Cobell v. Salazar

• Decision Date: 22 May 2012
• Docket Number: No. 11–5205.,11–5205.
• Citation: 400 U.S.App.D.C. 428,82 Fed.R.Serv.3d 758,679 F.3d 909
• Parties: Elouise Pepion COBELL, et al., Appellees Kimberly Craven, Appellant v. Kenneth Lee SALAZAR, Secretary of the Interior, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

679 F.3d 909

400 U.S.App.D.C. 428

82 Fed.R.Serv.3d 758

Elouise Pepion COBELL, et al., AppelleesKimberly Craven, Appellant

v.Kenneth Lee SALAZAR, Secretary of the Interior, et al., Appellees.

No. 11–5205.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 16, 2012.

Decided May 22, 2012.

Appeal from the United States District Court for the District of Columbia (No. 1:96–cv–01285).

Theodore H. Frank argued the cause and filed the briefs for appellant.

Anand V. Ramana was on the brief for amicus curiae Competitive Enterprise Institute in support of appellant.

Thomas M. Bondy, Attorney, U.S. Department of Justice, argued the cause for federal appellees. With him on the briefs were Tony West, Assistant Attorney General, Ronald C. Machen, Jr., U.S. Attorney, and Adam C. Jed and Brian P. Goldman, Attorneys. R. Craig Lawrence, Assistant U.S. Attorney, entered an appearance.

Adam H. Charnes argued the cause for appellees Elouise Pepion Cobell, et al. With him on the briefs were David C. Smith, Richard D. Dietz, Michael Alexander Pearl, Keith M. Harper, Dennis M. Gingold, William E. Dorris, and Elliott Levitas.

Heidi A. Drobnick was on the brief for amicus curiae Indian Land Tenure Foundation in support of appellees.

Before: ROGERS, TATEL and BROWN, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

This is an appeal from the approval of a class action settlement agreement related to the Secretary of the Interior's breach of duty to account for funds held in trust for individual Native Americans. Class member Kimberly Craven challenges the fairness of the settlement, contending principally that an impermissible intra-class conflict permeates the scheme to compensate class members for surrendering their established right to injunctive relief and that this conflict undermines the commonality, cohesiveness, and fairness required by Federal Rule of Civil Procedure 23 and due process. The record, however, fails to confirm either the existence of the purported intra-class conflict or a violation of due process. Rather, the record confirms that the two plaintiff classes possess the necessary commonality and adequate representationto warrant certification, and that the district court, therefore, did not abuse its discretion in certifying the two plaintiff classes in the settlement or in approving the terms of the settlement as fair, reasonable, and adequate pursuant to Rule 23(e). Accordingly, we affirm the judgment approving the class settlement agreement.

I.

In 1996, Eloise Cobell and four other Native Americans filed a class action alleging a breach of fiduciary duties by the Secretary in managing the class members' “Individual Indian Money” (“IIM”) trust accounts. “The bulk of the trust assets ‘are the proceeds of various transactions in land allotted to individual Indians under the General Allotment Act of 1887, known as the Dawes Act.’ ” Cobell v. Salazar (“ Cobell XXII ”), 573 F.3d 808, 809 (D.C.Cir.2009) (citation omitted). The class, certified pursuant to Federal Rule of Civil Procedure 23(b)(1)(A) and (b)(2), sought injunctive and declaratory relief in the form of an historical accounting. Id.¹ Their right to an historical accounting arose under the American Indian Trust Fund Management Reform Act of 1994 (“the 1994 Act”), 25 U.S.C. § 162a et seq. (2006); id. §§ 4001–4061. Cobell XXII, 573 F.3d at 810. The Act did not specify, however, the proper scope of such an accounting or the methodology by which it could be accomplished. Id. at 813;Cobell XX, 532 F.Supp.2d at 42. During the initial stages of the litigation, the Secretary proposed several plans for accomplishing an accounting. See Cobell XX, 532 F.Supp.2d at 47–56. For example, in a 2002 report to Congress, the Secretary described plans “to conduct a transaction-by-transaction reconciliation of all funds in the IIM accounts through December 31, 2000,” and to provide historical statements of account for each account. Id. at 48. The estimated cost was $2.425 billion. Id. Congress “request[ed] that the Secretary ‘promptly consider ways to reduce the costs and the length of time necessary for an accounting ... [including] alternative accounting methods.’ ” Id. The Secretary then developed a plan in 2003, which was to rely on statistical sampling and use only limited transaction-by-transaction reconciliation, at an estimated cost of $335 million. Id. at 48–49. “Between 2003–2007, however, not only did Interior receive only $127.1 million in appropriations for its IIM historical accounting work, but it also discovered that the accounting process it had envisioned would be both more costly and more time-consuming than it had anticipated.” Id. at 56. Consequently, as the litigation entered its eleventh year, the issue of the proper scope and methodology of an historical accounting had yet to be resolved. In October 2007, the district court held a trial to address these and other questions.

