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COBELL v. BABBIT

June 7, 1999

ELOISE PEPION COBELL, ET AL., PLAINTIFFS,
v.
BRUCE BABBITT, SECRETARY OF THE INTERIOR, ROBERT RUBIN, SECRETARY OF THE TREASURY, AND KEVIN GOVER, ASSISTANT SECRETARY OF THE INTERIOR, DEFENDANTS.



The opinion of the court was delivered by: Lamberth, District Judge.

    MEMORANDUM OPINION

I. Introduction

This matter comes before the court on Defendants' Motion for Summary Judgment on Plaintiffs' Claims Based Upon a Common Law Breach of Trust Theory, Claims Based Upon Alleged Interference with the Office of Special Trustee, and Requests for a Mandatory Injunction*fn1; and Defendant Secretary of the Treasury's Motion [262] for Summary Judgment. Upon consideration of these motions and the applicable law, the court will DENY both motions.

This lawsuit involves the federal government's handling of the Individual Indian Money (IIM) trust.*fn2 The IIM trust has much in common with a standard common-law trust. Like other trusts, the IIM trust was created by the settlor with the intent to hold income generated by the trust corpus, in this case individual Native American land allotments, in trust for the benefit of its beneficiaries, who are all Native American individuals. In general terms, the trust income is generated from the mineral, agricultural, and timber leases of these land allotments. Federal law allows these monies to be deposited with the Department of the Treasury and requires these funds to be properly invested, at the discretion of the Secretary of the Interior. See 25 U.S.C. § 161; 25 U.S.C. § 161a(b); 25 U.S.C. § 162a.

The IIM trust also has several features that distinguish it from the standard common-law trust. First, the federal government acts as settlor and trustee of the trust. In 1887, Congress statutorily authorized the holding of Native American allotments in trust. See General Allotment Act § 5, 25 U.S.C. § 331 et seq. As described more fully below, this act marked the beginning of the government's pervasive federal control over Native American allotments and, more importantly for the purposes of this case, the funds that these allotments generated. Second, the creation of this trust and the inclusion of the trust corpus into the trust appear to have rested more upon the plenary power of the sovereign than the will of the beneficiaries, as can be seen from the unique history surrounding the establishment of the IIM trust relationship between Native Americans and the government.*fn3

Around the turn of the 19th Century, the growth of the United States created a demand for territorial expansion. This demand ushered into government the original policy of the "voluntary" extinguishment of Native American title, usually accomplished through treaties. The original period of expansion eventually led to the removal of native tribes to the western territories and, shortly thereafter, to the reservation system. It goes without saying that this policy created serious disputes between the government and the Native American people. In the mid-1850s, the government shifted away from its policy of apportioning reservation lands to tribes and began to experiment with "allotment" of tribal lands, the mechanism by which tribal ownership would be converted into title equitably held by Native American tribe members. This experiment was the precursor to the trust policy that exists to this day.

In short, and most importantly for the purposes of this case, the federal government kept legal title of these individual allotments, in trust, for the benefit of the equitable owners who are the plaintiffs in this case. This period of limited trusteeship by the government was originally set for 25 years in the General Allotment Act. See 25 U.S.C. § 348. The period was later extended indefinitely by the Indian Reorganization Act of 1934, 25 U.S.C. § 462. Although the government in the past four decades has moved toward a policy of self-determination, see 25 U.S.C. § 450 et seq., which is premised on the idea that Native American tribes are the basic governmental units of Native American policy, the IIM trust system of individual land allotments and proceeds therefrom still remains an area of pervasive and complete federal control.

