Southern Ute Indian Tribe v. Sebelius

• Decision Date: 19 September 2011
• Docket Number: 09–2291.,Nos. 09–2281,s. 09–2281
• Citation: 657 F.3d 1071
• Parties: SOUTHERN UTE INDIAN TRIBE, Plaintiff–Appellant/Cross–Appellee,v.Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services; Richard H. Carmona, Surgeon General of the United States; Charles W. Grim, Assistant Surgeon General and Director of the Indian Health Service; James L. Toya, Director, Albuquerque Area Office of the Indian Health Service; United States Indian Health Service; United States Public Health Service; United States Department of Health And Human Services, Defendants–Appellees/Cross–Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

657 F.3d 1071

SOUTHERN UTE INDIAN TRIBE, Plaintiff–Appellant/Cross–Appellee,

v.Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services; Richard H. Carmona, Surgeon General of the United States; Charles W. Grim, Assistant Surgeon General and Director of the Indian Health Service; James L. Toya, Director, Albuquerque Area Office of the Indian Health Service; United States Indian Health Service; United States Public Health Service; United States Department of Health And Human Services, Defendants–Appellees/Cross–Appellants.

Nos. 09–2281

09–2291.

United States Court of Appeals, Tenth Circuit.

Sept. 19, 2011.

Steven C. Boos of Maynes, Bradford, Shipps & Sheftel, LLP, Durango, CO, (Monte Mills of Southern Ute Indian Tribe Legal Department, Ignacio, CO, with him on the briefs), for Plaintiff–Appellant/Cross–Appellee.Jeffrica Jenkins Lee, Attorney, Civil Division (Tony West, Assistant Attorney General; Gregory J. Fouratt, United States Attorney; and Barbara C. Biddle, Attorney, Civil Division, with her on the briefs), Department of Justice, Washington, D.C., for Defendants–Appellees/Cross–Appellants.Before MURPHY, SEYMOUR and O'BRIEN, Circuit Judges.SEYMOUR, Circuit Judge.

This is the second appeal in litigation arising from the Secretary of Health and Human Services' (“HHS”) decision not to enter into a self-determination contract with the Southern Ute Indian Tribe (“Tribe”). In an initial order, the district court ruled that HHS's decision was unlawful, granted summary judgment to the Tribe, and directed the parties to prepare a proposed order for injunctive relief. See Southern Ute Indian Tribe v. Leavitt ( Southern Ute I ), 497 F.Supp.2d 1245 (D.N.M.2007). After the parties were unable to agree on the proposed order, the district court issued an interlocutory order in which it endorsed HHS's approach to the contract's start date and contract support costs. See Southern Ute Indian Tribe v. Leavitt, Mem. Op. & Order Following Presentment H'rg ( Southern Ute II ), Civil No. 05–988 WJ/LAM (D.N.M. Oct. 18, 2007). The Tribe appealed, and we dismissed the appeal for lack of jurisdiction. See Southern Ute Indian Tribe v. Leavitt ( Southern Ute II ), 564 F.3d 1198 (10th Cir.2009). On remand, the district court issued a final order, directing the parties to enter a self-determination contract including HHS's proposed language regarding the contract start date and contract support costs, and denying the Tribe's request for damages. See Southern Ute Indian Tribe v. Leavitt ( Southern Ute IV ), Civil No. 05–988 WJ/LAM (D.N.M. Sept. 16, 2009).

Both parties appeal. We affirm the district court's determination that HHS was required to contract with the Tribe and regarding the contract start date, but reverse regarding contract support costs.

I.

The statutory and factual background underpinning this litigation is set forth in detail in our prior decision. Southern Ute III, 564 F.3d at 1200–06. We repeat here only those details necessary to understand our disposition.

A.

The Indian Self–Determination and Education Assistance Act (“ISDA”) directs the Secretary of HHS (the “Secretary”), upon request of an Indian tribe, to enter into a contract by which the tribe assumes direct operation of HHS's federal Indian health care programs for the tribe's members. 25 U.S.C. § 450f. Congress provided for these self-determination contracts in an effort to encourage self-government and thereby enhance the progress of Indian people and their communities. See id. §§ 450, 450a. The ISDA derives from “the Federal Government's unique and continuing relationship with, and responsibility to, individual Indian tribes and to the Indian people as a whole.” Id. § 450a(b). “It pursues a goal of Indian ‘self-determination by assuring maximum Indian participation in the direction of ... Federal services to Indian communities so as to render such services more responsive to the needs and desires of those communities.’ ” Ramah Navajo Chapter v. Salazar, 644 F.3d 1054, 1058 (10th Cir.2011) (quoting 25 U.S.C. § 450a(a)).

Under the ISDA, the Secretary must approve a Tribe's contract proposal unless he or she makes a “specific finding that clearly demonstrates or ... is supported by a controlling legal authority” that one or more of the statutory grounds for declination are met. 25 U.S.C. § 450f(a)(2)(A)-(E) (specifying grounds on which the Secretary may decline to enter a self-determination contract). Under one of these grounds, at issue here, the Secretary may decline a Tribe's contract proposal if “the amount of funds proposed under the contract is in excess of the applicable funding level for the contract....” Id. § 450f(a)(2)(D).

