Salazar v. Ramah Navajo Chapter (11-551)

Oral argument: Apr. 18, 2012

Appealed from: United States Court of Appeals for the Tenth Circuit (May 9, 2011)

The Indian Self–Determination and Education Assistance Act (“ISDA”) allows Indian tribes to implement programs previously administered by the federal government. The government must reimburse tribes using Congressional appropriations for any reasonable implementation costs, known as contract support costs (“CSCs”). However, Congress appropriated insufficient funds to cover all of the tribes’ CSCs and the government failed to fully reimburse respondents, including the Ramah Navajo Chapter (“Ramah”). The district court determined that the government was not required to pay Ramah’s CSCs due to exhausted appropriations, but the Tenth Circuit held that a tribe can fully recover if Congress appropriated sufficient funds to cover their individual contracts. The government now appeals, arguing that the total sum of recoverable CSCs is limited to the appropriation. The Supreme Court’s decision may impact Congress’s ability to limit spending and the government’s perceived reliability as a contract partner.

Question presented

Whether the government is required to pay all of the CSCs incurred by a tribal contractor under the ISDA, where Congress has imposed an express statutory cap on the appropriations available to pay such costs and the Secretary of the Interior cannot pay all such costs for all tribal contractors without exceeding the statutory cap.

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Issue

Is the government liable for all contract-related payments to a tribal organization under a statute requiring the government to pay funds “subject to the availability of appropriations” when Congress appropriated enough funds to cover any individual government contract, but not every assigned contract?

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Facts

Under the ISDA, the United States can enter into self-determination contracts with Indian tribes and tribal organizations that allow those groups to implement various services previously administered by the government. 25 U.S.C. § 450b(j). The ISDA’s purpose is to allow tribes to take control of their own affairs, breaking a tradition of “federal domination.” § 450(a)(1). Yet, these contracts do not remove all governmental interaction with the tribes: under the ISDA’s terms, the government provides the tribes full funding for all costs necessary for the tribes to implement those services, i.e., CSCs, “[s]ubject to the availability of appropriations.” § 450j–1(a)(2); § 450j–1(b). However, since 1994, Congress has failed to appropriate funds sufficient to pay all CSCs. See Ramah Navajo Chapter v. Salazar, 644 F.3d 1054, 1056 (10th Cir. 2011). As a result of this funding shortfall, numerous important tribal programs have been threatened. See id.

Respondent Ramah, among other tribal organizations, has made various ISDA self-determination agreements with the United States. See id. at 1060. In 2000, Ramah filed a motion for summary judgment in this action, seeking a declaration that it was entitled to unpaid CSCs from 1994 forward. See id. at 1062. In response, the government cross-moved for summary judgment, arguing that its obligation to fully fund the CSCs depended on Congress’s appropriating enough funds to cover the CSCs arising from all existing self-determination contracts. See id. The United States District Court for the District of New Mexico stayed any ruling until the Supreme Court’s decision in Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2005). See 644 F.3d at1062.

In Cherokee, the Supreme Court held that the government was bound to pay CSCs if Congress appropriated enough funds to pay the specific contract at issue. See 543 U.S. at 637–38; Ramah Navajo Chapter, 644 F.3d at 1066–67. However, the district court granted the government’s motion for summary judgment, arguing that Congress was free of any requirements to pay for CSCs when it specifically capped the amount of its total appropriations. See id. at 1062. The Tenth Circuit reversed, holding that the “subject to the availability of appropriations” wording of the ISDA is satisfied when sufficient appropriations are available for the particular contract, regardless of any statutory cap. See id. at 1067–68. Thus, the court held that even though the government could not pay the CSCs associated with each and every contract, it was nevertheless liable for Ramah’s costs because there were sufficient funds to cover them. See id. Emphasizing the similarities between Ramah’s situation and the situation discussed in Cherokee, the court ultimately concluded that Ramah was entitled to its previously unpaid CSCs. See id. at 1068.

The Supreme Court granted certiorari to clarify when Indian tribes and tribal organizations are entitled to CSC costs. See Salazar v. Ramah Navajo Chapter, 132 S.Ct. 995 (2012).

