Fletcher v. United States

Decision Date24 February 2022
Docket Number2021-1625
Citation26 F.4th 1314
Parties William FLETCHER, Tara Damron, Richard Longsinger, Kathryn Redcorn, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee
CourtU.S. Court of Appeals — Federal Circuit

Jason Aamodt, Indian & Environmental Law Group, Tulsa, OK, argued for plaintiffs-appellants.

Brian C. Toth, Environment and Natural Resources Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Mary Gabrielle Sprague, Jean E. Williams.

Before Prost, Taranto, and Chen, Circuit Judges.

Chen, Circuit Judge.

Plaintiffs William Fletcher, Tara Damron, Richard Longsinger, and Kathryn Redcorn, individual holders of Osage headrights, filed suit against the United States in the Court of Federal Claims (Claims Court) seeking damages resulting from breach of fiduciary duties relating to royalties from the Osage mineral estate. Fletcher v. United States , 151 Fed. Cl. 487 (2020) ( Claims Court Decision ). Because the Claims Court incorrectly concluded that the plaintiffs had no standing and had failed to identify a source of money-mandating obligation as required under the Tucker Act, we reverse the dismissal of the complaint. We also vacate the Claims Court's decision on the availability of a damages accounting and the striking of declarations.

BACKGROUND

Congress established a reservation for the Osage tribe in Oklahoma Territory in 1872, which, years later, was found to have "mammoth reserves of oil and gas." Fletcher v. United States , 730 F.3d 1206, 1207 (10th Cir. 2013) ( Fletcher 2013 ). At one point, Osage County would become "one of the largest oil producing counties in the United States." Osage Tribe of Indians of Okla. v. United States , 72 Fed. Cl. 629, 648 (2006) ( Osage 2006 ). In 1906, after the discovery, Congress passed legislation that severed the subsurface mineral estate and placed it into trust with the federal government as trustee. Act for the Division of the Lands and Funds of the Osage Indians in Oklahoma Territory, and for Other Purposes, Pub. L. No. 59-321, 34 Stat. 539 (1906) (1906 Act); see Fletcher v. United States , 854 F.3d 1201, 1203 (10th Cir. 2017) ( Fletcher 2017 ); Osage Tribe of Indians of Okla. v. United States , 68 Fed. Cl. 322, 323 (2005) ( Osage 2005 ).

With the 1906 Act, Congress reserved the mineral estate to the tribe, to be leased with the approval and under the regulations of the Secretary of the Interior. 1906 Act § 3. It also directed the Secretary to hold the royalties generated from the mineral estate in a trust fund and to distribute the funds, quarterly on a pro rata basis, to tribal members listed on an approved membership roll created pursuant to the 1906 Act. 1906 Act § 4. Before distribution, a small portion of the royalty funds could be deducted and retained by the tribe for tribal operations. Id. ; see Fletcher 2013 , 730 F.3d at 1207–09.

The right to receive a distribution of the royalties is referred to as a "headright." Originally, there were 2,229 headright owners, but, over the years, the original headrights have fractionalized through transfers to heirs and devisees, resulting in many more headright owners. Headrights were transferrable to non-Osage persons and entities until 1978, when Congress "placed strict limits on the transfers of headrights to non-Osages." Fletcher v. United States , 153 F. Supp. 3d 1354, 1370 n.16 (N.D. Okla. 2015) ( Fletcher 2015 ). Of the four Osage headright-owner plaintiffs, three are citizens of the Osage tribe and the fourth is a citizen of the Ponca tribe.

A. Osage Tribe Litigation in the Claims Court

The present litigation is preceded by two other related litigations—one by the Osage tribe and the other by individual headright owners including the same lead plaintiff in the present case.

The first litigation involved two consolidated suits in the Claims Court, filed in 1999 and 2000 by the Osage tribe on allegations that the federal government violated its duty as trustee of the mineral estate or of the trust fund account (collectively, the Osage Tribe litigation).1 Osage 2006 , 72 Fed. Cl. at 631 n.1. At one point, the Claims Court denied the government's motion to dismiss based on a lack of standing. The government's theory was that only individual headright owners suffered injury from any mismanagement of trust funds because the funds were ultimately distributed to the individuals. Osage Nation and/or Tribe of Indians of Okla. v. United States , 57 Fed. Cl. 392, 394 (2003) ( Osage 2003 ). The Claims Court disagreed for the reason that the tribe was the "direct trust beneficiary" of the "tribal trust fund," relying on facts such as the funds sit in the tribal trust fund account for a calendar quarter, the tribe has an interest in the funds when sitting in the account, and a small portion of the funds is not distributed to individual headright owners but instead retained for tribal operations. Id. at 395. The Claims Court also relied on a distinction between mismanagement that occurs while the funds are in the tribal trust fund versus mismanagement "at the point of distribution of the funds to the individual headright holders." Id. Because the alleged mismanagement underlying the breach of fiduciary duty claim was "described as taking place when the funds were within the tribal trust fund," the court found the tribe had a sufficient interest in and a claim to those funds to support standing. Id.

In a denial of a second motion to dismiss, for lack of subject matter jurisdiction under the Tucker Act and the Indian Tucker Act, the Claims Court held that the plain language of Section 4 of the 1906 Act establishes money-mandating fiduciary duties owed by the government to the tribe. Osage 2005 , 68 Fed. Cl. at 327, 330, 333.

