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Cook Inlet Tribal Council v. Mandregan

United States District Court, District of Columbia

November 7, 2018

COOK INLET TRIBAL COUNCIL, Plaintiff,
v.
CHRISTOPHER MANDREGAN, JR., et. al., Defendants.

          MEMORANDUM OPINION

          Emmet G. Sullivan United States District Judge

         I. Introduction

         Over twenty-five years ago, the Cook Inlet Tribal Council (“CITC”) and the Indian Health Service (“IHS”) entered into a self-determination contract pursuant to the Indian Self-Determination and Education Assistance Act (“ISDEAA”). Under this contract, CITC has operated substance abuse programs serving Alaskan Native patients, while IHS provides federal funding to CITC, allowing CITC to administer federal programs and services that IHS would have otherwise provided. In 2014, CITC proposed a contract amendment for additional “contract support costs” funding to account for increased facility support costs, among other costs. IHS declined CITC's proposed amendment in part, stating that CITC receives payment for facility support costs as part of its annual “Secretarial” funding. CITC now appeals IHS' declination decision, bringing suit against Christopher Mandregan, Jr., Alaska Area Director of IHS; Alex Azar, [1] Secretary of the Department of Health and Human Services (“HHS”); and the United States of America. At issue is whether the ISDEAA clearly requires that CITC's facility support costs be funded exclusively from the Secretarial amount, or whether CITC's facility support costs may also be funded as contract support costs.

         Pending before the Court are the parties' cross-motions for summary judgment. Having carefully reviewed the motions and the entire record herein, the Court concludes that CITC's interpretation of the ISDEAA's ambiguous funding provision is reasonable. Therefore, the Court GRANTS IN PART CITC's motion for summary judgment and DENIES the defendants' cross-motion for summary judgment. However, rather than “immediately” compel IHS to approve and fund CITC's proposed contract amendment, the Court VACATES IHS' declination decision and REMANDS the matter to IHS for a determination consistent with this Memorandum Opinion.

         II. Background

         This case arises out of a dispute regarding the ISDEAA's funding provisions. The ISDEAA authorizes the government and Indian tribes to enter into self-determination contracts, pursuant to which tribes receive federal funding to provide certain services that a federal agency would normally provide. See 25 U.S.C. §§ 5301, et. seq.[2] The ISDEAA was designed-in recognition of the country's “obligation” “to respond to the strong expression of the Indian people for self-determination”- to “permit an orderly transition from the Federal domination of programs for, and services to, Indians to effective and meaningful participation by the Indian people in the planning, conduct, and administration of those programs and services.” Id. § 5302(a), (b). Consistent with these aims, the ISDEAA “direct[s]” the government to enter into and negotiate self-determination contracts with Indian tribes upon tribal request. Id. § 5321(a)(1). “Under a self-determination contract, the federal government supplies funding to a tribal organization, allowing [the tribe] to plan, conduct and administer a program or service that the federal government otherwise would have provided directly.” Rancheria v. Hargan, 296 F.Supp.3d 256, 260 (D.D.C. 2017) (quoting FGS Constructors, Inc. v. Carlow, 64 F.3d 1230, 1234 (8th Cir. 1995)(quotation marks omitted).

         CITC challenges IHS' decision to decline CITC's proposed contract amendment in part (“declination decision”). See Compl., ECF No. 1. IHS is an agency within HHS that provides primary health care for American Indians and Alaskan Natives throughout the United States. Defs.' MSJ, ECF No. 15 at 8.[3] IHS provides health care by several means, including directly through its own facilities or by contracting with tribes and tribal organizations pursuant to the ISDEAA. Id. at 8-9.

         CITC is a “private, non-profit corporation that delivers social, education, employment, training, alcohol treatment, child care, housing assistance, energy assistance and planning services to the Alaska Native people of the Cook Inlet Region.” A.R., [4] ECF No. 17-1 at 3. The services it provides to Native Alaskans are funded by the federal government and the state of Alaska. Id. CITC operates under the authority of its Board of Directors, which is made up of representatives from eight federally-recognized tribes: (1) the Chickaloon Village Traditional Council; (2) the Native Village of Eklutna; (3) the Kenaitze Indian Tribe; (4) the Knik Tribal Council; (5) the Ninilchik Traditional Council; (6) the Salamatof Tribal Council; (7) the Seldovia Village Tribe; (8) and the Native Village of Tyonek. See id.; Pl.'s Stmt., ECF No. 13-2 ¶ 1.

