Jicarilla Apache Nation v. United States
| Decision Date | 24 June 2013 |
| Docket Number | No. 02-25L,02-25L |
| Parties | JICARILLA APACHE NATION, formerly JICARILLA APACHE TRIBE, Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Tribal trust case; Trial; Standard of review;
Cheyenne-Arapaho Tribes - statutes give
rise to fiduciary obligation to maximize trust
income by prudent investment; Breach of
trust - investment decisions;
Underinvestment - investing in short-term
investments/lack of diversification;
Liquidity; Pooling; Unauthorized
disbursements; Deposit lag; Negative
interest; Damages; Standard for damages for
breach of trust; Use of investment modeling
techniques; Evaluation of hypothetical
portfolios; Damages determined for period
of suit; No damages awarded for period from
1992 to present; Damages for breach of
trust; Damages for deposit lag.
OPINIONSteven D. Gordon, Holland & Knight, LLP, Washington, D.C., for plaintiff.
Stephen R. Terrell, Environmental and Natural Resources Division, United States Department of Justice, Washington, D.C., with whom was Assistant Attorney General Ignacia S. Moreno, for defendant.
This Indian trust case is before the court following an extensive trial in Washington, D.C. In this case, the Jicarilla Apache Nation (the Nation) seeks an accounting and to recover for monetary losses and damages relating to the government's alleged breach of fiduciary duties in mismanaging the Nation's trust assets and other funds. Specifically, the Nation alleges that the United States: (i) failed to invest Jicarilla's trust monies prudently so as to obtain an appropriate return; (ii) made certain unauthorized disbursements of Jicarilla's trust monies; (iii) took too long to deposit funds received for Jicarilla into interest-bearing trust accounts; and (iv) charged Jicarilla interest for covering overdrafts on Jicarilla's trust accounts that were caused by the United States.
For case management purposes, the court has broken this case into several tranches, the first of which covers the Nation's claims relating to the government's actions with respect to certain trust fund accounts from February 22, 1974, through September 30, 1992 (sometimes referred to as "the Andersen Period," for reasons described below), for which plaintiff seeks damages in excess of $100 million. For the reasons that follow, the court concludes that defendant, in fact, grossly mismanaged the Nation's funds during the period in question, thereby breaching its fiduciary obligations to the Nation, and entitling plaintiff to damages in the amount of $21,017,491.99.
Based upon the record, including the stipulation of facts, the court finds as follows:
A. Background Facts
The Nation is a federally-recognized Indian Tribe, organized under the Indian Reorganization Act of 1934, 48 Stat. 984 (1934) (). The Nation's first Constitution, approved by the Secretary of the Interior on August 4, 1937, preserved for it all powers conferred by section 16 of the Indian Reorganization Act of 1934, 48 Stat. 984. In 1968, the Nation revised its Constitution to specify that the "[t]he inherent powers of the Jicarilla Apache Tribe . . . shall vest in the tribal council," adding that the council "may enact ordinances to govern the development of tribal lands and other resources." Revised Constitution of the Jicarilla Apache Tribe, Art. XI, § 1. Among the other relevant provisions in that Constitution is one requiring the establishment of a Capital Reserve Fund, "into which there shall be deposited each year no less than fifteen percent (15%) of the total annual income for the preceding fiscal year." The Constitution gives the Tribal Council the responsibility for investing these funds.
The Nation occupies an approximately 900,000-acre reservation in New Mexico that was set aside by an 1887 Executive Order. This land contains timber and gravel, as well as oil and gas reserves, the development of which is governed by statutes administered by the Department of the Interior (Interior). See Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 135 (1982) (). Over 3,000 individuals live on the reservation, with the majority residing in the town of Dulce, New Mexico, near the Colorado border.
From February 22, 1974, through September 30, 1992, the Bureau of Indian Affairs (BIA) held funds in trust for Jicarilla in "proceeds of labor" (PL) and "judgment award" (JA) accounts.2 The BIA is responsible primarily for managing the aforementioned trusts. BIA maintains an office in Dulce (the BIA Jicarilla Agency), which, during the years in question, was the locus for these management activities. The BIA Jicarilla Agency is part of the BIA's Southwestern Region, formerly known as the Albuquerque Area Office.