Once the Secretary enters into a self-determination contract, the ISDA directs the Secretary to provide two types of contract funding. The first is the “secretarial amount,” which is the amount of funding Congress would have provided HHS to operate the programs had they not been turned over to the tribe. Id. § 450j–1(a)(1). The second type of funding, which is at issue here, is for “contract support costs” (“CSCs”). Id. § 450j–1(a)(2). Soon after the ISDA was enacted, Congress recognized that limiting contract funding to the secretarial amount created a “serious problem” because those funds did not cover ancillary costs of federally-mandated administrative requirements faced by contractor tribes. S.Rep. No. 100–274, at 8 (1987), reprinted in 1988 U.S.C.C.A.N. 2620, 2627. To address this concern, Congress amended the ISDA to require the Secretary to provide full funding for CSCs to cover “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....” 25 U.S.C. § 450j–1(a)(2); see also Indian Self–Determination Amendments of 1987, Pub.L. No. 100–472, § 205, 102 Stat. 2285, 2292–94 (1988); Ramah Navajo Chapter, 644 F.3d at 1058.

The Secretary's obligation to fund self-determination contracts is not absolute. The ISDA includes an “availability clause,” which states that the Secretary's payment of funds to contractor tribes is “subject to the availability of appropriations.” 25 U.S.C. § 450j–1(b); see also id. § 450j (c)(1) (“The amounts of [self-determination] contracts shall be subject to the availability of appropriations.”). The statute also provides that the Secretary may not reduce funding to tribes with ongoing contracts, absent a reduction in appropriations or other special circumstances. See id. § 450j–1(b)(2); see also id. § 450j–1(b) (stating that “the Secretary is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe or tribal organization under this [Act]”).

Every self-determination contract must also contain or incorporate by reference the provisions of the “model agreement” prescribed by the ISDA and “such other provisions as are agreed to by the parties.” 25 U.S.C. § 450 l (a). The model agreement states that the contract shall attach and incorporate by reference an “annual funding agreement.” Id. § 405 l (c) (model agreement § 1(f)). That agreement sets forth the negotiated annual CSC amounts associated with the contract, id. (model agreement § § 1(b)(4), 1(c), 1(f)(2)(A)), and the “time and method of payment,” id. (model agreement § 1(f)(2)(A)(i)). ¹ It also reiterates that the Secretary's payment of amounts specified in the annual funding agreement is “subject to the availability of appropriations.” Id. (model agreement § 1(b)(4)).

The fact that the Secretary's payment of CSCs is subject to the availability of appropriations is important in light of Congress's funding decisions. In fiscal year 1994, Congress began capping CSC funding. Ramah Navajo Chapter, 644 F.3d at 1059. Because of these caps, aggregate shortfalls in CSC funding have been ubiquitous, leaving the HHS with insufficient funds to pay full CSCs under both ongoing and new contracts. See id. (noting “funding shortfalls for CSCs were repeated every fiscal year from 1994–2001”); see also Interior, Environment, and Related Agencies Appropriations for 2011: Hearings Before the Subcomm. on Interior, Environment, and Related Agencies of the H. Comm. on Appropriations, 111th Cong. 229–31 (2010) (statement of Lloyd B. Miller, Counsel, National Tribal Contract Support Cost Coalition) (noting shortfalls through 2011).

The ISDA includes remedial provisions. Relevant here, it gives United States district courts jurisdiction to hear tribal claims against the Secretary for actions taken contrary to the ISDA. 25 U.S.C. § 450m–1(a). The district courts have authority to “order appropriate relief including money damages, injunctive relief against [the Secretary] ... or mandamus ... to compel the Secretary to award and fund an approved self-determination contract.” Id. The ISDA also provides that self-determination contracts are subject to the Contract Disputes Act of 1978, 41 U.S.C. § 601. Id. § 450m–1(d). The CDA provides a process for tribes seeking to recover contract funds when the Secretary refuses to pay them. Id.; see also Indian Health Manual: Contract Support Costs 6–3.4f (2007) (noting CDA claim as a preferred method for resolving disputes over CSCs).

Such litigation has led to decisions by the Supreme Court and this court about the Secretary's obligation to pay CSCs to tribes under existing contracts in the face of chronic shortfalls in CSC funding. See Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 125 S.Ct. 1172, 161 L.Ed.2d 66 (2005); Ramah Navajo Chapter, 644 F.3d 1054. This appeal, by contrast, requires us to consider the Secretary's obligations in deciding whether and how to enter into new contracts.

B.

On January 31, 2005, the Tribe submitted a proposal to enter into a self-determination contract to assume control of the Southern Ute Health Center (the “Clinic”), beginning on May 1, 2005. This initiated...