After a ten-day trial in 2006, the Claims Court found the government liable for breaching its fiduciary duties by failing to collect the full amount of royalties and failing to invest the royalty revenue. Osage 2006 , 72 Fed. Cl. at 632–35, 671. In 2008, with litigation still ongoing, a group of individual Osage headright owners (not any of the present plaintiffs) attempted to intervene. Osage Tribe of Indians of Okla. v. United States , 85 Fed. Cl. 162 (2008) ( Osage 2008 ). The Claims Court denied the motion to intervene partly because, in its view, the individuals had no legal interest in the dispute. They were not a party to the trust relationship, which the court held "exists exclusively between the Tribe and [the government]." Id. at 170 n.6, 171–72. To the extent the individuals were arguing they were "entitled to damages as a result of [the government's] breach of fiduciary duties owed directly to them, rather than entitlement to damages as the ultimate payees of any judgment rendered," the Claims Court viewed such argument to be precluded by the law of the case. Id. at 170 n.6. Accordingly, the court did not analyze whether the individuals had their own trust relationship with the government under the 1906 Act.

The tribe ultimately settled its claims with the United States for $380 million. J.A. 127. The settlement agreement stated that the tribe, "on behalf of itself and the [h]eadright [h]olders," waived any claim relating to the tribe's trust assets or resources—including the mineral estate and tribal trust account—that was based on violations occurring before September 30, 2011. J.A. 130–32. The agreement also waived "all claims asserted, or that could have been asserted by the Osage Tribe in the [Claims Court] Action." J.A. 130.

B. Individual Headright Owners' Litigation in the Tenth Circuit

The other litigation was filed by individual headright owners in the Northern District of Oklahoma in 2002 (the Fletcher litigation). The plaintiffs included the same lead plaintiff in this case. The focus of the claims changed over time. Initially, plaintiffs' claims, asserted under the Administrative Procedure Act (APA), related to tribal voting and election rights being tied to headright ownership and the alienation of headrights to non-members of the Osage tribe. Fletcher v. United States , 160 F. App'x 792, 793 (10th Cir. 2005). A 2006 amendment to the complaint added an APA claim based on a breach of trust duties for failure to account for the trust funds. Fletcher v. United States , 801 F. App'x 640, 642 (10th Cir. 2020). By 2013, the failure-to-account claim was the only remaining count, when plaintiffs appealed its dismissal to the Tenth Circuit. Fletcher 2013 , 730 F.3d at 1208.

The single legal question on appeal was whether Osage headright holders possessed a legal right to seek an accounting of the trust fund from the Secretary of the Interior. Id. The Tenth Circuit held that the individual headright owners did. Writing for the court, now-Justice Gorsuch noted that the 1906 Act "clearly creates a trust relationship—and not just a trust relationship between the federal government and the Osage Nation, but also between the federal government and the individual Osage headright owners." Id. at 1209. The language of the 1906 Act requires the government to collect the royalties and place them "to the credit of" each individual headright owner and to disburse them to each individual headright owner on a quarterly basis, with interest. Id. (citing 1906 Act § 4(1)(2), 34 Stat. at 544). Therefore, the 1906 Act "imposes an obligation" on the government "to distribute funds to individual headright owners in a timely (quarterly) and proper (pro rata, with interest) manner." Id.

The Tenth Circuit conducted additional analysis to find that, attendant to the trust relationship between the government and individual headright owners, the government has a duty under other statutes to account to the individuals for the daily and annual balances of money held in trust. Id. at 1209–12 (discussing 25 U.S.C. § 4011(a) ). As part of this analysis, the Tenth Circuit emphasized that "the trust funds at issue in this case—collected and disbursed under...

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6 cases
  • Birdbear v. United States
    • United States
    • Court of Federal Claims
    • September 16, 2022
    ...a fundamental incident the right of an injured beneficiary to sue the trustee for damages resulting from a breach of the trust.'" Fletcher, 26 F.4th at 1325 (quoting II, 463 U.S. at 226). B. Statutes and Regulations Governing Mineral Leasing on Indian Lands 1. The Indian Long-Term Leasing A......
  • Birdbear v. United States
    • United States
    • Court of Federal Claims
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    ...a fundamental incident the right of an injured beneficiary to sue the trustee for damages resulting from a breach of the trust.'" Fletcher, 26 F.4th at 1325 (quoting II, 463 U.S. at 226). B. Statutes and Regulations Governing Mineral Leasing on Indian Lands 1. The Indian Long-Term Leasing A......
  • Gilham v. United States
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    ......The Federal. Circuit has described the Navajo II test as the. two-part test used "[i]n the context of breach of duties. to American Indians," even when individual Indians bring. breach-of-trust claims under the Tucker Act. Fletcher v. United States, 26 F.4th 1314, 1324-25 (Fed. Cir. 2022). (applying the Navajo II test to find Tucker Act. jurisdiction over a group of individual Indians'. breach-of-trust claim while declining to address whether the. group of plaintiffs qualified as an ......
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    • January 23, 2023
    ......The Federal. Circuit has described the Navajo II test as the. two-part test used "[i]n the context of breach of duties. to American Indians," even when individual Indians bring. breach-of-trust claims under the Tucker Act. Fletcher v. United States, 26 F.4th 1314, 1324-25 (Fed. Cir. 2022). (applying the Navajo II test to find Tucker Act. jurisdiction over a group of individual Indians'. breach-of-trust claim while declining to address whether the. group of plaintiffs qualified as an ......
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