Complete federal control over the IIM system is established by statute.*fn4 Among other duties, the Secretary of the Interior must collect trust income from the leases of the allotments, see 25 U.S.C. § 162a(d)(1), direct the investment of trust fund monies in public debt securities held by the United States Treasury, see 25 U.S.C. § 162a(b), deposit and invest trust fund monies outside of the United States Treasury, see 25 U.S.C. § 162a(a) & (c), maintain and perform the accounting on the IIM accounts for the individual Indian beneficiaries, 25 U.S.C. § 162a(d)(3) & (5), provide periodic account statements to beneficiaries, see 25 U.S.C. § 162a(d)(5), and disburse funds to the beneficiaries, see 25 U.S.C. § 162a(d)(2). The Department of the Interior has "exercised its comprehensive responsibilities in issuing extensive regulations to complement this legislative scheme." Department of the Treasury's Motion at 17 (citing 25 C.F.R.Pt.115). In furtherance of the discharge of these fiduciary obligations, Congress has authorized the Secretary of the Interior to deposit IIM funds with the United States Treasury. See 25 U.S.C. § 161. The Secretary of the Treasury is authorized to invest these funds, at the discretion of the Secretary of the Interior, subject to certain statutory requirements. See 25 U.S.C. § 161a. In short, Congress has statutorily provided the Secretary of the Interior and, to a more limited extent, the Secretary of the Treasury, with several specific fiduciary duties that pertain to the IIM trust.*fn5

The management of the Native American trusts, including the IIM trust, has been the subject of much public criticism from the beginning. It is reported that in 1828, Henry Rows Schoolcraft, a negotiator of Indian treaties and a novelist, said of the Native American trusts that "[t]he derangements in the fiscal affairs of the Indian department are in the extreme. One would think that appropriations had been handled with a pitchfork. . . . There is a screw loose in the public machinery somewhere." See H.R.Rep. No. 103-778 (1994).

Congress has not been impressed with defendants' handling of the IIM trust fund in the 171 years subsequent to Schoolcraft's comments. In the words of a 1992 congressional report of the Environment, Energy, and Natural Resources Subcommittee of the House of Representatives:

  Scores of reports over the years by the Interior
  Department's inspector general, the U.S. General
  Accounting Office, the Office of Management and
  Budget, and others have documented significant,
  habitual problems in BIA's ability to fully and
  accurately account for trust fund moneys, to
  properly discharge its fiduciary

Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of the Indian Trust Fund, H.R. No. 102-499 (1992). Congress was "particularly troubled by BIA's efforts — undertaken only grudgingly — to implement repeated congressional directives designed to provide a full and accurate accounting of the individual . . . account funds." See id. In short, almost every entity, governmental or otherwise, tasked with the assessment of the IIM trust has found serious accounting and financial management problems.

In 1994, as a result of the BIA's failures in the management of this trust fund, Congress codified some of the government's duties with regard to this IIM trust system. Section 101 of the Indian Trust Fund Management Reform Act, 25 U.S.C. § 162a(d), provides a non-exclusive list of the Secretary of the Interior's obligations in properly discharging the United States' trust responsibilities to IIM beneficiaries:

    (d) Trust responsibilities of Secretary of
  Interior
    The Secretary'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.
    (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). As can be seen from the face of this enactment, seven of the eight specific, statutorily mandated trust duties deal directly and unambiguously with providing the IIM beneficiaries an accounting of the IIM trust.

Section 162a was not the only statute passed placing trust duties on the federal government. 25 U.S.C. § 4011 also provides, under the caption "Recognition of Trust Responsibility," as follows:

  § 4011. Responsibility of Secretary [of the
  Interior] to account for the daily and annual
  balances of Indian trust funds.

(a) Requirement to account

    The Secretary shall account for the daily and
  annual balance of all funds held in trust by the
  United States for the benefit of an Indian tribe
  or an individual Indian which are deposited or
  invested pursuant to [25 U.S.C. § 162a].

(b) Periodic statement of performance

    Not later than 20 business days after the close
  of a calendar quarter, the Secretary shall provide
  a statement of performance to each Indian tribe
  and individual with respect to whom funds are
  deposited or invested pursuant to [25 U.S.C. § 162a].
  The statement, for the period concerned,
  shall identify —

(1) the source, type, and status of funds;

(2) the beginning balance;

(3) the gains and losses

(4) receipts and ...


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