Source: http://www.narf.org/nill/bulletins/dct/documents/fletcher_v_us.html
Timestamp: 2014-11-23 21:07:00
Document Index: 440989792

Matched Legal Cases: ['§ 702', '§ 701', '§ 11', '§ 4', '§ 1', '§ 3', '§ 4', '§ 2', '§ 551', '§ 4', '§ 162', '§ 4044', '§ 4044']

No. 02–CV–427–GKF–FHM.
*1 This matter comes before the court on the Motion to Dismiss plaintiffs' Third Amended Complaint, filed by defendants the United States of America, the Department of the Interior, Kenneth Salazar in his official capacity as Secretary of the Interior, the Bureau of Indian Affairs, and Larry EchoHawk in his official capacity as Assistant Secretary of the Interior–Indian Affairs (collectively, the “Federal Defendants”). For the reasons set forth below, the Motion to Dismiss [Dkt. # 1126] is granted.
The Federal Defendants moved to dismiss the complaint for failure to join the principal governing body of the Osage Tribe,FN1 the Osage Tribal Council, as a necessary and indispensable party. The Court granted the motion and dismissed the complaint. Plaintiffs appealed, but during the appeal, Congress passed the Reaffirmation of Certain Rights of the Osage Tribe, Public Law 108–431, 118 Stat. 2609. That statute maintains the system for assigning mineral interests but granted the Osage Tribe the right to determine membership for other purposes. Accordingly, the plaintiffs obtained their first request—that they obtain the right to participate in the affairs of the Osage Nation as members. The Tenth Circuit held that the district court had jurisdiction over plaintiffs' breach of trust and takings claims for violation of a statutory duty to pay royalties only to tribal members, as plaintiffs did not seek “money damages” under 5 U.S.C. § 702 . The panel vacated the dismissal and remanded to determine whether the Osage Tribal Council was a necessary and indispensable party with regard to the breach of trust and takings claims.
On remand, the plaintiffs filed a First Amended Complaint. Federal Defendants moved to dismiss on the following grounds: (a) failure to join other indispensable parties, including the Osage Nation and non-Osage owners of headrights FN2; (b) lack of jurisdiction for failure to comply with the final agency action prerequisites to judicial review under the Administrative Procedure Act, 5 U.S.C. § 701; and (c) failure to challenge an actionable final agency action within the applicable statute of limitations. The Court granted the motion in part and denied it in part, holding that: (a) the Osage Nation was not a required party under Rule 19(a); (b) non-Osage headright owners were required parties because plaintiffs sought to terminate their headright interests in royalty income; and (c) it was impossible to discern from the face of the First Amended Complaint the specific agency actions and/or inactions the plaintiffs were challenging. The Court directed plaintiffs to file a Second Amended Complaint adding all non-Osage headright owners as defendants and identifying with specificity the challenged agency actions and/or inactions.
FN2. A headright is statutorily defined as “any right of any person to share in any royalties, rents, sales, or bonuses arising from the Osage mineral estate.” Pub.L. No. 98–605, § 11(2), 98 Stat. 3163 (the “1984 Act”); Shelton's Estate v. Okla. Tax Comm'n, 544 P.2d 495, 497 (10th Cir.1975) (“headrights are interests in unaccrued royalties arising from mineral interests.”).
In 1872, Congress established a reservation of approximately one and a half million acres for the Osage Tribe of Indians in north central Indian Territory. See Act of June 5, 1872, ch. 310, 17 Stat. 228 (An Act to Confirm to the Great and Little Osage Indians a Reservation in the Indian Territory). The first oil and gas lease of the reservation was made in 1896, followed by substantial discoveries of oil and gas in 1904 and 1905. Cohen's Handbook of Federal Indian Law § 4.07[1][d][ii], p. 311 (2005 ed.). “The Osage Nation quickly accumulated a large tribal trust fund in the Treasury from oil and gas leases, sales of townsite lots, permit taxes, and sale of an earlier tribal reservation in Kansas.” Id. (citing McCurdy v. U.S., 246 U.S. 263 (1918) ). Tribal wealth made the Osages targets of various forms of fraud and overreaching. Id.
In 1906, Congress passed the Osage Allotment Act in an attempt to individualize much of the Osage tribal property and to provide some protection for tribal members. See Act of June 28, 1906, ch. 3572, 34 Stat. 539 (An Act for the Division of the Lands and Funds of the Osage Indians in Oklahoma Territory and for Other Purposes) (the “1906 Act”). The 1906 Act directed the preparation of a tribal membership roll composed of persons whose names were on the roll maintained by the United States Indian agent at the Osage Agency, as it existed on January 1, 1906, and their children born by July 1, 1907. See 1906 Act, § 1. The mineral estate underlying the Osage lands was “reserved to the Osage tribe.” 1906 Act, § 3. The royalties received from the mineral estate, less certain amounts retained for tribal purposes, is paid per capita on a quarterly basis to the 2,229 persons on the tribal roll, their heirs, devisees, and assigns. See 1906 Act, § 4. Most persons of Osage Indian ancestry own no headrights, and thus receive no royalty income. Cohen, p. 313. Some persons own more than one headright, or own fractional shares of headrights, and some headrights are owned by non-Osages. Id. The trust period was originally set at twenty-five years, but has been extended several times. In 1978, Congress extended the tribal trust “in perpetuity” and severly limited succession to headrights by non-Indians. See Pub.L. No. 95–496, §§ 2(a), 5(c), and 7, 92 Stat. 1660 (1978).
