N. Arapaho Tribe v. Cochran

Decision Date07 July 2021
Docket NumberCase No. 21-CV-0037
Citation548 F.Supp.3d 1134
Parties NORTHERN ARAPAHO TRIBE, Plaintiff, v. Norris COCHRAN, in his official capacity as Acting Secretary, U.S. Department of Health and Human Services ; Elizabeth Fowler, in her official capacity as Acting Director, Indian Health Service ; United States of America, Defendants.
CourtU.S. District Court — District of Wyoming

Geoffrey D. Strommer, Pro Hac Vice, Stephen Osborne, Pro Hac Vice, Hobbs Straus Dean & Walker LLP, Portland, OR, Lucas Evan Buckley, Hathaway & Kunz, Cheyenne, WY, for Plaintiff.

Nicholas Vassallo, US Attorney's Office, Cheyenne, WY, for Defendants.



The Northern Arapaho Tribe brings this case against the Government for violation of law and breach of contract by the Indian Health Service ("IHS") in failing to pay full funding of contract support costs ("CSC") for the operation of its federal health program under a Contract and Annual Funding Agreement authorized by the Indian Self-Determination and Education Assistance Act (ISDEAA), 25 U.S.C. § 5301 et seq. CM/ECF Document ("Doc.") 1. Funding for CSC reimburses the Tribe for the additional, reasonable direct and indirect costs for contract administrative expenses1 and overhead to ensure contract compliance and prudent management. 25 U.S.C. § 5325(a)(3)(A). This case focuses on IHS's refusal "to pay CSC associated with that portion of the Tribe's health care program funded with third-party revenues – payments from Medicare, Medicaid, private insurers, and others"2 for fiscal year 2016 and FY2017.3 Id. at ¶¶ 3-4. With regard to FY2016, the Tribe claims it is entitled to $538,936.00 for IHS's failure to pay CSC on expended third party-revenues. Doc. 1, ¶ 34. For FY2017, the Tribe claims $1,001,201.00. Doc. 1, ¶ 37.

Defendants move to dismiss the Tribe's case arguing neither the law nor the contract with the Tribe support the Tribe's claim that IHS must pay CSC on that portion of the Tribe's federal health care program funded by third-party revenues such as payments from Medicare, Medicaid, private insurers and others. Doc. 18. The Tribe opposes dismissal, arguing Defendants misread the ISDEAA. The Tribe argues it is required by law and contract to collect third-party revenues and use them for additional services within the scope of the Tribe's contract with the Secretary of Health and Human Services. Further, the Tribe argues these additional services made possible by third-party revenue generate additional administrative and overhead costs of precisely the kind that Congress required be funded by CSC.

The Court concludes that the ISDEAA and the Tribe's contract entitle the Tribe to receive CSC funding on expenditures of funds received under the contract with the IHS, which does not include expenditures of third-party income. Therefore, the Court grants Defendantsmotion to dismiss.


The ISDEAA authorizes Indian tribes and tribal organizations to assume responsibility to administer programs, functions, services, and activities (PFSAs) the Secretary would otherwise be obligated to provide under federal law to American Indians and Alaska Natives. 25 U.S.C. § 5321(a)(1). Pursuant to this authorization, the Northern Arapaho Tribe has entered into a contract with the Secretary of Health and Human Services to assume responsibility for the Tribe's federal health care program. The purpose of the ISDEAA is to reduce federal domination of Indian programs and promote tribal self-determination and self-governance. See 25 U.S.C. § 5302(b) ; Cherokee Nation of Okla. v. Leavitt , 543 U.S. 631, 639, 125 S.Ct. 1172, 161 L.Ed.2d 66 (2005).

The ISDEAA requires the amount of funds provided to the Tribe "shall not be less than the appropriate Secretary would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract[.]" 25 U.S.C. § 5325(a)(1). The amount the Secretary otherwise would have provided to operate the program is commonly referred to as the "Secretarial amount." Further, the ISDEAA requires, in addition to the Secretarial amount, payment of direct and indirect CSC to cover the administrative and overhead expenses for activities which must be carried on by the Tribe as a contractor to ensure compliance with, and prudent management of the terms of the contract. 25 U.S.C. § 5325(a)(2).