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Discussion

The Supreme Court will determine whether the government must pay CSCs despite Congress’s failure to appropriate enough funds to cover all existing contracts. See Question Presented. The government argues that it should not be required to make payments with funds Congress itself failed to appropriate. See Brief for Petitioner, Ken L. Salazar, Secretary of the Interior, at 36. In contrast, Ramah argues that holding the Government liable would not undermine Congress’s control over appropriations because of the various Congressional procedures in place in order to prevent overly-burdensome obligations. See Brief for Respondent, Ramah Navajo Chapter at 52–53.

 

Control Over Appropriations

The government argues that ignoring any explicit statutory caps on funding as long as there is a sufficient appropriation for an individual contract is an untenable position because it would render Congressional caps useless. See Brief for Petitioner at 47. Specifically, the government worries that allowing Ramah and others to circumvent statutory caps on appropriations (by allowing each one to receive CSC funding as long as it is individually below the statutory threshold) would remove Congress’s power to control spending. See id. Given the importance of statutory caps in providing Congress an avenue to control federal expenditures, the government concludes that a reading of the ISDA that focuses on individual contracts, rather than all CSCs, is unsustainable and should therefore be reversed. See id.

In response, Ramah contends that the government’s fear is unwarranted. See Brief for Respondent at 52–53. First, Ramah asserts that there are requirements in place to restrict agencies from exhausting appropriations. See id. at 52. Secondly, it argues that Congress has tools available to remedy the underfunding, which (in Ramah’s view) is the issue in this case. See id. at 52–53. For example, it maintains that Congress could modify the ISDA itself in a way that limited the financial burden placed on agencies, either by restricting their CSC payment obligations or by reworking the ways in which agencies enter into contracts with tribal organizations. See id. at 53. Similarly, Ramah asserts that Congress could end the self-determination contracts in favor of non-binding agreements or provide sufficient funding to cover all contracts. See id. Because Congress failed to use any of these tools and maintained the ISDA in its current form (with its mandatory CSC requirements), Ramah argues that the Tenth Circuit’s ruling should be upheld, and the Court should require the government to cover all individual contract expenditures. See id.

The Government as a Trade Partner

The government argues that it was not obligated to pay CSCs in the first place beyond its appropriations, and is thereby relieved it of those contractual obligations. See Brief for Petitioner at 43–45. It contends that under the ISDA’s terms, providing sufficient CSC appropriations is discretionary. See id. at 45. The government asserts that there was no contract requiring it to pay Ramah without regard to available appropriations. See id. at 43–44. It argues that Ramah and other tribes had the opportunity to decide whether to contract with the government on the terms offered in the ISDA. See id. at 43–46.

The Chamber of Commerce argues that a holding in favor of the government would have a detrimental effect on the Government’s reliability as a partner in contract. See Brief of Amicus Curiae Chamber of Commerce of the United States of America et al. in Support of Respondent at 22–24. Specifically, the Chamber argues that relieving the government of CSC payments would allow it to escape its obligations despite its promise to perform. See id. at 23. The Chamber maintains that this would hurt not only parties that have already relied on government appropriations, but also future contracts with the government. See id. at 24. It argues that government contracts would become harder to form as a result of funding uncertainties and that the government’s reputation as a reliable trade partner would suffer. See id.

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Analysis

The ISDA subjects the recovery of tribal CSCs to the availability of Congressional appropriations. See 25 U.S.C. § 450j-1(b). The Tenth Circuit held that a tribal contractor can fully recover its CSCs if Congress appropriated sufficient funds to cover its individual contract, regardless of whether sufficient funds were appropriated to cover the total sum of all the tribal contracts. See Ramah Navajo Chapter v. Salazar, 644 F.3d at 1067–68. Additionally, tribes may recover their CSCs from the Judgment Fund once the Congressional appropriation is exhausted. See id. at 1076. The Supreme Court must now determine whether to adopt the government’s contention that the total sum of recoverable CSCs for all tribal contractors is limited to the Congressional appropriation. See Brief for Petitioner at 21.

