# In the United States Court of Federal Claims

No. 12-431L

(Filed: July 28, 2015)

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Indian Claims; Breach of Fiduciary Duty; Individual Indian Money Accounts; Lost Profits; Statutory Interpretation; Partial Summary Judgment. *

GRACE M. GOODEAGLE , et al., *

* Plaintiffs, *

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v. *

* THE UNITED STATES, *

*

Defendant. *

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Nancie G. Marzulla , with whom was Roger J. Marzulla , Marzulla Law LLC, Washington, D.C., Stephen R. Ward and John L. Williams , Conner & Winters, LLP, Tulsa, Oklahoma, Of Counsel, for Plaintiffs.

Stephen R. Terrell , with whom were John C. Cruden , Assistant Attorn ey General, and Peter K. Dykema , Environmental and Natural Resource s Division, U.S. Department of Justice, Washington, D.C., Kenneth Dalton, Shani N. Walker, and Karen F. Boyd, U.S. Department of Interior, Thomas Kearns and Rebecca Saltiel , U.S. Department of Treasury, Of Counsel, for Defendant.

OPINION AND ORDER ON CROSSMOTIONS FOR PARTIAL SUMMARY JUDGMENT

WHEELER, Judge.

This case arises from an alleged breach of fiduciary duty by the Government in failing to prudently invest funds held in tr ust on behalf of individual members of the Quapaw Indian Tribe of Oklahoma. Plaintiffs, Grace M. Goodeagle et al. , are holders of Individual Indian Money (“IIM”) accounts ma naged by the Bureau of Indian Affairs (“BIA”). They are claiming damages for accou nt investment mismanagement of their IIM

funds. Included in Plaintiffs’ claims are am ounts for lost profits for the period pre-dating the American Indian Trust Management Refo rm Act of 1994 (“the 1994 Reform Act”),2 Pub. L. No. 103-412, 108 St at. 4239 (1994), during whic h Plaintiffs contend the Government failed to fulfill its statutory oblig ation to prudently invest IIM funds outside the Treasury to maximize income on those funds.

On April 13, 2015, Defendant filed a motion for partial summary judgment regarding the pre-1994 IIM account mismanagem ent claims, arguing that the Government was not required by statute or regulation to invest IIM fund s outside the Treasury, or pay interest on IIM accounts, prior to the enactment of the 1994 Reform Act. Defendant asserts

that the Government should not be liable to Plaintiffs for investment mismanagement claims predating the Act because controlling law did not provide for the payment of interest on IIM accounts, an argument the Government says was affirmed by the U.S. Court of

Claims in United States v. Gila River Prim a-Maricopa Indian Cmty ., 586 F.2d 209, 218 Ct. Cl. 74 (1978).

On May 14, 2015, Plaintiffs filed an op position to the Gove rnment’s motion and cross-moved for summary judgment. Plaintiffs contend that the 1994 Reform Act merely reaffirmed the BIA’s existing fiduciary duty, a nd that the United States has had a statutory obligation to maximize trust income on IIM accounts by prudent investment since 1918 under what became 25 U.S.C. §162a. Further, Pl aintiffs argue that th e 1918 Act effectively acts as a waiver of sovereign immunity becau se it creates a substan tive right enforceable against the Government for money damages. Pl aintiffs therefore assert that, consistent with the statutory mandate, th e United States was responsibl e for investing Indian trust funds in the highest yielding investment vehicl es available, and failure to do so constituted a breach of fiduciary duty befo re and after October 25, 1994, the effective date of the 1994

Reform Act. The cross-motions are fully briefed, and ready for decision. Oral argument is unnecessary.