This dispute involves funding for both direct and indirect CSC to cover the Tribe's expenditures of third-party income to further the general purposes of the Tribe's contract with IHS. The Tribe pursued its claims for underpaid CSC for FY2016 and FY2017, which the IHS denied by letter dated February 20, 2020. Doc. 1, ¶ 7. This civil action was filed within twelve months of receipt of the IHS decision, as required by the Contract Disputes Act, 41 U.S.C. § 7104(b)(3). Id. Therefore, this Court has jurisdiction to review the IHS denial under the Contract Disputes Act and Section 110 of the ISDEAA. 41 U.S.C. § 7104(b) ; 25 U.S.C. § 5331(a), (d).

Applicable law

Standard of Review

In determining a Rule 12(b)(6) motion to dismiss, a court "must accept as true all well-pleaded facts, as distinguished from conclusory allegations, and those facts must be viewed in the light most favorable to the non-moving party." Moss v. Kopp , 559 F.3d 1155, 1159 (10th Cir. 2009). As this dispute arises under the Contract Disputes Act, the Court's review is de novo , and the Tribe has the burden of proof. 41 U.S.C. § 7104(b)(4) ; J.C. Equip. Corp v. England , 360 F.3d 1311, 1318 (Fed. Cir. 2004). When interpreting the ISDEAA, the Court begins with the "language of the statute." Barnhart v. Sigmon Coal Co. , 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002).

Applicable Provisions of the ISDEAA
§ 1623. Special rules relating to Indians
(b) Payer of last resort
Health programs operated by ... Indian tribes ... shall be the payer of last resort for services provided by such ... tribes ... to individuals eligible for services through such programs, notwithstanding any Federal, State, or local law to the contrary.
§ 5325. Contract funding and indirect costs
(a) Amount of funds provided
(1) The amount of funds provided under the terms of self-determination contracts entered into pursuant to this chapter shall not be less than the appropriate Secretary would have otherwise provided for the operation of the programs ... covered by the contract ["the Secretarial amount"] ....
(2) There shall be added to the amount required by paragraph (1) contract support costs which shall consist of an amount for the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but which—
(A) normally are not carried on by the respective Secretary in his direct operation of the program; or
(B) are provided by the Secretary in support of the contracted program from resources other than those under contract.
(3)(A) The contract support costs that are eligible costs for the purposes of receiving funding under this chapter shall include the costs of reimbursing each tribal contractor for reasonable and allowable costs of—
(i) direct program expenses for the operation of the Federal program that is the subject of the contract; and(ii) any additional administrative or other expense incurred by the governing body of the Indian Tribe or Tribal organization and any overhead expense incurred by the tribal contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract, except that such funding shall not duplicate any funding provided under subsection (a)(1) of this section.
* * *
(m) Use of program income earned
The program income earned by a tribal organization in the course of carrying out a self-determination contract—
(1) shall be used by the tribal organization to further the general purposes of the contract; and
(2) shall not be a basis for reducing the amount of funds otherwise obligated to the contract.
§ 5326. Indian Health Service: availability of funds for Indian self-determination or self-governance contract or grant support costs
Before, on, and after October 21, 1998, and notwithstanding any other provision of law, funds available to the Indian Health Service in this Act or any other Act for Indian self-determination or self-governance contract or grant support costs may be expended only for costs directly attributable to contracts, grants and compacts pursuant to the Indian Self-Determination Act and no funds appropriated by this or any other Act shall be available for any contract support costs or indirect costs associated with any contract, grant, cooperative agreement, self-governance compact, or funding agreement entered into between an Indian tribe or tribal organization and any entity other than the Indian Health Service.

Applicable Provisions of the Tribe's Scope of Work Incorporated in its Annual Funding Agreement

The Tribe's Business Office ... will have an established accounting system to monitor the number of billings submitted, claims completed and total payments received. It will maintain accreditation standards in order to qualify for funds through third party-payers....

Doc. 20-3, pp. 15-16.4


By its complaint, the Tribe relies on 25 U.S.C. § 5325(a)(3)(A) for its claim that "the entire ‘Federal program’ that is the subject of the contract – including program income from that Federal program – generates CSC requirements." Doc. 1, ¶ 18. The Tribe also alleges that it is required by law and contract to collect third-party revenues in order to assure that the Indian health program is a payer of last resort. Id. at ¶ 20; 25 U.S.C. § 1623(b). The third-party revenues (or program income) must be expended on PFSAs included in the Tribe's Annual Funding Agreement, thus the expenditures from third-party program income must be included in the base...

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