Cobell v. Kempthorne

• Decision Date: 07 August 2008
• Docket Number: Civil Action No. 96-1285 (JR).
• Citation: 569 F.Supp.2d 223
• Parties: Elouise Pepion COBELL, et al., Plaintiffs, v. Dirk KEMPTHORNE, Secretary of the Interior, et al., Defendants.
• Court: U.S. District Court — District of Columbia

Page 223

569 F.Supp.2d 223

Elouise Pepion COBELL, et al., Plaintiffs, v. Dirk KEMPTHORNE, Secretary of the Interior, et al., Defendants.

Civil Action No. 96-1285 (JR).

United States District Court, District of Columbia.

August 7, 2008.

Washington, DC, Elliott H. Levitas, Kilpatrick Stockton, L.L.P., Atlanta, GA, Keith M. Harper, Justin Guilder, Kilpatrick Stockton, LLP, Richard A. Guest, Native American Rights Fund, Mark Kester Brown, Dennis M. Gingold, Washington, DC, for Plaintiffs.

Earl Old Person, Browning, MT, pro se.

Cynthia Lisette Alexander, J. Christopher Kohn, John Thomas Stemplewicz, Sandra Peavler Spooner, U.S. Department of Justice, Robert Craig Lawrence, U.S. Attorney's Office, Washington, DC, Jonathan Brian New, U.S. Department of Justice, New York, NY, for Defendant.

MEMORANDUM

JAMES ROBERTSON, District Judge.

In January 2008, I found that the government had not succeeded in providing the accounting mandated by the Indian Trust Fund Management Reform Act, and that the record demonstrated the impossibility of rendering such an accounting. Cobell v. Kempthorne, 532 F.Supp.2d 37 (D.D.C.2008) (Cobell XX). On the basis of that ruling, plaintiffs ask for equitable relief in the nature of restitution, seeking the return of funds that have been received into the IIM trust in the years since 1887 but cannot now be proven to have been disbursed or credited to IIM account holders, plus an amount representing the benefit the government has assertedly enjoyed from having the use of those funds. See [Dkt. 3515]. An evidentiary proceeding was convened on June 9, 2008, for the purpose of considering whether such relief was warranted, and, if so, determining its dollar amount.

Plaintiffs' claims for withheld funds and for an amount representing "benefit to the government" raise significant jurisdictional and other legal issues. Those issues were briefed by the parties before the June trial, see Plaintiffs' Memorandum in Support of Equitable Restitution and Disgorgement, [Dkt. 3515]; Defendants' Response to Plaintiffs' Memorandum in Support of Equitable Restitution and Disgorgement, [Dkt. 3519], but I deferred ruling on them in the belief that they would be illuminated by evidence adduced at the trial. [Dkt. 3526]. At the trial, the government sought to explain the difference between IIM trust receipts and IIM trust postings noted in my January 2008 opinion, see 532 F.Supp.2d at 85-86, and both sides presented models for estimating the amount of money withheld from, or not disbursed to, IIM account holders over the years. Evaluation of those models, and of the plaintiffs' legal theories for recovery, is the principal focus of this memorandum.

Although the case no longer directly concerns the accounting question that dominated the first twelve years of its existence, the evaluation of the plaintiffs' legal theories for recovery is necessarily influenced by what we have learned from the government's failed effort to produce an accounting and from the many round trips the case has taken to the Court of Appeals. It is clear now that this Court has broad equitable authority to deal with a century or more of trustee nonfeasance and to fashion appropriate remedies, see Cobell v. Norton, 240 F.3d 1081, 1108-10 (D.C.Cir. 2001) (Cobell VI), but it is also clear that that authority is constrained by traditional doctrinal limits on federal courts that apply in suits against the government, including sovereign immunity and separation of powers. See Cobell v. Norton, 392 F.3d 461, 473 (D.C.Cir.2004) (Cobell XIII). It is clear that the duties of the trustee and the principles of equity that govern failures to account are derived from statutes as informed by common law principles of trust, see Cobell VI, 240 F.3d at 1098-1102, but it is also clear that those statutory and common law principles are tempered by the unique nature of the trust and of the trustee. See Cobell v. Norton, 428 F.3d 1070, 1075-76 (D.C.Cir.2005) (Cobell XVII). Accordingly, methods that might be unacceptable in a typical trust case, such as statistical sampling, are available here, where I am instructed to strike a more forgiving "balance between exactitude and cost." Id. at 1076; see also id. at 1077-79 (discussing statistical sampling). In these uncharted waters, where the trust is of enormous scope, the trustee of unusual character, and the data affected with such great uncertainty, the law of trusts is a sort of magnetic compass; it cannot be expected to point to due north, or to "map directly" onto this context. Id. at 1078.

