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Council of Athabascan Tribal Governments v. United States

March 16, 2010

COUNCIL OF ATHABASCAN TRIBAL GOVERNMENTS, PLAINTIFF,
v.
UNITED STATES OF AMERICA ET AL., DEFENDANTS.



The opinion of the court was delivered by: Richard W. Roberts United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Council of Athabascan Tribal Governments ("the Council") brings breach of contract claims against the United States of America, the Secretary of the Department of Health and Human Services, and the Director of the Indian Health Service ("IHS"). The defendants move to dismiss under Federal Rule of Civil Procedure 12(b)(6) asserting that the Council has failed to state a claim upon which relief can be granted, or, in the alternative, for summary judgment arguing that the doctrine of laches bars the Council's claims. Because the Council has pled plausible claims and the defendants have not shown that the claims should be barred by laches, the defendants' motion will be denied.

BACKGROUND

During the 1995 fiscal year, the Council, a tribal organization, operated public health facilities and provided health care services under a contract with the IHS, a part of the Department of Health and Human Services. (Compl. ¶¶ 1, 13.) The parties entered into the contract under the Indian Self-Determination and Education Assistance Act ("ISDEAA"), 25 U.S.C. § 450 et. seq. (Id. ¶ 1.) The ISDEAA "authorizes [the Council] . . . to assume responsibility to provide programs, functions, services and activities ("[PFSA]") that the Secretary would otherwise be obligated to provide." (Id. ¶ 14.) The Secretary must provide the Council with program funds to cover the costs of services that IHS would have incurred if it had retained responsibility to provide services and contract support costs to cover "reasonable administrative and overhead costs associated with carrying out the PFSAs[.]" (Id.) Contract support costs include start-up costs "to plan, prepare for and assume operation of a new or expanded PFSA[,]" indirect costs, which are "costs incurred for a common or joint purpose [that benefit] more than one PFSA, such as administrative and overhead costs," and direct costs, which are "expenses directly attributable to a certain PFSA[,]" such as workers compensation insurance. (Id. ¶ 15.)

The complaint alleges that the ISDEAA requires the Secretary to pay the Council the full contract support costs due under its contracts and that IHS has failed to do so, resulting in a shortfall. (Id. ¶¶ 16, 18-19.) Indirect costs are calculated using a ratio between the "[indirect costs] pool, the amount considered necessary to run the contractor's entire PFSAs -- the numerator -- and the total direct funding for those PFSAs -- the denominator." (Id. ¶ 21.) The Council alleges that IHS used a ratio that "systematically undercalculate[d] the [indirect costs] needed to operate" ISDEAA contracts by including funds received from other federal agencies in the calculation. (Id. ¶ 22.) Inclusion of these funds decreases the ratio and reduces the indirect costs needed to execute ISDEAA contracts because unlike IHS, other federal agencies "heavily restrict or forbid the use of program dollars for [indirect costs.]" (Id.)

Before filing this suit, the Council submitted its claims to IHS for a decision from a contracting officer on September 2, 2005. (Id. ¶ 7.) The contracting officer denied the claims on July 17, 2006, and the Council received notice of the decision "some days later." (Id. ¶ 8.) The Council filed this suit on July 17, 2007, bringing one count alleging that the Secretary underpaid contract support costs for the 1995 fiscal year in violation of the ISDEAA and one count alleging that the Secretary used a "flawed [indirect costs] rate calculation methodology" in calculating the ratio. (Id. ¶¶ 30, 33.) The defendants move to dismiss, arguing (1) that the shortfall claim fails because the defendants fully performed under the ISDEAA contact and (2) that the ratio miscalculation claim fails because an indirect costs rate was not used in the ISDEAA contract.*fn1 (Defs.' Mem. of P. & A. in Supp. of Mot. to Dismiss or in the Alternative for Summ. J. ("Defs.' Mem.") at 9, 11.) The defendants have also moved in the alternative for summary judgment, arguing that the Council's claims are barred by laches. (Id. at 16-17.)