*3 Plaintiffs allege the Federal Defendants have breached their trust obligations “by failing to distribute Osage mineral royalties only to persons who are Osage Indians by blood, and those who may by statute be allowed to receive distributions of trust property .” Third Amended Complaint, ¶ 3 (emphasis in original). Plaintiffs “make no claim against the Osage Nation or the Osage Mineral Estate itself; nor is there any dispute regarding the amounts which the Osage Nation has obtained from the Osage Mineral Estate. Instead, the Plaintiffs' claims relate to the Federal Defendants' Section 4 Royalty Payments made during the pendency of this litigation, and those to be made in the future.” Third Amended Complaint, ¶ 30.
The Third Amended Complaint asserts three causes of action. In their First Claim for Relief—Breach of the Federal Trust Responsibility—plaintiffs allege the Federal Defendants have breached their trust obligations by improperly distributing trust assets to persons who are not Osage Indians or their lawful heirs, and by failing to account to plaintiffs for all funds held in trust, including all royalty distributions. In their Second Claim for Relief—entitled Failure to Account and Deprivation of Property—plaintiffs allege that, because the Federal Defendants have allowed royalty payments to be distributed to non-Osage persons, and because the Federal Defendants have failed to account for and audit their actions, the plaintiffs have been deprived of property in violation of the Fifth Amendment. In their Third Claim for Relief—entitled Administrative Action Not in Accordance with Law and Violative or in Contravention of the Plaintiffs' Rights—plaintiffs allege, upon information and belief, that the Federal Defendants have taken administrative actions, or have failed to take action, in ways that are not in accordance with law, including: (a) approving “family settlement agreements” in the course of contested probates contrary to the explicit directives in Osage Indian wills, which has resulted in the alienation of Section 4 royalty interests in favor of non-Indians and the diminishment of the Osage mineral estate; (b) facilitating and encouraging the “legal” adoption of adult non-Indians by Osage Indians as a means of ostensibly complying with the 1978 Act and its explicit prohibitions against alienation to non-Indians; (c) permitting the sale of Section 4 Royalty Interests by non-Indians in derogation of the right of repurchase specifically reserved to Osage remaindermen of the original allottees by the 1978 Act; (d) making quarterly Section 4 royalty payments in violation of the law; and (e) refusing “to provide the accounting and audits required by law.” Third Amended Complaint, ¶ 65.
*4 Plaintiffs seek the following relief: (1) an order compelling the Federal Defendants to provide an accounting and audit of the Section 4 Royalty Payments distributed from the Osage Mineral Estate “showing the amounts actually paid to each person and the basis for each payment;” (2) an order requiring that the accounting and audit “determine whether Section 4 Royalty Payments distributed from the Osage Mineral Estate have been distributed only to Osage Indians (and their heirs);” (3) a reformation of the Plaintiffs and class members' entitlement to Section 4 royalty payments; and (4) an order compelling the Federal Defendants to prospectively distribute the Section 4 royalty payments only to Osage Indians and their heirs. Id. at pp. 85–86.
V. The Allegations of Improper Distributions to Non–Osage Headright Owners
A complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) . The plausibility requirement does “not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal [conduct].” Id. at 556. “[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle [ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (citations omitted). The court must determine “whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Lane v. Simon, 495 F.3d 1182, 1186 (10th Cir.2007) .
*5 In the alternative, the portions of plaintiff's Third Claim for Relief alleging administrative action not in accordance with law in connection with permitting royalty payments to non-Indians must be dismissed. Plaintiffs who rely on the APA for jurisdiction must “satisfy the ‘statutory standing’ requirements of the APA.” Colorado Farm Bureau v. U.S. Forest Serv., 220 F.3d 1171, 1173 (10th Cir.2000) . The plaintiffs “have the burden of identifying specific federal conduct and explaining how it is ‘final agency action,’ “ which is defined as an “agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act.” Id. (citing 5 U.S.C. § 551(13) ). “[W]here an agency is under an unequivocal statutory duty to act, failure so to act constitutes, in effect, an affirmative act that triggers ‘final agency action’ review.” Cobell v. Norton, 240 F.3d 1081, 1095 (D.C.Cir.2001) . Plaintiffs may demonstrate a failure to act if they can show “that an agency failed to take a discrete agency action that it is required to take.” Otoe–Missouria Tribe of Oklahoma v. Kempthorne, 542 U.S. 55, 64 (2004) (emphasis in original).
