Cherokee Nation of Oklahoma v. Thompson; Thompson v. Cherokee Nation of Oklahoma
This case raises important issues regarding the nature of the federal government's contractual obligations, particularly in the context of ongoing relations with the Native American nations. The U.S. Supreme Court granted certiorari to resolve a split between the between the Court of Appeals for the Federal Circuit and the Tenth Circuit Court of Appeals over whether Indian tribes were contractually or statutorily entitled to recover administrative costs incurred while performing self-determination contracts under the Indian Self-Determination and Education Assistance Act ("ISDA"). The Court must decide whether the government is obligated to fully fund programs based on contracts with the tribes, whether there are any limits to what the government is required to provide under these arrangements, and whether the government possessed the funding to cover the administrative costs of these programs.
In 1975, Congress passed the ISDA to promote tribal autonomy and self-governance by allowing Indian tribes to manage programs and services that benefit Indian tribes but which had previously been administered by the federal government. Congress believed that transferring control of these programs would help tribes develop leadership skills crucial to the realization of self-government. See 25 U.S.C.A. § 450. The ISDA requires the Secretary of Health and Human Services ("Secretary") to enter into contracts with any tribe that requests control of a federally-funded service program. Tribes that enter into such "self-determination contracts" must receive the same amount of federal funding that the Secretary would have been provided ("the secretarial amount") to operate the program. Tribes then manage, on behalf of themselves, these programs which the Secretary would otherwise manage on their behalf.
By 1987, many tribes had implemented ISDA programs for education, health, and job training. Unfortunately, government funding was sometimes insufficient to cover the full cost of the programs; while funding levels comprehended direct program costs, additional administrative costs that the Secretary had not previously incurred were not included in the funds distributed to the tribes. In an effort to rectify this problem, Congress passed the Indian Self-Determination Amendments of 1988, which required the Secretary to provide contract support costs ("CSC") for the full administrative costs incurred by the tribes. However, these funds are "subject to the availability of appropriations," ("the Appropriations Clause") and "the Secretary is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe or tribal organization." 25 U.S.C § 450j-1(b). In addition to the availability clause in 25 U.S.C § 450j-1(b), Congress tried to contain cost escalation by passing the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 Pub.L. No. 105-277, § 314, (1998), which imposed a mandatory cap on the total amount of CSC funding for new and expanded self-determination programs.
In resolving the circuit split over whether the Indian tribes were entitled to recover costs incurred in performing self-determination contracts under ISDA, the Court will examine the appropriations clause of the ISDA as well as the 1998 Omnibus Act to determine the limits of the government's obligations to fund administrative costs. If the Court agrees with the Tenth Circuit and rules that the government incurs no liability because Congress limited the amount of money available to the tribes for administrative costs, the ruling may discourage Indian tribes from entering into self-determination contracts, thus defeating one of the primary policy objectives of the ISDA. Such a ruling may have a chilling effect and discourage future private parties from contracting with the government, fearing that the government might abuse its power and retroactively limit the funds available to pay the contract. However, if the Court agrees with the Federal District, Congress's ability to limit cost overruns and instill financial discipline could be severely curtailed. In the long run, this may discourage Congress from relinquishing control of programs and services traditionally managed by the federal government.
Questions as Framed for the Court by the Parties
02-1472 CHEROKEE NATION OF OKLAHOMA v. THOMPSON
1. Whether the federal government can repudiate, without liability, express contractual commitments for which it has received valuable consideration, either by spending down discretionary agency appropriations otherwise available to pay its contracts, or simply by changing the law and the contracts retroactively.
2. Whether government contract payment rights that are contingent on "the availability of appropriations" vest when an agency receives a lump-sum appropriation that is legally available to pay the contracts, as is the law of the Federal Circuit under Blackhawk Heating & Plumbing Co. v. United States, 622 F.2d 539 (Fed. Cir. 1980), or is the government's liability calculated only at the end of the year after the agency has spent its appropriations on other activities, as the Tenth Circuit ruled below.
03-853 THOMPSON v. CHEROKEE NATION OF OKLAHOMA
The Indian Self-Determination and Education Assistance Act (ISDA), 25 U.S.C. §§ 450-450n, authorizes the Secretary of Health and Human Services (the Secretary) to enter into contracts with Indian Tribes for the administration of programs the Secretary otherwise would administer himself. The ISDA also provides that the Secretary shall pay "contract support costs" to cover certain direct and indirect expenses incurred by the Tribes in administering those contracts. The ISDA, however, makes payment "subject to the availability of appropriations," and declares that the Secretary "is not required to reduce funding for programs, projects or activities serving a tribe to make funds available" for contract support and other self-determination contract costs. 25 U.S.C. § 450j-l(b). The questions presented are:
1. Whether the ISDA requires the Secretary to pay contract support costs associated with carrying out self-determination contracts with the Indian Health Service, where appropriations were otherwise insufficient to fully fund those costs and would require reprogramming funds needed for noncontractable, inherently federal functions such as having an Indian Health Service.
2. Whether Section 314 of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999, Pub. L. No.105-277, 112 Stat. 2681-288, bars respondent from recovering its contract support costs.
In 1994, under the terms of the Indian Self-Determination and Education Assistance Act ("ISDA"), see 25 U.S.C.A. § 450, the Shoshone-Paiute and the Cherokee Nation Tribes of the Duck Valley Reservation ("Plaintiffs") entered into self-determination contracts to administer a range of health care programs for their tribal members with the Secretary of Health and Human Services ("Secretary"). Under the ISDA, Indian tribes could manage, on behalf of themselves, certain programs which the Secretary would otherwise manage for them.