DISCUSSION

I. MOTION TO DISMISS UNDER RULE 12(b)(6)

In a motion to dismiss for failure to state a claim under Rule 12(b)(6), the complaint must be construed in the light most favorable to the plaintiff, Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002), and "the court must assume the truth of all well-pleaded allegations." Warren v. District of Columbia, 353 F.3d 36, 39 (D.C. Cir. 2004). "However, the court need not accept inferences drawn by [a] plaintiff[] if such inferences are unsupported by the facts set out in the complaint. Nor must the court accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994); see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). A plaintiff does not need to plead detailed factual allegations. Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 16 (D.C. Cir. 2008) (stating that "[i]n general, a complaint should simply identify the 'circumstances, occurrences, and events' giving rise to the claim" (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007))). But, enough facts must be pled to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570.

A. Contractual Requirement to Fund Indirect Contract Support Costs

Congress passed the ISDEAA "to promote Indian self-determination by providing for the transition of federal programs and services for Indians, including health care services, to the control of Indian communities." Three Affiliated Tribes of Fort Berthold Indian Reservation v. United States, 637 F. Supp. 2d 25, 26 (D.D.C. 2009). Under the ISDEAA, "[u]pon the approval of a self-determination contract, the Secretary shall add to the contract the full amount of funds to which the contractor is entitled under subsection (a) of this section[.]" 25 U.S.C. § 450j-1(g). "The amount of funds provided under the terms of self-determination contracts entered into pursuant to this subchapter shall not be less than the appropriate Secretary would have otherwise provided for the operation of the programs or portions thereof for the periodcovered by the contract[.]" 25 U.S.C. § 450j-1(a)(1). The ISDEAA also provides that [t]here shall be added to the amount required by [§ 450j-1(a)(1)] contract support costs which shall consist of an amount for the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but which . . . normally are not carried on by the respective Secretary in his direct operation of the program; or . . . are provided by the Secretary in support of the contracted program from resources other than those under contract.

25 U.S.C. § 450j-1(a)(2). Funding under the ISDEAA is constrained by Congress' appropriation of funds. Three Affiliated Tribes of Fort Berthold Indian Reservation, 637 F. Supp. 2d at 27.

The defendants move for dismissal, arguing that they paid the full amount owed for indirect contract support costs and that "the mere fact that the contract was entered pursuant to the [ISDEAA] does nothing to further [the Council's] claims of breach." (Defs.' Mem. at 13.) According to the defendants, the ISDEAA "does not mandate the payment of a specific amount of indirect [contract support costs] or that a specific formula be included in the contract." (Id.) However, the ISDEAA does create "statutory obligations to fully fund indirect [contract support costs] insofar as possible[,]" Menominee Indian Tribe of Wis. v. United States, 539 F. Supp. 2d 152, 155 (D.D.C. 2008); see also Ramah Navajo School Bd., Inc. v. Babbitt, 87 F.3d 1338,1341 (D.C. Cir. 1996) (noting that the ISDEAA refers to contract support funds for administrative costs as "an entitlement of the contracting Tribes"), and the complaint alleges that the defendants violated this obligation. (Compl. ¶ 19.) Citing Cherokee Nation v. Leavitt, 543 U.S. 631 (2005), the Council alleges that "IHS should have reprogrammed funds to pay the tribal contractors the full [contract support costs] due under their contracts for [fiscal year] 1994 through [fiscal year] 1997 when Congress appropriated lump sums for the IHS without earmarking an amount for [contract support costs,]" but that IHS "took no such action." (Compl. ¶¶ 18-19.)

Under the Council's theory, a contract formed under the ISDEAA imposes an obligation on the defendants to pay a certain level of contract support costs that has not been satisfied. While the defendants assert that the $375,185 paid fully satisfies the contract, the Council disputes that the defendants have fulfilled their contractual obligation, arguing that "IHS paid [the Council] less than its full [contract support costs] requirement in [fiscal year] 1995" and that "IHS [has] breached its agreements with [the Council] and violated the ISDEAA's requirement of full payment from available appropriations[.]" (Id. ΒΆ 30.) In Menominee, the court rejected the defendants' argument that the ISDEAA "does not mandate the payment of a specific amount of indirect [contract support costs]," noting that the ISDEAA "mandates the payment of full indirect [contract support costs] and ISDEAA itself establishes that entitlement." 539 F. Supp. 2d at 155. "Although the Secretary cannot disburse funds he does not have or amounts in excess of limitations set by Congress, he still has the obligation to fund indirect [contract support costs] to the greatest ...


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