San Carlos Apache Tribe v. Azar, No. CV-19-05624-PHX-NVW

• Decision Date: 31 August 2020
• Docket Number: No. CV-19-05624-PHX-NVW
• Citation: 482 F.Supp.3d 932
• Parties: SAN CARLOS APACHE TRIBE, Plaintiff, v. Alex AZAR, Secretary, U.S. Department of Health and Human Services; Michael Weahkee, Principal Deputy Director, Indian Health Service; United States of America, Defendants.
• Court: U.S. District Court — District of Arizona

482 F.Supp.3d 932

SAN CARLOS APACHE TRIBE, Plaintiff,

v.Alex AZAR, Secretary, U.S. Department of Health and Human Services; Michael Weahkee, Principal Deputy Director, Indian Health Service; United States of America, Defendants.

No. CV-19-05624-PHX-NVW

United States District Court, D. Arizona.

Signed August 31, 2020

Alexander Bennett Ritchie, Office of the Attorney General, San Carlos, AZ, Lloyd B. Miller, Pro Hac Vice, Rebecca A. Patterson, Pro Hac Vice, Sonosky Chambers Sachse Miller & Munson LLP, Anchorage, AK, for Plaintiff.

Brock Jason Heathcotte, US Attorneys Office, Phoenix, AZ, for Defendants.

ORDER

Neil V. Wake, Senior United States District Judge

Before the Court is Defendants’ Motion to Dismiss Count II of Plaintiff's Complaint (Doc. 13). For the reasons stated below, the motion shall be granted.

A. 25 U.S.C. § 5325(a)

The Indian Health Service ("IHS") is not required by the Indian Self-Determination and Education Assistance Act of 1975, 25 U.S.C. § 5301 et seq. ("ISDEAA"), to pay Plaintiff San Carlos Apache Tribe's (the "Tribe") indirect contract support costs associated with the income it received from third-party payors. This conclusion is principally informed by the language of 25 U.S.C. § 5325(a), which outlines the funds IHS must provide to federally recognized Indian tribes under self-determination contracts such as the one entered into between IHS and the Tribe.¹ (See generally Doc. 13-2.)

The first type of funding is provided for direct program costs, which is known as the "Secretarial Amount." See Swinomish Indian Tribal Cmty. v. Azar , 406 F. Supp. 3d 18, 21 (D.D.C. 2019), appeal docketed , 19-5299 (D.C. Cir. Oct. 31, 2019). This funding includes an amount of funds that "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). "In other words, a tribe receives the amount the Secretary would have provided for the programs, functions, services, and activities had the IHS retained responsibility for them." Swinomish Indian Tribal Cmty. , 406 F. Supp. 3d at 21 (internal alterations, quotation marks, and citation omitted).

The second type of funding is provided for contract support costs. This type of funding is added to the Secretarial 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," except such activities that "normally are not carried on by the respective Secretary in his direct operation of the program" or "are provided by the Secretary in support of the contracted program from resources other than those under the contract." 25 U.S.C. § 5325(a)(2). "[E]ligible [contract support] costs for the purposes of receiving funding" include direct and indirect contract support costs. See 25 U.S.C. § 5325(a)(3)(A). Direct costs are "direct program expenses for the operation of the Federal program that is the subject of the contract" and indirect costs are "any additional administrative or other expense related to the overhead incurred by the tribal contractor in connection with the operation of the Federal program, function, service, or activity pursuant to the contract." Id.

None of the above provisions makes any reference to third-party revenue.

See Swinomish Indian Tribal Cmty. , 406 F. Supp. 3d at 27-28 (finding " § 5325(a) does not entitle the Tribe to collect CSC [contract support costs] for its expenditure of third-party revenue, as that section's references to the ‘Secretarial amount’ to which CSC must be added and the ‘Federal program’ that generates CSC do not include third-party revenue" (footnote omitted)). While the Tribe argues the "Federal program" language in 25 U.S.C. § 5325(a)(3)(A) signifies Congress’ intent that IHS pay contract support costs on "all healthcare activities carried out pursuant to the Tribe's contract with IHS, both the portion funded directly by IHS appropriations and the portion funded by the third-party revenues the Tribe is required to collect and reinvest in the program," (Doc. 21 at 11), to accept this argument would be to read language into the statute that is not there and in effect "enlarge[ ] ... it ... so that what was omitted, presumably by inadvertence, may be included within its scope. To supply omissions transcends the judicial function." See Iselin v. United States , 270 U.S. 245, 251, 46 S.Ct. 248, 70 L.Ed. 566 (1926) (internal citations omitted). Moreover, this argument ignores the language that is there, as § 5325(a)(3)(A) refers to a single "Federal program that is the subject of the contract." 25 U.S.C. § 5325(a)(3)(A)(i) ; 25 U.S.C. § 5325(a)(3)(A)(ii) (including as contract support costs eligible for reimbursement costs of "any additional administrative or other expense related to the overhead incurred by the tribal contractor in connection with the operation of the Federal program ... pursuant to the contract (emphasis added)). It would be unreasonable to construe this program as anything other than the program or programs² IHS would be charged with operating absent an ISDEAA contract.

