United Keetoowah Band of Cherokee Indians v. Hud

• Decision Date: 05 June 2009
• Docket Number: No. 08-7025.,08-7025.
• Citation: 567 F.3d 1235
• Parties: UNITED KEETOOWAH BAND OF CHEROKEE INDIANS OF OKLAHOMA, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; Alphonso Jackson, Secretary of the United States Department of Housing and Urban Development; Orlando J. Cabrera, Assistant Secretary for Public and Indian Housing, Defendants-Appellees, Cherokee Nation, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

567 F.3d 1235

UNITED KEETOOWAH BAND OF CHEROKEE INDIANS OF OKLAHOMA, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; Alphonso Jackson, Secretary of the United States Department of Housing and Urban Development; Orlando J. Cabrera, Assistant Secretary for Public and Indian Housing, Defendants-Appellees Cherokee Nation, Amicus Curiae.

No. 08-7025.

United States Court of Appeals, Tenth Circuit.

June 5, 2009.

James C. McMillin (Michael D. McClintock, Tamara Schiffner Pullin of McAfee & Taft, with him on the brief), Oklahoma City, OK, for Plaintiff-Appellant.

Patricia Sharin Flagg, Senior Trial Attorney of U.S. Department of Housing and Urban Development, (Sheldon J. Sperling, United States Attorney, Linda A. Epperley, Assistant United States Attorney, Muskogee, OK, with her on the brief), Washington, D.C., for Defendants-Appellees.

A. Diane Hammons, Attorney General of Cherokee Nation, Tahlequah, OK, for Amicus Curiae.

Before KELLY, BRISCOE, and McCONNELL, Circuit Judges.

PAUL KELLY, JR., Circuit Judge.

Plaintiff-Appellant, the United Keetoowah Band of Cherokee Indians of Oklahoma ("UKB"), is challenging a final agency action by the United States Department of Housing and Urban Development ("HUD") which drastically reduced the federal funding that the UKB received for housing under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), 25 U.S.C. §§ 4101-4243. The basis of the UKB's claim, in essence, is that HUD's decision was arbitrary and capricious (1) as a substantive matter because HUD's regulations implementing NAHASDA were contrary to the clear language of that statute, and (2) as a procedural matter because of various alleged defects in the process leading up to HUD's final agency action. The district court rejected the UKB's challenge, finding that HUD's regulations survived scrutiny under Chevron deference and concluding that the procedure employed by HUD was not arbitrary or capricious. United Keetoowah Band of Cherokee Indians of Okla. v. U.S. Dep't of Hous. and Urban Dev., No. CIV-06-533-RAW, slip. op. at 5-10 (E.D. Okla. Jan 9, 2008). The UKB now appeals the district court's order. Our jurisdiction arises under 28 U.S.C. § 1291, and we reverse.

Background

A. Funding Scheme under NAHASDA

This case involves HUD's implementation of NAHASDA, a federal statute enacted to provide funding to Native American tribes in order to "help[ ] tribes and their members ... improve their housing conditions and socioeconomic status." 25 U.S.C. § 4101(5).¹ Adopted in 1996, NAHASDA established a housing-assistance program that was funded directly through Indian Housing Block Grants ("IHBG"), id. § 4111, and disbursed to tribes on the basis of Indian Housing Plans prepared by the tribes and submitted to HUD, id. § 4112. All federally-recognized and state-recognized Indian tribes are eligible for IHBG funding. 24 C.F.R. § 1000.202; see 25 U.S.C. § 4103(12). The amount of IHBG funding each eligible tribe receives is determined in accordance with the allocation formula established by HUD pursuant to a negotiated rulemaking procedure and contained in the implementing regulations. 25 U.S.C. §§ 4116(b), 4151, 4152(a). While Congress delegated to HUD the authority to create the allocation formula, Congress also circumscribed HUD's discretion by specifically stating that the formula must be "based on factors that reflect the need of the Indian tribes and the Indian areas of the tribes for assistance for affordable housing activities." Id. § 4152(b).

The formula HUD created has two components: (1) Formula Current Assisted Housing Stock ("FCAS"), and (2) Need. 24 C.F.R. § 1000.310. Generally, the amount of annual funding for an Indian tribe is the sum of the FCAS component and the Need component. The Need component, the only component at issue here, is based on seven criteria set forth in the regulations — criteria such as the number of tribal households with income below a median income level and the number of households without kitchens and plumbing.² Id. § 1000.324. None of the criteria references court jurisdiction over a geographic area. In addition to these seven criteria, HUD has also created a "Formula Area" requirement. While the regulations do not say so explicitly, HUD apparently only applies the seven § 1000.324 criteria to Indian households within an applicant tribe's Formula Area. Therefore, applicant tribes must show that they possess a Formula Area in order to receive need-based funding under § 1000.324. At the time, the regulations defined "Formula Area" as

the geographic area over which an Indian tribe could exercise court jurisdiction or is providing substantial housing services and, where applicable, the Indian tribe ... has agreed to provide housing services pursuant to a Memorandum of Agreement with the governing entity or entities (including Indian tribes) of the area, including but not limited to: ...