B. The United States' Fiduciary Obligations to Manage the Nation's Trust Funds
"The United States' trust relationship with American Indian tribes includes a spectrum of obligations and responsibilities." Jicarilla Apache Nation v. United States, 100 Fed. Cl. 726, 731 (2011) (Jicarilla Apache II). In the first instance, these obligations and responsibilities originate in statute. But, once established, they may be reinforced by principles that flow from the general trust relationship that has existed between the United States and the Tribes for centuries. See United States v. White Mountain Apache Tribe, 537 U.S. 465, 475-77 (2003); United States v. Mitchell, 463 U.S. 206, 210, 228 (1983); Cheyenne-Arapaho Tribes of Indians of Okla. v. United States, 512 F.2d 1390, 1392-93 (Ct. Cl. 1975); Jicarilla Apache II, 100 Fed. Cl. at 732-38.
As part of this framework, Congress enacted various federal statutes that "define the contours of the United States' fiduciary responsibilities" with respect to its management of Indian trust assets and other tribal property. Mitchell, 463 U.S. at 224. The United States first adopted a policy of holding tribal funds in trust in 1820. That system of trusteeship and federal management of Indian funds evolved with the passage of various laws in the first half of the nineteenth century, directing the government to hold and manage Indian tribal funds in trust. See, e.g., Act of 1837, 5 Stat. 135 (1837); see also Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of the Indian Trust Fund, H.R. Rep. No. 102-499, at 6 (1992) (hereinafter, "Misplaced Trust"). As is true with other Tribes, the trust fund accounts at issue here are comprised mainly of money received through the sale or lease of reservation lands, and include proceeds from the sale of timber, gravel, oil, and gas. See also H.R. Rep. No. 103-778, at 9 (1994). They also include the proceeds of various judgments that have been awarded to the Tribes.3 The United States has held these funds in trust for the Nation since the late 1800s.
The BIA started its centralized investment program for tribal funds in mid-1966. On June 16, 1966, the Commissioner of Indian Affairs (the Commissioner) sent a memorandum to BIA officials, in which he noted that the 4-percent simple interest statutorily available to Tribes was "below rates that can be obtained on investments in securities in the current money market," adding that "[t]he difference between a five percent rate with interest payable semiannually, forexample, and the Treasury rate is $10.63 per thousand annually." The Commissioner recommended that BIA Area Offices solicit the views of the Tribes as to the investment of surplus trust fund cash being held by the United States Treasury (Treasury). He noted that "any investment program must be designed with built-in features to assure a high status of liquidity, thus providing ready cash when required either for emergency needs or to take advantage of possible extraordinary reinvestment opportunities." But, he anticipated that, with planning, these needs could be met by staggering the Tribes' investments. The Commissioner provided similar advice in memoranda he issued on January 2, 1968, and May 22, 1969, respectively. In 1971, the same advice - urging local BIA officials to solicit Tribes as to their views on investment, but noting the need to maintain liquidity - was incorporated into a formal BIA investment policy that remained in effect through June 6, 2002.4
During the period in question, the BIA invested virtually all of Jicarilla's tribal trust funds in securities with maturities of one year or less. The weighted average days to maturity of these investments fluctuated between a low of 11 days to a high of 333 days, and typically ranged from approximately 30 to 180 days. Approximately 86 percent of Jicarilla's funds were invested in certificates of deposit (CDs) over this period, with the vast majority of non-CD investments (i.e., government securities) limited to a five-year window from 1980 to 1984. From 1974 through 1978, in 1985, and again from 1989 through 1991, all of Jicarilla's funds were invested in CDs (as of the relevant reporting dates).
The BIA did not waiver from this investment approach despite significant fluctuations in Jicarilla's trust fund balance and market interest rates. From February 21, 1974, to September 30, 1983, the amount of Jicarilla trust funds under BIA management jumped from $2.3 million to $62.6 million. Then, from 1983 to September 1992, that balance gradually diminished, as the Nation shifted its assets to privately-managed reserve accounts (primarily to take advantage of longer-term investments) - it dropped so much, that by September 1992, BIA was managing only $5.4 million in Jicarilla tribal trust funds. Interest rates also fluctuated widely during this period, rising from a floor of 7 percent in 1974 to a peak of 16 percent in 1981, before settling at between 4 to 6 percent at the end of the period in question. Moreover, there were times during this period (from mid-1973 to mid-1974, and again from early 1979 to mid-1981) in...
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