At trial, the Secretary offered evidence regarding the latest plan (“the 2007 Plan”) for accomplishing an historical accounting in compliance with the 1994 Act. The 2007 Plan relied on statistical sampling for account and transaction reconciliation to an even greater extent than the 2003 Plan. In addition, the total number of transactions to be reconciled was significantly reduced, and the provision of asset statements to account beneficiaries was eliminated. See id. at 56–58. The Secretary's explanation for these changes to the scope and methodology of the proposed accounting echoed those offered in 2003 for tailoring the 2002 proposal: “Original cost and time estimateswere off by several multiples, and Congress failed to appropriate the funds Interior had requested and expected.” Id. at 58. The 2003 Plan was now estimated to cost $1.675 billion to complete, with an average cost of $3,000 to $3,500 for reconciliation of a single transaction. Id. In contrast, the Secretary estimated completion of the 2007 Plan would cost $271 million. Id. at 81. Despite the reduced ambitions of the 2007 Plan, the average cost of the accounting for a single transaction still would likely exceed the average value of that transaction, id. at 92, and, more significantly, the 2007 Plan would “not provide beneficiaries with information about the assets from which IIM funds ha[d] been derived,” id. at 98.

Given this state of affairs and the likelihood of many more years of litigation, the parties entered into settlement negotiations in the summer of 2009. On December 7, 2009, the parties entered into a class settlement agreement. See Class Action Settlement Agreement, Ex. 2 to Joint Mot. for Prelim. Approval of Settlement, Cobell v. Salazar (No. 1:96–cv–01285) (Dec. 10, 2010). We describe its basic parts:

First, an amended complaint would be filed setting forth two classes:

(1) the Historical Accounting Class, consisting of individual beneficiaries who had an IIM account (with at least one cash transaction) between October 25, 1994 (the date on which the 1994 Act became law) and September 30, 2009 (the “record date” of the parties' agreement),²id. § A ¶ 16, and

(2) the Trust Administration Class, consisting of the beneficiaries ³ who had IIM accounts between 1985 and the date of the proposed amended complaint as well as individuals who, as of September 30, 2009, “had a recorded or other demonstrable ownership interest in land held in trust or restricted status, regardless of the existence of an IIM [a]ccount and regardless of the proceeds, if any, generated from the [l]and,” id. § A ¶ 35.

The settlement envisioned that the Historical Accounting Class would be certified pursuant to Rule 23(b)(1)(A) and 23(b)(2), in the alternative, with no individual right to opt out of the class; the Trust Administration Class would be certified pursuant to Rule 23(b)(3) with an opt-out right. Id. § B ¶ 4.b.

Second, the Secretaries of Interior and Treasury would deposit $1.412 billion into a settlement fund. Id. § E ¶ 2.a. From this fund, each member of the Historical Accounting Class would receive $1,000, id. § E ¶ 3.a, in exchange for the release of the Secretary of Interior's “obligation to perform a historical accounting of [the class member's] IIM Account or any individual Indian trust asset,” id. § I ¶ 1. The Trust Administration Class members would receive a baseline payment of $500 plus an additional pro rata share of the remaining settlement funds in accordance with an agreed-upon compensation formula. Id. § E ¶ 4.b. The Trust Administration Class payment would release the Secretary from liability arising out of any past mismanagement of IIM accounts and trust properties. The scope of that release would not be unlimited: for example, claims for payment of existing account balances,breach-of-trust claims arising after September 30, 2009, and water-rights claims would fall outside of its scope. Id. § I ¶¶ 2–3.

Third, in addition to the class and compensation structure, the proposed settlement provided for:

(1) establishment of a $1.9 billion Trust Land Consolidation Fund for the Secretary to acquire fractional interests in trust lands, id. § A ¶ 36, § F ¶ 2, § G ¶ 2.c;

(2) establishment of an Indian Education Scholarship Fund, id. § G ¶ 1;

(3) potential tax-exempt status, at the election of Congress, for funds received by the class members, see id. § H;

(4) reasonable attorneys' fees, expenses, and costs for class counsel, to be awarded at the discretion of the district court, id. § J; and,

(5) incentive payments for the class representatives, to be awarded at the discretion of the district court, id. § K.

The proposal also stated that the class settlement agreement was contingent upon the enactment of legislation by Congress to authorize certain aspects of the settlement. Id. § B ¶ 1.

In 2010, Congress enacted the Claims Resolution Act of 2010 (“the CRA”), Pub.L. No. 111–291, 124 Stat. 3064 (Dec. 8, 2010), which “authorized, ratified, and...