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Quantum Entertainment, Ltd. v. United States Dep't of the Interior

February 19, 2009


The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Document Nos. 16, 17




The plaintiff, Quantum Entertainment Limited ("QEL")*fn1 , and the defendant, the U.S. Department of the Interior ("DOI") Bureau of Indian Affairs ("BIA"), filed cross-motions for summary judgment on the question of whether the DOI's Interior Board of Indian Appeals ("the Board") violated the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701, et seq., by promulgating a decision adverse to the plaintiff. Stemming from the administrative review of a contract to which the plaintiff was a party, the Board determined that, under the applicable statute, the contract required the BIA's approval in order to be valid. The Board further concluded, that because the plaintiff failed to obtain the BIA's approval, the contract was invalid. Because the court determines that the Board failed to articulate a reasoned basis for certain determinations central to its holding, the court grants in part the plaintiff's motion for summary judgment and remands the Board's decision that the plaintiff's contract was invalid. The court denies the parties' motions in all other respects. Accordingly, the court remands this case to the Board to explain its decision consistent with this opinion.


A. Factual History

On August 1, 1996, the plaintiff entered into a management agreement ("Agreement") with the Santo Domingo Pueblo ("Pueblo")*fn2 and Kewa Gas Limited ("Kewa").*fn3 AR at 0131. The Agreement was for an initial term of ten years, during which time the plaintiff managed a gas distribution business owned by Kewa on lands leased by Kewa from the Pueblo. Id. at 0046. The agreement was never submitted to or approved by the Secretary of the DOI. AR at 0833-34. The parties to the Agreement intended to benefit from a tax exemption available to Indian tribes. Id. at 0046, 0827. The parties to the Agreement performed under the Agreement until 2003 when the governor the Pueblo sought BIA review of the Agreement, beginning the administrative process culminating in this lawsuit. Id. at 0828, 0052.

B. Legislative, Administrative and Procedural History

Congress first enacted in 1871, as part of an appropriations bill, and in 1872, as permanent legislation, what later was codified at 25 U.S.C. § 81 ("Old Section 81"). Id. at 0828 & n.2. From 1871 until 2000, with minor exceptions not relevant here, the text of Old Section 81 remained substantially unchanged as follows:

No agreement shall be made by any person with any tribe of Indians . . . for the payment or delivery of any money or other thing of value . . . in consideration of services for said Indians relative to their lands . . . unless such contract or agreement be executed and approved [by the Secretary of the DOI ("Secretary")] . . . . All contracts or agreements made in violation of this section shall be null and void, and all money or other thing of value paid to any person by any Indian, tribe, or any one else, for or on his or their behalf, on account of such services, in excess of the amount approved by the . . . Secretary for such services, may be recovered by suit in the name of the United States.

25 U.S.C. § 81 (1994).

Congress enacted Old Section 81 out of concern that "claims agents and attorneys working on contingency fees [were] routinely swindl[ing] Indians out of their land, accepting it as payment for prosecuting dubious claims against the federal government." United States v. Turn Key Gaming, Inc., 260 F.3d 971, 976-77 (8th Cir. 2001) (citing Cong. Globe, 41st Cong., 3d Sess. 1483, 1483-87 (daily ed. Feb. 22, 1871)); see also id. at 976 n.6, 977 n.7 . Congress's act of legislative protection, through the enactment of Old Section 81, stems from the federal government's trust responsibility to Indian tribes. See Mark A. Smith, Contracting with Tribes under 25 U.S.C. § 81, 20-APR PROB & PROP. 8, 10 (2006) (describing briefly the genesis and development of the federal government's moral obligation and fiduciary duty to Indian tribes).

In 2000, however, Congress amended Old Section 81 as part of the Indian Tribal Economic Development and Contracts Encouragement Act of 2000. 25 U.S.C. §§ 71, 81, 476. This "amendment" was intended to replace Old Section 81, as the changes to the text where quite substantial. See S. REP. NO. 106-150, at 1, 1999 WL 965424 (1999). The relevant text of 25 U.S.C. § 81 ("New Section 81"), as amended, states that "[n]o agreement or contract with an Indian tribe that encumbers Indian lands for a period of 7 or more years shall be valid ...

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