Cheyenne-Arapaho Tribes of Okl. v. United States, 342-70

• Citation: 512 F.2d 1390
• Decision Date: 19 March 1975
• Docket Number: 343-70.,No. 342-70,342-70
• Parties: CHEYENNE-ARAPAHO TRIBES OF INDIANS OF OKLAHOMA et al. v. The UNITED STATES.
• Court: Court of Federal Claims

512 F.2d 1390

CHEYENNE-ARAPAHO TRIBES OF INDIANS OF OKLAHOMA et al. v. The UNITED STATES.

Nos. 342-70, 343-70.

United States Court of Claims.

March 19, 1975.

Pierre J. LaForce, Washington, D. C., for plaintiffs.

I. S. Weissbrodt, Washington, D. C., attorney of record for the Confederated Tribes of the Colville Reservation, and others; Weissbrodt & Weissbrodt, Ruth Duhl and Howard L. Sribnick, Washington, D. C., of counsel.

Glen A. Wilkinson, Washington, D. C., attorney of record for Cheyenne-Arapaho Tribes of Indians, and others; Wilkinson, Cragun & Barker, E. Foster De-Reitzes, Angelo A. Iadarola, Frances L. Horn, and Charles H. Gibbs, Jr., Washington, D. C., of counsel.

Herbert Pittle, Washington, D. C., with whom was Asst. Atty. Gen., Wallace H. Johnson, for defendant.

Before DAVIS, NICHOLS, and KUNZIG, Judges.

ON PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

DAVIS, Judge.

These consolidated cases, before us on cross-motions for summary judgment as to liability, challenge the Government's performance of its fiduciary duties as trustee of funds belonging to various Indian tribes. The suits are brought on behalf of a number of tribes either for themselves or as representatives of large or aboriginal groups, but for the purpose of these motions the parties have agreed that two tribes for each suit will be considered representative "test plaintiffs." No. 342-70 challenges the Government's management of judgment funds in the Treasury belonging to plaintiffs Southern Ute Tribe and Southern Ute Tribe as representative of the Confederated Bands of Ute Indians.¹ No. 343-70 challenges defendant's conduct with respect to other trust funds of plaintiffs Southern Ute Tribe and Hoopa Valley Tribe.

Both petitions allege that defendant breached its fiduciary duties in the care of plaintiffs' funds by not making the funds productive (by not investing moneys ready for investment and also by delay in making funds available for investment), by not maximizing the productivity of funds, and by using the funds to its own benefit and to the detriment of the tribes. It is clear from past opinions of this court and of the Supreme Court, and from the actions of both Congress and the Executive Branch, that funds appropriated to Indians to satisfy judgments of the Indian Claims Commission or of this court, as well as funds produced by tribal activities, are, when kept in the Treasury, held in trust for the Indians. See United States v. Mason, 412 U.S. 391, 398, 93 S.Ct. 2202, 37 L.Ed.2d 22 (1973); Seminole Nation v. United States, 316 U.S. 286, 296-97, 62 S.Ct. 1049, 86 L.Ed. 1480 (1942); Menominee Tribe of Indians v. United States, 59 F.Supp. 137, 102 Ct.Cl. 555, 562 (1945); 10 Cong.Rec. 214 (1880) (statement of Senator Edmunds); S.Rep. No. 1396, 70th Cong., 2d Sess. 1-2 (1929) (letter from Sec'ty of the Interior West); 34 Op.Atty.Gen. 439, 442 (1925). We have ruled that the United States as trustee has undertaken an obligation "of the highest responsibility and trust," Seneca Nation of Indians v. United States, 173 Ct.Cl. 917, 925 (1965), an obligation doubly strict when the defendant, by retaining Indian moneys in the Treasury, in effect borrows those funds. Menominee Tribe of Indians v. United States, supra, 59 F.Supp. at 140, 102 Ct.Cl. at 562; see Navajo Tribe of Indians v. United States, 364 F.2d 320, 324, 176 Ct.Cl. 502, 507-08 (1966); Menominee Tribe of Indians v. United States, 101 Ct.Cl. 10, 19-21 (1944). We have also held that because the United States in effect imposes trust status on the Indian funds, our jurisdiction to review discretionary acts of the Secretaries of the Interior and of the Treasury in administering the trust is broad enough to cover the types of claims made here. See United States v. Seminole Nation, 173 F.Supp. 784, 789-90, 146 Ct.Cl. 171, 179-80 (1959); § 24 of the Indian Claims Commission Act, 60 Stat. 1049, 1055, 28 U.S.C. § 1505.

Test plaintiff Southern Ute Tribe is (or was during the relevant period) the beneficial owner of two judgment fund accounts, a proceeds of labor account,² a fourth principal account and five interest accounts held in the Treasury. The balances in the accounts at times totaled several million dollars. Even larger amounts were held in the accounts of the Consolidated Ute Tribes, represented here by the Southern Utes. The Hoopa Valley Tribe was the owner of a proceeds of labor account, the balance of which never fell below $1,000,000 from July 1964 to early 1970, and which at times held as much as $3,000,000, and an interest account to which interest on the proceeds of labor account was credited.