One useful if not very precise pointer provided by case law is that a trustee may not hide behind obscurity that he himself has created. See, e.g., Rainbolt v. Johnson, 669 F.2d 767, 769 (D.C.Cir. 1981) ("Under established principles of trust law, if the former trustee has not kept adequate accounts, the benefit of the doubt is to be given to the beneficiary."); GEORGE GLEASON BOGERT, ET AL., THE LAW OF TRUSTS AND TRUSTEES § 962 (2007) ("As to a trustee who fails to keep proper records of his trust it is usually stated that, `all presumptions are against him' on his accounting, or that `all doubts on the accounting are resolved against him.'"). Thus, a consequence of the government's failure to account is that evidentiary presumptions run in favor of the plaintiffs.

But even this principle, like the trust duties themselves, requires compass correction in the context of this suit. The rules that identify and govern a breach of the accounting duty for a simple, 25-year trust with a single beneficiary cannot be applied, unaltered, to a 121-year old perpetual trust, managed by civil servants, with rapidly multiplying beneficiaries and a variety of ever-changing assets. Equity seeks "to do justice to all parties," Bollinger & Boyd Barge Serv., Inc. v. The Motor Vessel, Captain Claude Bass, 576 F.2d 595, 598 (5th Cir.1978) (emphasis added)— "its orders are adapted to the exigencies of the case," Taylor v. Sterrett, 499 F.2d 367, 368 (5th Cir.1974), and it seeks to make accurate evaluations of difficult evidence, not to provide "windfalls" for victims or punishment for wrongdoers. See Bollinger & Boyd, 576 F.2d at 598. The application of familiar equitable principles will have to be made fairly to fit the special character of this case and this trust.

My conclusions, after attempting to apply a suitably adjusted set of equitable principles to the facts of this case, are that plaintiffs have properly asserted a claim for restitution; that this Court has both the jurisdiction and the power to adjudicate that claim; and that the evidence supports an award in the amount of $455,600,000, a number that is within the range of the government's own admitted "uncertainty" about the amount necessary to restore the proper balance to the IIM trust. I have rejected the plaintiffs' claim of entitlement to an additional sum representing "benefit to the government."

This opinion—indeed, this litigation— neither deals with nor resolves any claims that IIM account holders may have for damages against the government.¹ And it leaves for another day the question of how and to whom the award should be distributed.

I. Starting Point

Two important exhibits received at the October 2007 trial, AR-171 and DX-365, appeared to show that only 77 percent of the dollars collected on behalf of individual Indians over the years had actually been posted to IIM accounts, and that, over those years, the difference amounted to a shortfall of some $3 billion. See Cobell XX, 532 F.Supp.2d at 85-86. I did not believe this to be the intended import of these exhibits, and I said so, noting the government's mention of the role of lease deposits and other non-individual monies in the system, id. at 86, but also noting that the parties had paid only "desultory" attention to the "throughput" question I had posed at the beginning of the trial. Id. at 82. The government made it clear at the outset of the June 2008 trial that indeed it had not intended to communicate the existence of a $3 billion shortfall.

The government's task of estimating and explaining the actual shortfall was complicated, however, by the fact that it could not produce an individualized accounting and by the paucity of existing aggregate data about the IIM trust. Tr. 500:19-501:16 (Herman) (acknowledging the Court's request for an explanation of the shortfall between receipts and postings, and attributing the difficulty to the lack of aggregate data). The government's explanation at the June 2008 trial was, essentially, that receipts recorded in the IIM system include monies not intended for IIM accounts, but the government also conceded that, without transaction-bytransaction accounting, there is essentially no way to distinguish IIM transactions from non-individual transactions. Id. There is some historical data regarding total receipts and disbursements in the early years of the trust, but "for the most part aggregate receipt and disbursement records on IIM weren't kept." Tr. 784:3-5 (Angel). For many years during the early period of the trust, there is no receipt and disbursement data at all. See DX-461.

Moreover, considerable evidence has been collected over the long life of this litigation, and more was adduced at the June 2008 trial, detailing the various ways in which trust systems purporting to contain receipt and disbursement data have been and still are unreliable, from qualified audits, Tr. 392:10 et seq. (Pallais), to a 73-page compendium of critiques and negative comments by politicians and auditors, each one hyperlinked to an historical document. PX-65.² There was also the out-ofbalance condition between Interior and Treasury records, see Cobell XX, 532 F.Supp.2d at 74-75, which lent credence to the possibility that substantial funds had gone missing over the life of the trust.

II. The "IIM system"

The framework for the government's presentation was its description of how...