The issue before the Court is one of st atutory interpretation, and is therefore susceptible to resolution through summary judgm ent. For the reasons explained below, the

Court finds that the Government had an exis ting fiduciary duty to prudently invest IIM

funds held in trust before th e 1994 Reform Act, which rea ffirmed and codified existing federal trust responsibilities, and that Plaintiffs have met their burden of proof establishing the Government’s liability for failure to prud ently invest IIM funds before October 25, 1994. Accordingly, Defendant’s motion for partial summary judgment is DENIED and Plaintiffs’ cross-motion for partia l summary judgment is GRANTED.3 Factual Background 1

IIM accounts are interest-bearing accounts fo r trust funds belonging to an individual

who has an interest in trust asse ts held by the Secretary of the In terior. 25 C.F.R. § 115.002.

Allotments of Indian lands have been held in trust by the United States for nearly a century, and any revenues from the allotments have also been held in trust in IIM accounts, which

later became an established feature of Indian law with the Indian Reorganization Act of 1934, 25 U.S.C. §§ 461-479. In 1918, Congress stipulat ed that the Secretary was authorized to invest these funds (both IIM and tribal funds) in interest-bearing bank accounts and Treasury bonds. In 1938, Congress codified this practice in 25 U.S.C. § 162a, which established additional types of accounts into which IIM and tribal funds could be

invested.

The 1938 statute, which governs the issue be fore the Court today, currently states that “[t]he Secretary of the In terior is hereby authorized in his discretion . . . to withdraw from the United States Treasury and to deposit in banks to be selected by him the common or community funds of any Indian tribe,” and c ontinues to provide that the Secretary is also authorized to withdraw funds held in trust by the United States “for th e benefit of individual Indians.” 25 U.S.C. § 162a. The Government’s investment choices for both tribal and

individual funds determine the rate of retu rn on the accounts, and thus the Government, having chosen to make these investments, owes a fiduciary duty to individuals and tribes alike to invest their funds pr udently in order to maximize return on the accounts. See Jicarilla Apache Nation v. United St ates, 112 Fed. Cl. 274, 289 (2013).

With the enactment of § 162a, the BIA in itiated a policy where IIM funds would be invested and managed by BIA ag ency officers, remaining cons istent with the Secretary’s existing responsibilities for tribal trust funds. H.R. Report No . 1030778, at 11-12 (1994). In 1966, the Department of the Interior bega n to invest IIM funds centrally from the BIA’s

Division of Finance in New Me xico, and the funds were invest ed in group securities. The BIA computed and dist ributed IIM interest semi-annually until 1989, at which point the BIA converted to a monthly dist ribution of interest based on the average daily value of

each account. Then with the Reform Act of 1994, Congre ss codified and reaffirmed the Government’s existing fiduciary du ties concerning IIM trust funds.

Standard of Review

Summary judgment is appropriate when ther e is no genuine dispute as to any issue of material fact, and the movant is entitled to judgment as a matter of law. RCFC 56(a); Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 247-48 (1986). A “gen uine” dispute is one

1 The facts are taken from the parties’ briefs and suppor ting exhibits, and are deemed not to be in dispute.4 that “may reasonably be resolved in favor of either party,” Anderson, 477 U.S. at 250, and a fact is “material” if it might significan tly alter the outcome of the case under the governing law. Id. at 248. In determining th e propriety of summary judgment, a court will not make credibility determinations, and will draw all inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indu s. Co. v. Zenith Radi o Corp., 475 U.S. 574, 587-88 (1986).

Discussion

As noted, the issue before the Court is one of statutory interpretation, namely, whether the enactment of 25 U.S.C. § 162a cr eated a statutory mandate for the Government to prudently invest IIM funds, and whether th e 1994 Reform Act mere ly reaffirmed this existing duty or whether it gave rise to a new duty to prudently inve st IIM funds which had not existed previously. Plaintiffs maintain that the Government’s fiduciary duty to

maximize return on IIM accounts dates back as far as 1918, whereas the Government argues that the 1994 Act created a new statutor y duty authorizing the Secretary to invest IIM funds outside the Treasury for the first time.