Liability for Excess Contract Support Costs

The government argues that the United States is not liable for CSCs exceeding Congressional appropriations. See Brief for Petitioner at 21. It contends that unlike the federal statutes that directly confer “contract authority” on government agents, 25 U.S.C. § 450j-1(b)’s “subject to availability of appropriations” language makes it clear that the ISDA does not authorize the Secretary of the Interior (“Secretary”) to contractually bind the United States irrespective of Congressional appropriations. See id. at 31–32. The government also asserts that the Secretary would not have knowingly obligated the United States to commit Treasury funds in excess of Congressional appropriations because doing so would constitute violations of federal law punishable by fines and imprisonment. See id. at 43–44. Furthermore, the government contends that Congress enacted the statutory limit to control the amount of Treasury funds paid for CSCs and that the Tenth Circuit’s “single contractor in isolation” theory effectively undermines that statutory purpose. See id. at 46–47. The government asserts that if the appropriations cap is $1 million, the Tenth Circuit’s holding would permit the United States to commit to an infinite number of contracts valued at $999,999 and would completely hinder Congress’s ability to control Treasury funds. See id. Therefore, the government argues that the total sum of recoverable costs for all tribal contractors must be limited to the Congressional appropriation. See id. at 21.

In contrast, Ramah argues that the United States is liable for a tribe’s CSCs if Congress appropriated sufficient funds to cover the tribe’s individual contract regardless of whether Congress appropriated sufficient funds to cover the total sum of all the tribal contracts. See Brief for Respondent, at 28. Ramah asserts that it is a well-established principle of government contract law that government agencies are liable for all of their contractual obligations regardless of whether Congress appropriated sufficient funds to fulfill those obligations. See id. at 28. Ramah contends that the risk of contractual over-commitment falls on the government because it cannot expect contractors paid from appropriations to track the fund’s accounting and administration. See id. at 29, 36–37. Ramah asserts that appropriations merely impose limitations on government agents and that the tribe does not lose its contractual rights because the government mismanaged the fund. See id. at 29. Ramah also maintains that the Government Accountability Office (“GAO”) Redbook adopts the same stance, that contractors are not obligated to track the appropriation’s impact on the government’s books and that valid contractual obligations remain enforceable despite fund exhaustion if the individual obligation is within Congressional limits. See id. at 31–32. Therefore, Ramah argues that because its individual contract is within Congressional limits, the United States is contractually liable for all of its CSCs. See id. at 28.

Applicability of the Ferris-Dougherty Progeny

In reaching its decision in this case, the Tenth Circuit relied on the Cherokee holding because it found there were no meaningful factual distinctions between the two cases. See Ramah Navajo Chapter, 644 F.3d at 1069, 1075. In Cherokee, the Supreme Court confirmed the principle established in Ferris v. United States, 27 Ct. Cl. 542 (1892), and Dougherty v. United States, 18 Ct. Cl. 496 (1883), that when multiple contractors are to be paid from a Congressional appropriation, the United States is not relieved of contractual liability simply because it failed to appropriate sufficient funds to reimburse all of the contractors. See Cherokee Nation of Okla., 543 U.S. at 637–638; Brief for Petitioner at 48.

The government argues that Ferris, Dougherty, and Cherokee are inapplicable to the present case. See Brief for Petitioner at 49. First, it contends that those cases only address its contractual liability in the context of funds that Congress had appropriated without a related statutory limitation. See id. at 26–27, 49. The government argues that because all three cases involved an Executive Branch official’s discretionary spending, the courts did not have to determine whether awarding full costs would violate a statutory limitation. See id. at 49. Second, the government asserts that Ferris and Dougherty did not involve a contract with an express contingency clause that predicated liability on fund availability. See id. at 50. Although the Tenth Circuit rejected similar contractual language in Cherokee, the Government argues that Cherokee is distinguishable because there Congress had not expressly forbidden the Secretary from using other unrestricted agency funds to cover the shortfall caused by the insufficient appropriations. See id. at 46. Third, the government maintains that unlike the present tribal contractors who have consistently experienced appropriation shortfalls since 1994, the contractors in Ferris and Dougherty had no reason to anticipate insufficient funds. See id. at 50. Therefore, the government argues that Ferris, Dougherty, and Cherokee are inapplicable to the facts of the contract in dispute and provide no basis for liability. See id. at 49, 51.