         CITC has been a “tribal contractor” under the ISDEAA since 1992, Defs.' Stmt., ECF No. 15-1 ¶¶ 1, 2, when it submitted a proposal to IHS to enter into a self-determination contract to provide residential treatment and recovery services at the Alaska Native Alcohol Recovery Center, see A.R., ECF No. 17-2; Pl.'s Stmt., ECF No. 13-2 ¶ 2. IHS accepted the proposal. Pl.'s Stmt., ECF No. 13-2 ¶ 3. In the first year of the self-determination contract, CITC was provided approximately $150, 000 in Secretarial funding, which included $11, 838.50 for facility-related costs. Id. ¶¶ 3, 4; see also A.R., ECF No. 17-2. Since then, CITC's programs have “expanded substantially . . . with most funding coming from increases in congressional appropriations.” Pl.'s Stmt., ECF No. 13-2 ¶ 5. Accordingly, its funding increased from about $150, 000 in 1992 to approximately $2, 000, 000 in 2014, including the $11, 838.50 IHS has paid annually for facility support costs since 1992. See A.R., ECF No. 11-1 at 2 ($1, 943, 226 as of April 2014); Pl.'s Stmt, ECF No. 13-2 ¶ 6 ($2, 518, 559).

         By 2013, CITC's facility support costs grew to $479, 040, including the $11, 838.50 IHS has paid annually since 1992. Pl.'s Stmt, ECF No. 13-2 ¶ 8. On April 11, 2014, CITC requested to amend of its 2014 self-determination contract to add $479, 040 in “direct contract support costs associated with facility support.” A.R., ECF No. 17-3. In its proposal, CITC argued that its request should be approved because facility support funds are “reasonable costs for activities which must be carried on by CITC as a contractor” pursuant to the ISDEAA. Id. (citing 25 U.S.C. § 5325(a)(2)). On July 7, 2014, IHS denied CITC's proposal based on one of the five declination options permissible under the ISDEAA: the amount CITC requested was “in excess of the applicable funding level for the contract.” A.R., ECF No. 11-1 at 2-3 (citing 25 U.S.C. § 5321(a)(2)(D)).[5] In its declination letter, IHS explained that facility support costs were already included as part of CITC's “program base, ” or the “Secretarial amount.” Id. The Secretarial amount is the funding that “IHS would have spent for costs associated with its programs” had it run the program itself. Id. (citing 25 U.S.C. § 5325(a)(1)). According to IHS, paying the requested $479, 040 in “direct contract support costs” would cause it to pay CITC for facility support costs twice, in violation of the ISDEAA. See Id. (citing 25 U.S.C. § 5325(a)(3)(A) (contract support costs funding “shall not duplicate any funding” otherwise provided)).

         CITC appealed this declination decision by filing a complaint on October 31, 2014. Compl., ECF No. 1. The parties filed cross-motions for summary judgment in 2015, which the Court denied without prejudice while the parties engaged in settlement negotiations. See Jan. 4, 2016 Minute Order. After the negotiations failed, the Court granted the parties' motions to reinstate the cross-motions for summary judgment. See June 8, 2016 Minute Order.

         III. Standard of Review

          Pursuant to Federal Rule of Civil Procedure 56, summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Waterhouse v. District of Columbia, 298 F.3d 989, 991 (D.C. Cir. 2002). CITC's claim arises under the ISDEAA, not the Administrative Procedure Act. As such, the Court's review of IHS' declination decision is de novo. Pyramid Lake Paiute Tribe v. Burwell, 70 F.Supp.3d 534, 542 (D.D.C. 2014); see also Defs.' MSJ, ECF No. 15 (not disputing that the Court's review is de novo).