When Congress, in the exercise of its power over the Indians, determined by statute and by treaty to hold funds due the tribes in trust rather than immediately distributing them to the Indians, it also developed a series of investment policies for those funds. We are not faced here with a claim that Congress breached its trust duties under the Constitution or treaties. See Menominee Tribe of Indians v. United States, 101 Ct.Cl. 10, 21 (1944); compare Navajo Tribe of Indians v. United States, No. 256-69 (Ct.Cl., filed May 28, 1969) (alleged violation of Fifth Amendment in statutory provision for lower rate of interest on Indian funds than on other trust funds). Rather, plaintiffs urge that the Bureau of Indian Affairs has not properly used the tools Congress provided in order to meet the Government's fiduciary obligation.

The statutory scheme is that Indian trust funds deposited in the Treasury are to earn interest at the rate provided in the appropriate treaty or appropriations bill, and that if no interest rate is specified, the funds are to earn four percent simple interest per year. 25 U.S.C. §§ 161a, 161b (1970). In Menominee Tribe of Indians v. United States, 97 Ct.Cl. 158, 163-65 (1942), the court held that this provision prohibited the Treasury from paying interest on the interest earned by funds on deposit. Cf. Peoria Tribe of Indians v. United States, 390 U.S. 468, 473 n. 6, 88 S.Ct. 1137, 20 L.Ed.2d 39 (1968). Accordingly, the various interest funds owned by plaintiffs, when held in the Treasury, are totally unproductive. Defendant has in fact paid four percent simple interest on plaintiffs' other funds,³ and if this were the limit of the Government's power, plaintiffs' claim, which does not attack the statutes, would have to fail.

However, holding the money in the Treasury is only one of defendant's statutory alternatives. Until 1880, tribal funds, rather than being deposited in the Treasury, were required by law to be invested, usually at a minimum rate of return of 5%. See Act of January 9, 1837, ch. 1, 5 Stat. 135, R.S. § 2096; Act of September 11, 1841, ch. 25, 5 Stat. 465, R.S. § 3659. Because of defaults on some bonds in which the Secretary of Interior had invested and due to declining interest rates, Congress provided by the Act of April 1, 1880, ch. 41, 21 Stat. 70, for the holding of moneys in the Treasury and payment of interest as an alternative to investment when the Secretary of Interior "is of the opinion that the best interests of the Indians will be promoted by such deposits, in lieu of investments." See 10 Cong.Rec. 213-15, 720 (1880); S.Rep.No.186, 46th Cong., 2d Sess. 1-2 (1880); F. Cohen, Handbook of Federal Indian Law 105 n. 210 (1942). Interest on Indian trust funds, where no rate was specified by the law or treaty setting up the fund, was set at four percent by the Act of Feb. 12, 1929, ch. 178, 45 Stat. 1164. In 1918, Congress clarified and limited the Secretary's power to invest rather than hold Indian funds by providing that the Secretary could withdraw Indian funds from the Treasury and place them in banks where such banks paid a higher rate of interest than the Treasury was obligated to give,⁴ and he could also invest the funds "for the best interest of the Indians" in "any public-debt obligations of the United States and in any bonds, notes, or other obligations which are unconditionally guaranteed as to both interest and principal by the United States."⁵ Act of May 25, 1918, ch. 86, § 28, 40 Stat. 591, as amended by Act of June 24, 1938, ch. 648, § 1, 52 Stat. 1037, codified at 25 U.S.C. § 162a (1970).

It is therefore legally possible, depending on the state of the market, for the Secretary, by investing rather than holding Indian funds, to provide the Indians with more than 4 percent simple interest. Because the investments are required by statute to be either heavily collateralized (in the case of bank deposits) or guaranteed by the Government, safety is not an issue. Moreover, because of the existence of a secondary market in many of the permitted investments (e. g. Treasury bills, Federal Home Loan Bank Board notes, Federal Intermediate Credit Bank notes, etc.), sudden requirements for cash do not present major obstacles to these types of investments.⁶ The four percent attainable by retaining the funds in the Treasury is, as another court has stated, a floor rather than a ceiling. Manchester Band of Pomo Indians, Inc. v. United States, 363 F.Supp. 1238, 1243-44 (N.D. Cal.1973).

The fiduciary duty which the United States undertook with respect to these funds includes the "obligation to maximize the trust income by prudent investment," and the trustee has the burden of proof to justify less than a maximum return. See Blankenship v. Boyle, 329 F.Supp. 1089, 1096 (D.D.C. 1971). See also Restatement of Trusts 2d § 181 (1959). A corollary duty is the responsibility to keep informed so that when a previously proper investment becomes improper, perhaps because of the opportunity for better (and equally safe) investment elsewhere, funds can be reinvested. While the trustee has a reasonable time in which to make the initial investment or to reinvest, he becomes liable for a breach of trust if that reasonable time is exceeded. Restatement of Trusts 2d §§ 231 and comm. b, 181...