...

(vi) Former Indian Reservation Areas in Oklahoma as defined by the Census as Tribal Jurisdictional Statistical Area.

24 C.F.R. § 1000.302.³ However, even though the Formula Area requirement acts as a threshold for need-based funding under § 1000.324, tribes that do not possess a designated Formula Area are still entitled to a minimum funding amount under § 1000.328. Id. § 1000.328. See generally Fort Peck Hous. Auth. v. U.S. Dep't of Hous. and Urban Dev., 435 F.Supp.2d 1125, 1127-29 (D.Colo.2006) (describing NAHASDA's funding mechanism).

B. Agency Decision to Award Minimum Funding to the UKB

It is undisputed that the UKB received IHBG funding above the minimum amount for the fiscal years 1997-2005. United Keetoowah Band, No. CIV-06-533-RAW, slip. op. at 2. For each of these fiscal years, HUD determined that the UKB shared a Formula Area with the Cherokee Nation of Oklahoma ("CNO") in the CNO's "Tribal Jurisdictional Statistical Area/Oklahoma Tribal Statistical Area." However, this determination was called into question on June 14, 2004, when the CNO wrote a letter to HUD challenging the UKB's right to receive IHBG funding. In the letter, the CNO claimed jurisdiction over the Tribal Jurisdictional Statistical Area to the exclusion of the UKB. Accordingly, HUD interpreted the substance of the challenge to be that the UKB should not receive more than the minimum funding allocation because the tribe could not claim a Formula Area as defined in 24 C.F.R. § 1000.302. After reviewing the matter, HUD issued a memorandum on January 19, 2005, in which the agency concluded that the UKB had "no jurisdiction or regulatory basis" for being assigned a Formula Area because only the CNO could assert jurisdiction over the Oklahoma Tribal Statistical Area and the UKB had no Memorandum of Agreement with the CNO. HUD stated that the formula correction, which rendered the UKB ineligible "for funding under the Need component of the IHBG formula," would become effective for fiscal year 2006.

On February 11, 2005, the UKB requested that HUD reconsider its determination that the UKB had no jurisdiction over and therefore could not be assigned a share of the Oklahoma Tribal Statistical Area. After further inquiry into the matter, HUD reversed itself on April 26, 2005, finding that the UKB did in fact "meet the regulatory basis under the IHBG program for being assigned a share of the Cherokee Oklahoma Tribal Statistical Area" because the UKB could, in HUD's estimation, "exercise court jurisdiction" over the area. Accordingly, on the basis of the UKB's ability to claim the Oklahoma Tribal Statistical Area as its Formula Area, HUD granted the UKB $545,989 in funding for the fiscal year 2006. HUD also informed the CNO, on October 18, 2005, that it had the "right to appeal this decision" to assign the UKB a share of the Oklahoma Tribal Statistical Area.

This prompted an administrative appeal by the CNO on November 16, 2005. The appeal contained a detailed legal argument designed to show that the CNO possessed exclusive jurisdiction over the Oklahoma Tribal Statistical Area. This argument was based in part on our decision in United Keetoowah Band of Cherokee Indians v. Mankiller, in which we reaffirmed that "the Cherokee Nation is the only tribal entity with jurisdictional authority in Indian Country within the Cherokee Nation."⁴ No. 93-5064, 1993 WL 307937, *4 (10th Cir. Aug.12, 1993) (unpublished). In response, HUD reversed itself again on February 7, 2006, concluding that the "the UKB could not exercise court jurisdiction over land in the Cherokee former reservation area." The UKB, predictably, then challenged this new decision in a letter dated March 27, 2006. HUD denied this request for reconsideration on November 3, 2006, in a letter described as a "final agency action." HUD based the denial on its conclusion that the UKB

failed to show that it possesses a Formula Area, as that term is defined pursuant to 24 C.F.R. § 1000.302, because it has neither a geographic area over which it could exercise court jurisdiction nor an area in which it provides substantial housing services pursuant to a Memorandum of Agreement with the governing entity, the [CNO].

Accordingly, HUD awarded the UKB only the minimum funding allocation under 24 C.F.R. § 1000.328.

The UKB then sought judicial review in federal district court under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-706. The UKB argued that Chevron deference should not apply to 24 C.F.R. § 1000.302 and asserted several bases to show that HUD had acted arbitrarily and capriciously. United Keetoowah Band, No. CIV-06-533-RAW, slip. op. at 5. However, the district court applied Chevron deference and found that HUD had not acted arbitrarily and capriciously. Id. at 5-10. The UKB now appeals this decision. The main issue before us is whether NAHASDA is clear and unambiguous such that we should not grant Chevron deference to the implementing regulations.

Discussion

When reviewing a final...