         When a tribe appeals a government agency's declination decision under the ISDEAA, as here, the burden of proof rests with the government: “the Secretary shall have the burden of proof to establish by clearly demonstrating the validity of the grounds for declining the contract proposal (or portion thereof).” 25 U.S.C. § 5321(e)(1). Therefore, IHS must “clearly demonstrate” and make a “specific finding” that there exists one of five permissible grounds to decline. Id. § 5321(a)(2). In other words, the government “must demonstrate that its reading is clearly required by the statutory language.” Salazar v. Ramah Navajo Chapter, 567 U.S. 182, 194 (2012)(quoting 25 U.S.C. § 5329). IHS must therefore clearly demonstrate that CITC's contract proposal for additional facility support costs was in excess of the self-determination contract's applicable funding level. 25 U.S.C. § 5321(a)(2). To do so, IHS must establish that facility support costs were included in CITC's Secretarial amount and to pay them again would violate the ISDEAA's prohibition against duplicative funding. See id.; id. § 5325(a)(3)(A); see also A.R., ECF No. 11-1 at 2-3.

         Additionally, the ISDEAA and the self-determination contracts formed thereunder “shall be liberally construed for the benefit of the [tribal] Contractor.” Ramah Navajo, 567 U.S. at 194 (quoting 25 U.S.C. § 5329). This canon of construction has been codified in the ISDEAA, see 25 U.S.C. § 5329, and is memorialized in the self-determination contract between IHS and CITC, see A.R., ECF No. 11-1 at 14 § (a)(2) (“Each provision of the Indian Self-Determination and Education Assistance Act and each provision of this contract shall be liberally construed for the benefit of the Contractor . . . .”); see also 25 U.S.C. § 5329(c) (model agreement codifying this provision); Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 766 (1985) (when cases involve American Indians, “statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit”).

         This canon displaces the deference a court would otherwise give an agency's interpretation under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) in a challenge brought pursuant to the Administrative Procedure Act. See Cobell v. Norton, 240 F.3d 1081, 1101 (D.C. Cir. 2001) (Because “the governing canon of construction” requires liberal construction in favor of tribes, “Chevron deference is not applicable in this case”). Therefore, when interpreting a statute, a court must first determine whether the statutory text is plain and unambiguous. Carcieri v. Salazar, 555 U.S. 379, 387 (2009). If so, the court “must apply the statute according to its terms.” Id. If, on the other hand, the court determines the statute to be ambiguous, the court need not give controlling weight to an agency's reasonable interpretation of that statute, as it normally would under Chevron. See Muscogee (Creek) Nation v. Hodel, 851 F.2d 1439, 1444 (D.C. Cir. 1988)(“[T]he standard principles of statutory construction do not have their usual force in cases involving Indian law.”). Instead, the court is to give IHS' views “consideration, ” but not deference. Cobell, 240 F.3d at 1101; see also Rancheria, 296 F.Supp.3d at 265-67 (D.D.C. 2017)(summarizing “statutory interpretation and Chevron deference in Indian law”); Maniilaq Ass'n v. Burwell, 72 F.Supp.3d 227, 232 (D.D.C. 2014) (“[T]he canon of construction in favor of Indian tribes can trump the deference to agencies' interpretations courts ordinarily give under Chevron and its progeny . . . .”). Because “statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit, ” the Court must construe any ambiguity or inconsistency in the ISDEAA or the self-determination contract in CITC's favor. Muscogee, 851 F.2d at 1444-45 (quoting Blackfeet Tribe, 471 U.S. at 766).

         IV. Analysis

         IHS denied CITC's contract proposal because the “amount of funds proposed . . . is in excess of the applicable funding level for the contract.” A.R., ECF No. 11-1 at 3. According to IHS, CITC is not entitled to the requested facility support funding because that funding has been included in CITC's “Secretarial amount.” See Id. The Secretarial amount is “the amount that the IHS would have spent for costs associated with its programs” under the ISDEAA. Id. Because the Secretarial amount is capped at the amount IHS would have spent, IHS may “decline any proposal seeking funds in excess of that amount.” Maniilaq Ass'n, 170 F.Supp.3d at 249 (citations omitted). Although it has received $11, 838.50 annually in facility support costs since 1992, CITC argues that its increasing facility support costs have not been funded in the Secretarial amount. See generally Pl.'s MSJ, ECF No. 13. Therefore, CITC contends that such costs must be provided as eligible “contract support costs.” Id. IHS responds that CITC's Secretarial amount has steadily increased to almost $2 million in 2014 to “account for inflation and rising costs of operating” Indian programs. Defs.' MSJ, ECF No. 15 at 6. It contends that this amount includes funding for increased facility support costs. Id. CITC replies that IHS has provided no evidence to support that it provided increased facility support costs beyond the $11, 838.50 paid annually since 1992; therefore, it argues that IHS failed to meet its burden under the ISDEAA. Pl.'s Reply, ECF No. 18 at 16. At issue, then, is whether the ISDEAA clearly requires that CITC's facility support costs be funded exclusively from the Secretarial amount, or whether CITC's facility support costs may also be funded as contract support costs. See generally Pl.'s MSJ, ECF No. 13; Defs.' MSJ, ECF No. 15. In reaching its decision, the Court first discusses the ISDEAA's statutory scheme and the two types of funding provided thereunder. The Court then evaluates whether the statute speaks clearly on the precise question. Concluding that it does not, the Court finds CITC's interpretation of the ambiguous statutory provision to be reasonable, particularly in light of IHS' contradictory guidance, which contemplates that facility support costs may be paid as contract support costs in certain circumstances. Similarly, the Court finds that IHS' interpretation is not compelled by the ISDEAA and may in fact be contradicted by its own regulations and guidance.

