Arctic Slope Native Ass'n, Ltd. v. Sebelius

• Decision Date: 19 April 2011
• Docket Number: No. 2010-1013,2010-1013
• Citation: 629 F.3d 1296
• Parties: ARCTIC SLOPE NATIVE ASSOCIATION, LTD., Appellant, v. Kathleen SEBELIUS, Secretary of Health and Human Services, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

629 F.3d 1296

ARCTIC SLOPE NATIVE ASSOCIATION, LTD., Appellant,

v.Kathleen SEBELIUS, Secretary of Health and Human Services, Appellee.

No. 2010-1013.

United States Court of Appeals, Federal Circuit.

Dec. 15, 2010.

Rehearing and Rehearing En Banc Denied April 19, 2011.

Lloyd B. Miller, Sonosky, Chambers, Sachse, Endreson & Perry, LLP, of Washington,DC, argued for appellant.With him on the brief were Donald J. Simon, Arthur Lazarus, Jr., and Peng Yu.Of counsel on the brief were Carter G. Phillips and Jonathan F. Cohn, Sidley Austin LLP, of Washington, DC.

Jacob A. Schunk, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellee.On the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Donald E. Kinner, Assistant Director, and Sameer Yerawadekas, Attorney.Of counsel on the brief was Sean Dooley, Senior Attorney, Office of the General Counsel, Public Health Division, United States Department of Health and Human Services, of Washington, DC.

Before LOURIE, BRYSON, and DYK, Circuit Judges.

DYK, Circuit Judge.

Arctic Slope Native Association("ASNA") filed suit against the Secretary of Health and Human Services ("Secretary") for breach of contract, alleging that the government failed to pay ASNA's so-called contract support costs shortfall for fiscal years 1999 and 2000.The Secretary argued that the obligation to pay, under the contract and the statute, was subject to the availability of appropriations and that there were no available appropriations because Congress had provided that the appropriations available for the funding of contract support costs were "not to exceed" specified amounts.The Civilian Board of Contract Appeals("the Board") granted summary judgment for the Secretary.Arctic Slope Native Ass'n, Ltd. v. Dep't of Health & Human Servs.,CBCA 294-ISDA, et al., 09-2 BCA ¶ 34,281 (C.B.C.A. Oct. 1, 2009).We affirm.

Background

I

This case is the latest in a long-running dispute between the various Indian tribes and the Secretary concerning the Secretary's obligation to pay contract support costs.This dispute has led to decisions by the Supreme Court and this court.See, e.g., Cherokee Nation of Okla. v. Leavitt,543 U.S. 631, 125 S.Ct. 1172, 161 L.Ed.2d 66(2005)[hereinafter Cherokee II ], aff'g sub nom, Thompson v. Cherokee Nation of Okla.,334 F.3d 1075(Fed.Cir.2003)[hereinafter Cherokee I ];Babbitt v. Oglala Sioux Tribal Pub. Safety Dep't,194 F.3d 1374(Fed.Cir.1999), cert. denied,530 U.S. 1203, 120 S.Ct. 2196, 147 L.Ed.2d 233(2000).

Briefly, the Indian Self-Determination Act ("ISDA"), Pub.L. No. 103-413,108 Stat. 4250(codified at 25 U.S.C. §§ 450-450n), as amended in 1994, authorizes the Secretary to enter into contracts with tribes, under which the tribes supply health services that a government agency would otherwise provide, id.§ 450f(a)(1).This case concerns indirect costs under the contracts for fiscal years 1999 and 2000.Indirect costs are "administrative or other expense[s] related to the overhead incurred by the tribal contractor in connection with the operation of the Federal program...."Id.§ 450j-1(a)(3)(A)(ii).The Act and the contract entered into pursuant to the Act require that the Secretary pay the tribal contractors' indirect costs.Id.§ 450j-1(a).These indirect costs include the secretarial amount, id.§ 450j-1(a)(1), and contract support costs, id.§ 450j-1(a)(2).See alsoCherokee II,543 U.S. at 634-35, 125 S.Ct. 1172.The secretarial amount is the amount the Secretary would have expended had the government itselfrun the program.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 administrative resources that the Secretary could draw from other government agencies).These additional indirect costs, which are not included in the secretarial amount, are referred to as contract support costs.See25 U.S.C. § 450j-1(a)(2);Cherokee II,543 U.S. at 635, 125 S.Ct. 1172.

Both under the ISDA and the contracts, the government's obligation to pay contract support costs is "subject to the availability of appropriations."25 U.S.C. § 450j-1(b);JointApp. 133(incorporating § 450j-1(b) into the contract).Additionally, "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...."25 U.S.C. § 450j-1(b).Congress has been reluctant to appropriate the amount necessary to pay the full amount of contract support costs, and the Secretary has accordingly declined to pay contract support costs not funded by appropriations.The Secretary has urged that the "availability of appropriations" clause justified the failure to pay.

