Fletcher v. United States, Case No. 02-CV-427-GKF-PJC

• Decision Date: 30 December 2015
• Docket Number: Case No. 02-CV-427-GKF-PJC
• Citation: 153 F.Supp.3d 1354
• Parties: William S. Fletcher, et al., Plaintiffs, v. The United States of America, et al., Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

153 F.Supp.3d 1354

William S. Fletcher, et al., Plaintiffs,

v.The United States of America, et al., Defendants.

Case No. 02-CV-427-GKF-PJC

United States District Court, N.D. Oklahoma.

Signed December 30, 2015

Cathryn Dawn McClanahan, Cheryl L. Baber, Jeffrey Andrew Gallant, Thomas Scott Woodward, United States Attorney's Office, Tulsa, OK, John H. Martin, U.S. Department of Justice, Denver, CO, Joseph Hosu Kim, U.S. Department of Justice, Washington, DC, for Defendant.

OPINION AND ORDER

GREGORY K. FRIZZELL

, CHIEF JUDGE, UNITED STATES DISTRICT COURT

In the early twentieth century, large quantities of oil and gas were discovered on lands belonging to the Osage Nation. Shortly thereafter, Congress enacted the Osage Allotment Act of 1906, see Act of June 28, 1906, Pub. L. No. 59–321, 34 Stat. 539 (“Osage Allotment Act” or “1906 Act”), which severed the mineral estate underlying Osage lands from the surface estate, placed the mineral estate in trust, and directed the Secretary of Interior to collect and distribute royalty income every quarter to persons on the 1906 tribal membership roll. The right to receive such royalty payments is called a “headright.”

The sole remaining claim in this long-running case concerns the federal government's duty to account to individual Osage headright owners. Certified as a class in 2014, plaintiffs are Osage Indians who receive headright payments pursuant to the 1906 Act. They brought this claim pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et seq .,

against the United States of America, the Department of Interior, Sally Jewell in her official capacity as Secretary of the Interior, the Bureau of Indian Affairs, and Kevin Washburn in his official capacity as Assistant Secretary of the Interior–Indian Affairs (collectively, “the government”), seeking an accounting of tribal trust funds held on their behalf. In particular, plaintiffs request an accounting of the Osage tribal trust account—an account within the United States Treasury which holds Osage royalty income prior to its distribution to the headright owners. In response, the government maintains that the account at issue is held in trust for the Osage Nation only and that, as such, plaintiffs are not entitled to the accounting they seek. For the reasons stated in this Opinion and Order, the court holds that the plaintiffs are entitled to accounting of the Osage tribal trust account in accordance with the requirements set forth herein.

I. Background

“In 1872, Congress established a reservation for the Osage Nation in present day Oklahoma.” Osage Nation v. Irby , 597 F.3d 1117, 1120 (10th Cir.2010)

(citing Act of June 5, 1872, ch. 310, 17 Stat. 228). In 1904 and 1905, large quantities of oil and gas were discovered on the reservation. See Cohen's Handbook of Federal Indian Law § 4.07[1][d][ii], at 311 (Nell Jessup Newton et al., eds., 2005) [hereinafter, “Cohen's Handbook”]. To manage the Osages' newfound wealth, Congress enacted the Osage Allotment Act which, as previously mentioned, placed the mineral estate underlying Osage lands in trust, directed the Secretary of Interior to collect royalty income, and required the Secretary to distribute such income (with interest) to tribal members on a quarterly, pro rata basis. See 1906 Act, § 4.¹ The government's trusteeship over the Osage mineral estate was originally set to last twenty-five years, see 1906 Act §§ 3, 4, but has since been extended “in perpetuity,” see Pub. L. No. 95-496, § 2(a), 92 Stat. 1660 (1978).

As previously mentioned, the right to receive quarterly trust distributions is referred to as a “headright.” Taylor v. Tayrien , 51 F.2d 884, 886 (10th Cir.1931)

. Under the 1906 Act, there are 2,229 headrights—one for each person on the 1906 tribal membership roll. See

Big Eagle v. United States , 300 F.2d 765, 765 (Ct.Cl.1962) ; see also 1906 Act §§ 1, 4. Today, “[m]ost persons of Osage Indian ancestry own no headrights, and thus receive no tribal income. Some persons own more than one headright, or own fractional shares of headrights, and some headrights are owned by non-Osages.” Cohen's Handbook, supra , at 313. “This fractionalization is a result of succession to headrights by inheritance and devise. Succession by non-Indians is now severely limited, but during earlier periods there were fewer restrictions.” Id. at 313 n.873 (citation omitted).