         A. The Indian Self-Determination and Education Assistance Act

          Congress enacted the ISDEAA in 1975 to codify the federal government's “obligation” to “respond to the strong expression of the Indian people for self-determination” and to achieve “maximum Indian participation in the direction of educational as well as other Federal services to Indian communities so as to render such services more responsive to the needs and desires of those communities.” 25 U.S.C. § 5302(a). To that end, the Act mandates that IHS must “upon the request of any Indian tribe . . . enter into a self-determination contract . . . to plan, conduct, and administer” health, education, economic, and social programs that the Secretary otherwise would have administered. Id. § 5321(a); see also Salazar v. Ramah Navajo Chapter, 567 U.S. 182, 186 (2012). Once the self-determination contract has been executed, the government must pay the tribe's costs to run the program that it would have otherwise administered. See 25 U.S.C. § 5325. The ISDEAA provides for two types of funding: (1) “Secretarial” amount funding, pursuant to § 5325(a)(1); and (2) “contract support costs” funding, pursuant to § 5325(a)(2), (3). The Secretarial amount is “the amount that the agency would have spent ‘for the operation of the program' had the agency itself managed the program.” Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 634 (2005)(quoting 25 U.S.C. § 5325(a)(1)); see also Arctic Slope Native Ass'n, Ltd. v. Sebelius, 629 F.3d 1296, 1298-99 (Fed. Cir. 2010) (“The [S]ecretarial amount is the amount the Secretary would have expended had the government itself run the program.”), vacated on other grounds, 567 U.S. 930 (2012). The Secretarial amount “shall not be less than [the amount] the appropriate Secretary would have otherwise provided for the operation of the programs . . . covered by the contract, without regard to the organizational level” within the relevant agency “at which the program . . ., including supportive administrative functions that are otherwise contractible, is operated.” 25 U.S.C. § 5325(a)(1). The statute does not provide examples of types of costs that are included in the Secretarial amount.

         As originally enacted, the ISDEAA only required the government to provide Secretarial funding, equivalent to the amount that the Secretary would have otherwise provided. Ramah Navajo, 567 U.S. at 186 (discussing § 106(h), 88 Stat. 2211). However, “it soon became apparent that this [S]ecretarial amount failed to account for the full costs to tribes of providing services.” Id. For example, the Secretarial amount “does not include the additional indirect costs that the tribes incur in their operation of the programs, which the Secretary would not have directly incurred (i.e., the cost of the administrative resources that the Secretary could draw from other government agencies).” Arctic Slope, 629 F.3d at 1299. Therefore, in 1988, “because of ‘concern with Government's past failure to adequately reimburse tribes' indirect administrative costs,' Congress amended [the ISDEAA] to require the Secretary to contract to pay the full amount of contract support costs related to each self-determination contract.” Ramah Navajo, 567 U.S. at 186 (quoting Cherokee Nation, 543 U.S. at 639) (quotations to the statute omitted).

         Under the ISDEAA, contract support costs “shall be added” to the Secretarial amount. 25 U.S.C. § 5325(a)(2). Contract support costs are defined as:

an amount for the reasonable costs for activities which must be carried on by a tribal organization as contractor to ensure compliance with the terms of the contract ...

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