San Carlos Apache Tribe v. Becerra

Decision Date21 November 2022
Docket Number21-15641
Citation53 F.4th 1236
Parties SAN CARLOS APACHE TRIBE, Plaintiff-Appellant, v. Xavier BECERRA, Secretary, U.S. Department of Health and Human Services; Benjamin Smith, Principal Deputy Director, Indian Health Service ; United States of America, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Lloyd B. Miller (argued), Rebecca A. Patterson, and Whitney A. Leonard, Sonosky Chambers Sachse Miller & Monkman LLP, Anchorage, Alaska; Alexander B. Ritchie, San Carlos Apache Tribe, San Carlos, Arizona; for Plaintiff-Appellant.

John S. Koppel (argued) and Daniel Tenny, Appellate Staff Attorneys; Glenn McCormick, Acting United States Attorney; Brian M. Boynton, Acting Assistant Attorney General; for Defendants-Appellees.

Caroline P. Mayhew, Hobbs Straus Dean & Walker LLP, Washington, D.C.; Geoffrey D. Strommer and Stephen D. Osborne, Hobbes Straus Dean & Walker LLP, Portland, Oregon; for Amici Curiae Native American Tribes, Tribal Organizations, Indian Health Boards, and the National Congress of American Indians.

Before: Michael Daly Hawkins, Richard A. Paez, and Paul J. Watford, Circuit Judges.


PAEZ, Circuit Judge:

This case presents a question of Native sovereignty in the context of a healthcare dispute.

Indian Health Service ("IHS") administers health care programs for Native tribes. Those programs bill insurance like any other doctor's office: if a patient is covered by Medicare, Medicaid, or private insurance, IHS bills that insurance for the cost of the procedure and retains that third-party revenue.

In an attempt to further tribal sovereignty, Congress in the Indian Self-Determination and Education Assistance Act ("ISDA") allowed tribes to run their own healthcare programs, funded by IHS in the amount IHS would have spent on a tribe's health care.1 25 U.S.C. § 5325(a)(1). This furthered the goal of "assuring maximum Indian participation in the direction of ... Federal services to Indian communities so as to render such services more responsive to the needs and desires of those communities." 25 U.S.C. § 5302(a). But tribes quickly ran into a roadblock: absent the bureaucracy and legal protections the Federal government enjoys, it was too expensive for tribes to run those programs. Congress enacted a fix by requiring IHS to provide tribes with "contract support costs" ("CSC"), or the amount of money a tribe would need to administer its healthcare programs, so that the tribe could provide "at least the same amount of services" as IHS otherwise would. 25 U.S.C. § 5325(a)(2)(3) ; S. Rep. No. 100-274, at 16 (1987).

This helped. But amici tribes explain that they still did not enjoy parity with IHS, because IHS billed outside insurers slowly, and only imperfectly remitted that money to tribes. Tribes were thus losing some of their third-party revenue. So Congress stepped in again and allowed tribes to bill outside insurers directly. 25 U.S.C. § 1641(d)(1). Congress additionally allowed the tribes to keep the third-party revenue without diminishing their IHS grants, so long as tribes spent that revenue on health care. 25 U.S.C. §§ 1641(d)(2)(A), 5325(m).

A simplified example clarifies this scheme. Assume that a tribe administers a $3 million healthcare program for its members. It costs the tribe $500,000 in administrative costs to do so. IHS therefore will pay the tribe $3.5 million. Additionally, the tribe recovers $1 million for those procedures from outside insurers. It is statutorily required to spend that $1 million on health care as well.

But there is a hole in this statutory scheme. Who pays the CSC for that additional $1 million in health care that the tribe must provide with its third-party revenue? At the heart of this lawsuit is Plaintiff-Appellant San Carlos Apache Tribe's ("the Tribe") contention that IHS must cover those additional CSC.

The Tribe, a federally recognized Indian Tribe in Arizona, exercises its sovereignty by running its own healthcare programs and billing outside insurers directly. As required by contract and statute, it spends third-party revenue on additional health care for its members. But doing so is expensive, and the Tribe does not receive CSC from IHS to cover additional services. It filed suit to recover the CSC for program years 20112013. Defendant-Appellees Xavier Becerra, Secretary of the U.S. Department of Health & Human Services; Benjamin Smith, Principal Deputy Director of IHS; and the United States of America (collectively, "Defendants") contend that the Tribe must cover the additional CSC.

