the Government to collect the royalty. Shoshone, 364 F.3d at 1350. Similarly, the creation of a specific formula to determine the amount of royalty creates an expectation that that formula will be applied and enforced. As trustee, and particularly as the trustee who actually performs those calculations and collects those payments, the Government cannot escape liability for failing to adhere to its own regulations even if the regulations did not expressly state that the Government must do those things. As trustee, the Government must follow the terms of the trust, and is answerable in damages if it fails to do so. Moreover, the Government has fully assumed management and operation of the Osage Trust with respect to the calculation and collection of royalties. Government employees calculate the amount of royalties owed. The Government publishes and circulates to its employees listings of posted-prices for oil and gas to assist its employees in calculating royalties and Government employees review royalty payments and are charged with communicating with lessees or purchasers regarding the accuracy of royalty payments. The Government actually collects the royalty payments and prohibits the Osage Nation from participating in the royalty billing process.

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Critically, at all times, all royalty payments received are in the complete and exclusive control of the government. Supra at 9-12. As this Court has recognized, Mitchell II contemplates an inquiry into the level of control that the United States exercises over the Indian resources in question. Defendant's characterization of the Mitchell II control or supervision test overlooks the point that actual control or supervision by the government with respect to the Indians' resources may provide an independent basis for fiduciary responsibility in the absence of a clear statutory or regulatory directive prohibiting such a conclusion. Shoshone, 52 Fed. Cl. at 620-21. See also Brown, 86 F.3d at 1561-62. Here, there is nothing in the 1906 Act or Osage Regulations that forecloses finding a fiduciary relationship, and the Government's actual exercise of control over the Osage Trust and the calculation and collection of royalties means that the Government has assumed trustee duties, and is answerable in damages when it breaches those duties. 3. The Government's Attempts to Characterize Its Duties as Passive are Unavailing

The Government attempts to make the trust look bare by describing its role in the management of the trust in minimalist terms. Gov't Br. at 20-23. The Government describes its duties as entirely passive, to simply receive royalty checks and deposit them into the trust account, with no obligation to determine whether those payments were in