A. The Reform Act of 1994

Plaintiffs contend that the enactment of the 1994 Reform Act reaffirmed the Government’s existing fiduciary duties to IIM trust beneficiaries, rather than creating a new fiduciary duty to prudently invest IIM funds . In support of this contention, Plaintiffs point to Cobell v. Norton, in which the U.S. District Court for the District of Columbia stated that “[t]he trust nature of th e federal government’s IIM responsibilities was recognized long before passage of the 1994 Act,” and that the Reform Act was intended to codify the Secretary’s prior pr actice of exercising complete c ontrol over the IIM funds. Cobell v. Norton, 283 F. Su pp. 2d 66, 145 (D.D.C. 2003), vacated in part on other grounds

, 392 F.3d 461 (D.C. Cir. 2004). Plaintiffs furt her point out that these trust duties are moneymandating and create a Tucker Act claim. Id. 392 F.3d at 470-71; s ee also White Mountain Apache Tribe of Ariz. v. Unite d States, 20 Cl. Ct. 371 (1990).

Plaintiffs also support this contention by citing the House Repo rt for H.R. 4833,

later to become the 1994 Reform Act, which confirms congressi onal intent to reaffirm the Government’s existing fiducia ry duty. The Committee belie ved that this report would “further clarify the Secretary’s trust respon sibilities to require the Secretary to invest individual Indian trust funds,” and would “bro aden the types of investments in which the Secretary could invest individual Indian trust funds.” H.R. Report No. 103-778, at 11-12 (1994).

The Government argues that the United States owed no tr ust duty to pay interest on IIM accounts prior to the 1994 Reform Act because, before the Act, there was no specific5 statute or regulation mandating that the Governme nt must prudently invest IIM funds. The

Government contends that the relationship with the individua l Indian account holders may have been styled as trusts, but that the Gove rnment did not assume “all the fiduciary duties of a private trustee,” and thus created a far more limit ed relationship than those trust relationships between private parties at comm on law, citing United States v. Jicarilla Apache Nation, 131 S. Ct. 2313, 2323 (2011).

The legislative history of the 1994 Reform Act indicates that Congress intended the Act to merely reaffirm and codi fy the existing fiduciary duties of the Government to invest IIM funds outside the Treasury in order to maxi mize the return on those funds. Failure to prudently invest both tribal a nd individual Indian funds resu lts in a breach of fiduciary duty, and creates a cause of action in this Court. Plaintiffs are correct in their assertion that this fiduciary duty existed long before the enactment of the 1994 Reform Act, and accordingly Plaintiffs may seek lost prof its for pre-1994 investment mismanagement

claims.

B. The Government’s Liability fo r Imprudent Investment

The parties agree generally that Plainti ffs are not entitled to recover pre-1994 interest on IIM accounts. However, Plaintiffs stress that they are nevertheless entitled to recover lost profits due to the Government’s fa ilure to prudently invest all Indian funds, which are the damages Plaintiffs seek in this case. Therefor e, the Government’s reliance

on cases such as United States v. Gila Ri ver Pima-Maricopa Indian Community, White Mountain Apache Tribe of Ariz ona and American Indians Re siding on Maricopa-Ak Chin Reservation v. United States, which dealt exclus ively with the issue of unpaid interest on IIM accounts, is misplaced. See United States v. Gila River Pima-Maricopa Indian Cmty., 586 F.2d 209, 218 Ct. Cl. 74 (1978); White Mountain Apache Tr ibe, 20 Cl. Ct. at 384; Am. Indians Residing On Maricopa-Ak Chin Reserv ation v. United States, 667 F.2d 980, 1002- 03, 229 Ct. Cl. 16 7, 203 (1981).