Second, the Tenth Circuit recognized long ago that a trust relationship exists between the United States Government and members of the Osage Tribe. In Chouteau v. Comm'r of Int. Revenue, 38 F.2d 976, 978 (10th Cir.1930) , the Court stated: “The mineral reserves under the [Osage] lands are held in trust by the United States for the tribe and its members, and are being developed under its control and direction as an instrumentality for the best interests and advancement of the members of the tribe who are still recognized as dependents on Governmental care.” (emphasis added).
Third, the United States Court of Federal Claims has recognized that the 1906 Act creates a trust fund for the Tribe and “obliges the United States to hold mineral royalties in trust for ‘members of the Osage tribe.’ “ Osage Nation v. U.S., 57 Fed. Cl. 392, 395 (2003) ( Osage I ) FN6 , citing §§ 4(1) and 4(2) of the 1906 Act.
FN6. It should be noted that the trust relationship between the federal government and Osage headright owners differs from the trust relationship between the federal government and the Osage Nation. In Osage I, the Federal Court of Claims found that the Osage Nation has both an interest in and a claim to the mineral royalty funds “when those funds are within the tribal trust account that was established by the 1906 Act.” Osage I, 57 Fed. Cl. at 395 . In contrast with the claims made in this case, the mismanagement alleged by the Osage Nation was not alleged to have taken place at the point of distribution to the individual headright holders. Id .
U.S. v. Jicarilla Apache Nation, 131 S.Ct. 2313, 2325 (2011) (internal citations omitted). “Throughout the history of the Indian trust relationship, [the Supreme Court has] recognized that the organization and management of [a statutory Indian] trust is a sovereign function subject to the plenary authority of Congress.” U.S. v. Jicarilla Apache Nation, 131 S.Ct. 2313, 2323 (2011) . “[T]he Government has often structured the trust relationship to pursue its own policy goals. Thus, while trust administration ‘relat[es] to the welfare of the Indians, the maintenance of the limitations which Congress has prescribed as a part of its plan of distribution is distinctly an interest of the United States.’ “ Id. at 2324. The Supreme Court recognizes that, “[i]n some cases, Congress established only a limited trust relationship to serve a narrow purpose.” Id. at 2324–25. The 1906 Act requires the Government to make royalty payments “in the manner and at the same time that payments are made of interest on other moneys held in trust for the Osages by the United States.” At the least, the 1906 Act imposes a trust obligation upon the Federal Defendants to distribute royalty payments to headright owners in a timely and proper manner. This Court must therefore reject the Federal Defendants' contention that they have no trust obligations to headright owners.FN7
FN7. Plaintiffs allege they “are descendants of individuals who were listed on the rolls of the Osage Tribe, and are Osage Indians.” See Third Amended Complaint, ¶ 34. The allegation is ambiguous as to whether the plaintiffs are headright owners or not. The Court must assume for the purposes of this motion that plaintiffs are headright owners. If they are not, the Federal Defendants owe no trust responsibilities to them relative to headright distributions, and their claims would have to be dismissed.
*7 To establish that an agency was required to provide the plaintiffs with an accounting, plaintiffs must “identify a legal obligation imposed on Defendants to account for the funds held in trust.” Otoe–Missouria Tribe of Oklahoma v. Kempthorne, 2008 WL 5205191, *2 (W.D.Okla.2008) .
In the Third Amended Complaint, plaintiffs allege they are entitled to an accounting pursuant to 25 U.S.C. §§ 162a and 4011 .FN8 (Dkt. # 985–1, p. 26, ¶ 46. By its explicit terms, Section 162a(a) applies “to the funds of the Osage Tribe of Indians, and the individual members thereof, only with respect to the deposit of such funds in banks.” None of the failures to account alleged by plaintiffs relate to the deposit of funds in banks. Rather, the alleged failures to properly manage and account for monies relate to distributions from the Osage Mineral Estate, not deposits. Moreover, allegations pertaining to alleged mismanagement of deposits in the Osage Mineral Estate have been resolved between the Osage Nation and the federal government in the Federal Court of Claims.
FN8. Plaintiffs argue in their response brief that they are also entitled to an accounting pursuant to 25 U.S.C. § 4044 . Because this alleged violation was not pleaded, the court does not consider it. In the alternative, the court has examined § 4044 and holds that it applies only to Indian trust fund accounts, not to individual headright payments.
Similarly, Section 4011 imposes a requirement to account only for funds “deposited or invested pursuant to section 162a .” No such funds are implicated in this lawsuit. Plaintiffs' allegations of mismanagement focus on distributions. Section 4011 does not impose an obligation upon the Federal Defendants to account to the plaintiffs.
WHEREFORE, the Motion to Dismiss of defendants the United States of America, the Department of the Interior, Kenneth Salazar in his official capacity as Secretary of the Interior, the Bureau of Indian Affairs, and Larry EchoHawk in his official capacity as Assistant Secretary of the Interior–Indian Affairs [Dkt. # 1126] is granted.