Prior to distribution, royalty income collected under the 1906 Act is held in a U.S. Treasury account, titled the Osage tribal trust account. The tribal trust account “was established by the 1906 Act,” Osage Tribe of Indians of Okla. v. United States , 81 Fed.Cl. 340, 348 (2008)

, and is the means by which the government carries out its duties to collect, hold, and distribute funds pursuant thereto, [see Dkt. #1212-1, Administrative Record, p. 2]. Although some distributions from this account are made by direct check to headright owners, the vast majority are done via transfers to Individual Indian Money (“IIM”) accounts. An IIM account is “an interest bearing account for trust funds held by the Secretary that belong to a person who has an interest in trust assets.” 25 C.F.R. § 115.002. Unless restricted in some way, an account holder may freely withdraw funds from his or her IIM account. See id.

II. Procedural History

This case has a long and complicated history. Originally filed in 2002 as a dispute over the tribal voting rights of non-headright-owning Osage Indians [see Dkt. #1, p. 6], the case later evolved into an action over the government's allegedly wrongful distribution of Osage royalty income to non-Osages and its failure to account to the headright owners, [see Dkt. #985-1, pp. 27-31, 33]. Today, however, plaintiffs' only remaining claim is their request for an accounting.

Plaintiffs first asserted their accounting claim in 2006, as part of their First Amended Complaint. [See Dkt. #24, pp. 9, 11]. In May 2011, after litigating issues related to plaintiffs' other causes of action, the government moved to dismiss this claim along with, what was then, the plaintiffs' Third Amended Complaint.² [Dkt. #1126]. As to the accounting claim, the government argued that dismissal was warranted because (1) there was no trust relationship between the federal government and headright owners and (2) the statutes on which plaintiffs relied did not afford them the right to an accounting. [Id. at 8-12].

This court rejected the government's first argument, but accepted its second. As an initial matter, the court concluded that the 1906 Act created a limited trust relationship between the federal government and the Osage headright owners but that this relationship “differ[ed] from the trust relationship between the federal government and the Osage Nation.” [Dkt. #1162, p. 10 n.6]. Specifically, the court determined that the government's trust relationship with the Osage headright owners only took effect upon distribution and that, prior to distribution, royalty funds were held in trust for the Osage Nation only. [See id. at 10 n.6, 11, 13]. Based on this limited trust relationship, the court held that plaintiffs could not seek an accounting:

To establish that an agency was required to provide the plaintiffs with an accounting, plaintiffs must “identify a legal obligation imposed on Defendants to account for the funds held in trust.” Otoe – Missouria Tribe of Oklahoma v. Kempthorne , 2008 WL 5205191, *2 (W.D.Okla.2008)

.

In the Third Amended Complaint, plaintiffs allege they are entitled to an accounting pursuant to 25 U.S.C. §§ 162a and 4011. [Dkt. #985-1, p.26, ¶ 46]. By its explicit terms, Section 162a(a) applies “to the funds of the Osage Tribe of Indians, and the individual members thereof, only with respect to the deposit of such funds in banks.” None of the failures to account alleged by plaintiffs relate to the deposit of funds in banks. Rather, the alleged failures to properly manage and account for monies relate to distributions from the Osage Mineral Estate, not deposits....

Similarly, Section 4011 imposes a requirement to account only for funds “deposited or invested pursuant to section 162a.” No such funds are implicated in this lawsuit. Plaintiffs' allegations of mismanagement focus on distributions. Section 4011 does not impose an obligation upon the Federal Defendants to account to the plaintiffs.

Insofar as plaintiffs allege in Paragraph 59 of the Third Amended Complaint that the Federal Defendants bear certain accounting and administrative responsibilities pursuant to Section 4 of the 1906 Act and Section 162a(d), the Court addresses those alleged responsibilities.

Due to the nature of the trust relationship between the federal government and headright owners, plaintiffs' demands for an accounting or audit are misplaced. Headright owners receive quarterly payments in proportion to their fractional ownership of headrights. Plaintiffs do not allege the headright payment amounts have ever been miscalculated (as opposed to their claims that the headrights have been passed to improper individuals). Unlike the trust account held for the Osage tribe, there is no underlying trust account with a balance for headright owners to examine. Because headright owners do not have headright “accounts,” it is impossible for the Government to give them access to a daily balance of an account. Headright owners are simply paid a percentage of the funds from the tribal trust account at the end of each quarter. As previously discussed, the more complex trust responsibilities such as collecting royalty payments, investing proceeds, collecting interest, and calculating disbursement amounts are all part of the federal government's trust relationship with the Osage Nation, not with the individual headright owners. [Osage Nation v. United States , 57 Fed.Cl. 392, 395 (2003)

]. Simply put, the accounting obligations set forth in Section 162a(d) (e.g. trust fund balances, timely reconciliations, accurate cash balances, periodic statements to...