In contrast, Ramah argues that Ferris and Dougherty do apply here. See Brief for Respondent at 35, 42. First, it contends that the GAO has held that the appropriation formula used in the both those cases is effectively identical to the “not to exceed” language in the ISDA appropriations. See id. at 35. Therefore, Ramah argues that the government’s claim that Ferris and Dougherty do not involve statutory limitations is meritless. See id. Second, it asserts that the “subject to availability of appropriations” contractual language is simply a timing provision that Congress fulfilled when it enacted the appropriation statutes and not an ongoing contingency. See id. at 43. Third, Ramah contends that the Supreme Court has already determined that a tribal contractor’s awareness of insufficient appropriations will not bar relief. See id. at 47 (citing Cherokee Nation of Okla., 543 U.S. at 638–39). Finally, Ramah argues that even if Ferris and Dougherty are inapplicable, the government did not adequately demonstrate that Congress intended to disturb 120 years of government contract law and shift government contractual over-commitment risks on to the tribes. See id. at 37. Ramah contends that the Supreme Court must assume Congress drafted the statute against the background of traditional legal concepts because the “not to exceed” language does not sufficiently demonstrate a legislative intent to alter the interpretation of an established judicial principle. See id. at 37–38.

Use of the Judgment Fund to Finance Excess CSC Costs

The government argues that payments from the Judgment Fund would render the statutory limit “pointless” by effectively permitting tribal contractors to circumvent Congressional appropriations. See Brief for Petitioner at 53–54. It maintains that the Contract Disputes Act (“CDA”), which regulates judgments against the Government for ISDA contractual breaches, explicitly requires the Secretary to reimburse the Judgment Fund for any ISDA-related payments made on the government’s behalf. See id. Accordingly, the government notes that the Secretary must reimburse the Judgment Fund with remaining ISDA appropriations or must obtain additional appropriations exclusively for reimbursement purposes. See id. The government asserts that the Secretary would therefore have to request additional appropriations from Congress because the current appropriations would have already been exhausted. See id. at 54. Thus, it argues that the Secretary’s request for additional funds would effectively circumvent the Congressional appropriations and render the “do not exceed” language meaningless. See id. at 53–54.

In contrast, Ramah argues that the government must pay contractual damages in excess of the appropriations out of the Judgment Fund. See Brief for Respondent at 49. Ramah contends that the CDA’s reimbursement provision only applies to the government and has nothing to do with tribes’ contractual rights. See id. at 50–51. Additionally, Ramah points out that the reimbursement provision does not even bind the Secretary because the GAO has determined that the provision is not legally enforceable. See id. at 51. Ramah argues that by assuming that the provision renders the statutory limit “pointless,” the government presumes incorrectly that the point of the limit is to allow the government to “shortchange” the tribes and breach its contractual obligations. See id. Further, Ramah contends that the government’s theories would exempt the Judgment Fund from ever paying contractual damages because every government contract is funded through an appropriation. See id. at 50.

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Conclusion

In this case, the Supreme Court will determine under what circumstances the government must reimburse Indian tribes and tribal organizations for the costs associated with implementing ISDA programs. The government argues that agencies should be bound to cover CSCs only when the available Congressional appropriations cover all ISDA self-determination contracts. Ramah contends that the CSC funding applies when there is sufficient funding for the individual contract at issue, regardless of whether there is funding for all contracts taken as a whole. The Supreme Court’s decision will affect Congress’s ability to curtail federal spending and the Government’s ability to function as a trade partner.

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Authors

Prepared by: Heather Byrne and Judah Druck

Edited by: Eric Schulman

Acknowledgments

The authors would like to thank former Supreme Court Reporter of Decisions Frank Wagner for his assistance in editing this preview.

Additional Sources

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