The parties settled all claims but Claim 2, which alleges that Defendants must cover CSC for the third-party-revenue-funded portions of the Tribe's healthcare program. The district court granted Defendants' motion to dismiss this claim. The Tribe timely appealed that dismissal.2 We hold that the text of the governing statute, 25 U.S.C. § 5325(a), compels reversal and remand for additional proceedings.


Defendants contend that the language of the contract under which the Tribe operated its healthcare programs ("the Contract") forecloses the Tribe's claim. The section of the Contract concerning CSC reads:

The parties agree that the CSC funding under this Funding Agreement (FA) will be calculated and paid in accordance with Section 106(a) of the [ISDA]; IHS CSC Policy (Indian Health Manual – Part 6, Chapter 3) or its successor; and any statutory restrictions imposed by Congress. In accordance with these authorities and available appropriations for CSC, the parties agree that under this FA the San Carlos Apache Tribe will receive direct CSC in the amount of $135,203, and indirect CSC in the amount of $423,731. These amounts were determined using the FY 2010 IHS CSC appropriation, and the San Carlos Apache direct cost base and indirect rate as of December 7, 2010 , and may be adjusted as set forth in the IHS CSC Policy (IHM 6-3) as a result of changes in program bases, Tribal CSC need, and available CSC appropriations. Any adjustments to these amounts will be reflected in future modifications to this FA.

Here, the Contract sets out an agreed-upon CSC amount and provides for adjusting this amount, as set forth in the Indian Health Manual ("IHM").3

Defendants contend that the Tribe's claims are meritless because the Tribe received the amount of CSC specified by the Contract, a properly calculated amount that 25 U.S.C. § 5325(a) does not override. This argument ignores the flexibility written into the Contract, which allows those amounts to be adjusted in the event of changes to "program bases, Tribal CSC need, [or] available CSC appropriations." A determination that the Tribe is owed CSC by statute for third-party-revenue-funded portions of its health-care program would fall under this umbrella. Additionally, because the Contract incorporates the provisions of the ISDA, if that statute requires payment of the disputed funds, it controls. Thus, as the district court apparently concluded, we also conclude that the Contract is not dispositive and proceed to determine whether the Tribe is owed those additional CSC by statute.


The principles of statutory interpretation are familiar. "The starting point for our interpretation of a statute is always its language." Cmty. for Creative Non-Violence v. Reid , 490 U.S. 730, 739, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989) (citing Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc. , 447 U.S. 102, 108, 100 S.Ct. 2051, 64 L.Ed.2d 766 (1980) ). "If the statutory language is plain, we must enforce it according to its terms." King v. Burwell , 576 U.S. 473, 486, 135 S.Ct. 2480, 192 L.Ed.2d 483 (2015) (citing Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010) ). But when deciding whether language is plain, "we must read the words ‘in their context and with a view to their place in the overall statutory scheme.’ " King , 576 U.S. at 486, 135 S.Ct. 2480 (quoting FDA v. Brown & Williamson Tobacco Corp. , 529 U.S. 120, 133, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) ).

Statutory interpretation in this case has an additional wrinkle: the "Indian canon." Because "the canons of construction applicable in Indian law are rooted in the unique trust relationship between the United States and the Indians, ... statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit." Montana v. Blackfeet Tribe of Indians , 471 U.S. 759, 766, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985) (internal citations and alterations omitted). And while the canon in some cases is a "guide[ ] that need not be conclusive," Chickasaw Nation v. United States , 534 U.S. 84, 85, 122 S.Ct. 528, 151 L.Ed.2d 474 (2001), it is here incorporated into the Contract with binding language that reads: "[e]ach provision of the [ISDA] and each provision of this Contract shall be liberally construed for the benefit of the contractor ...." Thus, we need not conclude that the statutory meaning is plain; rather, to find that the Tribe has plausibly alleged a claim for relief, we merely must conclude that the language is ambiguous to read it as the Tribe does.


We start with the CSC provisions of the relevant statute, 25 U.S.C. § 5325(a), upon which the district court's order and the parties' arguments rely. Section 5325(a) reads:

(a) Amount of funds provided ...
(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

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