Plaintiffs argue that the 1918 statute, later codified as 25 U.S.C. §162a, establishes the Government’s liability for failure to pruden tly invest IIM funds. This Court has held

that the statute waives sove reign immunity and subjects th e Government to damages for imprudent investment. See White Mountain Apache Tribe, 20 Cl . Ct. 371; Jicarilla Apache Nation, 112 Fed. Cl. 274; Os age Tribe of Indians of Oklahoma v. United States, 72 Fed. Cl. 629 (2006). Although these cases involve d tribal trust funds, the same fiduciary duty applies equally to individual Indian funds as th ey are both governed by 25 U.S.C. § 162a. Further, Plaintiffs cite to the Supreme Court’ s decision in United Stat es v. Mitchell, which held that the Government’s liability was es tablished even absent an express mandating statute or other fundamental document. 463 U.S. 206, 225 (1983).6 The Government argues that its liability for imprudent i nvestment of IIM funds was not established until 1994 because the statutory language in § 162a makes the Secretary’s power to invest IIM funds discretionary. See 25 U.S.C. § 162a (“The Secretary of the Interior is hereby authorized in his discretion , and under such rules and regulations as he

may prescribe. . . .”) (emphasi s added). As noted above, the Government’s reliance on such an interpretation is misguided because the Supreme Court has found there to be an existing statutory mandate to prudently inve st Indian funds in the highest yielding

investment accounts to maximize return, even absent explicit statutory language. Mitchell,

463 U.S. at 225. This in terpretation stems from a common law understanding that a fiduciary duty exists with respect to such monies or properties unless Congress has provided otherwise. White Mountain Apache Tribe of Ariz., 20 Ct. Cl. at 383 (citing Mitchell, 463 U.S. at 225).

C. Duty to Invest Prudently Since 1966

The Government began inves ting Plaintiffs’ IIM funds in 1966. Along with the choice to invest came the duty to invest pr udently in order to maximize return on the

accounts. Plaintiffs draw an an alogy between their claims in this case to those brought by the Cheyenne-Arapaho Tribe, both of which were based on the Secretary’s authority to invest nonproductive funds, and a duty to do so , in order to make the funds “as productive as legally and practically possible.” Cheyenne-A rapaho Tribes of Indi ans of Okla v. United States, 206 Ct. Cl. 340, 347-48 (1975). This Court’s predece ssor has held that IIM funds are trust funds, and “[w]here th e Government takes on or has control or supervision over tribal money or property, the normal relations hip is fiduciary,” absent any congressional statement to the contrary. Am. Indians Resi ding on Maricopa-Ak Chin Reservation, 667 F.2d at 1002, 229 Ct. Cl. at 203. Thus, because the United States holds Plaintiffs’ IIM funds in trust, there is a fiduc iary duty on the part of the Go vernment to prudently invest

them in order to ma ximize the return.

While the Department of the Interior had th e statutory authority to invest IIM funds as early as 1908, the parties agree that the Secretary began investing these funds centrally

from the BIA’s Division of Finance in Albu querque, New Mexico in 1966. Once the

Government took Plaintiffs’ IIM funds into trust and began investing them in group securities, the Government had an obligation to Plaintiffs to make them as productive as possible through prudent investment, maximizi ng return on the funds. Failure to do so constitutes a breach of fiduciary du ty and gives rise to Plainti ffs’ claim for lost profits for the time period in which the Government di d not prudently invest the IIM funds.7 Conclusion

Upon consideration of the motions before the court, Defendant’s motion for partial summary judgment is DENIED and Plaintiffs ’ cross-motion for partial summary judgment is GRANTED. As explained, the outcome of the pre-1994 IIM investment mismanagement claims turns on the legal issue of whether the Government had a statutory obligation to prudently invest IIM funds prior to th e enactment of the 1994 Reform Act.

The Court finds that the Act reaffirmed and codified the Government’s existing fiduciary duty to invest IIM funds in order to maximize the return on those funds. Accordingly, Plaintiffs are entitled to recover lost profits resulting from the Gove rnment’s failure to prudently invest IIM funds prior to October 25, 1994.

IT IS SO ORDERED.

s/Thomas C. Wheeler

THOMAS C. WHEELER Judge