B. 25 U.S.C. § 5325(m)

Defendants’ argument with regard to 25 U.S.C. § 5325(m) misses the mark. Quoting that section, Defendants contend "Medicare, Medicaid, and other program income is ‘earned by a tribal organization in the course of carrying out a self-determination contract,’ not provided by the Secretary as part of the Secretarial amount." (Doc. 13 at 11.) But that is not what the statute says. Rather, it provides:

(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.

25 U.S.C. § 5325(m). This section only concerns how program income—which both sides agree does not come from IHS—can be used, not the types or amounts of funds that IHS must provide. These funds are addressed in 25 U.S.C. § 5325(a).

But this does not mean § 5325(m) is irrelevant, as the language therein informs—and further bolsters—the conclusion regarding the meaning of § 5325(a). "Statutory interpretation must account for both ‘the specific context in which language is used’ and ‘the broader context of the statute as a whole.’ " Castillo v. Metro. Life Ins. Co. , 970 F.3d 1224, 1232 (9th Cir. 2020) (internal alterations omitted) (quoting Util. Air Regulatory Grp. v. EPA , 573 U.S. 302, 321, 134 S.Ct. 2427, 189 L.Ed.2d 372 (2014) ). Indeed, "[s]tatutory construction is a holistic endeavor." Koons Buick Pontiac GMC, Inc. v. Nigh , 543 U.S. 50, 60, 125 S.Ct. 460, 160 L.Ed.2d 389 (2004) (internal quotation marks and citations omitted).

Numerous subsections within § 5325(a) refer to funds that are "provided" by the Secretary as part of the Secretarial Amount. See 25 U.S.C. §§ 5325(a)(1); (a)(3)(A). Other subsections refer to contract support costs that must be "paid" by the Secretary. See id. at § 5325(a)(5) ("[D]uring the initial year that a self-determination contract is in effect, the amount to be paid under paragraph (2) shall include ...."); § 5325(a)(6) ("Costs incurred before the initial year that a self-determination contract is in effect may not be included in the amount required to be paid under paragraph (2) if ...."). In contrast, § 5325(m) —the only section in § 5325 concerning program income (and accordingly, third-party revenue)—refers to "income earned by a tribal organization in the course of carrying out a self-determination contract." (emphasis added). The Court therefore agrees with the court in Swinomish Indian Tribal Community that "[r]ead together, the ISDEAA's various provisions clearly limit the Secretarial amount to funds that the IHS appropriates and exclude from that amount any third-party revenue that the Tribe collects on its own." 406 F. Supp. 3d at 29. Contract support costs accordingly need not be provided for expenditures of third-party revenue.

C. 25 U.S.C. § 5326

25 U.S.C. § 5326 also dooms the Tribe's claim. That statute states:

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.

Accordingly, it "prevents the IHS from paying more than its pro rata share of the indirect costs incurred by contracting tribes and tribal organizations." Tunica-Biloxi Tribe of La. v. United States , 577 F. Supp. 2d 382, 418 (D.D.C. 2008).³

As an initial matter, Defendants misconstrue this statute, erroneously contending it "prohibits payment of [contract support costs] on all non-IHS funds, including Medicare, Medicaid or any other third-party reimbursements." (See Doc. 13 at 13.) The statute prohibits not payment of contract support costs on "all non-IHS funds," but rather payment on such costs "associated with any contract ... entered into between an Indian tribe or tribal organization and any entity other than the Indian Health Service." 25 U.S.C. § 5326 (emphasis added). The legislative history Defendants cite only further confirms this. See H.R. Rep. No. 105-609, at 108 (1998) (recommending "specifying that IHS funding may not be used to pay for non-IHS contract support costs" (...