A similar dispute arose previously for fiscal years 1994 through 1997.SeeCherokee II,543 U.S. at 634-35, 125 S.Ct. 1172;Cherokee I,334 F.3d at 1079.The Secretary did not deny the promise to pay, nor the failure to pay, but argued that the legal obligation to pay arose "if, and only if, Congress appropriated sufficient funds, and that, in this instance, Congress failed to do so."Cherokee II,543 U.S. at 636, 125 S.Ct. 1172.The Secretary admitted that the relevant appropriations acts did not include an explicit cap on appropriations, but nonetheless argued that "specific recommendations of funding amounts for contract support costs in the appropriations committee reports" were sufficient to impose a cap.Cherokee I,334 F.3d at 1083.Both the Supreme Court and this court rejected the argument that committee report language is sufficient to impose a cap, holding specifically that "restrictive language contained in Committee Reports is not legally binding."Cherokee II,543 U.S. at 646, 125 S.Ct. 1172;seeCherokee I,334 F.3d at 1085."[I]n order for a statutory cap to be binding on an agency, it must be carried into the legislation itself; such a cap cannot be imposed by statements in committee reports or other legislative history."Cherokee I,334 F.3d at 1085.

This court held, and the Supreme Court affirmed, that where there are "no statutory caps on available appropriations, the Secretary [is] not excused from meeting his contractual obligations by the availability clause of section 450j-1(b)."¹Cherokee I,334 F.3d at 1093;seeCherokee II,543 U.S. at 641, 125 S.Ct. 1172."[I]f the amount of an unrestricted appropriation is sufficient to fund the contract, the contractor is entitled to payment even if the agency has allocated the funds to another purpose or assumes other obligations thatexhaust the funds."Cherokee II,543 U.S. at 641, 125 S.Ct. 1172.Absent explicit restriction, an agency is generally permitted to reprogram funds within a lump-sum appropriation.U.S. Gov't Accountability Office, Principles of Federal Appropriations Law 2-25 (3d ed.2006)[hereinafter GAO Redbook].Thus, where there is no "statutory cap or other explicit statutory restriction," the Secretary is required to reprogram funds if doing so is necessary to fund the contract.Cherokee I,334 F.3d at 1086.

The Secretary further argued that under § 450j-1(b) there was no obligation to reprogram funds to pay the claims at issue because "doing so would require a reduction of funds for programs serving other tribes."Id. at 1083.This court and the Supreme Court found this argument unpersuasive because "the relevant congressional appropriations contained other unrestricted funds ... sufficient to pay the claims at issue" that would not require a reduction in funding for programs serving other tribes.Cherokee II,543 U.S. at 641, 125 S.Ct. 1172(emphasis added);seeCherokee I,334 F.3d at 1093.

II

After the dispute arose with respect to fiscal years 1994 through 1997, Congress acted to impose a statutory cap on funding for contract support costs in fiscal years 1999 and 2000.The appropriations act for fiscal year 1999 provided that "notwithstanding any other provision of law, of the amounts provided herein, not to exceed $203,781,000 shall be for payments ... for contract or grant support costs."²Omnibus Consolidated & Emergency Supplemental Appropriations Act, 1999, Pub.L. No. 105-277,112 Stat. 2681, 2681-279(1998)(emphasis added)[hereinafter 1999 Appropriations Act].Similarly, the appropriations act for fiscal year 2000 provided that "notwithstanding any other provision of law, of the amounts provided herein, not to exceed $228,781,000 shall be for payments ... for contract or grant support costs."Consolidated Appropriations Act, 2000,Pub.L. No. 106-113,113 Stat. 1501, 1501A-182(1999)(emphasis added)[hereinafter 2000 Appropriations Act].The Conference Report viewed this language as imposing a statutory cap, specifically approving our earlier decision in Oglala Sioux.H.R. Conf. Rep. No. 106-479, 494-95(1999).There, as discussed below, we explicitly held that "not to exceed" language was sufficient to impose a statutory cap.Oglala Sioux,194 F.3d at 1376, 1379-80.

III

Beginning in fiscal year 1999, ASNA entered into a self-governance contract with the Secretary, which remained in effect during fiscal years 1999 and 2000.The contract does not specify funding amounts for contract support costs, but instead refers to separate Annual Funding Agreements.For each fiscal year, the contract requires the Secretary to pay the full amount of contract support costs specified in the Annual Funding Agreement, "[s]ubject only to the appropriation of funds by [Congress] and to adjustments pursuant to [25 U.S.C. § 450j-1(b) ]."Joint App.at 133-34.ASNA does notclaim that the Secretary failed to pay the secretarial amount, or the contract support costs specified in the Annual Funding Agreements—approximately $1.29 million for fiscal year 1999³ and approximately $3 million for fiscal year 2000.⁴ASNA claims...